FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 28, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ........... to .........
Commission file number 0-18110
GEHL COMPANY
- --------------------------------------------------------------------------------
Wisconsin 39-0300430
- ----------------------------------------------- ------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
143 Water Street, West Bend, WI 53095
- ----------------------------------------------- ------------------------
(Address of principal executive office) (Zip code)
(262) 334-9461
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes No X
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at September 28, 2002
Common Stock, $.10 Par Value 5,377,055
GEHL COMPANY
FORM 10-Q
September 28, 2002
REPORT INDEX
Page No.
PART I. - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statements of Operations for the
Three- and Nine-month Periods Ended September 28, 2002
and September 29, 2001....................................... 3
Condensed Consolidated Balance Sheets at September 28, 2002,
December 31, 2001, and September 29, 2001.................... 4
Condensed Consolidated Statements of Cash Flows for
the Nine-month Periods Ended September 28, 2002 and
September 29, 2001........................................... 5
Notes to Condensed Consolidated Financial Statements........... 6
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition........................... 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk.... 21
Item 4. Controls and Procedures....................................... 21
PART II. - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.............................. 22
SIGNATURES.............................................................. 23
CERTIFICATIONS.......................................................... 24
-2-
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data; unaudited)
Three Months Ended Nine Months Ended
------------------ -----------------
September 28, September 29, September 28, September 29,
2002 2001 2002 2001
---- ---- ---- ----
Net sales $ 54,575 $ 58,161 $ 181,332 $ 193,022
Cost of goods sold 42,867 44,381 142,038 149,549
---------- ---------- ---------- ----------
Gross profit 11,708 13,780 39,294 43,473
Selling, general and
administrative expenses 10,130 9,751 33,393 29,731
Strategic review costs - 513 - 513
Restructuring and other charges 333 4,300 725 4,300
---------- ---------- ---------- ----------
Total operating expenses 10,463 14,564 34,118 34,544
Income (loss) from operations 1,245 (784) 5,176 8,929
Interest expense (1,055) (1,071) (3,184) (3,413)
Interest income 527 431 1,507 1,449
Other expense, net (373) (854) (1,426) (2,758)
---------- ---------- ---------- ----------
Income (loss) before income taxes 344 (2,278) 2,073 4,207
Income tax provision (benefit) 121 (798) 726 1,472
---------- ---------- ---------- ----------
Net income (loss) $ 223 $ (1,480) $ 1,347 $ 2,735
========== ========== ========== ==========
Earnings (loss) per share
Diluted $ 0.04 $ (0.28) $ 0.25 $ 0.50
========== ========== ========== ==========
Basic $ 0.04 $ (0.28) $ 0.25 $ 0.51
========== ========== ========== ==========
The acompanying notes are an integral part of the financial statements.
-3-
GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
September 28, 2002 December 31, 2001 September 29, 2001
(Unaudited) (Audited) (Unaudited)
----------- --------- -----------
ASSETS
Cash $ 2,339 $ 2,248 $ 3,146
Accounts receivable - net 106,133 90,714 98,130
Finance contracts receivable - net 2,897 7,511 9,231
Inventories 44,173 52,161 42,469
Deferred tax assets 10,171 10,171 9,583
Prepaid expenses and other current assets 1,981 1,119 1,578
---------- ---------- ----------
Total current assets 167,694 163,924 164,137
---------- ---------- ----------
Property, plant and equipment - net 47,088 43,431 43,303
Finance contracts receivable - net, non-current 3,515 5,147 6,206
Goodwill 12,556 12,248 12,370
Other assets 13,306 12,659 11,193
---------- ---------- ----------
Total assets $ 244,159 $ 237,409 $ 237,209
========== ========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current portion of long-term debt obligations $ 148 $ 161 $ 188
Accounts payable 26,872 30,644 30,176
Accrued liabilities 26,366 25,661 27,836
---------- ---------- ----------
Total current liabilities 53,386 56,466 58,200
---------- ---------- ----------
Line of credit facility 60,269 55,188 54,850
Long-term debt obligations 9,092 9,049 9,081
Deferred income taxes 2,460 2,460 5,096
Other long-term liabilities 17,671 14,225 4,059
---------- ---------- ----------
Total long-term liabilities 89,492 80,922 73,086
---------- ---------- ----------
Common stock, $.10 par value, 25,000,000 shares
authorized, 5,377,055, 5,359,721 and 5,348,755
shares outstanding, respectively 538 536 535
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 6,966 6,980 6,663
Retained earnings 99,775 98,429 98,859
Accumulated other comprehensive loss (5,998) (5,924) (134)
---------- ---------- ----------
Total shareholders' equity 101,281 100,021 105,923
---------- ---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 244,159 $ 237,409 $ 237,209
========== ========== ==========
The acompanying notes are an integral part of the financial statements.
-4-
GEHL COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands; unaudited)
Nine Months Ended
--------------------------------------------------
September 28, 2002 September 29, 2001
------------------ ------------------
Cash flows from operating activities
Net income $ 1,347 $ 2,735
Adjustments to reconcile net income to net cash
provided by (used for) operating activities:
Depreciation 3,214 3,784
Amortization 173 549
Deferred income taxes - (1,505)
Restructuring charge (non-cash) - 1,754
Cost of sales of finance contracts 1,608 3,019
Proceeds from sales of finance contracts 73,816 82,371
Increase in finance contracts receivable (69,178) (74,311)
Net changes in remaining working capital items (8,887) (19,034)
--------- ---------
Net cash provided by (used for) operating activities 2,093 (638)
--------- ---------
Cash flows from investing activities
Property, plant and equipment additions - net (6,165) (3,104)
Other 1,231 714
--------- ---------
Net cash used for investing activities (4,934) (2,390)
--------- ---------
Cash flows from financing activities
Proceeds from line of credit facility - net 5,068 3,242
Repayments of other long-term borrowings - net (2,167) -
Proceeds from issuance of common stock 544 170
Treasury stock purchases (556) -
Other 43 172
--------- ---------
Net cash provided by financing activities 2,932 3,584
--------- ---------
Net increase in cash 91 556
Cash, beginning of period 2,248 2,590
--------- ---------
Cash, end of period $ 2,339 $ 3,146
========= =========
Supplemental disclosure of cash flow information:
Cash paid for the following:
Interest $ 3,110 $ 3,512
Income taxes $ 634 $ 1,048
The acompanying notes are an integral part of the financial statements.
-5-
GEHL COMPANY AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 28, 2002
(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 accounting principles generally accepted in the United States of America
have been condensed or omitted pursuant to such rules and regulations, although
management believes that the disclosures are adequate to make the information
presented not misleading.
In the opinion of management, the information furnished for the three- and
nine-month periods ended September 28, 2002 and September 29, 2001 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 nine-month period ended September 28, 2002 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, 2001 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):
September 28, 2002 December 31, 2001 September 29, 2001
------------------------ ------------------------ ------------------------
Raw materials and supplies $ 15,208 $ 20,309 $ 20,187
Work-in-process 2,774 6,414 4,435
Finished machines and parts 46,382 45,629 37,458
----------- ----------- ----------
Total current cost value 64,364 72,352 62,080
Adjustment to LIFO basis (20,191) (20,191) (19,611)
----------- ----------- ----------
$ 44,173 $ 52,161 $ 42,469
=========== =========== ==========
-6-
Note 4 - Goodwill and Intangible Assets
Effective January 1, 2002, the Company adopted the provisions of Statement
of Financial Accounting Standard ("SFAS") No. 142, "Goodwill and Other
Intangible Assets." Under SFAS No. 142, goodwill and intangible assets deemed to
have indefinite lives will no longer be amortized, but will be tested for
impairment at least annually. Other intangible assets will continue to be
amortized over their useful lives. As a result of adopting SFAS No. 142, the
Company ceased amortization of all goodwill.
For the three-month period ended September 29, 2001, the Company reported a
net loss of $1.5 million, which reflected the impact of $0.1 million of goodwill
amortization, and basic and diluted loss per share of $0.28. Had the Company
adopted SFAS No. 142 on January 1, 2001, the net loss for the three-month period
ended September 29, 2001 would have been $1.4 million and basic and diluted loss
per share would have been $0.25.
For the nine-month period ended September 29, 2001, the Company reported
net income of $2.7 million, which reflected the impact of $0.4 million of
goodwill amortization, and basic and diluted earnings per share of $0.51 and
$0.50, respectively. Had the Company adopted SFAS No. 142 on January 1, 2001,
net income for the nine-month period ended September 29, 2001 would have been
$3.1 million and basic and diluted earnings per share would have been $0.58 and
$0.56, respectively.
Note 5 - Accounting Pronouncements
Effective January 1, 2002, the Company adopted the provisions of Emerging
Issues Task Force ("EITF") 00-25, "Vendor Income Statement Characterization of
Consideration Paid to a Retailer of the Vendor's Products." As a result of
adopting EITF 00-25, the Company now classifies the costs associated with sales
incentives provided to dealers as a reduction of net sales. Prior to January 1,
2002, these costs were included in selling, general and administrative expenses.
Net sales and selling, general and administrative expenses for the three- and
nine-month period ended September 29, 2001 have been restated to conform to the
current year presentation. This reclassification had no impact on reported
income before income taxes or net income.
In August 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 143, "Accounting for Asset Retirement Obligations." This statement addresses
financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. It applies to legal obligations associated with the retirement of
long-lived assets that result from the acquisition, construction, development
and/or the normal operation of a long-lived asset. The statement will be
effective for years beginning after June 30, 2002. Management has not yet
completed its evaluation of the impact, if any, of the adoption of this
statement.
Effective January 1, 2002, the Company adopted the provisions of SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The
adoption of SFAS No. 144 had no impact on the Company's financial position at
September 28, 2002 or the results of operations and cash flows for the three-
and nine-month periods then ended.
-7-
In April 2002, the FASB issued SFAS No. 145, "Recission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections
as of April 2002." SFAS No. 145 rescinds SFAS No. 4, "Reporting Gains and Losses
from Extinguishment of Debt," SFAS No. 64, "Extinguishments of Debt Made to
Satisfy Sinking-Fund Requirements" and SFAS No. 44, "Accounting for Intangible
Assets of Motor Carriers." This Statement also amends SFAS No. 13, "Accounting
for Leases," to eliminate an inconsistency between the required accounting for
sale-leaseback transactions and the required accounting for certain lease
modifications that have economic effects that are similar to sale-leaseback
transactions. This Statement also amends other existing authoritative
pronouncements to make various technical corrections, clarify meanings, or
describe their applicability under changed conditions. The provisions of this
statement related to the rescission of SFAS No. 4 shall be applied in fiscal
years beginning after May 15, 2002. The provisions of this statement related to
SFAS No. 13 shall be effective for transactions occurring after May 15, 2002.
All other provisions of this statement are effective for financial statements
issued on or after May 15, 2002. The adoption of SFAS No. 145 had no impact on
the Company's financial position at September 28, 2002 or the results of
operations and cash flows for the three- and nine-month periods then ended.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." This statement nullifies EITF
94-3, "Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)," which allowed companies engaged in exit and disposal activities
to record liabilities for certain costs when the company committed to the exit
or disposal plan. SFAS No. 146 requires costs associated with an exit or
disposal plan to be recognized and measured initially at fair value only when
the liability has been incurred as defined by FASB Concepts Statement 6. The
provisions of SFAS No. 146 are effective for exit or disposal activities that
are initiated after December 31, 2002. The adoption of this statement will not
impact the accounting for the plant rationalization initiatives adopted by the
Company on September 26, 2001 (see Note 6 - Restructuring and Other Charges).
Note 6 - Restructuring and Other Charges
On September 26, 2001, the Company adopted several major plant
rationalization initiatives to improve the Company's profitability by
consolidating certain operations. Under these initiatives, the Company announced
it would close its manufacturing facility in Lebanon, Pennsylvania and transfer
production to other locations. The Company also indicated it would transfer the
manufacturing of its Mustang line of skid steer loaders from its facility in
Owatonna, Minnesota to its skid steer facility in Madison, South Dakota. In
implementing these actions, the Company expected that it would ultimately incur
total restructuring and other non-recurring charges of approximately $5.5 to
$6.5 million; a $4.3 million charge related to the plant rationalization
initiatives was recorded in the third quarter of 2001 in accordance with
accounting principles generally accepted in the United States of America. Of the
$4.3 million charge recorded in the third quarter of 2001, $1.5 million and $2.8
million related to the Agricultural and Construction equipment segments,
respectively.
-8-
Details of the restructuring charge and related activity are as follows (in
thousands):
Employee
Severance and Write-down of
Termination Long-lived and
Benefits Other Assets Other Exit
Costs Totals
---------------- ----------------- -------------- ---------------
Original Reserve $ 1,635 $ 1,754 $ 911 $ 4,300
Utilization - 1,754 - 1,754
---------- ---------- ---------- ----------
Balance at December 31, 2001 and
March 30, 2002 1,635 - 911 2,546
Utilization 308 - 51 359
---------- ---------- ---------- ----------
Balance at June 29, 2002 1,327 - 860 2,187
Utilization 433 - 159 592
---------- ---------- ---------- ----------
Balance at September 28, 2002 $ 894 $ - $ 701 $ 1,595
========== ========== ========== ==========
As a result of the plant rationalizations, the Company expected to reduce
its workforce by 249, consisting of hourly and salaried employees at the Lebanon
and Owatonna locations. During the three- and nine-month period ended September
28, 2002, workforce reductions of 123 and 220, respectively, occurred, which
included 111 and 196 employees, respectively, who were terminated with severance
payments and termination benefits commencing in April 2002 and continuing into
the first quarter of 2003.
The manufacturing consolidations announced on September 26, 2001 have been
completed. Production of Mustang skid loaders has been transferred to the
Madison plant. The Lebanon plant was closed in the 2002 first quarter and the
production of certain products formerly manufactured at that facility has been
outsourced. Both the Lebanon and Owatonna manufacturing facilities are expected
to be sold and, accordingly, the tangible assets to be disposed of have been
written down to their estimated fair value, less cost of disposal.
Other exit costs primarily consist of non-recurring charges that will not
benefit activities that will be continued, will not be incurred to generate
future revenue, and are incremental to other costs incurred by the Company prior
to the adoption of the above initiatives.
During the three- and nine-month periods ended September 28, 2002, the
Company expensed $0.3 million and $0.7 million, respectively, of other charges
related to the plant rationalization initiatives. These charges were required to
be expensed when incurred and were not included in the original reserve.
Note 7 - 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
-9-
share is computed by dividing net income by the weighted-average number of
common shares and, if applicable, common stock equivalents that would arise from
the exercise of stock options.
A reconciliation of the shares used in the computation of earnings per
share follows (in thousands):
For the three months ended: September 28, 2002 September 29, 2001
--------------------- --------------------
Basic shares 5,414 5,349
Effect of options 37 -
----- -----
Diluted shares 5,451 5,349
===== =====
For the nine months ended: September 28, 2002 September 29, 2001
--------------------- --------------------
Basic shares 5,396 5,341
Effect of options 98 178
----- -----
Diluted shares 5,494 5,519
===== =====
Accumulated other comprehensive loss is comprised of minimum pension
liability and foreign currency translation adjustments. Comprehensive income was
$0.2 million and $1.3 million for the three- and nine-month periods ended
September 28, 2002, respectively, which reflects the Company's net income
reduced by currency translation adjustments. Comprehensive income equaled net
income for the three- and nine-month periods ended September 29, 2001.
Note 8 - 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):
Three Months Ended Nine Months Ended
------------------------------------ --------------------------------------
September 28, September 29, September 28, September 29,
2002 2001 2002 2001
---------------- ----------------- ---------------- -----------------
Net Sales:
Construction $ 31,455 $ 27,775 $ 102,888 $ 99,278
Agricultural 23,120 30,386 78,444 93,744
----------- ---------- ------------ ------------
Consolidated $ 54,575 $ 58,161 $ 181,332 $ 193,022
=========== ========== ============ ============
Income (loss) from Operations:
Construction $ 1,206 ($ 1,488) $ 3,480 $ 2,183
Agricultural 39 704 1,696 6,746
----------- ---------- ------------ ------------
Consolidated $ 1,245 ($ 784) $ 5,176 $ 8,929
=========== ========== ============ ============
-10-
The following table reflects segment operating income (in thousands)
excluding the restructuring and other charges incurred during the three- and
nine-months ended September 28, 2002 of $0.3 million and $0.7 million,
respectively, and the restructuring and strategic review process costs of $4.3
million and $0.5 million, respectively, incurred during the three- and
nine-months ended September 29, 2001:
Three Months Ended Nine Months Ended
------------------------------------ --------------------------------------
September 28, September 29, September 28, September 29,
2002 2001 2002 2001
---------------- ----------------- ---------------- -----------------
Income from Operations:
Construction $ 1,458 $ 1,543 $ 3,806 $ 5,214
Agricultural 120 2,486 2,095 8,528
-------- -------- ---------- ----------
Consolidated $ 1,578 $ 4,029 $ 5,901 $ 13,742
======== ======== ========== ==========
Note 9 - Stock Repurchases
In September 2001, the Company's Board of Directors authorized a stock
repurchase plan providing for the repurchase of up to 500,000 shares of the
Company's outstanding common stock. During the three- and nine-month periods
ended September 28, 2002, the Company repurchased 35,000 and 47,800 shares,
respectively, in the open market under this authorization at an aggregate cost
of $0.4 and $0.6 million, respectively. All treasury stock acquired by the
Company has been cancelled and returned to the status of authorized but unissued
shares.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
CONSOLIDATION OF GEHL GMBH
Effective January 1, 2002, the Company has accounted for its investment in
a German distribution operation (Gehl GmbH) as a consolidated subsidiary, as a
result of the Company's controlling influence on the operations of Gehl GmbH as
of such date. Prior to January 1, 2002, the Company recorded its investment in
Gehl GmbH under the equity method. The impact of the Gehl GmbH consolidation is
discussed below.
RESTRUCTURING AND OTHER CHARGES
On September 26, 2001, the Company adopted several major plant
rationalization initiatives to improve the Company's profitability by
consolidating certain operations. Under these initiatives, the Company announced
it would close its manufacturing facility in Lebanon, Pennsylvania and transfer
production to other locations. The Company also indicated it would transfer the
manufacturing of its Mustang line of skid steer loaders from its facility in
Owatonna, Minnesota to its skid steer facility in Madison, South Dakota. In
implementing these actions, the Company expected that it would ultimately incur
total restructuring and other non-recurring charges of approximately $5.5 to
$6.5 million; a $4.3 million charge related to the plant rationalization
initiatives was recorded in the third quarter of 2001 in accordance with
accounting principles generally accepted in the United States of America. Of the
$4.3 million charge recorded in the third quarter of 2001, $1.5 million and $2.8
million related to the Agricultural and Construction equipment segments,
respectively.
-11-
Details of the restructuring charge and related activity are as follows (in
thousands):
Employee
Severance and Write-down of
Termination Long-lived and Other Exit
Benefits Other Assets Costs Totals
---------------- ----------------- -------------- ---------------
Original Reserve $ 1,635 $ 1,754 $ 911 $ 4,300
Utilization - 1,754 - 1,754
---------- ---------- ---------- ----------
Balance at December 31, 2001 and
March 30, 2002 1,635 - 911 2,546
Utilization 308 - 51 359
---------- ---------- ---------- ----------
Balance at June 29, 2002 1,327 - 860 2,187
Utilization 433 - 159 592
---------- ---------- ---------- ----------
Balance at September 28, 2002 $ 894 $ - $ 701 $ 1,595
========== ========== ========== ==========
As a result of the plant rationalizations, the Company expected to reduce
its workforce by 249, consisting of hourly and salaried employees at the Lebanon
and Owatonna locations. During the three- and nine-month period ended September
28, 2002, workforce reductions of 123 and 220, respectively, occurred, which
included 111 and 196 employees, respectively, who were terminated with severance
payments and termination benefits commencing in April 2002 and continuing into
the first quarter of 2003.
The manufacturing consolidations announced on September 26, 2001 have been
completed. Production of Mustang skid loaders has been transferred to the
Madison plant. The Lebanon plant was closed in the 2002 first quarter and the
production of certain products formerly manufactured at that facility has been
outsourced. Both the Lebanon and Owatonna manufacturing facilities are expected
to be sold and, accordingly, the tangible assets to be disposed of have been
written down to their estimated fair value, less cost of disposal.
Other exit costs primarily consist of non-recurring charges that will not
benefit activities that will be continued, will not be incurred to generate
future revenue, and are incremental to other costs incurred by the Company prior
to the adoption of the above initiatives.
During the three- and nine-month periods ended September 28, 2002, the
Company expensed $0.3 million and $0.7 million, respectively, of other charges
related to the plant rationalization initiatives. These charges were required to
be expensed when incurred and were not included in the original reserve.
-12-
RESULTS OF OPERATIONS
Three Months Ended September 28, 2002 Compared to Three Months Ended September
29, 2001
Net Sales
Net sales for the three months ended September 28, 2002 ("2002 third
quarter") were $54.6 million compared to $58.2 million in the three months ended
September 29, 2001 ("2001 third quarter"), a decrease of $3.6 million or 6%.
Excluding $2.3 million of net sales resulting from the consolidation of Gehl
GmbH, net sales decreased 10% from the 2001 third quarter.
Construction equipment segment net sales were $31.5 million in the 2002
third quarter compared to $27.8 million in the 2001 third quarter, an increase
of $3.7 million or 13%. Excluding $2.3 million of net sales resulting from the
consolidation of Gehl GmbH, construction equipment segment net sales increased
5% from the 2001 third quarter. Demand for the new compact tracked loader, which
was introduced in the second quarter of 2002, was strong during the 2002 third
quarter. Contributions from telescopic handlers and compact excavator models
sold through the Mustang distribution channel, the introduction of new all-wheel
steer loaders in the 2002 third quarter, and net sales from the Company's new
attachment business positively impacted construction equipment segment net sales
in the 2002 third quarter. These increases in construction equipment segment net
sales were partially offset by the continued sluggish market for telescopic
handlers as industry conditions for that product line continued to remain
challenging.
Agricultural equipment segment net sales were $23.1 million in the 2002
third quarter, compared to $30.4 million in the 2001 third quarter, a decrease
of $7.3 million or 24%. Agricultural implement net sales were adversely impacted
by a significant decline in milk prices in the 2002 third quarter compared to
milk prices in the 2001 third quarter, as well as drought conditions in certain
regions of the United States. In addition, shipments of skid loaders were lower
in the 2002 third quarter than 2001's comparable period. Partially offsetting
these reductions were the favorable impacts of the new compact tracked loader
introduced in the second quarter of 2002, new all-wheel steer loaders introduced
in the 2002 third quarter, and increased sales from the Company's new attachment
business.
Of the Company's total net sales reported for the 2002 third quarter, $9.8
million were made outside of the United States compared with $8.1 million in the
2001 third quarter. The increase in exports was due primarily to the
consolidation of Gehl GmbH.
Gross Profit
Gross profit was $11.7 million in the 2002 third quarter compared to $13.8
million in the 2001 third quarter, a decrease of $2.1 million or 15%. Gross
profit as a percent of net sales (gross margin) was 21.5% for the 2002 third
quarter compared to 23.7% for the 2001 third quarter. Gross margin for the
construction equipment segment was 22.6% in the 2002 third quarter compared with
21.6% for the 2001 third quarter. The increase in the construction equipment
segment gross margin during the 2002 third quarter was primarily due to the
levels of discounts and sales incentives associated with the mix of products
shipped as well as improved manufacturing efficiencies. Gross margin for the
agricultural equipment segment was 19.9% in the 2002 third quarter compared to
25.6% in the 2001 third quarter. The decrease in the agricultural equipment
segment gross margin was due to continued significant competitive
-13-
pressure resulting in higher sales discounts and sales incentives, reduced
production volume and a less favorable mix of product shipments.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $10.1 million, or 18.5%
of net sales, in the 2002 third quarter compared to $9.8 million, or 16.8% of
net sales, in the 2001 third quarter. The increase was primarily due to the
consolidation of Gehl GmbH effective January 1, 2002. These costs were partially
offset by cost reduction initiatives implemented by the Company, including
impacts from the previously announced plant rationalization project. The
increased selling, general and administrative expenses, combined with a lower
level of net sales during the 2002 third quarter, contributed to the Company's
increased selling, general and administrative expenses as a percentage of net
sales. Assuming the Company had adopted SFAS No. 142 on January 1, 2001,
selling, general and administrative expenses for the 2001 third quarter would
have been $9.6 million.
Income (Loss) from Operations
Income from operations in the 2002 third quarter was $1.2 million compared
to a loss of ($0.8) million in the 2001 third quarter. Assuming the Company had
adopted SFAS No. 142 on January 1, 2001, the loss from operations for the 2001
third quarter would have been ($0.7) million.
Excluding the restructuring and other charges incurred in the 2002 third
quarter, income from operations was $1.6 million. Excluding the restructuring
and strategic review process costs incurred in the 2001 third quarter and
assuming the Company had adopted SFAS No. 142 on January 1, 2001, income from
operations was $4.1 million.
Interest Expense
Interest expense was $1.1 million in the 2002 and the 2001 third quarter. A
decline in the Company's borrowing rate in the 2002 third quarter when compared
to the 2001 third quarter had a favorable impact on interest expense during the
quarter. The favorable impact of a reduced borrowing rate was offset by an
increase in the Company's average outstanding debt due to increases in working
capital and the consolidation of Gehl GmbH, effective January 1, 2002.
Other Expense, Net
Other expense, net was $0.4 million in the 2002 third quarter compared to
$0.9 million in the 2001 third quarter, a decrease of $0.5 million. The
reduction was primarily due to decreases in the costs of selling finance
contracts (due to lower discount rates required by third party purchasers of
such contracts as a result of the general downward trend of overall interest
rates) compared to the 2001 third quarter.
Net Income (Loss)
Net income was $0.2 million in the 2002 third quarter compared with a net
loss of ($1.5) million in the 2001 third quarter. Assuming the Company had
adopted SFAS No. 142 on January 1, 2001, the net loss for the 2001 third quarter
would have been ($1.4) million.
-14-
Excluding the restructuring and other charges, net of tax, incurred in the
2002 third quarter, net income was $0.4 million. Excluding the restructuring and
strategic review process costs, net of tax, incurred in the 2001 third quarter
and assuming the Company had adopted SFAS No. 142 on January 1, 2001, net income
was $1.7 million.
Nine Months Ended September 28, 2002 Compared to Nine Months Ended September 29,
2001
Net Sales
Net sales for the nine months ended September 28, 2002 ("2002 nine months")
were $181.3 million compared to $193.0 million in the nine months ended
September 29, 2001 ("2001 nine months"), a decrease of $11.7 million or 6%.
Excluding $7.2 million of net sales resulting from the consolidation of Gehl
GmbH, net sales decreased 10% from the 2001 nine months.
Construction equipment segment net sales were $102.9 million in the 2002
nine months compared to $99.3 million in the 2001 nine months, an increase of
$3.6 million or 4%. Excluding $7.2 million of net sales resulting from the
consolidation of Gehl GmbH, net sales decreased 4% from the 2001 nine months.
Demand for the new compact tracked loaders has been strong since its
introduction in the second quarter of 2002. In addition, construction equipment
segment net sales for the 2002 nine months benefited from the introduction of
new all-wheel steer loaders in the 2002 third quarter, contributions from
telescopic handlers and compact excavator models sold through the Mustang
distribution channel and net sales from the Company's new attachment business.
These increases in construction equipment segment net sales were more than
offset by the continued downward trend in telescopic handler shipments due to
the sluggish market for this product as industry conditions for this product
line continued to remain challenging.
Agricultural equipment segment net sales were $78.4 million in the 2002
nine months, compared to $93.7 million in the 2001 nine months, a decrease of
$15.3 million or 16%. Agricultural implement net sales were adversely impacted
by the significant decline in milk prices from those during the 2001 nine months
as well as drought conditions in certain regions of the United States. Good
demand for the new compact tracked loaders introduced in the 2002 second
quarter, the introduction of new all-wheel steer loaders in the 2002 third
quarter, increased shipments of compact excavators to select rural equipment
dealers, and increased sales from the Company's new attachment business
partially offset reduced agricultural implement and skid loader net sales in the
2002 nine months.
Of the Company's total net sales reported for the 2002 nine months, $34.1
million were made outside of the United States compared with $27.0 million in
the 2001 nine months. The increase in exports was due primarily to the
consolidation of Gehl GmbH.
Gross Profit
Gross profit was $39.3 million in the 2002 nine months compared to $43.5
million in the 2001 nine months, a decrease of $4.2 million or 10%. Gross profit
as a percent of net sales (gross margin) was 21.7% for the 2002 nine months
compared to 22.5% for the 2001 nine months. Gross margin for the construction
equipment segment was 21.6% in the 2002 nine months compared with 20.2% for the
2001 nine months. The increase in the construction equipment segment gross
margin during the 2002 nine months was primarily due to the levels of discounts
and sales incentives associated with the mix of products shipped as well as
improved
-15-
manufacturing efficiencies. Gross margin for the agricultural equipment segment
was 21.8% in the 2002 nine months compared to 24.9% in the 2001 nine months. The
decrease in the agricultural equipment segment gross margin was due to
significant competitive pressure resulting in higher sales discounts and sales
incentives, reduced production volume and a less favorable mix of product
shipments.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were $33.4 million, or 18.4%
of net sales, in the 2002 nine months compared to $29.7 million, or 15.4% of net
sales in the 2001 nine months. The increase is primarily due to the
consolidation of Gehl GmbH effective January 1, 2002 and expenses associated
with the Company's attachment business that was launched in July 2001. These
costs, combined with a lower level of net sales during the 2002 nine months,
contributed to the Company's increased selling, general and administrative
expenses as a percentage of net sales. Assuming the Company had adopted SFAS No.
142 on January 1, 2001, selling, general and administrative expenses for the
2001 nine months would have been $29.4 million.
Income from Operations
Income from operations in the 2002 nine months was $5.2 million compared to
$8.9 million in the 2001 nine months. Assuming the Company had adopted SFAS No.
142 on January 1, 2001, income from operations for the 2001 nine months would
have been $9.3 million.
Excluding the restructuring and other charges incurred in the 2002 nine
months, income from operations was $5.9 million. Excluding the restructuring and
strategic review process costs incurred in the 2001 nine months and assuming the
Company had adopted SFAS No. 142 on January 1, 2001, income from operations was
$14.1 million.
Interest Expense
Interest expense was $3.2 million in the 2002 nine months compared to $3.4
million in the 2001 nine months. The decrease was due to the decline in the
Company's borrowing rate in the 2002 nine months when compared to the 2001 nine
months. The favorable impact of a reduced borrowing rate was offset, in part, by
an increase in the Company's average outstanding debt due to increases in
working capital and the consolidation of Gehl GmbH, effective January 1, 2002.
Other Expense, Net
Other expense, net was $1.4 million in the 2002 nine months compared to
$2.8 million in the 2001 nine months, a decrease of $1.4 million. Decreases in
the costs of selling finance contracts (due to lower discount rates required by
third party purchasers of such contracts as a result of the general downward
trend of overall interest rates) as well as a reduction in the number of
contracts sold had a favorable impact on other expense, net.
Net Income
Net income was $1.3 million in the 2002 nine months compared to $2.7
million in the 2001 nine months. Assuming the Company had adopted SFAS No. 142
on January 1, 2001, net income for the 2001 nine months would have been $3.1
million.
-16-
Excluding the restructuring and other charges, net of tax, incurred in the
2002 nine months, net income was $1.8 million. Excluding the restructuring and
strategic review process costs, net of tax, incurred in the 2001 third quarter
and assuming the Company had adopted SFAS No. 142 on January 1, 2001, net income
was $6.2 million.
FINANCIAL CONDITION
The Company's working capital was $114.3 million at September 28, 2002, as
compared to $107.5 million at December 31, 2001, and $105.9 million at September
29, 2001. The increase since December 31, 2001 and September 29, 2001 was due
primarily to: 1) increases in accounts receivable related to new products
introduced throughout 2001, such as new skid loader models, the introduction of
the new compact tracked loaders and all-wheel steer loaders in the 2002 second
and third quarters, respectively, the introduction of the Company's new
attachment business which was launched in July 2001, and the shipment of compact
excavators and mini-loaders into the agriculture distribution channel; 2) the
consolidation of Gehl GmbH as of January 1, 2002 (primarily impacting
inventory); and 3) increases in accounts receivable related to seasonality (only
impacting the increase since December 31, 2001). The increases were offset, in
part, by a reduction in inventories (only impacting the change since December
31, 2001) and finance contracts receivable.
Capital expenditures for property, plant and equipment during the 2002 nine
months were approximately $6.2 million. The Company does not anticipate making
any significant capital additions during the remainder of the fiscal year. As of
September 28, 2002, the Company has made capital expenditures of approximately
$4.8 million to substantially complete an expansion of the Madison, South Dakota
plant necessary to accommodate the transfer of Mustang skid loader production
from Owatonna, Minnesota to the Madison facility. The Company believes that its
present facilities, with the completion of the Madison, South Dakota expansion
project, will be sufficient to provide adequate capacity for its operations
through 2003.
As of September 28, 2002, the weighted-average interest rate paid by the
Company on outstanding borrowings under its credit facility was 4.69%. The
Company had available unused borrowing capacity of $12.2 million, $18.2 million
and $18.3 million under the facility at September 28, 2002, December 31, 2001,
and September 29, 2001, respectively. At September 28, 2002, December 31, 2001,
and September 29, 2001, the Company's outstanding borrowings under the facility
were $60.3 million, $55.2 million and $54.9 million, respectively. In addition,
the Company had short-term letters of credit totaling $1.2 million outstanding
at September 28, 2002 due to the factoring of receivables by a supplier. The
Company believes the existing facility will provide sufficient borrowing
capacity for the Company to finance its operations for the foreseeable future.
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 September 28, 2002, the Company serviced
$155.2 million of such contracts, of which $148.1 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 September 28, 2002, shareholders' equity had decreased $4.6 million to
$101.3 million from $105.9 million at September 29, 2001. This decrease
primarily reflected the impact of the minimum pension liability adjustment
recorded in 2001 offset by the net income earned from
-17-
September 29, 2001 to September 28, 2002. The Company is reviewing, with the
assistance of its actuaries, any adjustment that may be required to the minimum
pension liability prior to December 31, 2002. Any such adjustment is expected to
impact only the Company's balance sheet.
In September 2001, the Company's Board of Directors authorized a stock
repurchase plan providing for the repurchase of up to 500,000 shares of the
Company's outstanding common stock. During the three- and nine-month periods
ended September 28, 2002, the Company repurchased 35,000 and 47,800 shares,
respectively, in the open market under this authorization at an aggregate cost
of $0.4 and $0.6 million, respectively. All treasury stock acquired by the
Company has been cancelled and returned to the status of authorized but unissued
shares.
There have been no material changes to the annual maturities of debt
obligations, nor to the future minimum non-cancelable operating lease payments
as disclosed in Notes 5 and 12, respectively, of Notes to Consolidated Financial
Statements in the Company's Annual Report on Form 10-K for the year ended
December 31, 2001 as filed with the Securities and Exchange Commission.
ACCOUNTING PRONOUNCEMENTS
Effective January 1, 2002, the Company adopted the provisions of Emerging
Issues Task Force ("EITF") 00-25, "Vendor Income Statement Characterization of
Consideration Paid to a Retailer of the Vendor's Products." As a result of
adopting EITF 00-25, the Company now classifies the costs associated with sales
incentives provided to dealers as a reduction of net sales. Prior to January 1,
2002, these costs were included in selling, general and administrative expenses.
Net sales and selling, general and administrative expenses for the three- and
nine-month period ended September 29, 2001 have been restated to conform to the
current year presentation. This reclassification had no impact on reported
income before income taxes or net income.
In August 2001, the Financial Accounting Standards Board (FASB) issued SFAS
No. 143, "Accounting for Asset Retirement Obligations." This statement addresses
financial accounting and reporting for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. It applies to legal obligations associated with the retirement of
long-lived assets that result from the acquisition, construction, development
and/or the normal operation of a long-lived asset. The statement will be
effective for years beginning after September 29, 2002. Management has not yet
completed its evaluation of the impact, if any, of the adoption of this
statement.
Effective January 1, 2002, the Company adopted the provisions of SFAS No.
144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The
adoption of SFAS No. 144 had no impact on the Company's financial position at
September 28, 2002 or the results of operations and cash flows for the three-
and nine-month periods then ended.
In April 2002, the FASB issued SFAS No. 145, "Recission of FASB Statements
No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections
as of April 2002." SFAS No. 145 rescinds SFAS No. 4, "Reporting Gains and Losses
from Extinguishment of Debt," SFAS No. 64, "Extinguishments of Debt Made to
Satisfy Sinking-Fund Requirements" and SFAS No. 44, "Accounting for Intangible
Assets of Motor Carriers." This Statement also amends SFAS No. 13, "Accounting
for Leases," to eliminate an inconsistency between the required accounting for
sale-leaseback transactions and the required accounting for certain lease
-18-
modifications that have economic effects that are similar to sale-leaseback
transactions. This Statement also amends other existing authoritative
pronouncements to make various technical corrections, clarify meanings, or
describe their applicability under changed conditions. The provisions of this
statement related to the rescission of SFAS No. 4 shall be applied in fiscal
years beginning after May 15, 2002. The provisions of this statement related to
SFAS No. 13 shall be effective for transactions occurring after May 15, 2002.
All other provisions of this statement are effective for financial statements
issued on or after May 15, 2002. The adoption of SFAS No. 145 had no impact on
the Company's financial position at September 28, 2002 or the results of
operations and cash flows for the three- and nine-month periods then ended.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs
Associated with Exit or Disposal Activities." This statement nullifies EITF No.
94-3, "Liability Recognition for Certain Employee Termination Benefits and Other
Costs to Exit an Activity (including Certain Costs Incurred in a
Restructuring)", which allowed Companies engaged in exit and disposal activities
to record liabilities for certain costs when the Company committed to the exit
or disposal plan. SFAS No. 146 requires costs associated with an exit or
disposal plan to be recognized and measured initially at fair value only when
the liability has been incurred as defined by FASB Concepts Statement 6. The
provisions of SFAS No. 146 are effective for exit or disposal activities that
are initiated after December 31, 2002. The adoption of this statement will not
impact the accounting for the plant rationalization initiatives adopted by the
Company on September 26, 2001.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Management's discussion and analysis of results of operations and financial
condition is based on the Company's condensed consolidated financial statements.
The preparation of these financial statements requires the Company to make
estimates and judgments that affect the reported amounts of assets, liabilities,
net sales and expenses. The Company bases its estimates on historical experience
and on various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions and materially impact the carrying value of the assets
and liabilities. The Company believes the following accounting policies are
critical to the Company's business operations and the understanding of the
Company's results of operations and financial condition.
Allowance for Doubtful Accounts - The Company's accounts receivable are
reduced by an allowance for amounts that may be uncollectible in the future. The
Company estimates the uncollectibility of accounts receivable by specifically
analyzing accounts receivable where the Company has information indicating that
the customer may be unable to meet its financial obligation to the Company as
well as analyzing the age of unpaid amounts and historical write-off
percentages.
Inventories - Inventories are valued at the lower of cost or market. Cost
is determined using the last-in, first-out (LIFO) method for substantially all
of the Company's inventories. Adjustments to slow moving and obsolete inventory
to the lower of cost or market are determined based on historical experience and
the Company's best estimates of current product demand.
Product Warranty - In general, the Company provides warranty coverage on
equipment for a period of up to twelve months or for a specified period of use
after sale or rental by a dealer. The
-19-
Company's reserve for warranty claims is established based on the best estimate
of the amounts necessary to settle future and existing claims on products sold
as of the balance sheet date.
Product Liability - The Company directly assumes all liability for costs
associated with claims up to specified limits in any policy year and, as such,
records an estimated reserve for product liability. The Company's reserve for
product liability is based on the best estimate of the amounts necessary to
resolve future and existing claims.
Goodwill and Intangible Assets - Effective January 1, 2002, the Company
adopted the provisions of SFAS No. 142 "Goodwill and Other Intangible Assets."
Under SFAS No. 142, goodwill and intangible assets deemed to have indefinite
lives will no longer be amortized, but will be tested for impairment at least
annually. Other intangible assets will continue to be amortized over their
useful lives. The Company is subject to financial statement risk to the extent
that goodwill becomes impaired.
OUTLOOK
The continuing difficult economic conditions in the U.S. continue to
forestall the anticipated recovery. As a result of the stagnant economic
conditions, combined with a six week, temporary suspension of production at the
Company's West Bend, Wisconsin manufacturing facility commencing November 25,
2002, and the expectation that very competitive conditions will continue at
least through year-end, the Company now believes its full year's earnings per
diluted share will be in the range of $.25 to $.30. This forecast excludes
restructuring expenses that will be incurred in 2002 which are projected to
lower the full-year 2002 earnings per diluted share by $.15 to $.20 for period
costs, which are recorded as incurred.
-20-
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
"believes," "anticipates," "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 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 (including factors
that could affect a general economic recovery), the Company's ability to
implement successfully its strategic initiatives and plant rationalization
actions, 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
currency exchange rates, the Company' ability to secure sources of liquidity
necessary to fund its operations, 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 2002 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 Annual Report on Form 10-K for the year
ended December 31, 2001 as filed with the Securities and Exchange Commission.
ITEM 4. CONTROLS AND PROCEDURES
The Company's management, under the supervision and with the participation
of the Company's principal executive officer and principal financial officer,
has evaluated the Company's disclosure controls and procedures within 90 days
prior to the filing date of this quarterly report. Based upon that evaluation,
the Company's principal executive officer and principal financial officer have
concluded that the Company's disclosure controls and procedures are effective.
There were no significant changes in the Company's internal controls or in other
factors that could significantly affect these controls subsequent to the date of
their evaluation, including any corrective actions with regard to significant
deficiencies and material weaknesses.
-21-
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
Exhibit No. Document Description
4.1 Amendment to Rights Agreement, dated as of September
20, 2002, by and among U.S. Bank National Association,
Gehl Company and American Stock Transfer and Trust
Company.
99.1 Certification of the Chief Executive Officer pursuant
to 18 U.S.C. Section 1350.
99.2 Certification of the Chief Financial Officer pursuant
to 18 U.S.C. Section 1350.
(b) REPORTS ON FORM 8-K
The Company filed a Current Report on Form 8-K on July 25, 2002
reporting (under Item 9) the Company's financial results for the three
months ended June 29, 2002.
-22-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GEHL COMPANY
Date: November 12, 2002 By: /s/ William D. Gehl
--------------------------------
William D. Gehl
Chairman of the Board, President
and Chief Executive Officer
Date: November 12, 2002 By: /s/ Kenneth P. Hahn
--------------------------------
Kenneth P. Hahn
Vice President of Finance
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
-23-
CERTIFICATIONS
I, William D. Gehl, Chairman of the Board, President and Chief Executive Officer
of Gehl Company, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Gehl Company;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
-24-
Date: November 12, 2002 /s/ William D. Gehl
------------------------------
William D. Gehl
Chairman of the Board,
President and Chief Executive
Officer (Principal Executive Officer)
I, Kenneth P. Hahn, Vice President of Finance and Chief Financial Officer of
Gehl Company, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Gehl Company;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly report
is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing
date of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability
to record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
-25-
(b) any fraud, whether or not material, that involves
management or other employees who have a significant role in the
registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: November 12, 2002 /s/Kenneth P. Hahn
------------------------------------
Kenneth P. Hahn
Vice President of Finance and
Chief Financial Officer
(Principal Financial Officer)
-26-
GEHL COMPANY
INDEX TO EXHIBITS
Exhibit
No. Document Description
- ------- --------------------
4.1 Amendment to Rights Agreement, dated as of September 20, 2002,
by and among U.S. Bank National Association, Gehl Company and
American Stock Transfer and Trust Company.
99.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C.
Section 1350.
99.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C.
Section 1350.
-27-