West Bend, Wis.-based Gehl Company last week announced plans to discontinue the manufacturing and distribution of its agricultural implement product lines.
The company’s West Bend, Wis., agricultural implement manufacturing operations will permanently close following the wind down of operations over the next 60 days, the company said. The product line discontinuation is expected to result in an after-tax charge to the company’s 2006 earnings of approximately $9.5 million, or 76 cents per fully diluted share. The after-tax charge is comprised of an $8.1 million non-cash asset impairment charge, related to inventory and fixed assets, and a $1.4 million cash charge related to severance and other employee costs.
The company expects to cut140 employees to match the decline in manufacturing and administrative activities associated with its agricultural implement product lines. The location of the company’s corporate headquarters in West Bend will not be impacted.
“Over the last 20 years, there has been a continuous consolidation occurring in the U.S. dairy industry,” said William Gehl, chairman and CEO. “Many of our small dairy farmer customers have either retired or sold their operations to larger producers. Consequently, the customer base for our agricultural implement lines has declined dramatically. “Although we are eliminating our agricultural implement product lines, we remain fully committed to our agricultural equipment dealers and customers through our continuing supply of compact equipment and ongoing parts and service support for the ag implement product lines. “The evolution of our business focus on the growing market for compact equipment is evidenced by fact that over 90 percent of our 2005 sales were compact equipment related,” said Gehl. As a result of discontinuing the agricultural implement product lines, the company is updating its revenue and earnings outlook for 2006. Gehl now expects 2006 net sales from continuing operations to range from $485 million to $495 million and earnings per fully diluted share from continuing operations of $2.20 to $2.30. Expected earnings per fully diluted share include an estimated 6 cents per share of compensation expense related to the company’s adoption, in the first quarter of 2006, of Statement of Financial Accounting Standards No.123R, which requires companies to recognize compensation expense for all stock-based awards.
Beginning in the first quarter of 2006, the results of operations relating to the agricultural implement product lines will be accounted for as discontinued operations. The company anticipates incurring an approximate $1 million after-tax loss, or 8 cents per fully diluted share, from results of discontinued operations in 2006. In addition, the discontinued operations will include the after-tax charge of $9.5 million, or 76 cents per fully diluted share, related to asset impairment, severance and other employee costs.
Gehl is a manufacturer of compact equipment used worldwide in construction and agricultural markets. The company markets its products under the Gehl and Mustang brand names.
