-----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, E7BvQQcQ6M63Igj5FmmWPUMkFabZyjbmbd9D845lFy4azIWNjO8JIrYjnve2NQpv FoUpcCwlHHrHxWYfDVk1Rw== 0000856386-97-000005.txt : 19970228 0000856386-97-000005.hdr.sgml : 19970228 ACCESSION NUMBER: 0000856386-97-000005 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970227 SROS: NASD 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: 1934 Act SEC FILE NUMBER: 000-18110 FILM NUMBER: 97545903 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, 1996 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 incorporation or organization) (I.R.S. Employer Identification No.) 143 Water Street, West Bend, WI 53095 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code (414) 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) 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: $62,982,805 at February 17, 1997. Number of shares outstanding of each of the registrant's classes of common stock, as of February 17, 1997: Class Shares Outstanding Common Stock, $.10 Par Value 6,182,852 DOCUMENTS INCORPORATED BY REFERENCE Gehl Company 1996 Annual Report to Shareholders (Parts I and II) Gehl Company Proxy Statement for the 1997 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, 1996 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 7 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 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, distributes, sells and finances equipment used in the light construction equipment and the agricultural equipment industries. The Company's construction segment ("Gehl Construction") manufactures and markets skid steer loaders, rough-terrain telescopic forklifts, and asphalt pavers used by contractors, sub-contractors, owner operators and municipalities. The Company's agricultural segment ("Gehl Agriculture") has manufactured agricultural implements for 138 years, and today markets a broad range of equipment used primarily in the dairy and livestock industries, including haymaking, forage harvesting, materials handling (skid steer loaders and attachments), manure handling and feedmaking equipment. The Company believes that it is currently the largest non-tractor agricultural equipment manufacturer in North America. Equipment for Gehl Construction is manufactured in two South Dakota facilities and equipment for Gehl Agriculture 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. Business Segments The Company operates in two business segments, construction and agriculture. The following table shows certain information relating to the Company's operations by industry segment (dollars in thousands): Year Ended December 31, 1994 1995 1996 Amount % Amount % Amount % Net sales: Gehl Construction $ 51,796 35.3% $ 64,381 42.0% $ 70,826 44.4% Gehl Agriculture 94,824 64.7 89,071 58.0 88,836 55.6 ------- ---- --------- ------ ------- ------ Total . $146,620 100% $153,452 100% $159,662 100% Income from operations: Gehl Construction $ 8,542 65.9% $ 13,164 96.7% $ 12,967 83.4% Gehl Agriculture 4,419 34.1 449 3.3 2,580 16.6 ------ ----- ------ ----- ------ ----- Total . $12,961 100% $ 13,613 100% $ 15,547 100% 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 and agriculture markets, see Note 12 of "Notes to Consolidated Financial Statements", included on Pages 22 and 23 of the Gehl Company 1996 Annual Report to Shareholders, which pages are incorporated by reference herein. Gehl Construction Products: Gehl Construction markets equipment in the following three product areas: 1. Skid Steer Loaders - Gehl Construction offers six models of skid steer loaders which feature a choice of hand-operated controls or hand and foot controls. The skid steer loader, with its fixed-wheel four-wheel drive, is used principally for materials 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. Rough-Terrain Forklifts - Gehl markets five models of Dynalift[R] rough-terrain telescopic forklifts and one model of the Dyna- Handler[R] , a rough-terrain telescopic forklift with digging capabilities. These forklifts are designed to handle heavy loads (up to 10,000 pounds) reaching horizontally and vertically for use by a variety of customers, including masons, roofers and building contractors. 3. Asphalt Pavers - Four models of Power Box[R] 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. Marketing and Distribution: The Company maintains a separate distribution system for Gehl Construction. The Company markets its equipment in North America through 116 independent dealers (with 261 outlets) and worldwide through 23 distributors. The top ten dealers and distributors in Gehl Construction accounted for approximately 13% of the Company's sales for the year ended December 31, 1996; however, no single dealer or distributor accounted for more than 4% of the Company's sales for that period. Sales of the skid steer loader and rough- terrain forklift product lines by Gehl Construction each accounted for more than 10% of the Company's net sales in 1994, 1995 and 1996. The Company believes that maintenance and expansion of its dealer network is important to its success in the light construction equipment market. Gehl Construction provides various forms of support for its 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. Industry and Competition: Gehl Construction's 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. No one company competes directly with Gehl Construction across all of its product lines. In the compact asphalt paving equipment market niche Gehl serves, the Company believes it is first or second in terms of market share. In the rough-terrain telescopic forklift market, the Company believes it and four other competitors share at least 75% of the market among them. In the skid steer loader product market, three other companies share over 80% of the market. The Company believes that it shares a greater portion of the balance of the skid steer loader market than does any of its remaining competitors. The Company competes within the light construction equipment markets based primarily on price, quality, service and distribution. Gehl Construction's primary markets outside of North America are in Europe, Latin America, the Middle East and the Pacific Rim. The Company believes it is a significant competitor in the skid steer loader market in Western Europe. Gehl Agriculture Products: Gehl Agriculture markets equipment 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 and sickle 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. Materials Handling - Gehl Agriculture's materials handling line consists of six different models of skid steer loaders and the Dyna-Handler[R] 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[R] is a rough-terrain telescopic forklift with digging capabilities. The skid steer loader and Dyna-Handler[R] forklift are marketed by both Gehl Agriculture and Gehl Construction. 4. Manure Handling - Gehl offers a broad range of manure spreaders, including the Scavenger[R]. The Scavenger[R] "V-Tank" side- discharge manure spreader incorporates a hydraulically controlled auger which allows 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. Gehl Agriculture offers the Gehl Mix-All[R] 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 557 geographically dispersed dealers (with 615 outlets). Eighty-one of these dealers are located in Canada. Gehl Agriculture also markets products through 22 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 Agriculture is not dependent for its sales on any specific dealer or group of dealers. The top ten dealers and distributors in Gehl Agriculture accounted for approximately 7% of the Company's sales for the year ended December 31, 1996 and no one dealer or distributor accounted for over 1.5% of the Company's sales during that period. Sales of the skid steer loader product line by Gehl Agriculture accounted for more than 10% of the Company's net sales in 1994, 1995 and 1996. 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 by providing training, equipment demonstrations and assistance with sales, 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 for two service parts distribution locations in Rockwood, Ontario and Saskatoon, Saskatchewan. Industry and Competition: The agricultural 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 agricultural equipment industry based primarily on price, quality, service and distribution. The agricultural 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 agricultural 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 agricultural products are concentrated. Except for one competitor, no other 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 Agriculture primarily serves the dairy and livestock industries. Compared to a more volatile period in the late 1980's through 1992, milk prices, cash income, land values, and the general economy were more favorable and stable for the dairy farmer in 1993 through 1996. These more favorable conditions and lower debt to equity ratios than generally experienced in most of the 1980's led to increased buying by farmers of agriculture equipment in 1993 and 1994. In 1995 and 1996 industry market demand varied, with demand for the Company's products generally lower than in 1994. Approximately 80% of the Company's agricultural 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 the products offered by Gehl Agriculture. Gehl Agriculture's dealers also market equipment manufactured by limited line manufacturers which compete with specific product lines offered by the Company. Gehl Agriculture's primary markets outside of North America are in Europe and the Pacific Rim. In these markets the Company competes with both agricultural 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, 1996 was $42.7 million versus $47.5 million at December 31, 1995. Virtually all orders in the backlog at December 31, 1996 should be shipped in 1997. The decreased backlog at December 31, 1996 was due to somewhat larger percentage decreases in Gehl Construction compared to Gehl Agriculture orders. Order backlog is lower in Gehl Construction due to a reduced rate of sales growth and in Gehl Agriculture due to reduced market demand for certain products. As the Company has increased its sales of Gehl Construction products, the Company has been successful in reducing the seasonality of its sales. However, some sales seasonality still remains, primarily in April through June, the Company's second fiscal quarter. The Company's first and fourth fiscal quarters in January through March and October through December, respectively, have traditionally been its weakest. Because the haymaking and forage equipment products are primarily retailed by the Company's dealers in the Spring, Summer, and early Fall, the Company's floor plan financed accounts receivable generally reach a seasonal peak in early Summer and a post-seasonal low in late Fall. 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, in Gehl Construction for varying periods of time generally up to six months and in Gehl Agriculture generally for up to one year. Gehl 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 a rate of between 1.5% to 3.0% above the prime rate or on occasion provides interest-free extensions of up to six months upon payment by the dealer of curtailments generally between 10% to 20% of the original invoice price to the dealer. This type of floor plan equipment financing accounts for approximately 90% of Gehl's 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 Gehl equipment to end users. Additionally, a number of Gehl 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 through Gehl Finance[R], 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 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 36 to 48 months. The Company continues to service the finance contracts it sells, including cash collections. See Note 2 of "Notes to Consolidated Financial Statements," Page 18, and "Management's Discussion and Analysis," Page 13 of the Gehl Company 1996 Annual Report to Shareholders, which pages are incorporated by reference herein. Employees As of December 31, 1996, the Company had 832 employees, of which 538 were hourly employees and 294 were salaried employees. At the production facilities in West Bend, Wisconsin, one of four Gehl production facilities, 226 hourly employees are covered by a collective bargaining agreement with the United Paperworkers International Union (formerly the Allied Industrial Workers) which expires December 31, 1999. 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-three years. Manufacturing The Company is currently expanding its two South Dakota manufacturing facilities and believes that its present manufacturing facilities, as expanded, will be sufficient to provide adequate capacity for its operations in 1997. 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 manufacturers, 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 1996. Research and Development The Company attempts to maintain and strengthen its market position through internal new product development and incremental improvement to existing products. Products obtained through acquisition have generally undergone redesign by the Company to enhance their marketability. This redesign was in some cases major. 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 $2.2 million, $1.4 million and $1.2 million on research and development for the years ended December 31, 1996, 1995 and 1994, 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[R] name and the group of patents relating to the Scavenger[R] manure spreader, the business of the Company is not dependent 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 12 of "Notes to Consolidated Financial Statements," Page 23, of the Gehl Company 1996 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, 1996, relating to the Company's principal manufacturing facilities. See "Management's Discussion and Analysis - Liquidity and Capital Resources, Capital Expenditures," Page 13, of the Gehl Company 1996 Annual Report to Shareholders, which page is incorporated by reference herein. Approximate Floor Area in Owned or Square Feet Leased(1) Principal Uses West Bend, WI 450,000 Owned General offices and engineering, research and development and manufacture of products for Gehl Agriculture Madison, SD 110,000 Owned Manufacture of skid steer loaders for Gehl Construction and Gehl Agriculture Lebanon, PA 170,000 Owned(2) Manufacture of products for Gehl Agriculture Yankton, SD 68,000 Owned Manufacture of products for Gehl Construction (1) For information regarding collateral pledges and the Company's lease commitments and options, see Notes 5 and 10 of "Notes to Consolidated Financial Statements", included on Pages 9 and 22, of the Gehl Company 1996 Annual Report to Shareholders, which pages are incorporated by reference herein. (2) 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. 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, 1996. Executive Officers of the Registrant. Set forth below is certain information concerning the executive officers of the Company as of February 1, 1997: Name, Age and Position Business Experience William D. Gehl, 50, Mr. Gehl has served as Chairman of the Chairman, President, Chief Board of Directors of the Company since Executive Officer and April, 1996. Mr. Gehl has served as Director President and Chief 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 management positions with the Ziegler Companies from 1978 to 1990. Victor A. Mancinelli, 53, Mr. Mancinelli has served as Executive Executive Vice President Vice President and Chief Operating and Chief Operating Officer Officer of the Company since November, 1992. From 1990 to 1992, Mr. Mancinelli served as Group Vice President of W. H. Brady Co. From 1987 to 1990, Mr. Mancinelli served as President and Chief Operating Officer of Syracuse China Corp., a subsidiary of Canadian Pacific Ltd. Prior to 1987, Mr. Mancinelli served in a variety of management positions with Cummins Engine Company, Inc. John W. Gehl, 55, Mr. Gehl has served as Vice President, Vice President, International of the Company since 1992. International Mr. Gehl joined the Company in 1962 and has served as a Vice President of the Company since 1977 and in a variety of positions in marketing, manufacturing and strategic planning. Mr. Gehl has been a director of the Company since 1974. Kenneth P. Hahn, 39, Mr. Hahn joined the Company as Corporate Vice President of Finance Controller in April, 1988. Mr. Hahn was and Treasurer elected as an executive officer of the Company in April, 1994. Mr. Hahn was appointed Vice President of Finance and Treasurer in February, 1997. Michael J. Mulcahy, 50, Mr. Mulcahy has served as General Counsel of the Company since 1974 and became 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, 57, Mr. Semler joined the Company in May, Vice President of Data 1960 and has served in his current Systems position with 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 1997 Annual Meeting of Shareholders is currently scheduled for April 16, 1997. The Company has employment agreements 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, 1998, and Victor A. Mancinelli, pursuant to which he is to serve as Executive Vice President and Chief Operating Officer of the Company through the expiration of the agreement on September 30, 1998. PART II Item 5. Market for Registrant's Common Equity and Related Shareholder Matters. Information required by this item is included on Page 25 of the Gehl Company 1996 Annual Report to Shareholders, which page is hereby incorporated herein by reference. Item 6. Selected Financial Data. Information required by this item is included on Page 24 of the Gehl Company 1996 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 10 through 13 of the Gehl Company 1996 Annual Report to Shareholders, which pages are hereby incorporated herein by reference. Item 8. Financial Statements and Supplementary Data. Information required by this item is included on Page 9 and Pages 14 through 23 of the Gehl Company 1996 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 1997 Annual Meeting of Shareholders ("Proxy Statement"). 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. Pursuant to Instruction G, the information required by this item is hereby incorporated by reference from the caption "Executive Compensation - Summary Compensation Information" set forth in the Proxy Statement. 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 19 hereof. (b) Reports on Form 8-K. No reports on Form 8-K were filed by the Company during the quarter ended December 31, 1996. 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 21, 1997 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 21, 1997 William D. Gehl Chief Executive Officer and Director (Principal Executive Officer) /s/ Kenneth P. Hahn Vice President of Finance and Treasurer February 21, 1997 Kenneth P. Hahn (Principal Financial and Accounting Officer) /s/ Thomas J. Boldt Director February 21, 1997 Thomas J. Boldt /s/ Fred M. Butler Director February 21, 1997 Fred M. Butler /s/ John W. Gehl Director February 21, 1997 John W. Gehl /s/ William P. Killian Director February 21, 1997 William P. Killian /s/ Arthur W. Nesbitt Director February 21, 1997 Arthur W. Nesbitt /s/ Roger E. Secrist Director February 21, 1997 Roger E. Secrist /s/ John W. Splude Director February 21, 1997 John W. Splude 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 9 Consolidated Balance Sheets at December 31, 1996 and 1995 14 Consolidated Statements of Income for the three years ended December 31, 1996 15 Consolidated Statements of Shareholders' Equity for the three years ended December 31, 1996 15 Consolidated Statements of Cash Flows for the three years ended December 31, 1996 16 Notes to Consolidated Financial Statements 17-23 * Incorporated by reference from the indicated pages of the Gehl Company 1996 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, 1996 -- 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, 1997 appearing in the 1996 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) 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. PRICE WATERHOUSE LLP Milwaukee, Wisconsin February 10, 1997 GEHL COMPANY AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (in thousands) Additions --------- Balance at Charged to Charged Balance Beginning Costs and to Other at End Period Description of Year Expenses Accounts Deductions of Year - ------ ----------- --------- ---------- --------- ---------- ------- Year Ended December 31, 1994 Return & Allowances $ 115 $ - $ - $ - $ 115 Allowance for Doubtful Accounts- Trade Receiv- ables 1,843 (888) - 316 639 Volume Discounts 2,108 2,200 - 2,318 1,990 Product Discontinuance - 1,600 - - 1,600 ----- ----- ----- ----- ----- Total $4,066 $2,912 $ - $2,634 $4,344 ====== ====== ===== ====== ===== Allowances for Doubtful Accounts - Retail Contracts $ 650 $ 424 $ - $ 570 $ 504 ===== ===== ==== ===== ===== Inventory Obsolescence Reserve $3,881 $1,523 $ - $1,352 $4,052 ====== ====== ==== ===== ===== Income Tax Valuation Allowance $7,096 $ - $ - $1,409 $5,687 ====== ====== ==== ===== ===== Year Ended December 31, 1995 Return & Allowances $ 115 $ - $ - $ - $ 115 Allowance for Doubtful Accounts- Trade Receiv- ables 639 165 - 52 752 Volume Discounts 1,990 2,026 - 2,213 1,803 Product Discontin- uance 1,600 - - 265 1,335 ------ ------ ----- ------ ------ Total $4,344 $2,191 $ - $2,530 $4,005 ====== ====== ===== ====== ====== Allowances for Doubtful Accounts - Retail Contracts $ 504 $ 428 $ - $ 365 $567 ===== ===== ==== ===== ===== Inventory Obsolescence Reserve $4,052 $ 502 $ - $1,777 $2,777 ====== ===== ==== ===== ===== Income Tax Valuation Allowance $5,687 $ - $ - $3,038 $2,649 ====== ====== ==== ===== ====== Year Ended December 31, 1996 Return & Allowances $ 115 $ 35 $ - $ - $ 150 Allowance for Doubtful Accounts- Trade Receiv- ables 752 64 - 255 561 Volume Discounts 1,803 2,389 - 2,463 1,729 Product Discontin- uance 1,335 (131) - 429 775 ----- ----- --- ----- ----- Total $4,005 $2,357 $ - $3,147 $3,215 ====== ====== ==== ====== ===== Allowances for Doubtful Accounts - Retail Contracts $ 567 $ 276 $ - $ 252 $591 ====== ====== ===== ====== ====== Inventory Obsolescence Reserve $2,777 $ 527 $ - $1,564 $1,740 ====== ====== ====== ====== ====== Income Tax Valuation Allowance $2,649 $ - $ - $1,414 $1,235 ====== ====== ====== ====== ====== GEHL COMPANY INDEX TO EXHIBITS Exhibit Number Document Description (3.1) Restated Articles of Incorporation of Gehl Company [Incorporated by reference to Exhibit 3.1 to the Company's Form S-1 Registration Statement (Reg. No. 33-31571)] (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, 1995] (4.1) 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] (4.2) Common Stock Purchase Warrant, dated as of March 5, 1993, from Gehl Company to State of Wisconsin Investment Board [Incorporated by reference to Exhibit 4.14 to the Company's Annual Report on Form 10-K for the year ended December 31, 1992] (4.3) 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] (4.4) 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] (4.5) 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] (4.6) 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] (10.1)* Form of Supplemental Retirement Benefit Agreement between Gehl Company and Messrs. J.W. Gehl, Hahn, Mulcahy and Semler [Incorporated by reference to Exhibit 10.4 to the Company's Form S-1 Registration Statement (Reg. No. 33-31571)]. (10.2)* Employment Agreement between Gehl Company and William D. Gehl, dated as of July 1, 1995 [Incorporated by reference to Exhibit 10.2 of the Company's Annual Report on Form 10-K for the year ended December 31, 1995] (10.3)* Employment Agreement by and between Victor A. Mancinelli and Gehl Company, dated as of October 1, 1995 [Incorporated by reference to Exhibit 10.3 of the Company's Annual Report on Form 10-K for the year ended December 31, 1995] (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)* Supplemental Retirement Benefit Agreement by and between Victor A. Mancinelli and Gehl Company [Incorporated by reference to Exhibit 10.5 of the Company's Annual Report on Form 10-K for the year ended December 31, 1995] (10.6)* 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] (10.7) Gehl Savings Plan, as amended [Incorporated by reference to Exhibit 10.6 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994] (10.8)* 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] (10.9)* Gehl Company 1987 Stock Option Plan, as amended (10.10)* 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)] (10.11)* Gehl Company 1995 Stock Option Plan, as amended (10.12)* 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] (10.13)* 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] (10.14) 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 1996 Annual Report to Shareholders that are incorporated by reference herein (21) Subsidiaries of Gehl Company [Incorporated by reference to Exhibit 21 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994] (23) Consent of Price Waterhouse LLP (27) Financial Data Schedule (99) Proxy Statement for 1997 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 1997 Annual Meeting of Shareholders shall not be deemed to be filed with the Securities and Exchange Commission as part of this Annual Report or Form 10-K) * A management contract or compensatory plan or arrangement. EX-10 2 Approved: _______________ ________________________ Michael J. Mulcahy, Secretary GEHL COMPANY 1987 STOCK OPTION PLAN (AS AMENDED) 1.PURPOSE. The purpose of the Gehl Company 1987 Stock Option Plan (the "Plan") is to promote the best interests of Gehl Company (the "Company") and its shareholders by providing key employees of the Company and its subsidiaries, as defined in Section 3, with an opportunity to acquire a proprietary interest in the Company and thereby develop a stronger incentive to put forth maximum effort for the continued success and growth of the Company. In addition, the opportunity to acquire a proprietary interest in the Company will aid in attracting and retaining key personnel of outstanding ability. It is intended that all of the options issued pursuant to the Plan will constitute nonstatutory stock options. 2.ADMINISTRATION. The Plan shall be administered by the Board of Directors of the Company (the "Board"). The Board shall appoint a subcommittee of the Compensation and Benefits Committee to develop recommendations with respect to Board action hereunder (the "Committee"). The Committee shall consist of not less than three members of the Compensation and Benefits Committee of the Board who qualify as non-employee directors for the purposes of Rule 16b-3 under the Securities Exchange Act of 1934, as amended (or any successor provision thereto). In accordance with the provisions of the Plan (and except as provided below), the Board shall select the key employees to whom options shall be granted; shall select the key employees to whom options shall be granted; shall determine the number of shares to be embraced in each option, the time at which the option is to be granted, the option period, the option price and the manner in which options become exercisable; and shall establish such other provisions of the option agreements as the Board may deem necessary or desirable. The Board may adopt such rules and regulations for carrying out the Plan as it may deem proper and in the best interest of the Company. The interpretation of any provision of the Plan by the Board and any determination on the matters referred to in this Section shall be final. Notwithstanding the above, with respect to any options granted to employees who are also directors of the Company, such grants, including the number of shares subject to and the terms and conditions of such options, shall be made only in accordance with the recommendations of the Committee. 3.ELIGIBILITY. Any key employee ("Employee") of the Company or its present and future subsidiaries, as defined in Section 425(f) of the Internal Revenue Code ("Subsidiaries"), including any such Employee who is also an officer or director of the Company or its Subsidiaries, whose judgment, initiative and efforts contribute materially to the successful performance of the Company or its Subsidiaries, shall be eligible to receive options under the Plan. No option may be granted under the Plan to any pearson who is then a member of the Committee. 4.SHARES SUBJECT TO THE PLAN. The shares to be subject to options under the Plan shall be shares of the Company's Common Stock, $2.00 par value ("Stock"), and may be either authorized and unissued or treasury shares. The total amount of Stock for which options may be granted and which may be purchased pursuant to options under the Plan shall not exceed 106,000 shares, subject to adjustment as provided in Section 14; provided, however, that in the event an option granted under the Plan expires or is terminated unexercised as to any shares of Stock covered thereby, such shares shall thereafter be available for the granting of additional options under the Plan. 5.OPTION PRICE. The option price per share of Stock shall be fixed by the Board, but shall not be less than 100% of the fair market value, as determined by the Board, of a share of Stock on the date the option is granted. 6.GRANT OF OPTIONS. Subject to the terms and conditions of the Plan, the Board may, from time to time prior to the termination of the Plan, grant to such Employees as the Board may determine options to purchase such number of shares of Stock and on such terms and conditions as the Board may determine. More than one option may be granted to the same Employee. The day on which the Board approves the granting of an option shall be considered as the date on which such option is granted. Notwithstanding any other provision of the Plan to the contrary, in the case of any option granted to any Employee who is also a director of the Company, such grant shall be made and the terms and conditions of such grant shall be determined only in accordance with the recommendations of the Committee. 7.OPTION PERIOD. The Board shall determine the expiration date of each option, but such expiration date shall be not later than seven years after the date such option is granted. 8.VESTING OF OPTIONS. Subject to the provisions of Section 12 hereof, unless the Board shall otherwise determine on or prior to the date of grant of an option, such option may be exercised, in whole or in part, from and after the date it is granted in accordance with the following schedule: Elapsed Period of Cumulative Percentage of Time After Date Shares of Stock Subject to Option is Granted Option Which May be Exercised One (1) Year 33-1/3% Two (2) Years 66-2/3% Three (3) Years 100% The right to purchase shares of Stock pursuant to the exercise of an option granted under the Plan shall be cumulative so that when the right to purchase any shares has accrued in accordance with the foregoing schedule, such shares or any part thereof, may be purchased at any time thereafter until the expiration or termination of the option. 9.CHANGE OF CONTROL. Notwithstanding the provisions of Section 8 hereof, in the event there is a "Change in Control of the Company" then from and after the date of such change of control all outstanding options granted under the Plan shall be immediately exercisable. For purposes of this Section 9, a "Change in Control of the Company" occurs when: (a)securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding voting securities are acquired pursuant to a tender offer or an exchange offer; or (b)the shareholders of the Company approve a merger or consolidation of the Company with any other corporation as a result of which less than 50% of the outstanding voting securities of the surviving or resulting entity are owned by the former shareholders of the Company (other than a shareholder who is an "affiliate", as defined in Rule 501(b) of Regulation D under the Securities Act of 1933, of any party to such consolidation or merger); or (c)the shareholders of the Company approve the sale of substantially all of the Company's assets to a corporation which is not a wholly-owned subsidiary of the Company; or (d)any person becomes the beneficial owner, directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding securities the effect of which (as determined by the Board) is to take over control of the Company; or (e)during any period of two consecutive years, individuals who, at the beginning of such period, constituted the Board of the Company cease, for any reason, to constitute at least a majority thereof, unless the election or nomination for election of each new director was approved by the vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period. 10.EXERCISE OF OPTIONS. A person entitled to exercise an option may, subject to its terms and conditions and the terms and conditions of the Plan, exercise it in full at any time or in part from time to time by delivery to the Company at its principal office of a written notice of exercise specifying the number of shares with respect to which the option is being exercised. Any notice of exercise shall be accompanied by full payment of the option price of the shares being purchased (a) in cash or its equivalent; (b) with the consent of the Board, by delivering to the Company shares of Stock (valued at their fair market value at the date of exercise, as determined by the Board consistent with the method of valuation set forth in Section 5); or (c) with the consent of the Board, by any combination of (a) or (b). No shares shall be issued until full payment therefor has been made, and the granting of an option to an individual shall give such individual no rights as a shareholder except as to shares actually issued to him. 11.TRANSFERABILITY OF OPTIONS. No option shall be assignable or transferable by the optionee other than by will or the laws of descent and distribution and may be exercised during the life of the optionee only by the optionee. 12.TERMINATION OF OPTIONS. Except as hereinafter provided, an option granted under the Plan may be exercised only while the optionee is an Employee of the Company or its Subsidiaries and only if he has been continuously so employed since the date the option was granted. Subject to the terms of any option agreement, in the event an optionee ceases to be employed by the Company or a Subsidiary by reason of death, disability or retirement on or after attaining age 62, the option, to the extent not theretofore exercised, may be exercised in full as follows: (a) by the legal representative of the optionee at any time within one year after the date of termination of employment due to death; or (b) by the optionee or his legal representative at any time within one year after termination of the optionee's employment by reason of retirement on or after attaining age 62 or disability, but in either case no later than ten years after the date of grant. Subject to the terms of any option agreement, in the event the optionee is discharged or leaves the employ of the Company and its Subsidiaries for any reason other than death, disability or retirement on or after attaining age 62 the option, to the extent not theretofore exercised, shall immediately terminate and shall not be exercisable following such termination of employment. 13.RESTRICTIONS UPON TRANSFER OF STOCK. (a)Shares of Stock acquired pursuant to the exercise of an option by an Employee under the Plan may not be sold, pledged, encumbered or otherwise disposed of or transferred in any manner, either voluntarily or by operation of law (all hereinafter collectively referred to as "transfer") except in accordance with and subject to Section 13(b), 13(c) and 13(d) hereof. If the Employee is permitted to transfer his stock pursuant to Section 13(b) hereof, the Employee shall require the transferee, as a condition of the transfer of the Stock, to agree, in writing, that the Stock transferred shall be subject to all of the terms and conditions in Section 13(b) and 13(c) hereof. (b)If the Employee should decide to transfer any of the Stock acquired pursuant to the Plan (other than pursuant to a transfer at death permitted pursuant to subsection 13(d)), such Employee shall first give written notice to the Company of such intent to transfer the Stock specifying the date of transfer, the proposed transferee and the consideration to be received upon such transfer (hereinafter referred to as "Selling Price"). Any such proposed transfer must be pursuant to a bona fide written offer from the proposed transferee. Such written notice by the Selling Employee shall constitute an offer to sell the Stock to the Company at the Selling Price and upon the same terms as the proposed transfer. For a period of fifteen (15) days after the receipt of such notice, the Company shall have the right to purchase the selling Employee's stock. If the Company fails to purchase all or any part of such Stock within fifteen (15) days after receipt of written notice of the offer of sale from the Selling Employee, the Selling Employee shall be free to offer, transfer or otherwise dispose of such Stock not purchased by the Company for a price not less than that stated in the written notice for a period of thirty (30) days thereafter without restriction, but after such period expires, the restriction set forth above shall again apply. (c)Shares of Stock purchased under the Plan may not be sold or otherwise disposed of unless registered under the Securities Act of 1933, as amended (the "1933 Act"), and/or any applicable state securities laws, except in a transaction which, in the opinion of counsel for the Company, is exempt from registration under the 1933 Act and any applicable state securities laws. (d)An Employee shall be permitted to transfer his Stock (i) by bequest or descent upon the death of the Employee or (ii) by gift to the Employee's spouse or lineal descendants, provided, however, that the Stock so transferred shall remain subject to the benefits and restrictions of the Plan, including the mandatory right of first refusal provisions of subsection 13(b) hereof. (e)Each certificate representing Stock acquired pursuant to the exercise of an option or by subsequent transfer under the Plan shall be endorsed on the face of each such certificate with a legend reading substantially as follows: "Any sale, assignment, transfer, pledge or any other disposition of the shares of stock represented by this certificate, whether voluntary, involuntary or by operation of law, is restricted by, and subject to, the terms and provisions of a 1987 Stock Option Agreement dated as of ________________, 19 ___. A copy of such Agreement and of all amendments or supplements thereto is on file in the office of the Secretary of the Corporation. By acceptance of this certificate, the holder hereof agrees to be bound by the terms of said Agreement and all amendments or supplements thereto." (f) The Board may impose such other restrictions on any shares of Stock granted pursuant to the Plan as it, in its sole discretion, may deem advisable. (g)The restrictions on transfer in this Section 13, other than subsection (c), shall terminate at such time as the Stock of the Company is offered to the public pursuant to a registration statement declared effective by the Securities and Exchange Commission under the 1933 Act. 14.CAPITAL ADJUSTMENTS AFFECTING COMMON STOCK. In the event of a capital adjustment resulting from a stock dividend, (other than a stock dividend in lieu of an ordinary cash dividend), stock split, reorganization, recapitalization, merger, consolidation, combination or exchange of shares or the like, the number of shares of Stock subject to the Plan and the number of shares under option in outstanding option agreements shall be adjusted in a manner consistent with such capital adjustment; provided, however, that no such adjustment shall require the Company to sell any fractional shares and the adjustment shall be limited accordingly. The price of any shares under option shall be adjusted so that there will be no change in the aggregate purchase price payable upon exercise of any such option. The determination of the Board as to any adjustment shall be final. 15.CORPORATE MERGERS AND OTHER CONSOLIDATIONS. The Board may also grant options having terms and provisions which vary from those specified in the Plan provided that any options granted pursuant to this Section 15 are granted in substitution for, or in connection with the assumption of, existing options granted by another corporation and assumed or otherwise agreed to be provided for by the Company pursuant to, or by reason of, a transaction involving a corporate merger, consolidation, acquisition or other reorganization to which the Company is a party. 16.OPTION AGREEMENTS. All options granted under the Plan shall be evidenced by written agreements (which need not be identical) in such form as the Board shall determine. 17.POWERS OF COMPANY NOT AFFECTED. The existence of the Plan or any options granted under the Plan shall not affect in any way the right or power of the Company or its shareholders to make or authorize any or all adjustments, recapitalizations, reorganizations, or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issuance of bonds, debentures, preferred or prior preference stock ahead of or affecting the Stock or the rights thereof, or dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. 18.AMENDMENT, SUSPENSION AND TERMINATION OF PLAN. The Board shall have the right to amend, suspend or terminate the Plan at any time, provided, however, that no such amendment, suspension or termination shall (a) without the Employee's consent, alter or impair any of the rights or obligations under any option previously granted to an Employee and (b) no amendment shall be made to the Plan, unless approved by the shareholders of the Company, which (i) materially modifies the eligibility requirements as provided in Section 3, (ii) increases the total number of shares of Stock (except pursuant to a capital adjustment as provided in Section 14) or (iii) materially increases the benefits accruing to participants under the Plan. 19.EFFECTIVE DATE AND TERM OF PLAN. The effective date of the Plan is the date of its adoption by the Board, April 23, 1987. The Plan shall terminate on January 1, 1997, or on such earlier date as may be determined by the Board. Termination of the Plan, however, shall not affect the rights of optionees under options theretofore granted to them, and all unexpired options shall continue in force and operation after termination of the Plan except as they may lapse or be terminated by their own terms and conditions. 20.TAX WITHHOLDING. The Company may deduct and withhold from any cash otherwise payable to the Employee such amount as may be required for the purpose of satisfying the Company's obligation to withhold federal, state or local taxes. Further, in the event the amount so withheld is insufficient for such purpose, the Company may require as a condition precedent to the issuance or transfer of any shares of Stock upon exercise of any option that the Employee pay to the Company upon its demand or otherwise make arrangements satisfactory to the Company for payment of, such amount as may be requested by the Company in order to satisfy its obligation to withhold any such taxes. If the amount so requested is not paid, or if such arrangements are not made, the Company may refuse to issue or transfer shares of Stock upon exercise of the option. With the consent of the Board (or, in the case of any option granted to an Employee who is also a director of the Company, the Committee), an Employee may be permitted to satisfy the Company's withholding tax requirements by electing to have the Company withhold shares of Stock otherwise issuable to the Employee or to deliver to the Company shares of Stock having a fair market value on the date income is recognized pursuant to the exercise of an option equal to the amount required to be withheld. The election shall be made in writing and shall be made according to such rules and in such form as the Board (or the Committee) may determine. 21.RIGHTS AS A SHAREHOLDER. An Employee shall have no rights as a shareholder with respect to shares covered by an option until the date of issuance of stock certificates to him and only after such shares are fully paid. No adjustment will be made for dividends or other rights for which the record date is prior to the date such Stock is issued. 22.REQUIREMENTS OF LAW. The granting of options and the issuance of shares of Stock upon the exercise of an option shall be subject to all applicable laws, rules and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required. EX-10 3 GEHL COMPANY 1995 Stock Option Plan (As Amended) Section 1. Purpose The purpose of the Gehl Company 1995 Stock Option Plan (the "Plan") is to promote the best interests of Gehl Company (together with any successor thereto, the "Company") and its shareholders by providing key employees of the Company and its Affiliates (as defined below) and members of the Company's Board of Directors who are not employees of the Company or its Affiliates with an opportunity to acquire a proprietary interest in the Company. It is intended that the Plan will promote continuity of management and increased incentive and personal interest in the welfare of the Company by those key employees who are primarily responsible for shaping and carrying out the long- range plans of the Company and securing the Company's continued growth and financial success. In addition, by encouraging stock ownership by directors who are not employees of the Company or its Affiliates, the Company seeks to attract and retain on its Board of Directors persons of exceptional competence and to provide a further incentive to serve as a director of the Company. Section 2. Definitions As used in the Plan, the following terms shall have the respective meanings set forth below: (a) "Affiliate" shall mean any entity that, directly or through one or more intermediaries, is controlled by, controls, or is under common control with, the Company. (b) "Award" shall mean any Option granted under the Plan. (c) "Stock Option Agreement" shall mean any written agreement, contract, or other instrument or document evidencing any Award under the Plan. (d) "Change of Control of the Company" shall mean any one of the following events: (i) securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding voting securities are acquired pursuant to a tender offer or exchange offer; (ii) the shareholders of the Company approve a merger or consolidation of the Company with any other Person as a result of which less than 50% of the outstanding voting securities of the surviving or resulting Person are owned by the former shareholders of the Company (other than a shareholder who is an Affiliate of any party to such consolidation or merger); (iii) the shareholders of the Company approve the sale of substantially all of the Company's assets to a Person which is not a wholly-owned subsidiary of the Company; (iv) any person becomes a beneficial owner (as such term is defined in Rule 13d-3 of the Exchange Act (or any successor provision thereto)), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of the Company's then outstanding securities the effect of which (as determined by the Board of Directors of the Company and, in the case of Non- Qualified Stock Options granted to Non-Employee Directors under the Plan, to the extent permitted by Rule 16b-3) is to take over control of the Company; or (v) during any period of two consecutive years, individuals who, at the beginning of such period, constituted the Board of Directors of the Company cease, for any reason, to constitute at least a majority thereof, unless the election or nomination for election of each new director was approved by the vote of at least two-thirds of the directors of the Company then in office who were directors of the Company at the beginning of the period. (e) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (f) "Commission" shall mean the United States Securities and Exchange Commission or any successor agency. (g) "Committee" shall mean a committee of the Board of Directors of the Company designated by such Board to administer the Plan and comprised of not less than two directors, each of whom is a "non-employee director for purposes of Section 16 within the meaning of Rule 16b-3 and each of whom is an "outside director" within the meaning of Section 162(m)(4)(C) of the Code (or any successor provision thereto). (h) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (i) "Fair Market Value" shall mean, with respect to any property (including, without limitation, any Shares or other securities), the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. (j) "Incentive Stock Option" shall mean an option granted under Section 6(a) of the Plan that is intended to meet the requirements of Section 422 of the Code (or any successor provision thereto). (k) "Key Employee" shall mean any officer or other key employee of the Company or of any Affiliate who is responsible for or contributes to the management, growth or profitability of the business of the Company or any Affiliate as determined by the Committee. (l) "Non-Employee Director" shall mean any member of the Company's Board of Directors who is not an employee of the Company or of any Affiliate. (m) "Non-Qualified Stock Option" shall mean an option granted under Section 6(a) of the Plan that is not intended to be an Incentive Stock Option and shall mean any option granted to a Non-Employee Director under Section 6(b) of the Plan. (n) "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock Option. (o) "Participating Key Employee" shall mean a Key Employee designated to be granted an Award under the Plan. (p) "Person" shall mean any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization, or government or political subdivision thereof. (q) "Rule 16b-3" shall mean Rule 16b-3 as promulgated by the Commission under the Exchange Act, or any successor rule or regulation thereto. (r) "Shares" shall mean shares of common stock of the Company, $.10 par value, and such other securities or property as may become subject to Awards pursuant to an adjustment made under Section 4(b) of the Plan. Section 3. Administration The Plan shall be administered by the Committee; provided, however, that if at any time the Committee shall not be in existence, the functions of the Committee as specified in the Plan shall be exercised by a committee consisting of those members of the Board of Directors of the Company who qualify as "non-employee directors for purposes of Section 16" under Rule 16b- 3 and as "outside directors" under Section 162(m)(4)(C) of the Code (or any successor provision thereto). Section 4. Shares Available for Award (a) Shares Available. Subject to adjustment as provided in Section 4(b): (i) Number of Shares Available. The number of Shares with respect to which Awards may be granted under the Plan shall be 600,000. If, after the effective date of the Plan, any Shares covered by an Award granted under the Plan, or to which any Award relates, are forfeited or if an Award otherwise terminates, expires or is cancelled prior to the delivery of all of the Shares or of other consideration issuable or payable pursuant to such Award, then the number of Shares counted against the number of Shares available under the Plan in connection with the grant of such Award, to the extent of any such forfeiture, termination, expiration or cancellation, shall again be available for granting of additional Awards under the Plan. (ii) Limitations on Awards to Individual Participants. During any one calendar year, no Participating Key Employee shall be granted Awards under the Plan that could result in such Participating Key Employee receiving Options for more than 100,000 Shares under the Plan. Such number of Shares as specified in the preceding sentence shall be subject to adjustment in accordance with the terms of Section 4(b) hereof. In all cases, determinations under this Section 4(a)(ii) shall be made in a manner that is consistent with the exemption for performance-based compensation provided by Section 162(m) of the Code (or any successor provision thereto) and any regulations promulgated thereunder. (iii) Accounting for Awards. The number of Shares covered by an Award under the Plan, or to which such Award relates, shall be counted on the date of grant of such Award against the number of Shares available for granting Awards under the Plan. (iv) Sources of Shares Deliverable Under Awards. Any Shares delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares or of treasury Shares. (b) Adjustments. In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, Shares, other securities, or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase, or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, or other similar corporate transaction or event affects the Shares such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee may, in such manner as it may deem equitable, adjust any or all of (i) the number and type of Shares subject to the Plan and which thereafter may be made the subject of Awards under the Plan, (ii) the number and type of Shares subject to outstanding Awards, and (ii) the grant, purchase, or exercise price with respect to any Award, or, if deemed appropriate, make provision for a cash payment to the holder of an outstanding Award; provided, however, in each case, that with respect to Awards of Incentive Stock Options no such adjustment shall be authorized to the extent that such authority would cause the Plan to violate Section 422(b) of the Code (or any successor provision thereto); and provided further that the number of Shares subject to an Award shall always be a whole number. Notwithstanding the foregoing, Non-Qualified Stock Options subject to grant or previously granted to Non-Employee Directors under Section 6(b) of the Plan at the time of any event described in the preceding sentence shall be subject to only such adjustments as shall be necessary to maintain the relative proportionate interest represented thereby immediately prior to any such event and to preserve, without exceeding, the value of such Options. Section 5. Eligibility Any Key Employee, including any executive officer or employee-director of the Company or of any Affiliate, who is not a member of the Committee shall be eligible to be designated a Participating Key Employee. All Non-Employee Directors shall receive Awards of Non-Qualified Stock Options as provided in Section 6(b). Section 6. Awards (a) Option Awards to Key Employees. The Committee is hereby authorized to grant Options to Key Employees with the terms and conditions as set forth below and with such additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine. (i) Exercise Price. The exercise price per Share of an Option granted pursuant to this Section 6(a) shall be determined by the Committee; provided, however, that such exercise price shall not be less than 100% of the Fair Market Value of a Share on the date of grant of such Option. (ii) Option Term. The term of each Option shall be fixed by the Committee; provided, however, that in no event shall the term of any Option exceed a period of ten years from the date of its grant. (iii) Exercisability and Method of Exercise. An Option shall become exercisable in such manner (including, without limitation, accelerated exercisability in the event of Change of Control of the Company) and within such period or periods and in such installments or otherwise as shall be determined by the Committee. Unless the Committee shall otherwise determine on or prior to the date of grant of an Option, such Option may be exercised, in whole or in part, from and after the date it was granted in accordance with the following schedule: Cumulative Percentage of Shares Subject Elapsed Period of Time to Option Which May be After Date Option is Granted Purchased (which number of Shares shall be rounded down to the nearest whole number) Less than One (1) Year 0% One (1) Year 33-1/3% Two (2) Years 66-2/3% Three (3) Years 100% The Committee also shall determine the method or methods by which, and the form or forms, including, without limitation, cash, Shares, other securities, other Awards, or other property, or any combination thereof, having a Fair Market Value on the exercise date equal to the relevant exercise price, in which payment of the exercise price with respect to any Option may be made or deemed to have been made. (iv) Incentive Stock Options. The terms of any Incentive Stock Option granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code (or any successor provision thereto) and any regulations promulgated thereunder. Notwithstanding any provision in the Plan to the contrary, no Incentive Stock Option may be granted hereunder after the tenth anniversary of the adoption of the Plan by the Board of Directors of the Company. (b) Non-Qualified Stock Option Awards to Non-Employee Directors. (i) Eligibility. Each Non-Employee Director shall automatically be granted Non-Qualified Stock Options under the Plan in the manner set forth in this Section 6(b). A Non-Employee Director may hold more than one Non- Qualified Stock Option, but only on the terms and subject to any restrictions set forth herein. (ii) Annual Option Grants to Non-Employee Directors. Each Non- Employee Director (if he or she continues to serve in such capacity) shall, on the day following the annual meeting of shareholders in each year during the time the Plan is in effect, automatically be granted a Non-Qualified Stock Option to purchase 2,000 Shares (which number of Shares shall be subject to adjustment in the manner provided in Section 4(b) hereof). (iii) Grant Limitation. Notwithstanding the provisions of Section 6(b)(ii) hereof, Non-Qualified Stock Options shall be automatically granted to Non-Employee Directors under the Plan only for so long as the Plan remains in effect and a sufficient number of Shares are available hereunder for the granting of such Options. (iv) Exercise Price. The exercise price per Share for a Non- Qualified Stock Option granted to a Non-Employee Director under the Plan shall be equal to 100% of the "market value" of a Share on the date of grant of such Option. The "market value" of a Share on the date of grant to the Non- Employee Director shall be the last sale price per Share for the Shares on The Nasdaq Stock Market on the trading date next preceding such grant date; provided, however, that if the principal market for the Shares is then a national securities exchange, the "market value" shall be the closing price per Share for the Shares on the principal securities exchange on which the Shares are traded on the trading date next preceding the date of grant, or, in either case above, if no trading occurred on the trading date next preceding the date on which the Non-Qualified Stock Option is granted, then the "market price" per Share shall be determined with reference to the next preceding date on which the Shares were traded. (v) Exercisability of Options. Non-Qualified Stock Options granted to Non-Employee Directors under the Plan shall become exercisable in accordance with the following schedule: Elapsed Period of Time Cumulative Percentage of After Date Option is Granted Shares Subject to Option Which May be Purchased (which number of Shares shall be rounded down to the nearest whole number) Less than One (1) Year 0% One (1) Year 33-1/3% Two (2) Years 66-2/3% Three (3) Years 100% Notwithstanding the foregoing schedule, if a Non-Employee Director ceases to be a director of the Company by reason of death, disability or retirement within three (3) years after the date of grant or in the event of a Change of Control of the Company within three (3) years after the date of grant, the Option shall become immediately exercisable in full. (vi) Termination of Options. Non-Qualified Stock Options granted to Non-Employee Directors shall terminate on the earlier of: (A) ten years after the date of grant; or (B) twelve months after the Non-Employee Director ceases to be a director of the Company for any reason, including as a result of the Non-Employee Director's death, disability or retirement. (vii) Exercise of Options. A Non-Qualified Stock Option granted to a Non-Employee Director may be exercised, subject to its terms and conditions and the terms and conditions of the Plan, in full at any time or in part from time to time by delivery to the Secretary of the Company at the Company's principal office in West Bend, Wisconsin, of a written notice of exercise specifying the number of shares with respect to which the Option is being exercised. Any notice of exercise shall be accompanied by full payment of the exercise price of the Shares being purchased (x) in cash or its equivalent; (y) by tendering previously acquired Shares (valued at their "market value" [as determined in accordance with Section 6(b)(iv)] as of the date of exercise); or (z) by any combination of the means of payment set forth in subparagraphs (x) and (y). For purposes of subparagraphs (y) and (z) above, the term "previously acquired Shares" shall only include Shares owned by the Non-Employee Director prior to the exercise of the Option for which payment is being made and shall not include Shares which are being acquired pursuant to the exercise of said Option. No shares will be issued until full payment therefor has been made. (c) General. (i) No Consideration for Awards. Awards shall be granted to Participating Key Employees without the requirement of cash consideration unless otherwise determined by the Committee. Awards of Non-Qualified Stock Options granted to Non-Employee Directors under Section 6(b) of the Plan shall be granted for no cash consideration unless otherwise required by law. (ii) Award Agreements. Each Award granted under the Plan shall be evidenced by a Stock Option Agreement in such form (consistent with the terms of the Plan) as shall have been approved by the Committee. (iii) Awards May Be Granted Separately or Together. Awards to Participating Key Employees under the Plan may be granted either alone or in addition to, in tandem with, or in substitution for any other Award or any award granted under any other plan of the Company or any Affiliate. Awards granted in addition to or in tandem with other Awards, or in addition to or in tandem with awards granted under any other plan of the Company or any Affiliate, may be granted either at the same time as or at a different time from the grant of such other Awards or awards. (iv) Limits on Transfer of Awards. No Award, and no right under any such Award, shall be assignable, alienable, salable, or transferable by a Participating Key Employee or a Non-Employee Director otherwise than by will or by the laws of descent and distribution; provided, however, that a Participating Key Employee at the discretion of the Committee may, and a Non- Employee Director shall, be entitled, in the manner established by the Committee, to designate a beneficiary or beneficiaries to exercise his or her rights, and to receive any property distributable, with respect to any Award upon the death of the Participating Key Employee or the Non-Employee Director, as the case may be. Each Award, and each right under any Award, shall be exercisable, during the lifetime of the Participating Key Employee or the Non- Employee Director, only by such individual or, if permissible under applicable law, by such individual's guardian or legal representative. No Award, and no right under any such Award, may be pledged, alienated, attached, or otherwise encumbered, and any purported pledge, alienation, attachment, or encumbrance thereof shall be void and unenforceable against the Company or any Affiliate. (v) Term of Awards. Except as otherwise provided in the Plan, the term of each Award shall be for such period as may be determined by the Committee but the expiration date of an Award shall be not later than ten years after the date such Award is granted. (vi) Share Certificates; Representation. All certificates for Shares delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the Commission, any stock exchange or other market upon which such Shares are then listed or traded, and any applicable federal or state securities laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. The Committee may require each Participating Key Employee, Non- Employee Director or other Person who acquires Shares under the Plan by means of an Award originally made to a Participating Key Employee or a Non-Employee Director to represent to the Company in writing that such Participating Key Employee, Non-Employee Director or other Person is acquiring the Shares without a view to the distribution thereof. Section 7. Amendment and Termination of the Plan; Correction of Defects and Omissions (a) Amendments to and Termination of the Plan. The Board of Directors of the Company may at any time amend, alter, suspend, discontinue, or terminate the Plan; provided, however, that the provisions of Section 6(b) of the Plan shall not be amended more than once every six months, other than to comport with changes in the Code, the Employee Retirement Income Security Act of 1974, as amended, or the rules promulgated thereunder; and provided further that shareholder approval of any amendment of the Plan shall also be obtained if otherwise required by: (i) the rules and/or regulations promulgated under Section 16 of the Exchange Act (in order for the Plan to remain qualified under Rule 16b-3), (ii) the Code or any rules promulgated thereunder (in order to allow for Incentive Stock Options to be granted under the Plan), or (iii) the quotation or listing requirements of The Nasdaq Stock Market or any principal securities exchange or market on which the Shares are then traded (in order to maintain the quotation or listing of the Shares thereon). Termination of the Plan shall not affect the rights of Participating Key Employees or Non-Employee Directors with respect to Awards previously granted to them, and all unexpired Awards shall continue in force and effect after termination of the Plan except as they may lapse or be terminated by their own terms and conditions. (b) Correction of Defects, Omissions and Inconsistencies. The Committee may correct any defect, supply any omission, or reconcile any inconsistency in any Award or Stock Option Agreement in the manner and to the extent it shall deem desirable to carry the Plan into effect. Section 8. General Provisions (a) No Rights to Awards. No Key Employee, Participating Key Employee or other Person (other than a Non-Employee Director to the extent provided in Section 6(b) of the Plan) shall have any claim to be granted an Award under the Plan, and there is no obligation for uniformity of treatment of Key Employees, Participating Key Employees, or holders or beneficiaries of Awards under the Plan. The terms and conditions of Awards need not be the same with respect to each Participating Key Employee. (b) Withholding. No later than the date as to which an amount first becomes includible in the gross income of a Participating Key Employee for federal income tax purposes with respect to any Award under the Plan, the Participating Key Employee shall pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, any federal, state, local or foreign taxes of any kind required by law to be withheld with respect to such amount. Unless otherwise determined by the Committee, withholding obligations arising with respect to Awards to Participating Key Employees under the Plan may be settled with Shares, including Shares that are part of, or are received upon exercise of, the Award that gives rise to the withholding requirement. The obligations of the Company under the Plan shall be conditional on such payment or arrangements, and the Company and any Affiliate shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the Participating Key Employee. The Committee may establish such procedures as it deems appropriate for the settling of withholding obligations with Shares, including, without limitation, the establishment of such procedures as may be necessary to satisfy the requirements of Rule 16b-3. (c) No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases. (d) Rights and Status of Recipients of Awards. The grant of an Award shall not be construed as giving a Participating Key Employee the right to be retained in the employ of the Company or any Affiliate. Further, the Company or any Affiliate may at any time dismiss a Participating Key Employee from employment, free from any liability, or any claim under the Plan, unless otherwise expressly provided in the Plan or in any Stock Option Agreement. The grant of an Award to a Non-Employee Director pursuant to Section 6(b) of the Plan shall confer no right on such Non-Employee Director to continue as a director of the Company. Except for rights accorded under the Plan and under any applicable Stock Option Agreement, Participating Key Employees and Non- Employee Directors shall have no rights as holders of Shares as a result of the granting of Awards hereunder. (e) Unfunded Status of the Plan. Unless otherwise determined by the Committee, the Plan shall be unfunded and shall not create (or be construed to create) a trust or a separate fund or funds. The Plan shall not establish any fiduciary relationship between the Company and any Participating Key Employee, any Non-Employee Director or other Person. To the extent any Person holds any right by virtue of a grant under the Plan, such right (unless otherwise determined by the Committee) shall be no greater than the right of an unsecured general creditor of the Company. (f) Governing Law. The validity, construction and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Wisconsin and applicable federal law. (g) Severability. If any provision of the Plan or any Stock Option Agreement or any Award is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction, or as to any Person or Award, or would disqualify the Plan, any Stock Option Agreement or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan, any Stock Option Agreement or the Award, such provision shall be stricken as to such jurisdiction, Person, or Award, and the remainder of the Plan, any such Stock Option Agreement and any such Award shall remain in full force and effect. (h) No Fractional Shares. No fractional Shares or other securities shall be issued or delivered pursuant to the Plan, any Stock Option Agreement or any Award, and the Committee shall determine (except as otherwise provided in the Plan) whether cash, other securities, or other property shall be paid or transferred in lieu of any fractional Shares or other securities, or whether such fractional Shares or other securities or any rights thereto shall be canceled, terminated, or otherwise eliminated. (i) Headings. Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. Section 9. Effective Date of the Plan The Plan shall be effective on the date of adoption of the Plan by the Board of Directors of the Company provided that the Plan is approved by the shareholders of the Company within twelve months following the date of adoption of the Plan by the Board of Directors. All Awards granted prior to shareholder approval of the Plan shall be subject to such approval and shall not be exercisable until after such approval. EX-13 4 [Page 9 of the Annual Report] Reports of Management and Independent 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 Price Waterhouse 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. Price Waterhouse LLP annually provides to management and the Audit Committee a supplemental report which includes comments on the adequacy of the system and recommendations for any improvements. William D. Gehl Chairman of the Board of Directors, President and Chief Executive Officer Kenneth P. Hahn Vice President, Finance and Treasurer Report of Independent Accountants PRICE WATERHOUSE LLP To the Board of Directors and Shareholders of Gehl Company In our opinion, the statements appearing on pages 14 through 23 of this report present fairly, in all material respects, the financial position of Gehl Company and its subsidiaries at December 31, 1996 and 1995, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1996, in conformity with generally accepted accounting principles. 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 generally accepted auditing standards 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, 1997 [Pages 10 through 13 of the Annual Report] Management's Discussion and Analysis Overview The Company's net income in 1996 was $9.6 million, or $1.54 per share, a 6% increase from $9.0 million, or $1.44 per share, earned in 1995. Net sales in 1996 increased 4% to $159.7 million from $153.5 million in 1995. Gehl Construction 1996 net sales increased 10% to $70.8 million, while Gehl Agriculture 1996 net sales decreased .3% to $88.9 million. Gehl Construction comprised 44% of Company net sales in 1996 versus 42% in 1995 and 35% in 1994. Gehl Agriculture's sales were 56% of Company net sales in 1996, down from 58% in 1995. Operating profit in 1996 increased 14% to $15.5 million. Gehl Construction accounted for $12.9 million of the operating profit, while Gehl Agriculture contributed the balance of $2.6 million. Interest expense in 1996 declined $2.3 million, or 40%, to $3.4 million. Other expense, consisting primarily of the costs of selling finance contracts receivable, which was $537,000 in 1995, increased in 1996 to $1,152,000. The Company continued to reduce its Gehl Agriculture accounts receivable in 1996, from $55.0 million at December 31, 1995 to $43.3 million at December 31, 1996. Cash flow provided by operating activities was $31.8 million, as compared with $9.7 million in 1995. Cash flow generated in 1996 was used in part to reduce debt by $27.5 million to $19.4 million at December 31, 1996. The Company has reduced its debt by $78.3 million during the last four years. The Company's ratio of debt to total capital was 23.0% at December 31, 1996, as compared with 45.7% and 54.2% at December 31, 1995 and 1994, respectively. Results of Operations 1996 vs. 1995 Net Sales ($ millions) 1996 1995 1994 1993 1992 Gehl Construction $70.8 $64.4 $51.8 $43.3 $38.5 Gehl Agriculture 88.9 89.1 94.8 93.9 91.2 ------- ------ ------- ------- ------- Total $159.7 $153.5 $146.6 $137.2 $129.7 (% of total) Gehl Construction 44.4% 42.0% 35.3% 31.5% 29.7% Gehl Agriculture 55.6% 58.0% 64.7% 68.5% 70.3% Net sales for 1996 of $159.7 million were 4% greater than the $153.5 million of net sales in 1995. Gehl Construction net sales in 1996 were $70.8 million, 10% higher than sales of $64.4 million in 1995. The increase from 1995 levels was a result of increased demand for rough-terrain telescopic forklifts and skid loaders due to the favorable construction climate which prevailed in the United States. Gehl Agriculture net sales in 1996 decreased .3% to $88.9 million from $89.1 million in 1995. The decrease was due in part to the introduction of only one redesigned product line in 1996 contrasted to two such introductions during 1995. The decrease was also due in part to approximately $1.3 million of shipments, during 1995, of products which have since been discontinued. Partially offsetting these shipment reductions was an increase in shipments of forage harvesters and skid loaders in 1996. Gross Profit: 1996 gross profit of $47.8 million was 7% higher than 1995's $44.6 million. Gross profit as a percent of net sales increased in 1996 to 29.9% from 29.1% in 1995. The increase was the result of higher sales volume, the shift in product mix of sales toward Gehl Construction products and the favorable impact associated with a liquidation of LIFO inventory quantities (See Note 3 of Notes to Consolidated Financial Statements). Gehl Construction's gross profit as a percent of net sales for 1996 remained consistent, at 32.2%, with 1995 percent levels. Gehl Agriculture's 1996 gross profit as a percent of net sales increased to 28.1% from 26.8% in 1995. This increase was due primarily to: 1) the favorable impact associated with a liquidation of LIFO inventory quantities; 2) the impact of favorable material purchase prices, especially steel, during 1996; and 3) the impact of a change in the mix of products shipped in 1996 versus products shipped in 1995. Selling, General and Administrative Expenses: Selling, general and administrative expenses increased $1.2 million, or 4%, to $32.2 million in 1996 as compared with $31.0 million in 1995. As a percent of sales, however, selling, general and administrative expenses in 1996 remained consistent, at 20.2%, with 1995 percent levels. The increased expenses in 1996 resulted primarily from increased investments in research and development costs and increased selling expenses. Income (Loss) from Operations ($ millions) 1996 1995 1994 1993 1992 Gehl Construction $12.9 $13.2 $8.6 $1.8 $(2.5) Gehl Agriculture 2.6 .4 4.4 5.5 (4.4) ----- ------ ------ ------ ------ Total $15.5 $13.6 $13.0 $7.3 $(6.9) Due primarily to higher net sales combined with improved gross profit, income from operations in 1996 increased 14% from 1995 to $15.5 million. Gehl Construction income from operations decreased 2% in 1996 to $12.9 million from $13.2 million in 1995. Increased investments in research, development and selling costs offset the impacts of increased Gehl Construction sales volumes. Income from operations in Gehl Agriculture increased to $2.6 million in 1996 from $449,000 in 1995, due in part to the favorable impact associated with a liquidation of LIFO inventory quantities in 1996. The remainder of the improvement results from favorable material purchase prices and reduced operating expenses. Interest Expense: Interest expense decreased $2.3 million, or 40%, to $3.4 million in 1996. During the last four years, interest expense has declined $6.7 million, or 66%, from 1992's $10.1 million peak. Reductions in interest-bearing debt from $97.7 million at the end of 1992 to $19.4 million at December 31, 1996 and lower borrowing rates have resulted in the significant reduction in the Company's interest expense. The average rate of interest paid by the Company in 1996 was 8.2% compared to 9.8% in 1995. The rate decrease was due to the impact of a reduced interest rate structure negotiated by the Company with the December 1, 1995 amendment to its line of credit facility. Other Income (Expense), Net: Other expense increased $615,000 in 1996 to $1,152,000 from $537,000 in 1995. The increase in expense was due primarily to an increase of $673,000 associated with the costs of selling finance contracts receivable to third parties in 1996 compared with 1995. The increase in the costs of such sales was the result of selling approximately $7.4 million more contracts in 1996 than in 1995 combined with lower weighted average yields on such finance contracts sold due to lower financing rates offered to the Company's retail customers. Provision for Income Taxes: The Company's effective income tax rate was 23.4% for 1996. Under generally accepted accounting principles, the Company was not required to record a federal income tax provision related to its 1995 pre-tax income due to the existence of net operating loss and tax credit carryforwards. The $150,000 provision for taxes made in 1995 related primarily to state tax requirements. The Company has utilized, in years prior to 1996, substantially all of its federal net operating loss carryforwards. In years subsequent to 1996, the Company expects to provide for federal income taxes at rates approximating statutory rates. Net Income: Net income in 1996 of $9.6 million was 6% higher than 1995's $9.0 million net income. 1996 earnings per common share of $1.54 compares to earnings of $1.44 per share in 1995. No dividends were declared in 1996 on the Company's common stock. 1995 vs. 1994 Net Sales: Net sales for 1995 of $153.5 million were 5% greater than the $146.6 million of net sales in 1994. Gehl Construction net sales in 1995 were $64.4 million, 24% higher than sales of $51.8 million in 1994. The increase from 1994 levels was primarily due to increased shipments of rough-terrain telescopic forklifts and skid loaders, the latter both domestically and internationally. Continued strong demand in the Company's residential and non- residential construction markets and ongoing general construction activity propelled the sales growth. Gehl Agriculture net sales in 1995 decreased 6% to $89.1 million from $94.8 million in 1994. The decrease was due in part to weaker industry-wide demand for agricultural implements during 1995 and in part to the Company's continuing efforts to ship product to its agricultural dealers at levels below the dealers' sales to farmers, thereby reducing field inventory levels at its dealers. Gross Profit: 1995 gross profit of $44.6 million was 3% higher than 1994's $43.3 million. The increase was due primarily to higher sales volume. Gross profit as a percent of net sales decreased slightly in 1995 to 29.1% from 29.5% in 1994. Gehl Construction's gross profit as a percent of net sales increased to 32.2% in 1995 from 28.6% in 1994. The substantial improvement resulted primarily from: 1) increased sales of higher margin rough-terrain telescopic forklifts; and 2) lower unit product costs due to increased overhead absorption at higher production levels and productivity improvements at both of the Company's construction plants. Gehl Agriculture's 1995 gross profit as a percent of net sales decreased to 26.8% from 30.0% in 1994. This decrease was due primarily to: 1) the impact of a change in the mix of products shipped in 1995 versus products shipped in 1994; 2) increased unit costs due to lower overhead absorption associated with decreases in the levels of production; and 3) increased price competition due in part to higher inventory levels among the Company's competitors. Selling, General and Administrative Expenses: Selling, general and administrative expenses increased $688,000, or 2%, to $31.0 million in 1995 as compared to expenses of $30.3 million in 1994. As a percent of sales, however, selling, general and administrative expenses decreased to 20.2% in 1995 from 20.7% in 1994. The increased expenses in 1995 resulted primarily from higher agricultural equipment sales promotion costs which were incurred to stimulate market demand, partially offset by lower product liability expenses. Income from Operations: Due primarily to higher net sales, income from operations in 1995 increased 5% from 1994 to $13.6 million. Gehl Construction income from operations increased 54% in 1995 to $13.2 million from $8.6 million in 1994. Increased sales volume and higher gross profit margin were the major factors for the improvement. Income from operations in Gehl Agriculture fell from $4.4 million in 1994, including a $2.6 million charge to operations for discontinued products, to $449,000 in 1995. The decrease was primarily due to lower sales volume and to reduced gross profit margin. Interest Expense: Interest expense decreased $978,000, or 15%, to $5.7 million in 1995. Reductions in interest-bearing debt and lower interest rate mark-ups negotiated with the Company's primary lender and implemented in October 1994, resulted in the significant reduction in the Company's interest expense. Despite the lower interest rate mark-ups, the average rate of interest paid by the Company in 1995 was 9.8% compared to 9.6% in 1994, due to the prime rate, upon which the Company's interest rates were based, averaging approximately 8.8% in 1995 versus 7.1% in 1994. Other Income (Expense), Net: Other expense decreased $2.4 million in 1995 to $537,000 from $2.9 million in 1994. The reduction in expense was due primarily to: 1) a gain of $142,000 on four variable rate sales of finance contracts made in 1993 and 1994 versus a loss of $492,000 recorded on these same sales in 1994, an improvement of $634,000; 2) a reduction of $608,000 in the costs of selling finance contracts receivable to third parties in 1995 as compared with 1994; 3) a one-time $400,000 prepayment fee associated with the subordinated debt retirement in November 1994; 4) a $358,000 reduction in deferred financing fees amortization; and 5) a $107,000 Canadian foreign exchange gain recorded in 1995 versus a $181,000 exchange loss in 1994, an improvement of $288,000. Provision for Income Taxes: Under generally accepted accounting principles, the Company was not required to record a federal income tax provision related to its 1995 pre-tax income due to the existence of net operating loss and tax credit carryforwards. The $150,000 provision for taxes made in 1995 related primarily to state tax requirements. Net Income: Net income in 1995 of $9.0 million was 79% higher than 1994's $5.0 million net income. 1995 earnings per common share of $1.44 compares to earnings of $.82 per share in 1994. No dividends were declared in 1995 on the Company's common stock. Liquidity and Capital Resources Working Capital: The Company's working capital decreased 25% to $57.6 million at December 31, 1996 from $77.0 million twelve months earlier primarily due to reductions in accounts receivable and inventory levels. The Company's current ratio at December 31, 1996 decreased to 2.8 to 1 from 3.6 to 1 at the same time a year ago. Cash on hand at December 31, 1996 was $4.2 million as compared to $3.3 million a year earlier. Cash Flow Provided by (Used for) Operating Activities: ($ in thousands) 1996 1995 1994 1993 1992 Cash flow $31,795 $9,701 $19,522 $26,113 $(162) In 1996 cash flow provided by operating activities was $31.8 million as compared to $9.7 million in 1995. Net income before depreciation and amortization, accounts receivable reductions and inventory reductions were primarily responsible for the positive cash flow. The increase from 1995 was due to higher cash flow provided by reductions in accounts receivable and plant inventories in 1996 as compared with 1995. The larger reduction in accounts receivable was primarily due to retail sales of equipment from Gehl agricultural dealers to their customers exceeding shipments of equipment from the Company to its dealers, in 1996, by amounts greater than in 1995. The inventory reduction in 1996 was the result of planned, lower levels of finished goods inventory at December 31, 1996 than at the same time in 1995. The 1996 cash flow was used primarily to repay $27.5 million of debt. Accounts Receivable: The Company's net accounts receivable decreased $14.0 million, or 20%, from $69.1 million at December 31, 1995 to $55.1 million at December 31, 1996. During the past four years, the Company has reduced its accounts receivable by approximately $46 million, or 46%, from $101.2 million at December 31, 1992. Gehl Agriculture accounts receivable at year-end 1996 decreased $11.7 million from a year earlier, while Gehl Construction accounts receivable decreased $2.3 million over the same period. Finance Contracts Receivable: Finance contracts receivable increased $445,000 to $8.2 million at December 31, 1996. The combined portfolio of owned and sold-but-serviced finance contracts receivable was $61.7 million at December 31, 1996 as compared to $55.5 million at year-end 1995. (See Sales of Finance Contracts Receivable following.) Capital Expenditures: 1996 1995 1994 1993 1992 ($ thousands) Capital expenditures $3,837 $2,437 $2,505 $ 809 $1,473 Depreciation $2,438 $2,520 $2,692 $2,940 $3,093 The Company expended $3.8 million for property, plant and equipment in 1996. The majority of 1996 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 the plant expansions as described below, the Company had no significant outstanding commitments for capital items at December 31, 1996. The Company plans to make approximately $8.0 million in capital expenditures in 1997, including $4.0 million to expand its two South Dakota manufacturing facilities and add equipment necessary to increase production levels of skid loaders, rough- terrain telescopic forklifts and paving products. The Company believes its present facilities, with these expansion projects, will be sufficient to provide adequate capacity for its operations in 1997. Debt and Equity: December 31, 1996 1995 1994 1993 1992 ($ millions) Total Debt $19.4 $46.9 $54.9 $72.8 $97.7 Shareholders' Equity $64.8 $55.7 $46.3 $40.9 $40.4 % Total Debt to Total Capitalization 23.0% 45.7% 54.2% 64.0% 70.7% At December 31, 1996, shareholders' equity had increased $9.1 million to $64.8 million from $55.7 million a year earlier. By reducing its debt $27.5 million to $19.4 million, the Company lowered its capitalization ratio to 23.0% at December 31, 1996. Borrowing Arrangements (See also Note 5 of Notes to Consolidated Financial Statements): The Company maintains a $75 million line of credit facility (the "Facility") which expires December 31, 1998, and is subject to a borrowing base related to the Company's accounts receivable, finance contracts receivable and inventories. Under the terms of the Facility, 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 $6.5 million, the interest rate is 2.50% above Canadian one-month bankers' acceptance rates ("BA Rate"). Under the Facility the base LIBOR and BA Rate are adjusted weekly. At December 31, 1996, the Company had unused borrowing capacity of $45.4 million under the Facility, versus $27.4 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 ("IDB") 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 all contracts whether or not sold. At December 31, 1996, the Company serviced $61.7 million of such contracts, of which $53.0 million were owned by third parties. Losses on finance contracts due to customer nonperformance were $252,000 in 1996 as compared to $365,000 in 1995. As a percentage of outstanding serviced contracts, the loss ratios were .4% and .7% in 1996 and 1995, respectively. The Company incurred $1.2 million of costs in selling $38.8 million of its finance contracts in 1996, as compared to $534,000 of costs in selling $31.4 million of such contracts in 1995. 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. In 1996, the Company's cost of selling such contracts increased $674,000 from 1995 due to: 1) selling approximately $7.4 million more of such contracts in 1996 than in 1995; and 2) the lower average interest rate on contracts sold in 1996, versus 1995, due to lower rates offered to retail customers. Management believes the Company has sufficient capacity to meet its requirements to sell its finance contracts for the foreseeable future. [Pages 14 through 23 of the Annual Report] GEHL COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS In Thousands, Except Share Data - December 31, 1996 1995 Assets Cash $ 4,208 $ 3,266 Accounts receivable - net 55,141 69,087 Finance contracts receivable - net 5,098 4,817 Inventories 18,642 23,320 Prepaid income taxes 5,035 4,397 Prepaid expenses and other assets 1,624 1,676 ________ ________ Total current assets 89,748 106,563 ________ ________ Property, plant and equipment - net 21,678 20,315 Finance contracts receivable - net, non-current 3,063 2,899 Other assets 5,636 5,146 ________ ________ Total assets $120,125 $134,923 ======== ======== Liabilities and Shareholders' Equity Current portion of long-term debt obligations $ 178 $ 197 Accounts payable 14,384 14,083 Accrued liabilities 17,574 15,281 ________ ________ Total current liabilities 32,136 29,561 ________ ________ Line of credit facility 10,454 37,848 Long-term debt obligations 8,740 8,818 Deferred income taxes 2,369 1,425 Other long-term liabilities 1,594 1,592 ________ ________ Total long-term liabilities 23,157 49,683 ________ ________ Common stock, $.10 par value, 25,000,000 shares authorized, 6,158,720 and 6,216,765 shares outstanding at December 31, 1996 and 1995, respectively 616 622 Preferred stock, $.10 par value, 2,000,000 -- -- shares authorized, no shares issued Capital in excess of par 26,155 26,580 Retained earnings 38,061 28,477 ________ ________ Total shareholders' equity 64,832 55,679 ________ ________ Total liabilities and shareholders' equity $120,125 $134,923 ======== ======== Contingencies (Notes 2 and 11) The accompanying notes are an integral part of the financial statements. GEHL COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME In Thousands, Except Per Share Data - Year Ended December 31, 1996 1995 1994 Net sales $159,662 $153,452 $146,620 Cost of goods sold 111,902 108,838 103,346 ________ ________ ________ Gross profit 47,760 44,614 43,274 Selling, general and administrative expenses 32,213 31,001 30,313 ________ ________ ________ Income from operations 15,547 13,613 12,961 Interest expense (3,443) (5,733) (6,711) Interest income 1,542 1,820 1,715 Other income (expense), net (1,152) (537) (2,930) ________ ________ ________ Income before income taxes 12,494 9,163 5,035 Provision for income taxes 2,929 150 --- ________ ________ ________ Net income $ 9,565 $ 9,013 $ 5,035 ======== ======== ======== Net income per common share $ 1.54 $ 1.44 $ .82 ======== ======== ======== The accompanying notes are an integral part of the financial statements. GEHL COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY Capital In Common Excess of Retained In Thousands Stock Par Earnings Total Balance at December 31, 1993 $613 $25,820 $14,462 $40,895 Net income -- -- 5,035 5,035 Exercise of stock options 4 131 -- 135 Amortization of unearned compensation related to restricted stock grants -- 182 -- 182 Minimum liability adjustment -- -- 36 36 ____ _______ ________ ________ Balance at December 31, 1994 617 26,133 19,533 46,283 Net income -- -- 9,013 9,013 Exercise of stock options 5 265 -- 270 Amortization of unearned compensation related to restricted stock grants -- 182 -- 182 Minimum liability adjustment -- -- (69) (69) ____ _______ _______ _______ Balance at December 31, 1995 622 26,580 28,477 55,679 Net income -- -- 9,565 9,565 Exercise of stock options 2 102 -- 104 Treasury stock purchase/cancellation (8) (527) -- (535) Minimum liability adjustment -- -- 19 19 ____ _______ _______ _______ Balance at December 31, 1996 $616 $26,155 $38,061 $64,832 ==== ======= ======= ======= 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, 1996 1995 1994 Cash Flows from Operating Activities Net income $ 9,565 $ 9,013 $ 5,035 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,576 2,865 3,767 (Gain) loss on sale of equipment 10 (13) 8 Cost of sales of finance contracts 1,208 534 1,142 Deferred income taxes 306 (2,071) (900) Proceeds from sales of finance contracts 36,824 30,062 31,935 Increase (decrease) in cash due to changes in: Accounts receivable - net 13,946 3,306 12,576 Finance contracts receivable - net (39,248) (33,432) (33,241) Inventories 4,678 (1,868) 181 Prepaid expenses and other assets (288) 231 155 Other assets (14) 240 113 Accounts payable 301 (394) (1,307) Accrued liabilities 1,931 1,228 58 ________ ________ ________ Net cash provided by operating activities 31,795 9,701 19,522 ________ ________ ________ Cash Flows from Investing Activities Increase in unexpended plant construction fund (10) (16) (7) Proceeds from sale of equipment 26 47 42 Property, plant and equipment additions (3,837) (2,437) (2,505) Decrease in other assets 869 777 1,100 Other 19 113 217 ________ ________ ________ Net cash (used for) investing activities (2,933) (1,516) (1,153) ________ ________ ________ Cash Flows from Financing Activities (Decrease)increase in other long-term obligations (97) 14 (9,828) Repayment of revolving credit loans (27,394) (8,031) (8,100) Increase in other long- term liabilities 2 258 536 Proceeds from issuance of common stock 104 270 135 Treasury stock purchase (535) -- -- ________ ________ ________ Net cash (used for) financing activities (27,920) (7,489) (17,257) ________ ________ ________ Net increase in cash 942 696 1,112 Cash, beginning of year 3,266 2,570 1,458 ________ ________ ________ Cash, end of year $ 4,208 $ 3,266 $ 2,570 ======== ======== ======== The accompanying notes are an integral part of the financial statements. GEHL COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996 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.; 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 through its finance division. 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. Foreign Currency Transactions: Foreign currency transaction gains and losses are included in the determination of income. Foreign currency gains (losses) were $24,000, $107,000 and $(181,000) in 1996, 1995 and 1994, 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 $2,227,000, $1,363,000 and $1,172,000 in 1996, 1995 and 1994, respectively. Other Income (Expense): Other income (expense) is comprised primarily of foreign currency transaction gains (losses), cost of sales of finance contracts, amortization of debt issue costs, and royalty and license income (expense). Net Income Per Common Share: 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. The weighted average number of shares used in the computations was 6,227,479, 6,252,235 and 6,174,476 for 1996, 1995 and 1994, respectively. Reclassifications: Certain amounts in the 1995 financial statements have been reclassified to conform to the 1996 presentation. Note 2 -Accounts Receivable and Finance Contracts Receivable Accounts receivable and finance contracts receivable were comprised of the following (in thousands): December 31, 1996 1995 Accounts receivable $58,356 $73,092 Less allowances for: doubtful accounts (561) (752) returns and dealer discounts (2,654) (3,253) _______ _______ $55,141 $69,087 ======= ======= Finance contracts receivable $ 9,294 $ 9,056 Less: unearned interest (542) (773) allowance for doubtful accounts (591) (567) _______ _______ 8,161 7,716 Less: non-current portion (3,063) (2,899) _______ _______ Current portion $ 5,098 $ 4,817 ======= ======= The Company maintains a reserve for discontinued products. The allowance for returns and dealer discounts contains $775,000 and $1,335,000 to reflect the anticipated costs of retailing such products in dealer inventory at December 31, 1996 and 1995, respectively. The finance contracts receivable at December 31, 1996 have a weighted average interest rate of approximately 8%. The Company has entered into various agreements with third parties to sell with recourse certain finance contracts receivable. The recourse provisions of certain of these agreements require that the Company provide additional collateral in the form of cash withheld at the time of sale. At December 31, 1996, $1.6 million of cash previously withheld by third party buyers was provided as additional collateral. 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 these contracts which generally have maturities of 36 to 48 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 1996 and 1995 (in thousands): 1996 1995 Value of contracts sold - net of $4.4 million and $4.3 million, respectively, of unearned interest $38,804 $31,363 Cash received on sales of contracts 36,824 30,062 Cash withheld as additional collateral 772 767 _______ _______ Cost of sales of finance contracts $ 1,208 $ 534 ======= ======= Net receivables outstanding at December 31 relating to finance contracts sold $52,971 $47,178 ======= ======= 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 3 - 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, 1996 1995 Raw materials and supplies $ 3,547 $ 4,151 Work-in-process 9,120 9,893 Finished machines and parts 24,770 28,149 ________ ________ Total current cost value 37,437 42,193 Adjustment to LIFO basis (18,795) (18,873) ________ ________ $ 18,642 $ 23,320 ======== ======== During 1996, inventory quantities were reduced. This reduction resulted in a liquidation of LIFO inventory quantities carried at lower costs prevailing in prior years as compared with the cost of 1996 purchases, the effect of which decreased cost of goods sold by approximately $1 million. Note 4 - Property, Plant and Equipment - Net Property, plant and equipment consisted of the following (in thousands): December 31, 1996 1995 Land $ 1,411 $ 1,411 Buildings 18,551 17,344 Machinery and equipment 28,972 27,014 Autos and trucks 410 418 Office furniture and fixtures 7,727 7,459 _________ _________ 57,071 53,646 Less: accumulated depreciation (35,393) (33,331) _________ _________ Property, plant and equipment - net $ 21,678 $ 20,315 ========= ========= Note 5 - Debt Obligations A summary of the Company's debt obligations, and related current maturities, is as follows (in thousands): December 31, 1996 1995 Line of credit facility $10,454 $37,848 9.0% industrial development bonds 8,400 8,400 Other debt obligations 518 615 _______ _______ 19,372 46,863 Less: current portion (178) (197) _______ _______ Long-term debt obligations $19,194 $46,666 ======= ======= The Company maintains a $75 million line of credit facility (the "Facility") which expires December 31, 1998. Interest is paid monthly on outstanding borrowings under the Facility as follows: borrowings in Canadian denominated dollars up to a $6.5 million credit line are at 2.5% above 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, 1996, the Company had unused borrowing capacity of approximately $45.4 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 $518,000 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): 1997 $ 178 1998 10,648 1999 109 2000 37 2001 - Later years 8,400 ________ $19,372 ======== Interest paid on total debt obligations was $3.6 million, $5.9 million and $6.9 million in 1996, 1995 and 1994, respectively. Note 6 - Accrued Liabilities Accrued liabilities were comprised of the following (in thousands): December 31, 1996 1995 Accrued salaries and wages $ 4,132 $ 3,033 Dealer recourse deposits 2,308 2,222 Accrued warranty costs 2,290 1,815 Accrued product liability costs 3,870 3,025 Other 4,974 5,186 _______ _______ $17,574 $15,281 ======= ======= Note 7 - Income Taxes The income tax provision (benefit) recorded for the years ended December 31, 1996, 1995 and 1994 consisted of the following (in thousands): Year Ended State and December 31, Federal Foreign Total 1996 Current $ 2,548 $ 75 $ 2,623 Deferred 306 - 306 ________ ________ ________ Total $ 2,854 $ 75 $ 2,929 ======== ======== ======== 1995 Current $ 2,303 $ 150 $ 2,453 Deferred (2,303) - (2,303) ________ ________ ________ Total $ - $ 150 $ 150 ======== ======== ======== 1994 Current $ 900 $ 78 $ 978 Deferred (900) (78) (978) ________ ________ ________ Total $ - $ - $ - ======== ======== ======== 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, 1996 1995 1994 Federal statutory rate 34.0% 34.0% 34.0% Minimum tax credits utilized (10.5) - - Net operating loss utilized - (34.0) (34.0) State income taxes, net of Federal income tax effect .5 1.6 - Other, net (.6) - - _______ _______ _______ 23.4% 1.6% - ======= ======= ======= The Company's temporary differences and carryforwards which give rise to deferred tax assets and liabilities consisted of the following (in thousands): December 31, 1996 1995 Accrued expenses and reserves $4,297 $3,582 Asset valuation reserves 1,643 2,240 Operating loss carryforwards 925 1,024 Tax credit carryforwards 1,615 3,584 Installment sales (2,118) (2,718) Property, plant and equipment (1,230) (1,222) Other, net (1,231) (869) Valuation allowance (1,235) (2,649) ______ ______ Net deferred tax asset $2,666 $2,972 ====== ====== The net asset is included in the consolidated balance sheet in the following captions (in thousands): December 31, 1996 1995 Prepaid income taxes $5,035 $4,397 Deferred income taxes (2,369) (1,425) ______ ______ $2,666 $2,972 ====== ====== At December 31, 1996, the Company had state net operating loss carryforwards of $17.5 million and had alternative minimum tax credit carryforwards of $1.3 million which do not expire. The carryforwards will be available for the reduction of future income tax liabilities; a valuation allowance has been recorded against certain of these carryforwards for which utilization is uncertain. Cash paid related to income taxes during 1996, 1995 and 1994 was $2,607,000, $3,012,000 and $61,000, respectively. Note 8 - Employee Retirement Plans The Company maintains non-contributory defined benefit pension plans covering the majority of its employees. The benefits provided by certain of the plans are based on a defined monthly multiplier applied to the employee's length of service, with the remaining plans providing benefits based primarily on years of service and average compensation. Net pension (income) expense includes the following components (in thousands): Year Ended December 31, 1996 1995 1994 Service cost $ 483 $ 411 $ 643 Interest cost on projected benefit obligation 1,808 1,830 1,726 Actual (return) loss on plan assets (1,830) (3,381) 4 Net amortization and deferral (475) 1,018 (2,260) _______ _______ _______ Net periodic pension (income) expense $ (14) $ (122) $ 113 ======= ======= ======= The following schedule details (in thousands) the funded status of the plans. 1996 1995 1994 Actuarial present value of benefit obligation: Vested $21,866 $21,982 $19,299 Nonvested 1,570 1,690 1,607 _______ _______ _______ Accumulated benefit obligation 23,436 23,672 20,906 Effect of projected salary increases 1,103 1,186 1,316 _______ _______ _______ Total projected benefit obligation 24,539 24,858 22,222 Plan assets at fair value 25,277 23,670 21,754 _______ _______ _______ Plan assets in excess of (less than) projected benefit obligation 738 (1,188) (468) Unrecognized transitional asset (707) (1,093) (1,579) Prior service cost not yet recognized in net periodic pension cost 1,544 1,094 1,190 Unrecognized net loss 1,315 3,607 3,154 _______ _______ _______ Prepaid pension asset $2,890 $ 2,420 $ 2,297 ====== ====== ====== The projected benefit obligation was determined using assumed discount rates of 8.0% in 1996, 7.75% in 1995 and 8.5% in 1994, and assumed long-term rates of compensation increase of 4% in 1996, 1995 and 1994. The measurement dates used in the actuarial calculations were September 30 in 1996 and 1995 and December 31 in 1994. The annual long-term rate of return on plan assets was assumed to be 9.0% in 1996, 1995 and 1994. 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 $989,000 and $954,000 at December 31, 1996 and 1995, respectively, using a discount rate of 8.0% and 7.25%, respectively. The Company maintains a savings and profit sharing plan under Section 401(k) of the Internal Revenue Code which covers substantially all employees who have completed sixty (60) days of service with the Company. Effective July 1, 1995, the Company reinstated its policy of matching 25% of non- bargaining unit employee contributions to the plan not to exceed 6% of the employee's annual compensation. Vesting of Company contributions occurs at the rate of 20% per year. Contributions approximated $155,000 and $58,000 for the years ended December 31, 1996 and 1995, respectively. The Company maintains a defined contribution plan that covers substantially all employees not included under 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 has contributed approximately $252,000, $212,000 and $194,000 in connection with this plan for 1996, 1995 and 1994, respectively. The Company only provides postretirement benefits to 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 167. Net postretirement benefit expense included the following components (in thousands): Year Ended December 31, 1996 1995 1994 Service cost $ 49 $ 47 $ 49 Interest cost on projected benefit obligation 102 117 106 Net amortization and deferral 58 57 70 _____ _____ _____ Net postretirement benefit expense $209 $221 $225 ===== ===== ===== The Company's postretirement benefit plans are not funded. The status of the Company's plans was as follows (in thousands): December 31, 1996 1995 Actuarial present value of accumulated postretirement benefit obligation $1,564 $1,634 Unrecognized transitional obligation (361) (382) Unrecognized net loss (667) (887) ----- ----- Accrued postretirement benefit liability $ 536 $ 365 ===== ===== The assumed health care cost trend rate used in measuring the accumulated postretirement benefit obligation at December 31, 1996 was 10% decreasing to 6% over four years and at December 31, 1995 was 12% decreasing to 6% over seven years. The discount rate used in determining the accumulated postretirement benefit obligation was 7.5% at December 31, 1996 and 7.25% at December 31, 1995. A one point percentage increase in the health care cost trend rate would increase the accumulated postretirement benefit obligation by approximately $192,000 and would increase the net postretirement benefit expense by approximately $29,000. Note 9 - 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 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 1995 and 1996: Weighted Shares Average Subject Option to Option Price Outstanding, January 1, 1995 240,919 $ 6.58 Granted 170,500 7.31 Exercised (47,242) 5.71 Cancelled (8,505) 5.94 _________ ______ Outstanding, December 31, 1995 355,672 $7.06 ========= ====== Outstanding, January 1, 1996 355,672 $ 7.06 Granted 323,650 8.60 Exercised (32,082) 5.79 Cancelled (53,751) 8.82 _________ ______ Outstanding, December 31, 1996 593,489 $7.81 ========= ====== Exercisable, December 31, 1996 208,350 $7.00 ========= ====== The exercise price for options outstanding at December 31, 1996 range from $3.00 to $9.375 per share. The weighted-average remaining contractual life of these options approximates seven years. The Company has adopted the disclosure-only provisions of Statement of Financial Accounting Standards ("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 1995 and 1996 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): For the year ended December 31, 1996 1995 Net income - as reported $9,565 $9,013 Net income - pro-forma 9,306 9,006 Net income per share - as reported 1.54 1.44 Net income per share - pro-forma 1.49 1.44 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 1996 and 1995: For the year ended December 31, 1996 1995 Expected stock price volatility 20.9% 21.2% Risk-free interest rate 6.4% 5.6% Expected life of options 7 years 6 years The weighted-average grant-date fair value of options granted during 1996 and 1995 was $3.40 and $2.58, respectively. At December 31, 1996, a warrant to purchase 180,000 shares of the Company's common stock for $7 per share, subject to certain adjustments as provided in the warrant agreement, was outstanding to a former junior note holder. The warrant can be exercised at any time through March 5, 1998. Note 10 - Leases The Company occupies certain warehouse facilities and uses certain equipment under operating lease arrangements. Rent expense under such arrangements amounted to $1,381,000, $1,510,000 and $1,606,000 in 1996, 1995 and 1994, respectively. The Company maintains non-cancellable operating leases for certain facilities and equipment. Future minimum lease payments under such leases at December 31, 1996, are as follows (in thousands): 1997 $212 1998 80 1999 42 2000 26 2001 13 ------- $373 ======= Note 11 - 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 on opinion 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 12 - Segment Information The Company manufactures and distributes products into two industry segments. Gehl Construction is engaged in the manufacture and distribution of equipment and machinery for the construction market. As of December 31, 1996, 21% of the Company's accounts receivable were from customers in the construction market. Gehl Agriculture is engaged in the manufacture and distribution of farm equipment and machinery for the dairy and livestock agricultural sector. As of December 31, 1996, 79% of the Company's accounts receivable were from customers in the agricultural sector. Unallocated assets are cash, deferred income taxes and other nonallocable assets. Segments of business by industry are presented below (in thousands): Year Ended December 31, 1996 1995 1994 Net Sales Construction $ 70,826 $ 64,381 $ 51,796 Agriculture 88,836 89,071 94,824 ________ ________ ________ Consolidated $159,662 $153,452 $146,620 ======== ======== ======== Income from Operations Construction $ 12,967 $ 13,164 $ 8,542 Agriculture 2,580 449 4,419 ________ ________ ________ Consolidated $ 15,547 $ 13,613 $ 12,961 ======== ======== ======== Assets (Year-end) Construction $ 27,994 $ 29,999 $ 24,029 Agriculture 76,857 91,612 97,730 Unallocated 15,274 13,312 9,268 ________ ________ ________ Consolidated $120,125 $134,923 $131,027 ======== ======== ======== Depreciation/ Amortization Construction $ 760 $ 921 $ 1,076 Agriculture 1,758 1,883 2,273 Unallocated 58 61 418 ________ ________ ________ Consolidated $ 2,576 $ 2,865 $ 3,767 ======== ======== ======== Capital Expenditures Construction $ 922 $ 655 $ 1,422 Agriculture 2,915 1,782 1,083 ________ ________ ________ Consolidated $ 3,837 $ 2,437 $ 2,505 ======== ======== ======== Exports of U.S. produced products were approximately $26.8 million, $28.0 million and $25.9 million in 1996, 1995 and 1994, respectively. Note 13 - Quarterly Financial Data (unaudited) In Thousands, Except Per First Second Third Fourth Share Data -- Quarter Quarter Quarter Quarter Total 1996 Net sales $39,165 $44,474 $40,550 $35,473 $159,662 Gross profit 11,016 13,352 12,252 11,140 47,760 Net income 1,896 2,933 2,621 2,115 9,565 Net income per common share .31 .47 .42 .34 1.54 1995 Net sales $38,268 $42,730 $36,901 $35,553 $153,452 Gross profit 10,680 12,697 10,726 10,511 44,614 Net income 1,813 3,598 2,236 1,366 9,013 Net income per common share .29 .58 .36 .22 1.44 Due to the use of the weighted average shares outstanding each quarter for computing net income per share, the sum of the quarterly per share amounts does not equal the per share amount for the year. [Page 24 of the Annual Report] GEHL COMPANY AND SUBSIDIARIES FIVE-YEAR FINANCIAL SUMMARY Dollars in Thousands, Except Per Share Data 1996 1995 1994 1993 1992 Summary of Operations Net sales $159,662 $153,452 $146,620 $137,218 $129,694 Gross profit 47,760 44,614 43,274 38,883 32,971 Income (loss) from operations 15,547 13,613 12,961 7,339 (6,866) Interest expense 3,443 5,733 6,711 8,364 10,103 Income (loss) before income taxes 12,494 9,163 5,035 366 (18,150) Net income (loss) 9,565 9,013 5,035 241 (17,900) Financial Position at December 31 Current assets $89,748 $106,563 $102,621 $114,355 $138,193 Current liabilities 32,136 29,561 28,710 30,328 128,717 Working capital 57,612 77,002 73,911 84,027 9,476 Accounts receivable 55,141 69,087 72,393 84,969 101,181 Finance contracts receivable 8,161 7,716 5,647 6,847 9,793 Inventories 18,642 23,320 21,452 21,633 24,083 Property, plant and equipment, net 21,678 20,315 20,433 20,088 22,242 Total assets 120,125 134,923 131,027 144,280 170,225 Long-term debt 19,194 46,666 54,700 72,259 418 Total debt 19,372 46,863 54,880 72,808 97,676 Shareholders' equity 64,832 55,679 46,283 40,895 40,405 Common Share Summary Net income (loss) per share $1.54 $1.44 $.82 $.04 $(3.05) Dividends per share -- -- -- -- -- Book value per share 10.53 8.96 7.50 6.67 6.88 Shares outstanding at year-end 6,158,720 6,216,765 6,169,523 6,132,443 5,875,110 Other Financial Statistics Net cash provided by (used for) operating activities $31,795 $9,701 $19,522 $26,113 $(162) Capital expenditures 3,837 2,437 2,505 809 1,473 Depreciation 2,438 2,520 2,692 2,940 3,093 Current ratio 2.8 to 1 3.6 to 1 3.6 to 1 3.8 to 1 1.1 to 1 Percent total debt to total capitalization 23.0% 45.7% 54.2% 64.0% 70.7% Net income (loss) as a percent of net sales 6.0% 5.9% 3.4% .2% (13.8%) After-tax return on average shareholders' equity 15.9% 17.7% 11.6% .6% (36.3%) Employees at year-end 832 842 928 946 1,001 Common stock price range 12-6-7/8 9-5/8-6-1/4 8-1/2-5-3/8 7-3/8-3 6-2-1/4 Investor Information Price Range Dividends 1996 1995 1996 1995 Stock Prices and Dividends First Quarter $8-3/4 - 6-7/8 $7-5/8 - 6-1/4 $ -- $ -- Second Quarter 8-3/4 - 7-5/8 9-3/8 - 6-7/8 -- -- Third Quarter 8-5/8 - 7-3/8 9-5/8 - 7-3/4 -- -- Fourth Quarter 12 - 7-5/8 8-1/4 - 6-5/8 -- -- ______________ ______________ ______________ ______________ Year $12 - 6-7/8 $9-5/8 - 6-1/4 $ -- $ -- ============== ============== ============== ============= [Page 25 of the Annual Report] Directors and Officers Board of Directors Thomas J. Boldt President, The Boldt Group, Inc. (1) Fred M. Butler President and Chief Executive Officer, The Manitowoc Company (*2) John W. Findley Chairman and President, Vine and Branches Foundation, Inc. and Chairman and President, Cedars of Nemahbin Foundation, Inc. (1,2) John W. Gehl Vice President, International (3) William D. Gehl Chairman of the Board of Directors, President and Chief Executive Officer, (3) William P. Killian Vice President, Corporate Development and Strategy Johnson Controls, Inc. (3) Arthur W. Nesbitt Chairman, President and Chief Executive Officer, Nasco International (2,*3) Roger E. Secrist Retired Chairman and Chief Executive Officer, ANGUS Chemical Company (2,3) John W. Splude President and Chief Executive Officer, HK Systems, Inc. (*1) Executive Officers William D. Gehl Chairman of the Board of Directors, President and Chief Executive Officer Victor A. Mancinelli Executive Vice President and Chief Operating Officer John W. Gehl Vice President, International Kenneth P. Hahn Vice President, Finance and Treasurer Michael J. Mulcahy Vice President, Secretary and General Counsel Richard J. Semler Vice President, Data Systems (*) Chairman (1) Audit Committee (2) Compensation and Benefits Committee (3) Nominating Committee Information of Interest Annual Meeting All shareholders are invited to attend our annual meeting which will be held on Wednesday, April 16, 1997, at 3:00 p.m. at the Cedar Theatre, Cedar Lake Campus, 5595 Hwy Z, West Bend, Wisconsin. Transfer Agent Shareholders with a change of address or related needs should contact: Firstar Trust Company 615 E. Michigan Street, 4th Floor P.O. Box 2077 Milwaukee, Wisconsin 53201 800-637-7549 Stock Market Information Gehl Company common stock is traded on The Nasdaq Stock Market under the symbol GEHL. As of February 3, 1997, share-holders of record numbered 856. This number does not include shareholders who hold Gehl Company Stock in street name. Independent Accountants Price Waterhouse LLP Milwaukee, Wisconsin Investor Information The Company provides quarterly financial information to Shareholders through an automated "News on Demand Service". The Company does not mail out Quarterly Reports to Shareholders. By calling 1-800-882-2786, you will be able to request from a directory maintained by the Company a faxed copy of financial and other types of information about the Company to be sent directly to you. You may also order for mailing to you Forms 10-K and 10-Q and other available information by calling the same toll-free number. Additionally, copies of Gehl Company's Form 10-K for 1996, as well as other financial information about the Company, are available from: Michael J. Mulcahy Corporate Secretary Gehl Company 143 Water Street West Bend, Wisconsin 53095 414-334-9461 The Company anticipates making 1997 quarterly earnings announcements: First Quarter: Week ending, April 18, 1997 Second Quarter: Week ending, July 18, 1997 Third Quarter: Week ending, October 17, 1997 Fourth Quarter: Week ending, February 20, 1998 EX-23 5 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, 1997 appearing in the 1996 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 on 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) PRICE WATERHOUSE LLP Milwaukee, Wisconsin February 27, 1997 EX-27 6
5 This schedule contains summary financial information extracted from Gehl Company's consolidated balance sheet at December 31, 1996 and consolidated statements of income for the twelve month period ended December 31, 1996 and is qualified in its entirety by reference to such financial statements. 1000 12-MOS DEC-31-1996 JAN-1-1996 DEC-31-1996 4208 0 67108 3806 18642 89748 57071 35393 120125 32136 19194 616 0 0 64216 120125 159662 159662 111902 111902 0 0 3443 12494 2929 9565 0 0 0 9565 1.54 0 Includes all non-current portion of debt obligations Not reported
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