FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number 001-12049
Gradall Industries, Inc.
(Exact name of registrant as specified in its charter)
Delaware 36-3381606
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
406 Mill Avenue S. W., New Philadelphia, OH 44663
(Address of principal executive offices)
(330) 339-2211
(Registrant's telephone number, including area code)
Not applicable
(Former name, former address and former fiscal year, if changed since last
report)
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 for 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
--------- ---------
Number of shares outstanding at March 31, 1997
Common Stock, $.001 par value: 8,939,294
<PAGE>
GRADALL INDUSTRIES, INC.
FORM 10-Q
QUARTER ENDED MARCH 31, 1997
Index
Page
PART I FINANCIAL INFORMATION
Item 1 -- Consolidated Financial Statements 1
Item 2 -- Management's Discussion and Analysis of
Financial Condition and Results of Operations 6
PART II OTHER INFORMATION
Item 6 -- Exhibits and Reports on Form 8-K 8
Signatures 8
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
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<CAPTION>
GRADALL INDUSTRIES, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Dollars in Thousands, Except Per Share Data)
Three Months Ended
--------------------------
<S> <C> <C>
Mar 31, 1997 Mar 31, 1996
---------- ----------
Net sales $ 35,910 $ 34,137
Cost of sales 27,292 26,467
---------- ----------
Gross profit 8,618 7,670
Operating expenses:
Engineering 895 752
Selling and marketing 1,715 1,586
Administrative 1,334 1,177
---------- ----------
Operating income 4,674 4,155
Interest expense 239 1,018
Other, net 72 141
---------- ----------
Income before provision for taxes 4,363 2,996
Income tax provision 1,706 1,162
---------- ----------
Net income $ 2,657 $ 1,834
========== ==========
Weighted average shares outstanding 8,939,294 5,989,294
Net income per share: $ 0.30 $ 0.31
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
Mar 31, 1997 Dec 31, 1996
-------------- --------------
(Unaudited)
<S> <C> <C>
ASSETS
- ---------------------------------------------
Current assets:
Cash $ 3,857 $ 215
Accounts receivable - trade, net of allowance
for doubtful accounts 18,793 16,846
Inventories 21,838 21,326
Prepaid expenses and deferred charges 182 495
Deferred income taxes 1,151 1,151
-------------- --------------
Total current assets 45,821 40,033
Deferred income taxes 5,345 5,257
Property, plant and equipment, net 11,912 11,535
Other assets 1,360 1,401
Total assets $ 64,438 $ 58,226
============== ==============
LIABILITIES & STOCKHOLDERS' EQUITY
- --------------------------------------------
Current liabilities:
Current portion long term debt $ 170 $ 174
Accounts payable - trade 12,753 13,405
Accrued other expenses 10,273 11,547
Total current liabilities 23,196 25,126
-------------- --------------
Long term obligations:
Long-term debt, net of current portion 12,978 7,736
Accrued post-retirement benefit cost 14,866 14,604
Other long term liabilities 1,684 1,684
-------------- --------------
Total long term obligations 29,528 24,024
Total liabilities 52,724 49,150
-------------- --------------
Stockholders' equity:
Common shares, $.001 par value; 18,000,000 shares
authorized; 8,939,294 issued and outstanding 9 9
Additional paid-in capital 38,888 38,907
Accumulated (deficit) surplus (27,183) (29,840)
-------------- --------------
Total stockholders' equity (deficit) 11,714 9,076
Total liabilities and stockholders' equity $ 64,438 $ 58,226
============== ==============
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GRADALL INDUSTRIES, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in Thousands)
Three Months Ended
-----------------------------------
<S> <C> <C>
Mar 31, 1997 Mar 31, 1996
--------------- --------------
Operating Activities:
Net income $ 2,657 $ 1,834
Adjustments to reconcile net income to net
cash provided by operating activities:
Post-retirement benefit transition obligation 262 219
Depreciation and amortization 451 434
Deferred income taxes (88) (74)
Increase in accounts receivable (1,947) (5,760)
(Increase) Decrease in inventory (512) 822
Decrease in prepaid expenses 313 119
Increase in other assets (214)
(Decrease) increase in accounts payable and
accrued expenses (1,926) 1,272
---------------- --------------
Net cash used in operating activities (790) (1,348)
---------------- --------------
Investing Activities:
Purchase of property, plant and equipment (787) (201)
---------------- --------------
Financing Activities:
Net borrowings under lines of credits 5,287 2,260
Repayments on capital leases (49) (42)
Other (19)
Net cash provided by financing activities 5,219 2,218
--------------- --------------
Net increase in cash 3,642 669
--------------- --------------
Cash at beginning of year 215 1,537
---------------- --------------
Cash at end of period $ 3,857 $ 2,206
================ ==============
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
GRADALL INDUSTRIES, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The unaudited interim financial information as of March 31, 1997 and 1996, and
for the three months ended March 31, 1997 and 1996, has been prepared on the
same basis as the audited financial statements. In the opinion of management,
such unaudited information includes all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of the interim
information. Operating results for the three months ended March 31, 1997, are
not necessarily indicative of the results that may be expected for the entire
year ending December 31, 1997.
2. INVENTORIES:
Inventories were comprised of:
<TABLE>
<CAPTION>
March 31 December 31
<S> <C> <C>
1997 1996
---------- ----------
Raw materials $ 1,106 $ 1,167
Work in process 18,443 18,402
Finished goods 7,869 7,187
---------- ----------
27,418 26,756
LIFO reserve (5,580) 5,430
Total inventory $ 21,838 $ 21,326
========== ==========
</TABLE>
3. PUBLIC OFFERING:
On September 3, 1996, the Company completed an initial public offering in
which 2,950,000 shares of common stock were issued for a total sum of $29.5
million. Expenses incurred in connection with the issue approximated $2.6
million. The net proceeds of the offering were used as follows:
Repay outstanding senior term debt $ 9,550
Repay subordinate debt 10,000
Redeem preferred stock 2,000
Reduce revolving credit liability 5,379
In connection with the offering, the Company increased the number of its
authorized shares of common stock from 2,200 to 18,000,000 and effected a
5,540 to 1 stock split. All applicable share and per share data have been
retroactively adjusted for the stock split.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. CONTINGENCIES:
The Company is involved in certain claims and litigation related to its
operations. Based upon the facts known at this time, management is of the
opinion that the ultimate outcome of all such claims and litigation will not
have a material adverse effect on the financial condition or results of
operations of the Company.
5. UNION CONTRACT:
The Company's production workers, represented by the International Association
of Machinists and Aerospace Workers, ratified a new three-year agreement after
a three-week work stoppage. They returned to work on April 14th. Management
believes the work stoppage will not have a material adverse impact on either
the operations or the financial condition of the Company.
<PAGE>
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997, COMPARED TO THREE MONTHS ENDED MARCH 31,
1996.
Net Sales. Net sales for the three months ended March 31, 1997, were $35.9
million, an increase of $1.8 million or 5.2% compared to $34.1 million for the
three months ended March 31, 1996. The increase in net sales was attributable
to a significant increase in unit volume of material handlers and a moderate
increase in service parts.
Gross Profit. Gross profit for the three months ended March 31, 1997, was
$8.6 million, an increase of $0.9 million or 12.4%, compared to $7.7 million
for the three months ended March 31, 1996. Gross profit as a percentage of
net sales increased to 24.0% for the three months ended March 31, 1997, from
22.5% for the three months ended March 31, 1996, primarily due to improved
production efficiencies and economies of higher production volume.
Engineering. Engineering expense for the three months ended March 31, 1997,
was $0.9 million, an increase of $0.1 million or 19.0%, compared to $0.8
million for the three months ended March 31, 1996. This increase was due to
the addition of engineering personnel to support new product development.
Selling and Marketing. Selling and marketing expenses for the three months
ended March 31, 1997, were $1.7 million, an increase of $0.1 million or 8.1%,
compared to $1.6 million for the three months ended March 31, 1996. This
increase is attributable to the addition of field sales and service
representatives and interest subsidy for a higher number of dealer floor plan
units.
Administrative. Administrative expenses for the three months ended March 31,
1997, were $1.3 million, an increase of $0.2 million or 13.3%, compared to
$1.2 million for the three months ended March 31, 1996. This increase was
primarily attributable to higher outside professional services.
Interest Expense. Interest expense for the three months ended March 31, 1997,
was $0.2 million, a decrease of $0.8 million or 76.5%, compared to $1.0
million for the three months ended March 31, 1996. This decrease in interest
expense was due to lower borrowings in connection with the debt reduction from
the proceeds of the September 3, 1996, initial public offering.
Income Tax Provision. Income tax expense for the three months ended March 31,
1997, was $1.7 million, an increase of $0.5 million or 46.8%, compared to $1.2
million for the three months ended March 31, 1996, and represented an
effective tax rate of 39.1% and 38.8%, respectively.
Net Income. Income for the three months ended March 31, 1997, was $2.7
million, an increase of $0.8 million or 44.9%, compared to $1.8 million for
the three months ended March 31, 1996. This increase was attributable to the
increased sales volume and lower interest expense.
Net Income Per Share. Net income per share decreased to $0.30 for the three
months ended March 31, 1997, from $0.31 for the three months ended March 31,
1996, as a result of a higher number of shares outstanding from the initial
public offering.
Pro Forma Net Income Per Share. Net income per share for the three months
ended March 31, 1997, was $0.30, an increase of $0.04 per share, or 15.4%
compared to the pro forma net income per share of $0.26 for the three months
ended March 31, 1996. The pro forma net income is presented as if the
issuance of shares of common stock pursuant to the initial public offering and
the application of the net proceeds thereof had occurred on January 1, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company used net cash for operating activities of $0.8 million during the
first three months of 1997. Net cash from operating activities resulted from
$2.7 million from net income, $0.4 million from depreciation and $0.2 million
from post retirement benefit net of deferred taxes. The sum of these
operating activities prior to changes in working capital totaled $3.3 million
which was offset by $4.1 million of net cash used by changes in operating
assets and liabilities, primarily due to an increase in accounts receivable to
support the revenue growth and reduction in accounts payable and accrued
expenses primarily for settlement of prior year litigation.
For the first three months of 1997, net cash invested in purchases of new
equipment and permanent tooling was $0.8 million. Management expects to
continue their multi-year capital investment program to increase production
productivity and product output at the New Philadelphia facility.
For the first three months of 1997, net borrowings under the Company's lines
of credit increased as a means of funding cash requirements for operating
activities and new equipment purchases and as a result of an increase in lock
box cash receipts for the last day of the month not yet deducted from lines of
credit.
A substantial amount of the Company's working capital is invested in accounts
receivable and inventories. The Company periodically reviews accounts
receivable for noncollectibility and inventories for obsolescence and
establishes allowances it believes are appropriate.
As of March 31, 1997, the Company has borrowed $12.6 million of its $25
million bank revolving credit facility which is secured by most of the assets
of the Company. Interest is calculated, at the Company's option, at LIBOR
plus 1.0% or a commercial bank's base rate less 0.5% and requires a commitment
fee of 0.25% per annum on the unused portion of the revolving credit
commitment. At March 31, 1997, $12.4 million was available for future
borrowings under the revolver and the Company was in compliance with all
financial covenants.
The Company believes that cash flows from operations and funds available under
its revolving credit facility will be adequate to fund its working capital and
capital expenditure requirements for the foreseeable future.
NEW ACCOUNTING STANDARDS
In February 1997, FASB issued SFAS 128 "Earnings per Share," which is
effective for financial statements issued for periods after December 15, 1997.
This Statement simplifies the standards for computing earnings per share
("EPS") and makes them comparable to international EPS standards. The Company
will adopt the provisions of SFAS 128 for its fiscal year ending December 31,
1997, but does not expect such adoption to have a material impact on EPS.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits: None
b) Reports on Form 8-K filed for the three months ended March 31, 1997:
None
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Gradall Industries, Inc.
Date: May 8, 1997 By: /s/ Barry L. Phillips
------------------------
Barry L. Phillips
President and Chief Executive Officer
Date: May 8, 1997 By: /s/ Bruce A. Jonker
----------------------
Bruce A. Jonker
Chief Financial Officer
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1996
<CASH> 3857
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<RECEIVABLES> 18,783
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<INVENTORY> 21,838
<CURRENT-ASSETS> 45,821
<PP&E> 11,912
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0
0
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<CGS> 27,292
<TOTAL-COSTS> 27,292
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<EPS-PRIMARY> .30
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</TABLE>
