FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

OR

Commission file number 0-18110

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

                     (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.

Gehl Company

FORM 10-Q

June 30, 2007

Report Index

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PART I – Financial Information

Item 1. Financial Statements

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

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

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Gehl Company and Subsidiaries
Condensed Consolidated Balance Sheets
(unaudited and in thousands, except share data)

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

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Gehl Company and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(unaudited and in thousands)

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

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Gehl Company and Subsidiaries
Notes to Condensed Consolidated Financial Statements
June 30, 2007
(Unaudited)

Note 1 – Basis of Presentation

        The condensed consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate to make the information presented not misleading. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States of America.

        In the opinion of management, the information furnished for the three and six month periods ended June 30, 2007 and June 30, 2006 include all adjustments, consisting only of normal recurring accruals, necessary for a fair presentation of the results of operations and financial position of the Company. 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 and six month periods ended June 30, 2007 are not necessarily indicative of the results to be expected for the entire year.

        It is suggested that these interim financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 as filed with the Securities and Exchange Commission.

Note 2 – Significant Accounting Policies

Accounting Pronouncements: In July 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109” (“FIN 48”), which prescribes a recognition threshold and measurement process for recording, in the financial statements, uncertain tax positions taken or expected to be taken in a tax return. In addition, FIN 48 provides guidance on the recognition, classification, accounting in interim periods and disclosure requirements for uncertain tax positions. The Company adopted FIN 48 effective January 1, 2007. The impact of the adoption on the Condensed Consolidated Financial Statements as of January 1, 2007, was an increase in total assets of $0.4 million, an increase in total liabilities of $0.9 million and a decrease in shareholders’ equity of $0.5 million.

        In September 2006, the FASB issued Statement of Financial Accounting Standards No. 158, “Employers’ Accounting for Defined Benefit Plans and Other Postretirement Plans—an amendment of FASB Statements No. 87, 88, 106, and 132(R)” (“SFAS No. 158”), which requires employers to fully recognize the obligations associated with single-employer defined benefit pension, retiree healthcare and other postretirement plans in their financial statements.  In addition, SFAS No. 158 requires companies to measure plan assets and liabilities as of the end of a fiscal year rather than a date within 90 days of the end of the fiscal year.  The Company adopted SFAS No. 158 effective December 31, 2006, except for the change in measurement date provisions which are not effective until 2008. The impact of the adoption at December 31, 2006, was a decrease in total assets of $0.4 million, an increase in total liabilities of $5.3 million and a decrease in shareholders’ equity, net of tax, of $3.7 million.

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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 totaled 140 employees which included 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 six month period ended June 30, 2006 of $9.0 million, or $0.73 per diluted share. Of the $9.0 million charge, $8.9 million, or $0.72 per diluted share, was recorded in the three month period ended March 31, 2006 and $0.1 million, or $0.01 per diluted share, was recorded in the three month period ended June 30, 2006. The after-tax charge is comprised of non-cash asset impairment charges of $7.1 million related to agricultural implement field and factory inventory and certain property, plant and equipment, and cash charges related to severance and other employee termination costs of $1.9 million. There was no charge to the Company’s earnings for the six months ended June 30, 2007.

The following table summarizes the pre-tax charge associated with the discontinued operation (in thousands):

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

        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):

Note 4 – Income Taxes

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

        The Company and its subsidiaries file income tax returns in the U.S. Federal jurisdiction, and various state and foreign jurisdictions. Effective January 1, 2007, the Company adopted FIN 48. In accordance with FIN 48, the Company recognized a cumulative-effect adjustment of $0.5 million, increasing its liability for unrecognized tax benefits along with related interest and penalties, and reducing the January 1, 2007 balance of retained earnings.

        At January 1, 2007, the Company had $2.5 million in unrecognized tax benefits, the recognition of which would have an effect of $2.5 million on the effective tax rate. At June 30, 2007, the Company had unrecognized tax benefits of $2.8 million, which would have an effect of $2.8 million on the effective tax rate. The Company does not believe it is reasonably possible that its unrecognized tax benefits will significantly change within the next twelve months.

        The Company recognizes accrued interest and penalties related to unrecognized tax benefits in income tax expense. At January 1, 2007 and June 30, 2007, the Company had accrued $0.2 million and $0.3 million, respectively, for the potential payment of interest and $0.5 million for the potential payment of penalties.

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        As of January 1, 2007 and June 30, 2007, the Company was subject to U.S. Federal income tax examinations for the tax years 2005 through 2006, and to non-U.S. income tax examinations for the tax years 2004 through 2006. In addition, the Company is subject to state and local income tax examinations for the tax years 2001 through 2006.

Note 5 – 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 (maximum 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 in 2006 which were 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.

        The following summarizes the Company’s sales of retail finance contracts receivable through asset securitization facilities (in thousands):

        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 June 30, 2007, the fair value of the retained interest was calculated using an interpolated risk-free rate of return of 4.87% based on U.S. Treasury rates, an approximate 17 month weighted-average prepayable portfolio life and an approximate 1.0% 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 $0.3 million. A 10% increase in the annual loss rate would decrease the fair value of the retained interest by $0.9 million. Retained interest of $37.7 million, $20.3 million and $17.7 million was included in current assets at June 30, 2007, December 31, 2006 and June 30, 2006, respectively, and $17.8 million, $16.8 million and $10.9 million was included in other assets in the accompanying Condensed Consolidated Balance Sheet at June 30, 2007, December 31, 2006 and June 30, 2006, respectively.

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        The total credit capacity under the 2006 Securitization Facility is $300 million, with an outstanding note balance of $203.3 million at June 30, 2007. Finance contracts receivable sold and being serviced by the Company totaled $259.5 million at June 30, 2007. Of the $259.5 million in sold contracts receivable, $14.7 million were greater than 60 days past due at June 30, 2007. There were no credit losses on contracts sold through the Securitization Facility during the three and six month periods ended June 30, 2007. The Company received $1.2 and $0.6 million in service fee income during the six months ended June 30, 2007 and 2006, respectively.

        In addition to the sale of finance contracts receivable through the Securitization Facility, the Company sold finance contracts through limited recourse arrangements during 2007 and 2006. Based on the terms of these sales, recourse to the Company is limited to 5% of the sold portfolio of finance contracts receivable. Amounts to cover potential losses on these sold finance contracts receivable are included in the allowance for doubtful accounts. The following table summarizes the Company’s sales of finance contracts receivable through these arrangements for the six months ended June 30, 2007, and 2006 (in thousands):

        At June 30, 2007, the Company serviced $375.5 million finance contracts receivable of which $259.5 million, $77.6 million and $18.9 million were sold through the Securitization Facility, limited recourse arrangements and full recourse arrangements, respectively.

        The finance contracts require periodic installments of principal and interest over periods of up to 66 months, with interest rates based on market conditions. The Company has retained the servicing of substantially all of these contracts which generally have maturities of 12 to 60 months.

        The sales of finance contracts receivable were accounted for as a sale in accordance with SFAS No. 140 “Accounting for Transfers and Servicing of Financial Assets and Extinguishment of Liabilities—a Replacement of FASB Statement No. 125.” Sales of finance contracts receivable are reflected as a reduction of finance contracts receivable in the accompanying Condensed Consolidated Balance Sheets and the proceeds received are included in cash flows from operating activities in the accompanying Condensed Consolidated Statement of Cash Flows.

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Note 6 – Inventories

        If all of the Company’s inventories had been valued on a current cost basis, which approximated FIFO value, estimated inventories by major classification would have been as follows (in thousands):

Note 7 – Product Warranties and Other Guarantees

        In general, the Company provides warranty coverage on equipment for a period of up to twelve months. The Company’s reserve for warranty claims is established based on the best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. The Company records warranty expense as a component of selling, general and administrative expense. While the Company’s warranty costs have historically been within its calculated estimates, it is possible that future warranty costs could differ from those estimates. The changes in the carrying amount of the Company’s total product warranty liability for the six month periods ended June 30, 2007 and 2006 were as follows (in thousands):

Note 8 – 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):

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        The Company recorded a $0.7 million pension curtailment loss related to discontinued operations in 2006 (see Note 3, “Discontinued Operations”). The Company anticipates making $0.1 million of contributions to the pension plans during 2007. No contributions were made during the three or six month periods ended June 30, 2007.

        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):

        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):

Note 9 – Shareholders’ Equity

        The Company maintains equity incentive plans for certain of its directors, officers and key employees. The Company currently has three primary equity incentive plans: the 2004 Equity Incentive Plan, the 2000 Equity Incentive Plan and the 1995 Stock Option Plan. The 2004 Equity Incentive Plan, which was adopted in April 2004 and amended in April 2006, authorizes the granting of awards with respect to up to 737,500 shares of the Company’s common stock. During April 2000, the 2000 Equity Incentive Plan was adopted, which authorizes the granting of awards with respect to up to 812,771 shares of the Company’s common stock. An award is defined within the 2004 and 2000 Equity Incentive Plan as a stock option, a stock appreciation right, restricted stock or a performance share. In April 1996, the 1995 Stock Option Plan was adopted, which authorizes the granting of options to purchase up to 726,627 shares of the Company’s common stock. These plans provide that options be granted at an exercise price not less than fair market value on the date the options are granted and that the options generally vest ratably over a period not exceeding three years after the grant date. The option period may not be more than ten years after the grant date.

        In the three month period ended June 30, 2007, the Company awarded 21,000 stock options to purchase common stock to directors. There were no options issued in the first quarter of 2007. In the three and six month periods ended June 30, 2006, the Company awarded 21,000 and 129,284 stock options, respectively, to purchase common stock to certain officers, key employees and directors. Awards of stock options under the plans are subject to certain vesting requirements and are accounted for using the fair value based method. In the six months ended June 30, 2007, the Company awarded 132,087 stock appreciation rights to certain key employees at the fair market value on the grant date. There were no stock appreciation rights issued in the three months ended June 30, 2007, or the six months ended June 30, 2006. The stock appreciation rights can only be settled in cash and are subject to certain vesting requirements.

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        In 2007 and 2006, the Company awarded restricted shares under the 2004 Equity Incentive Plan to certain key employees. Awards of restricted stock under the plan are subject to certain vesting requirements. There were 25,118 and 26,257 restricted shares awarded in the six months ended June 30, 2007 and 2006, respectively, with an average fair market value of $28.68 and $34.04 per share. Compensation expense related to restricted stock awards is based upon the market price at the date of award and is charged to earnings over the vesting period.

Note 10 – Net Income Per Share and Comprehensive Income

        Basic net income per common share is computed by dividing net income by the weighted- average number of common shares outstanding for the period. Diluted net income per common share is computed by dividing net income by the weighted-average number of common shares and, if applicable, common stock equivalents that would arise from the exercise of stock options. A reconciliation of the shares used in the computation of earnings per share follows (in thousands):

        For the three and six months ended June 30, 2007, 146,284 options to purchase common shares were antidilutive and, accordingly, excluded from the effect of options and unvested restricted stock in the calculation of diluted earnings per share. For the three and six months ended June 30, 2006, 129,284 options to purchase common shares were antidilutive.

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

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.

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Note 12 – Financial Instruments

        The Company selectively uses interest rate swaps and foreign currency forward contracts to reduce market risk associated with changes in interest rates and the value of the U.S Dollar versus the Euro. The use of derivatives is restricted to those intended for hedging purposes.

        In 2005, the Company entered into an interest rate swap agreement with a third party financial institution to exchange variable rate interest obligations for fixed rate obligations without the exchange of the underlying principal amounts. Effective January 2006, under this agreement, the Company’s variable to fixed rate obligations 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 referenced 30 day LIBOR rate was 5.32% at June 30, 2007. The variable to fixed interest rate swap is an effective cash-flow hedge. The fair value of the swap totaled $293,000 at June 30, 2007 and was recorded on the Condensed Consolidated Balance Sheets, with changes in fair value included in other comprehensive income.

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

Results of Operations

Three Months Ended June 30, 2007 Compared to Three Months Ended June 30, 2006

Net Sales

        Net sales in the three months ended June 30, 2007 (“2007 second quarter”) were $135.3 million compared to $139.5 million in the three months ended June 30, 2006 (“2006 second quarter”), a decrease of $4.1 million, or 3%. Net sales remained solid, impacted by increased international sales and telescopic handler market share gains. International shipments of the Company’s skid loaders, including shipments of skid loaders by the Company’s European subsidiary, Gehl Europe, increased 24% from the 2006 second quarter. Shipments of all products from the Company’s European subsidiary, Gehl Europe, increased 27% in the second quarter of 2007. Along with the increase in shipments noted above, net sales were impacted by approximately 4 percentage points due to price increases during 2006 and 2007. These increases in shipments and pricing were offset by a 30% and 11% reduction in shipments of compact track loaders and North American skid loaders, respectively, during the 2007 second quarter as a result of continued softness in the North American housing market.

        Of the Company’s total net sales reported for the 2007 second quarter, $35.7 million were made to customers residing outside of the United States compared with $29.3 million in the 2006 second quarter. The increase in export sales was primarily due to increased sales of skid loaders by the Company’s European subsidiary, Gehl Europe. Skid loader shipments outside of North America increased to 44% of total Company skid loader sales versus 36% a year earlier.

Gross Profit

        Gross profit was $29.5 million in the 2007 second quarter compared to $30.1 million in the 2006 second quarter, a decrease of $0.6 million, or 2%. Gross profit as a percentage of net sales (“gross margin”) was 21.8% in the 2007 second quarter compared to 21.6% in the 2006 second quarter. The increase in gross profit as a percentage of sales was primarily driven by the favorable impact the Company continues to realize as a result of its added supply chain resources and investments in state-of-the-art manufacturing equipment.

Selling, General and Administrative Expenses

        Selling, general and administrative expenses were $15.7 million, or 11.6% of net sales, in the 2007 second quarter compared to $15.3 million, or 10.9% of net sales, in the 2006 second quarter. The increase in selling, general and administrative expenses as a percentage of net sales primarily reflects planned incremental investments in research and development and information technology projects totaling $0.9 million in the 2007 second quarter.

Income from Operations

        Income from operations in the 2007 second quarter was $13.8 million, or 10.2% of net sales, compared to income from operations of $14.9 million, or 10.7% of net sales, in the 2006 second quarter, a decrease of $1.0 million, or 7%.

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Interest Expense

        Interest expense was $1.2 million in the 2007 second quarter compared to $0.8 million in the 2006 second quarter, an increase of $0.4 million. The increase in interest expense was due to an increase in the average outstanding debt during the 2007 second quarter compared to the 2006 second quarter (see “Financial Condition” below for discussion of changes in outstanding debt).

Interest Income

        Interest income was $1.1 million in the 2007 second quarter compared to $0.8 million in the 2006 second quarter, an increase of $0.3 million. This increase was primarily due to the increase in average accounts receivable balances in the 2007 second quarter compared to the 2006 second quarter.

Net Other Expense

        The Company recorded net other expense of $0.3 million and $0.7 million in the 2007 second quarter and 2006 second quarter, respectively. The change in net other expense was primarily due to a $0.8 million reduction in the loss on sale of finance contracts receivable in the 2007 second quarter compared to the 2006 second quarter. This decrease was partially offset by foreign currency losses in the 2007 second quarter compared to foreign currency gains in the 2006 second quarter.

Income from Continuing Operations

        Income from continuing operations in the 2007 second quarter was $8.8 million, or 6.5% of net sales, compared to income from continuing operations of $9.4 million, or 6.7% of net sales, in the 2006 second quarter, a decrease of $0.6 million, or 6%.

(Loss) Income from Discontinued Operations, Net of Tax

        The Company recorded a loss from discontinued operations, net of tax of $108,000 in the 2007 second quarter compared to income from discontinued operations, net of tax of $37,000 in the 2006 second quarter.

Loss on Disposal of Discontinued Operations, Net of Tax

        The Company recorded an additional $112,000 loss on the disposal of discontinued operations, net of tax in the 2006 second quarter. There was no loss on disposal of discontinued operations for the 2007 second quarter.

Net Income

        The Company recorded net income in the 2007 second quarter of $8.7 million compared to net income of $9.3 million in the 2006 second quarter, a decrease of $0.6 million, or 6%.

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Six Months Ended June 30, 2007 Compared to Six Months Ended June 30, 2006

Net Sales

        Net sales in the six months ended June 30, 2007 (“2007 six months”) were $250.6 million compared to $261.6 million in the six months ended June 30, 2006 (“2006 six months”), a decrease of $11.0 million, or 4%. Net sales, in general, were favorably impacted by the continued strength of the Company’s international markets and telescopic handler market share gains. International shipments of the Company’s skid loaders, including shipments of skid loaders by the Company’s European subsidiary, Gehl Europe, increased 29% from the 2006 six months. Shipments of all products from the Company’s European subsidiary, Gehl Europe, increased 29% in the 2007 six months. Along with the increase in shipments noted above, net sales were impacted by approximately 4 percentage points due to price increases during 2006 and 2007. These increases in shipments and pricing were offset by a 28% and 14% reduction in shipments of compact track loaders and North American skid loaders, respectively, during the 2007 six months as a result of softness in the North American housing market.

        Of the Company’s total net sales reported for the 2007 six months, $67.7 million were made to customers residing outside of the United States compared with $52.9 million in the 2006 six months. The increase in export sales was primarily due to increased sales of skid loaders by the Company’s European subsidiary, Gehl Europe. Skid loader shipments outside of North America increased to 45% of total Company skid loader sales versus 35% a year earlier.

Gross Profit

        Gross profit was $55.3 million in the 2007 six months compared to $56.4 million in the 2006 six months, a decrease of $1.1 million, or 2%. Gross margin was 22.1% in the 2007 six months compared to 21.6% in the 2006 six months. The increase in gross profit as a percentage of sales was primarily driven by favorable product mix, as well as the favorable impact the Company continues to realize as a result of its added supply chain resources and investments in state-of-the-art manufacturing equipment.

Selling, General and Administrative Expenses

        Selling, general and administrative expenses were $30.7 million, or 12.2% of net sales, in the 2007 six months compared to $30.2 million, or 11.6% of net sales, in the 2006 six months. The increase in selling, general and administrative expenses as a percentage of net sales primarily reflects planned incremental investments in research and development and information technology projects totaling $1.3 million in the 2007 six months.

Income from Operations

        Income from operations in the 2007 six months was $24.6 million, or 9.8% of net sales, compared to income from operations of $26.1 million, or 10.0% of net sales, in the 2006 six months, a decrease of $1.5 million, or 6%.

Interest Expense

        Interest expense was $2.1 million in the 2007 six months compared to $1.9 million in the 2006 six months, an increase of $0.1 million. The increase in interest expense was due to an increase in the average outstanding debt during the 2007 six months compared to the 2006 six months (see “Financial Condition” below for discussion of changes in outstanding debt).

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Interest Income

        Interest income was $2.1 million in the 2007 six months compared to $2.0 million in the 2006 six months, an increase of $0.1 million. This increase was primarily due to the increase in average accounts receivable balances in the 2007 six months compared to the 2006 six months.

Net Other Expense

        The Company recorded net other expense of $1.3 million and $2.2 million in the 2007 six months and 2006 six months, respectively. The change in net other expense was primarily due to a $1.1 million decrease in the loss on sale of finance contracts receivable in the 2007 six months and $0.7 million in securitization facility structuring costs incurred during the 2006 six months. These decreases were partially offset by foreign currency losses recorded in the 2007 six months of $0.4 million versus foreign currency gains in the 2006 six months of $0.5 million.

Income from Continuing Operations

        Income from continuing operations in the 2007 six months was $15.3 million, or 6.1% of net sales, compared to income from continuing operations of $15.8 million, or 6.0% of net sales, in the 2006 six months, a decrease of $.5 million, or 3%.

Loss from Discontinued Operations, Net of Tax

        The Company recorded a loss from discontinued operations, net of tax of $268,000 in the 2007 six months compared to a loss from discontinued operations, net of tax of $79,000 in the 2006 six months.

Loss on Disposal of Discontinued Operations, Net of Tax

        The Company recorded a $9.0 million loss on the disposal of discontinued operations, net of tax in the 2006 six months. There was no loss on disposal of discontinued operations for the 2007 six months.

Net Income

        The Company recorded net income in the 2007 six months of $15.0 million compared to net income of $6.7 million in the 2006 six months. The 2006 six months net income included a $9.0 million loss on disposal of discontinued operations noted above.

Financial Condition

Working Capital

        The Company’s working capital was $214.0 million at June 30, 2007 as compared to $201.5 million at December 31, 2006 and $217.7 million at June 30, 2006. The change in working capital at June 30, 2007 from December 31, 2006 was primarily due to increases in accounts receivable and the current portion of retained interest from the sale of finance contracts. These increases in working capital were partially offset by an increase in accounts payable. Accounts receivable increased from December 31, 2006 primarily due to increased shipments during the 2007 six months to national account customers carrying longer terms, which were primarily driven by continued market share gains in telehandlers. The current portion of retained interest in sold finance contracts increased from December 31, 2006 due to an increase in the total portfolio balance of contracts in the Securitization Facility. The increase in accounts payable was due to increased production resulting from strong shipments.

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        The change in working capital at June 30, 2007 from June 30, 2006 was primarily due to an increase in accounts receivable and the current portion of retained interest from the sale of finance contracts. These increases were partially offset by a decrease in assets of discontinued operations and an increase in short term debt obligations. Accounts receivable increased from June 30, 2006 primarily due to increased shipments to national account customers carrying longer terms, the addition of several new dealers in the period and decreased retail demand in the North American construction market. The current portion of retained interest from the sale of finance contracts increased from June 30, 2006 due to an increase in the total portfolio balance of contracts in the Securitization Facility. Assets of discontinued operations decreased from June 30, 2006 due to the continued collection on accounts receivable and disposition of inventory and property, plant and equipment related to the discontinued operations. Short term debt obligations increased from June 30, 2006 as the Company began issuing commercial paper during the fourth quarter of 2006. See “Debt and Equity” below for additional discussion.

Capital Expenditures

        Capital expenditures for property, plant and equipment during the 2007 six months were approximately $3.6 million. The Company plans to make up to $10.0 million of capital expenditures in 2007, primarily to complete the Yankton, South Dakota manufacturing facility expansion, enhance manufacturing and information technology capabilities and maintain and upgrade machinery and equipment.

Debt and Equity

        The Company maintains a $125 million revolving credit facility (the “Facility”) with a syndicate of commercial bank lenders. The credit commitment under the facility is for a five-year period expiring October 17, 2011. At any time during the term of the Facility, the Company has the option to request an increase in the credit commitment under the Facility to $175 million from the current syndicate of commercial bank lenders or any other commercial bank lender(s) selected by the Company. Under the terms of the Facility, the Company has pledged the capital stock of certain wholly-owned subsidiaries which are all co-borrowers. The Company may borrow up to $25 million under the Facility in a currency other than the U.S. Dollar. The Company may elect to pay interest on U.S. Dollar borrowings under the Facility at a rate of either (1) the London Interbank Offered Rate (“LIBOR”) plus 0.625% to 1.3750% or (2) a base rate defined as the prime commercial rate less 0.125% to 1.125%. The Company’s actual borrowing costs for LIBOR or base rate borrowings is determined by reference to a pricing grid based on the Company’s ratio of funded debt to total capitalization. Interest on amounts borrowed under the Facility in currencies other than the U.S. Dollar will be priced at a rate equal to LIBOR plus 0.625% to 1.375%. As of June 30, 2007, the weighted average interest rate on Company borrowings outstanding under the Facility was 6.06%.

        The Facility requires the Company to maintain compliance with certain financial covenants related to total capitalization, interest expense coverage, tangible net worth, capital expenditures and operating lease spending. The Company was in compliance with all covenants as of June 30, 2007.

        Borrowings under the Facility were $23.4 million, $24.7 million and $46.3 million at June 30, 2007, December 31, 2006 and June 30, 2006, respectively. Available unused borrowings under the Facility were $51.5 million, $75.1 million and $78.7 million at June 30, 2007, December 31, 2006 and June 30, 2006, respectively. Available borrowings at June 30, 2007 and December 31, 2006 were reduced by $50.0 million and $25.0 million, respectively, of outstanding commercial paper.

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        During the fourth quarter of 2006, the Company began to issue commercial paper through a placement agent to fund a portion of its short term working capital needs. The Company had the ability to sell up to $25.0 million in commercial paper under this arrangement. In April 2007, this arrangement was expanded to give the Company the ability to sell up to $50.0 million in commercial paper. The Company’s commercial paper program is backed by the credit commitment under the Company’s revolving credit facility. At June 30, 2007, the Company had $50.0 million of short term commercial paper outstanding compared to $25.0 million outstanding at December 31, 2006.

        In May 2006, the Company entered into a $10.0 million committed line of credit facility with a commercial bank lender. Borrowings under this facility bear interest at 1.15% 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, 2007. There were no borrowings outstanding under this facility at December 31, 2006 and June 30, 2006.

        In addition, the Company has access to a €2.5 million committed foreign short-term credit facility. There were no borrowings outstanding under this facility at June 30, 2007.

        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 2007 will continue to be funded by operations and the Company’s borrowing arrangements.

        At June 30, 2007, shareholders’ equity had increased $28.8 million to $247.5 million from $218.6 at June 30, 2006. This increase primarily reflects the impact of net income of $27.9 million.

        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 2007 six months or 2006 six months. As of June 30, 2007, 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, capital commitments and FIN 48 liabilities, 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 8 and 15, respectively, of Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 as filed with the Securities and Exchange Commission.

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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 June 30, 2007, the Company had available unused capacity of $96.7 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. The Company continues to service substantially all contracts, whether or not sold. At June 30, 2007, the Company serviced $375.5 million finance contracts receivable of which $259.5 million, $77.6 million and $18.9 million were sold through the Securitization Facility, limited recourse arrangements and full recourse arrangements, respectively. 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.

Critical Accounting Policies and Estimates

        There are no material changes to the information provided in response to this item as set forth in the Company’s Annual Report on Form 10-K for the year ended December 31, 2006 as filed with the Securities and Exchange Commission.

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 cited in the Company’s filings with the Securities and Exchange Commission, any adverse change in general economic conditions, unanticipated changes in capital market conditions, the Company’s ability to implement successfully its strategic initiatives (including cost reduction initiatives), unanticipated expenses associated with the discontinuance of the Company’s agricultural implement lines, market acceptance of newly introduced products, unexpected issues related to the pricing and availability of raw materials (including steel) and component parts, unanticipated difficulties in securing product from third party manufacturing sources, the ability of the Company to increase its prices to reflect higher prices for raw materials and component parts, the cyclical nature of the Company’s business, the Company’s and its customers’ access to credit, competitive pricing, product initiatives and other actions taken by competitors, disruptions in production capacity, excess inventory levels, the effect of changes in laws and regulations (including government subsidies and international trade regulations), technological difficulties, changes in currency exchange rates or interest rates, the Company’s ability to secure sources of liquidity necessary to fund its operations, changes in environmental laws, the impact of any strategic transactions effected by the Company, and employee and labor relations. Shareholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and are cautioned not to place undue reliance on such forward-looking statements. The forward-looking statements included in this filing are only made as of the date of this filing, and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.

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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, 2006 as filed with the Securities and Exchange Commission.

Item 4.  Controls and Procedures

Disclosure Controls and Procedures

        The Company’s management, with the participation of the Company’s principal executive officer and its principal financial officer, has evaluated the Company’s disclosure controls and procedures as of June 30, 2007. 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 June 30, 2007.

Changes in Internal Control Over Financial Reporting

        There was no change in the Company’s internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during the three months ended June 30, 2007, that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

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PART II – Other Information

Item 1A.  Risk Factors

        There has not been any material change in the risk factors previously disclosed in the Company’s 2006 Form 10-K for the fiscal year ended December 31, 2006.

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 and six month periods ended June 30, 2007. As of June 30, 2007, the Company had authority to repurchase 272,150 shares under the plan.

Item 4.  Submission of Matters to a Vote of Security Holders

        At the Company’s 2007 annual meeting of shareholders held on April 27, 2007, Marcel-Claude Braud, William D. Gehl and John W. Splude were re-elected as directors of the Company for terms expiring at the 2010 annual meeting of shareholders:

        The following table sets forth the other directors of the Company whose terms of office continued after the 2007 annual meeting:

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        In addition, at the 2007 annual meeting, shareholders approved the appointment of PricewaterhouseCoopers LLP as the Company’s independent registered public accounting firm for fiscal year 2007. With respect to such approval, the number of shares voted for and against were 10,807,210 and 11,768, respectively. The number of shares abstaining was 14,625.

Item 6.  Exhibits

      Exhibit No.        Document Description

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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.

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GEHL COMPANY

INDEX TO EXHIBITS

      Exhibit No.        Document Description

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