# FORM 10-QUNITED STATES
SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549

|[X] | QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF 1934
|--- | --------------------------------------------------------------------------------------

# For the Quarterly Period
Ended March 31, 2006

# OR

|[   ] | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE                     ACT OF 1934
|----- | ------------------------------------------------------------------------------------------------------------

# For the transition
period from ____________ to  ____________

Commission file number
0-18110

|Gehl Company                                          
|------------------------------------------------------
|(Exact name of registrant as specified in its charter)

|Wisconsin                                     | 39-0300430                          
|--------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation | (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  X          No

Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
See definition of accelerated filer and large accelerated filer in Rule 12b-2
of the Exchange Act.

Large accelerated filer  
    Accelerated filer  X    Non-accelerated filer

Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).        Yes  
        No  X

Indicate the number of shares
outstanding of each of the issuers classes of common stock, as of the latest
practicable date.

|Class                        | Outstanding at March 31, 2006
|---------------------------- | -----------------------------
|Common Stock, $.10 Par Value | 12,041,535                   

---

# Gehl Company

# FORM 10-Q

# March 31, 2006

# Report Index

|                                                                                  
|----------------------------------------------------------------------------------
|PART I. - Financial Information                                                   
|Item 1. Financial Statements                                                      
|Condensed Consolidated Statements of Operations for the Three-Month Periods Ended 
|March 31, 2006 and April 2, 2005                                                  
|Condensed Consolidated Balance Sheets at March 31, 2006,                          
|December 31, 2005, and April 2, 2005                                              
|Condensed Consolidated Statements of Cash Flows for the Three-Month Periods Ended 
|March 31, 2006 and April 2, 2005                                                  
|Notes to Condensed Consolidated Financial Statements                              
|Item 2. Managements Discussion and Analysis of Financial Condition and Results of
|Operations                                                                        
|Item 3. Quantitative and Qualitative Disclosures about Market Risk                
|Item 4. Controls and Procedures                                                   
|PART II. - Other Information                                                      
|Item 1A. Risk Factors                                                             
|Item 2. Unregistered Sales of Equity Securities and Use of Proceeds               
|Item 6. Exhibits                                                                  
|Signatures                                                                        

-2-

---

# PART I  Financial
Information

# Item 1. Financial
Statements

# Gehl Company and
SubsidiariesCondensed Consolidated Statements of Operations (unaudited and in thousands,
except per share data)

|                                                       
|-------------------------------------------------------
|April 2, 2005                                          
|Net sales                                              
|Cost of goods sold                                     
|                                                       
|Gross profit                                           
|Selling, general and administrative expenses           
|                                                       
|Income from operations                                 
|Interest expense                                       
|Interest income                                        
|Other expense, net                                     
|                                                       
|Income from continuing operations before income taxes  
|Provision for income taxes                             
|                                                       
|Income from continuing operations                      
|(Loss) income from discontinued operations, net of tax 
|Loss on disposal of discontinued operations, net of tax
|                                                       
|Net (loss) income                                      
|                                                       
|Diluted (loss) earnings per share(1):                  
|Continuing operations                                  
|Discontinued operations                                
|                                                       
|Total diluted (loss) earnings per share                
|                                                       
|Basic (loss) earnings per share(1):                    
|Continuing operations                                  
|Discontinued operations                                
|                                                       
|Total basic (loss) earnings per share                  
|                                                       

(1)           2005 data adjusted to
reflect the August 2005 three-for-two common stock split.

The accompanying notes
are an integral part of the financial statements.

-3-

---

# Gehl Company and
SubsidiariesCondensed Consolidated Balance Sheets  (unaudited and in thousands, except
share data)

|                                                         | March 31, 2006
|-------------------------------------------------------- | --------------
|Assets                                                   |               
|Cash                                                     |               
|Accounts receivable - net                                |               
|Finance contracts receivable - net                       |               
|Inventories                                              |               
|Assets of discontinued operations - net (Note 3)         |               
|Deferred income tax assets                               |               
|Prepaid expenses and other current assets                |               
|                                                         |               
|Total current assets                                     |               
|                                                         |               
|Property, plant and equipment - net                      |               
|Retained interest in sold finance contracts, non-current |               
|Finance contracts receivable - net, non-current          |               
|Goodwill                                                 |               
|Other assets                                             |               
|                                                         |               
|Total assets                                             |               
|                                                         |               
|Liabilities and Shareholders Equity                     |               
|Current portion of long-term debt obligations            |               
|Short-term debt obligations                              |               
|Accounts payable                                         |               
|Liabilities of discontinued operations (Note 3)          |               
|Accrued and other current liabilities                    |               
|                                                         |               
|Total current liabilities                                |               
|                                                         |               
|Line of credit facility                                  |               
|Long-term debt obligations                               |               
|Deferred income tax liabilities                          |               
|Other long-term liabilities                              |               
|                                                         |               
|Total long-term liabilities                              |               
|                                                         |               
|Common stock, $.10 par value, 25,000,000 shares          |               
|authorized, 12,041,535, 12,009,527 and 10,143,229        |               
|shares outstanding, respectively(1)                      |               
|Preferred stock, $.10 par value, 2,000,000 shares        |               
|authorized, 250,000 shares designated as Series A        |               
|preferred stock, no shares issued                        |               
|Capital in excess of par(1)                              |               
|Retained earnings                                        |               
|Accumulated other comprehensive loss                     |               
|                                                         |               
|Total shareholders equity                               |               
|                                                         |               
|Total liabilities and shareholders equity               |               
|                                                         |               

(1)           2005 data adjusted to
reflect the August 2005 three-for-two common stock split.

The accompanying notes
are an integral part of the financial statements.

-4-

---

# Gehl Company and
SubsidiariesCondensed Consolidated Statements of Cash Flows  (unaudited and in thousands)

|                                                        
|--------------------------------------------------------
|April 2, 2005                                           
|Cash Flows from Operating Activities                    
|Net (loss) income                                       
|Adjustments to reconcile net (loss) income to net cash  
|provided by (used for) operating activities:            
|Loss on discontinued operations (non-cash), net of taxes
|Depreciation and amortization                           
|Compensation expense for share-based payments           
|Cost of sales of finance contracts                      
|Proceeds from sales of finance contracts                
|Increase in finance contracts receivable                
|Increase in retained interest in sold finance contracts,
|non-current                                             
|Increase (decrease) in cash due to changes in:          
|Accounts Receivable - net                               
|Inventories                                             
|Accounts Payable                                        
|Remaining working capital items                         
|                                                        
|Net cash provided by (used for) operating activities    
|                                                        
|Cash Flows from Investing Activities                    
|Property, plant and equipment additions                 
|Proceeds from the sale of property, plant and equipment 
|Decrease in other assets                                
|                                                        
|Net cash used for investing activities                  
|                                                        
|Cash Flows from Financing Activities                    
|(Repayments on) proceeds from revolving credit loans    
|Proceeds from short-term borrowings                     
|Repayments of short-term borrowings                     
|Repayments of other borrowings                          
|Proceeds from exercise of stock options                 
|                                                        
|Net cash (used for) provided by financing activities    
|                                                        
|Net (decrease) increase in cash                         
|Cash, beginning of period                               
|                                                        
|Cash, end of period                                     
|                                                        
|Supplemental disclosure of cash flow information:       
|Cash paid for the following:                            
|Interest                                                
|Income taxes                                            

The accompanying notes
are an integral part of the financial statements.

-5-

---

Gehl Company and
Subsidiaries  Notes to Condensed Consolidated Financial StatementsMarch 31, 2006
 (Unaudited)

# Note 1  Basis of
Presentation

The
condensed consolidated financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the Securities and
Exchange Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally accepted
in the United States of America have been condensed or omitted pursuant to such rules and
regulations, although management believes that the disclosures are adequate to make the
information presented not misleading.

In
the opinion of management, the information furnished for the three-month periods ended
March 31, 2006 and April 2, 2005 includes all adjustments, consisting only of normal
recurring accruals, necessary for a fair presentation of the results of operations and
financial position of the Company. Certain prior year amounts have been reclassified to
conform to the current year presentation. Such reclassifications had no impact on
previously reported net income. Due, in part, to the seasonal nature of the Companys
business, the results of operations for the three-month period ended March 31, 2006 are
not necessarily indicative of the results to be expected for the entire year.

Effective
January 1, 2006, the Companys fiscal quarter-ends were converted to calendar
quarter-ends on a prospective basis. For the first quarter of 2006, the prior year
comparative period consists of two additional days. The Companys year-end will
remain December 31 consistent with all prior years.

It
is suggested that these interim financial statements be read in conjunction with the
financial statements and notes thereto included in the Companys Annual Report on
Form 10-K for the year ended December 31, 2005 as filed with the Securities and Exchange
Commission.

# Note 2 
Significant Accounting Policies

Stock-Based
Compensation: Effective January 1, 2006, the Company adopted Statement of Financial
Accounting Standard (SFAS) No. 123R, Share-Based Payment
(SFAS No. 123R) using the modified prospective method, in which compensation
cost was recognized beginning with the effective date based on the requirements of SFAS
No. 123R for all share-based payments granted after the effective date and all awards
granted to employees prior to the effective date of SFAS No. 123R that were unvested on
the effective date.

Prior
to adopting SFAS No. 123R, as permitted under SFAS No. 123, Accounting for
Stock-Based Compensation (SFAS No. 123), the Company elected to follow Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees
(APB No. 25), and related interpretations in accounting for stock-based awards
to employees through December 31, 2005. Accordingly, compensation cost for stock options
and restricted stock grants was measured as the excess, if any, of the market price of the
Companys common stock at the date of grant over the exercise price. All employee
stock options were granted at the grant day market price resulting in no compensation cost
for prior periods. All stock-based compensation expense prior to the adoption of SFAS No.
123R related to restricted stock grants. See Note 4, Stock-Based Compensation,
for more information.

-6-

---

# Note 3 
Discontinued Operations

During
March 2006, the Company decided to discontinue the manufacturing and distribution of
agricultural implement products. The agricultural implement business included one
manufacturing facility and related manufacturing machinery and equipment. The reduction in
headcount is expected to total 140 employees which includes both manufacturing and
administrative positions related to the agricultural implements business. As a result of
this action, the Condensed Consolidated Financial Statements and related notes have been
restated to present the results of the agricultural implement business as a discontinued
operation.

The
discontinuation of the agricultural implement business resulted in an after-tax charge to
the Companys earnings for the three months ended March 31, 2006 of $8.9 million, or
$0.72 per diluted share. The after-tax charge is comprised of a $7.6 million non-cash
asset impairment charge, related to agricultural implement field and factory inventory and
certain property, plant and equipment, and a $1.3 million cash charge related to severance
and other employee termination costs. In addition to the after-tax charge recognized in
the three months ended March 31, 2006, the company will record an after-tax charge related
to additional severance and other employee termination costs in the second quarter of 2006
of approximately $0.5 million.

At
March 31, 2006, the pre-tax charge associated with the discontinued operation consisted of
the following (in thousands):

|                                     
|-------------------------------------
|Employee severance & related benefits
|Asset Impairment                     
|                                     
|Total                                
|                                     

The
Company has reflected the results of its agricultural implements business as discontinued
operations in the Condensed Consolidated Statements of Operations and prior periods have
been restated. Summary results of operations for the agricultural implements business were
as follows (in thousands):

|March 31, 2006                                    
|--------------------------------------------------
|Net sales                                         
|Pretax (loss) income from discontinued operations 
|Pretax loss on disposal of discontinued operations
|Income tax (benefit) expense                      
|                                                  
|Net (loss) income from discontinued operations    
|                                                  

-7-

---

The assets of the agricultural
implements business are reflected as net assets of discontinued operations in the
Condensed Consolidated Balance Sheets and were as follows (in thousands):

|March 31, 2006                        
|--------------------------------------
|Accounts receivable, net              
|Inventories                           
|Property, plant, and equipment, net   
|                                      
|Assets of discontinued operations, net
|                                      

# Note 4 
Stock-Based Compensation

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, stock appreciation right, restricted stock or
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 be more than ten years after the grant date.

Stock option activity under all of
the Companys equity incentive plans since December 31, 2005 is summarized as
follows:

|                              
|------------------------------
|Outstanding, December 31, 2005
|                              
|Granted                       
|                              
|Exercised                     
|                              
|Cancelled                     
|                              
|Outstanding, March 31, 2006   
|                              

In
the three months ended March 31, 2006, the Company awarded 108,284 stock options to
purchase common stock to certain key employees. Awards of stock options under the plans
are subject to certain vesting requirements. There were no options granted in the three
months ended April 2, 2005. The options granted in the three months ended March 31, 2006
had a weighted average grant date fair value of $15.68. The aggregate intrinsic value of
the shares exercised during the three months ended March 31, 2006 totaled $0.2 million.

-8-

---

Options outstanding under the plans
at March 31, 2006 were as follows:

|Range of Exercise
Prices | Outstanding at
March 31, 2006 | Weighted Average
Remaining
Contractual
Life (years) | Weighted Average
Exercise Price
per Share | Aggregate
Intrinsic
Value (000s)
|------------------------ | ----------------------------- | --------------------------------------------------- | ----------------------------------------- | ---------------------------------
|$   5.00 - $  9.99       | 452,887                       | 5.86                                                | $  8.50                                   | $  11,150                        
|$ 10.00 - $14.99         | 196,718                       | 4.69                                                | 11.97                                     | 4,162                            
|$ 15.00 - $19.99         | 143,475                       | 8.78                                                | 17.16                                     | 2,289                            
|$ 30.00 - $34.99         | 108,284                       | 9.91                                                | $34.04                                    | $     (100)                      
|                        

Options exercisable under the plan at
March 31, 2006 were as follows:

|Range of Exercise
Prices | Exercisable Shares
at
March 31, 2006 | Weighted Average
Exercise Price
per Share at
March 31, 2006 | Aggregate
Intrinsic
Value (000s)
|------------------------ | ------------------------------------ | ----------------------------------------------------------- | ---------------------------------
|$  5.00 - $  9.99        | 410,398                              | $  8.49                                                     | $  10,107                        
|$10.00 - $14.99          | 167,573                              | $11.98                                                      | 3,543                            
|$15.00 - $19.99          | 39,427                               | $16.63                                                      | $      650                       

In
2006 and 2005, 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 ranging from three to five years. Following is a summary of
restricted stock activity in the 2004 Equity Incentive Plan for the three months ended
March 31, 2006:

|                                         
|-----------------------------------------
|Outstanding (unvested), December 31, 2005
|                                         
|Granted                                  
|                                         
|Vested                                   
|                                         
|Forfeited                                
|                                         
|Outstanding (unvested), March 31, 2006   
|                                         

Effective
January 1, 2006, the Company adopted the provisions of SFAS No. 123R which establishes
accounting for equity instruments exchanged for employee services. Under the provisions of
SFAS No. 123R, share-based compensation cost is measured at the grant date, based on a
calculated fair value of the award, and is recognized as an expense over the
employees requisite service period (vesting period of the equity grant). Prior to
January 1, 2006, the Company accounted for share-based compensation to employees in
accordance with APB No. 25 and related interpretations. The Company also followed the
disclosure requirements of SFAS No. 123 as amended by SFAS No. 148, Accounting for
Stock-Based Compensation  Transition and Disclosure (SFAS No.
148). The Company elected to adopt the modified prospective transition method as
provided by SFAS No. 123R and, accordingly, financial statement amounts for the prior
periods presented in this Form 10-Q have not been restated to reflect the fair value
method of expensing share-based compensation.

-9-

---

The
Company estimates the fair value of stock options using the Black-Scholes valuation model.
Key input assumptions used to estimate the fair value of stock options include the
exercise price of the award, the expected option term, the expected volatility of the
Companys stock over the options expected term, the risk-free interest rate
over the options expected term, and the Companys expected annual dividend
yield. The Company believes that the valuation technique and the approach utilized to
develop the underlying assumptions are appropriate in calculating the fair values of the
Companys stock options granted in the three months ended March 31, 2006. Estimates
of fair value are not intended to predict actual future events or the value ultimately
realized by persons who receive equity awards.

The
Company granted stock options on February 24, 2006. The fair value of the option grant was
estimated on the grant date using the Black-Scholes option-pricing model with the
following assumptions:

| | Expected option term (1)       | 6.0 years | 
| | ------------------------------ | --------- | 
| | Expected volatility factor (2) | 39.82%    | 
| | Risk-free interest rate (3)    | 4.60%     | 
| | Expected annual dividend yield | 0.00%     | 

| | (1) | The
option term was determined using the simplified method for estimating option
          life under Staff Accounting Bulletin No. 107 Share-Based Payment,          which
expresses the SEC staffs views regarding the interaction between           SFAS No.
123R and certain SEC rules including the valuation of share-based           payments.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | The
stock volatility for each grant is based on the historical volatility of the
          Companys Common Stock over the most recent period equal to the expected
          option life of the grant.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3) | The
risk-free interest rate for periods equal to the expected term of the share
          option is based on the 6-year U.S. Treasury Strip Rate in effect at the date of
          the grant.
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

For
the three months ended March 31, 2006, the Company recognized pre-tax compensation expense
of $0.2 million related to unvested stock options. The after tax impact totaled $0.1
million or $0.01 per diluted share. As of March 31, 2006, there was $3.8 million of total
unrecognized compensation cost related to unvested share-based compensation arrangements
granted under the Companys equity incentive plans. That cost is expected to be
recognized over a weighted-average period of 1.8 years.

The
Company did not recognize compensation expense for employee share-based awards for the
three months ended April 2, 2005, as the exercise price of the Companys employee
stock awards equaled the market price of the underlying stock on the date of grant. The
Company did recognize compensation expense under APB No. 25 relating to certain restricted
stock grants as the grants have no exercise price.

-10-

---

The
Company had previously adopted the provisions of SFAS No. 123 as amended by SFAS No. 148
through disclosure only. The following table illustrates the effects on net income and
earnings per share for the three months ended April 2, 2005 as if the Company had applied
the fair value recognition provisions of SFAS No. 123 to share based employee awards (in
thousands, except per share data).

|Three months ended                                      | April 2, 2005
|------------------------------------------------------- | -------------
|Net income, as reported                                 |              
|Add: stock-based compensation expense included in       |              
|reported net income under APB No. 25                    |              
|Less: stock-based compensation expense determined based |              
|on fair value method, net of tax                        |              
|                                                       
|Pro forma net income                                    |              
|                                                       
|Diluted net income per share:                           |              
|As reported                                             |              
|Pro forma                                               |              
|Basic net income per share:                             |              
|As reported                                             |              
|Pro forma                                               |              
|                                                       

# Note 5  Income
Taxes

The
income tax provision is determined by applying an estimated annual effective income tax
rate to income before income taxes. The estimated annual effective income tax rate is
based on the most recent annualized forecast of pretax income, permanent book/tax
differences and tax credits.

# Note 6  Finance
Contracts Receivable Financing

In
March 2006, the Company entered into an asset securitization facility (the
Securitization Facility) with a financial institution (the Purchaser)
whereby the Company can sell, through a revolving securitization facility, up to $300
million of retail and fleet installment sale contracts (installment sale
contracts or finance contracts receivable). The Securitization Facility
has a final maturity date in March 2009, subject to annual renewal 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 90% 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. The Company incurred one-time transaction costs of $0.7 million,
which are included in other expense in the accompanying Condensed Consolidated Statement
of Operations, related to the implementation of the Securitization Facility.

The Securitization Facility replaced
the previous $150 million revolving securitization facility the Company terminated in
February 2006. The participating interest in finance contracts receivable that had been
sold under the previous securitization facility was purchased by the Purchaser in March
2006.

-11-

---

The
following summarizes the Companys sales of retail finance contracts receivable
through asset securitization facilities during the three months ended March 31, 2006 and
April 2, 2005 (in thousands):

|                                    | March 31, 2006
|----------------------------------- | --------------
|Value of contracts sold             |               
|Cash received on sales of contracts |               
|                                   
|Retained interest in contracts sold |               
|                                   
|Cost of sales of finance contracts  |               
|                                   

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 on historical results. At March 31, 2006, the fair value of
the retained interest was calculated using an interpolated risk-free rate of return of
4.82% based on U.S. Treasury rates, an approximate 17 month weighted-average prepayable
portfolio life and an approximate 1.2% annual 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 $0.2 million.
A 10% increase in the annual loss rate would decrease the fair value of the retained
interest by $0.6 million. The Company received $1.4 million in cash flows related to the
retained interest during the three months ended March 31, 2006. Retained interest of $5.2
million was included in other current assets and $21.5 million was included in other
assets in the accompanying Condensed Consolidated Balance Sheet at March 31, 2006.

The
total credit capacity under the 2006 Securitization Facility is $300 million, with finance
contracts receivable sold and being serviced by the Company totaling $145.4 million at
March 31, 2006. Of the $145.4 million in sold contracts receivable, $3.4 million were
greater than 60 days past due at March 31, 2006. There were no credit losses on contracts
sold through the Securitization Facility during the three months ended March 31, 2006.

During
the three months ended April 2, 2005, the loss on sale of finance contracts receivable was
partially offset by a $1.1 million realized gain on interest rate swap contracts that were
put in place to hedge gains / losses on the sale of finance contracts receivable (see Note
13). The Company received $0.3 and $0.0 million in service fee income during the three
months ended March 31, 2006 and April 2, 2005, respectively.

In
addition to the sale of finance contracts receivable through the asset securitization
program, the Company sold finance contracts through limited recourse arrangements during
2006 and 2005. 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 periods ended March 31, 2006, and April 2,
2005 (in thousands):

|                                    | 2006
|----------------------------------- | ----
|Value of contracts sold             |     
|Cash received on sales of contracts |     
|                                   
|Cost of sales of finance contracts  |     
|                                   

-12-

---

At
March 31, 2006, the Company serviced $297.9 million of sold finance contracts receivable
of which $145.4 million, $85.5 million and $66.9 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 66 months, with fixed interest rates based on market conditions at the time of
origination. 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 Consolidated Balance Sheets and the proceeds received are included in cash
flows from operating activities in the accompanying Consolidated Statement of Cash Flows.

# Note 7  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):

|                            | March 31, 2006
|--------------------------- | --------------
|Raw materials and supplies  |               
|Work-in-process             |               
|Finished machines and parts |               
|                            |               
|Total current cost value    |               
|Adjustment to LIFO basis    |               
|                            |               
|                            |               
|                            |               

# Note 8  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 three-month periods ended March
31, 2006 and April 2, 2005 were as follows (in thousands):

|Three months ended                                      | March 31, 2006 | April 2, 2005
|------------------------------------------------------- | -------------- | -------------
|Beginning balance                                       |                |              
|Accruals for warranties issued during the period        |                |              
|Accruals related to pre-existing warranties             |                |              
|(including changes in estimates)                        |                |              
|Settlements made (in cash or in kind) during the period |                |              
|                                                        |                |              
|Ending balance                                          |                |              
|                                                        |                |              

-13-

---

# Note 9  Employee
Retirement Plans

The
Company sponsors two qualified defined benefit pension plans (pension plans)
for certain of its employees. The following table provides disclosure of the net periodic
benefit cost (in thousands):

|March 31, 2006                    
|----------------------------------
|Service cost                      
|Interest cost                     
|Expected return on plan assets    
|Amortization of prior service cost
|Amortization of net loss          
|                                  
|Net periodic benefit cost         
|                                  

The
Company recorded a $0.7 million pension curtailment related to discontinued operations
(see Note 3, Discontinued Operations). The Company anticipates making $0.3
million of contributions to the pension plans during 2006. No contributions were made
during the three-month period ended March 31, 2006.

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):

|March 31, 2006                    
|----------------------------------
|Service cost                      
|Interest cost                     
|Amortization of prior service cost
|Amortization of net loss          
|                                  
|Net periodic benefit cost         
|                                  

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):

|March 31, 2006                       
|-------------------------------------
|Service cost                         
|Interest cost                        
|Amortization of transition obligation
|Amortization of net loss             
|                                     
|Net periodic benefit cost            
|                                     

# 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.

-14-

---

A reconciliation of the shares used
in the computation of earnings per share follows (in thousands):

|                               | March 31, 2006
|------------------------------ | --------------
|Basic shares                   |               
|Effect of options and unvested |               
|restricted stock               |               
|                               |               
|Diluted shares                 |               
|                               |               

For
the three month ended March 31, 2006, 108,284 options to purchase common shares and 26,257
restricted stock shares were antidilutive and, accordingly, excluded from the effect of
options and unvested restricted stock in the calculation of diluted EPS.

The
components of comprehensive (loss) income are as follows (in thousands):

|                            
|----------------------------
|April 2, 2005               
|Net (loss) income           
|Foreign currency translation
|adjustments                 
|Unrealized gains (losses)   
|                            
|Other comprehensive loss    
|                            
|Comprehensive (loss) income 
|                            

# Note 11  Business
Segments

SFAS
No. 131, Disclosures about Segments of an Enterprise and Related Information,
establishes the standards for reporting information about operating segments in financial
statements.  Historically the Company had two operating and reportable segments,
construction equipment and agricultural equipment.  The products in the historical
agricultural equipment segment included material handling equipment (skid loaders,
telescopic handlers, compact excavators, compact track loaders and all-wheel-loaders) and
agricultural implement products for haymaking, forage harvesting, feedmaking and manure
handling.  In the first quarter of 2006, the Company re-evaluated its operating and
reportable segments in connection with the discontinuation of the manufacturing and
distribution of its agricultural implement business and determined that it now has only
one operating and reportable segment.  Sales of material handling equipment that were
previously included in the agricultural equipment segment and sales that were previously
included in the construction equipment segment are now combined for both internal and
external reporting purposes.

# Note 12  Financial
Instruments

The
Company selectively uses interest rate swaps to reduce market risk associated with changes
in interest rates. The use of derivatives is restricted to those intended for hedging
purposes.

The
Companys revolving credit facility is primarily LIBOR-based and is subject to
interest rate changes. In order to manage interest rate exposures, the Company entered
into a forward starting interest rate swap agreement with a 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 are an aggregate swapped
notional amount of $40 million through January 2008. The aggregate notional amount of the
swap decreases to $30 million effective January 2008, $20 million effective January 2009,
$10 million effective January 2010 and 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 variable to fixed interest rate swap is designated as an effective cash-flow hedge as
defined by SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities (SFAS No. 133). Accordingly, the fair value of the swap was
recorded on the balance sheet, with changes in fair value included in other comprehensive
(loss) income in the amount of $0.3 million for the three-month period ended March 31,
2006. Swap gains or losses included in other comprehensive (loss) income are reclassified
into earnings at the time the related interest expense is recognized or settlement of the
obligation occurs.

-15-

---

During
the three months ended April 2, 2005, the Company was a party to three interest rate swap
agreements. The swaps were hedges protecting against underlying changes in interest rates
and their impact on the gains / losses incurred upon the sale of finance contracts
receivable. Accordingly, the implied gains / losses associated with the fair values of
interest rate swaps would be offset by gains / losses on the sale of the underlying retail
finance contracts. Under the swaps, the Company received interest on a variable London
Interbank Offered Rate for one-month deposits and pays on a fixed rate ranging from of
3.18% to 3.41%.

The
Companys derivative instruments are recorded at fair value in the Condensed
Consolidated Balance Sheet. At April 2, 2005, the notional amount of the swaps totaled
$61.3 million and fair value adjustments of $1.2 million were recorded as a current asset.
Under the provisions of SFAS No. 133, the swaps were deemed ineffective as of April 2,
2005 as the finance contracts that were owned by the Company at the inception of the swaps
had been sold during the three-month period ended April 2, 2005. As a result, the Company
recorded $1.1 million of other income in the three-month period ended April 2, 2005, which
more than offset the $0.4 million loss incurred on the sale of finance contracts during
the period. Changes, if any, in the fair value of the swaps from April 2, 2005 to the time
the Company terminated the swaps was recorded as other income or expense. The Company did
not terminate the swaps during the three-month period ended April 2, 2005 because the
swaps continued to provide an economic hedge for the finance contracts still owned by the
Company for future sales. The Company terminated the swaps during the second quarter of
2005.

-16-

---

# Item 2.
Managements Discussion and Analysis of Financial Condition and Results of
Operations

# Discontinued Operations

During March 2006, the Company
decided to discontinue the manufacturing and distribution of its agricultural implement
products. The agricultural implement business included one manufacturing facility and
related manufacturing machinery and equipment. The reduction in headcount is expected to
total 140 employees, which includes both manufacturing and administrative positions
related to the agricultural implement business. As a result of this action, the Condensed
Consolidated Financial Statements and related notes have been restated to present the
results of the agricultural implement business as discontinued operations.

The
discontinuation of the agricultural implements business resulted in an after-tax charge to
the Companys earnings for the three months ended March 31, 2006 of $8.9 million, or
$0.72 per diluted share. The after-tax charge is comprised of a $7.6 million non-cash
asset impairment charge, related to agricultural implement field and factory inventory and
certain property, plant and equipment, and a $1.3 million cash charge related to severance
and other employee termination costs. In addition to the after-tax charge recognized in
the three months ended March 31, 2006, the Company will record an after-tax charge related
to additional severance and other employee termination costs in the second quarter of 2006
of approximately $0.5 million.

The
Company has reflected the results of its agricultural implement business as discontinued
operations on the Condensed Consolidated Statements of Operations and prior periods have
been restated. Summary results of operations for the agricultural implement business were
as follows (in thousands):

|March 31, 2006                                    
|--------------------------------------------------
|Net sales                                         
|Pretax (loss) income from discontinued operations 
|Pretax loss on disposal of discontinued operations
|Income tax (benefit) expense                      
|                                                  
|Net (loss) income from discontinued operations    
|                                                  

The
assets of the agricultural implements business are reflected as net assets of discontinued
operations on the Condensed Consolidated Balance Sheets and were as follows (in
thousands):

|March 31, 2006                        
|--------------------------------------
|Accounts receivable, net              
|Inventories                           
|Property, plant, and equipment, net   
|                                      
|Assets of discontinued operations, net
|                                      

-17-

---

# Business Segments

SFAS
No. 131, Disclosures about Segments of an Enterprise and Related Information,
establishes the standards for reporting information about operating segments in financial
statements.  Historically the Company had two operating and reportable segments,
construction equipment and agricultural equipment.  The products in the historical
agricultural equipment segment included material handling equipment (skid loaders,
telescopic handlers, compact excavators, compact track loaders and all-wheel-loaders) and
agricultural implement products for haymaking, forage harvesting, feedmaking and manure
handling.  In the first quarter of 2006, the Company re-evaluated its operating and
reportable segments in connection with the discontinuation of the manufacturing and
distribution of its agricultural implement business and determined that it now has only
one operating and reportable segment.  Sales of material handling equipment that were
previously included in the agricultural equipment segment and sales that were previously
included in the construction equipment segment are now combined for both internal and
external reporting purposes.

# Results of Operations

# Three Months Ended March
31, 2006 Compared to Three Months Ended April 2, 2005

# Net Sales

Net
sales in the three months ended March 31, 2006 (2006 first quarter) were
$122.1 million compared to $108.9 million in the three months ended April 2, 2005
(2005 first quarter), an increase of $13.2 million, or 12%. Net sales, in
general, were favorably impacted by the continued strength of the Companys
construction markets. Demand for the Companys telescopic handlers and compact track
loaders remained robust during the 2006 first quarter as shipments increased 55% and 15%,
respectively, from the 2005 first quarter. Shipments of the Companys skid loaders,
including shipments of skid loaders by the Companys European subsidiary, Gehl
Europe, increased 4% from the 2005 first quarter. The Companys attachment
subsidiary, CE Attachments, Inc., increased sales 22% from 2005. In addition to the
increased shipments noted above, approximately two percentage points of the net sales
increase was due to price increases during 2005 and 2006. These increases in net sales
were partially offset by a 43% reduction in shipments of compact excavators during the
2006 first quarter as increased competitive pricing pressure adversely impacted shipments.
The Company has increased sales incentives on compact excavators for the second quarter of
2006 to be more price competitive.

Of
the Companys total net sales reported for the 2006 first quarter, $23.6 million were
made to customers residing outside of the United States compared with $16.2 million in the
2005 first quarter. The increase in export sales was primarily due to increased sales in
Europe as discussed above.

# Gross Profit

Gross
profit was $26.3 million in the 2006 first quarter compared to $23.0 million in the 2005
first quarter, an increase of $3.2 million, or 14%. Gross profit as a percentage of net
sales (gross margin) was 21.5% in the 2006 first quarter compared to 21.2% in
the 2005 first quarter. Gross margin in the 2006 first quarter was favorably impacted by
approximately 1.3 percentage points due to 2005 and 2006 price increases. The favorable
impact of these price increases was partially offset by sales incentives paid on increased
retail settlement activity in the 2006 first quarter compared to the 2005 first quarter
(approximately 0.7 percentage points) as well as the impact of increases in the cost of
certain product components, utilities and freight (approximately 0.3 percentage points).

-18-

---

# Selling, General and
Administrative Expenses

Selling,
general and administrative expenses were $15.0 million, or 12.3% of net sales, in the 2006
first quarter compared to $14.6 million, or 13.4% of net sales, in the 2005 first quarter.
The increase in spending is primarily the result of items that vary with sales levels.
Selling, general and administrative expenses as a percentage of net sales improved as the
growth in net sales exceeded expense increases.

# Income from Operations

Income
from operations in the 2006 first quarter was $11.3 million, or 9.2% of net sales,
compared to income from operations of $8.4 million, or 7.7% of net sales, in the 2005
first quarter, an increase of $2.9 million, or 34%.

# Interest Expense

Interest
expense was $1.2 million in the 2006 first quarter compared to $1.4 million in the 2005
first quarter, a decrease of $0.3 million. The decrease in interest expense was due to an
decrease in the average outstanding debt during the 2006 first quarter compared to the
2005 first quarter (see Financial Condition below for discussion of changes in
outstanding debt).

# Interest Income

Interest
income was $1.3 million in the 2006 first quarter compared to $1.1 million in the 2005
first quarter, an increase of $0.1 million.

# Net Other Expense

The
Company recorded net other expense of $1.5 million and $0.7 million in the 2006 first
quarter and 2005 first quarter, respectively. The change in net other expense was
primarily due to a $1.1 million unrealized gain on an interest rate swap contract that was
in place during the 2005 first quarter. In addition, the Company recognized approximately
$0.3 million in foreign currency gains in the 2006 first quarter compared to $0.2 million
in foreign currency losses in the 2005 first quarter.

# Income from Continuing
Operations

Income
from continuing operations in the 2006 first quarter was $6.4 million, or 5.2% of net
sales, compared to income from continuing operations of $4.9 million, or 4.5% of net
sales, in the 2005 first quarter, an increase of $1.5 million, or 30%.

# (Loss) Income from
Discontinued Operations, Net of Tax

The
Company recorded a loss from discontinued operations, net of tax of $116,000 in the 2006
first quarter compared to income from discontinued operations, net of tax of $11,000 in
the 2005 first quarter.

-19-

---

# Loss on Disposal of
Discontinued Operations, Net of Tax

The
Company recorded an $8.9 million loss on the disposal of discontinued operations, net of
tax in the 2006 first quarter. Of the $8.9 million after-tax charge, $7.6 million related
to the impairment of assets related to the discontinued operations (field and factory
inventory and property, plant and equipment) and $1.3 million related to employee
termination costs. See Discontinued Operations above for additional
discussion.

# Net (Loss) Income

The
Company recorded a net loss in the 2006 first quarter of $2.7 million compared to net
income of $4.9 million in the 2005 first quarter. The 2006 first quarter net loss included
a $9.0 million loss related to the discontinued operations noted above.

# Financial Condition

# Working Capital

The
Companys working capital was $196.7 million at March 31, 2006 as compared to $206.5
million at December 31, 2005 and $185.1 million at April 2, 2005. The change in working
capital at March 31, 2006 from December 31, 2005 was primarily due to reductions in
finance contracts receivable, discontinued operations net assets and an increase in
accounts payable. These reductions in working capital were partially offset by an increase
in accounts receivable. Finance contracts receivable decreased from December 31, 2005 due
to the timing of the sale of contracts through the Companys asset securitization
facility. Discontinued operations net assets decreased from December 31, 2005 due to the
decline in production and shipments of agricultural implements as well as the recording of
the asset impairment charge associated with the discontinued operations during the 2006
first quarter. The increase in accounts payable was due to increased production resulting
from strong shipments as well as the timing of payments resulting from a change in the mix
of vendors. Accounts receivable increased from December 31, 2005 due to increased
shipments during the 2006 first quarter, which were primarily driven by strong demand for
telescopic handlers and compact track loaders.

The
change in working capital at March 31, 2006 from April 2, 2005 was primarily due to an
increase in accounts receivable and a decrease in short-term debt obligations. These
increases in working capital were partially offset by reductions in cash and finance
contracts receivable. Accounts receivable increased due to strong shipments of telescopic
handlers, skid loaders and compact track loaders. Short-term debt obligations decreased as
the Company used proceeds from the revolving credit facility put in place in June 2005 to
repay, in full, short-term debt obligations. Cash on the balance sheet at April 2, 2005
was higher than normal due to the timing of funds received from a sale of finance
contracts on April 1, 2005. The cash was used to pay down long-term debt on April 4, 2005.
Finance contracts receivable decreased from April 2, 2005 as the Company sold contracts
through the asset securitization established in February 2005.

# Capital Expenditures

Capital
expenditures for property, plant and equipment during the 2006 first quarter were
approximately $1.1 million. On May 1, 2006, the Company announced a $6.5 million expansion
of its Yankton, South Dakota telescopic handler production facility. The project includes
a 30,000 square foot expansion of the facility as well as further investment in
technological production enhancements, including increased laser cutting, robotics and a
new paint system. The project is expected to be completed in January 2007 and will
increase telescopic handler production by approximately 50%. In addition to the expansion
of the Yankton, South Dakota facility, the Company plans to make an additional $6.5
million of capital expenditures in 2006, primarily to enhance manufacturing and
information technology capabilities and maintain and upgrade machinery and equipment. The
Company believes its Madison, South Dakota skid loader production facility will be
sufficient to provide adequate capacity for its operations for the foreseeable future. The
Company believes its present Yankton, South Dakota facility will operate at, or near, full
capacity up to the completion of the previously discussed expansion in January 2007.

-20-

---

# 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 June 3, 2010. At any time during the term of the Facility, the
Company has the option 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. Borrowings under the Facility are
secured by the Companys accounts receivable, inventory and the capital stock of
certain wholly-owned subsidiaries. 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 0.75% to 1.50% or (2) a base rate defined as the
prime commercial rate less 0.0% to 1.0%. 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 0.75% to 1.50%. As of March 31, 2006, the weighted average interest rate on
Company borrowings outstanding under the Facility was 5.55%.

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 March 31, 2006.

Borrowings
under the Facility and the previous asset-based senior secured debt facility (the Facility
replaced the Companys previous asset-based senior secured debt facility on June 3,
2005) were $48.3 million at March 31, 2006 versus $87.5 million at April 2, 2005.
Available unused borrowings under the Facility and the previous asset-based senior secured
debt facility were $76.7 million at March 31, 2006 versus $1.0 million at April 2, 2005.

In
October 2005, the Company entered into a $15 million committed line of credit facility
with a commercial bank lender. Borrowings under this facility bear interest at 1.85% above
the LIBOR for 30 day deposits reset monthly and are secured by a first priority lien on an
assigned pool of retail finance contracts receivable. This facility expired on April 30,
2006. There were no borrowings outstanding under this facility at March 31, 2006.

In
addition, the Company has access to a 2.5 million committed foreign short-term
credit facility. Borrowings of 1.5 million were outstanding at a weighted average
interest rate of 3.92% at March 31, 2006.

The
Company believes it has adequate capital resources and borrowing capacity to meet its
projected capital requirements for the foreseeable future. Requirements for working
capital, capital expenditures, pension fund contributions and debt maturities in fiscal
2006 will continue to be funded by operations and the Companys borrowing
arrangements.

-21-

---

At
March 31, 2006, shareholders equity had increased $63.6 million to $206.7 million
from $143.1 at April 2, 2005. This increase primarily reflects the impact of the $46.1
million in proceeds received from the sale of the Companys common stock in September
2005, net income of $14.2 million and $2.1 million related to the exercise of stock
options.

In
September 2001, the Companys Board of Directors authorized a stock repurchase plan
providing for the repurchase of up to 500,000 shares of the Companys outstanding
common stock. No shares were repurchased under this authorization during the 2006 first
quarter or 2005 first quarter. As of March 31, 2006, the Company has repurchased an
aggregate of 227,850 shares under this authorization. All treasury stock acquired by the
Company has been cancelled and returned to the status of authorized but unissued shares.

# Contractual Obligations

Other
than the changes in the outstanding borrowings and capital commitments, as described
above, 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 6 and 14, respectively, of Notes to Consolidated Financial
Statements in the Companys Annual Report on Form 10-K for the year ended December
31, 2005 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. In March 2006, the Company entered into an asset securitization facility
(the Securitization Facility) with a financial institution (the
Purchaser) whereby the Company can sell, through a revolving securitization
facility, up to $300 million of retail and fleet installment sale contracts
(installment sale contracts or finance contracts receivable). The
Securitization Facility has a final maturity date in March 2009, subject to annual renewal
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 90% 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 Securitization Facility
replaced the previous $150 million revolving securitization facility the Company
terminated in February 2006. The participating interest in finance contracts receivable
that had been sold under the previous securitization facility was purchased by Purchaser
in March 2006. At March 31, 2006, the Company had available unused capacity of $183.1
million under the Securitization Facility.

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. Prior to 2005, the Company sold certain
finance contracts receivable to various financial institutions on a full recourse basis.
The Company continues to service substantially all contracts, whether or not sold. At
March 31, 2006, the Company serviced $297.9 million of sold finance contracts receivable
of which $145.4 million, $85.5 million and $66.9 million were sold through the
Securitization Facility, limited recourse arrangements and full recourse arrangements,
respectively. It is the intention of the Company to continue to sell substantially all of
its existing as well as 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.

-22-

---

# Critical Accounting
Policies and Estimates

The
preparation of the Companys consolidated financial statements requires the Company
to make estimates and judgments that affect the reported amounts of assets, liabilities,
net sales and expenses. The Company bases its estimates on historical experience and on
various other assumptions that are believed to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying values of assets
and liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions and materially
impact the carrying value of the assets and liabilities. The Company believes the
following accounting policies are critical to the Companys business operations and
the understanding of the Companys results of operations and financial condition.

Allowance for Doubtful Accounts

The
Companys accounts receivable are reduced by an allowance for amounts that may be
uncollectible in the future. In circumstances where the Company is aware of a specific
customers inability to meet its financial obligations, a specific reserve for bad
debts is recorded against the accounts receivable balance to reduce the amount due to the
net amount reasonably expected to be collected. Additionally, a general percentage of past
due receivables is reserved, based on the Companys past experience of
collectibility. If circumstances change (i.e., higher than expected defaults or an
unexpected material adverse change in a major customers ability to meet its
financial obligations), estimates of the recoverability of amounts due could be reduced by
a material amount.

Inventories

Inventories
are valued at the lower of cost or market value. Cost is determined using the last-in,
first-out (LIFO) method for the majority of the Companys inventories. In valuing
inventory, management is required to make assumptions regarding the level of reserves
required to value potentially obsolete or slow moving items to the lower of cost or market
value. Inventory reserves are established taking into account inventory age and frequency
of use or sale. While calculations are made involving these factors, significant
management judgment regarding expectations for future events is involved. Future events
that could significantly influence managements judgment and related estimates
include general economic conditions in markets where the Companys products are sold,
as well as new products and design changes introduced by the Company.

Accrued Warranty

The
Company establishes reserves related to the warranties provided on its products. Specific
reserves are maintained for programs related to known machine safety and reliability
issues. When establishing specific reserves, estimates are made regarding the size of the
population, the type of program, costs to be incurred and estimated participation.
Additionally, general reserves are maintained based on the historical percentage
relationships of warranty costs to machine sales and applied to current equipment sales.
If these estimates and related assumptions change, reserve levels may require adjustment.

-23-

---

Accrued Product Liability

The
Company records a general reserve for potential product liability claims based on the
Companys prior claim experience and specific reserves for known product liability
claims. Specific reserves for known claims are valued based upon the Companys prior
claims experience, including consideration of the jurisdiction, circumstances of the
accident, type of loss or injury, identity of plaintiff, other potential responsible
parties, analysis of outside counsel, and analysis of internal product liability counsel.
Actual product liability costs could be different due to a number of variables, including
decisions of juries or judges.

Goodwill Impairment

In
connection with SFAS No. 142, Goodwill and Other Intangible Assets, the
Company is required to perform goodwill impairment reviews, at least annually, using a
fair-value-based approach. The Company performs its annual impairment review as of
December 31. As part of the annual impairment review, an estimate of the fair value of the
Company, primarily by using a discounted cash flow analysis, is performed. Significant
assumptions used in this analysis include: expected future revenue growth rates, operating
profit margins, working capital levels and a weighted average cost of capital. Changes in
assumptions could significantly impact the estimate of the fair value of the Company,
which could result in a goodwill impairment charge and could have a significant impact on
the consolidated financial statements.

Pension and Postretirement
Benefits

Pension
and postretirement benefit costs and obligations are dependent on assumptions used in
calculation of these amounts. These assumptions, used by actuaries, include discount
rates, expected return on plan assets for funded plans, rate of salary increases, health
care cost trend rates, mortality rates and other factors. In accordance with accounting
principles generally accepted in the United States, actual results that differ from the
actuarial assumptions are accumulated and amortized to future periods and therefore affect
recognized expense and recorded obligations in future periods. While the Company believes
that the assumptions used are appropriate, differences in actual experience or changes in
assumptions may materially effect its financial position or results of operations.

-24-

---

# Forward-Looking
Statements

Certain
statements included 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
described under Risk Factors, included in Part II Item 1A, and the following,
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), unanticipated expenses associated with the
discontinuance of the Companys agricultural implement business, 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,
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 2006 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, 2005 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 March 31, 2006. Based upon that evaluation, the
Companys principal executive officer and its principal financial officer have
concluded that the Companys disclosure controls and procedures were effective as of
March 31, 2006.

# 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 March 31, 2006, that has materially affected, or is reasonably likely to materially
affect, the Companys internal control over financial reporting.

-25-

---

# PART II  Other
Information

# Item 1A. Risk Factors

You
should carefully consider each of the risks described below, together with all of the
other information contained in this Quarterly Report on Form 10-Q, before making an
investment decision with respect to our securities. If any of the following risks develop
into actual events, our business, financial condition or results from operations could be
materially and adversely affected and you may lose all or part of your investment.

# We operate in cyclical
industries, which could adversely affect our growth and results of operations.

Our
business depends upon general activity levels in the construction and agricultural
industries. Historically, these industries have been cyclical. As a result, our operating
profits are susceptible to a number of industry-specific factors, including:

| |  | prevailing
levels of construction, especially housing starts, and levels of industrial production;
| | - | --------------------------------------------------------------------------------------------------

| |  | public
spending on infrastructure;
| | - | ----------------------------------

| |  | market
interest rates;
| | - | ----------------------

| |  | volatility
of sales to rental companies;
| | - | ----------------------------------------

| |  | real
estate values;
| | - | -------------------

| |  | consumer
confidence;
| | - | --------------------

| |  | changes
in farm income and farmland value;
| | - | ------------------------------------------

| |  | the
level of worldwide farm output and demand for farm products;
| | - | ----------------------------------------------------------------

| |  | commodity
prices;
| | - | -----------------

| |  | energy
prices;
| | - | --------------

| |  | government
agricultural policies and subsidies;
| | - | -----------------------------------------------

| |  | animal
diseases and crop pests; and
| | - | -----------------------------------

| |  | weather.
| | - | --------

As
a result of these and other factors, including related effects on us and our
customers access to and cost of credit and dealer inventory management, a downturn
in demand for our products can occur suddenly, resulting in excess inventories,
under-utilized production capacity and reduced sales prices for our products. These
downturns may be prolonged and may result in lower net sales and earnings. Equipment
manufacturers, including us, have responded to downturns in the past by reducing
production and discounting product prices. These actions have resulted in restructuring
charges and lower earnings for us in past affected periods. In the event of future
downturns, we may take similar actions.

-26-

---

# Our dependence on, and
the price and availability of, raw materials and component parts may adversely affect our
profits.

We
are exposed to fluctuations in market prices for commodities, such as steel and rubber, as
well as component parts, including engines. In recent years, the prices of various raw
materials and component parts have increased significantly, and we have been unable to
avoid exposure to global price fluctuations and supply limitations, such as occurred in
2004 and 2005 with the cost and availability of steel and related products. In addition,
our products are designed to work with particular components. As a result, our products,
in certain cases, rely on a single source of supply for certain components. If we are
unable to purchase the raw materials and components we require or are unable to pass on
price increases to our customers, our future profitability may be adversely affected.

# The construction and
agricultural industries in which we operate are competitive, and competitors offerings
of new products or services or lower prices could result in a decrease in our net sales
and earnings.

We
compete with global full-line suppliers (including Caterpillar Inc., Deere & Company,
Case Construction Equipment and Komatsu Ltd.) with a presence in every market and a broad
range of products as well as with product line specialists (including JLG Industries,
Inc., Ingersoll-Rand Company (Bobcat) and Takeuchi Mfg. Co. Ltd.). Some of our competitors
are larger than us and have greater financial, manufacturing, marketing and distribution
resources. Competitive pricing, product initiatives and other actions taken by our
competitors could cause us to lose customers or force us to decrease our sales prices,
resulting in lower net sales and earnings.

# We source some of our
products from third parties and any interruption in the supply of these products could
adversely affect our net sales and profitability.

We
source compact excavators and compact track loaders from third-party foreign suppliers.
Any interruption in the supply of these products or any material increase in prices could
adversely affect our net sales and profitability. We are exposed to foreign currency risk
with respect to the prices of these products. Any material change in the value of the
United States dollar versus other currencies could adversely impact our net sales and
profitability.

# Our success depends in
part on the introduction of new products, and the failure to introduce new products on a
timely basis could adversely affect our net sales and profitability.

Our
long-term results depend upon our ability to secure, introduce and market new products
successfully. Our success in this area will depend on a number of factors, including our
ability to develop new products internally or source new products from third-party
suppliers, product quality, competition, customer acceptance of new products and the
strength of our dealer networks. Any difficulties in developing or identifying and
sourcing new products, any manufacturing delays or problems with new product launches, or
any increased warranty costs from new products could adversely affect our operating
results. The introduction of new products could also result in a decrease in revenues from
our existing products. The internal development and refinement of products also consumes a
substantial amount of capital. We may need more capital for product development and
refinement than is available to us, which could adversely affect our net sales and
profitability.

-27-

---

# Cyclical and structural
declines in the demand for products we offer may cause us to undertake product line and
facility rationalization initiatives that could result in restructuring charges and lower
net sales and earnings.

The
construction and agricultural industries are continually evolving and undergoing cyclical
and structural changes that impact the demand for the products we offer. We have
historically reviewed these cyclical and structural changes in demand and have taken
action to rationalize our product offerings and production facilities in light of market
conditions. We expect to continue these reviews and to take appropriate action based on
future conditions. Those actions could result in restructuring charges and lower net sales
and earnings.

During
March 2006, we decided to discontinue the manufacturing and distribution of our
agricultural implement products. As a result, we recorded a $7.6 million after-tax
non-cash impairment charge related to agricultural implement field and factory inventory
and certain property, plant and equipment and a $1.3 million after-tax cash charge related
to severance and other termination costs. See Item 2. Managements Discussion
and Analysis of Financial Condition and Results of Operations  Discontinued
Operations. If we incur additional unanticipated expenses associated with the
discontinuation of our implement business, then our net income could be adversely affected
in future periods.

# Our leverage could
adversely affect our financial health and make us vulnerable to adverse economic and
industry conditions.

At
times, we may incur indebtedness that is substantial relative to our shareholders
equity. Our indebtedness has important consequences. For example, it could:

| |  | make
it difficult for us to fulfill our obligations under our credit agreement;
| | - | -------------------------------------------------------------------------------

| |  | make
it more challenging for us to obtain additional financing to fund our business strategy,
debt service requirements, capital expenditures and working capital;
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | increase
our vulnerability to interest rate changes and general adverse economic and industry
conditions;
| | - | ---------------------------------------------------------------------------------------------------------

| |  | require
us to dedicate a substantial portion of our cash flow from operations to service
indebtedness, thereby reducing the availability of cash flow to fund working capital,
capital expenditures, research and development efforts and other general corporate
activities;
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |  | limit
our flexibility in planning for, or reacting to, changes in our business and markets; and
| | - | -----------------------------------------------------------------------------------------------

| |  | place
us at a competitive disadvantage relative to our competitors that have less debt.
| | - | ---------------------------------------------------------------------------------------

In
addition, our credit facility requires us to maintain specified financial ratios and
satisfy certain financial condition tests, which may require that we take action to reduce
our debt or to act in a manner contrary to our long-term business objectives.

# We are subject to risks
and associated changes in the business climate that could limit our access to capital.

Our
business is capital intensive and the fulfillment of our strategic plan depends, at least
in part, upon our ability to access capital at attractive rates and terms. If access to
capital becomes significantly constrained because of changes in the business climate or
other factors, then our results of operations and financial condition could be
significantly adversely affected.

-28-

---

# We are subject to
significant environmental, health and safety laws and regulations and related compliance
expenditures and   liabilities.

We
are subject to various laws and regulations relating to the protection of the environment
and human health and safety and have incurred and will continue to incur capital and other
expenditures to comply with these regulations. If we fail to comply with any environmental
regulations, then we could be subject to future liabilities, fines or penalties or the
suspension of production at our manufacturing facilities. If unexpected obligations at
these or other sites or more stringent environmental laws are imposed in the future, our
future profitability may be adversely affected.

# Item 2. Unregistered
Sales of Equity Securities and Use of Proceeds

In
September 2001, the Companys Board of Directors authorized a stock repurchase plan
providing for the repurchase of up to 500,000 shares of the Companys outstanding
common stock in open market or privately negotiated transactions. The plan does not have
an expiration date. No shares were repurchased under the plan during the three-month
period ended March 31, 2006. As of March 31, 2006, the Company had authority to repurchase
272,150 shares under the plan.

# Item 6. Exhibits

| | Exhibit No. | Document Description
| | ----------- | --------------------

| | 3.2 | By-laws
of Gehl Company, as amended [Incorporated by reference to Exhibit 3.2 to the Companys
Current Report on Form 8-K filed March 1, 2006]
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------

| | 10.1 | Receivables
Sale Agreement, dated March 15, 2006, between the Company and Gehl Receivables II, LLC
[Incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form
8-K filed on March 20, 2006]
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.2 | Receivables
Purchase and Sale Agreement, dated March 15, 2006, between Gehl Receivables II, LLC and
Gehl Funding II, LLC [Incorporated by reference to Exhibit 10.2 to the Companys
Current Report on Form 8-K filed on March 20, 2006]
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.3 | Receivables
Purchase Agreement, dated March 15, 2006, between the Company, Gehl Funding II, LLC, Park
Avenue Receivables Company, LLC and JP Morgan Chase Bank, N.A. [Incorporated by reference
to Exhibit 10.3 to the Companys Current Report on Form 8-K filed on March 20, 2006]
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.4 | Receivables
Sale and Assignment Agreement, dated March 15, 2006, between Gehl Funding LLC and Gehl
Funding II, LLC [Incorporated by reference to Exhibit 10.4 to the Companys Current
Report on Form 8-K filed on March 20, 2006]
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

-29-

---

| | Exhibit No. | Document Description
| | ----------- | --------------------

| | 10.5 | Performance
Undertaking, dated March 15, 2006, between the Company and Gehl Funding II, LLC
[Incorporated by reference to Exhibit 10.5 to the Companys Current Report on Form
8-K filed on March 20, 2006]
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

# SIGNATURES

Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned thereunto duly authorized.

|                    | GEHL COMPANY               
|------------------- | ---------------------------
|Date:  May 10, 2006 | By:  /s/ William D. Gehl   
|                    | William D. Gehl            
|                    | Chairman of the Board      
|                    | and Chief Executive Officer
|Date:  May 10, 2006 | By:  /s/ Thomas M. Rettler 
|                    | Thomas M. Rettler          
|                    | Vice President and         
|                    | Chief Financial Officer    
|                    | (Principal Financial and   
|                    | Accounting Officer)        

-30-

---

# GEHL COMPANY

# INDEX TO EXHIBITS

| | Exhibit No. | Document Description
| | ----------- | --------------------

| | 3.2 | By-laws
of Gehl Company, as amended [Incorporated by reference to Exhibit 3.2 to the Companys
Current Report on Form 8-K filed March 1, 2006]
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------

| | 10.1 | Receivables
Sale Agreement, dated March 15, 2006, between the Company and Gehl Receivables II, LLC
[Incorporated by reference to Exhibit 10.1 to the Companys Current Report on Form
8-K filed on March 20, 2006]
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.2 | Receivables
Purchase and Sale Agreement, dated March 15, 2006, between Gehl Receivables II, LLC and
Gehl Funding II, LLC [Incorporated by reference to Exhibit 10.2 to the Companys
Current Report on Form 8-K filed on March 20, 2006]
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.3 | Receivables
Purchase Agreement, dated March 15, 2006, between the Company, Gehl Funding II, LLC, Park
Avenue Receivables Company, LLC and JP Morgan Chase Bank, N.A. [Incorporated by reference
to Exhibit 10.3 to the Companys Current Report on Form 8-K filed on March 20, 2006]
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.4 | Receivables
Sale and Assignment Agreement, dated March 15, 2006, between Gehl Funding LLC and Gehl
Funding II, LLC [Incorporated by reference to Exhibit 10.4 to the Companys Current
Report on Form 8-K filed on March 20, 2006]
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 10.5 | Performance
Undertaking, dated March 15, 2006, between the Company and Gehl Funding II, LLC
[Incorporated by reference to Exhibit 10.5 to the Companys Current Report on Form
8-K filed on March 20, 2006]
| | ---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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.
| | ---- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

-31-