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 April 1, 2000
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
Wisconsin 39-0300430
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
143 Water Street, West Bend, WI 53095
(Address of principal (Zip code)
executive office)
(262) 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 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 April 1, 2000
Common Stock, $.10 Par Value 5,567,402
<PAGE>
GEHL COMPANY
FORM 10-Q
April 1, 2000
REPORT INDEX
Page No.
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Statements of Income for the
Three-Month Periods Ended April 1, 2000 and
April 3, 1999 . . . . . . . . . . . . 3
Condensed Consolidated Balance Sheets at April 1, 2000,
December 31, 1999, and April 3, 1999 . 4
Condensed Consolidated Statements of Cash Flows for
the Three-Month Periods Ended April 1, 2000 and
April 3, 1999 . . . . . . . . . . . . 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. Quantitative and Qualitative Disclosures about Market Risk 11
PART II. OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K . 11
SIGNATURES 12
<PAGE>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data; unaudited)
<CAPTION>
Three Months Ended
April 1, 2000 April 3, 1999
------------- -------------
<S> <C> <C>
NET SALES $70,696 $68,963
Cost of goods sold 51,414 50,187
------- -------
GROSS PROFIT 19,282 18,776
Selling, general and
administrative expenses 11,744 12,539
------- -------
INCOME FROM OPERATIONS 7,538 6,237
Interest expense (873) (777)
Interest income 380 413
Other expense, net (785) (440)
------- -------
INCOME BEFORE INCOME TAXES 6,260 5,433
Income tax provision 2,191 1,929
------- -------
NET INCOME $ 4,069 $ 3,504
======= =======
EARNINGS PER SHARE
Diluted $ .70 $ .52
Basic $ .73 $ .54
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
<TABLE>
GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
<CAPTION>
April 1, December 31, April 3,
2000 1999 1999
(Unaudited) (Unaudited)
ASSETS
<S> <C> <C> <C>
Cash $ 3,254 $ 1,010 $ 3,688
Accounts receivable-net 86,190 68,551 78,575
Finance contracts receivable-net 13,364 12,074 9,709
Inventories 42,219 35,206 36,015
Deferred tax assets 8,431 8,431 7,138
Other current assets 557 511 1,324
-------- -------- --------
Total Current Assets 154,015 125,783 136,449
-------- -------- --------
Property, plant and equipment-net 38,809 37,028 33,910
Finance contract receivable-net,
non-current 8,041 7,311 5,805
Intangible assets 15,521 15,706 16,267
Other assets 8,205 8,332 6,998
-------- -------- --------
TOTAL ASSETS $224,591 $194,160 $199,429
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current portion of long-term debt
obligations $ 427 $ 519 $ 562
Accounts payable 29,536 25,077 26,447
Accrued liabilities 31,941 30,703 30,499
-------- -------- --------
Total Current Liabilities 61,904 56,299 57,508
-------- -------- --------
Line of credit facility 44,117 22,038 25,329
Long-term debt obligations 9,010 9,059 9,445
Other long-term liabilities 5,976 5,391 5,372
Deferred income taxes 3,949 3,949 3,943
-------- -------- --------
Total Long-Term Liabilities 63,052 40,437 44,089
-------- -------- --------
Common stock, $.10 par value,
25,000,000 shares authorized,
5,567,402, 5,645,620 and 6,468,411
shares outstanding, respectively 557 565 647
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 9,444 11,294 28,550
Retained earnings 90,537 86,468 69,787
Accumulated other comprehensive
loss (903) (903) (1,152)
-------- -------- --------
Total Shareholders' Equity 99,635 97,424 97,832
-------- -------- --------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $224,591 $194,160 $199,429
======== ======== ========
</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>
Three Months Ended
April 1, April 3,
2000 1999
---------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income $ 4,069 $ 3,504
Adjustments to reconcile net income to net cash
(used for) provided by operating activities:
Depreciation 1,250 1,075
Amortization 199 199
Proceeds from sales of finance contracts 14,796 14,880
Increase in finance contracts receivable (17,681) (15,310)
Cost of sales of finance contracts 865 506
Net changes in remaining working capital items (19,001) (6,440)
-------- --------
Net cash used for operating activities (15,503) (1,586)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment additions, net (3,031) (843)
Other assets 113 (757)
-------- --------
Net cash used for investing activities (2,918) (1,600)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit facility 22,079 5,970
Proceeds from issuance of common stock 273 223
Treasury stock purchases (2,131) -
Other 444 (206)
-------- --------
Net cash provided by financing activities 20,665 5,987
-------- --------
Net increase in cash 2,244 2,801
Cash, beginning of period 1,010 887
-------- --------
Cash, end of period $ 3,254 $ 3,688
======== ========
Supplemental disclosure of cash flow information:
Cash paid for the following:
Interest $ 743 $ 703
Income Taxes $ 886 $ 796
</TABLE>
The accompanying notes are an integral part of the financial statements.
<PAGE>
GEHL COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
April 1, 2000
(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 April 1, 2000 and April 3, 1999 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 April 1, 2000 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, 1999 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):
April 1, December 31, April 3,
2000 1999 1999
Raw materials and supplies $ 17,741 $ 17,371 $ 16,390
Work-in-process 5,655 5,767 6,637
Finished machines and parts 38,018 31,263 32,384
-------- -------- --------
Total current cost value 61,414 54,401 55,411
Adjustment to LIFO basis (19,195) (19,195) (19,396)
-------- -------- --------
$ 42,219 $ 35,206 $ 36,015
======== ======== ========
NOTE 4 ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board (FASB) has issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Investments and Hedging Activities" which was originally effective for fiscal
quarters of fiscal years beginning after June 15, 1999. In June 1999, the
effective date was delayed by one year and will be effective January 1, 2001
for the Company. Due to the Company's current limited use of derivative
instruments, the adoption of this statement is not expected to materially
affect the Company's financial condition or results of operations.
NOTE 5 EARNINGS PER SHARE AND COMPREHENSIVE INCOME
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.
A reconciliation of the shares used in the computation of earnings per
share follows (in thousands):
April 1, 2000 April 3, 1999
------------- -------------
Basic shares 5,599 6,456
Effect of options 191 233
----- -----
Diluted shares 5,790 6,689
===== =====
Accumulated other comprehensive loss is comprised entirely of minimum
pension liability adjustments. Comprehensive income equaled net income for
the three months ended April 1, 2000 and April 3, 1999, as the minimum pension
liability amount did not change from the respective prior year-end amount.
NOTE 6 BUSINESS SEGMENTS
The Company operates in two business segments: Construction equipment and
Agricultural equipment. The long-term financial performance of the Company's
reportable segments are affected by separate economic conditions and cycles.
The segments are managed separately based on the fundamental differences in
their operations. Following is selected segment information (in thousands):
April 1, 2000 April 3, 1999
Net Sales:
Construction $ 40,303 $ 40,246
Agricultural 30,393 28,717
-------- --------
Consolidated $ 70,696 $ 68,963
======== ========
Income from Operations:
Construction $ 4,320 $ 4,794
Agricultural 3,218 1,443
-------- --------
Consolidated $ 7,538 $ 6,237
======== ========
NOTE 7 STOCK REPURCHASES
In March 2000, the Company's Board of Directors authorized a repurchase
plan providing for the repurchase of up to an additional 325,000 shares of the
Company's outstanding common stock. As of April 1, 2000, no shares had been
repurchased under this authorization. In March 1999, a repurchase plan
relating to up to 325,000 shares of the Company s outstanding common stock was
authorized. As of April 1, 2000, all of the authorized shares under that plan
had been repurchased at an aggregate cost of $5.8 million.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Results of Operations
Three Months Ended April 1, 2000 Compared to Three Months Ended April 3, 1999
Net sales for the first quarter of 2000 of $70.7 million were $1.7 million,
or 3%, higher than the $69.0 million in the comparable period of 1999.
Construction equipment net sales increased to $40.3 million in the first
quarter of 2000 from $40.2 million in the first quarter of 1999. Shipments of
telescopic handlers were below last year's first quarter levels due to a
reduction in retail sales activity of telescopic handlers throughout the
entire industry during the quarter. However, construction sales benefited
from increased shipments of skid loaders and shipments of mini-excavators,
which were introduced in mid-1999.
Agricultural equipment sales increased 6% to $30.4 million in the first
quarter of 2000 from $28.7 million in the first quarter of 1999. The increase
was due primarily to the shipments of the newly introduced 15' and 18' disc
mower conditioners combined with increased shipment levels, over the first
quarter of 1999, for skid loaders and manure handling equipment.
Of the Company's total net sales reported for the first quarter of 2000,
$10.8 million were made outside of the United States compared with $8.6
million in the comparable period of 1999. The increase was due primarily to
strong demand for shipments to Europe and Canada.
Given the segments that the Company ships into, there exists some
seasonality in sales, primarily in the Company's second and third quarter
which historically have tended to be its strongest quarters for sales, while
sales levels have historically tended to be lower in the first and fourth
quarters.
Gross profit increased $506,000, or 3%, during the first quarter of 2000
versus the comparable period of 1999, due to increased sales volume. Gross
profit as a percent of net sales increased to 27.3% for the first quarter of
2000 from 27.2% in the comparable period of 1999. Gross profit as a percent
of net sales for Construction equipment decreased to 25.3% in the first
quarter of 2000 from 26.6% in the first quarter of 1999. The decrease in
Construction equipment gross margin was a function of increased export and
mini-excavator shipments, which sales are, generally, at lower gross margins
than other construction equipment, and decreased telescopic handler sales,
which sales are at higher gross margins than other construction equipment.
Gross profit as a percent of net sales for Agricultural equipment increased to
29.9% in the first quarter of 2000 from 28.0% for the first quarter of 1999.
The primary reason for the increase was the impact of a change in the mix of
products shipped in 2000 versus products shipped in 1999 and improved
efficiencies at the manufacturing plants.
Selling, general and administrative expenses decreased $795,000, or 6%,
during the first quarter of 2000 versus the comparable period of 1999 due,
primarily to lower sales related costs for Agricultural equipment in 2000
versus 1999. As a percent of net sales, selling, general and administrative
expenses decreased to 16.6% of net sales during the first quarter of 2000
versus 18.2% in the comparable period of 1999.
Income from operations in the first quarter of 2000 was $7.5 million, 21%
higher than the $6.2 million for the first quarter of 1999.
Interest expense increased $96,000 to $873,000 in the first quarter of 2000
from $777,000 in the first quarter of 1999. The increase was a result of an
increase in average debt outstanding to $43.8 million in the first quarter of
2000 versus $35.2 million in the first quarter of 1999. The average rate of
interest paid by the Company increased to 7.9% in the first quarter of 2000
from 7.7% for the first quarter of 1999.
Other expense increased $345,000, to $785,000 in the first quarter of 2000
from $440,000 in the first quarter of 1999. This was primarily caused by
increasing costs of sales of finance contracts due to lower finance rates
offered to Gehl finance customers combined with increasing discount rates used
in selling finance contracts to third parties resulting from the general trend
of overall interest rates.
First quarter 2000 net income of $4.1 million was a 16% increase from $3.5
million in the first quarter of 1999. Diluted earnings were $.70 per share
for the first quarter of 2000 versus $.52 per share in 1999.
Financial Condition
The Company's working capital was $92.1 million at April 1, 2000, as
compared to $69.5 million at December 31, 1999, and $78.9 million at April 3,
1999. The increase since December 31, 1999 was due primarily to seasonal
increases in accounts receivable and factory inventories. The increase from
April 3, 1999 in accounts receivables and inventories was primarily related to
the new mini-excavator product line.
Capital expenditures for property, plant and equipment during the first
quarter of 2000 were approximately $3.0 million. The Company plans to make up
to $20 million in capital expenditures in 2000, including approximately $9.8
million to complete the expansion of the two South Dakota manufacturing
facilities and to add equipment necessary to increase production levels in the
manufacture of skid loaders and telescopic handlers. The Company believes its
present facilities, with these expansion projects, will be sufficient to
provide adequate capacity for its operations in 2000. Outstanding commitments
as of April 1, 2000 totaled approximately $2.4 million.
As of April 1, 2000, the weighted-average interest rate paid by the Company
on outstanding borrowings under its line of credit facility was 8.1%. The
Company had available unused borrowing capacity of $29.0 million, $49.8
million and $47.9 million under the line of credit facility at April 1, 2000,
December 31, 1999, and April 3, 1999, respectively. At April 1, 2000,
December 31, 1999, and April 3, 1999, the borrowings outstanding under the
line of credit facility were $44.1 million, $22.0 million and $25.3 million,
respectively. The increase in indebtedness in relation to April 3, 1999 is
due to repurchase of Company stock, working capital requirements and capital
expenditures offset by operating cash flow generated from April 4, 1999 to
April 1, 2000.
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 April 1, 2000, the Company serviced
$113.2 million of such contracts, of which $90.3 million were owned by other
parties. The Company believes that it has sufficient capacity to sell its
retail finance contracts for the foreseeable future.
At April 1, 2000, shareholders' equity had increased $1.8 million to $99.6
million from $97.8 million at April 3, 1999. This increase primarily
reflected the impact of the income earned from April 4, 1999 to April 1, 2000
offset by $20.6 million expended to repurchase Company stock.
In March 2000, the Company's Board of Directors authorized a repurchase
plan providing for the repurchase of up to an additional 325,000 shares of the
Company's outstanding common stock. As of April 1, 2000, no shares had been
repurchased under this authorization. In March 1999, a repurchase plan
relating to up to 325,000 shares of the Company's outstanding common stock was
authorized. As of April 1, 2000, all of the authorized shares under that plan
had been repurchased at an aggregate cost of $5.8 million. The Company
repurchased 120,400 shares of its common stock in the open market at an
aggregate cost of $2.1 million during the quarter ended April 1, 2000.
Accounting Pronouncements
The Financial Accountings Standards Board (FASB) has issued Statement of
Financial Accounting Standards (SFAS) No. 133, "Accounting for Derivative
Investments and Hedging Activities" which was originally effective for fiscal
quarters of fiscal years beginning after June 15, 1999. In June 1999, the
effective date was delayed by one year and will be effective January 1, 2001
for the Company. Due to the Company's current limited used of derivative
instruments, the adoption of this statement is not expected to materially
affect the Company's financial condition or results of operations.
Forward-Looking Statements
Certain matters discussed in this quarterly report are "forward-looking
statements" intended to qualify for the safe harbors 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 the statement will include such words as the Company "believes",
"anticipates" or "expects", or words of similar import. Similarly, statements
that describe 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, changes
in the Company's plans regarding capital expenditures, general economic
conditions, changes in commodity prices, especially milk, market acceptance of
existing and new products offered by the Company, changes in the cost of raw
materials and component parts purchased by the Company, and interest rate and
foreign currency fluctuations. 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
There are no material changes to the information provided in response to
this item as set forth in the Company s Form 10-K for the year ended December
31, 1999 as filed with the Securities and Exchange Commission.
PART II OTHER INFORMATION
Item 6. Exhibits and Report 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 April 1, 2000.
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 12, 2000 By: /s/ William D. Gehl
William D. Gehl
Chairman of the Board, President
and Chief Executive Officer
Date: May 12, 2000 By: /s/ Kenneth P. Hahn
Kenneth P. Hahn
Vice President of Finance,
Treasurer and Chief Financial
Officer (Principal Financial
and Accounting Officer)
<PAGE>
GEHL COMPANY
FORM 10-Q
April 1, 2000
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 April 1, 2000 and condensed
consolidated statements of income for the three-month period ended April 1,
2000 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-31-2000
<PERIOD-START> JAN-1-2000
<PERIOD-END> APR-01-2000
<CASH> 3254
<SECURITIES> 0
<RECEIVABLES> 99554
<ALLOWANCES> 0<F1>
<INVENTORY> 42219
<CURRENT-ASSETS> 154015
<PP&E> 83823
<DEPRECIATION> 45014
<TOTAL-ASSETS> 224591
<CURRENT-LIABILITIES> 61904
<BONDS> 53127<F2>
<COMMON> 557
0
0
<OTHER-SE> 99078
<TOTAL-LIABILITY-AND-EQUITY> 224591
<SALES> 70696
<TOTAL-REVENUES> 70696
<CGS> 51414
<TOTAL-COSTS> 51414
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 873
<INCOME-PRETAX> 6260
<INCOME-TAX> 2191
<INCOME-CONTINUING> 4069
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4069
<EPS-BASIC> .73<F3>
<EPS-DILUTED> .70
<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>
