UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 Washington,
D.C.   20549
 FORM
10-Q
 
 S QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
 
 For
the Quarterly Period Ended June 30, 2008
 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 01-33504
 
 Gehl
Company
 (Exact
name of registrant as specified in its charter)
 Wisconsin
              
              39-0300430(State
      or other jurisdiction of incorporation
              
              (I.R.S.
      Employer Identification No.)or
      organization)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  S  No  £
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer”,
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act. Large accelerated filer  £  Accelerated
filer  S  Non-accelerated
filer  £  Smaller
reporting company  £
 
 Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act).  Yes  £  No  S
 
 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 June 30,
  2008Common
      Stock, $.10 Par Value
              
              12,135,737
 
  
  Gehl
Company
 FORM
10-Q
 June
30, 2008
 Report
Index
 
 
 Page No.PART
      I. – Financial InformationItem
      1.  Financial StatementsCondensed
      Consolidated Statements of Operations for the Three and Six Month Periods
      Ended June 30, 2008 and 2007
              
              3Condensed
      Consolidated Balance Sheets at June 30, 2008,
                December
      31, 2007, and June 30,
      2007
              
              4Condensed
      Consolidated Statements of Cash Flows for the Six Month Periods Ended June
      30, 2008 and 2007
              
              5Notes
      to Condensed Consolidated Financial Statements
              
              6Item
      2.  Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
              
              17Item
      3.  Quantitative and Qualitative Disclosures about Market
      Risk
              
              24Item
      4.  Controls and
      Procedures
              
              24PART
      II. – Other InformationItem
      1A. Risk
      Factors
              
              25Item
      2.  Unregistered Sales of Equity Securities and Use of
      Proceeds
              
              25Item
      4.  Submission of Matters to a Vote of Security
      Holders
              
              25Item
      6.  Exhibits
              
              26Signatures
              
              27
 
  -2-
  PART
I – Financial Information
 
 Item
1.  Financial
Statements
 
 Gehl
Company and Subsidiaries
 Condensed
Consolidated Statements of Operations
 (unaudited
and in thousands, except per share data)
 
 Three Months Ended
              
              
              Six Months EndedJune 30, 2008
              
              
              June 30, 2007
              
              
              June 30, 2008
              
              
              June 30, 2007Net
      sales
              
              $
              111,087
              
              
              $
              135,347
              
              
              $
              193,238
              
              
              $
              250,561Cost
      of goods sold
              
              
              88,314
              
              
              
              105,807
              
              
              
              152,100
              
              
              
              195,257Gross
      profit
              
              
              22,773
              
              
              
              29,540
              
              
              
              41,138
              
              
              
              55,304Selling,
      general and
                administrative
      expenses
              
              
              14,659
              
              
              
              15,703
              
              
              
              30,992
              
              
              
              30,655Income
      from operations
              
              
              8,114
              
              
              
              13,837
              
              
              
              10,146
              
              
              
              24,649Interest
      expense
              
              
              (880
              )
              
              
              (1,168
              )
              
              
              (1,914
              )
              
              
              (2,077
              )Interest
      income
              
              
              697
              
              
              
              1,098
              
              
              
              1,401
              
              
              
              2,106Other
      expense, net
              
              
              (286
              )
              
              
              (302
              )
              
              
              (3,188
              )
              
              
              (1,346
              )Income
      from continuing operations
                before
      income taxes
              
              
              7,645
              
              
              
              13,465
              
              
              
              6,445
              
              
              
              23,332Provision
      for income taxes
              
              
              2,408
              
              
              
              4,646
              
              
              
              2,030
              
              
              
              8,050Income
      from continuing operations
              
              
              5,237
              
              
              
              8,819
              
              
              
              4,415
              
              
              
              15,282Loss
      from discontinued operations, net of tax
              
              
              -
              
              
              
              (108
              )
              
              
              -
              
              
              
              (268
              )Net
      income
              
              $
              5,237
              
              
              $
              8,711
              
              
              $
              4,415
              
              
              $
              15,014Diluted
      net income per share:Continuing
    operations
              
              $
              0.43
              
              
              $
              0.71
              
              
              $
              0.36
              
              
              $
              1.23Discontinued
      operations
              
              
              -
              
              
              
              (0.01
              )
              
              
              -
              
              
              
              (0.02
              )Total diluted net
      income
                per share
              
              $
              0.43
              
              
              $
              0.70
              
              
              $
              0.36
              
              
              $
              1.20Basic
      net income per share:Continuing
    operations
              
              $
              0.43
              
              
              $
              0.73
              
              
              $
              0.37
              
              
              $
              1.26Discontinued
      operations
              
              
              -
              
              
              
              (0.01
              )
              
              
              -
              
              
              
              (0.02
              )Total basic net
      income
                per share
              
              $
              0.43
              
              
              $
              0.72
              
              
              $
              0.37
              
              
              $
              1.24
  The
accompanying notes are an integral part of the financial
statements.
 -3-
  Gehl
Company and Subsidiaries
 Condensed
Consolidated Balance Sheets
 (unaudited
and in thousands, except share data)
 
 
 June 30, 2008
              
              
              December 31, 2007
              
              
              June 30, 2007AssetsCash
              
              $
              4,984
              
              
              $
              10,349
              
              
              $
              5,039Accounts
      receivable – net
              
              
              190,642
              
              
              
              190,439
              
              
              
              233,498Finance
      contracts receivable – net
              
              
              6,094
              
              
              
              4,675
              
              
              
              10,034Inventories
              
              
              72,423
              
              
              
              49,093
              
              
              
              42,346Retained
      interest in sold finance contracts receivable
              
              
              55,156
              
              
              
              47,730
              
              
              
              37,673Deferred
      income tax assets
              
              
              9,653
              
              
              
              8,849
              
              
              
              9,688Prepaid
      expenses and other current assets
              
              
              3,230
              
              
              
              4,985
              
              
              
              7,264Total
      current assets
              
              
              342,182
              
              
              
              316,120
              
              
              
              345,542Property,
      plant and equipment – net
              
              
              38,773
              
              
              
              35,510
              
              
              
              33,421Goodwill
              
              
              11,748
              
              
              
              11,748
              
              
              
              11,748Other
      assets
              
              
              37,290
              
              
              
              44,584
              
              
              
              32,568Total
      assets
              
              $
              429,993
              
              
              $
              407,962
              
              
              $
              423,279Liabilities
      and Shareholders’ EquityCurrent
      portion of long-term debt obligations
              
              $
              212
              
              
              $
              212
              
              
              $
              212Short-term
      debt obligations
              
              
              49,140
              
              
              
              50,000
              
              
              
              49,997Accounts
      payable
              
              
              48,634
              
              
              
              35,799
              
              
              
              52,768Accrued
      and other current liabilities
              
              
              18,398
              
              
              
              22,548
              
              
              
              28,553Total
      current liabilities
              
              
              116,384
              
              
              
              108,559
              
              
              
              131,530Long-term
      debt obligations
              
              
              28,503
              
              
              
              21,425
              
              
              
              23,863Other
      long-term liabilities
              
              
              17,503
              
              
              
              16,948
              
              
              
              20,398Total
      long-term liabilities
              
              
              46,006
              
              
              
              38,373
              
              
              
              44,261Common
      stock, $.10 par value, 25,000,000 sharesauthorized,
      12,135,737, 12,127,623 and 12,245,780shares
      outstanding, respectively
              
              
              1,214
              
              
              
              1,213
              
              
              
              1,225Preferred
      stock, $.10 par value, 2,000,000 sharesauthorized,
      250,000 shares designated as Series Apreferred
      stock, no shares issued
              
              
              -
              
              
              
              -
              
              
              
              -Capital
      in excess of par
              
              
              85,749
              
              
              
              85,291
              
              
              
              86,187Retained
      earnings
              
              
              185,035
              
              
              
              180,734
              
              
              
              171,341Accumulated
      other comprehensive loss
              
              
              (4,395
              )
              
              
              (6,208
              )
              
              
              (11,265
              )Total
      shareholders’ equity
              
              
              267,603
              
              
              
              261,030
              
              
              
              247,488Total
      liabilities and shareholders’ equity
              
              $
              429,993
              
              
              $
              407,962
              
              
              $
              423,279
  The
accompanying notes are an integral part of the financial
statements.
 -4-
  
 Gehl
Company and Subsidiaries
 Condensed
Consolidated Statements of Cash Flows
 (unaudited
and in thousands)
 
 
 Six Months EndedJune 30, 2008
              
              
              June 30, 2007Cash
      Flows from Operating ActivitiesNet
      income
              
              $
              4,415
              
              
              $
              15,014Adjustments
      to reconcile net income to net cashused
      for operating activities:Depreciation
      and amortization
              
              
              2,356
              
              
              
              2,577Compensation
      expense for long-term incentive stock grants
              
              
              729
              
              
              
              948Cost
      of sales of finance contracts
              
              
              2,644
              
              
              
              823Proceeds
      from sales of finance contracts
              
              
              59,487
              
              
              
              69,818Increase
      in finance contracts receivable
              
              
              (62,253
              )
              
              
              (72,304
              )Increase
      in retained interest in sold finance contracts
              
              
              (3,378
              )
              
              
              (18,413
              )(Decrease)
      increase in cash due to changes in:Accounts
      receivable – net
              
              
              1,391
              
              
              
              (43,975
              )Inventories
              
              
              (21,522
              )
              
              
              6,790Accounts
      payable
              
              
              11,263
              
              
              
              12,764Remaining
      working capital items
              
              
              (277
              )
              
              
              3,604Net
      cash used for operating activities
              
              
              (5,145
              )
              
              
              (22,354
              )Cash
      Flows from Investing ActivitiesProperty,
      plant and equipment additions
              
              
              (6,395
              )
              
              
              (3,576
              )Proceeds
      from the sale of property, plant and equipment
              
              
              198
              
              
              
              50Increase
      in other assets
              
              
              (28
              )
              
              
              (4
              )Net
      cash used for investing activities
              
              
              (6,225
              )
              
              
              (3,530
              )Cash
      Flows from Financing ActivitiesProceeds
      from (repayments on) revolving credit loans
              
              
              7,126
              
              
              
              (1,272
              )(Repayments
      on) proceeds from short-term borrowings
              
              
              (908
              )
              
              
              24,890Proceeds
      from exercise of stock options including windfall tax
      benefits
              
              
              280
              
              
              
              413Purchase
      of treasury shares
              
              
              (493
              )
              
              
              -Net
      cash provided by financing activities
              
              
              6,005
              
              
              
              24,031Net
      decrease in cash
              
              
              (5,365
              )
              
              
              (1,853
              )Cash,
      beginning of period
              
              
              10,349
              
              
              
              6,892Cash,
      end of period
              
              $
              4,984
              
              
              $
              5,039Supplemental
      disclosure of cash flow information:Cash
      paid for the following:Interest
              
              $
              2,011
              
              
              $
              2,042Income
      taxes
              
              $
              728
              
              
              $
              5,562
  The
accompanying notes are an integral part of the financial
statements.
 -5-
  Gehl
Company and Subsidiaries
 Notes
to Condensed Consolidated Financial Statements
 June
30, 2008
 (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.  The year-end condensed balance sheet data
was derived from audited financial statements, but does not include all
disclosures required by accounting principles generally accepted in the United
States of America.
 
 In the
opinion of management, the information furnished for the three and six month
periods ended June 30, 2008 and June 30, 2007 include 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 three and six month periods ended
June 30, 2008 are not necessarily indicative of the results to be expected for
the entire year.
 
 The
Company suggests 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, 2007, as filed with the
Securities and Exchange Commission.
 
 Note
2 – Significant Accounting Policies
 
 Accounting
Pronouncements: In September 2006, the Financial Accounting
Standards Board (“FASB”) issued Statement of Financial Accounting Standards
(“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair
value, establishes a framework for measuring fair value and expands disclosures
about fair value measurements, but does not change existing guidance as to
whether or not an instrument is carried at fair value. SFAS 157 is effective for
fiscal years beginning after November 15, 2007.  In February 2008, the
FASB issued a final Staff Position to allow a one-year deferral of adoption of
SFAS 157 for nonfinancial assets and nonfinancial liabilities that are
recognized or disclosed at fair value in the financial statements on a
nonrecurring basis.  The FASB also issued a final Staff Position to exclude
FASB Statement No. 13 and its related interpretive accounting pronouncements
that address leasing transactions. The Company recorded a $1.4 million, or $0.11
per share, after-tax charge in the first quarter of 2008 related to implementing
SFAS 157 on the consolidated financial statements. See Note 4 and Note 12
for additional information related to the adoption of SFAS 157.
 
 In March
2008, the FASB issued SFAS No. 161 “Disclosures about Derivative Instruments and
Hedging Activities – an amendment of SFAS 133” (“SFAS 161”). SFAS 161 is
intended to improve financial reporting about derivative instruments and hedging
activities by requiring enhanced disclosures to enable investors to better
understand their effects on an entity’s financial position, financial
performance, and cash flows. This statement will be applicable to the Company on
January 1, 2009. The Company is currently evaluating the impact, if any, that
this standard will have on its financial statements.
  -6-
  
 Note
3 – 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.
 
 The
Company and its subsidiaries file income tax returns in the U.S. Federal
jurisdiction, and various state and foreign jurisdictions.  Effective
January 1, 2007, the Company adopted FASB Interpretation No. 48, “Accounting for
Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN
48”).  In accordance with FIN 48, the Company recognized a
cumulative-effect adjustment of $0.5 million, increasing its liability for
unrecognized tax benefits along with related interest and penalties, and
reducing the January 1, 2007 balance of retained earnings.
 
 At June
30, 2008, the Company had $3.8 million in unrecognized tax benefits, the
recognition of which would have an effect of $3.2 million on the effective tax
rate.  At June 30, 2007, the Company had unrecognized tax benefits of $3.2
million, which would have an effect of $2.8 million on the effective tax
rate.  The Company does not believe it is reasonably possible that its
unrecognized tax benefits will significantly change within the next twelve
months.
 
 Note
4 – Finance Contracts Receivable Financing
 
 The
Company maintains an asset securitization facility (“the Securitization
Facility”) with a financial institution (the “Purchaser”) whereby the Company
can sell, through a revolving securitization facility, retail and fleet
installment sale contracts (“installment sale contracts” or “finance contracts
receivable”).  On March 31, 2008 the Securitization Facility was
amended to adjust the total facility size from $300 million to $200 million. The
amendment also resolved all previous exceptions that resulted in the reservation
of rights agreement in operation at December 31, 2007.  The
Purchaser’s commitment to purchase new contracts under the Securitization
Facility is subject to annual renewal in September 2008.  Under the
Securitization Facility, the Company sells portfolios of its finance contracts
receivable to a wholly-owned, bankruptcy-remote special purpose subsidiary
(“SPE”) which, in turn, sells each such portfolio to a wholly-owned
bankruptcy-remote special purpose subsidiary of the SPE.  The
wholly-owned bankruptcy-remote special purpose subsidiary of the SPE sells a
participating interest in each such portfolio of finance contracts receivable to
the Purchaser (maximum 85% of the discounted value of the finance contract
receivable portfolio). The Purchaser has no recourse against the Company for
uncollectible finance contracts receivable, if any; however, the Company’s
retained interest in the portfolio of finance contracts receivable is
subordinate to the Purchaser’s interest.  The Company has retained
collection and administrative responsibilities for each sold portfolio of
finance contracts receivable.
  -7-
  
 The
following summarizes the Company’s sales of retail finance contracts receivable
through the Securitization Facility for the six months ended June 30, 2008 and
2007 (in thousands):
 
 June 30, 2008
              
              
              June 30, 2007Value
      of contracts sold
              
              $
              41,694
              
              
              $
              74,816Cash
      received on sales of contracts
              
              
              36,368
              
              
              
              55,733Retained
      interest in contracts sold
              
              
              79,188
              
              
              
              55,541Pre-tax
      impact of SFAS 157
              
              
              2,005
              
              
              
              -Cost
      of sales of finance contracts
              
              $
              99
              
              
              $
              596
 
 The
Company’s retained interest is recorded at fair value, which is calculated based
on the present value of estimated future cash flows and reflects prepayment and
loss assumptions, which are based, in part, on historical results. At June 30,
2008, the fair value of the retained interest was calculated using a discount
rate of 4.49%, an approximate 17 month weighted-average prepayable portfolio
life and an approximate 2.1% loss rate. Changes in any of these assumptions
could affect the calculated value of the retained interest.  A 10%
increase in the discount rate would decrease the fair value of the retained
interest by $0.3 million.  A 10% increase in the annual loss rate
would decrease the fair value of the retained interest by $0.5
million.  Retained interest of $55.2 million, $47.7 million and $37.7
million was included  in current assets at June 30, 2008, December 31,
2007 and June 30, 2007, respectively, and $24.0 million,
$28.1 million and $17.8 million was included in other assets in the accompanying
Condensed Consolidated Balance Sheet at June 30, 2008, December 31, 2007 and
June 30, 2007, respectively.   See Note 12 for additional
information on the fair value measurement of the retained interest.
 
 The total
credit capacity at June 30, 2008 under the Securitization Facility, as amended
on March 31, 2008, was $200 million with an outstanding note balance of $178.5
million at June 30, 2008.  Finance contracts receivable sold and being
serviced by the Company under the Securitization Facility totaled $252.3 million
at June 30, 2008. Of the $252.3 million in sold contracts receivable, $26.4
million were greater than 60 days past due at June 30, 2008. Credit losses on
contracts sold through the program during the three and six month periods ended
June 30, 2008 totaled $0.4 million.  There were no credit losses on
contracts sold through the Securitization Facility during the three and six
month periods ended June 30, 2007.  The Company received $1.4 and $1.2
million in service fee income during the six months ended June 30, 2008 and
2007, respectively.
 
  -8-
  In
addition to the sale of finance contracts receivable through the Securitization
Facility, the Company sold finance contracts through limited recourse
arrangements during 2008 and 2007.  Based on the terms of these sales,
recourse to the Company is limited to 5% of the sold portfolio of finance
contracts receivable.  Amounts to cover potential losses on these sold
finance contracts receivable are included in the allowance for doubtful
accounts.  The following table summarizes the Company’s sales of
finance contracts receivable through these arrangements for the six months ended
June 30, 2008, and 2007 (in thousands):
 
 2008
              
              
              2007Value
      of contracts sold
              
              $
              23,643
              
              
              $
              14,312Cash
      received on sales of contracts
              
              
              23,119
              
              
              
              14,085Cost
      of sales of finance contracts
              
              $
              540
              
              
              $
              227
 
 
 At June
30, 2008, the Company serviced $342.3 million of finance contracts receivable of
which $252.3 million, $68.1 million and $3.7 million were sold through the
Securitization Facility, limited recourse arrangements and full recourse
arrangements, respectively.
 
 The
finance contracts require periodic installments of principal and interest over
periods of up to 72 months, with interest rates based on market conditions. The
Company has retained the servicing of substantially all of these contracts which
generally have maturities of 12 to 60 months.
 
 The sales
of finance contracts receivable were accounted for as a sale in accordance with
SFAS No. 140 “Accounting for Transfers and Servicing of Financial Assets and
Extinguishment of Liabilities—a Replacement of FASB Statement No. 125.” Sales of
finance contracts receivable are reflected as a reduction of finance contracts
receivable in the accompanying Condensed Consolidated Balance Sheets and the
proceeds received are included in cash flows from operating activities in the
accompanying Condensed Consolidated Statements of Cash Flows.
 
 Note
5 – Accounts Receivable
 
 Accounts
receivable were comprised of the following (in thousands):
 
 June
      30, 2008
              
              
              December
      31, 2007
              
              
              June
      30, 2007Accounts
      receivable
              
              $
              196,455
              
              
              $
              196,175
              
              
              $
              237,503Less
      allowances for:doubtful
    accounts
              
              
              (5,639
              )
              
              
              (5,562
              )
              
              
              (3,831
              )returns and dealer
      discounts
              
              
              (174
              )
              
              
              (174
              )
              
              
              (174
              )$
              190,642
              
              
              $
              190,439
              
              
              $
              233,498
 
 The
Company retains as collateral a security interest in the equipment associated
with accounts receivable.
  -9-
  Note
6 – 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):
 
 June
      30, 2008
              
              
              December
      31, 2007
              
              
              June
      30, 2007Raw
      materials and supplies
              
              $
              26,387
              
              
              $
              20,173
              
              
              $
              21,472Work-in-process
              
              
              2,544
              
              
              
              2,160
              
              
              
              2,070Finished
      machines and parts
              
              
              73,007
              
              
              
              56,275
              
              
              
              48,456Total
      current cost value
              
              
              101,938
              
              
              
              78,608
              
              
              
              71,998Adjustment
      to LIFO basis
              
              
              (29,515
              )
              
              
              (29,515
              )
              
              
              (29,652
              )$
              72,423
              
              
              $
              49,093
              
              
              $
              42,346
 
 
 Note
7 – Product Warranties and Other Guarantees
 
 In
general, the Company provides warranty coverage on equipment for a period of up
to twelve months.  The 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.  The Company records warranty expense as a component of selling,
general and administrative expense.  While the Company’s warranty
costs have historically been within its calculated estimates, it is possible
that future warranty costs could differ from those estimates. The changes in the
carrying amount of the Company’s total product warranty liability for the six
month periods ended June 30, 2008 and 2007 were as follows (in
thousands):
 
 For
      the six months ended
              
              June
      30, 2008
              
              
              June
      30, 2007Beginning
      balance
              
              $
              5,704
              
              
              $
              5,778Accruals
      for warranties issued during the period
              
              
              1,727
              
              
              
              2,852Accruals
      related to pre-existing warranties(including
      changes in estimates)
              
              
              (4
              )
              
              
              (148
              )Settlements
      made (in cash or in kind) during the period
              
              
              (2,229
              )
              
              
              (2,325
              )Ending
      balance
              
              $
              5,198
              
              
              $
              6,157
 
  -10-
  
 Note
8 – Employee Retirement Plans
 
 The
Company sponsors a qualified defined benefit pension plan for certain of its
employees.  The following table provides disclosure of the net
periodic benefit cost (in thousands):
 
 For the Three Months Ended
              
              
              For the Six Months EndedJune 30, 2008
              
              
              June 30, 2007
              
              
              June 30, 2008
              
              
              June 30, 2007Service
      cost
              
              $
              144
              
              
              $
              160
              
              
              $
              288
              
              
              $
              320Interest
      cost
              
              
              738
              
              
              
              724
              
              
              
              1,475
              
              
              
              1,448Expected
      return on plan assets
              
              
              (922
              )
              
              
              (857
              )
              
              
              (1,843
              )
              
              
              (1,714
              )Amortization
      of prior service cost
              
              
              2
              
              
              
              3
              
              
              
              4
              
              
              
              6Amortization
      of net loss
              
              
              213
              
              
              
              240
              
              
              
              426
              
              
              
              480Net
      periodic benefit cost
              
              $
              175
              
              
              $
              270
              
              
              $
              350
              
              
              $
              540
 
 The
Company does not anticipate making any contributions to the pension plan during
2008. No contributions were made during the six month period ended June 30,
2008.  SFAS 158, “Employers’ Accounting for Defined Benefit Plans and
Other Postretirement Plans - an amendment of FASB Statements No. 87, 88, 106 and
132(R)” requires Companies to measure plan assets and liabilities as of the end
of a fiscal year rather than a date within ninety days of the end of the fiscal
year.  Effective January 1, 2008, the Company changed its measurement date
for plan assets and liabilities from September 30 to December 31.  The
impact of the adoption was an increase in total liabilities of $0.2 million, an
increase in total assets of $0.1 million and a decrease to retained earnings,
net of tax, of $0.1 million.
 
 The
Company maintains an unfunded non-qualified supplemental retirement benefit plan
for certain management employees.  The following table provides
disclosure of the net periodic benefit cost (in thousands):
 
 For the Three Months Ended
              
              
              For the Six Months EndedJune 30, 2008
              
              
              June 30, 2007
              
              
              June 30, 2008
              
              
              June 30, 2007Service
      cost
              
              $
              (5
              )
              
              $
              137
              
              
              $
              73
              
              
              $
              274Interest
      cost
              
              
              144
              
              
              
              113
              
              
              
              294
              
              
              
              226Amortization
      of prior service cost
              
              
              24
              
              
              
              25
              
              
              
              47
              
              
              
              50Amortization
      of net loss
              
              
              30
              
              
              
              25
              
              
              
              92
              
              
              
              50Curtailment
              
              
              7
              
              
              
              -
              
              
              
              7
              
              
              
              -Net
      periodic benefit cost
              
              $
              200
              
              
              $
              300
              
              
              $
              513
              
              
              $
              600
 
 The
Company provides postemployment benefits to certain retirees, which includes
subsidized health insurance benefits for early retirees prior to their attaining
age 65.  The following table provides disclosure of the net periodic
benefit cost (in thousands):
 
 For the Three Months Ended
              
              
              For the Six Months EndedJune 30, 2008
              
              
              June 30, 2007
              
              
              June 30, 2008
              
              
              June 30, 2007Service
      cost
              
              $
              35
              
              
              $
              32
              
              
              $
              70
              
              
              $
              64Interest
      cost
              
              
              32
              
              
              
              30
              
              
              
              65
              
              
              
              60Amortization
      of transition obligation
              
              
              5
              
              
              
              6
              
              
              
              10
              
              
              
              12Amortization
      of net loss
              
              
              15
              
              
              
              13
              
              
              
              30
              
              
              
              26Net
      periodic benefit cost
              
              $
              87
              
              
              $
              81
              
              
              $
              175
              
              
              $
              162
  -11-
  Note
9–Shareholders’
Equity
  The
Company maintains equity incentive plans for certain of its directors, officers
and key employees.  The Company currently has three primary equity
incentive plans:  the 2004 Equity Incentive Plan, the 2000 Equity
Incentive Plan and the 1995 Stock Option Plan.  The 2004 Equity
Incentive Plan, which was adopted in April 2004 and amended in April 2006,
authorizes the granting of awards with respect to up to 737,500 shares of the
Company’s common stock.  During April 2000, the 2000 Equity Incentive
Plan was adopted, which authorizes the granting of awards with respect to up to
812,771 shares of the Company’s common stock.  An award is defined
within the 2004 and 2000 Equity Incentive Plan as a stock option, a stock
appreciation right, restricted stock or a performance share.  In April
1996, the 1995 Stock Option Plan was adopted, which authorizes the granting of
options to purchase up to 726,627 shares of the Company’s common
stock.  These plans provide that options be granted at an exercise
price not less than fair market value on the date the options are granted and
that the options generally vest ratably over a period not exceeding three years
after the grant date.  The option period may not extend more than ten
years after the grant date.
 
 In the
three month period ended June 30, 2008 and 2007, the Company awarded to
directors, 21,000 stock options to purchase common stock.  There were
no options issued in the first quarter of 2008 and 2007.  Awards of
stock options under the plans are subject to certain vesting requirements and
are accounted for using the fair value based method.  In the six
months ended June 30, 2008 or 2007, the Company awarded 184,552 and 132,087
stock appreciation rights to certain key employees at the fair market value on
the grant date, respectively.  There were no stock appreciation rights
issued in the three months ended June 30, 2008 and 2007.  The stock
appreciation rights can only be cash-settled and are subject to certain vesting
requirements.
 
 In 2008
and 2007, the Company awarded restricted shares under the 2004 Equity Incentive
Plan to certain key employees.  Awards of restricted stock under the
plan are subject to certain vesting requirements.  There were 35,112
and 25,118 restricted shares awarded in the six months ended June 30, 2008 and
2007, respectively, with an average fair market value of $17.33 and $28.68 per
share, respectively.  Compensation expense related to restricted stock
awards is based upon the market price at the date of award and is charged to
earnings over the vesting period.
 
 Note
10 – Net Income 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 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 and vesting of
restricted stock.  A reconciliation of the shares used in the
computation of earnings per share follows (in thousands):
 
 For the Three Months Ended
              
              
              For the Six Months EndedJune 30, 2008
              
              
              June 30, 2007
              
              
              June 30, 2008
              
              
              June 30, 2007Basic
      shares
              
              
              12,061
              
              
              
              12,132
              
              
              
              12,039
              
              
              
              12,121Effect
      of options and unvestedrestricted stock
              
              
              244
              
              
              
              345
              
              
              
              240
              
              
              
              343Diluted
      shares
              
              
              12,305
              
              
              
              12,477
              
              
              
              12,279
              
              
              
              12,464
 
  -12-
  
 For the
three and six months ended June 30, 2008, 277,724 options to purchase common
shares were antidilutive and, accordingly, excluded from the effect of options
and unvested restricted stock in the calculation of diluted earnings per
share.  For the three and six months ended June 30, 2007, 146,284
options to purchase common shares were antidilutive.
 
 The
components of comprehensive income are as follows (in thousands):
 
 Six Months EndedJune 30, 2008
              
              
              June 30, 2007Net
      income
              
              $
              4,415
              
              
              $
              15,014Foreign
      currency translationadjustments
              
              
              1,576
              
              
              
              373Amortization
      of pension losses, net of tax
              
              
              416
              
              
              
              406Unrealized
      (losses) gains, net of tax
              
              
              (179
              )
              
              
              128Other
      comprehensive income
              
              
              1,813
              
              
              
              907Comprehensive
      income
              
              $
              6,228
              
              
              $
              15,921
 
 
 Note
11 – Financial Instruments
 
 The
Company selectively uses interest rate swaps and foreign currency forward
contracts to reduce market risk associated with changes in interest rates and
the value of the U.S. Dollar versus the Euro. The use of derivatives is
restricted to those intended for hedging purposes.
 
 In
September 2007, the Company entered into a series of forward currency contracts
(“forward contracts”) to hedge a portion of the Company’s exposure to changes in
the value of the U.S. Dollar versus the Euro. The forward contracts expire
between June 16, 2008 and December 15, 2008 and have a notional amount of €6.0
million ($8.4 million) and contract rates ranging from €1.0:$1.4003 to
€1.0:$1.4014.  One of the forward contracts settled on June 16, 2008
for a cumulative loss of $0.3 million.  As the contracts are deemed
ineffective under the provisions of SFAS No. 133, “Accounting for Derivative
Instruments and Hedging Activities” (“SFAS 133”), the Company recorded a
decrease to current liabilities and a decrease to other expense of $0.3 million
during the three months ended June 30, 2008.
 
 In 2005,
the Company entered into an interest rate swap agreement with a third party
financial institution to exchange variable rate interest obligations for fixed
rate obligations without the exchange of the underlying principal
amounts.  Effective January 2006, under this agreement, the Company’s
variable to fixed rate obligations were an aggregate swapped notional amount of
$40 million through January 2008.  The aggregate notional amount of
the swap decreased to $30 million effective January 2008 and will decrease to
$20 million effective January 2009 and $10 million effective January 2010 before
the swap expires in January 2011. The Company pays a 4.89% fixed interest rate
under the swap agreement and receives a 30 day LIBOR variable
rate.  The referenced 30 day LIBOR rate was 2.46% at June 30,
2008.  The variable to fixed interest rate swap is an effective
cash-flow hedge.  The fair value of the swap was a liability of $0.7
million at June 30, 2008 and was recorded in other long-term liabilities on
the Condensed Consolidated Balance Sheets, with changes in fair value included
in other comprehensive income.
 
 In
connection with the Company’s Securitization Facility, the Company and the SPE
are parties to interest rate swap agreements to manage the SPE’s interest rate
exposure from floating rate debt.  The term and notional balances of
the swap agreements are matched to the
  -13-
  
 anticipated
repayment profile of the aggregate portfolio of securitized finance contracts.
At June 30, 2008, the Company’s variable to fixed rate obligations are an
aggregate swapped notional balance of $237.2 million decreasing to $0 by
December 31, 2013. As of June 30, 2008, the Company pays a fixed rate of 4.93%
under the swaps and receives a 30 day LIBOR variable rate. The referenced 30 day
LIBOR rate was 2.46% at June 30, 2008.  The swaps are deemed
ineffective under the provisions of SFAS 133.  Accordingly, changes in
fair value are recognized in earnings each period as part of the Company’s
retained interest valuation. At June 30, 2008, the Company’s retained interest
calculation was reduced by $6.0 million as a result of the swap
liability.
 
 Note
12 – Fair Value Measurements
 
 On
January 1, 2008, the Company prospectively adopted SFAS 157.  See Note
2 for additional information.  While SFAS 157 does not expand the use
of fair value measurements in any new circumstance, it applies to several
current accounting standards that require or permit measurement of assets and
liabilities at fair value.  SFAS 157 provides a common definition of
fair value and establishes a framework to make the measurement of fair value in
generally accepted accounting principles more consistent and comparable. SFAS
157 defines fair value as the exchange price that would be received
for an asset or paid to transfer a liability (an exit price) in the principal or
most advantageous market for the asset or liability in an orderly transaction
between market participants.  SFAS 157 also specifies a fair value
hierarchy based upon the observability of inputs used in valuation
techniques.   Observable inputs (highest level) reflect market
data obtained from independent sources, while unobservable inputs (lowest level)
reflect internally developed assumptions about the assumptions a market
participant would use.
 
 In
accordance with SFAS 157, fair value measurements are classified under the
following hierarchy:
 
 ·
              Level
      1 – Quoted prices for identical instruments in active
    markets.
 ·
              Level
      2 – Quoted prices for similar instruments; quoted prices for identical or
      similar instruments in markets that are not active; and model-derived
      valuations in which all significant inputs or significant value-drivers
      are observable.
 ·
              Level
      3 – Model-derived valuations in which one or more inputs or value-drivers
      are both significant to the fair value measurement and
      unobservable.
 
 If
applicable, the Company uses quoted market prices in active markets to determine
fair value, and therefore classify such measurements within Level
1.  In some cases where market prices are not available, the Company
makes use of observable market based inputs to calculate fair value, in which
case the measurements are classified within Level 2.  If quoted or
observable market prices are not available, fair value is based upon internally
developed models that use, where possible, current market-based parameters such
as interest rates, yield curves, currency rates, etc.  These
measurements are classified within Level 3 if they use significant unobservable
inputs.  Fair value measurements are classified according to the
lowest level input or value-driver that is significant to the
valuation.
  -14-
  Fair
value measurements impacted by SFAS 157 include:
 
 Derivative financial
instruments
 
 The fair
value of interest rate swap derivatives is primarily based on pricing
models.  These models use discounted cash flows that utilize the
appropriate market-based forward swap curves and zero-coupon interest
rates.
 
 The fair
value of foreign currency forward contracts is based on a pricing model that
discounts cash flows resulting from the differential between the contract price
and the market-based forward rate.
 
 Securitized retained
interests
 
 The fair
value of securitized retained interest is based upon a valuation model that
calculates the present value of future expected cash flows using a quoted
discount rate on a similar asset, adjusted for credit and liquidity risk as
appropriate, in addition to key assumptions for prepayment speeds and loss
factors among others.  These assumptions are based on our historical
experience, market trends and anticipated performance relative to the particular
assets securitized.  Included in the fair value measurement of
securitized retained interest is a derivative financial instrument discussed in
Note 11.
  The
following table provides the assets and liabilities that were recognized at fair
value on a recurring basis as of June 30, 2008 (in thousands):
 Level
      1
              
              
              Level
      2
              
              
              Level
      3
              
              
              Total
      Assets / Liabilities at Fair ValueAssetsSecuritized
      retained interest(1)
              
              $
              -
              
              
              $
              -
              
              
              $
              79,188
              
              
              $
              79,188LiabilitiesDerivative
      financial instruments(2)
              
              $
              -
              
              
              $
              1,369
              
              
              $
              -
              
              
              $
              1,369
 
 (1)
              Of
      the total securitized retained interest, $55,156 is recorded in retained
      interest in sold finance contracts receivable and $24,032 is included in
      other long-term assets on the June 30, 2008 Condensed Consolidated Balance
      Sheet.
 
 (2)
              Of
      the total derivative financial instruments, $659 is recorded in accrued
      and other current liabilities and $710 is included in other long-term
      liabilities on the June 30, 2008 Condensed Consolidated Balance
      Sheet.
 
 Below is
a roll-forward of the securitized retained interest measured at fair value using
Level 3 inputs for the six months ended June 30, 2008.  This
instrument was valued using pricing models that, in management’s judgment,
reflect the assumptions a marketplace participant would use.
 
 Securitized
      Retained InterestBalance
      at December 31, 2007
              
              $
              75,810Unrealized
      losses
              
              
              (2,104
              )Purchases,
      issuances and settlements, net
              
              
              5,482Balance
      at June 30, 2008
              
              $
              79,188
  -15-
  
 The
Company recorded a pre-tax charge of $2.0 million in the three months ended
March 31, 2008 related to the adoption of SFAS 157 in other expense, net on the
Condensed Consolidated Statement of Operations.  The charge is the
result of a higher discount rate required to achieve fair value measurement, as
defined, under SFAS 157.  See Note 4 for information regarding
assumptions used in the valuation of retained interest.
  -16-
  
 Item 2. Management’s Discussion and
Analysis of Financial Condition and Results of Operations
 
 Results of
Operations
 
 Three Months Ended June 30,
2008 Compared to Three Months Ended June 30, 2007
 
 Net
      Sales
 
 Net sales
in the three months ended June 30, 2008 (“2008 second quarter”) were $111.1
million compared to $135.3 million in the three months ended June 30, 2007
(“2007 second quarter”), a decrease of $24.3 million, or 18%. Continued
market share gains, along with the strength of the Company’s international and
agricultural markets, partially offset the impact of the continued softness in
the North American housing market and reductions in capital investments by
equipment rental companies.  Market share gains continued in the
Company’s two primary product categories, skid loaders and
telehandlers.  The Company’s North American retail skid loader volume
decreased 1% during second quarter of 2008 compared to the same period of 2007,
while based on data released by the Association of Equipment Manufacturers
(“AEM”), the overall industry retail volume decreased nearly 10% for the
quarter.  The Company’s telehandler retail demand declined 14% in the
second quarter compared to an industry-wide market that declined over 23% as
reported by AEM.
 
 Of the
Company’s total net sales reported for the 2008 second quarter, $33.8 million
were made to customers residing outside of the United States compared with $35.7
million in the 2007 second quarter.  Sales outside of North America
increased to 30% of net sales in the second quarter of 2008 compared to 26% in
the second quarter of 2007.  Due to the relative strength of the
European construction markets, total skid loader shipments outside of North
America increased to 47% of total Company skid loader sales versus 44% a year
earlier.
 
 Gross
Profit
 
 Gross
profit was $22.8 million in the 2008 second quarter compared to $29.5 million in
the 2007 second quarter, a decrease of $6.8 million, or 23%.  Gross
profit as a percentage of net sales (“gross margin”) was 20.5% in the 2008
second quarter compared to 21.8% in the 2007 second quarter.  The
decrease in gross profit as a percentage of net sales was primarily driven by
the unfavorable impact of lower volume and higher steel and component costs
which were partially offset by price increases, tight cost control and
investments in state-of-the-art manufacturing equipment.  Gross margin
in the quarter was favorably impacted by approximately 2.6 percentage points due
to 2008 price increases.
 
 Selling,
General and Administrative Expenses
  Selling,
general and administrative expenses were $14.7 million, or 13.2% of net sales,
in the 2008 second quarter compared to $15.7 million, or 11.6% of net sales, in
the 2007 second quarter.  This decrease reflects several cost savings
initiatives including the actions taken in the first quarter of 2008 to
streamline the sales and support groups for the Gehl and Mustang
brands.  The increase in selling, general and administrative expenses
as a percentage of net sales primarily reflects lower sales
volume.
  -17-
  
 Income
from Operations
 
 Income
from operations in the 2008 second quarter was $8.1 million, or 7.3% of net
sales, compared to income from operations of $13.8 million, or 10.2% of net
sales, in the 2007 second quarter, a decrease of $5.7 million, or
41%.
 
 Interest
Expense
 
 Interest
expense was $0.9 million in the 2008 second quarter compared to $1.2 million in
the 2007 second quarter, a decrease of $0.3 million. The decrease in interest
expense was due to a decrease in the average interest rate during the 2008
second quarter compared to the 2007 second quarter (see “Financial Condition”
below for discussion of changes in outstanding debt).
 
 Interest
Income
 
 Interest
income was $0.7 million in the 2008 second quarter compared to $1.1 million in
the 2007 second quarter, a decrease of $0.4 million.  This decrease
was primarily due to the decrease in average accounts receivable balances and a
decrease in interest rates in the 2008 second quarter compared to the 2007
second quarter.
 
 Provision
for Income Taxes
 
 The
Company’s effective income tax rate was 31.5% as of June 30, 2008 compared to
34.5% in the second quarter of 2007.  The decrease in the effective
tax rate is primarily due to the mix of international income, a higher domestic
manufacturing deduction and an increased credit for research and
development.
 
 Income
from Continuing Operations
 
 Income
from continuing operations in the 2008 second quarter was $5.2 million, or 4.7%
of net sales, compared to income from continuing operations of $8.8 million, or
6.5% of net sales, in the 2007 second quarter, a decrease of $3.6 million, or
41%.
 
 Net
Income
 
 The
Company recorded net income in the 2008 second quarter of $5.2 million compared
to net income of $8.7 million in the 2007 second quarter, a decrease of $3.5
million, or 40%.
 
 
 Six Months Ended June 30,
2008 Compared to Six Months Ended June 30, 2007
 
 Net
      Sales
 
 Net sales
in the six months ended June 30, 2008 (“2008 six months”) were $193.2 million
compared to $250.6 million in the six months ended June 30, 2007 (“2007 six
months”), a decrease of $57.3 million, or 23%.  Net Sales, in general, were
favorably impacted by the strength of the Company’s international and
agricultural markets and world-wide market share gains, which partially offset
the impact of the continued softness in the North American housing
market.  In the Company’s two primary product categories, skid loaders
and telehandlers, market share gains continued.  The Company’s North
American retail skid loader volume decreased 2% during first six months of 2008
compared to the same period of 2007,
  -18-
  while
based on data released by AEM, the overall industry retail volume decreased
nearly 12% for the same period.  The Company’s telehandler retail
demand declined 16% in the first six months of 2008 compared to an industry-wide
market that declined over 33% as reported by AEM.
 
 Of the
Company’s total net sales reported for the 2008 six months, $61.8 million were
made to customers residing outside of the United States compared with $67.7
million in the 2007 six
months. Sales outside of North America increased to 32% of net sales for the six
months ended June 30, 2008 compared to 27% in the six months ended June 30,
2007.  Skid loader shipments outside of North America increased to 48%
of total Company skid loader sales versus 45% a year earlier.
 
 Gross
Profit
 
 Gross
profit was $41.1 million in the 2008 six months compared to $55.3 million in the
2007 six months, a decrease of $14.2 million, or 26%. Gross margin was
21.3% in the 2008 six months compared to 22.1% in the 2007 six months. The
decrease in gross profit as a percentage of net sales was primarily driven by
lower sales volume and increased steel and component costs which were partially
offset by price increases, tight cost control and investments in
state-of-the-art manufacturing equipment.  Gross margin in 2008 was
favorably impacted by approximately 2.3 percentage points due to 2008 price
increases.
 
 Selling,
General and Administrative Expenses
  Selling,
general and administrative expenses were $31.0 million, or 16.0% of net sales,
in the 2008 six months compared to $30.7 million, or 12.2% of net sales, in the
2007 six months.  The increase in selling, general and administrative
expenses as a percentage of net sales primarily reflects the decrease is sales,
along with planned increased investments in research and development and
information technology projects totaling $0.9 million.  These costs
were partially offset by savings resulting from the consolidation of the sales
and support groups for the Gehl and Mustang brands which occurred in the first
quarter of 2008.
  Income
from Operations
  Income
from operations in the 2008 six months was $10.1 million, or 5.3% of net sales,
compared to income from operations of $24.6 million, or 9.8% of net sales, in
the 2007 six months, a decrease of $14.5 million, or 59%.
 
 Interest
Expense
 
 Interest
expense was $1.9 million in the 2008 six months compared to $2.1 million in the
2007 six months, a decrease of $0.2 million. The decrease in interest expense
was due to a decrease in the average interest rate during the 2008 six months
compared to the 2007 six months (see “Financial Condition” below for discussion
of changes in outstanding debt).
 
 Interest
Income
 
 Interest
income was $1.4 million in the 2008 six months compared to $2.1 million in the
2007 six months, a decrease of $0.7 million.  This decrease was
primarily due to the decrease in average accounts receivable balances and a
decrease in interest rates in the 2008 six months compared to the 2007 six
months.
  -19-
  
 Net
Other Expense
 
 The
Company recorded net other expense of $3.2 million and $1.3 million in the 2008
six months and 2007 six months, respectively.  The change in net other
expense was primarily due to the $2.0 million pre-tax charge related to the
adoption of SFAS 157.  See Note 12 to the Condensed Consolidated
Financial Statements “Fair Value Measurements” for additional
detail.
 
 Provision
for Income Taxes
 
 The
Company’s effective income tax rate was 31.5% as of June 30, 2008 compared to
34.5% in the second quarter of 2007.  The decrease in the effective
tax rate is primarily due to the mix of international income, a higher domestic
manufacturing deduction and an increased credit for research and
development.
 
 Income
from Continuing Operations
 
 Income
from continuing operations in the 2008 six months was $4.4 million, or 2.3% of
net sales, compared to income from continuing operations of $15.3 million, or
6.1% of net sales, in the 2007 six months, a decrease of $10.9 million, or
71%.  The 2008 six months includes a $1.4 million after-tax charge
related to the adoption of SFAS 157, as discussed above.  See Note 12
to the Condensed Consolidated Financial Statements “Fair Value Measurements” for
additional detail.
 
 Net
Income
 
 The
Company recorded net income in the 2008 six months of $4.4 million compared to
net income of $15.0 million in the 2007 six months.
 
 Financial
Condition
  Working
Capital
  The
Company’s working capital was $225.8 million at June 30, 2008 as compared to
$207.6 million at December 31, 2007 and $214.0 million at June 30,
2007.  The change in working capital at June 30, 2008 from December
31, 2007 was primarily due to increases in inventory and the current
portion of retained interest from the sale of finance
contracts.  These increases in working capital were partially offset
by an increase in accounts payable.  Inventory increased from December
31, 2007, primarily due to increased inventory requirements at our Gehl Europe
subsidiary as well as a two month delay in the launch of a new articulated
loader product line.  It is anticipated that the impact of the delay
of the articulated loaders launch will be recovered in the second half of 2008.
The current portion of retained interest in sold finance contracts increased
from December 31, 2007, primarily due to excess cash collections subsequently
used to repay the note balance.  The increase in accounts payable was
due to increased production resulting from the launch of the new articulated
loader product line.
 
 The
change in working capital at June 30, 2008 from June 30, 2007 was primarily due
to an increase in inventory and the current portion of retained interest from
the sale of finance contracts.  These increases were partially offset
by a decrease in accounts receivable.  Inventory increased from
December 31, 2007, primarily due to increased inventory requirements at our Gehl
Europe subsidiary as well as a two month delay in the launch of a new
articulated loader
  -20-
  product
line.   It is anticipated that the impact of the delay of the
articulated loaders launch will be recovered in the second half of 2008. The
current portion of retained interest from the sale of finance contracts
increased from June 30, 2007, due to excess cash collections subsequently used
to repay the note balance along with a decreased effective advance
rate.  The decrease in accounts receivable was the result of lower
sales volume and efforts to reduce field inventory in the six months ended June
30, 2008 compared to the same period in 2007.
 
 Capital
Expenditures
 
 Capital
expenditures for property, plant and equipment during the 2008 six months were
approximately $6.4 million.  The Company plans to make up
to $21.5 million of capital expenditures in 2008, primarily to
complete the research and development facility, construct the new corporate
office building, enhance manufacturing and information technology capabilities
and maintain and upgrade machinery and equipment.
 
 Debt
and Equity
 
 The
Company maintains a $125 million revolving credit facility (the “Facility”) with
a syndicate of commercial bank lenders. The credit commitment under the Facility
is for a five-year period expiring October 17, 2011.  At any time
during the term of the Facility, the Company has the option, subject to bank
approval, to request an increase in the credit commitment under the Facility to
$175 million from the current syndicate of commercial bank lenders or any other
commercial bank lender(s) selected by the Company.  Under the terms of
the Facility, the Company has pledged the capital stock of certain wholly-owned
subsidiaries which are all co-borrowers. The Company may borrow up to $25
million under the Facility in a currency other than the U.S. Dollar. The Company
may elect to pay interest on U.S. Dollar borrowings under the Facility at a rate
of either (1) the London Interbank Offered Rate (“LIBOR”) plus 0.625% to 1.3750%
or (2) a base rate defined as the prime commercial rate less 0.125% to 1.125%.
The Company’s actual borrowing costs for LIBOR or base rate borrowings
is determined by reference to a pricing grid based on the Company’s ratio of
funded debt to total capitalization.  Interest on amounts borrowed
under the Facility in currencies other than the U.S. Dollar will be priced at a
rate equal to LIBOR plus 0.625% to 1.375%.  As of June 30, 2008, the
weighted average interest rate on Company borrowings outstanding under the
Facility was 6.30%.  The Facility requires the Company to maintain
compliance with certain financial covenants related to total capitalization,
interest expense coverage, tangible net worth, capital expenditures and
operating lease spending. The Company was in compliance with all covenants as of
June 30, 2008.
 
 Borrowings
under the Facility were $28.2 million, $21.1 million and $23.4 million at June
30, 2008, December 31, 2007 and June 30, 2007,
respectively.  Available unused borrowings under the Facility were
$47.7 million, $53.9 million and $51.6 million at June 30, 2008, December 31,
2007 and June 30, 2007, respectively.  Available borrowings at June
30, 2008, December 31, 2007 and June 30, 2007 were reduced by $49.1 million,
$50.0 million and $50.0 million of outstanding commercial paper,
respectively.
 
 During
the fourth quarter of 2006, the Company began to issue commercial paper through
a placement agent to fund a portion of its short term working capital needs. The
Company had the ability to sell up to $25.0 million in commercial paper under
this arrangement. In April 2007, this arrangement was expanded to give the
Company the ability to sell up to $50.0 million in commercial
paper.  The Company’s commercial paper program is backed by the credit
commitment under the Company’s revolving credit facility.  At June 30,
2008, the Company had $49.1 million of short term commercial paper outstanding
at a rate of 2.86%
  -21-
  compared
to $50.0 million outstanding at December 31, 2007 and June 30, 2007 at a rate of
5.07% and 5.45%, respectively.
 
 In
addition, the Company has access to a €2.5 million committed foreign short-term
credit facility.  There were no borrowings outstanding under this
facility at June 30, 2008 and 2007.
 
 The
Company believes it has adequate capital resources and borrowing capacity to
meet its projected capital requirements for the foreseeable future. The Company
expects requirements for working capital, capital expenditures, pension fund
contributions and debt maturities in fiscal 2008 will continue to be funded by
operations and the Company’s borrowing arrangements.
 
 At June
30, 2008, shareholders’ equity had increased $20.1 million to $267.6 million
from $247.5 at June 30, 2007.  This increase primarily reflects the
impact of net income of $13.8 million and minimum pension liability adjustments
of $4.5 million.  Shareholders’ equity at June 30, 2008 increased $6.6
million compared to December 31, 2007.  This increase is primarily due
to net income of $4.4 million.
 
 On
October 26, 2007, the Company’s Board of Directors authorized a stock repurchase
plan providing for the repurchase of up to 1,000,000 shares of the Company's
outstanding common stock in open market or privately negotiated
transactions.  All treasury stock acquired by the Company will be
cancelled and returned to the status of authorized but unissued
shares.  The plan does not have an expiration date.  As of
June 30, 2008 and December 31, 2007, a total of 153,600 shares and 123,600
shares had been repurchased, respectively.
 
 Contractual
Obligations
 
 Other
than the changes in the outstanding borrowings and capital commitments, as
described above, and Financial Accounting Standards Board Interpretation No. 48
liabilities, as described in Note 3 to the Condensed Consolidated Financial
Statements, there have been no material changes to the annual maturities of debt
obligations, future minimum, non-cancelable operating
lease payments and capital commitments as disclosed in Management’s Discussion
and Analysis of Financial Condition and Results of Operations and Notes 8 and
15, respectively, of Notes to Consolidated Financial Statements in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2007, as filed with
the Securities and Exchange Commission.
 
 Off-Balance
      Sheet Arrangements - Sales of Finance Contracts
  Receivable
 
 The sale
of finance contracts is an important component of the Company’s overall
liquidity.  The Company maintains an asset securitization facility
(“the Securitization Facility”) with a financial institution (the “Purchaser”)
whereby the Company can sell, through a revolving securitization facility,
retail and fleet installment sale contracts (“installment sale contracts” or
“finance contracts receivable”).  On March 31, 2008, the
Securitization Facility was amended to adjust the total facility size from $300
million to $200 million. The reduction in the facility size coincided with a
change to the agreement to allow the Company to sell contracts through other
arrangements including limited recourse arrangements at the Company’s
discretion.  The amendment also resolved all previous exceptions that
resulted in the reservation of rights agreement in operation at December 31,
2007.  At June 30, 2008, the Company was in compliance with all
facility requirements. The Purchaser’s commitment to purchase new contracts
under the Securitization Facility is subject to annual renewal in September
2008.  While the Company expects the Purchaser to renew for an
additional year, the Company
  -22-
  believes
that it has adequate liquidity to finance future contracts receivable through
limited recourse arrangements regardless of whether the Securitization Facility
is renewed by the Purchaser.  Under the Securitization Facility, the
Company sells portfolios of its finance contracts receivable to a wholly owned,
bankruptcy-remote special purpose subsidiary (“SPE”) which, in turn, sells each
such portfolio to a wholly owned bankruptcy-remote special purpose subsidiary of
the SPE.  The wholly-owned bankruptcy-remote special purpose
subsidiary of the SPE sells a participating interest in each such portfolio of
finance contracts receivable to the Purchaser (approximately 85% of the
discounted value of the finance contract receivable portfolio). The Purchaser
has no recourse against the Company for uncollectible finance contracts
receivable, if any; however, the Company’s retained interest in the portfolio of
finance contracts receivable is subordinate to the Purchaser’s
interest.  At June 30, 2008, the Company had available unused capacity
of $21.5 million under the Securitization Facility compared to $96.7
million at June 30, 2007.
 
 In
addition to the Securitization Facility, the Company has arrangements with
multiple financial institutions to sell its finance contracts receivable with 5%
limited recourse on the sold portfolio of retail finance
contracts.  The Company continues to service substantially all
contracts, whether or not sold.  At June 30, 2008, the Company
serviced $342.3 million finance contracts receivable of which $252.3 million,
$68.1 million and $3.7 million were sold through the Securitization Facility,
limited recourse arrangements and full recourse arrangements,
respectively.  At June 30, 2007, the Company serviced $375.5 million
finance contracts receivable of which $259.5 million, $77.6 million and $18.9
million were sold through the Securitization Facility, limited recourse
arrangements and full recourse arrangements, respectively.  The
Company intends to continue to sell substantially all of its existing and future
finance contracts through an asset securitization program or limited recourse
arrangements.  The Company believes that it will be able to arrange
sufficient capacity to sell its finance contracts for the foreseeable
future.
 
 Critical
Accounting Policies and Estimates
 
 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, 2007 as filed with the Securities and Exchange Commission.
  -23-
  
 Forward-Looking
Statements
  The
Company intends that 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 are
forward-looking statements.  When used in this filing, words such as
the Company “believes,” “anticipates,” “expects,” “estimates” or “projects” or
words of similar meaning are generally intended to identify forward-looking
statements.  These forward-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, those risk factors cited in the Company’s filings with the
Securities and Exchange Commission, any adverse change in general economic
conditions, unanticipated changes in capital market conditions, the Company’s
ability to implement successfully its strategic initiatives (including cost
reduction initiatives), market acceptance of newly introduced products,
unexpected issues related to the pricing and availability of raw materials
(including steel and rubber) and component parts, unanticipated difficulties in
securing product from third party manufacturing sources, the ability of the
Company to increase its prices to reflect higher prices for raw materials and
component parts, 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 or interest
rates, the Company’s ability to secure sources of liquidity necessary to fund
its operations, changes in environmental laws, the impact of any strategic
transactions 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 the future 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, 2007, as filed with the Securities and Exchange Commission.
 
 Item 4. Controls and
Procedures
 
 Disclosure
Controls and Procedures
 
 The
Company’s management, with the participation of the Company’s principal
executive officer and its principal financial officer, has evaluated the
Company’s disclosure controls and procedures as of June 30, 2008. Based upon
that evaluation, the Company’s principal executive
  -24-
  officer
and its principal financial officer have concluded that the Company’s disclosure
controls and procedures were effective as of June 30, 2008.
 
 Changes
in Internal Control Over Financial Reporting
 
 There was
no change in the Company’s internal control over financial reporting (as such
term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that
occurred during the three months ended June 30, 2008, that has materially
affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting.
 
 PART
II – Other Information
 
 Item 1A.  Risk Factors
 
 There has
not been any material change in the risk factors previously disclosed in the
Company’s Annual Report on Form 10-K for the fiscal year ended December 31,
2007.
 
 Item 2.  Unregistered Sales of Equity Securities and
Use of Proceeds
 
 On
October 26, 2007, the Company’s Board of Directors authorized a stock repurchase
plan providing for the repurchase of up to 1,000,000 shares of the Company's
outstanding common stock in open market or privately negotiated
transactions.  All treasury stock acquired by the Company will be
cancelled and returned to the status of authorized but unissued
shares.  The plan does not have an expiration date.  There
were no repurchases of shares in the three months ended June 30,
2008.  As of June 30, 2008, a total of 153,600 shares had been
repurchased, and the Company has authority to purchase an additional 846,400
shares.
 
 Item 4.  Submission of Matters to a
Vote of Security Holders
  At the
Company’s 2008 annual meeting of shareholders held on April 25, 2008, Thomas J.
Boldt and Bruce D. Hertzke were re-elected as directors of the Company for terms
expiring at the 2011 annual meeting of shareholders:
 
 Name of Nominee
              Shares Voted For
              Shares Withholding
  AuthorityThomas
      J. Boldt
              8,229,104
              3,064,734Bruce
      D. Hertzke
              8,226,894
              3,066,944
 
 The
following table sets forth the other directors of the Company whose terms of
office continued after the 2008 annual meeting:
 
 Name of Director
              Year in Which Term
  ExpiresJohn
      T. Byrnes
              2009Richard
      J. Fotsch
              2009Dr.
      Herman Viets
              2009Marcel-Claude
      Braud
              2010William
      D. Gehl
              2010John
      W. Splude
              2010
 
 In
addition, at the 2008 annual meeting, shareholders approved the appointment of
PricewaterhouseCoopers LLP as the Company’s independent registered public
accounting firm for fiscal year 2008.  With respect to such approval,
the number of shares voted for and against were 11,251,334 and 31,160,
respectively.  The number of shares abstaining was
11,344.
  -25-
  
 
 
 Item
6.  Exhibits
 
 Exhibit No.
              Document Description10.1
              Employment
      Agreement, dated June 5, 2008, by and between Gehl Company and William D.
      Gehl [Incorporated by reference to Exhibit 10.1 to the Company’s Current
      Report on Form 8-K filed on June 11, 2008]10.2
              Amended
      and restated Supplemental Retirement Benefit Agreement, dated June 5,
      2008, by and between Gehl Company and William D. Gehl [Incorporated by
      reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
      filed on June 11, 2008]10.3
              Amended
      and restated Supplemental Retirement Benefit Agreement, dated June 5,
      2008, by and between Gehl Company and Malcolm F. Moore [Incorporated by
      reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K
      filed on June 11, 2008]10.4
              Form
      of amended and restated Supplemental Retirement Benefit Agreement, dated
      June 5, 2008, by and between Gehl Company and each of Daniel M. Keyes and
      Daniel L. Miller [Incorporated by reference to Exhibit 10.4 to the
      Company’s Current Report on Form 8-K filed on June 11, 2008]10.5
              Form
      of amended and restated Change in Control and Severance Agreement, dated
      June 5, 2008, by and between Gehl Company and each of Messrs. Moore, Keyes
      and Miller [Incorporated by reference to Exhibit 10.5 to the Company’s
      Current Report on Form 8-K filed on June 11, 2008]10.6
              Amendment
      No. 6 to Receivables Purchase Agreement, dated as of July 11, 2008, among
      Gehl Funding II, LLC, and Company, Park Avenue Receivables Company, LLC
      and JPMorgan Chase Bank, N.A. [Incorporated by reference to Exhibit 10.1
      to the Company’s Current Report on Form 8-K filed on July 15,
      2008]31.1
              Certification
      of the Chief Executive Officer pursuant to section 302 of the
      Sarbanes-Oxley Act of 2002.31.2
              Certification
      of the Chief Operating Officer pursuant to section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
              Certification
      of Periodic Financial Report by the Chief Executive Officer and Chief
      Operating Officer pursuant to section 906 of the Sarbanes-Oxley Act of
      2002.
  -26-
  
 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
      COMPANYDate:  August
      8, 2008
              By:
              /s/ William D.
      GehlWilliam
      D. GehlChairman
      of the Boardand
      Chief Executive OfficerDate:  August
      8, 2008
              By:
              /s/ Malcolm F.
      MooreMalcolm
      F. MoorePresident
      andChief
      Operating Officer(Principal
      Financial Officer)
 
  -27-
  
 GEHL
      COMPANYINDEX
      TO EXHIBITSExhibit No.
              Document Description10.1
              Employment
      Agreement, dated June 5, 2008, by and between Gehl Company and William D.
      Gehl [Incorporated by reference to Exhibit 10.1 to the Company’s Current
      Report on Form 8-K filed on June 11, 2008]10.2
              Amended
      and restated Supplemental Retirement Benefit Agreement, dated June 5,
      2008, by and between Gehl Company and William D. Gehl [Incorporated by
      reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K
      filed on June 11, 2008]10.3
              Amended
      and restated Supplemental Retirement Benefit Agreement, dated June 5,
      2008, by and between Gehl Company and Malcolm F. Moore [Incorporated by
      reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K
      filed on June 11, 2008]10.4
              Form
      of amended and restated Supplemental Retirement Benefit Agreement, dated
      June 5, 2008, by and between Gehl Company and each of Daniel M. Keyes and
      Daniel L. Miller [Incorporated by reference to Exhibit 10.4 to the
      Company’s Current Report on Form 8-K filed on June 11, 2008]10.5
              Form
      of amended and restated Change in Control and Severance Agreement, dated
      June 5, 2008, by and between Gehl Company and each of Messrs. Moore, Keyes
      and Miller [Incorporated by reference to Exhibit 10.5 to the Company’s
      Current Report on Form 8-K filed on June 11, 2008]10.6
              Amendment
      No. 6 to Receivables Purchase Agreement, dated as of July 11, 2008, among
      Gehl Funding II, LLC, and Company, Park Avenue Receivables Company, LLC
      and JPMorgan Chase Bank, N.A. [Incorporated by reference to Exhibit 10.1
      to the Company’s Current Report on Form 8-K filed on July 15,
      2008]31.1
              Certification
      of the Chief Executive Officer pursuant to section 302 of the
      Sarbanes-Oxley Act of 2002.31.2
              Certification
      of the Chief Financial Officer pursuant to section 302 of the
      Sarbanes-Oxley Act of 2002.32.1
              Certification
      of Periodic Financial Report by the Chief Executive Officer and Chief
      Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of
      2002.
 
  -28-