-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, WXUqSrcc6w0K/TghZ+3dW9mgV1sBfx3wYqkOmOa8+p3+ESGzWOERIXuoGP6SLj8G WFJdC+qxxpayQmv9wac+Cw== 0000856386-00-000003.txt : 20000307 0000856386-00-000003.hdr.sgml : 20000307 ACCESSION NUMBER: 0000856386-00-000003 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000302 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GEHL CO CENTRAL INDEX KEY: 0000856386 STANDARD INDUSTRIAL CLASSIFICATION: FARM MACHINERY & EQUIPMENT [3523] IRS NUMBER: 390300430 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-18110 FILM NUMBER: 559970 BUSINESS ADDRESS: STREET 1: 143 WATER STREET CITY: WEST BEND STATE: WI ZIP: 53095 BUSINESS PHONE: 4143349461 MAIL ADDRESS: STREET 1: 143 WATER STREET CITY: WEST BEND STATE: WI ZIP: 53095 10-K405 1 FORM 10-K 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 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 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. EX-4 2 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 EX-13 3 [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 [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. [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. 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. 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 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. 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. 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 $ -- $ -- ================== ================== ========== ========== EX-23 4 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 EX-27 5
5 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. 1000 12-MOS DEC-31-1999 JAN-1-1999 DEC-31-1999 1010 0 93888 5952 35206 125783 81967 44939 194160 56299 31097 565 0 0 96859 194160 285822 285822 205465 205465 0 0 3083 31294 11109 20185 0 0 0 20185 3.29 3.17 Company presents receivables on a net basis in compliance with Article 10 of Regulation S-X. Includes all non-current portion of debt obligations. The EPS under the "EPS-Primary" tag represents Basic Earnings Per Share.
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