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, 1998
--------------
[ ] 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 001-12049
---------
Gradall Industries, Inc.
------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-3381606
-------- ----------
(State or other jurisdiction (I.R.S.
of incorporation or organization) Employer Identification No.)
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, 1998
Common Stock, $.001 par value: 8,940,194
<PAGE>
<TABLE>
<CAPTION>
GRADALL INDUSTRIES, INC.
FORM 10-Q
QUARTER ENDED MARCH 31, 1998
Index
-----
PART I FINANCIAL INFORMATION Page
----
<S> <C> <C>
Item 1 -- Condensed Consolidated Financial Statements 1
Item 2 -- Management's Discussion and Analysis of 6
Financial Condition and Results of Operations
Item 3 -- Quantitative and Qualitative Disclosures 9
About Market Risk
PART II OTHER INFORMATION
Item 6 -- Exhibits and Reports on Form 8-K 9
Signatures 9
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Dollars in Thousands, Except Per Share Data)
Three Months Ended
------------------
March 31, 1998 March 31, 1997
--------------- ---------------
<S> <C> <C>
Net sales $ 41,541 $ 35,910
Cost of sales 31,990 27,292
--------------- ---------------
Gross profit 9,551 8,618
Operating expenses:
Research, development and product
engineering costs 1,054 895
Selling, general & administrative expenses 3,263 3,049
--------------- ---------------
Operating income 5,234 4,674
Interest expense 218 239
Other, net 5 72
--------------- ---------------
Income before provision for taxes 5,011 4,363
Income tax provision 1,957 1,706
Net income $ 3,054 $ 2,657
=============== ===============
Earnings per common share:
Basic:
Weighted average
Shares outstanding 8,940,194 8,939,294
Earnings per common share: $ 0.34 $ 0.30
Diluted:
Weighted average
Shares outstanding 9,023,295 9,005,868
Earnings per common share: $ 0.34 $ 0.30
<FN>
The accompanying notes are an integral part of these condensed Consolidated
financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
Unaudited Audited
---------------- -------------------
March 31, 1998 December 31, 1997
---------------- -------------------
<S> <C> <C>
ASSETS
- -------------------------------------------------
Current assets:
Cash $ 2,104 $ 1,605
Accounts receivable - trade, net of allowance for
doubtful accounts 26,290 25,290
Inventories 25,834 25,564
Prepaid expenses and deferred charges 484 1,645
Deferred income taxes 742 742
---------------- -------------------
Total current assets 55,454 54,846
Deferred income taxes 5,539 5,402
Property, plant and equipment, net 15,519 15,108
Other assets 1,338 1,379
Total assets $ 77,850 $ 76,735
================ ===================
LIABILITIES & STOCKHOLDERS' EQUITY
- -------------------------------------------------
Current liabilities:
Current portion long term debt $ 272 $ 297
Accounts payable - trade 13,587 17,113
Accrued other expenses 10,971 10,927
Total current liabilities 24,830 28,337
---------------- -------------------
Long term obligations:
Long-term debt, net of current portion 11,233 10,015
Accrued post-retirement benefit cost 16,069 15,719
Other long term liabilities 1,445 1,445
---------------- -------------------
Total long term obligations 28,747 27,179
Total liabilities 53,577 55,516
---------------- -------------------
Stockholders' equity:
Common shares, $.001 par value; 18,000,000 shares
authorized; 8,940,194 issued and outstanding 9 9
Additional paid-in capital 38,894 38,894
Accumulated deficit (14,630) (17,684)
---------------- -------------------
Total stockholders' equity 24,273 21,219
Total liabilities and stockholders' equity $ 77,850 $ 76,735
================ ===================
<FN>
The accompanying notes are an integral part of these condensed consolidated financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
GRADALL INDUSTRIES, INC., AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in Thousands)
Three Months Ended
--------------------
March 31, 1998 March 31, 1997
-------------------- ----------------
<S> <C> <C>
Operating Activities:
Net income $ 3,054 $ 2,657
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Post-retirement benefit transition obligation 350 262
Depreciation and amortization 575 451
Deferred income taxes (137) (88)
Gain on sale of property, plant & equipment (26)
Increase in accounts receivable (1,000) (1,947)
Increase in inventory (270) (512)
Decrease in prepaid expenses 1,161 313
Decrease in accounts payable and accrued
expenses (3,482) (1,926)
-------------------- ----------------
Net cash provided by (used in) operating
activities 225 (790)
-------------------- ----------------
Investing Activities:
Proceeds from sale of property, plant & equipment 66
Purchase of property, plant and equipment (985) (787)
Net cash used in investing activities (919) (787)
-------------------- ----------------
Financing Activities:
Net borrowings under lines of credits 1,261 5,287
Repayments on capital leases (68) (49)
Other (19)
Net cash provided by financing activities 1,193 5,219
-------------------- ----------------
Net increase in cash 499 3,642
-------------------- ----------------
Cash at beginning of year 1,605 215
-------------------- ----------------
Cash at end of period $ 2,104 $ 3,857
==================== ================
<FN>
The accompanying notes are an integral part of these condensed consolidated financial
statements.
</TABLE>
<PAGE>
GRADALL INDUSTRIES, INC., AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION:
The unaudited interim financial information as of March 31,1998, and for the
three months ended March 31, 1998 and 1997, 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, 1998, are
not necessarily indicative of the results that may be expected for the entire
year ending December 31, 1998.
These financial statements and the notes thereto should be read in conjunction
with the Company's audited financial statements included in its Annual Report on
Form 10-K for the fiscal year ended December 31, 1997.
2. OTHER COMPREHENSIVE INCOME:
The Company has no significant items of other comprehensive income.
3. INVENTORIES:
Inventories were comprised of:
<TABLE>
<CAPTION>
March 31,1998 December 31,1997
--------------- ------------------
<S> <C> <C>
Raw materials $ 815 $ 921
Work in process 19,430 24,739
Finished goods 11,159 5,474
--------------- ------------------
31,404 31,134
LIFO reserve (5,570) (5,570)
Total inventory $ 25,834 $ 25,564
=============== ==================
</TABLE>
4. EARNINGS PER COMMON SHARE:
The computation of the earnings per common share are as follows:
<TABLE>
<CAPTION>
March 31, 1998 March 31, 1997
--------------- ---------------
<S> <C> <C>
Basic earnings per common share
Net income $ 3,054 $ 2,657
=============== ===============
Weighted average number of shares
outstanding during the periods and used
in calculation of basic earnings per
common share 8,940,194 8,939,294
=============== ===============
Basic earnings per common share $ 0.34 $ 0.30
=============== ===============
Diluted earnings per common share
Net income $ 3,054 $ 2,657
=============== ===============
Weighted average number of shares
outstanding and used in calculation of
diluted earnings per common share 9,023,295 9,005,868
=============== ===============
Diluted earnings per common share $ 0.34 $ 0.30
=============== ---------------
Common shares
Weighted average number of shares
used in calculating basic earnings per
common share 8,940,194 8,939,294
Shares issuable upon exercise of stock
options based on average market prices 83,101 66,574
--------------- ---------------
Weighted average number of shares
used in calculation of diluted earnings
per common share 9,023,295 9,005,868
=============== ===============
</TABLE>
<PAGE>
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
5. 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.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
GENERAL
Gradall Industries operates in two segments of the construction equipment
market, hydraulic excavators and rough terrain variable reach material handlers.
As a result of the growth of Gradall's rough terrain variable reach material
handler business and related parts, this segment has accounted for the majority
of the Company's revenues since 1995. During the first three months of fiscal
1998, material handlers achieved record quarterly sales. In January 1998 the
Company introduced a new D-series family of material handlers. The increase in
material handler sales was driven by strong first quarter rental utilization and
larger distributor rental fleets along with strong demand from national rental
companies.
The new rough terrain wheeled excavator Model XL2300 was introduced in March
1998 at the BAUMA construction equipment show in Germany. Production shipments
for this machine are planned to start in May 1998. Excavator shipments in 1998
will also benefit from the new multi-million dollar order to sell construction
and maintenance equipment to Russia. We plan to start production and shipment
of the units in the fourth quarter of 1998.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998, COMPARED TO THREE MONTHS ENDED MARCH 31,
1997.
Net Sales. Net sales for the three months ended March 31, 1998, were $41.5
- ----------
million, an increase of $5.6 million or 15.7% compared to $35.9 million for the
three months ended March 31, 1997. The increase in net sales was attributable
to a significant increase in unit volume of material handlers. The unit volume
of excavators decreased slightly in the first quarter of 1998 and service parts
sales were level with the same quarter of the prior year.
<PAGE>
RESULTS OF OPERATIONS (CONTINUED)
Gross Profit. Gross profit for the three months ended March 31, 1998, was $9.6
- -------------
million, an increase of $0.9 million or 10.8%, compared to $8.6 million for the
three months ended March 31, 1997. Gross profit as a percentage of net sales
decreased to 23.0% for the three months ended March 31, 1998, from 24.0% for the
three months ended March 31, 1997, primarily due to the training costs of newly
hired employees required to support the increased production schedule.
Research, Development and Product Engineering Costs. Research, development and
- ----------------------------------------------------
product engineering costs expense for the three months ended March 31, 1998, was
$1.1 million, an increase of $0.2 million or 17.8%, compared to $0.9 million for
the three months ended March 31, 1997. This increase was due to the addition of
engineering personnel to support new product development. Although research and
development costs increased to support new product development, the overall cost
as a percent of net sales remained constant at 2.5%.
Selling, General and Administrative. Selling, general and administrative
- --------------------------------------
expense for the three months ended March 31, 1998, was $3.3 million, an increase
of $0.2 million or 7.0%, compared to $3.0 million for the three months ended
March 31, 1997. This increase is attributable to higher advertising spending
and interest subsidy for a higher number of dealer floor plan units. The total
cost of SG&A when expressed as a percent of net sales decreased to 7.4% for the
first quarter of 1998 from 8.5% for the same period in the prior year.
Interest Expense. Interest expense for the three months ended March 31, 1998,
- -----------------
was $0.2, which was a slight decrease from the three months ended March 31,
1997. This decrease in interest expense was due to lower average borrowings in
connection with working capital and capital expenditure needs. The lower
borrowings were slightly offset by a small increase in LIBOR rates.
Income Tax Provision. Income tax expense for the three months ended March 31,
- ----------------------
1998, was $2.0 million, an increase of $0.3 million or 14.7%, compared to $1.7
million for the three months ended March 31, 1997, and represents an effective
tax rate of 39.1% for both periods.
Net Income. Net income for the three months ended March 31, 1998, was $3.1
- -----------
million, an increase of $0.4 million or 14.9%, compared to $2.7 million for the
three months ended March 31, 1997. This increase was primarily attributable to
the increased sales volume of the material handler product.
Earnings Per Common Share. Basic and fully diluted earnings per common share
- ----------------------------
for the three months ended March 31, 1998, was $0.34, an increase of $0.04 per
share or 13.3% compared to $0.30 per share for the three months ended March 31,
1997.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
The Company generated net cash from operating activities of $0.2 million during
the first three months of 1998. Net cash from operating activities resulted
from the sum of $3.1 million of net income, $0.6 million of depreciation and
amortization and $0.2 million from post retirement benefit, net of deferred
taxes, reduced by $3.6 million of net cash used by changes in operating assets
and liabilities, primarily a decrease in accounts payable.
For the first three months of 1998, Gradall's purchases of new equipment and
permanent tooling was $1.0 million. Management plans to invest approximately $6
million in plant and equipment in 1998.
For the first three months of 1998 net borrowings under the Company's lines of
credit increased $1.3 million primarily as a result of the reduction of accounts
payable, increase in inventory and purchase of capital equipment.
A substantial amount of the Company's working capital consists of 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, 1998 the Company has borrowed $10.9 million under its $25
million bank revolving credit facility which is secured principally by the
Company's inventory and receivables. 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, 1998, $14.1 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 the first quarter, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income." This Standard had
no effect on the financial statements of the Company.
In February 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 132, "Employers' Disclosures About Pensions
and Other Postretirement Benefits," which is effective for financial years
beginning after December 31, 1997. The Company will adopt the provisions of SFAS
for its fiscal year ending December 31, 1998, but does not expect such adoption
to have material impact on the financial statements of the Company.
<PAGE>
CAUTIONARY STATEMENT
Statements included in this Form 10-Q which are not historical in nature are
forward-looking statements made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. Forward-looking statements
regarding the Company's future performance and financial results are subject to
certain risks and uncertainties that could cause actual results to differ
materially from those set forth in the forward-looking statements. The
Company's Quarterly Report on Form 10-Q contains certain detailed factors that
could cause the Company's actual results to materially differ from
forward-looking statements made by the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits:
Exhibit 27.0 Financial Data Schedule for the Quarter Ended
March 31, 1998
Exhibit 27.1 Restated Financial Data Schedule for the Quarter Ended
September 30, 1996
Exhibit 27.2 Restated Financial Data Schedule for the Year Ended
December 31, 1996
Exhibit 27.3 Restated Financial Data Schedule for the Quarter Ended
March 31, 1997
Exhibit 27.4 Restated Financial Data Schedule for the Quarter Ended
June 30, 1997
Exhibit 27.5 Restated Financial Data Schedule for the Quarter Ended
September 30, 1997
b) Reports on Form 8-K filed for the three months ended March 31, 1998: 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: By: /s/ Barry L. Phillips
------------------------
Barry L. Phillips
President and Chief Executive Officer
Date: By: /s/ Bruce A. Jonker
----------------------
Bruce A. Jonker
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
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<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
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<CURRENT-LIABILITIES> 24830
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<COMMON> 9
0
0
<OTHER-SE> 24273
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<CGS> 31990
<TOTAL-COSTS> 31990
<OTHER-EXPENSES> 0
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<INCOME-TAX> 1957
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<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3054
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 1057
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<RECEIVABLES> 18542
<ALLOWANCES> 0
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<COMMON> 9
0
0
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<CGS> 80594
<TOTAL-COSTS> 80594
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2805
<INCOME-PRETAX> 9244
<INCOME-TAX> 3623
<INCOME-CONTINUING> 5621
<DISCONTINUED> 0
<EXTRAORDINARY> 973
<CHANGES> 0
<NET-INCOME> 4648
<EPS-PRIMARY> .74 <F1>
<EPS-DILUTED> .74 <F2>
<FN>
<F1> The $0.74 earnings per share reported above are for basic earnings per
share after extraordinary items. Basic earnings per share before
extraordinary items are $0.89.
<F2> The $0.74 earnings per share reported above are for diluted earnings per
share after extraordinary items. Diluted earnings per share before
extraordinary items are $0.89.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 215
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<RECEIVABLES> 16846
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<COMMON> 9
0
0
<OTHER-SE> 9076
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<CHANGES> 0
<NET-INCOME> 7313
<EPS-PRIMARY> 1.05 <F1>
<EPS-DILUTED> 1.05 <F2>
<FN>
<F1> The $1.05 earnings per share reported above are for basic earnings per
share after extraordinary items. Basic earnings per share before
extraordinary items are $1.19.
<F2> The $1.05 earnings per share reported above are for diluted earnings per
share after extraordinary items. Diluted earnings per share before
extraordinary items are $1.19.
</TABLE>
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<EPS-DILUTED> .94
</TABLE>
