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 March 28, 1998
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 March 28, 1998
Common Stock, $.10 Par Value 6,392,929
<PAGE>
GEHL COMPANY
FORM 10-Q
March 28, 1998
REPORT INDEX
Page No.
PART I. - FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Statements of Income for the
Three-Month Periods Ended March 28, 1998 and
March 29, 1997 . . . . . . . . . . . . . . . . . . 3
Condensed Consolidated Balance Sheets at March 28, 1998,
December 31, 1997, and March 29, 1997 . . . . . . 4
Condensed Consolidated Statements of Cash Flows for the
Three-Month Periods Ended March 28, 1998 and
March 29, 1997 . . . . . . . . . . . . . . . . . . 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition . . . . . . . 8
Item 3. Quantitive and Qualitative Disclosures about Market Risk 9
PART II. - OTHER INFORMATION:
Item 2. Changes in Securities and Use of Proceeds . . 10
Item 5. Other Information . . . . . . . . . . . . . . 10
Item 6. Exhibits and Reports on Form 8-K . . . . . . . 10
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . 11
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data; unaudited)
Three Months Ended
March 28, March 29,
1998 1997
NET SALES $ 61,288 $ 43,675
Cost of goods sold 45,437 30,692
-------- ---------
GROSS PROFIT 15,851 12,983
Selling, general and
administrative expenses 10,873 8,832
-------- ---------
INCOME FROM OPERATIONS 4,978 4,151
Interest expense (1,176) (468)
Interest income 346 322
Other expense, net (18) (53)
-------- ---------
INCOME BEFORE INCOME TAXES 4,130 3,952
Income tax provision 1,466 1,423
-------- ---------
NET INCOME $ 2,664 $ 2,529
======== =========
EARNINGS PER SHARE
Diluted $ .40 $ .39
Basic $ .42 $ .41
The accompanying notes are an integral part of the financial statements.
<PAGE>
GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
March 28, December 31, March 29,
1998 1997 1997
ASSETS (Unaudited) (Unaudited)
Cash $ 3,049 $ 1,239 $ 3,137
Accounts receivable-net 86,602 72,190 64,420
Finance contracts receivable-net 9,670 8,210 5,763
Inventories 32,793 30,340 17,483
Deferred tax assets 4,217 4,217 5,035
Prepaid expenses and other assets 1,584 1,645 1,821
----------- ----------- -----------
Total Current Assets 137,915 117,841 97,659
----------- ----------- -----------
Property, plant and equipment-net 34,941 35,082 22,487
Finance contracts receivable-net,
non-current 3,531 3,031 3,446
Intangible assets 14,650 14,816 -
Other assets 5,546 5,453 5,666
----------- ----------- -----------
TOTAL ASSETS $ 196,583 $ 176,223 $ 129,258
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current portion of long-term debt
obligations $ 689 $ 672 $ 181
Accounts payable 26,555 22,212 16,142
Accrued liabilities 23,695 21,444 18,934
----------- ----------- -----------
Total Current Liabilities 50,939 44,328 35,257
----------- ----------- -----------
Line of credit facility 49,252 39,357 13,717
Long-term debt obligations 9,515 9,689 8,697
Other long-term liabilities 1,929 1,855 1,671
Deferred income taxes 3,421 3,421 2,369
----------- ----------- -----------
Total Long-Term Liabilities 64,117 54,322 26,454
----------- ----------- -----------
Common stock, $.10 par value,
25,000,000 shares authorized,
6,392,929, 6,212,686 and
6,188,685 shares issued,
respectively 640 621 619
Preferred stock, $.10 par value,
2,000,000 shares authorized,
250,000 shares designated as
Series A Preferred Stock,
no shares issued - - -
Capital in excess of par 27,590 26,319 26,338
Retained earnings 53,297 50,633 40,590
----------- ----------- -----------
Total Shareholders' Equity 81,527 77,573 67,547
----------- ----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 196,583 $ 176,223 $ 129,258
=========== =========== ===========
The accompanying notes are an integral part of the financial statements.
<PAGE>
GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands; unaudited)
Three Months Ended
March 28, March 29,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 2,664 $ 2,529
Adjustments to reconcile net income to net cash
(used for) provided by operating activities:
Depreciation and amortization 1,232 697
Increase in finance contracts receivable (7,784) (6,254)
Proceeds from sales of finance contracts 5,745 5,127
Cost of sales of finance contracts 79 79
Net changes in remaining working capital items (10,210) (5,299)
---------- -----------
Net cash used for operating activities (8,274) (3,121)
---------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment additions, net (918) (1,482)
Other assets (100) 46
---------- -----------
Net cash used for investing activities (1,018) (1,436)
---------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit facility 9,895 3,263
Proceeds from issuance of common stock 1,290 186
Decrease in long-term debt obligations (157) (40)
Increase in long-term liabilities 74 77
---------- -----------
Net cash provided by financing activities 11,102 3,486
---------- -----------
Net increase (decrease) in cash 1,810 (1,071)
Cash, beginning of period 1,239 4,208
---------- -----------
Cash, end of period $ 3,049 $ 3,137
========== ===========
Supplemental disclosure of cash flow
information:
Cash paid for the following:
Interest $ 1,057 $ 444
Income Taxes $ 65 $ 23
The accompanying notes are an integral part of the financial statements.
<PAGE>
GEHL COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 28, 1998
(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-
month periods ended March 28, 1998 and March 29, 1997 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. Due in part to the seasonal nature of the Company's business, the
results of operations for the three months ended March 28, 1998 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, 1997 as
filed with the Securities and Exchange Commission.
NOTE 2 - 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 3 - 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):
March 28, December 31 March 29,
1998 1997 1997
--------- ----------- --------
Raw materials and
supplies $15,934 $14,830 $ 8,935
Work in process 5,768 5,182 5,150
Finished machines
and parts 30,341 29,578 22,193
---------- ----------- ---------
Total current cost
value 52,043 49,590 36,278
Adjustment to LIFO
basis (19,250) (19,250) (18,795)
---------- ----------- ----------
$32,793 $30,340 $17,483
========== =========== ==========
NOTE 4 - ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards (SFAS) No. 132, "Employers' Disclosures about
Pensions and Other Postretirement Benefits: an amendment of FASB Statements
No. 87, 88 and 106" which is effective for financial statements beginning
after December 15, 1997. The adoption of this statement is not expected to
effect the Company's financial condition or results of operations as it is a
disclosure only pronouncement. Effective January 1, 1998, the Company adopted
SFAS No. 130 "Reporting Comprehensive Income", the effect of which was
immaterial to the financial statements. SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information", was adopted effective
January 1, 1998. The related footnote disclosures will be incorporated into
the Company's Form 10-K filing for the year ended December 31, 1998 as
required.
NOTE 5 - EARNINGS PER SHARE
Basic net income per common share is computed by dividing net income by the
weighted average number of common shares outstanding for the period. Diluted
net income per common share is computed by dividing net income by the weighted
average number of common shares, and if applicable, common stock equivalents
which would arise from the exercise of stock options and warrants.
A reconciliation of the shares used in the computation of earnings per share
follows (in thousands):
March 28, 1998 March 29, 1997
-------------- ---------------
Basic shares 6,274 6,185
Effect of warrants
and options 393 219
-------------- ---------------
Diluted shares 6,667 6,404
============== ===============
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Results of Operations
Three Months Ended March 28, 1998 Compared to Three Months Ended March 29,
1997
Net sales for the first quarter of 1998 of $61.3 million were $17.6
million, or 40%, higher than the $43.7 million in the comparable period of
1997 due, in part, to the shipment of Mustang skid loaders in 1998 as a result
of the fourth quarter 1997 acquisition of this product line. Construction
equipment net sales increased 64% to $34.1 million in the first quarter of
1998 from $20.7 million in the first quarter of 1997. The increase in sales
of construction equipment was due primarily to higher telescopic handler
shipments and the aforementioned Mustang skid loader shipments. Agriculture
equipment sales increased 19% to $27.2 million in the first quarter of 1998
from $23.0 million in the first quarter of 1997. The increase was due
primarily to increased shipments of skid loaders and shipments of a new,
larger model of disc mower conditioner. Of the Company's total net sales
reported for the first quarter of 1998, $9.7 million were made outside of the
United States.
Gross profit increased $2.9 million, or 22%, during the first quarter of
1998 versus the comparable period of 1997 due primarily to increased sales
volume. Gross profit as a percent of net sales decreased to 25.9% for the
first quarter of 1998 from 29.7% in the comparable period of 1997. Gross
profit as a percent of net sales for construction equipment decreased to 24.4%
in the first quarter of 1998 from 30.7% in the first quarter of 1997. This
decrease was due primarily to: 1) shipments of Mustang skid loaders which have
lower gross margins than other Company sales of construction equipment; 2)
competitive pressures restricting price increases to lower levels than the
cost increases incurred by the Company; and 3) certain inefficiencies related
to the start-up manufacturing of the new telescopic handler product. Gross
profit as a percent of net sales for agriculture equipment decreased to 27.7%
in the first quarter of 1998 from 28.8% for the first quarter of 1997. The
primary reason for the decrease was the impact of a change in the mix of
products shipped in the first quarter of 1998 versus products shipped in
comparable 1997.
Selling, general and administrative expenses increased $2 million, or
23%, during the first quarter of 1998 versus the comparable period of 1997 due
primarily to operating costs related to Mustang skid loader operations. As a
percent of net sales, selling, general and administrative expenses decreased
to 17.7% of net sales during the first quarter of 1998 versus 20.2% in the
comparable period of 1997.
First quarter 1998 income from operations of $5.0 million was 20% higher
than the $4.2 million for the first quarter of 1997.
Interest expense increased $708,000, to $1,176,000 in the first quarter
of 1998 from $468,000 in the first quarter of 1997. The increase was a result
of an increase in average debt outstanding to $56.1 million in the first
quarter of 1998 versus $21.3 million in the first quarter of 1997. The
average rate of interest paid by the Company in the first quarter of 1998
remained constant at 8.1% in relation to the comparable period of 1997. The
increase in the average debt outstanding was primarily the result of the
indebtedness related to the Mustang acquisition.
Financial Condition
The Company's working capital was $87.0 million at March 28, 1998, as
compared to $73.5 million at December 31, 1997, and $62.4 million at March 29,
1997. The increase since December 31, 1997 resulted primarily from seasonal
increases in accounts receivable. The working capital increase from March 29,
1997 was due primarily to the working capital associated with the acquired
Mustang operations.
Capital expenditures for property, plant and equipment during the first
quarter of 1998 were approximately $918,000. The Company plans to make a
total of approximately $5.3 million of capital expenditures in 1998.
Outstanding commitments as of March 28, 1998 totaled approximately $400,000.
As of March 28, 1998, the weighted average interest rate paid by the
Company on outstanding borrowings under its line of credit facility was 7.7%.
The Company had available unused borrowing capacity of $24.1 million, $28.3
million and $50.6 million under the line of credit facility at March 28, 1998,
December 31, 1997, and March 29, 1997, respectively. At March 28, 1998,
December 31, 1997, and March 29, 1997, the borrowings outstanding under the
line of credit facility were $49.3 million, $39.4 million and $13.7 million,
respectively.
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 substantially
all contracts whether or not sold. At March 28, 1998, the Company serviced
$66.3 million of such contracts, of which $53.2 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 March 28, 1998 was $81.5 million. This was $14.0
million higher than the $67.5 million of shareholders' equity at March 29,
1997, due primarily to income earned from March 30, 1997 through March 28,
1998.
Certain matters discussed in the Quarterly Report on Form 10-Q are
"forward-looking statements" intended to qualify for the safe harbor from
liability established by the Private Securities Litigation Reform Act of 1995.
These forward-looking statements can generally be identified as such because
the context of statement will include such words as the Company "believes,"
"anticipates" or "expects," or words of similar import. Similarly, statements
that described the Company's future plans, objectives or goals are also
forward-looking statements. The forward-looking statements are subject to
certain risks and uncertainties which could cause actual results to differ
materially from those currently anticipated. Such risks and uncertainties
include competitive conditions in the markets served by the Company, general
economic conditions, interest and foreign currency fluctuations, and the
ability of the Company to successfully integrate the Mustang operations.
Shareholders, potential investors and other readers are urged to consider
these factors carefully in evaluating the forward-looking statements and are
cautioned not to place undue reliance on such forward-looking statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable
<PAGE>
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On March 3, 1998, the Company issued an aggregate of 130,000 shares
of common stock to entities controlled by James H. Dahl pursuant to
the exercise of Common Stock Purchase Warrants (the "Warrants").
The Warrants, which were originally issued to the State of Wisconsin
Investment Board in March 1993, had a per share exercise price of
$7.00. The Company realized an aggregate of $910,000 upon exercise
of the Warrants. The shares of common stock issued upon exercise of
the Warrants were issued in a private placement exempt from
registration under Section 4(2) of the Securities Act of 1933, as
amended.
Item 5. Other Information
On April 29, 1998, John W. Findley resigned as a director of the
Company in order to devote more time to his philanthropic
activities.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
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 March 28, 1998.
<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: May 11, 1998 By: /s/ William D. Gehl
William D. Gehl
Chairman, President and
Chief Executive Officer
Date: May 11, 1998 By: /s/ Kenneth P. Hahn
Kenneth P. Hahn
Vice President of Finance
and Treasurer (Principal
Financial and Accounting
Officer)
<PAGE>
GEHL COMPANY
FORM 10-Q
March 28, 1998
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 condensed consolidated balance sheet at March 28, 1998 and condensed
consolidated statements of income for the three-month period ended March 28,
1998 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> MAR-28-1998
<CASH> 3049
<SECURITIES> 0
<RECEIVABLES> 96272
<ALLOWANCES> 0<F1>
<INVENTORY> 32793
<CURRENT-ASSETS> 137915
<PP&E> 73654
<DEPRECIATION> 38713
<TOTAL-ASSETS> 196583
<CURRENT-LIABILITIES> 50939
<BONDS> 58767<F2>
<COMMON> 640
0
0
<OTHER-SE> 80887
<TOTAL-LIABILITY-AND-EQUITY> 196583
<SALES> 61288
<TOTAL-REVENUES> 61288
<CGS> 45437
<TOTAL-COSTS> 45437
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1176
<INCOME-PRETAX> 4130
<INCOME-TAX> 1466
<INCOME-CONTINUING> 2664
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2664
<EPS-PRIMARY> .42<F3>
<EPS-DILUTED> .40
<FN>
<F1>The 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>The EPS under the "EPS-Primary" tag represents Basic Earnings Per Share.
</FN>
</TABLE>
