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 139 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.
On October 2, 1997, the Company acquired all of the issued and outstanding shares of capital stock of Brunel America, Inc. and Subsidiaries, including Mustang Manufacturing Company, Inc. ("Mustang") from Brunel Holdings, plc. Mustang[R] designs, manufactures and distributes skid steer loaders and related attachments. Gehl acquired the Brunel America, Inc. stock for $26.7 million; and entered into a five year non-competition agreement with the seller pursuant to which Gehl paid $1.0 million. The Company borrowed $27.7 million under its existing credit facility to fund the acquisition. The acquisition has been accounted for as a purchase transaction and resulted in the recording of $14.0 million of goodwill. The results of the Mustang operations have been included in the Company's operating results since the date of the acquisition.
Equipment for Gehl Construction is manufactured in Minnesota and 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.
The statements which are not historical facts contained in this Form 10-K and other information provided by the Company are forward-looking statements intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. Such statements are subject to certain risks and uncertainties which could cause actual results to differ materially from those currently anticipated. These factors include, without limitation, competitive conditions in the markets served by the Company, market acceptance of existing and new products manufactured by the Company, changes in the cost of raw materials and component parts purchased by the Company, changes in interest and currency exchange rates, general economic conditions, and the ability of the Company to successfully integrate its recent acquisition of the Mustang operations. These factors should be considered in evaluating the forward-looking statements, and undue reliance should not be placed on such statements. The Company undertakes no obligation to update publicly such statements to reflect subsequent events or circumstances.
Business Segments
The Company operates in two business segments, construction and agriculture. The following table shows certain information relating to the Company's operations by industry segment:
(dollars in thousands)
Year ended December 31, 1995 1996 1997
Amount % Amount % Amount % Net sales: Gehl Construction $64,381 42.0% $70,826 44.4% $101,635 51.6% Gehl Agriculture 89,071 58.0 88,836 55.6 95,420 48.4 ------- ---- ------- ---- -------- ---- Total $153,452 100% $159,662 100% $197,055 100%
Income from operations:
Gehl Construction $13,164 96.7% $12,967 83.4% $16,277 74.5% Gehl Agriculture 449 3.3 2,580 16.6 5,571 25.5 ------- ---- ------- ---- ------- ----- Total $13,613 100% $15,547 100% $21,848 100%
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 13 of "Notes to Consolidated Financial Statements", included on Pages 22 and 23 of the Gehl Company 1997 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 seven models of Gehl skid steer loaders which feature a choice of hand-operated controls or hand and foot controls and four models of Mustang skid steer loaders which feature a choice of T-bar, hand only and hand/foot controls. The skid steer loader, with its fixed- wheel four-wheel drive, is used principally for material handling duties. The skid steer loader may also be used with a variety of attachments, including dirt, snow and cement buckets, pallet forks and hydraulically-operated devices such as cold planers, backhoes, brooms, trenchers, snowblowers, industrial grapples, tree diggers, concrete breakers, augers and many more.
2. Rough-Terrain Forklifts - Gehl markets six 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 336 independent dealers (with 627 outlets) and worldwide through 64 distributors. The Company has no Company-owned dealers and its dealers may sell equipment produced by other construction equipment manufacturers. The top ten dealers and distributors in Gehl Construction accounted for approximately 14% of the Company's sales for the year ended December 31, 1997; however, no single dealer or distributor accounted for more than 2.5% of the Company's sales for that period. Sales of the skid steer loader product line by Gehl Construction accounted for more than 19% of the Company's net sales in 1995, 1996 and 1997. Sales of the rough terrain forklift product line by Gehl Construction accounted for more than 17% of the Company's net sales in 1995, 1996 and 1997.
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 (exclusive of Gehl) 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, Australia, Latin America, the Middle East and the Pacific Rim. The Company believes it is a significant competitor in the skid steer loader market in most of these markets.
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 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 seven different models of Gehl skid steer loaders and the Dyna-Handler forklift. The skid steer loader is a compact, fixed-wheel four-wheel drive unit typically equipped with a bucket or fork and is used for moving a variety of material. The Dyna-Handler is a rough-terrain telescopic forklift with digging capabilities. The skid steer loader and Dyna-Handler forklift are marketed by both Gehl Agriculture and Gehl Construction.
4. Manure Handling - Gehl offers a broad range of manure spreaders, including the Scavenger . 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 500 geographically dispersed dealers (with 556 outlets). Seventy-one of these dealers are located in Canada. Gehl Agriculture also markets products through 31 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 6% of the Company's sales for the year ended December 31, 1997 and no one dealer or distributor accounted for over 1% of the Company's sales during that period. Sales of the Gehl skid steer loader product line by Gehl Agriculture accounted for more than 15% of the Company's net sales in 1995, 1996 and 1997.
The Company provides various forms of support for its dealer network, including sales and service training. The Company also provides floor plan and retail finance support for products sold by its dealers in the United States and Canada.
The Company employs district sales managers to assist its agricultural dealers in the promotion and sale of its product and regional service managers to assist in warranty and servicing matters. The Company currently operates three service parts distribution centers located in: Memphis, Tennessee; Syracuse, New York; and Minneapolis, Minnesota. The Company also contracts 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 1997. 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, 1996 and 1997 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, 1997 was $34.9 million versus $42.7 million at December 31, 1996. Virtually all orders in the backlog at December 31, 1997 are expected to be shipped in 1998. The decreased backlog at December 31, 1997 was due primarily to the reduced level of Gehl Construction backlog. Order backlog is lower in Gehl Construction due to the introduction of a new series of telescopic handlers in December 1997, for which orders were not received prior to year-end, and a change in the Construction dealer order pattern resulting in dealers placing orders at a point in time closer to their expected utilization of the machinery.
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. 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 rates between 1.5% to 3.25% above the prime rate or on occasion provides an interest-free extension of up to six months upon payment by the dealer of a curtailment of 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 equipment to end users. Additionally, a number of dealers purchase equipment which is held for rental to the public. The Company also provides retail financing to such dealers in connection with these purchases. Retail financing in the United States is provided by the Company primarily through Gehl Finance , the Company's finance division. Retail financing is provided in Canada by third parties at rates subsidized by the Company. The Company does not offer or sponsor retail financing outside of North America.
The Company maintains arrangements with third parties pursuant to which the Company sells with recourse certain of the Company's retail finance contracts. The finance contracts require periodic installments of principal and interest over periods of up to 60 months; interest rates are based on market conditions. The majority of these contracts have maturities of 24 to 48 months. The Company continues to service the finance contracts it sells, including cash collections. See Note 3 of "Notes to Consolidated Financial Statements," Page 18, and "Management's Discussion and Analysis," Page 13 of the Gehl Company 1997 Annual Report to Shareholders, which pages are incorporated by reference herein.
Employees
As of December 31, 1997, the Company had 1,192 employees, of which 801 were hourly employees and 391 were salaried employees. At the production facilities in West Bend, Wisconsin, one of five Gehl production facilities, 223 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-four years.
Manufacturing
During 1997, the Company completed expansion if its two South Dakota manufacturing facilities and believes that its present manufacturing facilities will be sufficient to provide adequate capacity for its operations in 1998.
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 1997.
Research and Development
The Company attempts to maintain and strengthen its market position through internal new product development and incremental improvement to existing products. The Company's research and development is devoted to developing new products that meet specific customer needs and to devising incremental improvements to existing products. Research and development performed by the Company includes the designing and testing of new and improved products as well as the fabrication of prototypes. The Company expended approximately $2.3 million, $2.2 million and $1.4 million on research and development for the years ended December 31, 1997, 1996 and 1995, 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 , the Mustang name and the group of patents relating to the Scavenger 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 13 of "Notes to Consolidated Financial Statements," Page 23, of the Gehl Company 1997 Annual Report to Shareholders, which page is incorporated by reference herein.
Item 2.
Item 2. Properties
The following table sets forth certain information as of December 31, 1997, 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 1997 Annual Report to Shareholders, which page is incorporated by reference herein. For information regarding collateral pledges, see Note 6 of "Notes to Consolidated Financial Statements", included on Page 19, of the Gehl Company 1997 Annual Report to Shareholders, which page is incorporated by reference herein.
Approximate Owned Floor Area or in Square Leased Feet Principal Uses
West Bend, WI 450,000 Owned General offices and engineering, research and development and manufacture of products for Gehl Agriculture
Madison, SD 130,000 Owned Manufacture of Gehl skid steer loaders for Gehl Construction and Gehl Agriculture
Lebanon, PA 170,000 Owned(1) Manufacture of products for Gehl Agriculture
Yankton, SD 100,000 Owned Manufacture of products for Gehl Construction
Owatonna, MN 235,000 Owned Manufacture of Mustang skid steer loaders for Gehl Construction
(1) This facility is financed with the proceeds from the sale of industrial development bonds maturing in 2010.
The Company also operates three service parts centers located in: Memphis, Tennessee; Syracuse, New York; and Minneapolis, Minnesota. The Company leases these facilities, except for the Minneapolis center which is owned. The leases have terms ranging from three to five years. The Company anticipates no difficulty in retaining adequate leased facilities, either by renewing existing leases prior to expiration or by replacing them with equivalent leased facilities.
Item 3.
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.
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, 1997.
Executive Officers of the Registrant.
Set forth below is certain information concerning the executive officers of the Company as of February 1, 1998:
Name, Age and Position Business Experience
William D. Gehl, 51, Mr. Gehl has served as Chairman, President, Chairman of the Board Chief Executive of Directors of the Officer and Director Company since April, 1996. Mr. Gehl has served as 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, 54, Mr. Mancinelli has Executive Vice served as Executive President and Vice President and Chief Operating Officer Chief Operating 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. From 1985 to 1987, Mr. Mancinelli served as Vice President International Business for Simplex Tire Reorder Co. Prior to 1985, Mr. Mancinelli served in a variety of management positions with Cummins Engine Company, Inc.
John W. Gehl, 56, Mr. Gehl has served as Vice President, Vice President, International International of the Company since 1992. 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. Mr. Gehl has announced his retirement as an officer of the Company effective March 1, 1998.
Kenneth P. Hahn, 40 Mr. Hahn joined the Vice President of Company as Corporate Finance Controller in April, and Treasurer 1988. Mr. Hahn was 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, 51, Mr. Mulcahy has served Vice President, as General Counsel of Secretary the Company since 1974 and General Counsel 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, 58, Mr. Semler joined the Vice President of Company in May, 1960 Data Systems and has served in his current 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 1998 Annual Meeting of Shareholders is currently scheduled for April 29, 1998. 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.
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 1997 Annual Report to Shareholders, which page is hereby incorporated herein by reference.
Item 6.
Item 6. Selected Financial Data.
Information required by this item is included on Page 24 of the Gehl Company 1997 Annual Report to Shareholders, which page is hereby incorporated herein by reference.
Item 7.
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 1997 Annual Report to Shareholders, which pages are hereby incorporated herein by reference.
Item 7A.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
Not Applicable
Item 8.
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 1997 Annual Report to Shareholders, which pages are hereby incorporated herein by reference.
Item 9.
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.
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 1998 Annual Meeting of Shareholders ("Proxy Statement")F1. Information with respect to executive officers of the Company appears at the end of Part I, Pages 9 through 10 of this Annual Report on Form 10-K.
Item 11.
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.
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.
Item 13. Certain Relationships and Related Transactions.
There are no relationships or related transactions to be reported pursuant to this item.
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.
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 15 hereof.
3. Exhibits.
Reference is made to the separate exhibit index contained on Pages 18 through 21 hereof.
(b) Reports on Form 8-K.
The Company filed a Current Report on Form 8-K, dated October 17, 1997, reporting (pursuant to Items 2 and 7) the acquisition of all of the issued and outstanding shares of capital stock of Brunel America, Inc. In connection with this acquisition, the Company, through Brunel America, Inc., acquired all of the issued and outstanding shares of capital stock of the following direct and indirect subsidiaries of Brunel America, Inc.: Mustang America, Inc.; Mustang Manufacturing Company, Inc.; Mustang Finance Inc.; and Mustang International, Inc.
The Company filed an amendment, dated December 16, 1997, to the above-referenced Form 8-K, which amendment includes Financial Statements and Pro-Forma Financial Information relating to the acquisition of all of the issued and outstanding stock of Brunel America, Inc.
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: March 6, 1998 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, March 6, 1998 William D. Gehl Chief Executive Officer and Director (Principal Executive Officer)
/s/ Kenneth P. Hahn Vice President of Finance March 6, 1998 Kenneth P. Hahn and Treasurer (Principal Financial and Accounting Officer)
/s/ Thomas J. Boldt Director March 6, 1998 Thomas J. Boldt
/s/ Fred M. Butler Director March 6, 1998 Fred M. Butler
/s/ John W. Gehl Director March 6, 1998 John W. Gehl
/s/ William P. Killian Director March 6, 1998 William P. Killian
/s/ Arthur W. Nesbitt Director March 6, 1998 Arthur W. Nesbitt
/s/ Roger E. Secrist Director March 6, 1998 Roger E. Secrist
/s/ John W. Splude Director March 6, 1998 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, 1997 and 1996 14 Consolidated Statements of Income for the three years ended December 31, 1997 15 Consolidated Statements of Shareholders' Equity for the three years ended December 31, 1997 15 Consolidated Statements of Cash Flows for the three years ended December 31, 1997 16 Notes to Consolidated Financial Statements 17-23
* Incorporated by reference from the indicated pages of the Gehl Company 1997 Annual Report to Shareholders.
Page in Form 10-K
(2) Financial Statement Schedule: Report of Independent Accountants on Financial Statement Schedule 16 For the three years ended December 31, 1997 -- Schedule II - Valuation and Qualifying Accounts 17
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, 1998 appearing in the 1997 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, 1998
GEHL COMPANY AND SUBSIDIARIES SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS (in thousands)
Additions -------------------- Balance Charged to Balance Beginning Costs and Acquired at End Period Description of Year Expenses Balances Deductions of Year - ------ ----------- --------- ---------- --------- ---------- ------- Year Ended December 31, 1995 Return & Allowances $115 $ - $ - $ - $ 115
Allowance for Doubtful Accounts-Trade Receivables 639 165 - 52 752
Volume Discounts 1,990 2,026 - 2,213 1,803
Product Discontinuance 1,600 - - 265 1,335 ------ ------ ------ ------- ------ Total $4,344 $2,191 $ - $2,530 $4,005 ====== ====== ======= ======= ====== Allowances of 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, Return & Allowances $ 115 $ 35 $ - $ - $ 150
Allowance for Doubtful Accounts-Trade Receivables 752 64 - 255 561
Volume Discounts 1,803 2,389 - 2,463 1,729
Product Discontinuance 1,335 (131) - 429 775 ------ ------ ------ ------- ------ Total $4,005 $2,357 $ - $3,147 $3,215 ====== ====== ====== ======= ====== Allowances of 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 ====== ====== ====== ======= ====== Year Ended December 31, Return & Allowances $ 150 $ - $ - $ - $ 150
Allowance for Doubtful Accounts-Trade Receivables 561 144 388 25 1,068
Volume Discounts 1,729 2,674 - 2,705 1,698
Product Discontinuance 775 - - 458 317 ------ ------ ------ ------- ------ Total $3,215 $2,818 $ 388 $3,188 $3,233 ====== ====== ======= ======= ====== Allowances of Doubtful Accounts - Retail Contracts $ 591 $ 355 $ 28 $ 91 $ 883
Inventory Obsolescence Reserve $1,740 $ 576 $ 265 $ 982 $1,599 ====== ====== ====== ======= ====== Income Tax Valuation Allowance $1,235 $ - $ - $ 268 $ 967 ====== ====== ====== ======= ======
GEHL COMPANY
INDEX TO EXHIBITS
Exhibit Number Document Description
(2) Stock Purchase Agreement, dated as of September 12, 1997, between Gehl Company and Brunel Holdings, plc [Incorporated by reference to Exhibit 2 of the Company's Current Report on Form 8-K, dated October 17, 1997]
(3.1) Restated Articles of Incorporation, as amended, of Gehl Company [Incorporated by reference to Exhibit 3.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 28, 1997.]
(3.2) By-laws of Gehl Company, as amended [Incorporated by reference to Exhibit 3.3 of the Company's Annual Report on Form 10-K for the year ended December 31, 1995]
(4.1) Amended and Restated Loan and Security Agreement by and between ITT Commercial Finance Corp. and Gehl Company and its subsidiaries, dated October 1, 1994 [Incorporated by reference to Exhibit 4.1 of the Company's Annual Report on Form 10-K for the year ended December 31, 1994]
(4.2) First Amendment to Amended and Restated Loan and Security Agreement by and between Deutsche Financial Services Corporation, f/k/a ITT Commercial Finance Corp. and Gehl Company and its subsidiaries, dated May 10, 1995 [Incorporated by reference to Exhibit 4.1 of the Company's Quarterly Report on Form 10-Q for the quarter ended July 1, 1995]
(4.3) Amendment to Amended and Restated Loan and Security Agreement by and between Deutsche Financial Services Corporation, f/k/a ITT Commercial Finance Corp., Deutsche Financial Services Canada Corporation and Gehl Company and its subsidiaries, dated December 1, 1995 [Incorporated by reference to Exhibit 4.1 of the Company's Annual Report on Form 10-K for the year ended December 31, 1995]
(4.4) Third Amendment to Amended and Restated Loan and Security Agreement by and between Deutsche Financial Services Corporation, f/k/a ITT Commercial Finance Corp., Deutsche Financial Services Canada Corporation and Gehl Company and its subsidiaries, dated as of July 15, 1996.
(4.5) 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 October 2, 1997 [Incorporated by reference to Exhibit 4.1 of the Company's Current Report on Form 8-K dated October 17, 1997]
(4.6) Fifth Amendment to Amended and Restated Loan and Security Agreement by and between Deutsche Financial Services Corporation, f/k/a ITT Commercial Finance Corp., Deutsche Financial Services, a division of Deutsche Bank Canada, and Gehl Company and its subsidiaries, dated as of February 5, 1998.
(4.7) Common Stock Purchase Warrant No. 2, dated June 4, 1997, from Gehl Company to William L. Dahl, SVCC TTEE, The Dahl Children's Trust, FBO James A. Dahl U/A/D 12-31-84.
(4.8) Common Stock Purchase Warrant No. 3, dated June 4, 1997, from Gehl Company to William L. Dahl, SVCC TTEE, The Dahl Children's Trust, FBO Kathryn W. Dahl U/A/D 12-31-84.
(4.9) Common Stock Purchase Warrant No. 4, dated June 4, 1997 from Gehl Company to Rock Creek Partners LTD.
(4.10) Loan Agreement between Pennsylvania Economic Development Financing Authority and Gehl Company, dated as of September 1, 1990 [Incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 29, 1990]
(4.11) First Supplemental Loan Agreement between Pennsylvania Economic Development Financing Authority and Gehl Company, dated as of April 23, 1993 [Incorporated by reference to Exhibit 4.3 to the Company's Quarterly Report on Form 10-Q for the quarter ended April 3, 1993]
(4.12) Second Supplemental Loan Agreement between Pennsylvania Economic Development Financing Authority and Gehl Company, dated as of February 1, 1994 [Incorporated by reference to Exhibit 4.10 to the Company's Annual Report on Form 10-K for the year ended December 31, 1993]
(4.13) Mortgage and Security Agreement by and between Gehl Company and First Pennsylvania Bank N.A., dated as of September 1, 1990 [Incorporated by reference to Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 29, 1990]
(4.14) Rights Agreement, dated as of May 28, 1997, between Gehl Company and Firstar Trust Company [Incorporated by reference to Exhibit 4.1 to the Company's Registration Statement on Form 8-A, dated as of May 28, 1997]
(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)* Gehl Company Director Stock Grant Plan [Incorporated by reference to Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 29, 1997]
(10.3)* Amended and Restated Employment Agreement between Gehl Company and William D. Gehl dated as of December 19, 1997
(10.4)* 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]
(10.5)* 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]
(10.6)* 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]
(10.7)* 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]
(10.8)* Gehl Savings Plan, as amended and restated executed March 17, 1997.
(10.9)* 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]
(10.10)* Gehl Company 1987 Stock Option Plan, as amended [Incorporated by reference to Exhibit 10.9 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996]
(10.11)* 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)]
(10.12)* Gehl Company 1995 Stock Option Plan, as amended [Incorporated by reference to Exhibit 10.11 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996]
(10.13)* 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]
(10.14)* 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]
(10.15) 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)]
(10.16) 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)]
(10.17) 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 1997 Annual Report to Shareholders that are incorporated by reference herein
(21) Subsidiaries of Gehl Company
(23) Consent of Price Waterhouse LLP
(27) Financial Data Schedule
(99) Proxy Statement for 1998 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 1998 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.
Except as otherwise noted, all documents incorporated by reference are to Commission File No. 0-18110.