SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarterly Period Ended March 31, 2001
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
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Wisconsin 39-0300430
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
143 Water Street, West Bend, WI 53095
- --------------------------------------- ----------
(Address of principal executive office) (Zip code)
(262) 334-9461
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 31, 2001
---------------------------- -----------------------------
Common Stock, $.10 Par Value 5,335,668
GEHL COMPANY
FORM 10-Q
March 31, 2001
REPORT INDEX
Page No.
PART I. - FINANCIAL INFORMATION:
Item 1. Financial Statements
Condensed Consolidated Statements of Income for the
Three-Month Periods Ended March 31, 2001 and
April 1, 2000 .....................................................3
Condensed Consolidated Balance Sheets at March 31, 2001,
December 31, 2000, and April 1, 2000 ..............................4
Condensed Consolidated Statements of Cash Flows for
the Three-Month Periods Ended March 31, 2001 and
April 1, 2000 .....................................................5
Notes to Condensed Consolidated Financial Statements ...............6
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition ................................8
Item 3. Quantitative and Qualitative Disclosures about Market Risk ........11
PART II. - OTHER INFORMATION:
Item 6. Exhibits and Reports on Form 8-K ..................................12
SIGNATURES ...................................................................13
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data; unaudited)
Three Months Ended
March 31, April 1,
2001 2000
--------- --------
NET SALES $ 63,716 $ 72,054
Cost of goods sold 47,489 52,772
--------- --------
GROSS PROFIT 16,227 19,282
Selling, general and administrative expenses 12,752 11,744
--------- --------
INCOME FROM OPERATIONS 3,475 7,538
Interest expense (1,196) (873)
Interest income 529 380
Other expense, net (1,231) (785)
--------- --------
INCOME BEFORE INCOME TAXES 1,577 6,260
Income tax provision 552 2,191
--------- --------
NET INCOME $ 1,025 $ 4,069
========= ========
EARNINGS PER SHARE
Diluted $ .19 $ .70
========= ========
Basic $ .19 $ .73
========= ========
The accompanying notes are an integral part of the financial statements.
3
GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
March 31, December 31, April 1,
2001 2000 2000
(Unaudited) (Audited) (Unaudited)
----------- ------------ -----------
ASSETS
Cash $ 3,839 $ 2,590 $ 3,254
Accounts receivable - net 84,109 69,546 86,190
Finance contracts receivable - net 9,969 16,549 13,364
Inventories 44,606 45,598 42,219
Deferred tax assets 8,078 8,078 8,431
Other current assets 1,329 636 557
---------- ---------- ----------
Total Current Assets 151,930 142,997 154,015
---------- ---------- ----------
Property, plant and equipment - net 46,025 46,172 38,809
Finance contracts receivable - net,
non-current 6,484 9,967 8,041
Intangible assets 12,923 13,086 15,521
Other assets 10,297 10,496 8,205
---------- ---------- ----------
TOTAL ASSETS $ 227,659 $ 222,718 $ 224,591
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current portion of long-term debt
obligations $ 168 $ 187 $ 427
Accounts payable 31,424 26,645 29,536
Accrued liabilities 24,222 23,195 31,941
---------- ---------- ----------
Total Current Liabilities 55,814 50,027 61,904
---------- ---------- ----------
Line of credit facility 49,699 51,608 44,117
Long-term debt obligations 9,184 9,277 9,010
Deferred income taxes 5,096 5,096 3,949
Other long-term liabilities 3,773 3,692 5,976
---------- ---------- ----------
Total Long-Term Liabilities 67,752 69,673 63,052
---------- ---------- ----------
Common stock, $.10 par value,
25,000,000 shares authorized,
5,335,668, 5,330,500 and 5,567,402
shares outstanding, respectively 534 533 557
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 6,544 6,495 9,444
Retained earnings 97,149 96,124 90,537
Accumulated other comprehensive loss (134) (134) (903)
---------- ---------- ----------
Total Shareholders' Equity 104,093 103,018 99,635
---------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $ 227,659 $ 222,718 $ 224,591
========== ========== ==========
The accompanying notes are an integral part of the financial statements.
4
GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands; unaudited)
Three Months Ended
March 31, April 1,
2001 2000
--------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 1,025 $ 4,069
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation 1,237 1,250
Amortization 175 199
Proceeds from sales of finance contracts 28,407 14,796
Increase in finance contracts receivable (19,577) (17,681)
Cost of sales of finance contracts 1,233 865
Net changes in remaining working capital items (8,458) (19,001)
-------- --------
Net cash provided by (used for) operating
activities 4,042 (15,503)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment additions, net (1,090) (3,031)
Other assets 187 113
-------- --------
Net cash used for investing activities (903) (2,918)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Repayment of) proceeds from line of credit
facility, net (1,909) 22,079
Proceeds from issuance of common stock 50 273
Treasury stock purchases - (2,131)
Other (31) 444
-------- --------
Net cash (used for) provided by financing
activities (1,890) 20,665
-------- --------
Net increase in cash 1,249 2,244
Cash, beginning of period 2,590 1,010
-------- --------
Cash, end of period $ 3,839 $ 3,254
======== ========
Supplemental disclosure of cash flow information:
Cash paid for the following:
Interest $ 1,232 $ 743
Income Taxes $ 130 $ 886
The accompanying notes are an integral part of the financial statements.
5
GEHL COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 2001
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although management believes that the
disclosures are adequate to make the information presented not misleading.
In the opinion of management, the information furnished for the three-month
periods ended March 31, 2001 and April 1, 2000 includes all adjustments,
consisting only of normal recurring accruals, necessary for a fair presentation
of the results of operations and financial position of the Company. Due in part
to the seasonal nature of the Company's business, the results of operations for
the three months ended March 31, 2001 are not necessarily indicative of the
results to be expected for the entire year.
It is suggested that these interim financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended December 31, 2000, as
amended, as filed with the Securities and Exchange Commission.
NOTE 2 - INCOME TAXES
The income tax provision is determined by applying an estimated annual
effective income tax rate to income before income taxes. The estimated annual
effective income tax rate is based on the most recent annualized forecast of
pretax income, permanent book/tax differences, and tax credits.
NOTE 3 - INVENTORIES
If all of the Company's inventories had been valued on a current cost
basis, which approximated FIFO value, estimated inventories by major
classification would have been as follows (in thousands):
March 31, 2001 December 31, 2000 April 1, 2000
-------------- ----------------- -------------
Raw materials and supplies $ 18,093 $ 17,689 $ 17,741
Work-in-process 5,888 4,995 5,655
Finished machines and parts 40,236 42,525 38,018
--------- ----------- ---------
Total current cost value 64,217 65,209 61,414
Adjustment to LIFO basis (19,611) (19,611) (19,195)
--------- ----------- ---------
$ 44,606 $ 45,598 $ 42,219
========= =========== =========
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NOTE 4 - ACCOUNTING PRONOUNCEMENTS
In the first quarter of fiscal 2001, the Company adopted Financial
Accounting Standards Board (FASB) 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. The statement as amended by SFAS Nos. 137 and 138, became
effective January 1, 2001 for the Company. Due to the Company's limited use of
derivative instruments, the adoption of this statement did not materially affect
the Company's financial condition or results of operations.
NOTE 5 - EARNINGS PER SHARE AND COMPREHENSIVE INCOME
Basic net income per common share is computed by dividing net income by the
weighted-average number of common shares outstanding for the period. Diluted
net income per common share is computed by dividing net income by the
weighted-average number of common shares and, if applicable, common stock
equivalents which would arise from the exercise of stock options.
A reconciliation of the shares used in the computation of earnings per
share follows (in thousands):
March 31, 2001 April 1, 2000
-------------- -------------
Basic shares 5,333 5,599
Effect of options 154 191
----- -----
Diluted shares 5,487 5,790
===== =====
Accumulated other comprehensive loss is comprised entirely of minimum
pension liability adjustments. Comprehensive income equaled net income for the
three months ended March 31, 2001 and April 1, 2000, as the minimum pension
liability amount did not change from the respective prior year-end amount.
NOTE 6 - BUSINESS SEGMENTS
The Company operates in two business segments: Construction equipment and
Agricultural equipment. The long-term financial performance of the Company's
reportable segments are affected by separate economic conditions and cycles. The
segments are managed separately based on the fundamental differences in their
operations. Following is selected segment information (in thousands):
March 31, 2001 April 1, 2000
-------------- -------------
Net Sales:
Construction $ 32,366 $ 41,071
Agricultural 31,350 30,983
-------- --------
Consolidated $ 63,716 $ 72,054
======== ========
Income from Operations:
Construction $ 878 $ 4,320
Agricultural 2,597 3,218
-------- --------
Consolidated $ 3,475 $ 7,538
======== ========
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NOTE 7 - STOCK REPURCHASES
In March 2000, the Company's Board of Directors authorized a repurchase
plan providing for the repurchase of up to 325,000 shares of the Company's
outstanding common stock. This authorization expired as of March 31, 2001 with
271,900 shares being repurchased on the open market at an aggregate cost of $3.8
million. No shares were repurchased in the quarter ended March 31, 2001.
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition
RESULTS OF OPERATIONS
Three Months Ended March 31, 2001 Compared to Three Months Ended April 1, 2000
Net sales for the first quarter of 2001 were $63.7 million which compares
with $72.1 million in the comparable period of 2000. Construction equipment net
sales were $32.4 million in the first quarter of 2001, versus $41.1 million in
the first quarter of 2000. Construction equipment sales and industry markets
both continued to be unfavorably affected by factors that impacted the second
half of 2000, including a soft housing market, low rental rates on equipment,
especially of telescopic handlers, a weak Euro and generally depressed market
demand for light construction equipment. Offsetting these adverse macroeconomic
conditions, progress was made during the first quarter on several key
construction business initiatives, including introducing mini-loaders to
construction dealers and a new 12-ton excavator to Gehl and Mustang dealers. The
Company also began shipment of four new skid loader models for Gehl and Mustang
dealers, which are being favorably received by the market.
Milk prices continued at low levels while fuel costs remained high
throughout the first quarter of 2001, creating a challenging environment for
agricultural equipment customers. Despite unsettled market conditions, sales of
Gehl agricultural equipment in the first quarter of 2001 increased one percent
over the year-ago period to $31.3 million. The increase was primarily a result
of favorable market acceptance of the Company's new round baler product line and
new Agri-Loader telescopic handler products designed exclusively for the
agricultural market, as well as sales to traditional agricultural dealers of the
Company's compact excavator and mini-loader products, which were not available
to these dealers in the comparable period of 2000.
Of the Company's total net sales reported for the first quarter of 2001,
$7.5 million were made outside of the United States compared with $10.8 million
in the comparable period of 2000. The decrease in export sales was due primarily
to a reduction in shipments to Europe as a result of a decrease in the value of
the Euro versus the U.S. dollar.
Gross profit decreased $3 million, or 16%, during the first quarter of 2001
versus the comparable period of 2000, due primarily to decreased sales volume.
Gross profit as a percent of net sales was 25.5% for the first quarter of 2001
versus 26.8% in the comparable period of 2000. Gross profit as a percent of net
sales for construction equipment was 21.8% in the first quarter of 2001 compared
with 25.0% for the first quarter of 2000. The decrease in construction equipment
gross margin was the result of competitive market conditions, lower production
levels, higher utility costs and a less favorable mix of product shipments.
Gross profit as a percent of net sales for agricultural equipment increased to
29.3% in the first quarter of 2001 from 29.2% for the first quarter of 2000.
8
Selling, general and administrative expenses were $12.7 million, or 20% of
net sales in the first quarter of 2001, an increase from $11.7 million, or 16.3%
of net sales, in the first quarter of 2000. To position the Company for future
growth and market share expansion, Gehl continues to invest in revenue enhancing
projects, such as improved parts distribution, new product development, ERP
systems and the new web-enabled attachment distribution business. Such
investments, combined with increased selling-related costs resulting from very
competitive market conditions, as well as a lower level of sales, have
contributed to the increased operating expenses as a percent of net sales.
Income from operations in the first quarter of 2001 was $3.5 million, 54%
lower than the $7.5 million for the first quarter of 2000.
Interest expense increased $.3 million to $1.2 million in the first quarter
of 2001 from $.9 million in the first quarter of 2000. The increase was a result
of an increase in average debt outstanding to $57.3 million in the first quarter
of 2001 versus $41.3 million in the first quarter of 2000, offset by a decrease
in the average rate of interest paid by the Company to 7.9% in the first quarter
of 2001 from 8.4% for the first quarter of 2000. The increase in average debt in
the first quarter of 2001 versus the comparable period of 2000 was due primarily
to capital expenditures for property, plant and equipment in 2000 and 2001 and
the repurchase of Company stock in 2000.
Other expense increased $.4 million, to $1.2 million in the first quarter
of 2001 from $.8 million in the first quarter of 2000. This was primarily caused
by increasing costs of sales of finance contracts due to selling $14.0 million
more contracts in the first quarter of 2001 versus the comparable period in
2000.
First quarter 2001 net income was $1.0 million versus $4.1 million in the
first quarter of 2000. Diluted earnings were $.19 per share for the first
quarter of 2001 versus $.70 per share in 2000.
Financial Condition
The Company's working capital was $96.1 million at March 31, 2001, as
compared to $93.0 million at December 31, 2000, and $92.1 million at April 1,
2000. The increase since December 31, 2000 was due primarily to seasonal
increases in accounts receivable offset by decreases in finance contracts
receivable and increases in accounts payable. The increase from April 1, 2000 in
inventories was primarily related to the new compact excavator and mini-loader
product lines.
Capital expenditures for property, plant and equipment during the first
quarter of 2001 were approximately $1.1 million. The Company plans to make up to
$4 million in capital expenditures in 2001. The Company believes its present
facilities will be sufficient to provide adequate capacity for its operations in
2001.
As of March 31, 2001, the weighted-average interest rate paid by the
Company on outstanding borrowings under its line of credit facility was 7.1%.
The Company had available unused borrowing capacity of $22.4 million, $20.2
million and $29.0 million under the line of credit facility at March 31, 2001,
December 31, 2000, and April 1, 2000, respectively. At March 31, 2001, December
31, 2000, and April 1, 2000, the borrowings outstanding under the line of credit
facility were $49.7 million, $51.6 million and $44.1 million, respectively.
The sale of finance contracts is an important component of the Company's
overall liquidity. The Company has arrangements with several financial
institutions and financial service
9
companies to sell, with recourse, its finance contracts receivable. The Company
continues to service substantially all contracts whether or not sold. At March
31, 2001, the Company serviced $148.8 million of such contracts, of which $130.3
million were owned by other parties. The Company believes that it will be able
to arrange sufficient capacity to sell its finance contracts for the foreseeable
future.
At March 31, 2001, shareholders' equity had increased $4.5 million to
$104.1 million from $99.6 million at April 1, 2000. This increase primarily
reflected the impact of the income earned from April 2, 2000 to March 31, 2001
offset by repurchases of Company stock.
In March 2000, the Company's Board of Directors authorized a repurchase
plan providing for the repurchase of up to 325,000 shares of the Company's
outstanding common stock. This authorization expired as of March 31, 2001 with
271,900 shares being repurchased on the open market at an aggregate cost of $3.8
million. No shares were repurchased in the quarter ended March 31, 2001.
Accounting Pronouncements
In the first quarter of fiscal 2001, the Company adopted Financial
Accounting Standards Board (FASB) 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. The statement as amended by SFAS Nos. 137 and 138, became
effective January 1, 2001 for the Company. Due to the Company's limited use of
derivative instruments, the adoption of this statement did not materially affect
the Company's financial condition or results of operations.
Outlook
The Company reiterated its previous guidance for the full year 2001. Gehl
expects net sales to increase approximately 5% to 8% over 2000 levels to between
$272 million and $280 million, and earnings to be in the range of $1.52 to $1.62
per diluted share. The Company also reiterated that it estimates that earnings
for the second quarter of 2001 will be in the range of $.61 to $.67 per diluted
share.
On May 9, 2001, the Company announced that its Board of Directors will
explore a full range of strategic alternatives to maximize value for all
shareholders, including acquisitions, strategic alliances, divestitures, a
leveraged buyout, a recapitalization and the potential sale of the Company. The
Company retained the investment banking firm of Robert W. Baird & Co. to assist
the Board in the strategic review process. The process is expected to take
approximately 2 to 3 months.
Forward-Looking Statements
Certain matters discussed in this filing are "forward-looking statements"
intended to qualify for the safe harbor from liability established by the
Private Securities Litigation Reform Act of 1995. All statements other than
statements of historical fact, including statements regarding the Company's
future financial position, business strategy, targets, projected sales and
earnings, and the plans and objectives of management for future operations, are
forward-looking statements. When used in this filing, words such as the Company
"expects" or "estimates" or words of similar meaning are generally intended to
identify forward-looking statements. These forwarding-looking statements are not
guarantees of future performance and are subject to certain
10
risks, uncertainties, assumptions and other factors, some of which are beyond
the Company's control, that could cause actual results to differ materially from
those anticipated as of the date of this filing. Factors that could cause such a
variance include, but are not limited to, unanticipated changes in general
economic and capital market conditions, the Company's ability to implement
successfully its strategic initiatives, unanticipated issues associated with the
Company's review of strategic alternatives, market acceptance of newly
introduced products, the cyclical nature of the Company's business, the
Company's and its customers' access to credit, competitive pricing, product
initiatives and other actions taken by competitors, disruptions in production
capacity, excess inventory levels, the effect of changes in laws and regulations
(including government subsidies and international trade regulations),
technological difficulties, changes in environmental laws, the impact of any
acquisition effected by the Company, and employee and labor relations.
Shareholders, potential investors, and other readers are urged to consider these
factors in evaluating the forward-looking statements and are cautioned not to
place undue reliance on such forward-looking statements. The forward-looking
statements included in this filing are only made as of the date of this filing,
and the Company undertakes no obligation to publicly update such forward-looking
statements to reflect subsequent events or circumstances. In addition, the
Company's expectations for fiscal year 2001 are based in part on certain
assumptions made by the Company, including those relating to commodities prices,
which are strongly affected by weather and other factors and can fluctuate
significantly, housing starts and other construction activities, which are
sensitive to, among other things, interest rates and government spending, and
the performance of the U.S. economy generally. The accuracy of these or other
assumptions could have a material effect on the Company's ability to achieve its
expectations.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
There are no material changes to the information provided in response to
this item as set forth in the Company's Form 10-K for the year ended December
31, 2000, as amended, as filed with the Securities and Exchange Commission.
11
PART II - OTHER INFORMATION
Item 6. Exhibits and Report on Form 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
A Current Report on Form 8-K was filed by the Company on February 15,
2001 and a Form 8-K/A was filed on February 16, 2001 in connection with
the Press Release and Letter to Shareholders of Gehl Company relating
to 2000 year-end results and strategic initiatives.
12
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GEHL COMPANY
Date: May 15, 2001 By: /s/ William D. Gehl
----------------------------------
William D. Gehl
Chairman of the Board, President
and Chief Executive Officer
Date: May 15, 2001 By: /s/ Kenneth P. Hahn
----------------------------------
Kenneth P. Hahn
Vice President of Finance,
Treasurer and Chief Financial
Officer (Principal Financial
and Accounting Officer)
13