FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_________________________
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1999
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 (I.R.S. Employer Identification No.)
incorporation or organization)
143 Water Street, West Bend, WI 53095
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (262) 334-9461
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 par value
(Title of class)
Rights to Purchase Preferred Shares
(Title of class)
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [X]
Aggregate market value of voting stock held by non-affiliates of the
registrant: $96,109,965 at February 14, 2000.
Number of shares outstanding of each of the registrant's classes of
common stock, as of February 14, 2000:
Class Shares Outstanding
Common Stock, $.10 Par Value 5,614,834
DOCUMENTS INCORPORATED BY REFERENCE
Gehl Company 1999 Annual Report to Shareholders (Parts I and II)
Gehl Company Proxy Statement for the 2000 Annual Meeting of Shareholders
(to be filed with the Commission under Regulation 14A within 120
days after the end of the registrant's fiscal year and, upon such
filing, to be incorporated by reference into Part III)
GEHL COMPANY
_________________
INDEX TO
ANNUAL REPORT ON FORM 10-K
For The Year Ended December 31, 1999
Page
Part I
Item 1 Business . . . . . . . . . . 1
Item 2 Properties . . . . . . . . . 7
Item 3 Legal Proceedings . . . . 7
Item 4 Submission of Matters to a Vote of Security Holders 8
Executive Officers of the Registrant 8
Part II
Item 5 Market for Registrant's Common Equity and Related
Shareholder Matters . . . . . 10
Item 6 Selected Financial Data . . . . 10
Item 7 Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 7A Quantitative and Qualitative Disclosures About
Market Risk . . . . . . . . . 10
Item 8 Financial Statements and Supplementary Data 10
Item 9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 10
Part III
Item 10 Directors and Executive Officers of the Registrant 11
Item 11 Executive Compensation . . . . 11
Item 12 Security Ownership of Certain Beneficial Owners
and Management . . . . . . . 11
Item 13 Certain Relationships and Related Transactions 11
Part IV
Item 14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K . . . . . . . . . . . . 12
Signatures . . . . . . . . . . 13
<PAGE>
PART I
Item 1. Business.
Overview
Gehl Company (the "Company" or "Gehl") designs, manufactures, sells and
finances equipment used in the light construction equipment and the
agriculture equipment industries. Construction equipment is comprised of skid
steer loaders, telescopic handlers, asphalt pavers, mini-excavators, and mini-
loaders and is sold to contractors, sub-contractors, owner operators, rental
stores and municipalities. Agriculture equipment is sold to customers in the
dairy and livestock industries, and includes a broad range of products
including haymaking, forage harvesting, materials handling (skid steer loaders
and attachments), manure handling and feedmaking equipment. The Company
believes that it is one of the largest non-tractor agriculture equipment
manufacturers in North America.
On October 2, 1997, the Company acquired all of the issued and outstanding
shares of capital stock of Brunel America, Inc. and Subsidiaries, including
Mustang Manufacturing Company, Inc. ("Mustang") from Brunel Holdings, plc.
Mustang designs, manufactures and sells skid steer loaders and related
attachments. Gehl acquired the Brunel America, Inc. stock for $26.7 million;
and entered into a five year non-competition agreement with the seller
pursuant to which Gehl paid $1.0 million. The Company borrowed $27.7 million
under its existing credit facility to fund the acquisition. The acquisition
has been accounted for as a purchase transaction and the results of the
Mustang operation have been included in the Company's operating results since
the date of the acquisition.
Construction equipment is manufactured in Minnesota, Pennsylvania and in
two South Dakota facilities and Agriculture equipment is manufactured in
plants in Wisconsin, Pennsylvania and South Dakota. The Company was founded
in 1859 and was incorporated in the State of Wisconsin in 1890.
The statements which are not historical facts contained in this Form 10-K
and other information provided by the Company are forward-looking statements
intended to qualify for the safe harbors from liability established by the
Private Securities Litigation Reform Act of 1995. Such statements are subject
to certain risks and uncertainties which could cause actual results to differ
materially from those currently anticipated. These factors include, without
limitation, 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. These factors should be
considered in evaluating the forward-looking statements, and undue reliance
should not be placed on such statements. The Company undertakes no obligation
to update publicly such statements to reflect subsequent events or
circumstances.
Business Segments
The Company operates in two business segments, construction equipment and
agriculture equipment. The following table shows certain information relating
to the Company's segments:
(dollars in thousands)
Years ended December 31,
1997 1998 1999
Amount % Amount % Amount %
Net sales:
Construction
Equipment $101,635 51.6% $156,008 59.5% $170,364 59.6%
Agriculture
Equipment 95,420 48.4 106,211 40.5 115,458 40.4
-------- ----- -------- ----- -------- -----
Total $197,055 100% $262,219 100% $285,822 100%
Income from
operations:
Construction
Equipment $16,277 74.5% $19,384 71.1% $23,661 67.5%
Agriculture
Equipment 5,571 25.5 7,894 28.9 11,396 32.5
-------- ----- -------- ----- -------- -----
Total $21,848 100% $27,278 100% $35,057 100%
The Company had no intersegment sales or transfers during the years
set forth above. For segment information with respect to identifiable assets,
depreciation/amortization and capital expenditures for the construction
equipment and agriculture equipment markets, see Note 13 of "Notes to
Consolidated Financial Statements", included on Page 27 of the Gehl Company
1999 Annual Report to Shareholders, which pages are incorporated by reference
herein.
Construction Equipment
Products:
Construction equipment is marketed in the following five product areas:
1. Skid Steer Loaders - Six models of Gehl skid steer loaders are offered
which feature a choice of hand-operated T-bar controls, hand only or
hand and foot controls; and four models of Mustang skid steer loaders
are offered which feature a choice of T-bar, hand only and hand/foot
controls. The skid steer loader, with its fixed-wheel four-wheel
drive, is used principally for material handling duties. The skid
steer loader may also be used with a variety of attachments, including
dirt, snow and cement buckets, pallet forks and hydraulically-operated
devices such as cold planers, backhoes, brooms, trenchers,
snowblowers, industrial grapples, tree diggers, concrete breakers,
augers and many more.
2. Telescopic Handlers - Gehl markets nine models of Dynalift telescopic
handlers and one model of the Dyna-Handler, rough-terrain telescopic
forklifts, all with digging capabilities. These handlers are designed
to handle heavy loads (up to 12,000 pounds) reaching horizontally and
vertically (up to 55 ft.) for use by a variety of customers, including
masons, roofers, building contractors and farmers.
3. Asphalt Pavers - Four models of Power Box pavers are marketed by
Gehl. These pavers allow variable paving widths from 4 1/2 to 13 feet
and are used for both commercial and municipal jobs such as county and
municipal road, sidewalk, golf cart path, jogging trail, parking lot,
driveway, trailer court and tennis court preparation.
4. Mini-excavators - Twelve models of mini-excavators are marketed under
both Gehl and Mustang brand names. The units range in size from 1.5
metric ton to 8 metric ton. All units come standard with auxiliary
hydraulics. An industry exclusive leveling system is offered on a
number of models. These units can be equipped with a wide variety of
attachments.
5. Mini-loaders - Gehl markets two models, one rigid frame and one
articulated unit, of mini-loaders. The units are powered by a 20 h.p.
engine and are the only mini-loaders offered in the industry where the
operator is seated on the unit. Gehl believes that it offers the only
mini-loader in the industry with articulated frame and telescopic boom
features which enable the operator to complete a task without
disturbing the underlying grass or soil.
Marketing and Distribution:
The Company maintains a separate distribution system for Construction
equipment. The Company markets its Construction equipment in North America
through 298 independent dealers (with 708 outlets) and worldwide through 80
distributors. The Company has no Company-owned dealers and its dealers may
sell equipment produced by other construction equipment manufacturers. The
top ten dealers and distributors of Construction equipment accounted for
approximately 18% of the Company's sales for the year ended December 31, 1999;
however, no single dealer or distributor accounted for more than 4% of the
Company's sales for that period. Sales of the Construction equipment skid
steer loader product line accounted for more than 25% of the Company's net
sales in 1997, 1998 and 1999. Sales of the Construction equipment telescopic
handler product line accounted for more than 21% of the Company's net sales in
1997, 1998 and 1999.
The Company believes that maintenance and expansion of its dealer network
is important to its success in the light construction equipment market. The
Company also believes that it needs to continue to further develop sales
relationships with key large rental companies to meet the demands of the
changing marketplace. Various forms of support are provided for its
Construction equipment dealers, including sales and service training, and, in
the United States and Canada, floor plan financing for its dealers and retail
financing for both its dealers and their customers. The light construction
equipment dealers in North America are also supported by district sales
managers who provide a variety of services, including training, equipment
demonstrations and sales, warranty and service assistance, and regional field
service representatives to assist in training and routine dealer service
support functions.
Industry and Competition:
Gehl's Construction equipment product lines face competition in each of
their markets. In general, each line competes with a small group of from
seven to twelve different companies. The Company competes within the light
construction equipment markets based primarily on price, quality, service and
distribution.
The primary markets for Gehl's Construction equipment outside of North
America are in Europe, Australia, Latin America, the Middle East and the
Pacific Rim. The Company believes it is a significant competitor in the skid
steer loader market in most of these markets.
Agriculture Equipment
Products:
Agriculture equipment is marketed in five product areas.
1. Haymaking - Gehl's haymaking line includes a broad range of products
used to harvest and process hay crops for livestock feed. The
Company offers disc mowers, a wide range of pull-type disc mower
conditioners, hay rakes and variable-chamber round balers.
2. Forage Harvesting - The Company believes that it currently
manufactures and sells one of the industry's most complete lines of
forage harvesting equipment, including forage harvesters, wagons and
blowers.
3. Material Handling - This line consists of six different models of
Gehl skid steer loaders and the Dyna-Handler forklift. The skid
steer loader is a compact, fixed-wheel four-wheel drive unit
typically equipped with a bucket or fork and is used for moving a
variety of material. The Dyna-Handler is a rough-terrain telescopic
forklift with digging capabilities. The skid steer loader and Dyna-
Handler forklift are marketed by dealers who handle Agriculture
equipment and by dealers who handle Construction equipment.
4. Manure Handling - Gehl offers a broad range of manure spreaders,
including the Scavenger "V-Tank" side-discharge manure spreader
which incorporates a hydraulically controlled auger allowing the
spreader to handle a wide range of semi-liquid waste products,
including municipal sludge. For handling mostly solid manure, the
Company also markets four models of rear-discharge box spreaders.
5. Feedmaking - The Company believes that it offers the broadest line of
portable feedmaking equipment in the industry. The Company offers the
Gehl Mix-All line of grinder mixers and a line of mixer feeders and
a feeder wagon for both mixing feed rations and delivery to livestock
feeders.
Marketing and Distribution:
In North America, Gehl's agricultural equipment is sold through
approximately 385 geographically dispersed dealers (with 423 outlets). Fifty-
four of these dealers are located in Canada. Agriculture equipment is also
marketed through 21 distributors in Europe, the Middle East, the Pacific Rim
and Latin America. The Company has no Company-owned dealers and its dealers
may sell equipment produced by other agricultural equipment manufacturers.
It has been and remains the Company's objective to increase the share of
Gehl products sold by a Gehl dealer. Gehl is not dependent for its sales on
any specific Agriculture dealer or group of dealers. The top ten dealers and
distributors in Agriculture equipment accounted for approximately 5% of the
Company's sales for the year ended December 31, 1999 and no one dealer or
distributor accounted for over .7% of the Company's sales during that period.
Sales of the Agriculture equipment skid steer loader product line accounted
for more than 13% of the Company's net sales in 1997, 1998 and 1999.
The Company provides various forms of support for its dealer network,
including sales and service training. The Company also provides floor plan
and retail finance support for products sold by its dealers in the United
States and Canada.
The Company employs district sales managers to assist its agricultural
dealers in the promotion and sale of its product and regional service managers
to assist in warranty and servicing matters. The Company currently operates
three service parts distribution centers located in: Memphis, Tennessee;
Syracuse, New York; and Minneapolis, Minnesota. The Company also contracts
with two service parts distribution locations in Rockwood, Ontario and
Saskatoon, Saskatchewan.
Industry and Competition:
The agriculture equipment industry has seen significant consolidation and
retrenchment since 1980. This has served to reduce the total number of
competitors, to strengthen certain major competitors, and to reduce the
strength of certain other companies in the industry. The Company competes
within the agriculture equipment industry based primarily on products sold,
price, quality, service and distribution.
The agriculture equipment markets in North America are highly competitive
and require substantial capital outlays. The Company has four major
competitors as well as numerous other limited line manufacturers and
importers. The largest manufacturers in the agriculture equipment industry,
the Company's major competitors, generally produce tractors and combines as
well as a full line of tillage and planting equipment. Such manufacturers
also market, to varying degrees, haymaking, forage harvesting, materials
handling, manure handling and/or feedmaking equipment, the areas in which the
Company's agriculture products are concentrated. No single competitor
competes with the Company in each of its product lines. The Company believes
that it is the only non-tractor manufacturer in the industry that produces
equipment in each of these product lines. Smaller manufacturers which compete
with the Company produce only a limited line of specialty items and often
compete only in regional markets.
Gehl's agriculture equipment is primarily distributed to customers in the
dairy and livestock industries. Compared to a more volatile period in the
late 1980's and early 1990's, milk prices, cash income, land values, and the
general economy were more favorable and stable for the dairy farmer in the mid
through late 1990's. These more favorable conditions and lower debt to equity
ratios as compared with those generally experienced in most of the 1980's led
to increased buying by farmers of agriculture equipment in 1993 and 1994.
However, declines in the total number of farms prevented total industry demand
to reach its 1989-1993 volume peaks in most product areas. In 1995-1999,
industry market demand varied, with demand for the Company's products
generally lower than its peak years.
Approximately 90% of the Company's agriculture dealers also carry the
tractor and combine product lines of a major manufacturer. In addition to
selling the tractors and combines of a major manufacturer, many of these
dealers carry the major manufacturer's entire line of products, some of which
directly compete with Gehl's products offered. Dealers of Gehl's Agriculture
equipment also market equipment manufactured by limited line manufacturers
which compete with specific product lines offered by the Company.
The primary markets for Gehl's Agriculture equipment outside of North
America are in Europe and the Pacific Rim. In these markets, the Company
competes with both agriculture equipment manufacturers from the United States,
some of which have manufacturing facilities in foreign countries, and foreign
manufacturers. The Company does not believe, however, that it is presently a
significant competitor in any of these foreign markets.
Backlog
The backlog of unfilled equipment orders (which orders are subject to
cancellation in certain circumstances) as of December 31, 1999 was $20.0
million versus $28.0 million at December 31, 1998. Virtually all orders in
the backlog at December 31, 1999 are expected to be shipped in 2000. The
decreased backlog at December 31, 1999 was due to the reduced levels of
backlog for both Agriculture equipment and Construction equipment. This trend
of decreasing backlog which, in general, has been occurring since 1994, is
believed to be a function of dealer order patterns, pursuant to which dealers
place orders at points in time closer to their expected need and due to the
increased manufacturing capacity of the Company's plants, which has allowed
the Company to supply equipment in a more expedited fashion.
Given the segments that the Company ships into, there exists some
seasonality in its sales trends, 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.
Floor Plan and Retail Financing
Floor Plan Financing:
The Company, as is typical in the industry, generally provides floor plan
financing for its dealers. Products shipped to dealers under the Company's
floor plan financing program are recorded by the Company as sales and the
dealers' obligations to the Company are reflected as accounts receivable.
The Company provides interest-free floor plan financing to its dealers,
for Construction equipment for varying periods of time generally up to six
months and for Agriculture equipment generally for up to one year. Dealers
who sell products utilizing floor plan financing are required to make
immediate payment for those products to the Company upon sale or delivery to
the retail customer. At the end of the interest-free period, if the equipment
remains unsold to retail customers, the Company generally charges interest to
the dealer at 3.25% above the prime rate or on occasion provides an interest-
free extension of up to six months upon payment by the dealer of a curtailment
of 25% of the original invoice price to the dealer. This type of floor plan
equipment financing accounts for approximately 90% of Gehl's dealer accounts
receivable, with all such floor planned receivables required to be secured by
a first priority security interest in the equipment sold.
Retail Financing:
The Company also provides retail financing primarily to facilitate the
sale of equipment to end users. Additionally, a number of dealers purchase
equipment which is held for rental to the public. The Company also provides
retail financing to such dealers in connection with these purchases. Retail
financing in the United States is provided by the Company primarily through
Gehl Finance, the Company's finance division. Retail financing is provided
in Canada by third parties at rates subsidized by the Company. The Company
does not offer or sponsor retail financing outside of North America.
The Company maintains arrangements with third parties pursuant to which
the Company sells, with recourse, certain of the Company's retail finance
contracts. The finance contracts require periodic installments of principal
and interest over periods of up to 60 months; interest rates are based on
market conditions. The majority of these contracts have maturities of 12 to
48 months. The Company continues to service the finance contracts it sells,
including cash collections. See Note 3 of "Notes to Consolidated Financial
Statements," Page 22, and "Management's Discussion and Analysis," Pages 16 and
17 of the Gehl Company 1999 Annual Report to Shareholders, which pages are
incorporated by reference herein.
Employees
As of December 31, 1999, the Company had 1,118 employees, of which 758
were hourly employees and 360 were salaried employees. At the production
facilities in West Bend, Wisconsin, one of five Gehl production facilities,
230 hourly employees are covered by a collective bargaining agreement with the
United Paperworkers International Union (formerly the Allied Industrial
Workers) which expires January 10, 2003. None of the remaining employees of
the Company are represented by unions. There have been no labor-related work
stoppages at the Company's facilities during the past twenty-six years.
Manufacturing
The Company is currently expanding its South Dakota skid loader
manufacturing facility and believes that its present manufacturing facilities,
as expanded, will be sufficient to provide adequate capacity for its
operations in 2000.
Component parts needed in the manufacture of the Company's equipment are
primarily produced by the Company. The Company obtains raw materials
(principally steel), component parts that it does not manufacture, most
notably engines and hydraulics, and supplies from third party suppliers. All
such materials and components used are available from a number of sources.
The Company is not dependent on any supplier that cannot be readily replaced
and has not experienced difficulty in obtaining necessary purchased materials.
In addition to the equipment it manufactures, the Company markets
equipment acquired from third party suppliers. Products acquired from these
suppliers accounted for less than 10% of the Company's sales in 1999.
Research and Development
The Company attempts to maintain and strengthen its market position
through internal new product development and incremental improvements to
existing products. The Company's research and development is devoted to
developing new products that meet specific customer needs and to devising
incremental improvements to existing products. Research and development
performed by the Company includes the designing and testing of new and
improved products as well as the fabrication of prototypes. The Company
expended approximately $3.0 million, $2.8 million and $2.3 million on research
and development for the years ended December 31, 1999, 1998 and 1997,
respectively.
Patents and Trademarks
The Company possesses rights under a number of domestic and foreign
patents and trademarks relating to its products and business. While the
Company considers the patents and trademarks important in the operation of its
business, including the Gehl name, the Mustang name, the Dynalift name
and the group of patents relating to the Scavenger manure spreader, the
business of the Company is not dependent, in any material respect, on any
single patent or trademark or group of patents or trademarks.
Export Sales
Information regarding the Company's export sales is included in Note 13
of "Notes to Consolidated Financial Statements," Page 27, of the Gehl Company
1999 Annual Report to Shareholders, which page is incorporated by reference
herein.
Item 2. Properties.
The following table sets forth certain information as of December 31,
1999, relating to the Company's principal manufacturing facilities. See
"Management's Discussion and Analysis - Liquidity and Capital Resources,
Capital Expenditures," Page 16, of the Gehl Company 1999 Annual Report to
Shareholders, which page is incorporated by reference herein. For information
regarding collateral pledges, see Note 6 of "Notes to Consolidated Financial
Statements", included on Page 23, of the Gehl Company 1999 Annual Report to
Shareholders, which page is incorporated by reference herein.
Approximate Owned or Principal Uses
Floor Area Leased
in Square
Feet
West Bend, WI 450,000 Owned General offices
and engineering,
research and
development and
manufacture of
Agriculture
equipment
Madison, SD 130,000 Owned Manufacture of
Gehl skid steer
loaders for
dealers of
Construction
equipment and
Agriculture
equipment
Lebanon, PA 170,000 Owned(1) Manufacture of
Agriculture
equipment and
Construction
equipment
Yankton, SD 130,000 Owned Manufacture of
Construction
equipment
Owatonna, MN 235,000 Owned Manufacture of
Mustang skid steer
loaders
(1) This facility is financed with the proceeds from the sale of
industrial development bonds maturing in 2010.
The Company also operates three service parts centers located in:
Memphis, Tennessee; Syracuse, New York; and Minneapolis, Minnesota. The
Company leases these facilities, except for the Minneapolis center which is
owned. The leases have terms ranging from three to five years. The Company
anticipates no difficulty in retaining adequate leased facilities, either by
renewing existing leases prior to expiration or by replacing them with
equivalent leased facilities.
Item 3. Legal Proceedings.
The Company is a defendant from time to time in actions for product
liability and other matters arising out of its ordinary business operations.
The Company believes that the actions presently pending will not have a
material adverse effect on its consolidated financial position or results of
operations. To the Company's knowledge, there are no material legal
proceedings to which any director, officer, affiliate or more than 5%
shareholder of the Company (or any associate of the foregoing persons) is a
party adverse to the Company or any of its subsidiaries or has a material
interest adverse to the Company or its subsidiaries.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of security holders during the
quarter ended December 31, 1999.
Executive Officers of the Registrant.
Set forth below is certain information concerning the executive officers
of the Company as of February 1, 2000:
Name, Age and Position Business Experience
William D. Gehl, 53, Mr. Gehl has served as Chairman of the Board
Chairman, President, Chief of Directors of the Company since April, 1996.
Executive Officer and Mr. Gehl has served as President and Chief
Director Executive Officer of the Company since
November, 1992 and has served as a director
of the Company since 1987. From January,
1990 until joining the Company, Mr. Gehl
served as Executive Vice President, Chief
Operating Officer, General Counsel and
Secretary of The Ziegler Companies, Inc.
(a financial services holding company).
Mr. Gehl held various senior managment
positions with The Ziegler Companies from
1978 to 1990.
Malcolm F. Moore, 49, Mr. Moore has served as Executive Vice
Executive Vice President President and Chief Operating Officer
and Chief Operating Officer since joining the Company in August, 1999.
From 1997 to 1999, Mr. Moore was associated
with the Moore Group (a private investment
consulting firm focused on the thermal
processing equipment industry). From 1996 to
1997, Mr. Moore served as President and Chief
Executive Officer of Pangborn Corporation
(a manufacturer of blast cleaning and surface
preparation systems and equipment). From
1993 to 1996, Mr. Moore served as President
of LINAC Holdings, (the U.S. financial
Holding Co. for all the U.S. based thermal
processing equipment companies owned by
Ruhrgas AG).
Kenneth P. Hahn, 42, Mr. Hahn joined the Company as Corporate
Vice President of Finance, Controller in April, 1988. Mr. Hahn was
Treasurer and Chief appointed Vice President of Finance and
Financial Officer Treasurer in February, 1997 and became
Chief Financial Officer in January, 1999.
Michael J. Mulcahy, 53, Mr. Mulcahy has served as General Counsel
Vice President, Secretary of the Company since 1974 and became
and General Counsel Secretary in 1977 and a Vice President in
1986. Mr. Mulcahy has also served, since
1988, as President of Equipco Insurance
Company, Ltd., which provides liability
insurance coverage for equipment
manufacturers, including the Company.
Richard J. Semler, 60, Mr. Semler joined the Company in May, 1960
Vice President of and has servied in his current position with
Data Systems the Company since January, 1977.
All officers of the Company are elected annually by the Board of
Directors following the Annual Meeting of Shareholders. The 2000 Annual
Meeting of Shareholders is currently scheduled for April 20, 2000. The
Company has an employment agreement with William D. Gehl, pursuant to which he
is to serve as President and Chief Executive Officer of the Company through
the expiration of the agreement on December 31, 2001.
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder
Matters.
Pursuant to the terms of the Gehl Company Director Stock Grant Plan,
each of the non-employee directors of the Company (i.e., Messrs. N.C. Babson,
T. J. Boldt, F. M. Butler, J. T. Byrnes, W. P. Killian, A. W. Nesbitt, J. W.
Splude and H. Viets) received on December 31, 1999 a grant of shares of
Company common stock as part of their annual retainer fee. An aggregate of
1,183 shares of Company common stock were granted under the Director Stock
Grant Plan. These shares were issued in transactions exempt from registration
under Section 4(2) of the Securities Act of 1933, as amended.
Information required by this item is also included on Pages 28 and 29 of
the Gehl Company 1999 Annual Report to Shareholders, which pages are hereby
incorporated herein by reference.
Item 6. Selected Financial Data.
Information required by this item is included on Page 28 of the Gehl
Company 1999 Annual Report to Shareholders, which page is hereby incorporated
herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Information required by this item is included on Pages 14 through 17 of
the Gehl Company 1999 Annual Report to Shareholders, which pages are hereby
incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
Information required by this item is included on Page 17 of the Gehl
Company 1999 Annual Report to Shareholders, which page is hereby incorporated
herein by reference.
Item 8. Financial Statements and Supplementary Data.
Information required by this item is included on Page 13 and Pages 18
through 27 of the Gehl Company 1999 Annual Report to Shareholders, which pages
are hereby incorporated herein by reference.
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.
There have been no changes in or disagreements with the Company's
accountants regarding accounting and financial disclosure required to be
reported pursuant to this item.
PART III
Item 10. Directors and Executive Officers of the Registrant.
Pursuant to Instruction G, the information required by this item with
respect to directors is hereby incorporated herein by reference from the
caption entitled "Election of Directors" set forth in the Company's definitive
Proxy Statement for its 2000 Annual Meeting of Shareholders ("Proxy
Statement")1. Information with respect to executive officers of the Company
appears at the end of Part I, Pages 8 through 9 of this Annual Report on Form
10-K.
Item 11. Executive Compensation.
Pursuant to Instruction G, the information required by this item is
hereby incorporated herein by reference from the captions entitled "Board of
Directors" and "Executive Compensation" set forth in the Proxy Statement;
provided, however, that the subsection entitled "Executive Compensation -
Report on Executive Compensation" shall not be deemed to be incorporated
herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
Pursuant to Instruction G, the information required by this item is
hereby incorporated by reference herein from the caption "Principal
Shareholders" set forth in the Proxy Statement.
Item 13. Certain Relationships and Related Transactions.
There are no relationships or related transactions to be reported
pursuant to this item.
______________________________________________________________________________
1 The Proxy Statement will be filed with the Commission pursuant to
Regulation 14A within 120 days after the end of the Company's fiscal year.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1 and 2. Financial statements and financial statement schedule.
Reference is made to the separate index to the Company's consolidated
financial statements and schedule contained on Page 14 hereof.
3. Exhibits.
Reference is made to the separate exhibit index contained on Pages 17
through 21 hereof.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Company during the quarter
ended December 31, 1999.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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: February 25, 2000 By /s/ William D. Gehl
William D. Gehl,
Chairman of the Board,
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ William D. Gehl Chairman of the Board, President, February 25, 2000
William D. Gehl Chief Executive Officer and Director
(Principal Executive Officer)
/s/ Kenneth P. Hahn Vice President of Finance February 25, 2000
Kenneth P. Hahn and Treasurer
(Principal Financial and Accounting Officer)
/s/ Nicholas C. Babson Director February 25, 2000
Nicholas C. Babson
/s/ Thomas J. Boldt Director February 25, 2000
Thomas J. Boldt
/s/ Fred M. Butler Director February 25, 2000
Fred M. Butler
/s/ John T. Byrnes Director February 25, 2000
John T. Byrnes
/s/ William P. Killian Director February 25, 2000
William P. Killian
/s/ Arthur W. Nesbitt Director February 25, 2000
Arthur W. Nesbitt
/s/ John W. Splude Director February 25, 2000
John W. Splude
/s/ Dr. Hermann Viets Director February 25, 2000
Dr. Hermann Viets
GEHL COMPANY
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULES
Page(s) in
Annual Report*
The following documents are filed as
part of this report:
(1)Financial Statements:
Report of Independent Accountants 13
Consolidated Balance Sheets at
December 31, 1999 and 1998 18
Consolidated Statements of Income
for the three years ended
December 31, 1999 19
Consolidated Statements of
Shareholders' Equity for the
three years ended December 31, 1999 19
Consolidated Statements of Cash
Flows for the three years ended
December 31, 1999 20
Notes to Consolidated Financial
Statements 21-27
* Incorporated by reference from the indicated pages of the Gehl Company 1999
Annual Report to Shareholders.
Page in
Form 10-K
(2)Financial Statement Schedule:
Report of Independent Accountants
on Financial Statement Schedule 15
For the three years ended
December 31, 1999 --
Schedule II - Valuation and Qualifying Accounts 16
All other schedules are omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of Gehl Company
Our audits of the consolidated financial statements referred to in our report
dated February 10, 2000 appearing in the 1999 Annual Report to Shareholders of
Gehl Company (which report and consolidated financial statements are
incorporated by reference in this Annual Report on Form 10-K) also included an
audit of the Financial Statement Schedule listed in Item 14(a)(2) of this Form
10-K. In our opinion, this Financial Statement Schedule presents fairly, in
all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
PRICEWATERHOUSECOOPERS LLP
Milwaukee, Wisconsin
February 10, 2000
<PAGE>
GEHL COMPANY AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Additions
-------------------
Balance at Charged to Balance
Beginning Costs and Acquired at end
Period Description of Year Expenses Balances Deductions of Year
- ------ ----------- --------- ---------- -------- ---------- -------
Year Ended
December 31,
1997
Allowance for
Doubtful
Accounts-
Trade
Receivables. $ 561 $ 144 $ 313 $ 25 $ 993
Returns and
Dealer
Discounts 1,879 2,674 - 2,705 1,848
Product
Discontinuance 775 - - 458 317
------ ------ ----- ------ ------
Total $3,215 $2,818 $ 313 $3,188 $3,158
====== ====== ====== ====== ======
Allowances of
Doubtful
Accounts -
Retail
Contracts . . $ 591 $355 $ 28 $ 91 $ 883
====== ====== ====== ====== ======
Inventory
Obsolescence
Reserve $1,740 $576 $ 265 $ 982 $1,599
====== ====== ====== ====== ======
Income Tax
Valuation
Allowance . . $1,235 $ - $ - $ 268 $ 967
====== ====== ====== ====== ======
Year Ended
December 31,
1998
Allowance for
Doubtful
Accounts-
Trade
Receivables $ 993 $ 383 $ - $ 71 $1,305
Returns and
Dealer
Discounts 1,848 3,644 - 3,243 2,249
Product
Discontinuance 317 (243) - 74 -
------ ------ ------ ------ ------
Total $3,158 $3,784 $ - $3,388 $3,554
====== ====== ====== ====== ======
Allowances of
Doubtful
Accounts -
Retail
Contracts . . $ 883 $ 280 $ - $ 170 $ 993
====== ====== ====== ====== ======
Inventory
Obsolescence
Reserve $1,599 $ 722 $ - $ 613 $1,708
====== ====== ====== ====== ======
Income Tax
Valuation
Allowance . . $ 967 $ - $ - $ 113 $ 854
====== ====== ====== ====== ======
Year Ended
December 31,
1999
Allowance for
Doubtful
Accounts-
Trade
Receivables . $1,305 $ 557 $ - $ 175 $1,687
Returns and
Dealer
Discounts 2,249 5,075 - 4,563 2,761
------ ------ ------ ------ ------
Total $3,554 $5,632 $ - $4,738 $4,448
====== ====== ====== ====== ======
Allowances of
Doubtful
Accounts -
Retail
Contracts . . $ 993 $ 810 $ - $ 299 $1,504
====== ====== ====== ====== ======
Inventory
Obsolescence
Reserve $1,708 $ 647 $ - $ 613 $1,742
====== ====== ====== ====== ======
Income Tax
Valuation
Allowance . . $ 854 $ - $ - $ 308 $ 546
====== ====== ====== ====== ======
GEHL COMPANY
INDEX TO EXHIBITS
Exhibit Number Document Description
(2) Stock Purchase Agreement, dated as of September 12, 1997,
between Gehl Company and Brunel Holdings, plc
[Incorporated by reference to Exhibit 2 of the Company's
Current Report on Form 8-K, dated October 17, 1997]
(3.1) Restated Articles of Incorporation, as amended, of Gehl
Company [Incorporated by reference to Exhibit 3.1 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 28, 1997.]
(3.2) By-laws of Gehl Company, as amended [Incorporated by
reference to Exhibit 3.3 of the Company s Annual Report
on Form 10-K for the year ended December 31, 1998]
(4.1) Amended and Restated Loan and Security Agreement by and
between ITT Commercial Finance Corp. and Gehl Company and
its subsidiaries, dated October 1, 1994 [Incorporated by
reference to Exhibit 4.1 of the Company's Annual Report
on Form 10-K for the year ended December 31, 1994]
(4.2) First Amendment to Amended and Restated Loan and Security
Agreement by and between Deutsche Financial Services
Corporation, f/k/a ITT Commercial Finance Corp. and Gehl
Company and its subsidiaries, dated May 10, 1995
[Incorporated by reference to Exhibit 4.1 of the
Company's Quarterly Report on Form 10-Q for the quarter
ended July 1, 1995]
(4.3) Amendment to Amended and Restated Loan and Security
Agreement by and between Deutsche Financial Services
Corporation, f/k/a ITT Commercial Finance Corp., Deutsche
Financial Services Canada Corporation and Gehl Company
and its subsidiaries, dated December 1, 1995
[Incorporated by reference to Exhibit 4.1 of the
Company's Annual Report on Form 10-K for the year ended
December 31, 1995]
(4.4) Third Amendment to Amended and Restated Loan and Security
Agreement by and between Deutsche Financial Services
Corporation, Deutsche Financial Services Canada
Corporation and Gehl Company and its subsidiaries, dated
as of July 15, 1996 [Incorporated by reference to
Exhibit 4.4 of the Company s Annual Report on Form 10-K
for the year ended December 31, 1997]
(4.5) Amendment to Amended and Restated Loan and Security
Agreement by and between Deutsche Financial Services
Corporation, Deutsche Financial Services Canada
Corporation and Gehl Company and its subsidiaries, dated
October 2, 1997 [Incorporated by reference to Exhibit 4.1
of the Company's Current Report on Form 8-K dated October
17, 1997]
(4.6) Fifth Amendment to Amended and Restated Loan and Security
Agreement by and between Deutsche Financial Services
Corporation, Deutsche Financial Services, a division of
Deutsche Bank Canada, and Gehl Company and its
subsidiaries, dated as of February 5, 1998 [Incorporated
by reference to Exhibit 4.6 of the Company s Annual
Report on Form 10-K for the year ended December 31, 1997]
(4.7) Sixth Amendment to Amended and Restated Loan and Security
Agreement by and between Deutsche Financial Services
Corporation, Deutsche Financial Services, a division of
Deutsche Bank Canada and Gehl Company and its
subsidiaries, dated as of June 1, 1998 [Incorporated by
reference to Exhibit 4.1 of the Company s Quarterly
Report on Form 10-Q for the quarter ended June 27, 1998]
(4.8) Seventh Amendment to Amended and Restated Loan and
Security Agreement by and between Deutsche Financial
Services Corporation, Deutsche Financial Services, a
division of Deutsche Bank Canada and Gehl Company and its
subsidiaries, dated as of September 1, 1998 [Incorporated
by reference to Exhibit 4.1 of the Company s Quarterly
Report on Form 10-Q for the quarter ended September 26,
1998]
(4.9) Eighth Amendment to Amended and Restated Loan and
Security Agreement by and between Deutsche Financial
Services Corporation, Deutsche Financial Services, a
division of Deutsche Bank Canada and Gehl Company and its
subsidiaries, dated as of December 30, 1999
(4.10) Loan Agreement between Pennsylvania Economic Development
Financing Authority and Gehl Company, dated as of
September 1, 1990 [Incorporated by reference to Exhibit
4.1 to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 29, 1990]
(4.11) First Supplemental Loan Agreement between Pennsylvania
Economic Development Financing Authority and Gehl
Company, dated as of April 23, 1993 [Incorporated by
reference to Exhibit 4.3 to the Company's Quarterly
Report on Form 10-Q for the quarter ended April 3, 1993]
(4.12) Second Supplemental Loan Agreement between Pennsylvania
Economic Development Financing Authority and Gehl
Company, dated as of February 1, 1994 [Incorporated by
reference to Exhibit 4.10 to the Company's Annual Report
on Form 10-K for the year ended December 31, 1993]
(4.13) Mortgage and Security Agreement by and between Gehl
Company and First Pennsylvania Bank N.A., dated as of
September 1, 1990 [Incorporated by reference to Exhibit
4.2 to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 29, 1990]
(4.14) Rights Agreement, dated as of May 28, 1997, between Gehl
Company and Firstar Bank Milwaukee N.A.(as successor to
Firstar Trust Company) [Incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement on
Form 8-A, dated as of May 28, 1997]
(4.15) Loan Agreement by and between South Dakota Board of
Economic Development and Gehl Company, dated May 26,
1998 [Incorporated by reference to Exhibit 4.2 of the
Company's Quarterly Report on Form 10-Q for the
quarter ended June 27, 1998]
(4.16) Promissory Note signed by Gehl Company payable to South
Dakota Board of Economic Development, dated May 26, 1998
[Incorporated by reference to Exhibit 4.3 of the
Company s Quarterly Report on Form 10-Q for the quarter
ended June 27, 1998]
(4.17) Mortgage by and between Gehl Company and South Dakota
Board of Economic Development, dated May 26, 1998
[Incorporated by reference to Exhibit 4.4 of the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 27, 1998]
(4.18) Employment Agreement by and between Gehl Company and
South Dakota Board of Economic Development, dated May 26,
1998 [Incorporated by reference to Exhibit 4.5 of the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 27, 1998]
(4.19) Loan Agreement by and between the City of Madison, a
political subdivision of the State of South Dakota, and
Gehl Company, dated September 8, 1998 [Incorporated by
reference to Exhibit 4.2 of the Company s Quarterly
Report on Form 10-Q for the quarter ended September 26,
1998]
(4.20) Promissory Note signed by Gehl Company payable to the
City of Madison, a political subdivision of the State of
South Dakota, dated September 8, 1998 [Incorporated by
reference to Exhibit 4.3 of the Company's Quarterly
Report on Form 10-Q for the quarter ended September 26,
1998]
(4.21) Mortgage by and between Gehl Company and the City of
Madison, a political subdivision of the State of South
Dakota, dated September 8, 1998 [Incorporated by
reference to Exhibit 4.4 of the Company's Quarterly
Report on Form 10-Q for the quarter ended September 26,
1998]
(10.1)* Form of Supplemental Retirement Benefit Agreement
between Gehl Company and Messrs. Hahn, Moore, Mulcahy
and Semler [Incorporated by reference to Exhibit 10.1
to the Company's Quarterly Report on Form 10-Q for the
quarter ended April 3, 1999]
(10.2)* Gehl Company Director Stock Grant Plan [Incorporated by
reference to Exhibit 10.1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 29, 1997]
(10.3)* Amendment to Amended and Restated Employment Agreement
between Gehl Company and William D. Gehl dated as of
December 18, 1998 [Incorporated by reference to Exhibit
10.3 of the Company s Annual Report on Form 10-K for the
year ended December 31, 1998]
(10.4)* Supplemental Retirement Benefit Agreement by and between
William D. Gehl and Gehl Company [Incorporated by
reference to Exhibit 10.4 of the Company's Annual Report
on Form 10-K for the year ended December 31, 1995]
(10.5)* Gehl Company Shareholder Value Added Management Incentive
Compensation Plan [Incorporated by reference to Exhibit
10.6 of the Company's Annual Report on Form 10-K for the
year ended December 31, 1995]
(10.6)* Gehl Savings Plan, as amended and restated executed March
17, 1997 [Incorporated by reference to Exhibit 10.8 of
the Company's Annual Report on Form 10-K for the year
ended December 31, 1997]
(10.7)* Gehl Company Retirement Income Plan "B", as amended
[Incorporated by reference to Exhibit 10.7 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1994]
(10.8)* Gehl Company 1987 Stock Option Plan, as amended
[Incorporated by reference to Exhibit 10.9 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1996]
(10.9)* Form of Stock Option Agreement used in conjunction with
the Gehl Company 1987 Stock Option Plan [Incorporated by
reference to Exhibit 4.2 to the Company's Form S-8
Registration Statement (Reg. No. 33-38392)]
(10.10)* Gehl Company 1995 Stock Option Plan, as amended
[Incorporated by reference to Exhibit 10.11 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1996]
(10.11)* Form of Stock Option Agreement for executive officers
used in conjunction with the Gehl Company 1995 Stock
Option Plan [Incorporated by reference to Exhibit 10.12
of the Company's Annual Report on Form 10-K for the year
ended December 31, 1995]
(10.12)* Form of Stock Option Agreement for non-employee directors
used in conjunction with the Gehl Company 1995 Stock
Option Plan [Incorporated by reference to Exhibit 10.13
of the Company's Annual Report on Form 10-K for the year
ended December 31, 1995]
(10.13)* Form of Change in Control and Severance Agreement between
Gehl Company and Messrs. Hahn, Mulcahy and Semler
[Incorporated by reference to Exhibit 10-14 of the
Company' Annual Report on Form 10-K for the year ended
December 31, 1998]
(10.14) Technical Assistance and License Agreement by and between
Gehl Company and Rheiner Maschinenfabrik Windhoff AG,
dated as of May 4, 1985, as amended [Incorporated by
reference to Exhibit 10.13 to the Company's Form S-1
Registration Statement (Reg. No. 33-31571)]
(10.15) Distributorship Agreement by and between Gehl Company and
Gehl GmbH, dated as of April 15, 1985 [Incorporated by
reference to Exhibit 10.16 to the Company's Form S-1
Registration Statement (Reg. No. 33-31571)]
(10.16) Trademark Licensing Agreement by and between Gehl Company
and Gehl GmbH, dated as of April 15, 1985 [Incorporated
by reference to Exhibit 10.17 to the Company's Form S-1
Registration Statement (Reg. No. 33-31571)]
(13) Portions of the Gehl Company 1999 Annual Report to
Shareholders that are incorporated by reference herein
(21) Subsidiaries of Gehl Company [Incorporated by reference
to Exhibit 21 of the Company's Annual Report of Form 10-K
for the year ended December 31, 1998]
(23) Consent of PricewaterhouseCoopers LLP
(27) Financial Data Schedule
(99) Proxy Statement for 2000 Annual Meeting of Shareholders
(To be filed with the Securities and Exchange Commission
under Regulation 14A within 120 days after the end of the
Company's fiscal year; except to the extent incorporated
by reference, the Proxy Statement for the 2000 Annual
Meeting of Shareholders shall not be deemed to be filed
with the Securities and Exchange Commission as part of
this Annual Report on Form 10-K)
* A management contract or compensatory plan or arrangement.
Except as otherwise noted, all documents incorporated by reference are to
Commission File No. 0-18110.
EIGHTH AMENDMENT TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS EIGHTH AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
("Amendment") is entered into as of the 30th day of December,
1999 between DEUTSCHE FINANCIAL SERVICES CORPORATION ("DFSC"), DEUTSCHE
FINANCIAL SERVICES a division of Deutsche Bank Canada ("DFS Canada") (DFSC and
DFS Canada are collectively referred to as "DFS") and GEHL COMPANY ("Gehl")
and its subsidiaries, including but not limited to Hedlund Martin, Inc., Gehl
Power Products, Inc., Mustang Manufacturing Company, Inc. and Mustang Finance,
Inc. (collectively with Gehl, "Gehl Company").
RECITALS:
A. DFS and Gehl Company entered into that certain Amended and Restated
Loan and Security Agreement dated as of October 1, 1994, as amended from time
to time (the "Agreement") pursuant to which DFS is providing financing to Gehl
Company.
B. DFS and Gehl Company wish to modify the terms of such financing as
set forth in this Amendment.
AGREEMENT:
NOW, THEREFORE, for and in consideration of the foregoing and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, DFS and Gehl Company hereby agree as follows:
1. The definition of "Maturity Date" as set forth in Section 1.1 is
deleted in its entirety and restated as follows:
"Maturity Date": December 31, 2002
2. Section 2.1.2 of the Agreement is deleted in its entirety and
restated as follows:
"2.1.2 Charges. Gehl Company agrees to pay DFS in advance of each
year of this Agreement an annual "Credit Facility Fee" (sometimes also
referred to herein as a "charge") equal to the lesser of (a) Twenty-Five
Thousand Dollars, and (b) the highest charges from time to time permitted by
applicable law (and amounts received from Gehl Company in excess of such
highest permitted amount or rate will be considered reductions of principal to
the extent of such excess). The Credit Facility Fee shall be due and payable
on December 31 of the 1999, 2000, and 2001 calendar years for the subsequent
calendar year of this Agreement.
3. Except as expressly modified hereby, the Agreement remains
unmodified and in full force and effect and the parties ratify and confirm the
Agreement as modified hereby. Gehl Company reaffirms that the representations
and warranties of Gehl Company as set forth in the Agreement are true and
correct as of the date of the Agreement and as of the date of this Amendment.
All terms defined herein shall have the meanings defined herein for all
purposes under the Agreement. This Amendment shall be governed by the
internal laws of the state whose law governs the Agreement. This Amendment
may be executed in one or more counterparts, each of which shall be deemed an
original and all of which shall constitute the same instrument.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, DFS and Gehl Company have executed this Amendment as
of the date and year first above written.
GEHL COMPANY HEDLUND MARTIN, INC.
By: /s/Kenneth P. Hahn By: /s/Kenneth P. Hahn
Name: Kenneth P. Hahn Name: Kenneth P. Hahn
Title: Vice President Title: Treasurer
GEHL POWER PRODUCTS, INC. MUSTANG MANUFACTURING COMPANY, INC.
By: /s/Kenneth P. Hahn By: /s/Kenneth P. Hahn
Name: Kenneth P. Hahn Name: Kenneth P. Hahn
Title: Treasurer Title: Vice President
MUSTANG FINANCE, INC.
By: /s/Kenneth P. Hahn By:
Name: Kenneth P. Hahn Name:
Title: Vice President Title:
DEUTSCHE FINANCIAL SERVICES DEUTSCHE FINANCIAL SERVICES
CORPORATION a division of Deutsche Bank Canada
By: /s/Thomas L. Meredith By: /s/William C. Blight
Name: Thomas L. Meredith Name: William C. Blight
Title: Vice President Title: Senior Vice President
[Page 13 of the Annual Report]
Reports of Management and Independant Accountants
Report of Management
The management of Gehl Company is responsible for the preparation and
integrity of all financial statements and other information contained in this
annual report. The financial statements have been prepared by the Company in
conformity with generally accepted accounting principles appropriate in the
circumstances. Such statements necessarily include amounts based on the best
estimates and judgments of management after giving due consideration to
materiality.
The Company maintains an internal control system designed to provide
reasonable assurance that transactions are properly recorded and executed in
accordance with management's authorization and that assets are safeguarded
from loss or unauthorized use. The internal control system is augmented by
careful selection and training of qualified employees, proper division of
responsibilities, and the development and dissemination of written policies
and procedures.
The Board of Directors elects, from among its members, an Audit Committee,
consisting entirely of outside directors, which is responsible for reviewing
and evaluating the overall performance of the Company's financial reporting
and accounting practices and for recommending appointment of the independent
accountants. The Audit Committee meets periodically with management and the
independent accountants to discuss any and all matters within the Committee's
responsibilities. The independent accountants have free access to the
Committee, without the presence of management if so requested.
The Company's financial statements have been audited by PricewaterhouseCoopers
LLP, independent accountants, whose report also appears on this page. Included
in the audit process was a review of the Company's system of internal
controls. PricewaterhouseCoopers LLP annually provides to management and the
Audit Committee recommendations to improve internal controls or enhance
administrative procedures.
William D. Gehl
Chairman of the Board of Directors,
President and Chief Executive Officer
Kenneth P. Hahn
Vice President of Finance, Treasurer
and Chief Financial Officer
Report of Independent Accountants
To the Board of Directors and Shareholders of Gehl Company
In our opinion, the statements appearing on pages 18 through 27 present
fairly, in all material respects, the financial position of Gehl Company and
its subsidiaries at December 31, 1999 and December 31, 1998, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express
an opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
Milwaukee, Wisconsin
February 10, 2000
<PAGE>
[Pages 14 through 17 of the Annual Report]
Management's Discussion and Analysis
Overview
The Company's net income in 1999 was $20.2 million, a 32% increase from $15.3
million earned in 1998. Diluted earnings per share for 1999 were $3.17
compared to $2.29 reported for 1998. Basic earnings per share for 1999 were
$3.29 versus $2.39 reported in 1998. Net sales in 1999 increased 9% to $285.8
million from $262.2 million in 1998. Construction equipment 1999 net sales
increased 9% to $170.4 million and Agriculture equipment 1999 net sales
increased 9% to $115.4 million. Construction equipment comprised 60% of
Company net sales in 1999 versus 59% in 1998 and 52% in 1997. Agriculture
equipment sales were 40% of Company net sales in 1999, down from 41% in 1998
and 48% in 1997.
Income from operations in 1999 increased 29% to $35.1 million. Construction
equipment accounted for $23.7 million of the operating profit, while
Agriculture equipment contributed the balance of $11.4 million. Interest
expense in 1999 decreased $943,000, or 23%, to $3.1 million. Other expense,
net, consisting primarily of the costs of selling finance contracts
receivable, which was $1.2 million in 1998, increased in 1999 to $2.2 million.
The Company continued to reduce its Agriculture equipment accounts receivable
in 1999, from $38.0 million at December 31, 1998 to $35.1 million at December
31, 1999. Cash flow provided by operating activities in 1999 was $25.0 million
following $21.4 million provided by operating activities in 1998. Cash flow
generated in 1999 was used to fund capital expenditures and repurchase
approximately $18.5 million of the Company's stock during 1999. The Company
has reduced its debt by $66.1 million, or 68%, during the last seven years,
despite borrowing $27.7 million to fund the acquisition of Mustang
Manufacturing Inc. in 1997, and $18.5 million to fund the repurchase of the
Company's common stock during 1999. The Company's ratio of debt to total
capital was 24.5% at December 31, 1999, as compared with 23.9% at December 31,
1998.
Results of Operations
1999 vs. 1998
Net Sales:
($ millions) 1999 1998 1997 1996 1995
Construction Equipment $170.4 $156.0 $101.7 $70.8 $64.4
Agriculture Equipment 115.4 106.2 95.4 88.9 89.1
------ ------ ------ ------ ------
Total $285.8 $262.2 $197.1 $159.7 $153.5
(% of total)
Construction Equipment 59.6% 59.5% 51.6% 44.4% 42.0%
Agriculture Equipment 40.4% 40.5% 48.4% 55.6% 58.0%
Net sales for 1999 of $285.8 million were 9% greater than the $262.2 million
of net sales in 1998. Construction equipment net sales in 1999 were $170.4
million, 9% higher than sales of $156.0 million in 1998. Construction
equipment sales in 1999 benefited from increased shipments of telescopic
handler sales and shipments of the new mini-excavator product line introduced
in mid-1999. Shipments of construction skid loaders declined slightly from
1998 levels due primarily to certain large customers deferring fourth quarter
purchases until the new year.
Agriculture equipment net sales in 1999 increased 9% to $115.4 million from
$106.2 million in 1998. The increase was due primarily to higher skid loader
and forage harvesting equipment shipments which more than offset reduced
levels of shipments of haytools and feedmaking equipment.
Of the Company's total net sales reported for 1999, $39.8 million represented
sales made outside the United States compared with $41.4 million in 1998. The
decrease in international sales was due to the economic slowdown in the Far
East and Australia. Given the segments that the Company ships into, there
exists some seasonality in the sales trends, primarily in the Company's second
and third quarters, 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: Gross profit in 1999 of $80.4 million was 13% higher than 1998's
$71.4 million. Gross profit as a percent of net sales increased in 1999 to
28.1% from 27.2% in 1998.
Construction equipment gross profit as a percent of net sales for 1999
increased to 27.0% from 25.7% in 1998. This increase was due primarily to: 1)
increased telescopic handler sales, which sales are at higher gross margins
than other construction equipment; 2) improved efficiencies at the
manufacturing plants; and 3) export sales, typically made at lower gross
margins than domestic sales, constituting a smaller percentage of sales in
1999 than in 1998.
Agriculture equipment 1999 gross profit as a percent of net sales increased to
29.8% from 29.5% in 1998. This increase was due primarily to: 1) the favorable
impact of a change in the mix of products shipped in 1999 versus products
shipped in 1998; 2) higher production levels in 1999 over 1998 generating
increased absorption of factory overhead; and 3) improved efficiencies
realized at the manufacturing plants.
Selling, General and Administrative Expenses:
Selling, general and administrative expenses increased $1.2 million, or 3%, to
$45.3 million in 1999 as compared with $44.1 million in 1998 due to continued
investment in engineering and sales related activities, as well as sales
volume increases. As a percent of net sales, however, selling, general and
administrative expenses in 1999 decreased to 15.8% from 16.8% in 1998.
Income from Operations:
($ millions) 1999 1998 1997 1996 1995
Construction Equipment $23.7 $19.4 $16.3 $12.9 $13.2
Agriculture Equipment 11.4 7.9 5.5 2.6 .4
----- ----- ----- ----- -----
Total $35.1 $27.3 $21.8 $15.5 $13.6
Due primarily to higher net sales volume combined with controlled operating
expense spending, income from operations in 1999 increased 29% from 1998 to
$35.1 million. Construction equipment income from operations increased 22% in
1999 to $23.7 million from $19.4 million in 1998. The improvement was
primarily due to the impact of increased Construction equipment sales volume
and improved gross margin levels which were offset, in part, by increased
expenditures in selling, general and administrative costs. Agriculture
equipment income from operations increased 44% in 1999 to $11.4 million from
$7.9 million in 1998. Increased Agriculture equipment sales volume coupled
with an improved gross margin percentage and slightly reduced selling, general
and administrative expense levels were the primary factors in generating this
increase.
Interest Expense: Interest expense decreased $943,000, to $3.1 million, due to
a lower level of average debt outstanding during 1999 than 1998 combined with
a decrease in the average rate of interest paid by the Company in 1999 to 7.9%
from 8.0% in 1998. During the last seven years, annual interest expense has
declined $7.0 million, or 69%, from the peak of $10.1 million in 1992.
Reductions in interest-bearing debt from $97.7 million at the end of 1992 to
$31.6 million at December 31, 1999 and lower borrowing rates have resulted in
the significant reduction in the Company's interest expense.
Other (Expense) Income, Net: Other expense, net increased $1.0 million to $2.2
million in 1999 from $1.2 million in 1998. This was primarily a result of
selling $21.7 million more retail finance contracts to third parties during
1999 than in 1998, combined with lower finance rates offered to Gehl Finance
customers and increasing discount rates used in selling finance contracts to
third parties resulting from the general trend of overall interest rates.
Provision for Income Taxes: The Company s effective income tax rate of 35.5%
for 1999 was consistent with 1998.
Net Income: Net income in 1999 of $20.2 million was 32% higher than 1998 s
$15.3 million of net income. Diluted earnings per share were $3.17 in 1999
compared to $2.29 in 1998. Basic earnings per share were $3.29 in 1999 versus
$2.39 in 1998. No dividends were declared in 1999 on the Company s common
stock.
1998 vs. 1997
Net Sales: Net sales for 1998 of $262.2 million were 33% greater than the
$197.1 million of net sales in 1997. Construction equipment net sales in 1998
were $156.0 million, 54% higher than sales of $101.7 million in 1997. The
increase from 1997 levels was a result of 1998 including a full year of
Mustang skid loader shipments versus only fourth quarter shipments in 1997
(the acquisition of the Mustang operation occurred on October 2, 1997), and
increased shipments of telescopic handlers due to increased production
capacity and increased demand as a result of the continuation of the favorable
economic trends which prevailed in the United States construction industry.
Agriculture equipment net sales in 1998 increased 11% to $106.2 million from
$95.4 million in 1997. The increase was due primarily to the introduction of
new product offerings, including a forage harvester with a crop processing
attachment and a wider disc mower conditioner. In addition, increased skid
loader shipments offset reduced levels of shipments of other forage harvesting
equipment and haytools, and feedmaking equipment.
Of the Company's total net sales reported for 1998, $41.4 million represented
sales made outside the United States compared with $32.9 million in 1997. The
increase was due primarily to the addition of Mustang product sales for the
full year.
Gross Profit: Gross profit in 1998 of $71.4 million was 24% higher than 1997's
$57.8 million. Gross profit as a percent of net sales decreased in 1998 to
27.2% from 29.3% in 1997.
Construction equipment gross profit as a percent of net sales for 1998
decreased to 25.7% from 29.6% in 1997. This decrease was due primarily to: 1)
Mustang skid loader gross margins being lower than the gross margin on other
Construction equipment sales; 2) competitive pressures restricting price
increases to lower levels than incurred cost increases; and 3) increased
shipments made directly to national account rental operations which are
generally at lower gross margin percentages than sales to dealers.
Agriculture equipment 1998 gross profit as a percent of net sales increased to
29.5% from 29.0% in 1997. This increase was due primarily to: 1) the favorable
impact of a change in the mix of products shipped in 1998 versus products
shipped in 1997; 2) higher production levels in 1998 over 1997 generating
increased absorption of factory overhead; and 3) improved efficiencies
realized at the manufacturing plants.
Selling, General and Administrative Expenses: Selling, general and
administrative expenses increased $8.2 million, or 23%, to $44.1 million in
1998 as compared with $36.0 million in 1997. As a percent of net sales,
however, selling, general and administrative expenses in 1998 decreased to
16.8% from 18.2% in 1997. The increased expenses in 1998 resulted primarily
from costs associated with a full year of Mustang operations versus only the
fourth quarter in 1997, and increased selling and promotional expenses.
Income from Operations: Due primarily to higher net sales volume combined with
controlled operating expense spending, income from operations in 1998
increased 25% from 1997 to $27.3 million. Construction equipment income from
operations increased 19% in 1998 to $19.4 million from $16.3 million in 1997.
The impact of increased Construction equipment sales volume was offset, in
part, by reduced gross margin levels and increased expenditures in selling,
general and administrative costs, which include the impact of a full year of
Mustang operations in 1998. Agriculture equipment income from operations
increased 42% in 1998 to $7.9 million from $5.5 million in 1997. Increased
Agriculture equipment sales volume coupled with an improved gross margin
percentage were the primary factors in generating this increase.
Interest Expense: Interest expense increased $1.7 million, to $4.0 million,
due to the average debt outstanding during 1998 exceeding 1997 levels
primarily as a result of the late 1997 acquisition of Mustang. The average
rate of interest paid by the Company in 1998, of 8%, was consistent with 1997.
Provision for Income Taxes: The Company s effective income tax rate was 35.5%
for 1998 versus 36.4% for 1997.
Net Income: Net income in 1998 of $15.3 million was 20% higher than 1997's
$12.8 million of net income. Diluted earnings per share were $2.29 in 1998
compared to $1.95 in 1997. Basic earnings per share were $2.39 in 1998 versus
$2.06 in 1997. No dividends were declared in 1998 on the Company's common
stock.
Liquidity and Capital Resources
Working Capital: The Company's working capital remained relatively constant at
$69.5 million at December 31, 1999 compared to $69.7 million twelve months
earlier. The Company's current ratio at December 31, 1999 decreased to 2.2 to
1 from 2.3 to 1 at the same time a year ago. Cash on hand at December 31, 1999
was $1.0 million as compared to $887,000 a year earlier.
Cash Flow Provided by Operating Activities:
($ thousands) 1999 1998 1997 1996 1995
Cash Flow $24,964 $21,367 $15,119 $31,795 $9,701
In 1999, cash flow provided by operating activities was $25.0 million as
compared to $21.4 million in 1998. Net income before depreciation and
amortization was the primary cause of the positive cash flow. The 1999 cash
flow was used to fund property, plant and equipment additions and repurchase
approximately $18.5 million of the Company's stock.
Accounts Receivable: The Company's net accounts receivable decreased $2.3
million during 1999. Agriculture equipment accounts receivable at year-end
1999 decreased $2.9 million from a year earlier, while Construction equipment
accounts receivables increased $600,000 over the same period.
Finance Contracts Receivable: Finance contracts receivable increased $3.8
million to $19.4 million at December 31, 1999. The combined portfolio of owned
and sold-but-serviced finance contracts receivable was $110.6 million at
December 31, 1999 as compared to $85.5 million at year-end 1998. (See "Sales
of Finance Contracts Receivable" following.)
Capital Expenditures:
($ thousands) 1999 1998 1997 1996 1995
Capital Expenditures $7,281 $3,051 $8,718 $3,837 $2,437
Depreciation $4,329 $3,941 $2,955 $2,438 $2,520
The Company expended $7.3 million for property, plant and equipment in 1999.
Approximately $3.8 million was spent in conjunction with the expansion of the
Company's two South Dakota manufacturing facilities and with the addition of
certain equipment to increase production levels of skid loaders and telescopic
handlers. The majority of the remaining 1999 expenditures were incurred to
upgrade and maintain machinery and equipment, to enhance capability, to
improve productivity and to improve product quality. Other than expenditures
related to complete the plant expansions as described below, the Company had
no significant outstanding commitments for capital items at December 31, 1999.
The Company plans to make up to $20 million in capital expenditures in 2000,
including approximately $9.8 million to complete the expansion of the two
South Dakota manufacturing facilities and to add equipment necessary to
increase production levels of skid loaders and telescopic handlers. The
Company believes its present facilities, with these expansion projects, will
be sufficient to provide adequate capacity for its operations in 2000.
Debt and Equity:
December 31, 1999 1998 1997 1996 1995
($ millions)
Total Debt $31.6 $29.5 $49.7 $19.4 $46.9
Shareholders' Equity $97.4 $94.1 $77.6 $64.8 $55.7
% Total Debt to Total Capitalization 24.5% 23.9% 39.1% 23.0% 45.7%
At December 31, 1999, shareholders' equity had increased $3.3 million to $97.4
million from $94.1 million a year earlier. This increase primarily reflected
the impact of the year's net income of $20.2 million partially offset by the
$18.5 million expended to repurchase Company stock. An increase in debt of
$2.1 million during 1999, to $31.6 million, resulted in a slight increase in
the Company's capitalization ratio to 24.5% at December 31, 1999.
In March 1999, the Company's Board of Directors authorized the repurchase of
up to 325,000 shares of the Company's outstanding common stock. In addition,
in July 1999, the Board authorized a specific repurchase from an individual
shareholder. During 1999 pursuant to these authorizations, the Company
repurchased and cancelled an aggregate of 930,500 shares of its common stock
at a total cost of approximately $18.5 million. As of December 31, 1999, the
Company had the authority to buy up to 120,400 additional shares of its common
stock under the repurchase program authorized in March 1999.
Borrowing Arrangements (See also Note 6 of Notes to Consolidated Financial
Statements): The Company maintains a $75 million line of credit facility (the
"Facility") which expires December 31, 2002, and is subject to a borrowing
base related to the Company's accounts receivable, finance contracts
receivable and inventories. The interest rate paid on loans denominated in
U.S. dollars is 2.00% above the London Interbank Offered Rate for one-month
deposits ( LIBOR ). In Canada, where the Company may borrow up to $5.5
million, the interest rate is 2.50% above the Canadian one-month bankers'
acceptance rates ("BA Rate"). At December 31, 1999, the Company had unused
borrowing capacity of $49.8 million under the Facility, versus $53.1 million a
year earlier. Management believes the Facility provides sufficient borrowing
capacity for the Company to finance its operations for the foreseeable future.
The Company also has outstanding $8.4 million of 9% industrial development
bonds with a 2010 final maturity; repayments commence in 2005.
Sales of Finance Contracts Receivable: 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 December 31, 1999, the Company serviced $110.6 million of such contracts,
of which $89.7 million were owned by third parties. Losses on finance
contracts due to customer nonperformance were $296,000 in 1999 as compared to
$155,000 in 1998. As a percentage of outstanding serviced contracts, the loss
ratios were .3% and .2% in 1999 and 1998, respectively.
The Company incurred $2.9 million of costs in selling $77.0 million of its
finance contracts in 1999, as compared to $1.1 million of costs in selling
$55.4 million of such contracts in 1998. The costs arise primarily from the
difference between the weighted average interest rate on the contracts being
sold and the interest rate negotiated with the purchaser of the contracts.
Management believes the Company has sufficient capacity to sell its finance
contracts for the foreseeable future.
Accounting Pronouncements: The Financial Accounting Standards Board ("FASB")
has issued Statement of Financial Accounting Standards ("SFAS") No. 133
"Accounting for Derivative Instruments 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 effect the Company's financial condition or results of
operations.
Year 2000
In 1995, a Company-wide program was initiated to ensure that its Information
Technology ("IT") systems and applications were Year 2000 compliant. The
initial focus of the Company's program contained the following steps:
assessment of the relevant issues; planning the conversion; implementing the
conversion; and testing. Those systems determined to be at risk were
prioritized and plans were put in place to upgrade systems by remediation,
replacement or outsourcing. Through December 1998, the assessment and planning
phases had been completed for all IT systems and applications. The Company's
objective, which was achieved, was to become Year 2000 compliant with its
mission critical IT activities and systems by mid-1999, allowing substantial
time for further testing, verification and the final completion of less
important systems in the second half of 1999.
In addition to the IT systems review noted above, the Company initiated
processes to review and to modify, where appropriate, other areas impacted by
Year 2000. These areas included, but were not limited to, personal computer
hardware and software, remote location access to IT systems, facility
management and certain non-IT issues, such as the extent to which embedded
chips were used in machinery and equipment used in operations. The Company
completed assessments in all of the above areas and testing in all of these
areas prior to the end of 1999.
In an attempt to further ensure Year 2000 compliance, the Company communicated
with its significant vendors to determine the extent to which the Company was
vulnerable to those third parties' failure to remediate their own Year 2000
compliance issues.
The Company incurred no significant Year 2000 compliance issues in connection
with the transition from 1999 to 2000. Although it is possible that issues
generally related to Year 2000 compliance may yet arise, the Company does not
believe that any such issues would have a material adverse effect on its
financial condition or results of operations. The Company expended
approximately $400,000 to achieve Year 2000 compliance, the majority of which
was spent in years prior to 1999.
Market Risk
The Company is exposed to market risk from changes in interest rates as well
as fluctuations in currency. See further disclosure relating to variable rate
debt under "Liquidity and Capital Resources - Borrowing Arrangements" above.
Interest Rate Risk: The Company's line-of-credit facility is primarily LIBOR-
based and is subject to interest rate movements. A 10% increase or decrease in
the average cost of the Company s variable rate debt would result in a change
in pre-tax interest expense of approximately $185,000 based upon borrowings
outstanding at December 31, 1999.
Commodity Risk: The Company is exposed to fluctuations in market prices for
commodities, especially steel. Each one of the Company's business segments is
subject to commodity price risk as the prices for raw materials change with
movements in underlying commodity prices. Therefore, the Company has
established various programs to manage the negotiations of commodity prices.
In general, the Company enters into contracts with its vendors to lock in
commodity prices at various times and for various periods in order to limit
near-term exposure to fluctuations in raw material prices.
Currency Risk: The Company has limited exposure to foreign currency exchange
fluctuations. Certain sales are made in Canadian dollars and Euros; however,
to minimize this exposure, the Company borrows in Canadian dollars under its
line-of-credit facility and, in certain circumstances, enters into currency
hedge transactions relative to Euro billings.
Forward-Looking Statements
Certain matters discussed in this Annual Report (particularly in this section
and the Chairman's Message) 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.
<PAGE>
[Pages 18 through 28 of the Annual Report]
GEHL COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
In Thousands, Except Share Data - December 31, 1999 1998
Assets
Cash $ 1,010 $ 887
Accounts receivable - net 68,551 70,806
Finance contracts receivable - net 12,074 9,786
Inventories 35,206 32,093
Prepaid income taxes 8,431 7,138
Prepaid expenses and other current assets 511 1,184
-------- --------
Total current assets 125,783 121,894
-------- --------
Property, plant and equipment - net 37,028 34,142
Finance contracts receivable - net, non-current 7,311 5,804
Intangible assets 15,706 16,451
Other assets 8,332 6,256
-------- --------
Total assets $194,160 $184,547
======== ========
Liabilities and Shareholders' Equity
Current portion of long-term debt obligations $ 519 $ 597
Accounts payable 25,077 23,562
Accrued liabilities 30,703 27,993
-------- -------
Total current liabilities 56,299 52,152
-------- --------
Line of credit facility 22,038 19,359
Long-term debt obligations 9,059 9,588
Deferred income taxes 3,949 3,943
Other long-term liabilities 5,391 5,400
-------- --------
Total long-term liabilities 40,437 38,290
-------- --------
Common stock, $.10 par value, 25,000,000 shares
authorized, 5,645,620 and 6,438,945 shares
outstanding at December 31, 1999 and 1998,
respectively 565 644
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 11,294 28,330
Retained earnings 86,468 66,283
Accumulated other comprehensive loss (903) (1,152)
-------- --------
Total shareholders' equity 97,424 94,105
-------- --------
Total liabilities and shareholders' equity $194,160 $184,547
======== ========
Contingencies (Notes 3 and 12)
The accompanying notes are an integral part of the financial statements.
<PAGE>
GEHL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
In Thousands, Except Share Data -
Year Ended December 31, 1999 1998 1997
-------- -------- --------
Net sales $285,822 $262,219 $197,055
Cost of goods sold 205,465 190,808 139,252
-------- -------- --------
Gross profit 80,357 71,411 57,803
Selling, general and administrative
expenses 45,300 44,133 35,955
-------- -------- --------
Income from operations 35,057 27,278 21,848
Interest expense (3,083) (4,026) (2,325)
Interest income 1,555 1,655 1,429
Other (expense) income, net (2,235) (1,235) (892)
-------- -------- --------
Income before income taxes 31,294 23,672 20,060
Provision for income taxes 11,109 8,404 7,299
-------- -------- --------
Net income $ 20,185 $ 15,268 $ 12,761
======== ======== ========
Diluted net income per common share $ 3.17 $ 2.29 $ 1.95
======== ======== ========
Basic net income per common share $ 3.29 $ 2.39 $ 2.06
======== ======== ========
The accompanying notes are an integral part of the financial statements.
<PAGE>
GEHL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
In Thousands Total Comprehensive Retained Accumulated Common Capital
Income Earnings Other Stock in
Comprehensive Excess
Loss of Par
Balance at
December 31,
1996 $64,832 $38,254 $(193) $616 $26,155
Comprehensive
Income:
Net income 12,761 $12,761 12,761
Minimum pension
liability
adjustments, net
of $108 of taxes (189) (189) (189)
-------
Comprehensive 12,572
Income
=======
Exercise of
stock options 362 5 357
Purchase of
stock warrant (193) (193)
------ ------- ------ ------ -------
Balance at
December 31,
1997 77,573 51,015 (382) 621 26,319
Comprehensive
Income:
Net income 15,268 15,268 15,268
Minimum pension
liability
adjustments,
net of $415
of taxes (770) (770) (770)
------
Comprehensive
Income 14,498
======
Exercise of
stock options/
warrant 1,652 23 1,629
Other 382 382
------ ------- ------ ----- -------
Balance at
December 31,
1998 94,105 66,283 (1,152) 644 28,330
Comprehensive
Income:
Net income 20,185 20,185 20,185
Minimum pension
liability
adjustments,
net of $134
of taxes 249 249 249
-------
Comprehensive
Income $20,434
=======
Exercise of
stock options 1,070 14 1,056
Treasury stock
purchases/
cancellations (18,523) (93) (18,430)
Other 338 338
------ ------- ------ ----- -------
Balance at
December 31,
1999 $97,424 $86,468 $ (903) $ 565 $11,294
======= ======= ======== ===== =======
The accompanying notes are an integral part of the financial statements
<PAGE>
GEHL COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
In Thousands - Year Ended
December 31, 1999 1998 1997
Cash Flows from Operating Activities
Net income $ 20,185 $ 15,268 $ 12,761
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation 4,329 3,941 2,955
Amortization 782 807 256
(Gain) loss on sale of equipment (46) 2 13
Cost of sales of finance contracts 2,911 1,088 1,123
Deferred income taxes (1,421) (177) 1,592
Proceeds from sales of finance
contracts 74,128 54,267 35,962
Increase (decrease) in cash
due to changes in:
Accounts receivable - net 2,255 1,384 1,451
Finance contracts receivable -
net (80,834) (59,704) (39,285)
Inventories (3,113) (1,808) (3,816)
Prepaid expenses and other
current assets 843 70 (291)
Other assets 542 377 689
Accounts payable 1,515 1,350 1,165
Accrued liabilities 2,888 4,502 544
________ ________ ________
Net cash provided by
operating activities 24,964 21,367 15,119
________ ________ ________
Cash Flows from Investing Activities
Property, plant and equipment
additions (7,281) (3,051) (8,718)
Acquisition of business -
net of cash acquired - - (27,857)
(Increase) decrease in unexpended
plant construction fund (40) (42) 20
Proceeds from sale of equipment 112 13 215
(Increase) decrease in other assets (2,673) (621) 45
Other - - (189)
_______ ________ ________
Net cash (used for) investing
activities (9,882) (3,701) (36,484)
_______ ________ ________
Cash Flows from Financing Activities
Proceeds from(repayment of)
revolving credit loans 2,679 (19,998) 18,258
Decrease in other
long-term obligations (607) (176) (292)
Increase in other long-
term liabilities 422 504 261
Proceeds from issuance of common
stock 1,070 1,652 362
Purchase of stock warrant - - (193)
Treasury stock purchases (18,523) - -
________ ________ ________
Net cash (used for) provided by
financing activities (14,959) (18,018) 18,396
________ ________ ________
Net increase (decrease) in cash 123 (352) (2,969)
Cash, beginning of year 887 1,239 4,208
-------- -------- --------
Cash, end of year $ 1,010 $ 887 $ 1,239
======== ======== ========
The accompanying notes are an integral part of the financial statements.
<PAGE>
Note 1 - Significant Accounting Policies
Consolidation: Gehl Company is engaged in the manufacture and distribution of
equipment and machinery for the construction market, and in the manufacture
and distribution of farm equipment and machinery primarily for the dairy,
livestock and poultry agricultural sector. The consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries: Hedlund Martin, Inc.; Gehl Power Products, Inc.; Mustang
America, Inc. and subsidiaries (Mustang); and Gehl International, Inc., a
foreign sales corporation. All significant intercompany transactions and
balances are eliminated.
Use of Estimates: The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions, in certain circumstances, that affect the reported amounts of
assets and liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting period.
Ultimate realization of assets and settlement of liabilities in the future
could differ from those estimates.
Revenue Recognition: Revenue is recorded upon the shipment of products to
dealers and distributors; these dealers and distributors have no right of
return, except as provided by law.
Accounts Receivable: The Company provides financing for its dealers in both
the construction and agricultural markets. The financing agreements provide
for, in certain instances, interest-free periods which generally range from 4
to 12 months.
Finance Contracts Receivable: The Company offers financing for its products to
retail customers and to its dealers. Finance contracts require periodic
installments of principal and interest over periods of up to 60 months.
Unearned interest is recognized over the life of the contracts using the sum
of the digits method. Principal expected to be collected within twelve months
of the balance sheet date is classified as a current asset; the remainder is
classified as a non-current asset.
Inventories: Inventories are valued at the lower of cost or market. Cost is
determined by the last-in, first-out (LIFO) method for substantially all of
the Company's inventories.
Properties and Depreciation: Properties are stated at cost. When properties
are sold or otherwise disposed of, cost and accumulated depreciation are
removed from the respective accounts and any gain or loss is included in
income. The Company provides for depreciation of assets generally using the
straight-line method for financial reporting purposes and accelerated methods
for income tax purposes. Expenditures which substantially increase value or
extend asset lives are capitalized. Expenditures for maintenance and repairs
are charged against income as incurred.
Debt Issue Costs: Costs incurred in conjunction with incurrence of
indebtedness are capitalized and subsequently amortized over the related
periods of the obligations.
Intangible Assets: The cost in excess of the fair market value of net assets
acquired (goodwill) arising from the acquisition of Mustang is being amortized
on the straight-line basis over 30 years. A five year noncompete agreement
with the former owners of Mustang is being amortized on the straight-line
basis over the life of the agreement. Accumulated amortization of intangible
assets at December 31, 1999 and 1998 is $1,683,000 and $937,000, respectively.
Foreign Currency Transactions: Foreign currency transaction gains and (losses)
are included in the determination of income. Foreign currency losses were
$15,000, $130,000 and $98,000 in 1999, 1998 and 1997, respectively.
Income Taxes: The Company follows the liability method in accounting for
income taxes. The liability method provides that deferred tax assets and
liabilities be recorded based on the difference between the tax bases of
assets and liabilities and their carrying amounts for financial reporting
purposes.
Product Liability Costs: The Company directly assumes all liability for costs
associated with claims up to specified limits in any policy year. Known
incidents involving the Company's products are investigated and reserves are
established for any estimated liability.
Product Warranty Costs: In general, the Company provides warranty on equipment
for a period of up to twelve months or for a specified period of use after
sale or rental by the dealer. Reserves for estimated warranty costs are
established at the time of sale.
Environmental Costs: Environmental expenditures that relate to current
operations are expensed or capitalized as appropriate. Expenditures that
relate to an existing condition caused by past operations, and that do not
contribute to current or future revenue generation, are expensed. Liabilities
are recorded when environmental assessments and/or remedial efforts are
probable, and the costs can be reasonably estimated.
Research and Development Costs: Costs for research activities relating to
product development and improvement are charged against income as incurred.
Such costs amounted to approximately $3.0 million, $2.8 million and $2.3
million in 1999, 1998 and 1997, respectively.
Other (Expense) Income: Other (expense) income is comprised primarily of
foreign currency transaction gains (losses), cost of sales of finance
contracts, amortization of debt issue costs, and royalty and license (expense)
income.
Accounting Pronouncements: The Financial Accounting Standards Board (FASB) has
issued Statement of Financial Accounting Standards (SFAS) No. 133 "Accounting
for Derivative Instruments 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 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 effect the Company's financial condition or results of operations.
Note 2 - Acquisition of Business
On October 2, 1997, the Company acquired all of the issued and outstanding
shares of capital stock of Mustang for $27.7 million. Mustang designs,
manufactures and distributes skid steer loaders and related attachments. This
acquisition has been accounted for as a purchase and the results of operations
of Mustang have been included in the Company's consolidated financial
statements since the date of the acquisition. The following unaudited pro-
forma consolidated results of operations for the year ended December 31, 1997
are presented as if the acquisition occurred as of January 1, 1997 (in
thousands, except per share data):
Year ended December 31 1997
Net sales $ 240,532
Net income 12,658
Diluted net income per share 1.93
Basic net income per share 2.04
The unaudited pro-forma financial information is not necessarily indicative of
either the results of operations that would have occurred had the acquisition
been made during the period presented or the future results of the combined
operations.
Note 3 - Accounts Receivable and Finance Contracts Receivable
Accounts receivable and finance contracts receivable were comprised of the
following (in thousands):
December 31, 1999 1998
Accounts receivable $72,999 $74,360
Less allowances for:
doubtful accounts (1,687) (1,305)
returns and dealer
discounts (2,761) (2,249)
------- -------
$68,551 $70,806
======= =======
Finance contracts receivable $23,285 $17,784
Less: unearned interest (2,396) (1,201)
allowance for doubtful
accounts (1,504) (993)
------- --------
19,385 15,590
Less: non-current portion (7,311) (5,804)
------- --------
Current portion $ 12,074 $ 9,786
======= =======
The finance contracts receivable at December 31, 1999 have a weighted average
interest rate of approximately 6.75%.
The Company has entered into various agreements with third parties to sell
with recourse certain finance contracts receivable. The finance contracts
require periodic installments of principal and interest over periods of up to
60 months; interest rates are based on market conditions. The Company has
retained the servicing of substantially all of these contracts which generally
have maturities of 12 to 60 months. Amounts to cover potential losses on these
sold receivables are included in the allowance for doubtful accounts.
The following summarizes the Company's sales of retail finance contracts
receivable during 1999 and 1998 (in thousands):
1999 1998
Value of contracts sold
- net of $6.1 million and
$4.8 million, respectively,
of unearned interest $77,039 $55,355
Cash received on sales of
contracts 74,128 54,267
------- -------
Cost of sales of finance
contracts $ 2,911 $ 1,088
======= =======
Net receivables outstanding
at December 31 relating
to finance contracts sold $90,331 $71,329
======= =======
The Company retains as collateral a security interest in the equipment
associated with accounts receivable and finance contracts receivable. The
Company also maintains certain levels of dealer recourse deposits as
additional security associated with finance contracts receivable.
Note 4 - Inventories
If all of the Company's inventories had been valued on a current cost basis,
which approximates FIFO value, estimated inventories by major classification
would have been as follows (in thousands):
December 31, 1999 1998
Raw materials and supplies $ 17,371 $ 15,656
Work-in-process 5,767 5,863
Finished machines and parts 31,263 29,970
--------- ---------
Total current cost value 54,401 51,489
Adjustment to LIFO basis (19,195) (19,396)
--------- ---------
$ 35,206 $ 32,093
========= =========
Note 5 - Property, Plant and Equipment - Net
Property, plant and equipment consisted of the following (in thousands):
December 31, 1999 1998
Land $ 1,838 $ 1,838
Buildings 28,202 25,781
Machinery and equipment 42,389 38,669
Autos and trucks 256 350
Office furniture and fixtures 9,282 8,995
-------- --------
81,967 75,633
Less: accumulated
depreciation (44,939) (41,491)
________ ________
Property, plant and
equipment - net $ 37,028 $ 34,142
======== ========
Note 6 - Debt Obligations
A summary of the Company's debt obligations, and related current maturities,
is as follows (in thousands):
December 31, 1999 1998
Line of credit facility $22,038 $19,359
9.0% industrial
development bonds 8,400 8,400
Other debt obligations 1,178 1,785
-------- -------
31,616 29,544
Less: current portion (519) (597)
-------- -------
Long-term debt obligations $31,097 $28,947
======== =======
The Company maintains a $75 million line of credit facility (the Facility)
which expires December 31, 2002. Interest is paid monthly on outstanding
borrowings under the Facility as follows: borrowings in Canadian denominated
dollars up to a $5.5 million credit line are at 2.5% above the Canadian one-
month bankers' acceptance rates; the remainder of the borrowings are in U.S.
dollars and are at 2.0% above the London Interbank Offered Rate for one-month
deposits (LIBOR). Under the Facility, $25 million is tied to a borrowing base
related to the Company's finance contracts receivable and inventories. The
remaining availability is tied to a borrowing base related to the Company's
accounts receivable. Borrowings under the Facility are secured by finance
contracts receivable, inventories and accounts receivable.
At December 31, 1999, the Company had unused borrowing capacity of
approximately $49.8 million under the Facility. The Facility also includes
financial covenants requiring the maintenance of a minimum tangible net worth
level and a maximum debt to equity ratio.
The 9% industrial development bonds are secured by the Company's Lebanon,
Pennsylvania manufacturing facility and require principal repayment in six
equal annual installments of $1.4 million commencing in 2005. The Company has
established a debt reserve fund of approximately $550,000 until the first
mandatory bond redemption period in 2003. The debt reserve fund was
established with remaining funds in the trustee-controlled unexpended plant
construction fund and interest subsequently earned. Financial covenants
related to the industrial development bonds require the maintenance of a
minimum tangible net worth level and a maximum debt to equity ratio.
Annual maturities of debt obligations are as follows (in thousands):
2000 $ 519
2001 170
2002 22,106
2003 421
2004 -
Later years 8,400
-------
$31,616
=======
Interest paid on total debt obligations was $3.0 million, $4.1 million and
$2.4 million in 1999, 1998 and 1997, respectively.
Note 7 - Accrued Liabilities
Accrued liabilities were comprised of the following (in thousands):
December 31, 1999 1998
Accrued salaries and wages $ 6,728 $ 5,516
Dealer recourse deposits 2,418 2,441
Accrued warranty costs 5,796 4,754
Accrued product liability costs 3,760 3,833
Accrued income taxes 3,225 2,934
Other 8,776 8,515
------- -------
$30,703 $27,993
======= =======
Note 8 - Income Taxes
The income tax provision recorded for the years ended December 31, 1999, 1998
and 1997 consisted of the following (in thousands):
Year Ended
December 31, Federal State Total
1999 Current $ 12,080 $ 450 $ 12,530
Deferred (1,421) - (1,421)
-------- ----- --------
Total $ 10,659 $ 450 $ 11,109
======== ======== ========
1998 Current $ 8,232 $ 349 $ 8,581
Deferred (177) - (177)
-------- ------- --------
Total $ 8,055 $ 349 $ 8,404
======== ======= ========
1997 Current $ 5,552 $ 155 $ 5,707
Deferred 1,592 - 1,592
-------- ------- --------
Total $ 7,144 $ 155 $ 7,299
======== ======= ========
A reconciliation between the reported income tax provision and the federal
statutory rate follows (as a percent of pre-tax income):
Year Ended December 31, 1999 1998 1997
Federal statutory rate 35.0% 35.0% 35.0%
State income taxes, net of
Federal income tax effect .9 1.0 .5
Other, net (.4) (.5) .9
----- ----- -----
35.5% 35.5% 36.4%
======= ======= =======
The Company's temporary differences and carryforwards which give rise to
deferred tax assets and liabilities consisted of the following (in thousands):
December 31, 1999 1998
Accrued expenses and reserves $8,237 $7,422
Asset valuation reserves 1,693 1,182
Operating loss carryforwards 251 844
Tax credit carryforwards 309 522
Installment sales (1,417) (1,890)
Property, plant and equipment (2,936) (2,932)
Other, net (1,109) (1,099)
Valuation allowance (546) (854)
------- -------
Net deferred tax asset $ 4,482 $ 3,195
======== ========
The net asset is included in the consolidated balance
sheet in the following captions (in thousands):
December 31, 1999 1998
Prepaid income taxes $ 8,431 $ 7,138
Deferred income taxes (3,949) (3,943)
------ ------
$ 4,482 $ 3,195
====== ======
At December 31, 1999, the Company had state net operating loss carryforwards
of $4.8 million which will be available for the reduction of future income tax
liabilities. A valuation allowance has been recorded against these
carryforwards for which utilization is uncertain.
Cash paid related to income taxes during 1999, 1998 and 1997 was $11.9
million, $7.0 million and $5.5 million, respectively.
Note 9 - Employee Retirement Plans
The Company sponsors two qualified defined benefit pension plans for certain
of its employees. The following schedules set forth a reconciliation of the
changes in the plans' benefit obligation and fair value of plan assets and a
statement of the funded status (in thousands):
December 31, 1999 1998
Reconciliation of benefit
obligation:
Obligation at beginning of year $ 29,953 $ 27,990
Service cost 573 525
Interest cost 2,107 2,037
Actuarial (gain) loss (392) 1,159
Benefit payments (1,812) (1,758)
-------- --------
Obligation $ 30,429 $ 29,953
Reconciliation of fair value of plan
assets
Fair value of plan assets at
beginning of year $ 27,087 $ 30,199
Actual return on plan asset 2,210 (1,898)
Employer contributions 588 544
Benefit payments (1,812) (1,758)
-------- --------
Fair value of plan assets $ 28,073 $ 27,087
Funded Status:
Funded status at end of year $ (2,356) $ (2,866)
Unrecognized prior service cost 1,099 1,247
Unrecognized loss 4,746 5,104
-------- --------
Net amount recognized 3,489 3,485
Employer contributions paid
between 9/30 and 12/31 - 358
-------- --------
Net amount recognized at December 31 $ 3,489 $ 3,843
The following table provides the amounts recognized in the
statement of financial position (in thousands):
December 31, 1999 1998
Prepaid benefit cost $ 3,489 $ 3,485
Accrued benefit liability (1,028) (1,295)
Intangible asset 26 29
Accumulated other
comprehensive loss 1,002 1,266
------- -------
Net amount recognized 3,489 3,485
Employer contributions paid
between 9/30 and 12/31 - 358
------- -------
Net amount recognized at December 31 $ 3,489 $ 3,843
The following table provides disclosure of Net Periodic Benefit Cost (in
thousands):
Year Ended December 31, 1999 1998 1997
Service cost $ 573 $ 525 $ 493
Interest cost 2,107 2,037 1,901
Expected return on plan assets (2,398) (2,244) (2,098)
Amortization of transition asset - (272) (436)
Amortization of prior service cost 149 149 149
Amortization of net loss 154 126 20
------- ------- -------
Net periodic benefit cost $ 585 $ 321 $ 29
The assumptions used in the measurement of the Company's benefit obligation
are shown in the following table:
1999 1998
Weighted-average assumptions
as of September 30:
Discount rate 8.25% 7.25%
Expected return on plan assets 9.00% 9.00%
Rate of compensation increase 4.00% 4.00%
The projected benefit obligation, accumulated benefit obligation, and fair
value of plan assets for the plan having accumulated benefit obligations in
excess of plan assets were $16.0 million, $14.2 million and $13.4 million,
respectively, as of December 31, 1999.
The measurement date used for each of the actuarial calculations was September
30. Plan assets consist principally of common stocks and fixed income
investments. Funding for the plans equals or exceeds the minimum requirements
of the Employee Retirement Income Security Act of 1974.
In addition, the Company maintains an unfunded supplemental retirement benefit
plan for certain management employees. The accumulated benefit obligation for
this plan was $1.8 million and $1.5 million at December 31, 1999 and 1998,
respectively, using a discount rate of 8.25% in 1999 and 7.25% in 1998.
The Company maintains a savings and profit sharing plan. The Company matches
50% of non-bargaining unit employee contributions to the plan not to exceed 6%
of the employees annual compensation. Vesting of Company contributions occur
at the rate of 20% per year. Contributions approximated $632,000, $577,000 and
$436,000 in 1999, 1998 and 1997, respectively.
The Company maintains a defined contribution plan that covers certain
employees not covered by a defined benefit plan. The Company contributes
various percentages of eligible employee compensation (as defined therein);
the plan does not allow employee contributions. The Company contributed
approximately $407,000, $329,000 and $287,000 in connection with this plan in
1999, 1998 and 1997, respectively.
The Company provides postretirement benefits to certain retirees in two areas:
a $2,500 life insurance policy for retired office employees and subsidized
health insurance benefits for early retirees prior to their attaining age 65.
The number of retirees associated with postretirement benefit costs is
approximately 180.
The following schedules set forth a reconciliation of the changes in the
postretirement plan's benefit obligation and funded status (in thousands):
December 31, 1999 1998
Reconciliation of benefit
obligation:
Obligation at beginning of year $1,507 $1,407
Service cost 59 40
Interest cost 127 110
Actuarial loss 181 175
Benefit payments (157) (225)
------- -------
Obligation $ 1,717 $ 1,507
Funded Status:
Funded status at end of year $(1,717) $(1,507)
Unrecognized transition
obligation 293 316
Unrecognized loss 842 710
------- -------
Net amount recognized $ (582) $ (481)
======= =======
The following table provides disclosure of the net periodic benefit cost (in
thousands):
Year ended December 31, 1999 1998 1997
Service cost $ 59 $ 40 $ 45
Interest cost 127 110 100
Amortization of transition obligation 23 23 23
Amortization of net loss 50 37 23
---- ---- ----
Net periodic benefit cost $259 $210 $191
==== ==== ====
The assumed health care cost rate trend used in measuring the accumulated
postretirement benefit obligation at December 31, 1999 was 7% decreasing to 5%
over four years and at December 31, 1998 was 8% decreasing to 5% over four
years. The discount rate used in determining the accumulated postretirement
obligation was 8.25% in 1999, 7.25% in 1998 and 7.5% in 1997.
Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plans. A 1% change in assumed health care cost
trend rates would have the following effects:
December 31, 1% Increase 1% Decrease
Effect on total of service and
interest cost components of net
periodic postretirement health
care benefit cost $17,623 $(14,982)
Effect on the health care
component of the accumulated
postretirement benefit
obligation $98,509 $(82,091)
Note 10 Shareholders' Equity
During April 1996, the 1995 Stock Option Plan was adopted by the Company as
approved by the shareholders (the "1995 Plan"), which authorized the granting
of options for up to 600,000 shares of the Company's common stock. In
addition, through its expiration in December 1996, the Company was authorized
to grant options for up to 530,000 shares of the Company s common stock under
the 1987 Stock Option Plan. The 1995 Plan provides that options be granted at
an exercise price not less than fair market value on the date the options are
granted and that the options generally vest ratably over a period not
exceeding three years after the grant date. The option period shall not be
more than ten years after the grant date.
Following is a summary of activity in the stock option plans for 1997, 1998
and 1999:
Shares Weighted
Subject Average
to Option Option
Price
Outstanding, January 1, 1997 593,489 $ 7.81
Granted 96,000 19.59
Exercised (41,084) 6.70
Cancelled (5,000) 14.88
------- -----
Outstanding, December 31, 1997 643,405 $ 9.58
Granted 117,750 14.54
Exercised (92,359) 7.67
Cancelled (13,002) 8.61
------- ------
Outstanding, December 31, 1998 655,794 $10.76
Granted 119,500 18.71
Exercised (135,992) 7.72
Cancelled (31,668) 16.73
------- ------
Outstanding, December 31, 1999 607,634 $12.69
======= ======
Exercisable, December 31, 1999 396,633 $10.10
======= ======
The exercise price for options outstanding at December 31, 1999 range from
$3.00 to $22.50 per share. The weighted-average remaining contractual life of
these options approximates seven years.
The Company has adopted the disclosure-only provisions of SFAS No. 123,
"Accounting for Stock-Based Compensation." Accordingly, no compensation cost
has been recognized for options granted under the stock option plans. Had
compensation cost been determined based on the fair value at the grant date
for awards in 1997, 1998 and 1999 consistent with the provisions of SFAS No.
123, the Company's pro-forma net income and earnings per share would have been
as presented below (in thousands, except per share data):
Year ended December 31, 1999 1998 1997
Net income $19,820 $14,831 $12,414
Diluted net income per share 3.12 2.23 1.90
Basic net income per share 3.24 2.33 2.00
The fair value of each option granted is estimated on the date of grant using
the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1999, 1998 and 1997:
For the year ended December 31, 1999 1998 1997
Expected stock price volatility 25.9% 19.7% 19.1%
Risk-free interest rate 6.3% 4.8% 6.1%
Expected life of options - years 7 7 7
The weighted-average grant-date fair value of options granted during 1999,
1998 and 1997 was $8.21, $5.13 and $7.60, respectively.
In March 1999, the Company's Board of Directors authorized the repurchase of
up to 325,000 shares of the Company's outstanding common stock. In addition,
in July 1999, the Board authorized a specific repurchase from an individual
shareholder. During 1999 pursuant to these authorizations, the Company
repurchased and cancelled an aggregate of 930,500 shares of its common stock
at a total cost of approximately $18.5 million. As of December 31, 1999, the
Company had the authority to buy up to 120,400 additional shares of its common
stock under the repurchase program authorized in March 1999.
On May 28, 1997, the Board of Directors of the Company adopted a Shareholder
Rights Plan and declared a rights dividend of one preferred share purchase
right (Right) for each share of common stock outstanding on June 16, 1997, and
provided that one Right would be issued with each share of common stock
thereafter issued. The Shareholder Rights Plan provides that in the event a
person or group acquires or seeks to acquire 15% or more of the outstanding
common stock of the Company, the Rights, subject to certain limitations, will
become exercisable. Each Right once exercisable initially entitles the holder
thereof (other than the acquiring person whose rights are cancelled) to
purchase from the Company one one-hundredth of a share of Series A preferred
stock at an initial exercise price of $55 per one one-hundredth of a share
(subject to adjustment), or, upon the occurrence of certain events, common
stock of the Company or common stock of an "acquiring company" having a market
value equivalent to two times the exercise price. Subject to certain
conditions, the Rights are redeemable by the Board of Directors for $.01 per
Right and are exchangeable for shares of common stock. The Rights have no
voting power and expire on May 28, 2007.
During 1997, the Company purchased a previously issued warrant to purchase
50,000 shares of the Company's stock for $193,000. During 1998, warrants to
purchase 130,000 shares of the Company's common stock for $7 per share were
exercised.
Note 11 - 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 follows (in thousands):
Year Ended December 31, 1999 1998 1997
Basic shares 6,126 6,376 6,194
Effect of warrants and options 233 286 348
----- ----- -----
Diluted shares 6,359 6,662 6,542
===== ===== =====
Note 12 - Contingencies
The Company is involved in litigation of which the ultimate outcome and
liability to the Company, if any, is not presently determinable. Management
believes, based in part on the advice of counsel, that final disposition of
such litigation will not have a material impact on the Company's results of
operations or financial position.
Note 13 - Segment Information
The Company has two segments, Construction equipment and Agricultural
equipment, as the long-term financial performance of these segments is
affected by separate economic conditions and cycles. Segment net sales and
income from operations tend to be aligned with the distribution networks of
the Company, and correlate with the manner in which the Company evaluates
performance.
Construction equipment is manufactured and distributed for customers in the
construction market. Products include a diversified offering of skid loaders,
telescopic handlers, mini-excavators and paving equipment. As of December 31,
1999, 49% of the Company's accounts receivable were from customers in the
construction market.
Agricultural equipment is manufactured and distributed for customers in the
dairy, livestock and poultry agricultural sectors. The products include
equipment for haymaking, forage harvesting, feed making, manure handling and
materials handling. As of December 31, 1999, 51% of the Company's accounts
receivable were from customers in the agricultural sector.
Unallocated assets are cash, deferred income taxes and other assets not
identified with the Company's segments.
Year Ended December 31, 1999 1998 1997
Net Sales
Construction $170,364 $156,008 $101,635
Agriculture 115,458 106,211 95,420
-------- -------- --------
Consolidated $285,822 $262,219 $197,055
======== ======== ========
Income from
Operations
Construction $ 23,661 $ 19,384 $ 16,277
Agriculture 11,396 7,894 5,571
-------- -------- --------
Consolidated $ 35,057 $ 27,278 $ 21,848
======== ======== ========
Assets (Year-end)
Construction $102,298 $ 92,472 $ 86,647
Agriculture 76,803 77,766 78,281
Unallocated 15,059 14,309 11,295
-------- -------- --------
Consolidated $194,160 $184,547 $176,223
======== ======== ========
Depreciation/
Amortization
Construction $ 2,992 $ 2,687 $ 1,225
Agriculture 2,092 2,033 1,957
Unallocated 27 28 29
-------- -------- --------
Consolidated $ 5,111 $ 4,748 $ 3,211
======== ======== ========
Capital Expenditures
Construction $ 3,852 $ 1,827 $ 5,265
Agriculture 3,429 1,224 3,453
-------- -------- --------
Consolidated $ 7,281 $ 3,051 $ 8,718
======== ======== ========
Exports of U.S. produced products were approximately $39.8 million, $41.4
million and $32.9 million in 1999, 1998 and 1997, respectively.
Note 14 - Quarterly Financial Data (unaudited)
In Thousands,
Except Per First Second Third Fourth
Share Data Quarter Quarter Quarter Quarter Total
1999
Net sales $68,963 $83,848 $69,838 $63,173 $285,822
Gross profit 18,776 24,115 20,643 16,823 80,357
Net income 3,504 6,772 6,101 3,808 20,185
Diluted net
income per
common share .52 1.01 1.00 .64 3.17
Basic net
income per
common share(1) .54 1.05 1.04 .67 3.29
1998
Net sales $61,288 $75,231 $63,452 $62,248 $262,219
Gross profit 15,851 21,175 17,834 16,551 71,411
Net income 2,664 5,210 4,058 3,336 15,268
Diluted net
income per
common share .40 .78 .61 .50 2.29
Basic net
income per
common share(1) .42 .81 .63 .52 2.39
1 Due to the use of the weighted-average shares outstanding each quarter for
computing net income per share, the sum of the quarterly per share amounts
does not equal the per share amount for the year.
<PAGE>
GEHL COMPANY AND SUBSIDIARIES
FIVE-YEAR FINANCIAL SUMMARY
Dollars in 1999 1998 1997 1996 1995
Thousands,
Except Per
Share Data
Summary of
Operations
Net sales $285,822 $262,219 $197,055 $159,662 $153,452
Gross profit 80,357 71,411 57,803 47,760 44,614
Income from
operations 35,057 27,278 21,848 15,547 13,613
Interest
expense 3,083 4,026 2,325 3,443 5,733
Income before
income taxes 31,294 23,672 20,060 12,494 9,163
Net income 20,185 15,268 12,761 9,565 9,013
Financial
Position at
December 31
Current assets $125,783 $121,894 $117,841 $89,748 $106,563
Current
liabilities 56,299 52,152 44,328 32,136 29,561
Working
capital 69,484 69,742 73,513 57,612 77,002
Accounts
receivable 68,551 70,806 72,190 55,141 69,087
Finance
contracts
receivable 19,385 15,590 11,241 8,161 7,716
Inventories 35,206 32,093 30,340 18,642 23,320
Property,
plant and
equipment,
net 37,028 34,142 35,082 21,678 20,315
Total assets 194,160 184,547 176,223 120,125 134,923
Long-term debt 31,097 28,947 49,046 19,194 46,666
Total debt 31,616 29,544 49,718 19,372 46,863
Shareholders'
equity 97,424 94,105 77,573 64,832 55,679
Common Share
Summary
Diluted net
income per
share $3.17 $2.29 $1.95 $1.54 $1.44
Basic net
income per
share 3.29 2.39 2.06 1.56 1.46
Dividends per
share -- -- -- -- --
Book value per
share 17.26 14.61 12.49 10.53 8.96
Shares
outstanding at
year-end 5,645,620 6,438,945 6,212,686 6,158,720 6,216,765
Other
Financial
Statistics
Net cash
provided by
operating
activities $24,964 $21,367 $15,119 $31,795 $9,701
Capital
expenditures 7,281 3,051 8,718 3,837 2,437
Depreciation 4,329 3,941 2,955 2,438 2,520
Current ratio 2.2 to 1 2.3 to 1 2.7 to 1 2.8 to 1 3.6 to 1
Percent total
debt to total
capitalization 24.5% 23.9% 39.1% 23.0% 45.7%
Net income as
a percent of
net sales 7.1% 5.8% 6.5% 6.0% 5.9%
After-tax
return on
average
shareholders'
equity 21.1% 17.8% 17.9% 15.9% 17.7%
Employees at
year-end 1,118 1,127 1,192 832 842
Common stock
price range 23-1/2-14 22-1/2-11 24-15/16-9-3/8 12-6-7/8 9-5/8-6-1/4
Investor Information
Price Range Dividends
1999 1998 1999 1998
Stock Prices
and Dividends
First Quarter $18-1/8 - 14 $22- 1/2 - 18-5/8 $ -- $ --
Second Quarter 23 - 14 1/8 22 - 16 -- --
Third Quarter 23-1/2 - 17 1/8 21- 1/2 - 11 -- --
Fourth Quarter 19-11/16 - 16-5/8 17- 1/2 - 12-3/4 -- --
------------------ ------------------ ------- -------
Year $23-1/2 - 14 $22-1/2 - 11 $ -- $ --
================== ================== ========== ==========
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Registration Statements listed below of Gehl Company of our report dated
February 10, 2000 relating to the financial statements, which appears
in the Annual Report to Shareholders, which is incorporated in this Annual
Report on Form 10-K. We also consent to the incorporation by reference of
our report dated February 10, 2000 relating to the Financial Statement
Schedule, which appears in this Form 10-K.
1. Registration Statement on Form S-8 (Registration No. 33-38392)
2. Registration Statement on Form S-8 (Registration No. 33-39150)
3. Registration Statement on Form S-8 (Registration No. 333-02195)
4. Registration Statement on Form S-8 (Registration No. 333-04017)
5. Registration Statement on Form S-3 (Registration No. 333-9173)
6. Registration Statement on Form S-3 (Registration No. 333-51723)
PRICEWATERHOUSECOOPERS LLP
Milwaukee, Wisconsin
March 2, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Gehl
Company's consolidated balance sheet at December 31, 1999 and consolidated
statements of income for the twelve month period ended December 31, 1999 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-1-1999
<PERIOD-END> DEC-31-1999
<CASH> 1010
<SECURITIES> 0
<RECEIVABLES> 93888<F1>
<ALLOWANCES> 5952
<INVENTORY> 35206
<CURRENT-ASSETS> 125783
<PP&E> 81967
<DEPRECIATION> 44939
<TOTAL-ASSETS> 194160
<CURRENT-LIABILITIES> 56299
<BONDS> 31097<F2>
<COMMON> 565
0
0
<OTHER-SE> 96859
<TOTAL-LIABILITY-AND-EQUITY> 194160
<SALES> 285822
<TOTAL-REVENUES> 285822
<CGS> 205465
<TOTAL-COSTS> 205465
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3083
<INCOME-PRETAX> 31294
<INCOME-TAX> 11109
<INCOME-CONTINUING> 20185
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20185
<EPS-BASIC> 3.29<F3>
<EPS-DILUTED> 3.17
<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>The EPS under the "EPS-Primary" tag represents Basic Earnings Per Share.
</FN>
</TABLE>