-----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, EqDVRCPM3IHbvOImHE2lO51QiDE7VC7w5JN54hx+9f4F5crjL1b6fMnNz4SAHynA 8Ndd3MZTNkS5t8uC9/uKNA== 0000897069-02-000889.txt : 20021112 0000897069-02-000889.hdr.sgml : 20021111 20021112170319 ACCESSION NUMBER: 0000897069-02-000889 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020928 FILED AS OF DATE: 20021112 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-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-18110 FILM NUMBER: 02817797 BUSINESS ADDRESS: STREET 1: 143 WATER STREET CITY: WEST BEND STATE: WI ZIP: 53095 BUSINESS PHONE: 2623349461 MAIL ADDRESS: STREET 1: 143 WATER STREET CITY: WEST BEND STATE: WI ZIP: 53095 10-Q 1 slp439.txt FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 28, 2002 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ........... to ......... Commission file number 0-18110 GEHL COMPANY - -------------------------------------------------------------------------------- Wisconsin 39-0300430 - ----------------------------------------------- ------------------------------ (State or other jurisdiction of incorporation (I.R.S. Employer or organization) Identification No.) 143 Water Street, West Bend, WI 53095 - ----------------------------------------------- ------------------------ (Address of principal executive office) (Zip code) (262) 334-9461 - -------------------------------------------------------------------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes No X Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at September 28, 2002 Common Stock, $.10 Par Value 5,377,055 GEHL COMPANY FORM 10-Q September 28, 2002 REPORT INDEX Page No. PART I. - FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Statements of Operations for the Three- and Nine-month Periods Ended September 28, 2002 and September 29, 2001....................................... 3 Condensed Consolidated Balance Sheets at September 28, 2002, December 31, 2001, and September 29, 2001.................... 4 Condensed Consolidated Statements of Cash Flows for the Nine-month Periods Ended September 28, 2002 and September 29, 2001........................................... 5 Notes to Condensed Consolidated Financial Statements........... 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition........................... 11 Item 3. Quantitative and Qualitative Disclosures about Market Risk.... 21 Item 4. Controls and Procedures....................................... 21 PART II. - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K.............................. 22 SIGNATURES.............................................................. 23 CERTIFICATIONS.......................................................... 24 -2- PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS GEHL COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data; unaudited)
Three Months Ended Nine Months Ended ------------------ ----------------- September 28, September 29, September 28, September 29, 2002 2001 2002 2001 ---- ---- ---- ---- Net sales $ 54,575 $ 58,161 $ 181,332 $ 193,022 Cost of goods sold 42,867 44,381 142,038 149,549 ---------- ---------- ---------- ---------- Gross profit 11,708 13,780 39,294 43,473 Selling, general and administrative expenses 10,130 9,751 33,393 29,731 Strategic review costs - 513 - 513 Restructuring and other charges 333 4,300 725 4,300 ---------- ---------- ---------- ---------- Total operating expenses 10,463 14,564 34,118 34,544 Income (loss) from operations 1,245 (784) 5,176 8,929 Interest expense (1,055) (1,071) (3,184) (3,413) Interest income 527 431 1,507 1,449 Other expense, net (373) (854) (1,426) (2,758) ---------- ---------- ---------- ---------- Income (loss) before income taxes 344 (2,278) 2,073 4,207 Income tax provision (benefit) 121 (798) 726 1,472 ---------- ---------- ---------- ---------- Net income (loss) $ 223 $ (1,480) $ 1,347 $ 2,735 ========== ========== ========== ========== Earnings (loss) per share Diluted $ 0.04 $ (0.28) $ 0.25 $ 0.50 ========== ========== ========== ========== Basic $ 0.04 $ (0.28) $ 0.25 $ 0.51 ========== ========== ========== ==========
The acompanying notes are an integral part of the financial statements. -3- GEHL COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
September 28, 2002 December 31, 2001 September 29, 2001 (Unaudited) (Audited) (Unaudited) ----------- --------- ----------- ASSETS Cash $ 2,339 $ 2,248 $ 3,146 Accounts receivable - net 106,133 90,714 98,130 Finance contracts receivable - net 2,897 7,511 9,231 Inventories 44,173 52,161 42,469 Deferred tax assets 10,171 10,171 9,583 Prepaid expenses and other current assets 1,981 1,119 1,578 ---------- ---------- ---------- Total current assets 167,694 163,924 164,137 ---------- ---------- ---------- Property, plant and equipment - net 47,088 43,431 43,303 Finance contracts receivable - net, non-current 3,515 5,147 6,206 Goodwill 12,556 12,248 12,370 Other assets 13,306 12,659 11,193 ---------- ---------- ---------- Total assets $ 244,159 $ 237,409 $ 237,209 ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Current portion of long-term debt obligations $ 148 $ 161 $ 188 Accounts payable 26,872 30,644 30,176 Accrued liabilities 26,366 25,661 27,836 ---------- ---------- ---------- Total current liabilities 53,386 56,466 58,200 ---------- ---------- ---------- Line of credit facility 60,269 55,188 54,850 Long-term debt obligations 9,092 9,049 9,081 Deferred income taxes 2,460 2,460 5,096 Other long-term liabilities 17,671 14,225 4,059 ---------- ---------- ---------- Total long-term liabilities 89,492 80,922 73,086 ---------- ---------- ---------- Common stock, $.10 par value, 25,000,000 shares authorized, 5,377,055, 5,359,721 and 5,348,755 shares outstanding, respectively 538 536 535 Preferred stock, $.10 par value, 2,000,000 shares authorized, 250,000 shares designated as Series A preferred stock, no shares issued - - - Capital in excess of par 6,966 6,980 6,663 Retained earnings 99,775 98,429 98,859 Accumulated other comprehensive loss (5,998) (5,924) (134) ---------- ---------- ---------- Total shareholders' equity 101,281 100,021 105,923 ---------- ---------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 244,159 $ 237,409 $ 237,209 ========== ========== ==========
The acompanying notes are an integral part of the financial statements. -4- GEHL COMPANY AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands; unaudited)
Nine Months Ended -------------------------------------------------- September 28, 2002 September 29, 2001 ------------------ ------------------ Cash flows from operating activities Net income $ 1,347 $ 2,735 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation 3,214 3,784 Amortization 173 549 Deferred income taxes - (1,505) Restructuring charge (non-cash) - 1,754 Cost of sales of finance contracts 1,608 3,019 Proceeds from sales of finance contracts 73,816 82,371 Increase in finance contracts receivable (69,178) (74,311) Net changes in remaining working capital items (8,887) (19,034) --------- --------- Net cash provided by (used for) operating activities 2,093 (638) --------- --------- Cash flows from investing activities Property, plant and equipment additions - net (6,165) (3,104) Other 1,231 714 --------- --------- Net cash used for investing activities (4,934) (2,390) --------- --------- Cash flows from financing activities Proceeds from line of credit facility - net 5,068 3,242 Repayments of other long-term borrowings - net (2,167) - Proceeds from issuance of common stock 544 170 Treasury stock purchases (556) - Other 43 172 --------- --------- Net cash provided by financing activities 2,932 3,584 --------- --------- Net increase in cash 91 556 Cash, beginning of period 2,248 2,590 --------- --------- Cash, end of period $ 2,339 $ 3,146 ========= ========= Supplemental disclosure of cash flow information: Cash paid for the following: Interest $ 3,110 $ 3,512 Income taxes $ 634 $ 1,048
The acompanying notes are an integral part of the financial statements. -5- GEHL COMPANY AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS September 28, 2002 (Unaudited) Note 1 - Basis of Presentation The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, the information furnished for the three- and nine-month periods ended September 28, 2002 and September 29, 2001 includes all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the results of operations and financial position of the Company. Due in part to the seasonal nature of the Company's business, the results of operations for the nine-month period ended September 28, 2002 are not necessarily indicative of the results to be expected for the entire year. It is suggested that these interim financial statements be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2001 as filed with the Securities and Exchange Commission. Note 2 - Income Taxes The income tax provision is determined by applying an estimated annual effective income tax rate to income before income taxes. The estimated annual effective income tax rate is based on the most recent annualized forecast of pretax income, permanent book/tax differences, and tax credits. Note 3 - Inventories If all of the Company's inventories had been valued on a current cost basis, which approximated FIFO value, estimated inventories by major classification would have been as follows (in thousands):
September 28, 2002 December 31, 2001 September 29, 2001 ------------------------ ------------------------ ------------------------ Raw materials and supplies $ 15,208 $ 20,309 $ 20,187 Work-in-process 2,774 6,414 4,435 Finished machines and parts 46,382 45,629 37,458 ----------- ----------- ---------- Total current cost value 64,364 72,352 62,080 Adjustment to LIFO basis (20,191) (20,191) (19,611) ----------- ----------- ---------- $ 44,173 $ 52,161 $ 42,469 =========== =========== ==========
-6- Note 4 - Goodwill and Intangible Assets Effective January 1, 2002, the Company adopted the provisions of Statement of Financial Accounting Standard ("SFAS") No. 142, "Goodwill and Other Intangible Assets." Under SFAS No. 142, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized, but will be tested for impairment at least annually. Other intangible assets will continue to be amortized over their useful lives. As a result of adopting SFAS No. 142, the Company ceased amortization of all goodwill. For the three-month period ended September 29, 2001, the Company reported a net loss of $1.5 million, which reflected the impact of $0.1 million of goodwill amortization, and basic and diluted loss per share of $0.28. Had the Company adopted SFAS No. 142 on January 1, 2001, the net loss for the three-month period ended September 29, 2001 would have been $1.4 million and basic and diluted loss per share would have been $0.25. For the nine-month period ended September 29, 2001, the Company reported net income of $2.7 million, which reflected the impact of $0.4 million of goodwill amortization, and basic and diluted earnings per share of $0.51 and $0.50, respectively. Had the Company adopted SFAS No. 142 on January 1, 2001, net income for the nine-month period ended September 29, 2001 would have been $3.1 million and basic and diluted earnings per share would have been $0.58 and $0.56, respectively. Note 5 - Accounting Pronouncements Effective January 1, 2002, the Company adopted the provisions of Emerging Issues Task Force ("EITF") 00-25, "Vendor Income Statement Characterization of Consideration Paid to a Retailer of the Vendor's Products." As a result of adopting EITF 00-25, the Company now classifies the costs associated with sales incentives provided to dealers as a reduction of net sales. Prior to January 1, 2002, these costs were included in selling, general and administrative expenses. Net sales and selling, general and administrative expenses for the three- and nine-month period ended September 29, 2001 have been restated to conform to the current year presentation. This reclassification had no impact on reported income before income taxes or net income. In August 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 143, "Accounting for Asset Retirement Obligations." This statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. It applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or the normal operation of a long-lived asset. The statement will be effective for years beginning after June 30, 2002. Management has not yet completed its evaluation of the impact, if any, of the adoption of this statement. Effective January 1, 2002, the Company adopted the provisions of SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The adoption of SFAS No. 144 had no impact on the Company's financial position at September 28, 2002 or the results of operations and cash flows for the three- and nine-month periods then ended. -7- In April 2002, the FASB issued SFAS No. 145, "Recission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections as of April 2002." SFAS No. 145 rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt," SFAS No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements" and SFAS No. 44, "Accounting for Intangible Assets of Motor Carriers." This Statement also amends SFAS No. 13, "Accounting for Leases," to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease modifications that have economic effects that are similar to sale-leaseback transactions. This Statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The provisions of this statement related to the rescission of SFAS No. 4 shall be applied in fiscal years beginning after May 15, 2002. The provisions of this statement related to SFAS No. 13 shall be effective for transactions occurring after May 15, 2002. All other provisions of this statement are effective for financial statements issued on or after May 15, 2002. The adoption of SFAS No. 145 had no impact on the Company's financial position at September 28, 2002 or the results of operations and cash flows for the three- and nine-month periods then ended. In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This statement nullifies EITF 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)," which allowed companies engaged in exit and disposal activities to record liabilities for certain costs when the company committed to the exit or disposal plan. SFAS No. 146 requires costs associated with an exit or disposal plan to be recognized and measured initially at fair value only when the liability has been incurred as defined by FASB Concepts Statement 6. The provisions of SFAS No. 146 are effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of this statement will not impact the accounting for the plant rationalization initiatives adopted by the Company on September 26, 2001 (see Note 6 - Restructuring and Other Charges). Note 6 - Restructuring and Other Charges On September 26, 2001, the Company adopted several major plant rationalization initiatives to improve the Company's profitability by consolidating certain operations. Under these initiatives, the Company announced it would close its manufacturing facility in Lebanon, Pennsylvania and transfer production to other locations. The Company also indicated it would transfer the manufacturing of its Mustang line of skid steer loaders from its facility in Owatonna, Minnesota to its skid steer facility in Madison, South Dakota. In implementing these actions, the Company expected that it would ultimately incur total restructuring and other non-recurring charges of approximately $5.5 to $6.5 million; a $4.3 million charge related to the plant rationalization initiatives was recorded in the third quarter of 2001 in accordance with accounting principles generally accepted in the United States of America. Of the $4.3 million charge recorded in the third quarter of 2001, $1.5 million and $2.8 million related to the Agricultural and Construction equipment segments, respectively. -8- Details of the restructuring charge and related activity are as follows (in thousands):
Employee Severance and Write-down of Termination Long-lived and Benefits Other Assets Other Exit Costs Totals ---------------- ----------------- -------------- --------------- Original Reserve $ 1,635 $ 1,754 $ 911 $ 4,300 Utilization - 1,754 - 1,754 ---------- ---------- ---------- ---------- Balance at December 31, 2001 and March 30, 2002 1,635 - 911 2,546 Utilization 308 - 51 359 ---------- ---------- ---------- ---------- Balance at June 29, 2002 1,327 - 860 2,187 Utilization 433 - 159 592 ---------- ---------- ---------- ---------- Balance at September 28, 2002 $ 894 $ - $ 701 $ 1,595 ========== ========== ========== ==========
As a result of the plant rationalizations, the Company expected to reduce its workforce by 249, consisting of hourly and salaried employees at the Lebanon and Owatonna locations. During the three- and nine-month period ended September 28, 2002, workforce reductions of 123 and 220, respectively, occurred, which included 111 and 196 employees, respectively, who were terminated with severance payments and termination benefits commencing in April 2002 and continuing into the first quarter of 2003. The manufacturing consolidations announced on September 26, 2001 have been completed. Production of Mustang skid loaders has been transferred to the Madison plant. The Lebanon plant was closed in the 2002 first quarter and the production of certain products formerly manufactured at that facility has been outsourced. Both the Lebanon and Owatonna manufacturing facilities are expected to be sold and, accordingly, the tangible assets to be disposed of have been written down to their estimated fair value, less cost of disposal. Other exit costs primarily consist of non-recurring charges that will not benefit activities that will be continued, will not be incurred to generate future revenue, and are incremental to other costs incurred by the Company prior to the adoption of the above initiatives. During the three- and nine-month periods ended September 28, 2002, the Company expensed $0.3 million and $0.7 million, respectively, of other charges related to the plant rationalization initiatives. These charges were required to be expensed when incurred and were not included in the original reserve. Note 7 - Earnings Per Share and Comprehensive Income Basic net income per common share is computed by dividing net income by the weighted- average number of common shares outstanding for the period. Diluted net income per common -9- share is computed by dividing net income by the weighted-average number of common shares and, if applicable, common stock equivalents that would arise from the exercise of stock options. A reconciliation of the shares used in the computation of earnings per share follows (in thousands): For the three months ended: September 28, 2002 September 29, 2001 --------------------- -------------------- Basic shares 5,414 5,349 Effect of options 37 - ----- ----- Diluted shares 5,451 5,349 ===== ===== For the nine months ended: September 28, 2002 September 29, 2001 --------------------- -------------------- Basic shares 5,396 5,341 Effect of options 98 178 ----- ----- Diluted shares 5,494 5,519 ===== ===== Accumulated other comprehensive loss is comprised of minimum pension liability and foreign currency translation adjustments. Comprehensive income was $0.2 million and $1.3 million for the three- and nine-month periods ended September 28, 2002, respectively, which reflects the Company's net income reduced by currency translation adjustments. Comprehensive income equaled net income for the three- and nine-month periods ended September 29, 2001. Note 8 - Business Segments The Company operates in two business segments: Construction equipment and Agricultural equipment. The long-term financial performance of the Company's reportable segments are affected by separate economic conditions and cycles. The segments are managed separately based on the fundamental differences in their operations. Following is selected segment information (in thousands):
Three Months Ended Nine Months Ended ------------------------------------ -------------------------------------- September 28, September 29, September 28, September 29, 2002 2001 2002 2001 ---------------- ----------------- ---------------- ----------------- Net Sales: Construction $ 31,455 $ 27,775 $ 102,888 $ 99,278 Agricultural 23,120 30,386 78,444 93,744 ----------- ---------- ------------ ------------ Consolidated $ 54,575 $ 58,161 $ 181,332 $ 193,022 =========== ========== ============ ============ Income (loss) from Operations: Construction $ 1,206 ($ 1,488) $ 3,480 $ 2,183 Agricultural 39 704 1,696 6,746 ----------- ---------- ------------ ------------ Consolidated $ 1,245 ($ 784) $ 5,176 $ 8,929 =========== ========== ============ ============
-10- The following table reflects segment operating income (in thousands) excluding the restructuring and other charges incurred during the three- and nine-months ended September 28, 2002 of $0.3 million and $0.7 million, respectively, and the restructuring and strategic review process costs of $4.3 million and $0.5 million, respectively, incurred during the three- and nine-months ended September 29, 2001:
Three Months Ended Nine Months Ended ------------------------------------ -------------------------------------- September 28, September 29, September 28, September 29, 2002 2001 2002 2001 ---------------- ----------------- ---------------- ----------------- Income from Operations: Construction $ 1,458 $ 1,543 $ 3,806 $ 5,214 Agricultural 120 2,486 2,095 8,528 -------- -------- ---------- ---------- Consolidated $ 1,578 $ 4,029 $ 5,901 $ 13,742 ======== ======== ========== ==========
Note 9 - Stock Repurchases In September 2001, the Company's Board of Directors authorized a stock repurchase plan providing for the repurchase of up to 500,000 shares of the Company's outstanding common stock. During the three- and nine-month periods ended September 28, 2002, the Company repurchased 35,000 and 47,800 shares, respectively, in the open market under this authorization at an aggregate cost of $0.4 and $0.6 million, respectively. All treasury stock acquired by the Company has been cancelled and returned to the status of authorized but unissued shares. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION CONSOLIDATION OF GEHL GMBH Effective January 1, 2002, the Company has accounted for its investment in a German distribution operation (Gehl GmbH) as a consolidated subsidiary, as a result of the Company's controlling influence on the operations of Gehl GmbH as of such date. Prior to January 1, 2002, the Company recorded its investment in Gehl GmbH under the equity method. The impact of the Gehl GmbH consolidation is discussed below. RESTRUCTURING AND OTHER CHARGES On September 26, 2001, the Company adopted several major plant rationalization initiatives to improve the Company's profitability by consolidating certain operations. Under these initiatives, the Company announced it would close its manufacturing facility in Lebanon, Pennsylvania and transfer production to other locations. The Company also indicated it would transfer the manufacturing of its Mustang line of skid steer loaders from its facility in Owatonna, Minnesota to its skid steer facility in Madison, South Dakota. In implementing these actions, the Company expected that it would ultimately incur total restructuring and other non-recurring charges of approximately $5.5 to $6.5 million; a $4.3 million charge related to the plant rationalization initiatives was recorded in the third quarter of 2001 in accordance with accounting principles generally accepted in the United States of America. Of the $4.3 million charge recorded in the third quarter of 2001, $1.5 million and $2.8 million related to the Agricultural and Construction equipment segments, respectively. -11- Details of the restructuring charge and related activity are as follows (in thousands):
Employee Severance and Write-down of Termination Long-lived and Other Exit Benefits Other Assets Costs Totals ---------------- ----------------- -------------- --------------- Original Reserve $ 1,635 $ 1,754 $ 911 $ 4,300 Utilization - 1,754 - 1,754 ---------- ---------- ---------- ---------- Balance at December 31, 2001 and March 30, 2002 1,635 - 911 2,546 Utilization 308 - 51 359 ---------- ---------- ---------- ---------- Balance at June 29, 2002 1,327 - 860 2,187 Utilization 433 - 159 592 ---------- ---------- ---------- ---------- Balance at September 28, 2002 $ 894 $ - $ 701 $ 1,595 ========== ========== ========== ==========
As a result of the plant rationalizations, the Company expected to reduce its workforce by 249, consisting of hourly and salaried employees at the Lebanon and Owatonna locations. During the three- and nine-month period ended September 28, 2002, workforce reductions of 123 and 220, respectively, occurred, which included 111 and 196 employees, respectively, who were terminated with severance payments and termination benefits commencing in April 2002 and continuing into the first quarter of 2003. The manufacturing consolidations announced on September 26, 2001 have been completed. Production of Mustang skid loaders has been transferred to the Madison plant. The Lebanon plant was closed in the 2002 first quarter and the production of certain products formerly manufactured at that facility has been outsourced. Both the Lebanon and Owatonna manufacturing facilities are expected to be sold and, accordingly, the tangible assets to be disposed of have been written down to their estimated fair value, less cost of disposal. Other exit costs primarily consist of non-recurring charges that will not benefit activities that will be continued, will not be incurred to generate future revenue, and are incremental to other costs incurred by the Company prior to the adoption of the above initiatives. During the three- and nine-month periods ended September 28, 2002, the Company expensed $0.3 million and $0.7 million, respectively, of other charges related to the plant rationalization initiatives. These charges were required to be expensed when incurred and were not included in the original reserve. -12- RESULTS OF OPERATIONS Three Months Ended September 28, 2002 Compared to Three Months Ended September 29, 2001 Net Sales Net sales for the three months ended September 28, 2002 ("2002 third quarter") were $54.6 million compared to $58.2 million in the three months ended September 29, 2001 ("2001 third quarter"), a decrease of $3.6 million or 6%. Excluding $2.3 million of net sales resulting from the consolidation of Gehl GmbH, net sales decreased 10% from the 2001 third quarter. Construction equipment segment net sales were $31.5 million in the 2002 third quarter compared to $27.8 million in the 2001 third quarter, an increase of $3.7 million or 13%. Excluding $2.3 million of net sales resulting from the consolidation of Gehl GmbH, construction equipment segment net sales increased 5% from the 2001 third quarter. Demand for the new compact tracked loader, which was introduced in the second quarter of 2002, was strong during the 2002 third quarter. Contributions from telescopic handlers and compact excavator models sold through the Mustang distribution channel, the introduction of new all-wheel steer loaders in the 2002 third quarter, and net sales from the Company's new attachment business positively impacted construction equipment segment net sales in the 2002 third quarter. These increases in construction equipment segment net sales were partially offset by the continued sluggish market for telescopic handlers as industry conditions for that product line continued to remain challenging. Agricultural equipment segment net sales were $23.1 million in the 2002 third quarter, compared to $30.4 million in the 2001 third quarter, a decrease of $7.3 million or 24%. Agricultural implement net sales were adversely impacted by a significant decline in milk prices in the 2002 third quarter compared to milk prices in the 2001 third quarter, as well as drought conditions in certain regions of the United States. In addition, shipments of skid loaders were lower in the 2002 third quarter than 2001's comparable period. Partially offsetting these reductions were the favorable impacts of the new compact tracked loader introduced in the second quarter of 2002, new all-wheel steer loaders introduced in the 2002 third quarter, and increased sales from the Company's new attachment business. Of the Company's total net sales reported for the 2002 third quarter, $9.8 million were made outside of the United States compared with $8.1 million in the 2001 third quarter. The increase in exports was due primarily to the consolidation of Gehl GmbH. Gross Profit Gross profit was $11.7 million in the 2002 third quarter compared to $13.8 million in the 2001 third quarter, a decrease of $2.1 million or 15%. Gross profit as a percent of net sales (gross margin) was 21.5% for the 2002 third quarter compared to 23.7% for the 2001 third quarter. Gross margin for the construction equipment segment was 22.6% in the 2002 third quarter compared with 21.6% for the 2001 third quarter. The increase in the construction equipment segment gross margin during the 2002 third quarter was primarily due to the levels of discounts and sales incentives associated with the mix of products shipped as well as improved manufacturing efficiencies. Gross margin for the agricultural equipment segment was 19.9% in the 2002 third quarter compared to 25.6% in the 2001 third quarter. The decrease in the agricultural equipment segment gross margin was due to continued significant competitive -13- pressure resulting in higher sales discounts and sales incentives, reduced production volume and a less favorable mix of product shipments. Selling, General and Administrative Expenses Selling, general and administrative expenses were $10.1 million, or 18.5% of net sales, in the 2002 third quarter compared to $9.8 million, or 16.8% of net sales, in the 2001 third quarter. The increase was primarily due to the consolidation of Gehl GmbH effective January 1, 2002. These costs were partially offset by cost reduction initiatives implemented by the Company, including impacts from the previously announced plant rationalization project. The increased selling, general and administrative expenses, combined with a lower level of net sales during the 2002 third quarter, contributed to the Company's increased selling, general and administrative expenses as a percentage of net sales. Assuming the Company had adopted SFAS No. 142 on January 1, 2001, selling, general and administrative expenses for the 2001 third quarter would have been $9.6 million. Income (Loss) from Operations Income from operations in the 2002 third quarter was $1.2 million compared to a loss of ($0.8) million in the 2001 third quarter. Assuming the Company had adopted SFAS No. 142 on January 1, 2001, the loss from operations for the 2001 third quarter would have been ($0.7) million. Excluding the restructuring and other charges incurred in the 2002 third quarter, income from operations was $1.6 million. Excluding the restructuring and strategic review process costs incurred in the 2001 third quarter and assuming the Company had adopted SFAS No. 142 on January 1, 2001, income from operations was $4.1 million. Interest Expense Interest expense was $1.1 million in the 2002 and the 2001 third quarter. A decline in the Company's borrowing rate in the 2002 third quarter when compared to the 2001 third quarter had a favorable impact on interest expense during the quarter. The favorable impact of a reduced borrowing rate was offset by an increase in the Company's average outstanding debt due to increases in working capital and the consolidation of Gehl GmbH, effective January 1, 2002. Other Expense, Net Other expense, net was $0.4 million in the 2002 third quarter compared to $0.9 million in the 2001 third quarter, a decrease of $0.5 million. The reduction was primarily due to decreases in the costs of selling finance contracts (due to lower discount rates required by third party purchasers of such contracts as a result of the general downward trend of overall interest rates) compared to the 2001 third quarter. Net Income (Loss) Net income was $0.2 million in the 2002 third quarter compared with a net loss of ($1.5) million in the 2001 third quarter. Assuming the Company had adopted SFAS No. 142 on January 1, 2001, the net loss for the 2001 third quarter would have been ($1.4) million. -14- Excluding the restructuring and other charges, net of tax, incurred in the 2002 third quarter, net income was $0.4 million. Excluding the restructuring and strategic review process costs, net of tax, incurred in the 2001 third quarter and assuming the Company had adopted SFAS No. 142 on January 1, 2001, net income was $1.7 million. Nine Months Ended September 28, 2002 Compared to Nine Months Ended September 29, 2001 Net Sales Net sales for the nine months ended September 28, 2002 ("2002 nine months") were $181.3 million compared to $193.0 million in the nine months ended September 29, 2001 ("2001 nine months"), a decrease of $11.7 million or 6%. Excluding $7.2 million of net sales resulting from the consolidation of Gehl GmbH, net sales decreased 10% from the 2001 nine months. Construction equipment segment net sales were $102.9 million in the 2002 nine months compared to $99.3 million in the 2001 nine months, an increase of $3.6 million or 4%. Excluding $7.2 million of net sales resulting from the consolidation of Gehl GmbH, net sales decreased 4% from the 2001 nine months. Demand for the new compact tracked loaders has been strong since its introduction in the second quarter of 2002. In addition, construction equipment segment net sales for the 2002 nine months benefited from the introduction of new all-wheel steer loaders in the 2002 third quarter, contributions from telescopic handlers and compact excavator models sold through the Mustang distribution channel and net sales from the Company's new attachment business. These increases in construction equipment segment net sales were more than offset by the continued downward trend in telescopic handler shipments due to the sluggish market for this product as industry conditions for this product line continued to remain challenging. Agricultural equipment segment net sales were $78.4 million in the 2002 nine months, compared to $93.7 million in the 2001 nine months, a decrease of $15.3 million or 16%. Agricultural implement net sales were adversely impacted by the significant decline in milk prices from those during the 2001 nine months as well as drought conditions in certain regions of the United States. Good demand for the new compact tracked loaders introduced in the 2002 second quarter, the introduction of new all-wheel steer loaders in the 2002 third quarter, increased shipments of compact excavators to select rural equipment dealers, and increased sales from the Company's new attachment business partially offset reduced agricultural implement and skid loader net sales in the 2002 nine months. Of the Company's total net sales reported for the 2002 nine months, $34.1 million were made outside of the United States compared with $27.0 million in the 2001 nine months. The increase in exports was due primarily to the consolidation of Gehl GmbH. Gross Profit Gross profit was $39.3 million in the 2002 nine months compared to $43.5 million in the 2001 nine months, a decrease of $4.2 million or 10%. Gross profit as a percent of net sales (gross margin) was 21.7% for the 2002 nine months compared to 22.5% for the 2001 nine months. Gross margin for the construction equipment segment was 21.6% in the 2002 nine months compared with 20.2% for the 2001 nine months. The increase in the construction equipment segment gross margin during the 2002 nine months was primarily due to the levels of discounts and sales incentives associated with the mix of products shipped as well as improved -15- manufacturing efficiencies. Gross margin for the agricultural equipment segment was 21.8% in the 2002 nine months compared to 24.9% in the 2001 nine months. The decrease in the agricultural equipment segment gross margin was due to significant competitive pressure resulting in higher sales discounts and sales incentives, reduced production volume and a less favorable mix of product shipments. Selling, General and Administrative Expenses Selling, general and administrative expenses were $33.4 million, or 18.4% of net sales, in the 2002 nine months compared to $29.7 million, or 15.4% of net sales in the 2001 nine months. The increase is primarily due to the consolidation of Gehl GmbH effective January 1, 2002 and expenses associated with the Company's attachment business that was launched in July 2001. These costs, combined with a lower level of net sales during the 2002 nine months, contributed to the Company's increased selling, general and administrative expenses as a percentage of net sales. Assuming the Company had adopted SFAS No. 142 on January 1, 2001, selling, general and administrative expenses for the 2001 nine months would have been $29.4 million. Income from Operations Income from operations in the 2002 nine months was $5.2 million compared to $8.9 million in the 2001 nine months. Assuming the Company had adopted SFAS No. 142 on January 1, 2001, income from operations for the 2001 nine months would have been $9.3 million. Excluding the restructuring and other charges incurred in the 2002 nine months, income from operations was $5.9 million. Excluding the restructuring and strategic review process costs incurred in the 2001 nine months and assuming the Company had adopted SFAS No. 142 on January 1, 2001, income from operations was $14.1 million. Interest Expense Interest expense was $3.2 million in the 2002 nine months compared to $3.4 million in the 2001 nine months. The decrease was due to the decline in the Company's borrowing rate in the 2002 nine months when compared to the 2001 nine months. The favorable impact of a reduced borrowing rate was offset, in part, by an increase in the Company's average outstanding debt due to increases in working capital and the consolidation of Gehl GmbH, effective January 1, 2002. Other Expense, Net Other expense, net was $1.4 million in the 2002 nine months compared to $2.8 million in the 2001 nine months, a decrease of $1.4 million. Decreases in the costs of selling finance contracts (due to lower discount rates required by third party purchasers of such contracts as a result of the general downward trend of overall interest rates) as well as a reduction in the number of contracts sold had a favorable impact on other expense, net. Net Income Net income was $1.3 million in the 2002 nine months compared to $2.7 million in the 2001 nine months. Assuming the Company had adopted SFAS No. 142 on January 1, 2001, net income for the 2001 nine months would have been $3.1 million. -16- Excluding the restructuring and other charges, net of tax, incurred in the 2002 nine months, net income was $1.8 million. Excluding the restructuring and strategic review process costs, net of tax, incurred in the 2001 third quarter and assuming the Company had adopted SFAS No. 142 on January 1, 2001, net income was $6.2 million. FINANCIAL CONDITION The Company's working capital was $114.3 million at September 28, 2002, as compared to $107.5 million at December 31, 2001, and $105.9 million at September 29, 2001. The increase since December 31, 2001 and September 29, 2001 was due primarily to: 1) increases in accounts receivable related to new products introduced throughout 2001, such as new skid loader models, the introduction of the new compact tracked loaders and all-wheel steer loaders in the 2002 second and third quarters, respectively, the introduction of the Company's new attachment business which was launched in July 2001, and the shipment of compact excavators and mini-loaders into the agriculture distribution channel; 2) the consolidation of Gehl GmbH as of January 1, 2002 (primarily impacting inventory); and 3) increases in accounts receivable related to seasonality (only impacting the increase since December 31, 2001). The increases were offset, in part, by a reduction in inventories (only impacting the change since December 31, 2001) and finance contracts receivable. Capital expenditures for property, plant and equipment during the 2002 nine months were approximately $6.2 million. The Company does not anticipate making any significant capital additions during the remainder of the fiscal year. As of September 28, 2002, the Company has made capital expenditures of approximately $4.8 million to substantially complete an expansion of the Madison, South Dakota plant necessary to accommodate the transfer of Mustang skid loader production from Owatonna, Minnesota to the Madison facility. The Company believes that its present facilities, with the completion of the Madison, South Dakota expansion project, will be sufficient to provide adequate capacity for its operations through 2003. As of September 28, 2002, the weighted-average interest rate paid by the Company on outstanding borrowings under its credit facility was 4.69%. The Company had available unused borrowing capacity of $12.2 million, $18.2 million and $18.3 million under the facility at September 28, 2002, December 31, 2001, and September 29, 2001, respectively. At September 28, 2002, December 31, 2001, and September 29, 2001, the Company's outstanding borrowings under the facility were $60.3 million, $55.2 million and $54.9 million, respectively. In addition, the Company had short-term letters of credit totaling $1.2 million outstanding at September 28, 2002 due to the factoring of receivables by a supplier. The Company believes the existing facility will provide sufficient borrowing capacity for the Company to finance its operations for the foreseeable future. The sale of finance contracts is an important component of the Company's overall liquidity. The Company has arrangements with several financial institutions and financial service companies to sell, with recourse, its finance contracts receivable. The Company continues to service substantially all contracts whether or not sold. At September 28, 2002, the Company serviced $155.2 million of such contracts, of which $148.1 million were owned by other parties. The Company believes that it will be able to arrange sufficient capacity to sell its finance contracts for the foreseeable future. At September 28, 2002, shareholders' equity had decreased $4.6 million to $101.3 million from $105.9 million at September 29, 2001. This decrease primarily reflected the impact of the minimum pension liability adjustment recorded in 2001 offset by the net income earned from -17- September 29, 2001 to September 28, 2002. The Company is reviewing, with the assistance of its actuaries, any adjustment that may be required to the minimum pension liability prior to December 31, 2002. Any such adjustment is expected to impact only the Company's balance sheet. In September 2001, the Company's Board of Directors authorized a stock repurchase plan providing for the repurchase of up to 500,000 shares of the Company's outstanding common stock. During the three- and nine-month periods ended September 28, 2002, the Company repurchased 35,000 and 47,800 shares, respectively, in the open market under this authorization at an aggregate cost of $0.4 and $0.6 million, respectively. All treasury stock acquired by the Company has been cancelled and returned to the status of authorized but unissued shares. There have been no material changes to the annual maturities of debt obligations, nor to the future minimum non-cancelable operating lease payments as disclosed in Notes 5 and 12, respectively, of Notes to Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2001 as filed with the Securities and Exchange Commission. ACCOUNTING PRONOUNCEMENTS Effective January 1, 2002, the Company adopted the provisions of Emerging Issues Task Force ("EITF") 00-25, "Vendor Income Statement Characterization of Consideration Paid to a Retailer of the Vendor's Products." As a result of adopting EITF 00-25, the Company now classifies the costs associated with sales incentives provided to dealers as a reduction of net sales. Prior to January 1, 2002, these costs were included in selling, general and administrative expenses. Net sales and selling, general and administrative expenses for the three- and nine-month period ended September 29, 2001 have been restated to conform to the current year presentation. This reclassification had no impact on reported income before income taxes or net income. In August 2001, the Financial Accounting Standards Board (FASB) issued SFAS No. 143, "Accounting for Asset Retirement Obligations." This statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. It applies to legal obligations associated with the retirement of long-lived assets that result from the acquisition, construction, development and/or the normal operation of a long-lived asset. The statement will be effective for years beginning after September 29, 2002. Management has not yet completed its evaluation of the impact, if any, of the adoption of this statement. Effective January 1, 2002, the Company adopted the provisions of SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." The adoption of SFAS No. 144 had no impact on the Company's financial position at September 28, 2002 or the results of operations and cash flows for the three- and nine-month periods then ended. In April 2002, the FASB issued SFAS No. 145, "Recission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections as of April 2002." SFAS No. 145 rescinds SFAS No. 4, "Reporting Gains and Losses from Extinguishment of Debt," SFAS No. 64, "Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements" and SFAS No. 44, "Accounting for Intangible Assets of Motor Carriers." This Statement also amends SFAS No. 13, "Accounting for Leases," to eliminate an inconsistency between the required accounting for sale-leaseback transactions and the required accounting for certain lease -18- modifications that have economic effects that are similar to sale-leaseback transactions. This Statement also amends other existing authoritative pronouncements to make various technical corrections, clarify meanings, or describe their applicability under changed conditions. The provisions of this statement related to the rescission of SFAS No. 4 shall be applied in fiscal years beginning after May 15, 2002. The provisions of this statement related to SFAS No. 13 shall be effective for transactions occurring after May 15, 2002. All other provisions of this statement are effective for financial statements issued on or after May 15, 2002. The adoption of SFAS No. 145 had no impact on the Company's financial position at September 28, 2002 or the results of operations and cash flows for the three- and nine-month periods then ended. In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This statement nullifies EITF No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)", which allowed Companies engaged in exit and disposal activities to record liabilities for certain costs when the Company committed to the exit or disposal plan. SFAS No. 146 requires costs associated with an exit or disposal plan to be recognized and measured initially at fair value only when the liability has been incurred as defined by FASB Concepts Statement 6. The provisions of SFAS No. 146 are effective for exit or disposal activities that are initiated after December 31, 2002. The adoption of this statement will not impact the accounting for the plant rationalization initiatives adopted by the Company on September 26, 2001. CRITICAL ACCOUNTING POLICIES AND ESTIMATES Management's discussion and analysis of results of operations and financial condition is based on the Company's condensed consolidated financial statements. The preparation of these financial statements requires the Company to make estimates and judgments that affect the reported amounts of assets, liabilities, net sales and expenses. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions and materially impact the carrying value of the assets and liabilities. The Company believes the following accounting policies are critical to the Company's business operations and the understanding of the Company's results of operations and financial condition. Allowance for Doubtful Accounts - The Company's accounts receivable are reduced by an allowance for amounts that may be uncollectible in the future. The Company estimates the uncollectibility of accounts receivable by specifically analyzing accounts receivable where the Company has information indicating that the customer may be unable to meet its financial obligation to the Company as well as analyzing the age of unpaid amounts and historical write-off percentages. Inventories - Inventories are valued at the lower of cost or market. Cost is determined using the last-in, first-out (LIFO) method for substantially all of the Company's inventories. Adjustments to slow moving and obsolete inventory to the lower of cost or market are determined based on historical experience and the Company's best estimates of current product demand. Product Warranty - In general, the Company provides warranty coverage on equipment for a period of up to twelve months or for a specified period of use after sale or rental by a dealer. The -19- Company's reserve for warranty claims is established based on the best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. Product Liability - The Company directly assumes all liability for costs associated with claims up to specified limits in any policy year and, as such, records an estimated reserve for product liability. The Company's reserve for product liability is based on the best estimate of the amounts necessary to resolve future and existing claims. Goodwill and Intangible Assets - Effective January 1, 2002, the Company adopted the provisions of SFAS No. 142 "Goodwill and Other Intangible Assets." Under SFAS No. 142, goodwill and intangible assets deemed to have indefinite lives will no longer be amortized, but will be tested for impairment at least annually. Other intangible assets will continue to be amortized over their useful lives. The Company is subject to financial statement risk to the extent that goodwill becomes impaired. OUTLOOK The continuing difficult economic conditions in the U.S. continue to forestall the anticipated recovery. As a result of the stagnant economic conditions, combined with a six week, temporary suspension of production at the Company's West Bend, Wisconsin manufacturing facility commencing November 25, 2002, and the expectation that very competitive conditions will continue at least through year-end, the Company now believes its full year's earnings per diluted share will be in the range of $.25 to $.30. This forecast excludes restructuring expenses that will be incurred in 2002 which are projected to lower the full-year 2002 earnings per diluted share by $.15 to $.20 for period costs, which are recorded as incurred. -20- FORWARD-LOOKING STATEMENTS Certain matters discussed in this filing are "forward-looking statements" intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding the Company's future financial position, business strategy, targets, projected sales and earnings, and the plans and objectives of management for future operations, are forward-looking statements. When used in this filing, words such as the Company "believes," "anticipates," "expects" or "estimates" or words of similar meaning are generally intended to identify forward-looking statements. These forwarding-looking statements are not guarantees of future performance and are subject to certain risks, uncertainties, assumptions and other factors, some of which are beyond the Company's control, that could cause actual results to differ materially from those anticipated as of the date of this filing. Factors that could cause such a variance include, but are not limited to, unanticipated changes in general economic and capital market conditions (including factors that could affect a general economic recovery), the Company's ability to implement successfully its strategic initiatives and plant rationalization actions, market acceptance of newly introduced products, the cyclical nature of the Company's business, the Company's and its customers' access to credit, competitive pricing, product initiatives and other actions taken by competitors, disruptions in production capacity, excess inventory levels, the effect of changes in laws and regulations (including government subsidies and international trade regulations), technological difficulties, changes in currency exchange rates, the Company' ability to secure sources of liquidity necessary to fund its operations, changes in environmental laws, the impact of any acquisition effected by the Company, and employee and labor relations. Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this filing are only made as of the date of this filing, and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances. In addition, the Company's expectations for fiscal year 2002 are based in part on certain assumptions made by the Company, including those relating to commodities prices, which are strongly affected by weather and other factors and can fluctuate significantly, housing starts and other construction activities, which are sensitive to, among other things, interest rates and government spending, and the performance of the U.S. economy generally. The accuracy of these or other assumptions could have a material effect on the Company's ability to achieve its expectations. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK There are no material changes to the information provided in response to this item as set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2001 as filed with the Securities and Exchange Commission. ITEM 4. CONTROLS AND PROCEDURES The Company's management, under the supervision and with the participation of the Company's principal executive officer and principal financial officer, has evaluated the Company's disclosure controls and procedures within 90 days prior to the filing date of this quarterly report. Based upon that evaluation, the Company's principal executive officer and principal financial officer have concluded that the Company's disclosure controls and procedures are effective. There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. -21- PART II - OTHER INFORMATION ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) EXHIBITS Exhibit No. Document Description 4.1 Amendment to Rights Agreement, dated as of September 20, 2002, by and among U.S. Bank National Association, Gehl Company and American Stock Transfer and Trust Company. 99.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350. 99.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350. (b) REPORTS ON FORM 8-K The Company filed a Current Report on Form 8-K on July 25, 2002 reporting (under Item 9) the Company's financial results for the three months ended June 29, 2002. -22- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. GEHL COMPANY Date: November 12, 2002 By: /s/ William D. Gehl -------------------------------- William D. Gehl Chairman of the Board, President and Chief Executive Officer Date: November 12, 2002 By: /s/ Kenneth P. Hahn -------------------------------- Kenneth P. Hahn Vice President of Finance and Chief Financial Officer (Principal Financial and Accounting Officer) -23- CERTIFICATIONS I, William D. Gehl, Chairman of the Board, President and Chief Executive Officer of Gehl Company, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Gehl Company; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. -24- Date: November 12, 2002 /s/ William D. Gehl ------------------------------ William D. Gehl Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer) I, Kenneth P. Hahn, Vice President of Finance and Chief Financial Officer of Gehl Company, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Gehl Company; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: (a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and (c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): (a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and -25- (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: November 12, 2002 /s/Kenneth P. Hahn ------------------------------------ Kenneth P. Hahn Vice President of Finance and Chief Financial Officer (Principal Financial Officer) -26- GEHL COMPANY INDEX TO EXHIBITS Exhibit No. Document Description - ------- -------------------- 4.1 Amendment to Rights Agreement, dated as of September 20, 2002, by and among U.S. Bank National Association, Gehl Company and American Stock Transfer and Trust Company. 99.1 Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350. 99.2 Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350. -27- EX-4.1 3 slp439c.txt AMENDMENT TO RIGHTS AGREEMENT AMENDMENT TO RIGHTS AGREEMENT This Amendment to Rights Agreement, effective as of the 20th day of September, 2002, is made and entered into by and among U.S. Bank National Association ("U.S. Bank"), Gehl Company, a Wisconsin corporation (the "Company"), and American Stock Transfer & Trust Company ("AST"). WITNESSETH WHEREAS, the Company and U.S. Bank (as successor to Firstar Trust Company) are parties to that certain Rights Agreement, dated as of May 28, 1997, a copy of which is attached hereto as Exhibit A (the "Rights Agreement"), pursuant to which U.S. Bank undertook the duties and obligations of the Rights Agent (as defined in the Rights Agreement) under the terms and conditions of the Rights Agreement; WHEREAS, U.S. Bank has notified the Company that it will resign as such Rights Agent; WHEREAS, pursuant to Section 21 of the Rights Agreement, the Company agrees to discharge U.S. Bank from its duties as Rights Agent under the Rights Agreement; WHEREAS, the Company desires to appoint AST as a successor Rights Agent under the Rights Agreement, and AST desires to undertake and perform the duties and obligations of the Rights Agent under the terms and conditions of the Rights Agreement; WHEREAS, the Company has directed U.S. Bank to amend Section 21 of the Rights Agreement as necessary to allow the Company to appoint AST as a successor Rights Agent under the Rights Agreement. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties agree as follows: 1. Amendment of Rights Agreement. Section 21 of the Rights Agreement is hereby amended and restated in its entirety to read as follows: "Section 21. Change of Rights Agent. The Rights Agent or any successor Rights Agent may resign and be discharged from its duties under this Agreement upon 30 days' notice in writing mailed to the Company and to each transfer agent of the Common Shares by registered or certified mail and, if separate Right Certificates have been issued as of the date of such notice as contemplated by Section 3 hereof, to the holders of the Right Certificates by first-class mail. The Company may remove the Rights Agent or any successor Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent or successor Rights Agent, as the case may be, and to each transfer agent of the Common Shares by registered or certified mail, and, if separate Right Certificates have been issued as of the date of such notice as contemplated by Section 3 hereof, to the holders of the Right Certificates by first-class mail. If the Rights Agent shall resign or be removed or shall otherwise become incapable of acting, the Company shall appoint a successor to the Rights Agent. If the Company shall fail to make such appointment within a period of 30 days after giving notice of such removal or after it has been notified in writing of such resignation or incapacity by the resigning or incapacitated Rights Agent or by the holder of a Right Certificate (who shall, with such notice, submit his Right Certificate for inspection by the Company), then the registered holder of any Right Certificate may apply to any court of competent jurisdiction for the appointment of a new Rights Agent. Any successor Rights Agent, whether appointed by the Company or by such a court, shall be (a) a corporation organized and doing business under the laws of the United States or of the State of New York or the State of Wisconsin (or of any other state of the United States so long as such corporation is authorized to do business in the State of New York or the State of Wisconsin), in good standing, having an office or agency in the State of Wisconsin or the State of New York, which is authorized under such laws to exercise corporate trust or stock transfer powers and is subject to supervision or examination by federal or state authority and which has at the time of its appointment as Rights Agent a combined capital and surplus of at least $10 million, or (b) an Affiliate of a corporation described in clause (a) of this sentence. After appointment, the successor Rights Agent shall be vested with the same powers, rights, duties and responsibilities as if it had been originally named as Rights Agent without further act or deed; but the predecessor Rights Agent shall deliver and transfer to the successor Rights Agent any property at the time held by it hereunder, and execute and deliver any further assurance, conveyance, act or deed necessary for the purpose. Not later than the effective date of any such appointment the Company shall file notice thereof in writing with the predecessor Rights Agent and each transfer agent of the Common Shares, and, if separate Right Certificates have been issued as of such effective date as contemplated by Section 3 hereof, mail a notice thereof in writing to the registered holders of the Right Certificates. Failure to give any notice provided for in this Section 21, however, or any defect therein, shall not affect the legality or validity of the resignation or removal of the Rights Agent or the appointment of the successor Rights Agent, as the case may be." 2. Appointment. The Company hereby appoints AST as a successor Rights Agent under the terms and conditions of the Rights Agreement, as amended pursuant to Section 1 above (as so amended, the "Amended Rights Agreement"). 3. Assumption. AST hereby accepts the appointment as agent for the Company and the holders of Rights under the Amended Rights Agreement, and AST hereby assumes and agrees to perform all of the duties and obligations of the Rights Agent under the terms and conditions of the Amended Rights Agreement. 4. Notice. U.S. Bank hereby acknowledges that this instrument constitutes notice to U.S. Bank, as the Company's transfer agent, pursuant to Section 21 of the Amended Rights Agreement that the Company has appointed AST as the successor Rights Agent to U.S. Bank 2 under the Amended Rights Agreement and that U.S. Bank is hereby discharged as such Rights Agent. 5. No Further Amendment. Except as provided in Section 1 above, the terms and conditions of the Amended Rights Agreement shall be unaffected by this instrument and shall remain in full force and effect. The Company and AST each acknowledge that pursuant to Section 28 of the Amended Rights Agreement the respective covenants and provisions of the Amended Rights Agreement by or for the benefit of the Company or the Rights Agent shall bind and inure to the benefit of their respective successors and assigns thereunder. 6. Governing Law. This instrument shall be deemed to be a contract made under the laws of the State of Wisconsin and for all purposes shall be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State. 7. Counterparts. This instrument may be executed in any number of counterparts, and each of such counterparts shall for all purposes be deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the parties hereto have executed this instrument, effective as of the date recited above. GEHL COMPANY By: ______________________________________ Name: Title: U.S. BANK NATIONAL ASSOCIATION By: ______________________________________ Name: Title: American Stock Transfer & Trust Company By: ______________________________________ Name: Title: 3 EX-99.1 4 slp439a.txt CERTIFICATION OF CEO Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350 Solely for the purposes of complying with 18 U.S.C. section 1350, I, the undersigned Chairman of the Board, President and Chief Executive Officer of Gehl Company (the "Company"), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended September 28, 2002 (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: November 12, 2002 /s/ William D. Gehl -------------------------------- William D. Gehl Chairman of the Board, President and Chief Executive Officer EX-99.2 5 slp439b.txt CERTIFICATION OF CFO Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 Solely for the purposes of complying with 18 U.S.C. section 1350, I, the undersigned Vice President of Finance and Chief Financial Officer of Gehl Company (the "Company"), hereby certify, based on my knowledge, that the Quarterly Report on Form 10-Q of the Company for the quarter ended September 28, 2002 (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: November 12, 2002 /s/ Kenneth P. Hahn ----------------------------- Kenneth P. Hahn Vice President of Finance and Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----