GRADALL INDUSTRIES INC, S-3/A, 1998-06-08

GRADALL INDUSTRIES INC
S-3/A, 1998-06-08
CONSTRUCTION MACHINERY & EQUIP

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 8, 1998

REGISTRATION NO. 333-55763

================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------

AMENDMENT NO. 1 TO

FORM S-3

REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
------------------

GRADALL INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C> <C>
DELAWARE 3531 36-3381606
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
</TABLE>

406 MILL AVENUE SW
NEW PHILADELPHIA, OH 44663
(330) 339-2211
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

BRUCE A. JONKER
VICE PRESIDENT AND
CHIEF FINANCIAL OFFICER
GRADALL INDUSTRIES, INC.
406 MILL AVENUE SW
NEW PHILADELPHIA, OH 44663
(330) 339-2211
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
COPIES TO:

<TABLE>
<S> <C>
ANTHONY E. EFREMOFF, ESQ. WINTHROP B. CONRAD, JR., ESQ.
Black, McCuskey, Souers & Arbaugh Davis Polk & Wardwell
1000 United Bank Plaza 450 Lexington Avenue
220 Market Avenue South New York, New York 10017
Canton, Ohio 44702 (212) 450-4000
(330) 456-8341
</TABLE>

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the Registration Statement becomes
effective.
------------------

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]

-------------------------------------------
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

CALCULATION OF REGISTRATION FEE
================================================================================

<TABLE>
<CAPTION>
PROPOSED
NUMBER OF MAXIMUM PROPOSED
TITLE OF SECURITIES SHARES TO BE OFFERING PRICE MAXIMUM AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value $.001
per share.................. 2,300,000 $15.0625 $34,643,750 $10,220.00(3)
=====================================================================================================================
</TABLE>

(1) Includes 300,000 shares which are being registered in connection with an
over-allotment option granted to the Underwriters.

(2) Estimated solely for purposes of calculating the registration fee based upon
the average of the high and low price of the Common Stock as reported by The
Nasdaq National Market on May 28, 1998.

(3) Full amount was paid upon the initial filing of the Registration Statement.

------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2

Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.

SUBJECT TO COMPLETION, DATED JUNE 8, 1998

2,000,000 SHARES

GRADALL INDUSTRIES, INC.
COMMON STOCK
------------------

Of the 2,000,000 shares of Common Stock, par value $.001 per share (the
"Common Stock"), of Gradall Industries, Inc., a Delaware corporation (the
"Company"), 500,000 shares are being offered by the Company and 1,500,000 shares
are being offered by a Selling Stockholder. See "Selling Stockholder." The
Company will not receive any of the proceeds from the sale of shares by the
Selling Stockholder.

The Common Stock is traded on The Nasdaq National Market under the symbol
"GRDL". The reported last sale price of the Common Stock reported on The Nasdaq
National Market on June 5, 1998 was $15 1/8 per share. See "Price Range of
Common Stock."

SEE "RISK FACTORS" BEGINNING ON PAGE 7 OF THE PROSPECTUS FOR A DISCUSSION
OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE
SHARES OF COMMON STOCK OFFERED HEREBY.
------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
============================================================================================================
UNDERWRITING PROCEEDS TO
PRICE TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS(1) COMPANY(2) STOCKHOLDER
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Per Share............... $ $ $ $
- ------------------------------------------------------------------------------------------------------------
Total(3)................ $ $ $ $
============================================================================================================
</TABLE>

(1) The Company and the Selling Stockholder have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933. See "Underwriting."

(2) Before deducting estimated expenses of $250,000 payable by the Company.

(3) The Company has granted the Underwriters a 30-day option to purchase up to
300,000 additional shares of Common Stock on the same terms per share solely
to cover over-allotments, if any. If such option is exercised in full, the
total price to public will be $ , the total underwriting discounts
and commissions will be $ and the total proceeds to the Company
will be $ . See "Underwriting."
------------------

The Common Stock is being offered by the Underwriters as set forth under
"Underwriting" herein. It is expected that the shares will be ready for delivery
at the offices of McDonald & Company Securities, Inc. or through the facilities
of The Depository Trust Company in New York, New York, on or about June , 1998
against payment therefor in immediately available funds.

MCDONALD & COMPANY SBC WARBURG DILLON READ INC.

SECURITIES, INC.

The date of this Prospectus is June , 1998.

<PAGE> 3

[Company photos of excavators and material handlers]

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THIS OFFERING,
AND MAY BID FOR, AND PURCHASE THE COMMON STOCK IN THE OPEN MARKET. FOR A
DISCUSSION OF THESE ACTIVITIES, SEE "UNDERWRITING."
<PAGE> 4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and financial statements, including the notes thereto, appearing
elsewhere in this Prospectus. Unless the context otherwise requires, "Gradall"
or the "Company" refers to Gradall Industries, Inc., a Delaware corporation, and
its consolidated subsidiaries.

THE COMPANY

Gradall is a leading manufacturer of telescopic hydraulic excavators and
rough-terrain variable reach material handlers as well as related service parts.
The Company's products are marketed under the widely respected Gradall tradename
and are distinguished by their telescopic boom technology, versatility,
productivity and reliability. Gradall's telescopic booms, which are manufactured
from high-strength specialty steel, are unique both in their shape and
engineering design, which provide added strength with minimal weight, and, in
the case of excavators, in their ability to rotate a full 360 degrees. Gradall
products serve niche markets within the construction equipment industry and
typically command premium prices. In 1997, total sales were $158.7 million,
comprised of $57.4 million in sales of excavators, $84.0 million in sales of
material handlers and $17.3 million in sales of service parts. Since January
1993, the Company has introduced 14 new products which accounted for in excess
of 60% of Gradall's net sales in 1997.

Gradall excavators are typically used by general contractors and government
agencies for ditching, sloping, finished grading, general maintenance and
infrastructure projects. The Company's excavators are sold through approximately
48 independent distributors at approximately 152 locations throughout North
America. The introduction and ongoing development of the Company's XL Series
excavators, featuring the unique Gradall rotating, telescopic booms with
high-pressure hydraulics, have allowed the Company to continue to dominate its
traditional niche market of wheeled, telescopic boom excavators and to
strengthen its competitive position in the larger market of conventional crawler
excavators, a market historically dominated by knuckle-boom technology.

Gradall rough-terrain variable reach material handlers are typically used
by residential, non-residential and institutional building contractors for
lifting, transporting and placing a wide variety of materials at their point of
use or storage. The Company's material handlers are sold through approximately
44 independent distributors at approximately 127 locations throughout North
America. In addition, Gradall material handlers are available at national rental
companies at over 250 locations. The Company continues to introduce new material
handlers with Gradall's unique 90 degrees rear-pivot steering, hydrostatic drive
and low profile design which provide an exceptional combination of
maneuverability, versatility and stability.

Gradall's strategy is to design and produce high quality hydraulic
excavators and material handlers for niche markets while simultaneously reducing
manufacturing costs and increasing production efficiencies. Gradall's ability to
design and customize each of its product lines to fit the specifications of its
customers augments the uniqueness of the Company's products. In 1995, the
Company commenced a multi-year program designed to expand plant capacity and
reduce production costs by improving labor efficiency, equipment productivity
and quality. The Company invested $4.2 million in 1995, $2.3 million in 1996 and
$5.3 million in 1997 for capital improvements pursuant to this program. During
1998, the Company plans to invest approximately $8.1 million for additional
capital improvements under this program. Management believes that these
strategies have enabled the Company to increase substantially its profitability
in recent years. In addition, the Board of Directors has approved in principle a
multi-year capacity expansion program (the "Capacity Expansion Program") which
is intended to raise capacity in excess of 50% over the next three to five
years. The Capacity Expansion Program will require a $30 to $50 million
investment over this time frame. The Company has entered into no commitments
with respect to the Capacity Expansion Program and may alter or revise the
Capacity Expansion Program based upon changes in market demand and/or economic
conditions. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources."

The Company's principal executive offices are located at 406 Mill Avenue
SW, New Philadelphia, OH 44663 and its telephone number is (330) 339-2211.

3
<PAGE> 5

THE OFFERING

<TABLE>
<S> <C>
Common Stock offered by the Company........................ 500,000 shares(1)

Common Stock offered by the Selling Stockholder............ 1,500,000 shares

Common Stock to be outstanding after the Offering made
hereby (the "Offering").................................. 9,445,734 shares(1)(2)

Use of proceeds............................................ For general corporate purposes, including
the Capacity Expansion Program, and to
repay outstanding indebtedness of the
Company under its revolving credit
facility, amounts under which, after such
repayment, would be available for general
corporate purposes as well as the Capacity
Expansion Program. See "Use of Proceeds."
The Company will not receive any proceeds
from the sale of Common Stock by the
Selling Stockholder.

Nasdaq National Market symbol.............................. GRDL
</TABLE>

- ---------------
(1) Does not include up to 300,000 shares of Common Stock which may be sold by
the Company pursuant to the Underwriters' over-allotment option.

(2) Does not include 518,786 shares of Common Stock issuable in connection with
outstanding stock options, 163,851 of which are exercisable as of June 1,
1998.

RISK FACTORS

Any investment in the Common Stock offered hereby involves risk. For a
discussion of considerations relevant to an investment in the shares of Common
Stock, see "Risk Factors" beginning on page 7.

4
<PAGE> 6

SUMMARY CONSOLIDATED FINANCIAL DATA

The summary consolidated financial data set forth below should be read in
conjunction with the Consolidated Financial Statements of the Company and the
Notes thereto included elsewhere in this Prospectus and "Management's Discussion
and Analysis of Financial Condition and Results of Operations."

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- ----------------------
1993(6) 1994(6) 1995 1996 1997 1997 1998
------- ------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................................... $72,208 $88,820 $ 118,438 $ 140,909 $ 158,659 $ 35,910 $ 41,541
Cost of sales............................... 59,274 71,280 92,637 108,098 120,663 27,292 31,990
------- ------- --------- --------- --------- --------- ---------
Gross profit................................ 12,934 17,540 25,801 32,811 37,996 8,618 9,551
Research and development and product
engineering costs......................... 1,848 2,123 2,504 3,081 3,644 895 1,054
Selling, general and administrative
expenses.................................. 9,307 9,346 10,503 11,815 13,712 3,049 3,263
------- ------- --------- --------- --------- --------- ---------
Operating income............................ 1,779 6,071 12,794 17,915 20,640 4,674 5,234
Amortization of FAS 106(1).................. -- (3,626) -- -- -- -- --
Interest expense............................ 1,055 1,146 1,642 3,108 696 239 218
Other, net.................................. (549) 234 865 1,018 257 72 5
------- ------- --------- --------- --------- --------- ---------
Income before provision for taxes,
extraordinary item and change in
accounting................................ 1,273 8,317 10,287 13,789 19,687 4,363 5,011
Income tax provision........................ 550 3,152 3,680 5,503 7,696 1,706 1,957
------- ------- --------- --------- --------- --------- ---------
Income before extraordinary item and change
in accounting............................. 723 5,165 6,607 8,286 11,991 2,657 3,054
Extraordinary item(2)....................... -- -- -- 973 -- -- --
Change in accounting loss(3)................ 9,014 -- -- -- -- -- --
------- ------- --------- --------- --------- --------- ---------
Net income (loss)(4)........................ $(8,291) $ 5,165 $ 6,607 $ 7,313 $ 11,991 $ 2,657 $ 3,054
======= ======= ========= ========= ========= ========= =========
Earnings per common share(4)(5)
Basic:
Before extraordinary item................... $1.17 $1.19 $1.34 $0.30 $0.34
After extraordinary item.................... $1.17 $1.05 $1.34 $0.30 $0.34
Weighted average common shares outstanding.... 5,637,244 6,956,507 8,939,605 8,939,294 8,940,194
Diluted:
Before extraordinary item................... $1.17 $1.18 $1.33 $0.30 $0.34
After extraordinary item.................... $1.17 $1.04 $1.33 $0.30 $0.34
Weighted average common shares outstanding.... 5,637,244 7,003,200 9,013,760 9,005,868 9,023,295

OTHER OPERATING DATA:
Employees (at period end)................... 518 557 581 632 681 632 695
Sales per employee.......................... $ 139 $ 159 $ 204 $ 223 $ 233 $ 57 $ 60
Capital expenditures........................ $ 534 $ 1,214 $ 4,189 $ 2,300 $ 5,305 $ 787 $ 985
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31, 1998
1997 ----------------------
------------ AS
ACTUAL ACTUAL ADJUSTED(7)
------------ ------- -----------
(UNAUDITED)
<S> <C> <C> <C>
BALANCE SHEET DATA:
Working capital........................................... $26,509 $30,624 $30,624
Total assets.............................................. 76,735 77,850 77,850
Total debt................................................ 10,312 11,505 4,608
Stockholders' equity...................................... 21,219 24,273 31,170
</TABLE>

- ---------------

(1) The FAS 106 gain resulted from the reduction in the post-retirement health
care benefits liability reflecting a change in actuarial assumptions related
to the projected growth in medical costs.

(2) An extraordinary item of $1.0 million, net of taxes, related to early
extinguishment of senior and subordinated debt which was incurred in
September 1996 to write off unamortized deferred financing costs and the
discount on subordinated debt which was paid off with the proceeds from the
Company's initial public offering of its Common Stock on September 3, 1996
(the "1996 IPO").

(3) Reflects a $9.0 million after-tax decrease in net income resulting from the
adoption of the accrual basis of accounting for post-retirement health care
benefits (FAS 106).

(4) Net income (loss) per share data have been omitted for years prior to 1995
as such amounts are not comparable due to the Company's consummation in
October 1995 of a series of transactions which resulted in a new
capitalization and ownership structure (the "1995 Recapitalization").

(5) Presented based on actual earnings and average shares outstanding in the
periods indicated after giving effect to a 5,540-for-1 stock split and the
conversion of outstanding warrants relating to the 1996 IPO.

(6) Excludes former wholly owned subsidiaries of the Company which were spun off
to certain shareholders in connection with the 1995 Recapitalization. See
Note 1 to the Consolidated Financial Statements included herein.

(7) Amounts do not reflect the proceeds from the sale of the 300,000 additional
shares of Common Stock pursuant to the Underwriters' over-allotment option.
Amounts assume an offering price of $15 1/8, the reported last sale price of
the Common Stock on The Nasdaq National Market on June 5, 1998.

5
<PAGE> 7

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

The following documents filed by the Company with the Commission (File No.
001-12049) pursuant to the Securities Exchange Act of 1934 (the "Exchange Act")
are incorporated by reference and made a part hereof:

(a) the Company's Annual Report on Form 10-K for the year ended
December 31, 1997; and

(b) the Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998.

All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act, after the date of this Prospectus and prior to the
termination of the offering pursuant hereto, shall be deemed to be incorporated
by reference herein and to be a part hereof from the date of filing of such
document. Any statement contained herein or in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Prospectus.

The Company will provide without charge to any person, including any
beneficial owner, to whom this Prospectus is delivered, upon written or oral
request of such person, a copy of any and all of the documents referred to above
which have been incorporated by reference in this Prospectus (other than
exhibits to such documents, unless such exhibits are specifically incorporated
by reference into such documents). Such requests should be directed to the
office of Bruce A. Jonker, Vice President, Chief Financial Officer and
Treasurer, Gradall Industries, Inc., 406 Mill Avenue SW, New Philadelphia, OH
44663, telephone number (330) 339-2211.

6
<PAGE> 8

RISK FACTORS

Any investment in the shares of Common Stock offered hereby involves risk.
Prospective investors should consider carefully the following factors in
evaluating any investment in the Common Stock.

IMPACT OF SIGNIFICANT COMPETITION

The markets in which the Company operates are highly competitive. The
Company faces competition in each of its product lines from a number of
different manufacturers, some of which have greater financial and other
resources than the Company. The principal competitive factors affecting the
markets for the Company's products include performance, functionality, price,
brand recognition, customer service and support, and product availability.

CYCLICALITY MAY LEAD TO FLUCTUATIONS IN DEMAND

The Company markets its products primarily to the construction industry.
Accordingly, demand for the Company's products, and therefore the profitability
of the Company, are sensitive to the state of the U.S. economy in general,
regional economic conditions, and particularly to changes in private
construction spending and infrastructure spending funded by the public sector.
There can be no assurance that the cyclicality of any of these factors will not
have a material adverse effect on the Company's business, operations or
financial performance.

DEPENDENCE ON SUCCESSFUL PRODUCT DEVELOPMENT

In excess of 60% of the Company's net sales in 1997 were attributable to
new products introduced since 1993. The Company believes that its future growth
and profitability are dependent on its continued development of new products and
the success of such new products, and no assurance can be given that the Company
will be able to successfully develop and distribute additional new products.

DEPENDENCE ON DISTRIBUTION NETWORK

The Company primarily markets and distributes its products through a
network of independent distributors and believes that this network is a core
strength of its business. While it is not dependent on any single distributor,
loss of certain key distributors could have an adverse effect on the business,
operations and financial results of the Company. The Company has agreements with
its distributors under which the distributors purchase products from the Company
at agreed upon prices for resale within the distributor's territory. Although
the Company's distributors are not required to purchase any minimum number of
products, they are required to maintain agreed-upon inventory levels. In
addition to the Company's products, its distributors typically sell construction
equipment manufactured by third parties, including competitors of the Company.
See "Business -- Marketing & Distribution." The Company also sells its products
to national rental companies, who in turn rent the products to end-users. The
Company believes that this distribution channel is increasingly important to its
continued success, and the loss of certain key national rental company accounts
could have a material adverse effect on the business, operations and financial
results of the Company.

DEPENDENCE ON NEW PHILADELPHIA FACILITY

Substantially all of the Company's operations are conducted from a single
company-owned facility in New Philadelphia, Ohio (the "New Philadelphia
Facility") which accommodates the Company's corporate offices, manufacturing and
assembly operations and certain warehouse space. The Company leases additional
warehouse space at a nearby location. Equipment failures at the New Philadelphia
Facility could limit or shut down the Company's production for a significant
period of time. In order to minimize the risk of equipment failure, the Company
follows a comprehensive maintenance and loss prevention program and periodically
reviews its failure exposure. To date, the Company has not experienced any
significant equipment failure. However, no assurance can be given that a
material shutdown will not occur in the future or that such a shutdown would not
have a material adverse effect on the business, operations and financial results
of the Company. In addition to equipment failure, the New Philadelphia Facility
also is subject to the risk of catastrophic loss. The Company maintains property
damage insurance which it believes to be adequate to provide for reconstruction
of damaged equipment, as well as business interruption insurance to mitigate
losses resulting from any production shutdown caused by an

7
<PAGE> 9

insured loss. However, no assurance can be given that such insurance will be
adequate to cover losses which could occur.

CAPACITY CONSTRAINTS; CAPACITY EXPANSION PROGRAM

Based on its current equipment and manufacturing processes, the New
Philadelphia Facility is operating at capacity. Significant increases in output
from current levels will require increases in capital expenditures and other
productivity improvements. In 1995, the Company commenced a multi-year program
designed to expand plant capacity and reduce production costs by improving labor
efficiency, equipment productivity and quality. The Company invested $4.2
million in 1995, $2.3 million in 1996 and $5.3 million in 1997 for capital
improvements pursuant to this program. During 1998, the Company plans to invest
approximately $8.1 million for capital improvements under this program. The
Company believes that recently completed capital expenditures, which have
expanded plant capacity, together with planned capital expenditures, should
allow the Company to meet anticipated demand for its products. In addition, the
Board of Directors has approved in principle the Capacity Expansion Program
which is intended to raise capacity in excess of 50% over the next three to five
years. The Capacity Expansion Program will require a $30 to $50 million
investment over this time frame. The Company has entered into no commitments
with respect to the Capacity Expansion Program and may alter or revise the
Capacity Expansion Program based upon changes in market demand and/or economic
conditions. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity And Capital Resources." However, there can be
no assurance that the Company will be successful in implementing these measures
or that such measures will be successful in increasing plant capacity or meeting
future increases in demand.

LABOR RELATIONS

The Company's 461 hourly employees are represented by the International
Association of Machinists and Aerospace Workers ("IAM") and are currently
working under a three-year contract which will expire on April 16, 2000. The
Company's current contract with the IAM was approved after a three-week stoppage
which occurred when the union failed to ratify a proposed three-year contract.
During the three-week work stoppage the Company was able to continue production
and shipment, though at a reduced level. There can be no assurance that the
Company will be able to negotiate satisfactory contracts with the union in the
future or that the Company's union employees will not participate in any work
stoppage which could have a material adverse effect on the operations of the
Company.

DEPENDENCE ON KEY MANAGEMENT

The success of the Company's business is dependent upon the management and
leadership skills of Barry L. Phillips, the Company's President and Chief
Executive Officer, and other members of the Company's senior management team.
Although the Company has an employment agreement with Mr. Phillips, the loss of
Mr. Phillips or any other member of the senior management team or an inability
to attract and retain additional personnel could have a material adverse effect
on the Company. There can be no assurance that the Company will be able to
retain its existing senior management personnel or to continue to attract
additional qualified personnel.

DEPENDENCE ON CERTAIN SUPPLIERS

Certain of the components included in the Company's products are obtained
from a single supplier or a limited number of suppliers. Disruption or
termination of supplier relationships or the inability to obtain needed
quantities to meet the Company's output of product could have a material adverse
effect on the Company's operations. The Company believes that alternative
sources could be obtained, if necessary, but the inability to obtain sufficient
quantities of the components or the need to develop alternative sources, if and
as required in the future, could result in delays or reductions in product
shipments which in turn may have a material adverse effect on the Company's
operating results and customer relationships.

RISK OF CLAIMS FOR PRODUCT LIABILITY

Due to the nature of its products, the Company may be subject to
significant claims for product liability. The Company is a party to various
lawsuits seeking damages for alleged product liability arising from the use of
its products. The Company currently maintains product liability insurance with
an annual aggregate limit of $6
8
<PAGE> 10

million subject to a self-insurance retention in the amount of $225,000 per
claim. There can be no assurance that proceeds available under the Company's
insurance policy would be adequate to cover potential product liability claims.
A successful claim against the Company in excess of the Company's insurance
coverage could have a material adverse effect on the financial results of the
Company. The Company's product liability costs for any claim have not exceeded
its self-insurance retention amount during any of the last three fiscal years.

ENVIRONMENTAL MATTERS

The Company is subject to various federal, state and local environmental
laws and regulations, including those governing discharges into the air and
water, as well as the handling and disposal of solid and hazardous wastes.
Pursuant to these laws and regulations, the Company may be required from time to
time to remediate environmental contamination associated with releases of
hazardous substances. In addition, the Company has made and will continue to
make capital and other expenditures to comply with such environmental laws and
regulations. Although the Company does not anticipate that expenditures to
comply with environmental laws and regulations, including costs of remediation,
will be material, there can be no assurance that the costs of complying with
such existing or future laws or regulations will not exceed current estimates.

CONTROL BY MLGA FUND II, L.P.

Upon the consummation of the Offering, approximately 25.0% of the
outstanding Common Stock of the Company (approximately 24.3% if the
Underwriters' over-allotment option is exercised in full) will be owned by MLGA
Fund II, L.P. ("Fund II") and its affiliates. Accordingly, Fund II and its
affiliates will be able to exert significant influence over the Company and its
business and affairs, including the election of directors. See "Selling
Stockholder" and "Description of Capital Stock."

ANTITAKEOVER PROVISIONS

The Company's Amended and Restated Certificate of Incorporation will
provide the Board of Directors the authority to issue up to 2,000,000 shares of
preferred stock in one or more series with such distinctive descriptions, rights
and preferences as the Board may provide. The Company has reserved 300,000
shares of Series B Participating Cumulative Series B Preferred Stock for
issuance in connection with the Rights Plan (as defined below). The issuance of
the preferred stock could adversely affect the voting power of the holders of
Common Stock and, accordingly, could make more difficult the acquisition of the
Company by means of a tender offer, a proxy contest or otherwise. The Company
also is subject to Section 203 of the Delaware General Corporation Law which
limits transactions between a publicly held company and "interested
stockholders" (generally, those stockholders who own 15% or more of the
company's outstanding stock and their affiliates and associates). This provision
of Delaware law may also have the effect of deterring certain potential
acquisitions of the Company.

In addition, the Company adopted a Rights Plan (the "Rights Plan") on May
29, 1998. Under the Rights Plan, each holder of Common Stock at the close of
business on June 10, 1998 will receive a dividend of one right (a "Right") for
each share of Common Stock held. Each share of Common Stock issued after June
10, 1998 but prior to the earlier of May 29, 2008 and the Distribution Date
(defined below) will be issued with a Right attached thereto. The Rights are not
exercisable until the earlier of: (i) the tenth business day after public
announcement that a person has become the beneficial owner of 15% or more of the
Common Stock or (ii) the tenth business day after the date of commencement of a
tender or exchange offer which would result in such ownership, in each case,
subject to extension by a majority of the Board of Directors not affiliated with
the person making such an acquisition or offer (such date, the "Distribution
Date"). Once a person has acquired such ownership, the Rights would permit
holders of Common Stock, other than the acquiring person, to purchase additional
Common Stock at a 50% discount to its then-current market price, thus diluting
the ownership position of the acquiring person. The Plan excludes current
holders of 15% or more of the Common Stock and Morgan Lewis Githens & Ahn
("MLGA") and its affiliates, associates and direct transferees, from the
definition of "acquiring person." The Rights will expire on May 29, 2008, unless
earlier exchanged or redeemed. The Plan may have the effect of deterring certain
potential acquisitions of the Company. See "Description of Capital
Stock -- Rights Plan."

9
<PAGE> 11

THE COMPANY

In September 1996, the Company sold 2,950,000 shares of its common stock
and certain shareholders sold 1,075,000 shares of common stock in an initial
public offering at a price of $10 per share. Net proceeds to the Company after
underwriting discounts and offering costs were approximately $26.9 million.

The Company's principal offices are located at 406 Mill Avenue, SW, New
Philadelphia, Ohio 44663, and its telephone number is (330) 339-2211.

10
<PAGE> 12

USE OF PROCEEDS

The net proceeds to the Company from this Offering, after deducting
underwriting discounts and commissions and expenses payable by the Company in
connection with this Offering, are estimated to be approximately $6.82 million
(or $11.06 million if the over-allotment option is exercised). The Company
intends to use such net proceeds for general corporate purposes, including the
Capacity Expansion Program, and to repay outstanding indebtedness of the Company
under its revolving credit facility, amounts under which, after such repayment,
would be available for general corporate purposes as well as the Capacity
Expansion Program. As of March 31, 1998, the average interest rate under the
revolving credit facility was 7.38%. The Company is not required to make any
principal repayments of the amount outstanding under such facility until August
31, 1999.

The Company will not receive any of the proceeds from the sale of shares of
Common Stock by the Selling Stockholder in this Offering. See "Selling
Stockholder."

PRICE RANGE OF COMMON STOCK

The Common Stock has been traded on The Nasdaq National Market under the
symbol "GRDL" since August 28, 1996.

The table below sets forth, for the periods indicated, the reported high
and low bid prices of the Common Stock on The Nasdaq National Market.

<TABLE>
<CAPTION>
BID PRICE
-------------
CALENDAR PERIOD HIGH LOW
- --------------- ---- ---
<S> <C> <C>
1996
Third quarter(1)............................................ $11 1/4 $10
Fourth quarter.............................................. 13 10 3/4
1997
First quarter............................................... $15 3/4 $12
Second quarter.............................................. 15 5/8 12
Third quarter............................................... 17 14 5/8
Fourth quarter.............................................. 16 1/2 14 3/4
1998
First quarter............................................... $18 1/2 $15 1/4
Second quarter (through June 5, 1998)....................... 17 3/4 14 5/8
</TABLE>

- ---------------
(1) Trading commenced on August 28, 1996.

A recent reported last sale price of the Common Stock quoted on The Nasdaq
National Market is set forth on the cover page hereof. At April 3, 1998, the
approximate number of record holders of Common Stock was 129.

DIVIDEND POLICY

The Company currently intends to retain its future earnings to finance the
growth and development of its business and therefore does not anticipate paying
cash dividends on the Common Stock for the foreseeable future. Any future
determinations to pay dividends will be at the discretion of the Board of
Directors and will be dependent upon the Company's financial condition, results
of operations, capital requirements and such other factors as the Board of
Directors deems relevant. The Company's revolving credit facility prohibits the
payment of any dividends on the Common Stock.

11
<PAGE> 13

CAPITALIZATION

The following table sets forth the current debt and capitalization of the
Company as of March 31, 1998, and as adjusted to give effect to the sale of the
Common Stock offered hereby. This table should be read in conjunction with the
Consolidated Financial Statements of the Company, including the Notes thereto,
appearing elsewhere in this Prospectus.

<TABLE>
<CAPTION>
MARCH 31, 1998
--------------------------
ACTUAL AS ADJUSTED(2)
-------- --------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Long-term debt:
Revolving credit facility................................. $ 10,864 $ 3,967
Capital lease obligation (including current portion)...... 641 641
-------- -------
11,505 4,608
-------- -------
Stockholders' equity:
Common Stock: actual, par value $.001 per share,
18,000,000 shares authorized, 8,940,194 issued and
outstanding; as adjusted, par value $.001 per share,
18,000,000 shares authorized, 9,440,194 issued and
outstanding(1)......................................... 9 9
Serial Preferred Stock, par value $.001 per share,
2,000,000 shares authorized, none issued and
outstanding............................................ -- --
Additional paid in capital................................ 38,894 45,979
Accumulated deficit....................................... (14,630) (14,818)(3)
-------- -------
Total stockholders' equity............................. 24,273 31,170
-------- -------
Total capitalization................................... $ 35,778 $35,778
======== =======
</TABLE>

- ---------------

(1) Does not include an aggregate of 518,786 shares of Common Stock issuable in
connection with outstanding stock options, 163,851 of which are currently
exercisable as of June 1, 1998. See "Description of Capital Stock."

(2) Amounts do not reflect the proceeds from the sale of the 300,000 additional
shares of Common Stock pursuant to the Underwriters' over-allotment option.
Amounts assume an offering price of $15 1/8, the reported last sale price of
the Common Stock on The Nasdaq National Market on June 5, 1998.

(3) Adjusted for pro rata share of estimated offering expenses relating to the
Common Stock offered by the Selling Stockholder.

12
<PAGE> 14

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected financial data relating to the Company have been
taken or derived from the historical financial statements of the Company and are
qualified in their entirety by reference to such financial statements and notes
included therein. See "Consolidated Financial Statements." The audited
consolidated financial statements of the Company for the three years ended
December 31, 1997 have been audited by Coopers & Lybrand L.L.P., independent
public accountants, whose audit report is included and incorporated herein by
reference. Certain information at March 31, 1998 and for the respective three
month periods ended March 31, 1997 and March 31, 1998 has been derived from the
Company's unaudited interim condensed consolidated financial statements, which
are also contained in this Prospectus, and which, in the opinion of the Company,
reflect all adjustments, consisting only of normal recurring accruals, necessary
for a fair presentation. Results for the three-month periods ended March 31,
1997 and 1998 are not necessarily indicative of results for the full year.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------------------------------------- ---------------------
1993(6) 1994(6) 1995 1996 1997 1997 1998
------- ------- --------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Net sales................................ $72,208 $88,820 $ 118,438 $ 140,909 $ 158,659 $ 35,910 $ 41,541
Cost of sales............................ 59,274 71,280 92,637 108,098 120,663 27,292 31,990
------- ------- --------- --------- --------- --------- ---------
Gross profit............................. 12,934 17,540 25,801 32,811 37,996 8,618 9,551
Research and development and product
engineering costs...................... 1,848 2,123 2,504 3,081 3,644 895 1,054
Selling, general and administrative
expenses............................... 9,307 9,346 10,503 11,815 13,712 3,049 3,263
------- ------- --------- --------- --------- --------- ---------
Operating income......................... 1,779 6,071 12,794 17,915 20,640 4,674 5,234
Amortization of FAS 106(1)............... -- (3,626) -- -- -- -- --
Interest expense......................... 1,055 1,146 1,642 3,108 696 239 218
Other, net............................... (549) 234 865 1,018 257 72 5
------- ------- --------- --------- --------- --------- ---------
Income before provision for taxes,
extraordinary item and change in
accounting............................. 1,273 8,317 10,287 13,789 19,687 4,363 5,011
Income tax provision..................... 550 3,152 3,680 5,503 7,696 1,706 1,957
------- ------- --------- --------- --------- --------- ---------
Income before extraordinary item and
change in accounting................... 723 5,165 6,607 8,286 11,991 2,657 3,054
Extraordinary item(2).................... -- -- -- 973 -- -- --
Change in accounting loss(3)............. 9,014 -- -- -- -- -- --
------- ------- --------- --------- --------- --------- ---------
Net income (loss)(4)..................... $(8,291) $ 5,165 $ 6,607 $ 7,313 $ 11,991 $ 2,657 $ 3,054
======= ======= ========= ========= ========= ========= =========
Earnings per common share(4)(5)
Basic:
Before extraordinary item.............. -- -- $1.17 $1.19 $1.34 $0.30 $0.34
After extraordinary item............... -- -- $1.17 $1.05 $1.34 $0.30 $0.34
Weighted average common shares
outstanding............................ -- -- 5,637,244 6,956,507 8,939,605 8,939,294 8,940,194
Diluted:
Before extraordinary item.............. -- -- $1.17 $1.18 $1.33 $0.30 $0.34
After extraordinary item............... -- -- $1.17 $1.04 $1.33 $0.30 $0.34
Weighted average common shares
outstanding............................ -- -- 5,637,244 7,003,200 9,013,760 9,005,868 9,023,295
OTHER OPERATING DATA:
Employees (at period end).............. 518 557 581 632 681 632 695
Sales per employee..................... $ 139 $ 159 $ 204 $ 223 $ 233 $ 57 $ 60
Capital expenditures................... $ 534 $ 1,214 $ 4,189 $ 2,300 $ 5,305 $ 787 $ 985
</TABLE>

- ---------------
(1) The FAS 106 gain resulted from the reduction in the post-retirement health
care benefits liability reflecting a change in actuarial assumptions related
to the projected growth in medical costs.
(2) An extraordinary item of $1.0 million, net of taxes, related to early
extinguishment of senior and subordinated debt which was incurred in
September 1996 to write off unamortized deferred financing costs and the
discount on subordinated debt which was paid off with the proceeds from the
1996 IPO.
(3) Reflects a $9.0 million after-tax decrease in net income resulting from the
adoption of the accrual basis of accounting for post-retirement health care
benefits (FAS 106).
(4) Net income (loss) per share data have been omitted for years prior to 1995
as such amounts are not comparable due to the 1995 Recapitalization.
(5) Presented based on actual earnings and average shares outstanding in the
periods indicated after giving effect to the 5,540-for-1 stock split and the
conversion of outstanding warrants relating to the 1996 IPO.
(6) Excludes former wholly owned subsidiaries of the Company which were spun off
to certain shareholders in connection with the 1995 Recapitalization. See
Note 1 to the Consolidated Financial Statements included herein.

13
<PAGE> 15

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of results of operations and financial condition
is based upon and should be read in conjunction with the Company's Consolidated
Financial Statements and Notes thereto, the Selected Financial Data and other
financial data appearing elsewhere in this Prospectus.

GENERAL

Gradall Industries, Inc. was formed in 1985 to acquire all of the
outstanding capital stock of The Gradall Company which primarily manufactured
telescopic boom excavators and variable reach material handlers. Concurrent with
the formation of Gradall Industries, Inc., the Company hired a new management
team and embarked on a strategy to profit from its established tradename by
redesigning and improving both its excavator and material handler product lines
and by strengthening and expanding its distribution network.

Gradall Industries operates in two segments of the construction equipment
market. Historically, the majority of the Company's revenues has been generated
by the sale of telescopic boom excavators and related parts, while sales of
rough-terrain variable reach material handlers and related parts accounted for
the balance of the revenues. Beginning in 1995, and continuing through 1996 and
1997, the Company's product mix shifted and sales of material handlers exceeded
sales of excavators. The growth of Gradall's material handler business reflects
the strong growth of the material handler market. Gradall's excavator business
has grown with the increased sales of the Company's XL Series of excavators and
the introduction of new products in new markets.

The Company's consolidated net sales grew from $118.4 million in 1995 to
$158.7 million in 1997, an increase of $40.3 million or 15.8% per annum. This
increase is largely due to significant growth in the rough-terrain variable
reach material handler market and to the increasing penetration of the excavator
market by the Company's XL Series of excavators. Of the $40.3 million total
increase of net sales, $31.7 million or 78.7% reflects growth in the Company's
material handlers business (including related service parts), and $8.6 million
or 21.3% relates to the growth of its excavator business (including related
service parts).

From 1995 to 1997, sales of material handlers grew from $52.9 million to
$84.0 million representing an increase of 26.0% per annum. This growth is due to
the overall growth in the market for material handlers and to an increase in
demand for the Company's material handlers. Over the same period, the
rough-terrain variable reach material handler market has grown at an overall
unit rate of 32% per annum. This dynamic industry growth is due to new
applications, increased rental demand and displacement of straight-mast
forklifts and small rough-terrain cranes.

From 1995 to 1997, sales of excavators grew from $49.2 million to $57.4
million, representing an increase of 8.0% per annum. This growth is due to the
success of the Company's XL Series excavators which strengthened Gradall's
competitive position in the market for conventional crawler excavators.
Approximately 75% of excavator units sold by the Company in 1997 were XL Series
models. In May 1997, Gradall shipped its first production units of the new XL
2200 excavator in the 12-14 ton size class. The Company believes that this new
model is well-positioned to take advantage of growth in the niche market for
smaller, more versatile high-pressure excavators.

The Company manufactures and markets service parts for its excavators and
material handlers. Sales of service parts grew from $14.8 million in 1995 to
$17.3 million in 1997, representing an increase of 8.1% per annum. Approximately
72% of service parts sales are related to the excavator product line.

Net income was reduced by an extraordinary charge of $1.0 million, net of
taxes, in 1996 due to the write off of unamortized deferred financing costs and
the discount on subordinated debt resulting from the repayment of indebtedness
from the proceeds of the Company's initial public offering of common stock.

Generally, the Company's sales are not subject to significant seasonal
variations; however, its sales and earnings tend to be somewhat lower in January
and February due to adverse weather conditions in northern climates.

14
<PAGE> 16

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.

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 and Development and Product Engineering Costs. Research and
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 Expenses. Selling, general and
administrative expense ("SG&A") 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 7.9% 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 million, 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.

FISCAL 1997 COMPARED TO FISCAL 1996

Net Sales. Net sales were $158.7 million for fiscal 1997, an increase of
$17.8 million or 12.6% compared to $140.9 million for fiscal 1996. The increase
in net sales was attributed to a material increase in unit volume of material
handlers and a moderate increase in sales volume of excavators and service
parts. The introduction of the new excavator models XL 2200 and XL 2210 in 1997
assisted in the excavator unit increase. Price increases affecting all three
product lines had a modest favorable impact. Net sales of excavators were $57.4
million for fiscal 1997, an increase of $2.3 million or 4.1% compared to $55.1
million for fiscal 1996. Net sales of material handlers were $84.0 million for
fiscal 1997, an increase of $13.6 million or 19.3% compared to $70.4 million for
fiscal 1996. Net sales of service parts was $17.3 million for fiscal 1997, an
increase of $1.9 million or 12.3% compared to $15.4 million for fiscal 1996.
Although the Company expects net sales to increase in the future, it

15
<PAGE> 17

anticipates that the rate of growth, especially with respect to sales of
material handlers, will not continue at the rate of growth experienced in 1997.

Gross Profit. Gross profit amounted to $38.0 million for fiscal 1997, an
increase of $5.2 million or 15.8% compared to $32.8 million for fiscal 1996.
Gross profit as a percentage of net sales increased to 24.0% for fiscal 1997
from 23.3% for fiscal 1996, primarily due to improved production efficiencies
and the economies of higher production volume.

Research and Development and Product Engineering Costs. Research and
development and product engineering cost was $3.6 million for fiscal 1997, an
increase of $0.6 million or 18.3% compared to $3.1 million for fiscal 1996. The
increase is due to the addition of engineering personnel to support new product
development.

Selling, General and Administrative Expenses. SG&A expense was $13.7
million for fiscal 1997, an increase of $1.9 million or 16.1% compared to $11.8
million for fiscal 1996. This increase is attributed to the addition of
marketing field sales and service representatives to improve service to the
distributor organization. In addition the higher unit volume of shipments in
fiscal 1997 increased the interest expense for dealer floor plan and retail
subsidy above the 1996 expense level.

Interest Expense. Interest expense was $0.7 million for fiscal 1997, a
decrease of $2.4 million or 77.6% compared to $3.1 million for fiscal 1996. This
reduction is the result of the application of the net proceeds of the Company's
initial public offering to reduce outstanding indebtedness on September 3, 1996.

Other. Other expense was $0.3 million for fiscal 1997, a decrease of $0.8
million or 74.8% compared to $1.0 million in fiscal 1996. In 1996 other expense
included a charge of $0.8 million for settlement of a distributor litigation.

Income Tax Provision. Income tax expense was $7.7 million for fiscal 1997,
an increase of $2.2 million or 39.9% compared to $5.5 million for fiscal 1996,
and representing an effective tax rate of 39.1% in 1997 and 40.0% in 1996.

Extraordinary Item. An extraordinary charge of $1.0 million, net of taxes,
related to early extinguishment of senior and subordinated debt was incurred in
September 1996 to write off unamortized deferred financing costs and the
discount on subordinated debt which was paid off with proceeds from the
Company's initial public offering on September 3, 1996.

Net Income. Net income was $12.0 million for fiscal 1997, an increase of
$4.7 million or 64.0% compared to $7.3 million for fiscal 1996. This increase
results from the higher level of sales in fiscal 1997 generating increased
operating margins and reduced debt from the 1996 initial public offering
lowering interest expense.

Diluted Earnings Per Common Share After Extraordinary Item. Earnings per
common share after extraordinary item were $1.33 for fiscal 1997, an increase of
$0.29 or 27.9% from $1.04 for fiscal year 1996, reflecting the $4.7 million
increase in net income described above.

FISCAL 1996 COMPARED TO FISCAL 1995

Net Sales. Net sales were $140.9 million for fiscal 1996, an increase of
$22.5 million or 19.0% compared to $118.4 million for fiscal 1995. The increase
in net sales was substantially attributable to a significant increase in unit
volume of material handlers and a moderate increase in unit volume of
excavators. Price increases affecting both product lines had a modest favorable
impact. Net sales of excavators were $55.1 million for fiscal 1996, an increase
of $5.9 million or 12.0% compared to $49.2 million for fiscal 1995. Net sales of
material handlers were $70.4 million for fiscal 1996, an increase of $16.8
million or 31.3% compared to $53.6 million for fiscal 1995. Net sales of service
parts were $15.4 million for fiscal 1996, a decrease of $0.2 million or 1.2%
compared to $15.6 million for fiscal 1995. In 1995 $0.6 million of the $15.6
million in service parts net sales was revenue associated with a one-time
military subcontract.

Gross Profit. Gross profit amounted to $32.8 million for fiscal 1996, an
increase of $7.0 million or 27.2% compared to $25.8 million for fiscal 1995.
Gross profit as a percentage of net sales increased to 23.3% for fiscal

16
<PAGE> 18

1996 from 21.8% for fiscal 1995, primarily due to improved production
efficiencies and the economies of higher production volume.

Research and Development and Product Engineering Costs. Research and
development and product engineering cost was $3.1 million for fiscal 1996, an
increase of $0.6 million or 23.0% compared to $2.5 million for fiscal 1995. The
increase is due to the addition of engineering personnel to support new product
development.

Selling, General and Administrative Expenses. SG&A expense was $11.8
million for fiscal 1996, an increase of $1.3 million or 12.5% compared to $10.5
million for fiscal 1995. The increase is due to expenses related to the 1996 Con
Expo, a major trade show held every three years, increased dealer floor plan
interest and retail subsidy tied to the increased sales volume, and higher legal
expenses in connection with the settlement of litigation.

Interest Expense. Interest expense was $3.1 million for fiscal 1996, an
increase of $1.5 million or 89.3% compared to $1.6 million for fiscal 1995. This
increase in interest expense was due to increased borrowings in connection with
the recapitalization which occurred on October 13, 1995. Fourth quarter 1996
interest was reduced as a result of the application of the net proceeds of the
Company's initial public offering to reduce outstanding indebtedness.

Income Tax Provision. Income tax expense was $5.5 million for fiscal 1996,
an increase of $1.8 million or 49.5% compared to $3.7 million for fiscal 1995,
and represented an effective tax rate of 40.0% in 1996 and 35.8% in 1995.

Extraordinary Item. An extraordinary charge of $1.0 million, net of taxes,
related to early extinguishment of senior and subordinated debt was incurred in
September 1996 to write off unamortized deferred financing costs and the
discount on subordinated debt which was paid off with the proceeds from the
Company's initial public offering on September 3, 1996.

Net Income. Net income was $7.3 million for fiscal 1996, an increase of
$0.7 million or 10.7% compared to $6.6 million for fiscal 1995. The higher level
of sales in fiscal 1996 generated higher operating margins which were partially
offset by the additional interest cost related to the debt incurred with the
1995 Recapitalization and the extraordinary charge.

Diluted Earnings Per Common Share After Extraordinary Item. Earnings per
common share after extraordinary item were $1.04 for fiscal 1996, a decrease of
$0.13 or 11.1% from $1.17 for fiscal year 1995, principally as a result of the
extraordinary charge described above and a higher number of shares outstanding
after the initial public offering.

LIQUIDITY AND CAPITAL RESOURCES

In September, 1996 Gradall completed the initial public offering of
2,950,000 newly issued shares of common stock at $10.00 per share. As part of
the offering, existing shareholders sold 1,075,000 shares of common stock
including the shares received upon exercise of all the warrants issued in
connection with the 1995 Recapitalization. The $26.9 million of net proceeds to
the Company were used to redeem $2.0 million in preferred stock, to repay in
full $10.0 million in subordinated debt and $9.6 million in senior term debt,
and to reduce the Company's revolving credit borrowings by $5.4 million. As a
result of the application of the proceeds from the initial public offering,
Gradall incurred an after tax extraordinary charge in the fourth quarter of 1996
of $1.6 million net of $0.6 million of income tax benefits, to write off
unamortized discount and deferred financing charges related to the warrants and
the repayment of indebtedness.

The Company has funded its operations primarily with cash generated from
operations. The Company generated net cash from operating activities of $0.2
million during the first three months of 1998 compared to $0.8 million used
during the first three months of 1997. 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.

17
<PAGE> 19

For the first three months of 1998 net borrowings under the Company's
revolving credit facility increased $1.3 million primarily as a result of the
reduction of accounts payable, increase in inventory and purchase of capital
equipment.

Net cash used by investing activities, consisting of purchases of property
and equipment, was $5.3 million in 1997 and $2.3 million in 1996. These capital
expenditures were incurred primarily in connection with the Company's multi-year
program to increase production efficiencies, labor productivity and the output
of the Company's manufacturing facility through investments in new capital
equipment. The Company's capital investments in 1997 under this program totaled
$5.3 million which were funded by cash from operations and borrowings from
available credit facilities. Management expects to invest approximately $8.1
million of additional capital in 1998 for improvements under the multi-year
program. For the first three months of 1998, the Company expended $1.0 million
for new equipment and permanent tooling.

As of March 31, 1998 the Company had 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% and/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. On March 31, 1998, the average annual interest rate under
the facility was 7.38%. The Company is not required to make any principal
repayments of the amount outstanding under the facility until August 31, 1999.
The facility requires the Company to maintain various financial ratios and
defined levels of tangible net worth and to restrict asset acquisitions and
dispositions, additional indebtedness and certain payments, including cash
dividends.

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 that it believes are appropriate. In addition, the
Company continuously monitors the level of its purchase orders for raw materials
and correlates these orders, and its inventory balances of various raw
materials, to its current production schedule. To avoid shortages of raw
materials during periods of increased demand, the Company may from time to time
increase its level of purchases to meet its anticipated future level of
production.

The Board of Directors has approved in principle the Capacity Expansion
Program which is intended to raise capacity in excess of 50% over the next three
to five years. The Capacity Expansion Program will require a $30 to $50 million
investment over this time frame. The Company has entered into no commitments
with respect to the Capacity Expansion Program and may alter or revise the
Capacity Expansion Program based upon changes in market demand and/or economic
conditions. The Company believes that cash flow from operations together with
funds available under its revolving credit facility will be adequate to fund its
working capital and capital expenditure requirements for the foreseeable future.

As part of an ongoing Internal Revenue Service ("IRS") examination, the
Company was recently notified of certain potential adjustments with respect to
prior years. The potential adjustments relate to the valuation of inventory and
the calculation of the Company's gain upon the distribution to shareholders of
shares in certain subsidiaries in connection with the 1995 Recapitalization of
the Company. The examination is ongoing and the IRS may raise additional issues.
At present, the IRS has not asserted any tax deficiency against the Company. The
Company plans to defend these issues vigorously.

IMPACT OF THE "YEAR 2000 ISSUE"

The "Year 2000 Issue" is the result of computer systems that were
programmed in prior years using a two-digit representation for the year.
Consequently, in the year 2000, date-sensitive computer programs may interpret
the date "00" as 1900 rather than 2000. The Company's operating units have
completed an initial assessment of the systems affected by the Year 2000 Issue,
and are formulating action plans to correct or replace these programs by a
target date of September 30, 1999.

18
<PAGE> 20

The Company will be required to modify or replace several internally
developed software packages along with purchased software packages used
internally. The Company will use internal resources to modify programs, and will
upgrade where necessary. Estimates of the total remaining cost of the year 2000
project have been finalized and are not expected to have a material adverse
effect on future operating results or cash flows.

INFLATION

The overall impact of the low rate of inflation in recent years has had no
significant impact on the Company.

ACCOUNTING PRONOUNCEMENTS

In March 1995, The Financial Accounting Standard Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," for the year ended December 31, 1996. The adoption of SFAS No. 121 had no
impact on the Company's consolidated financial position, results of operations,
or cash flows.

In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock Based
Compensation," effective for transactions entered into in fiscal years that
begin after December 15, 1995. The Company adopted this standard's disclosure
only provisions for the year ended December 31, 1996. The adoption of this
standard had no impact on the Company's consolidated financial position, results
of operation, or cash flows.

In March 1997, the FASB issued SFAS No. 128, "Earnings Per Share,"
effective for the periods ending after December 15, 1997. The Company adopted
SFAS No. 128, "Earnings Per Share" in the fourth quarter of 1997. The impact of
implementing SFAS No. 128 is discussed in Note 14 to the Consolidated Financial
Statements.

In March 1997, the FASB also issued SFAS No. 129, "Disclosure of
Information about Capital Structure," effective for fiscal years ending after
December 15, 1997. The adoption of this standard had no impact on the Company's
consolidated financial position, results of operation, or cash flows.

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income," and SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," both effective for fiscal years beginning after December
15, 1997. The adoption of this standard had no impact on the Company's
consolidated financial position, results of operation, or cash flows.

In February 1998, the FASB issued SFAS 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.

CAUTIONARY STATEMENT

This Prospectus, including the foregoing Management's Discussion and
Analysis of Financial Condition and Results of Operations contains and
incorporates by reference certain "forward looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. The Company's Annual
Report to Shareholders, any Report on Form 10-K, 10-Q or Form 8-K or any other
written or oral statements made by or on behalf of the Company may include
forward looking statements. Forward looking statements represent the Company's
expectations or beliefs concerning future events. Any forward looking statements
made by or on behalf of the Company are subject to uncertainties and other
factors that could cause actual results to differ materially from such
statements. INVESTORS ARE ENCOURAGED TO REFER TO THE "RISK FACTORS" SECTION
ABOVE WHICH DISCUSSES CERTAIN RISKS WHICH COULD HAVE AN IMPACT ON FUTURE RESULTS
OF THE COMPANY.

Undo reliance should not be placed on any forward looking statements made
by or on behalf of the Company as such statements speak only as of the date
made. The Company undertakes no obligation to publicly update or revise any
forward looking statement, whether as a result of new information, the
occurrence of future events or otherwise.

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<PAGE> 21

BUSINESS

OVERVIEW

Gradall excavators are typically used by general contractors and government
agencies for ditching, sloping, finished grading, general maintenance and
infrastructure projects. The Company's excavators are sold through approximately
48 independent distributors at approximately 152 locations throughout North
America. The introduction and ongoing development of the Company's XL Series
excavators featuring the unique Gradall rotating, telescopic booms with
high-pressure hydraulics have allowed the Company to continue to dominate its
traditional niche market of wheeled, telescopic boom excavators and to
strengthen its competitive position in the larger market of conventional crawler
excavators, a market historically dominated by knuckle-boom technology.

Gradall's strategy is to design and produce high quality hydraulic
excavators and material handlers for niche markets while simultaneously reducing
manufacturing costs and increasing production efficiencies. Gradall's ability to
design and customize each of its product lines to fit the specifications of its
customers augments the uniqueness of the Company's products. In 1995, the
Company commenced a multi-year program designed to expand plant capacity and
reduce production costs by improving labor efficiency, equipment, productivity
and quality. The Company invested $4.2 million in 1995, $2.3 million in 1996 and
$5.3 million in 1997 for capital improvements pursuant to this program. During
1998, the Company plans to invest approximately $8.1 million for additional
capital improvements under this program. Management believes that these
strategies have enabled the Company to increase substantially its profitability
in recent years. In addition, the Board of Directors has approved in principle
the Capacity Expansion Program which is intended to raise capacity in excess of
50% over the next three to five years. The Capacity Expansion Program will
require a $30 to $50 million investment over this time frame. The Company has
entered into no commitments with respect to the Capacity Expansion Program and
may alter or revise the Capacity Expansion Program based upon changes in market
demand and/or economic conditions. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources."

THE INDUSTRY

Gradall competes principally in the construction equipment industry. In
1997, the Company estimates that total construction equipment spending exceeded
$47 billion. In 1997, the value of new construction put in place was over $609
billion. The construction equipment industry is highly competitive and global in
scope. The U.S. construction equipment industry consists of about 700
manufacturers. The demand for construction equipment is largely driven by
general economic conditions.

20
<PAGE> 22

Since the beginning of 1993, the construction equipment industry has grown
due to improved general economic conditions, increased public funding for
infrastructure projects and increased demand for rental equipment. The U.S.
Department of Commerce has estimated that more than half of the country's major
highways and one-third of the bridges are in need of some repair. Gradall
management believes that the need for such repairs will continue to benefit the
demand for the Company's products to the extent that funding for such repairs is
available. In addition, construction machinery rentals have increased due to the
need for specific, high-cost equipment for short durations, distributors'
ability to convert rentals into subsequent sales and the lack of an investment
tax credit for purchasers. In particular, the market for material handlers,
which typically are rented by distributors or other rental companies before
being sold in the retail market, has notably increased over the past several
years consistent with the trend towards rental of construction equipment.
Another important element of the current demand for construction machinery is
the replacement of older machines with new and more versatile ones. The Company
believes that the present popularity of machines with multiple functions, faster
work cycles, ease of transport and special attachments, such as Gradall
products, will continue in the future.

Excavators. The total market for hydraulic excavators in the U.S. grew
from approximately 11,000 units in 1993 to over 19,000 units in 1997. The growth
in the market is due to improved general economic conditions and expanding
applications of hydraulic excavators. Excavators were traditionally used for
earth moving and below-ground applications such as trenching, road construction,
site development, mining and irrigation. The use of excavators has expanded to
include many above-ground applications such as demolition, bridge work,
hazardous waste clean-up, scrap handling and forestry work as well as
applications at industrial sites such as mines and steel mills.

The excavator market may be divided into two product categories consisting
of track-mounted "crawler" excavators (which is further divided into several
size classes) and wheel-mounted "wheeled" excavators, which in recent years have
constituted approximately 97% and 3% of the total market for excavators,
respectively. The conventional crawler excavator market has been traditionally
dominated by knuckle-boom technology. The Company manufactures telescopic boom
crawler excavators in three size classes -- 12-14 tons, 19-21 tons and 24-28
tons -- which size classes in 1997 accounted for approximately 9%, 21% and 9% of
the total excavator market, respectively, for a total of approximately 40%. The
remainder of the crawler excavator market is represented by size classes which
are smaller or larger than the sizes currently manufactured by the Company.
Based on industry data, the Company estimates that its market share of the
crawler excavator market in which it competes is approximately 1%; however, its
unit sales of crawler excavators have increased at a compounded annual growth
rate of 38% over the past three years.

Gradall is a leading manufacturer of wheeled telescopic boom excavators.
Based on industry data, the company estimates that its market share of wheeled
excavators exceeded 45% and that its market share of highway speed, telescopic
boom excavators is 85-90%.

Material handlers. The market for rough-terrain variable reach material
handlers has experienced dynamic growth in recent years due to new applications,
increased rental demand and displacement of straight-mast forklifts and small
rough-terrain cranes. The retail market for material handlers has grown from
approximately 1,900 units in 1993 to more than 8,500 units in 1997. Material
handlers are typically used for lifting, transporting and placing a wide variety
of materials such as bricks, blocks, lumber, drywall, structural steel and
roofing materials at their point of use or storage. The increased use of new
attachments such as buckets, augers, winches, truss booms, side shifting/fork
positioning carriages and swing carriages has contributed to the development of
new applications of material handlers.

The rough-terrain variable reach material handler market is divided into
several size classes. The Company manufactures and markets material handlers in
three size classes -- 6-7,000 lbs., 8-9,000 lbs. and 10,000 lbs. and over, which
size classes in the aggregate represent over 94% of the total market for
material handlers. Based on industry data, the Company estimates that its market
share of rough-terrain variable reach material handlers is approximately 16%.

21
<PAGE> 23

GROWTH STRATEGY

The Company's growth strategy is to design and produce high quality
hydraulic excavators and material handlers for niche markets while
simultaneously reducing manufacturing costs and increasing production capacity.
Since 1993, the Company introduced 14 new products, its sales increased from
$72.2 million in 1993 to $158.7 million in 1997 and operating income increased
from $1.8 million in 1993 to $20.6 million in 1997. The key components of the
Company's strategy are:

Develop unique products. The Company remains committed to devoting
significant resources toward engineering and producing unique excavators and
material handlers. With the development of its XL Series excavators, the Company
introduced new products to the conventional crawler excavator market. The XL
Series excavators are exceptional because they combine the versatility of the
Gradall rotating, telescopic boom with the productivity of high-pressure
hydraulics. Shipments of the XL 2200, the latest XL Series model, which competes
in the 12-14 ton size class, commenced in May 1997, and this model has been well
received by distributors and customers. In mid-1997 the Company introduced the
newest XL model, XL2210, which is operated with a remote control device, making
it popular for steel and aluminum metal mill maintenance work as well as
hazardous waste cleanup and other potentially dangerous jobs. In July 1997,
Gradall introduced a new D Series material handler in the 10,000 lbs. and over
size class which is one of the largest material handlers in the industry. In
January 1998, the Company introduced seven new D Series models, completing the D
Series family. The eight new D Series models provide state of the industry
operator protection, new instrumentation, wider seating and excellent visibility
in all directions. The machines are designed for easy operation, shortening the
operator training process and encouraging faster, more efficient work with
advantages like no-shift transmissions. The Company's product development
engineers are currently designing additional new excavators and material
handlers which Gradall plans to market in the near future.

Target niche markets. The Company is working to continue its leading
position in its traditional niche market of highway speed, telescopic boom
excavators and to gain a leading position in several niche markets in the
conventional crawler market. Prior to 1993, the Company focused on the wheeled
excavator market which represents approximately 3% of the total excavator
market. Although this niche market accounts for a small portion of the overall
excavator market, it is an increasing market that generates consistent profit
margins. With the introduction of the XL Series excavators in 1993, the Company
significantly strengthened its competitive position in several size classes of
the conventional crawler excavator market which in the aggregate currently
represent approximately 40% of that market. Gradall believes that it is
well-positioned to take advantage of the niches in the crawler excavator market
which demand premium full-featured products. In the material handler market, the
Company focuses on the segment which demands a reliable premium product that
offers a high level of versatility and maneuverability. The Company believes it
is well-positioned to compete in this dynamically growing market.

Improve manufacturing processes. An important element of Gradall's growth
strategy is to expand profit margins through improved manufacturing processes.
In 1995, the Company commenced a multi-year program designed to expand plant
capacity and reduce production costs by increasing labor efficiency and
equipment productivity and improving quality. The Company invested $4.2 million
in 1995, $2.3 million in 1996 and $5.3 million in 1997 for capital improvements
pursuant to this program. During 1998, the Company plans to invest approximately
$8.1 million for additional capital improvements under this program. The recent
capital improvements have included robotic welding systems, fabrication
equipment and direct computer-controlled equipment for cellular production. In
addition, the Board of Directors has approved in principle the Capacity
Expansion Program which is intended to raise capacity in excess of 50% over the
next three to five years. The Capacity Expansion Program will require a $30 to
$50 million investment over this time frame. The Company has entered into no
commitments with respect to the Capacity Expansion Program and may alter or
revise the Capacity Expansion Program based upon changes in market demand and/or
economic conditions. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity And Capital Resources." Gradall
has also adopted programs designed to reward its employees for improvements in
overall productivity and profitability. In addition, the Company has implemented
aggressive quality programs in the areas of statistical process control,
warranty reduction and quality assurance. Gradall believes its recent and
planned

22
<PAGE> 24

investments in automation and technology, material control, productivity
incentives and quality programs should improve its manufacturing processes and
benefit profit margins in the future.

Emphasize quality. Gradall has adopted a "continuous improvement" strategy
for every facet of its operation. The Company has carried the continuous
improvement concept beyond the scope of the traditional quality definition to
include product development and employee training and development. This strategy
has led to significant reductions in the Company's total cost of quality
(defined as warranty, rework and scrap expenses), which declined from 2.6% of
sales in 1993 to 1.5% in 1997. The Company has implemented statistical process
controls, a monitored product quality review program and a formal supplier
quality assurance program.

Increase distributor support. The Company believes that its distribution
network is among the strongest in the industry and a core strength for its
future growth. The Company plans to further enhance its distribution network by
continuing to produce unique new products, provide marketing and sales support
through its regional sales managers, and provide technical and service support
through its district service managers.

Expand service parts business. Management has focused on expanding the
Company's service parts business to increase revenues and profits by taking
advantage of the growth in the working population of Gradall excavators and
material handlers. As a part of this focus, the Company has implemented the
Gradall On Line Distributor ("GOLD") computer system which links the Company and
its distributors to facilitate communications regarding orders, availability and
other information involving Gradall service parts. In 1997, the Company invested
significant resources toward the development of CD ROM operators, service and
parts manuals which will be available to all dealers in 1998. Service parts
sales and marketing activities are supported by three regional parts managers
who are dispersed geographically throughout the U.S.

Pursue joint ventures, international business opportunities and strategic
acquisitions. Although substantially all of the Company's business has been
focused in North America, the Company believes its increased product development
efforts should enable the Company to take advantage of international
opportunities, including infrastructure development in emerging markets in the
former Soviet Union and Asia. The Company currently has a joint venture to
manufacture and market material handlers in Eastern Europe and is exploring
other international opportunities. In addition, the Company has embarked on a
program to obtain its ISO 9001 registration in order to assist the international
marketing of its products. The audit for this registration is scheduled for the
fourth quarter 1998. The Company believes there is opportunity to grow through
acquisitions, by participating in the current trend of consolidation in the
construction equipment industry.

PRODUCTS AND MARKETS

The Company engineers, manufactures and markets premium hydraulic
excavators and material handlers which incorporate Gradall's unique design
features. In addition, the Company manufactures and markets service parts for
its excavators and material handlers. Since January 1993, the Company has
introduced 14 new products which accounted for in excess of 60% of total sales
in 1997.

REVENUE BY PRODUCT CATEGORY

<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1993(1)(2) 1994(2) 1995(2) 1996 1997
---------- ------- ------- ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Excavators.............................. $40.2 $45.2 $ 49.2 $ 55.1 $ 57.4
Material handlers....................... 21.4 30.7 53.6 70.4 84.0
Service parts........................... 10.7 12.9 15.6 15.4 17.3
----- ----- ------ ------ ------
Total......................... $72.2 $88.8 $118.4 $140.9 $158.7
===== ===== ====== ====== ======
</TABLE>

- ---------------

(1) The sum does not equal the indicated total due to rounding.

(2) Material handlers and service parts revenue includes revenue from a product
line which was discontinued in 1995.

23
<PAGE> 25

EXCAVATORS

All Gradall excavators are distinguished by their rotating telescopic boom
technology, versatility, productivity and reliability. Gradall excavators are
typically used for ditching, sloping, finished grading and general maintenance
which often require precise boom and bucket movements which conventional
knuckle-boom excavators cannot provide. Gradall excavators are also used at
various construction sites with restricted overhead clearance areas or other
operating requirements where it would be difficult for conventional knuckle-boom
excavators to operate. Gradall's highway speed excavators are particularly
useful to customers who require their equipment to be at multiple locations
within short periods of time. Gradall excavators compete in the wheeled
excavator category and three size classes in the crawler excavator category.

A brief description of Gradall excavator models is as follows:

G3WD Series E. This model is a single-engine highway speed excavator
purchased primarily by state and local government agencies. The mobility and
versatility of this product are its primary market strengths since it enables
the user to do the work of three machines -- an excavator, grader and wheeled
loader. The Company's ability to customize this product to meet the
specifications required by government agency bid contracts gives it a particular
competitive advantage.

XL Series. The Company formally introduced the XL Series in March 1993 to
enhance its competitive position in the larger market segment of conventional
crawler excavators. The XL Crawler Series products compete in the 12-14 ton,
19-21 ton and 24-28 ton size classes which size classes in the aggregate
constitute approximately 40% of the entire excavator market. The XL Series
products combine the versatility of the Gradall telescopic boom technology with
the performance of high-pressure hydraulics. The XL Series products have more
than twice the productivity and efficiency of the Gradall models they replaced.

XL2000 Series. Shipments of the new crawler model XL2200 commenced in May
1997, and it competes in the 12-14 ton class which size class represents
approximately 9% of the total excavator market. This model is designed to meet
the needs of residential and general contractors. In August 1997, the Company
commenced shipments of a remote controlled crawler model XL2210, which is a
special industrial version for use in mines and steel mills. During 1998, the
Company plans to introduce a non-highway speed wheeled version of the XL2000
series.

XL4000 Series. This model competes in the 19-21 ton class which size class
represents approximately 21% of the total excavator market. The XL4000 Series is
available in both wheeled and crawler versions. This model is widely used by
municipalities and general contractors.

XL5000 Series. This model competes in the 24-28 ton class traditionally
dominated by conventional crawler knuckle-boom excavators. This size class
accounts for approximately 9% of the total excavator market. The XL5000 Series
is the largest high-pressure hydraulic excavator manufactured by the Company and
is available in both wheeled and crawler versions. It is well-accepted among
infrastructure and highway contractors.

In addition to the above-mentioned models which are primarily used in
construction applications, the Company offers excavators in both wheeled and
crawler versions which are used in industrial applications such as mines and
steel mills, respectively. Certain specialized Gradall crawler models are the
accepted standard in the steel industry for cleaning furnaces and ladles and for
other steel mill applications. Gradall excavators have also been specially
designed for mine scaling applications at limestone and salt mines.

The primary features of Gradall excavators are:

Telescopic boom. The rotating, telescopic boom is well-known for its
versatility and strength. The unique design is excellent for production work
such as trenching and earth moving as well as precision work including finished
grading and clean-up.

Wheeled carriers. The Company's highway speed, wheeled carriers are
designed and manufactured by Gradall to meet the needs for a reliable and
durable carrier. They are offered in two, four or six-wheel drive
configurations.

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<PAGE> 26

Remote control, single cab operation. All Gradall highway speed wheeled
excavators are designed with two cabs -- one for the operation of the carrier
and the other for the operation of the excavator. They are engineered so that
one operator can control the carrier by remote control from the excavator cab.
This allows for greater versatility and adds significantly to the productivity
of the machine.

Crawler undercarriages. Gradall crawler undercarriages are specifically
designed and manufactured by the Company to provide the speed and stability
requirements of XL Series excavators.

Options/attachments. In addition to a variety of standard features,
Gradall also offers specialized options as requested by customers including air
conditioning, work lights, vandal covers and special auxiliary hydraulics. In
1996, Gradall introduced the "telestick" boom attachment which extends the reach
of the XL4000 and XL5000 Series excavators approximately 50% to 45'5" and 50'9",
respectively.

MATERIAL HANDLERS

All Gradall material handlers are renowned for their maneuverability,
versatility and dependability. Gradall material handlers are typically used for
lifting, transporting and placing a variety of materials such as bricks, blocks,
lumber, drywall, structural steel and roofing materials at their point of use or
storage. The Company manufactures five basic models of material handlers in
three size classes.

A brief description of Gradall material handler models is as follows:

522/524D. The 522/524D was introduced in January 1998 and competes in the
6-7,000 lbs. class which size class represents approximately 49% of the total
material handler market. It is available in both two-section and three-section
booms which provide a maximum lift height of 24" and 32', respectively. This
model is very cost efficient and is ideally suited for less demanding
applications.

534D-6. The 534D-6 was introduced in January 1998 and is the most popular
Gradall material handler. It also competes in the 6-7,000 lbs. class and has a
maximum lift height of 36'. This model is very well-accepted among mason and
roofing contractors.

534D-9. The 534D-9 was introduced in January 1998 and competes in the
8-9,000 lbs. class which size class represents approximately 35% of the market
and has a maximum lift height of 40'. This model has a strong appeal to framing
contractors.

534D-10. The 534D-10 was introduced in January 1998 and competes in the
10,000 lbs. and over class which size class represents approximately 10% of the
market. It has a maximum lift height of 40' and is ideally suited for operations
requiring heavy lifting. This model has stabilizers as standard equipment to
increase its overall capacity at full reach.

544D. The 544D was introduced in July 1997 and also competes in the 10,000
lbs. and over class. It is one of the industry's largest material handlers and
has a maximum lift height of 55'. This model permits working on buildings as
high as six stories and also includes stabilizers as standard equipment.

The primary features of Gradall material handlers are:

90 degree rear-pivot steering. This is the key feature of a Gradall
material handler which provides excellent maneuverability by allowing the
machines to turn within a tight radius. The design keeps the forks and the load
inside the turning radius while providing the ability to maneuver the vehicle in
tight areas.

Strong and versatile boom. Gradall material handlers feature one of the
industry's strongest booms. The Gradall boom is capable of handling a variety of
attachments which leads to a high degree of versatility. In addition, Gradall
has a proprietary design to facilitate switching the attachments called
QuickSwitch.

Low profile. A significant advantage of the Gradall material handler is
its low overall height. The vehicle can move under doorways as low as eight feet
while maintaining excellent ground clearance.

Hydrostatic drive. Hydrostatic drive provides the benefits of easier,
no-shift operations, inching capability, quick accelerations and a smooth, even
ride.

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<PAGE> 27

Stability. Gradall material handlers operate with the industry's longest
wheelbase and shortest overall length which increase their capacity and
stability. Their engine is mid-mounted within the frame providing uniform weight
distribution and improved visibility.

SERVICE PARTS

In addition to engineering, manufacturing and marketing hydraulic
excavators and material handlers, the Company produces and sells related service
parts. This is an important source of revenue and profitability for the Company.
Since the Company's products are kept operational for years with parts and
service support, each Gradall product that enters the market provides the
Company with a potential long-term revenue source. Sales of service parts
typically generate high gross margins and historically have been less sensitive
to industry cycles.

In order to increase sales of service parts in the face of growing
competition, the Company focuses on parts availability, marketing and sales
activities. As a part of this focus, the Company has implemented the Gradall On
Line Distributor ("GOLD") computer system which links the Company and its
distributors to facilitate communications regarding orders, availability and
other information involving Gradall service parts. The Company emphasizes the
importance of stocking and marketing service parts and has developed a delivery
system to provide quick shipment of emergency and unit down parts. The Company
provides same day shipment on unit down orders and promotes distributor
incentives for stock orders. In 1997, the Company invested significant resources
to the development of CD ROM operators, service and parts manuals which will be
available to all dealers in 1998.

SPECIALIZED MACHINES

Gradall has the ability to modify its products to suit the specific needs
of its customers. This ability to produce specialized machines is a part of
Gradall's overall strategy to serve specialty, higher margin markets within the
construction equipment industry. Over 30% of all Gradall excavators are modified
from standard models, and approximately 10% of all Gradall material handlers are
customized with add-on and/or special attachments. Gradall is able to design and
produce specialized machines while meeting the delivery schedule of its
customers. Some of the specialized machines developed by the Company are now
being marketed as standard models; for example, special excavators created for
mine scaling, steel mills and other special industrial applications have become
Gradall standard models.

MARKETING & DISTRIBUTION

The Company primarily markets and distributes its products through a
network of independent distributors and rental companies who, in turn, sell or
rent the products to end-users. The Company also sells directly through its own
marketing staff to certain major accounts as well as to customers located
outside the United States.

The Company has agreements with its distributors under which the
distributors purchase products from the Company at agreed upon prices for resale
within the distributor's territory. Although the Company's distributors are not
required to purchase any minimum number of products, they are required to
maintain agreed-upon inventory levels. Either party may terminate the
distributor agreement upon the occurrence of certain events, including
bankruptcy or breach, or in the event either party is dissatisfied with the
other party's performance, upon thirty days notice after a sixty day dispute
resolution procedure. In addition to the Company's products, distributors
typically sell construction equipment manufactured by third parties, including
competitors of the Company.

Gradall excavators are primarily used by general contractors and government
agencies. Gradall material handlers are customarily used by residential,
non-residential and institutional building contractors. Since these are distinct
user bases, the Company markets excavators and material handlers and their
related service parts through two separate distribution networks. The Company's
excavator distribution network is comprised of approximately 48 independent
distributors at approximately 152 locations in North America. The Company's
material handler distribution network is composed of approximately 44
independent distributors at approximately 127 locations. In

26
<PAGE> 28

addition, Gradall material handlers are available at national rental companies
at over 250 locations. No single distributor or rental company accounted for
more than 10% of the Company's sales in 1997.

The Company believes that its ongoing distributor support and training
programs help enhance the competitiveness and increase the strength of its
distribution network. The Company supports the sales, service and rental
activities of its distributors with product advertising, sales literature,
product training and major trade show participation. The independent
distribution network is serviced by the Company's five regional sales managers
for excavators and six regional sales managers for material handlers. Each
regional sales manager is also responsible for developing new distributors
within his region.

The Company provides its distributors with product financing through
agreements with third party financing companies. Such financings include a
Wholesale Floor Plan for distributors and a Retail Finance Plan for end-users,
each with reduced interest rates subsidized by the Company, and a Rental Plan
for distributors.

The Company supports the servicing of its products through a field service
organization consisting of four district service managers located throughout the
United States. The district service managers provide service training and
technical support to the distributors, and act as a liaison among customers,
distributors and the Company on service related matters. The district service
managers are also involved in service parts marketing, sales call support and
product demonstrations. In addition, the Company has three service
representatives at its principal offices who are responsible for fulfilling the
Company's commitment to product reliability.

MANUFACTURING

The Company fabricates, welds, machines and assembles the chassis,
telescopic booms, attachments and many component parts for its excavators and
material handlers. The goals of the Company's manufacturing operation are
quality, efficiency, productivity, cost control and on-time delivery. The
Company strives to develop its manufacturing capacity, productivity and quality
through automation and technology, material control, productivity incentives for
employees and quality programs.

Automation and technology. In 1995, the Company commenced a multi-year
program designed to expand plant capacity and reduce production costs by
improving labor efficiency, equipment productivity and quality. The Company
invested $4.2 million in 1995, $2.3 million in 1996 and $5.3 million in 1997 for
capital improvements pursuant to this program. Thus far, capital improvements
have included robotic welding systems, laser cutting machines, oxygen assist
plasma cutting machines and direct computer-controlled equipment designed for
cellular production. Planned expenditures will include additional robotic
welding systems, laser cutting machines, oxygen assist plasma cutting machines
and a large computerized boring machine. In addition, the Board of Directors has
approved in principle the Capacity Expansion Program which is intended to raise
capacity in excess of 50% over the next three to five years. The Capacity
Expansion Program will require a $30 to $50 million investment over this time
frame. The Company has entered into no commitments with respect to the Capacity
Expansion Program and may alter or revise the Capacity Expansion Program based
upon changes in market demand and/or economic conditions. Gradall believes that
the recently completed capital improvements, which have reduced production
costs, expanded plant capacity and improved quality, and planned capital
improvements, should benefit profit margins and increase unit output capacity in
the future.

Material control. The Company has instituted and continues to institute
material control improvements. These improvements include the introduction of
just-in-time inventory management, the relocation of certain inventory to the
shop floor to support cell manufacturing, the implementation of set-up reduction
programs and the reduction and control of obsolete and surplus inventory.

Productivity incentives. The Company operates a productivity sharing plan
for its unionized, hourly employees called "Gainsharing." Gainsharing is a group
incentive program that is calculated from a company-wide measure of
productivity. The productivity of the plant is measured against a base period.
Each employee receives a Gainshare bonus based upon the percentage increase in
productivity. The Company has an active labor management cooperative committee
which is supported by employee positive action teams. These teams implement
changes in the manufacturing processes which improve quality and productivity
which in turn support the Gainsharing program.

27
<PAGE> 29

Quality programs. The Company has implemented comprehensive quality
programs, including the following:

Statistical process control. The Company maintains control charts in
machining, welding and assembly as well as a pre-shipment quality audit program
on finished machines. The Company plans to continue expanding the use of
statistical process control charts.

Quality feedback/warranty reduction. Gradall reviews critical quality
issues on an ongoing basis and initiates corrective actions. A computerized
warranty system captures early warning reports from field service managers as
well as details of warranty claims which provide additional input to the quality
feedback program.

Supplier quality assurance. The Company monitors supplier quality through
a computer system which records and tracks reports on defective material
allowing the Company to execute corrective action measures.

Gradall's commitment to automation and technology, material control,
productivity incentives for employees and quality programs have improved the
capacity, productivity and quality of the Company's manufacturing operations.
From 1993 to 1997, the Company increased its unit production by 169.1% with only
a 33.5% increase in its workforce. The Company's total cost of quality (defined
as warranty, rework and scrap expenses) declined from 2.6% of sales in 1993 to
1.5% of sales in 1997.

ENGINEERING AND DESIGN

Gradall believes that its engineering and design capabilities are among the
Company's major strengths. The engineering and design functions are closely
integrated with the Company's manufacturing and marketing activities. This
allows the Company to integrate new production technology with specific needs of
customers, resulting in expanded market opportunities and increased
profitability for the Company. In 1997, over 30% of Gradall's excavators were
modified from standard models to meet end-users' specific requirements.

The Company's manufacturing engineers are involved in both product design
and implementation of capital improvements in order to maximize manufacturing
processes and efficiencies. In addition, the implementation of "concurrent
engineering," in which personnel from engineering, manufacturing, materials
procurement and marketing are simultaneously engaged in new product development
programs, has led to faster new product development time, reduced costs and
improved quality.

Gradall has made significant investments in its engineering systems, which
currently include a computer-aided design (CAD) system with finite element
analysis (FEA) and three-dimensional solids design capabilities. These systems
have greatly expanded Gradall's design capabilities and has significantly
reduced the time required for engineering and design functions.

Since 1993, the Company's engineering department personnel has increased by
approximately 80% in order to accelerate new product development.

COMPETITION

The excavator market may be divided into two product categories of
track-mounted "crawler" excavators (which is further divided into several size
classes) and wheel-mounted "wheeled" excavators. In recent years, crawler
excavators have constituted approximately 97% of the total market for excavators
and wheeled excavators have accounted for 3%. The conventional crawler excavator
market has been traditionally dominated by knuckle-boom technology. The leading
producers of conventional crawler excavators are Caterpillar Inc., Deere & Co.,
Hitachi Corporation and Komatsu, Ltd. The Company manufactures telescopic boom
crawler excavators in three size classes -- 12-14 tons, 19-21 tons and 24-28
tons -- which size classes in 1997 accounted for approximately 9%, 21% and 9% of
the total excavator market, respectively, for a total of approximately 40% of
the total market.
28
<PAGE> 30

Gradall's XL Series excavators are designed to appeal to niche markets in these
size classes which require the versatility of the Gradall telescopic boom
technology with the performance of high-pressure hydraulics. The remainder of
the crawler excavator market is represented by size classes which are smaller or
larger than the sizes currently manufactured by the Company. Based on industry
data, the Company estimates that its market share of the crawler excavator
market in which it competes is approximately 1%; however, its unit sales of
crawler excavators have increased at a compounded annual growth rate of 38% over
the past three years.

Gradall is a leading manufacturer of wheeled telescopic boom excavators.
Based on industry data, the Company estimates that its market share of all
wheeled excavators exceeds 45% and that its market share of highway speed,
telescopic boom excavators is 85-90%. The Company has only one competitor in the
highway speed, telescopic boom excavator market.

The rough-terrain variable reach material handler market is divided into
several size classes. The Company manufactures and markets material handlers in
three size classes -- 6-7,000 lbs., 8-9,000 lbs. and 10,000 lbs. and over, which
in the aggregate represent over 94% of the total market for material handlers.
Based on industry data, the Company estimates that its market share of all
material handlers is approximately 16%. Other than Gradall, the principal
producers of variable reach material handlers are Caterpillar, Inc., Gehl, JCB
International Co., Ltd., and Omniquip International.

EMPLOYEES

As of March 31, 1998, Gradall employed 695 people -- 461 hourly and 234
salaried. The Company's hourly employees are represented by the IAM and are
currently working under a three-year contract which will expire on April 16,
2000. The Company's current contract with the IAM was approved after a
three-week work stoppage which occurred in March 1997 when the union failed to
ratify a proposed new three-year contract. During the work stoppage the Company
was able to continue production and shipment, although at a reduced level. There
can be no assurance that the Company will be able to negotiate satisfactory
contracts with the union in the future or that the Company's union employees
will not participate in any work stoppage which could have a material adverse
effect on the operations of the Company.

29
<PAGE> 31

MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth certain information regarding the Company's
executive officers and directors.

<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Barry L. Phillips(1).................. 56 President -- Chief Executive Officer and
Director
David S. Williams..................... 57 Vice President, Marketing & Sales and Director
Joseph H. Keller...................... 52 Vice President, Engineering and Secretary
James C. Cahill....................... 45 Vice President, Manufacturing
Bruce A. Jonker....................... 56 Vice President, Chief Financial Officer and
Treasurer
Sangwoo Ahn(1)........................ 59 Director and Chairman of the Board
John A. Morgan........................ 67 Director
Perry J. Lewis(2)..................... 60 Director
William C. Ughetta, Jr.(2)............ 37 Director
Jack D. Rutherford(1)(2).............. 64 Director
Ernest Green(2)....................... 58 Director
</TABLE>

- ---------------
(1) Member of the Compensation Committee.

(2) Member of the Audit Committee.

Mr. Phillips has served as President and Chief Executive Officer of the
Company since 1995 and has served as President of The Gradall Company since
1985. Prior to 1985, Mr. Phillips spent 26 years with International Harvester
and was the plant manager of its Farmall Plant in Rock Island, Illinois.

Mr. Williams has served as Vice President, Marketing and Sales and has been
a director of the Company since 1995 and has served as Vice President, Marketing
and Sales of The Gradall Company since 1986. Prior to that, Mr. Williams served
as President of Claas of America and held various management positions at
International Harvester, including General Sales Manager.

Mr. Keller joined The Gradall Company in 1981 and has served as its Vice
President, Engineering and Secretary since 1987. Mr. Keller has served as Vice
President, Engineering and Secretary of the Company since 1995.

Mr. Cahill joined The Gradall Company in 1982 and has served as its Vice
President, Manufacturing since 1990. Mr. Cahill has served as Vice President,
Manufacturing of the Company since 1995.

Mr. Jonker joined The Gradall Company in 1973 and has served as its Vice
President and Chief Financial Officer since July 1994 and its Treasurer since
November 1995. Mr. Jonker has served as Vice President, Finance and
Administration and Treasurer of the Company since November 1995 and as Vice
President, Chief Financial Officer and Treasurer of the Company since April
1996.

Mr. Ahn was a Co-Chairman of the Board from October 1995 to March 1996 and
has been Chairman of the Board since March 1996. Mr. Ahn is a founding partner
of MLGA, a privately-owned international investment banking and leveraged buyout
firm which was founded in 1982. Mr. Ahn has served as a general partner of MLGAL
Partners L.P. ("MLGAL"), a Connecticut limited partnership and the general
partner of Fund II, since its formation in 1987. Mr. Ahn also serves on the
Board of Directors of Kaneb Pipeline Partners, L.P., Kaneb Services, Inc., PAR
Technology Corporation, Quaker Fabric Corporation, Stuart Entertainment, Inc.
and ITI Technologies, Inc.

30
<PAGE> 32

Mr. Morgan has been a director of the Company since 1995. Mr. Morgan is a
founding partner of MLGA and has served as a general partner of MLGAL since its
formation. Mr. Morgan also serves on the Board of Directors of MascoTech, Inc.,
Masco Corp. and Allied Digital Technologies, Inc.

Mr. Lewis has been a director of the Company since 1995. Mr. Lewis is a
founding partner of MLGA and has served as a general partner of MLGAL since its
formation. Mr. Lewis also serves on the Board of Directors of Aon Corporation,
Stuart Entertainment, Inc., ITI Technologies, Inc. and Chancellor Media
Corporation.

Mr. Ughetta has been a director of the Company since 1995. In 1997, Mr.
Ughetta became a Managing Director of Long Point Capital, Inc., a private equity
investment firm. From 1994 through 1996, Mr. Ughetta was a general partner of
MLGA and MLGAL. Prior to that, Mr. Ughetta served as a Vice President of MLGA
and MLGAL from 1990 to 1994. Currently, Mr. Ughetta serves on the Board of
Directors of ITI Technologies, Inc.

Mr. Rutherford has been a director of the Company since its formation in
1985. Mr. Rutherford has served as Chairman of the Board and Chief Executive
Officer of the Company from 1985 to October 1995 and as Co-Chairman of the Board
from October 1995 until March 1996. He has served as President and Vice Chairman
of ICM Krebsoge, Inc., a manufacturer of component parts for the automotive
industry, from 1993 until 1996. Mr. Rutherford also served as Vice Chairman of
Magna LLC, and its predecessors, a holding company whose operating subsidiary
manufactures hydraulic cylinders, pumps and valves, from 1986 through 1996. Mr.
Rutherford also serves on the Board of Directors of Code Alarm, Inc.

Mr. Green has been a director of the Company since July 1996. Mr. Green is
the founder of, and since its formation in 1981, has served as President and
Chief Executive Officer of EGI, Inc., a manufacturer of automotive components.
He is also President of Florida Production Engineering, Inc., a subsidiary of
EGI, Inc. Mr. Green also serves on the Board of Directors of DPL Inc., Eaton
Corporation, Fluor Daniel GTI, Inc. and Pitney Bowes, Inc.

Directors who are not officers or employees of the Company are entitled to
receive $1,000 per attended meeting and $20,000 per annum for serving as
directors of the Company. In addition, Mr. Green was granted an option to
purchase 10,000 shares of Common Stock of the Company, at an exercise price of
$2.71 per share, which may be exercised at any time and from time to time prior
to August 14, 2006.

31
<PAGE> 33

SELLING STOCKHOLDER

A portion of the shares of Common Stock offered in the Common Stock
offering are being offered for the account of MLGA Fund II, L.P. (the "Selling
Stockholder").

Certain directors of the Company, Messrs. Ahn, Morgan, Ughetta and Lewis,
have held, and currently hold various management positions at either Fund II, or
MLGA or MLGAL, both of which are affiliates of Fund II. See "Management." MLGA
and/or its affiliates have performed various investment banking services for the
Company in the past and may do so from time to time in the future.

The following table sets forth certain information for the Selling
Stockholder with respect to (i) such Selling Stockholder's beneficial ownership
of the Common Stock prior to the offering made hereby, (ii) the number of shares
being offered for sale hereby, and (iii) the number of shares and the percentage
of outstanding shares of the Common Stock to be beneficially owned by the
Selling Stockholder after the offering referred to in clause (ii) above.

<TABLE>
<CAPTION>
SHARES OF COMMON STOCK SHARES OF COMMON STOCK TO BE
BENEFICIALLY OWNED BEFORE SALE SHARES TO BE BENEFICIALLY OWNED AFTER SALE
NAME OF SELLING STOCKHOLDER UNDER THIS PROSPECTUS(1)(2) SOLD UNDER THIS PROSPECTUS(2)
- --------------------------- ------------------------------ ------------ ------------------------------
NUMBER PERCENTAGE NUMBER PERCENTAGE
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
MLGA Fund II, L.P. ......... 3,865,637 43.2% 1,500,000 2,365,637 25.0%
</TABLE>

- ---------------

(1) Information is as of June 1, 1998.

(2) Assumes underwriter's overallotment option is not exercised.

The Company entered into an Amended and Restated Shareholders Agreement
dated as of August 20, 1996, (the "Shareholders Agreement") with its
stockholders which provides in part for the grant of registration rights to the
holders of Restricted Securities, as is defined in the Shareholders Agreement.
This Offering is being made pursuant to the Shareholders Agreement, a copy of
which is included as an exhibit to the Registration Statement of which this
Prospectus is a part. Pursuant to these registration rights, Fund II and its
affiliates may require the Company to file, as expeditiously as possible, one or
more registration statements with respect to shares of Common Stock held by
them, at any time and from time to time. In addition to these "demand"
registration rights, Fund II has the right to have shares of Common Stock held
by them included in any registration statement filed by the Company. The Company
has agreed to pay any and all expenses incidental to performance of or
compliance with any registration of shares of Common Stock received by the
Selling Stockholder including (i) all SEC fees registration and filing fees,
(ii) fees and expenses of compliance with state securities or blue sky laws
(including reasonable fees and disbursements of counsel in connection with blue
sky qualifications of the shares of Common Stock), (iii) printing expenses, (iv)
reasonable fees of counsel for the Company and customary fees and expenses for
independent certified public accountants retained by the Company (including the
expenses of any comfort letters or costs associated with the delivery by
independent certified public accountants of a comfort letter or comfort letters
requested), (v) the reasonable fees and expenses of one counsel (who shall be
reasonably acceptable to the Company for the Selling Stockholder; (vi) fees
payable to the National Association of Securities Dealers, Inc. and (vii) fees
and disbursements of underwriters customarily paid by issuers or sellers of
securities, but excluding underwriting fees, discounts or commissions
attributable to the sale of Common Stock or any out-of-pocket expenses of the
Selling Stockholder or any fees and expenses of underwriter's counsel.

32
<PAGE> 34

DESCRIPTION OF CAPITAL STOCK

Upon completion of the Offering, the authorized capital stock of the
Company will consist of 18,000,000 shares of Common Stock, par value $.001 per
share and 2,000,000 shares of Serial Preferred Stock, par value $.001 per share,
of which 9,445,734 shares of Common Stock will be issued and outstanding
(assuming the Underwriters' over-allotment option is not exercised) and no
shares of Serial Preferred Stock will be issued and outstanding. As of June 1,
1998, 518,786 shares of Common Stock were reserved for issuance pursuant to
outstanding options. The following description is a summary of the capital stock
and of the preferred stock purchase rights of the Company and is subject to and
qualified in its entirety by reference to the provisions of the Amended and
Restated Certificate of Incorporation, the Amended and Restated Bylaws of the
Company and the Rights Agreement dated as of May 29, 1998 between the Company
and ChaseMellon Shareholder Services, L.L.C., as Rights Agent, copies of which
are included as exhibits to the Registration Statement of which this Prospectus
is a part.

COMMON STOCK

The issued and outstanding shares of Common Stock are, and the shares being
offered by the Company will be, when issued, fully paid and nonassessable. Each
outstanding share of Common Stock is entitled to one vote on all matters
submitted to a vote of stockholders. The holders of outstanding shares of Common
Stock are entitled to receive dividends out of assets legally available therefor
at such times and in such amounts as the Board of Directors may from time to
time determine. See "Dividend Policy." Holders of Common Stock have no
preemptive, conversion, redemption or sinking fund rights. Upon liquidation,
dissolution or winding up of the Company, the holders of Common Stock are
entitled to receive pro rata the assets of the Company which are legally
available for distribution, after payment of all debts and other liabilities,
subject to the prior rights of any Preferred Stock then outstanding. There is no
cumulative voting. Therefore, the holders of a majority of the shares of Common
Stock voted in an election of directors can elect all of the directors then
standing for election, subject to any rights of the holders of any then
outstanding Preferred Stock. See "Risk Factors -- Control by MLGA Fund II, L.P."

SERIAL PREFERRED STOCK

The Board of Directors is authorized, subject to any limitations prescribed
by law, to issue preferred stock in one or more classes or series and to fix the
designations, voting powers, preferences, rights, qualifications, limitations or
restrictions of any such class or series, including dividend rights, dividend
rates, redemption prices and terms, conversion rights and liquidation
preferences of each class or series of Preferred Stock, without any further vote
or action by the stockholders of the Company. The issuance of Preferred Stock by
the Board of Directors could adversely affect the rights of holders of Common
Stock. For example, Preferred Stock could have preferences over the Common Stock
with respect to dividends and in liquidation and (upon conversion or otherwise)
also enjoy all of the rights appurtenant to the Common Stock.

LIMITATION OF LIABILITY; INDEMNIFICATION

As permitted by the Delaware General Corporation Law (as amended from time
to time, the "DGCL"), the Amended and Restated Certificate of Incorporation
provides that directors of the Company shall not be personally liable to the
Company or its stockholders for monetary damages for breach of fiduciary duty as
a director to the fullest extent permitted by the DGCL (which currently provides
that such liability may be so limited, except for liability (i) for any breach
of the director's duty of loyalty to the Company or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or a
knowing violation of the law, (iii) under Section 174 of the DGCL, relating to
prohibited dividends or distributions or the repurchase or redemption of stock,
or (iv) for any transaction from which the director derives an improper personal
benefit).

Each person who is or was a party to any action by reason of the fact that
such person is or was a director or officer of the Company shall be indemnified
and held harmless by the Company to the fullest extent permitted by the DGCL.
This right to indemnification also includes the right to have paid by the
Company the expenses incurred in connection with any such proceeding in advance
of its final disposition, to the fullest extent permitted

33
<PAGE> 35

by the DGCL. In addition, the Company may, by action of the Board of Directors,
provide indemnification to such other officers, employees and agents of the
Company to such extent as the Board of Directors determines to be appropriate
under the DGCL.

As a result of this provision, the Company and its stockholders may be
unable to obtain monetary damages from a director for breach of his duty of
care. Although stockholders may continue to seek injunctive or other equitable
relief for an alleged breach of fiduciary duty by a director, stockholders may
not have any effective remedy against the challenged conduct if equitable
remedies are unavailable. The Company also reserves the right to purchase and
maintain directors' and officers' liability insurance.

SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW

The Company is subject to Section 203 of the DGCL which, subject to certain
exceptions, prohibits a Delaware corporation from engaging in a business
combination (as defined therein) with an "interested stockholder" (defined
generally as any person who beneficially owns 15% or more of the outstanding
voting stock of the Company or any person affiliated or associated with such
person) for a period of three years following the date that such stockholder
became an interested stockholder, unless (i) prior to such date the board of
directors of the corporation approved either the business combination or the
transaction that resulted in the stockholder becoming an interested stockholder;
(ii) upon consummation of the transaction that resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at least
85% of the voting stock of the corporation at the time the transaction commenced
(excluding for purposes of determining the number of shares outstanding those
shares owned (a) by directors who are also officers of the corporation and (b)
by employee stock plans in which employee participants do not have the right to
determine confidentially whether shares held subject to the plan will be
tendered in a tender or exchange offer); or (iii) on or subsequent to such date
the business combination is approved by the board of directors of the
corporation and authorized at a meeting of stockholders by the affirmative vote
of at least 66 2/3% of the outstanding voting stock of the corporation not owned
by the interested stockholder.

RIGHTS PLAN

The Company adopted a Rights Plan on May 29, 1998. Under the Plan, each
holder of Common Stock at the close of business on June 10, 1998 will receive a
dividend of one Right for each share of Common Stock held. Each share of Common
Stock issued after June 10, 1998 but prior to the earlier of May 29, 2008 and
the Distribution Date will be issued with a Right attached thereto. Following
the Distribution Date, each Right will be exercisable to purchase one
one-hundredth of a share of Series B Participating Cumulative Preferred Stock,
par value $0.01 per share. Once a person has become the beneficial owner of 15%
or more of the Company's Common Stock, the Rights would permit holders of Common
Stock, other than the acquiring person, to purchase additional Common Stock at a
50% discount to its then-current market price. In addition, if, after any person
has acquired such ownership, (i) the Company is involved in a merger or other
business combination in which the Company is not the surviving corporation or
its Common Stock is exchanged for other securities or assets or (ii) the Company
and/or one or more of its subsidiaries sell or otherwise transfer assets or
earning power aggregating more than 50% of the assets or earning power of the
Company and its subsidiaries taken as a whole, then each Right will entitle the
holder to purchase, for the Purchase Price, a number of shares of common stock
of the other party to such business combination or sale (or, in certain
circumstances, an affiliate) at a 50% discount to its then-current market price.
The Rights will expire on May 29, 2008, unless earlier exchanged or redeemed.
Current holders of 15% or more of the Company's Common Stock and MLGA and any of
its current or future affiliates, associates, and direct transferees are not
deemed "acquiring persons" under the Rights Plan.

TRANSFER AGENT

The transfer agent and registrar for the Common Stock is ChaseMellon
Shareholder Services, L.L.C., 450 West 33rd Street, New York, NY 10001.

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<PAGE> 36

UNDERWRITING

Subject to the terms and conditions contained in the Underwriting Agreement
(the "Underwriting Agreement") among the Company, the Selling Stockholder and
each of the Underwriters named below, the Company and the Selling Stockholder
have agreed to sell to the Underwriters, and each of the Underwriters severally
and not jointly has agreed to purchase from the Company and the Selling
Stockholder, the number of shares of Common Stock set forth opposite its name
below.

<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
<S> <C>
McDonald & Company Securities, Inc. ........................
SBC Warburg Dillon Read Inc. ...............................
Total.............................................
</TABLE>

McDonald & Company Securities, Inc. and SBC Warburg Dillon Read Inc. are
acting as representatives (the "Representatives") of the several Underwriters.

The Underwriting Agreement provides that the obligation of the several
Underwriters to pay for and accept delivery of the shares of Common Stock is
subject to the approval of certain legal matters by counsel and to certain other
conditions. The Underwriters are obligated to take and pay for all shares of the
Common Stock offered hereby (other than those covered by the over-allotment
option described below) if any such shares are taken. The Underwriting Agreement
contains certain provisions whereby, if any Underwriter defaults in its
obligation to purchase such shares, and the aggregate obligations of the
Underwriters so defaulting do not exceed ten percent of the shares offered
hereby, some or all of the remaining Underwriters must assume such obligations.

The Underwriters propose to offer the shares of Common Stock directly to
the public at the offering price per share set forth on the cover page hereof
and to certain dealers at a price that represents a concession not in excess of
$ per share of Common Stock under the offering price. The Underwriters
may allow, and such dealers may re-allow a concession not in excess of
$ per share to the other Underwriters or to certain other dealers. The
public offering price and the other selling terms may be changed by the
Representatives.

The Company has granted to the Underwriters an option, exercisable at any
time during the 30-day period from the date of this Prospectus, to purchase up
to an aggregate of 300,000 additional shares of Common Stock at the public
offering price set forth on the cover page hereof less underwriting discounts
and commissions. The Underwriters may exercise such option to purchase
additional shares solely for the purpose of covering over-allotments, if any,
incurred in connection with the sale of the Common Stock offered hereby. To the
extent such option is exercised, each Underwriter will become obligated, subject
to certain conditions, to purchase a number of additional shares proportionate
to such Underwriter's initial amount reflected in the preceding table.

The Company and the Selling Stockholder have agreed to indemnify the
several Underwriters against certain liabilities, including certain liabilities
under the Securities Act, or to contribute to payments the Underwriters may be
required to make in respect thereof.

The Company, the Selling Stockholder and certain other stockholders of the
Company prior to the Offering have agreed, subject to certain exceptions, not to
sell, contract to sell, grant any option to sell, or otherwise dispose of,
directly or indirectly, any shares of Common Stock or securities convertible
into or exchangeable or exercisable for Common Stock or warrants or other rights
to purchase Common Stock or permit the registration of Common Stock, for a
period of 180 days from the date of this Prospectus, without the prior written
consent of McDonald & Co. Securities Inc., except for the shares of Common Stock
offered hereby.

In connection with the offering, the Underwriters may purchase and sell the
Common Stock in the open market. These transactions may include over-allotment
and stabilizing transactions and purchases to cover short positions created by
the Underwriters in connection with the offering. Stabilizing transactions
consist of certain bids or purchases for the purpose of preventing or retarding
a decline in the market price of the Common Stock; and short positions created
by the Underwriters involve the sale by the Underwriters of a greater number of
shares of Common Stock than they are required to purchase from the Selling
Stockholder in the offering. The

35
<PAGE> 37

underwriters also may impose a penalty bid, whereby selling concessions allowed
to broker-dealers in respect of the securities sold in the offering may be
reclaimed by the Underwriters if such shares of Common Stock are repurchased by
the Underwriters in stabilizing or covering transactions. These activities may
stabilize, maintain or otherwise affect the market price of the Common Stock,
which may be higher than the price that might otherwise prevail in the open
market; and these activities, if commenced, may be discontinued at any time.
These transactions may be effected on The Nasdaq National Market, in the
over-the-counter market or otherwise.

The Underwriters have performed various investment banking services for the
Company in the past and may do so from time to time in the future. McDonald &
Company Securities, Inc. and Dillon, Read & Co. Inc., a predecessor of SBC
Warburg Dillon Read Inc., each served as a managing underwriter in the Company's
1996 IPO. Because more than 10% of the net proceeds of the Offering will be paid
to affiliates of certain members of the National Association of Securities
Dealers, Inc. ("NASD"), the Offering is being made pursuant to Rule 2710(c)(8)
of the Conduct Rules of the NASD.

EXPERTS

The consolidated balance sheets of the Company as of December 31, 1997 and
1996 and the consolidated statements of income, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1997 included
in and incorporated by reference to this Prospectus have been included and
incorporated herein in reliance on the report of Coopers & Lybrand L.L.P.,
independent accountants, given upon their authority as experts in accounting and
auditing.

LEGAL MATTERS

Certain legal matters with respect to the Common Stock offered hereby will
be passed upon for the Company and for the Selling Stockholder by Black,
McCuskey, Souers & Arbaugh, Canton, Ohio and for the Underwriters by Davis Polk
& Wardwell, New York, New York.

AVAILABLE INFORMATION

The Company is subject to the informational requirements of the Exchange
Act, and in accordance therewith files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission").
Reports, proxy statements and other information filed by the Company may be
inspected at the public reference facilities maintained by Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the
Commission located at Citicorp, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661 and 7 World Trade Center, New York, New York 10048. Such material
may also be accessed electronically by means of the Commission's home page on
the Internet at http://www.sec.gov.

The Company has filed with the Commission a registration statement on Form
S-3 (herein, together with any amendments thereto, the "Registration Statement")
under the Securities Act with respect to the shares being offered hereby. This
Prospectus does not contain all the information set forth in the Registration
Statement, certain portions of which have been omitted as permitted by the Rules
and Regulations of the Commission. Statements contained in this Prospectus as to
the contents of any contract or other document referred to herein are not
necessarily complete, and in each instance in which a copy of such contract or
other document has been filed as an exhibit to the Registration Statement,
reference is made to such copy and each such statement is qualified in all
respects by such reference.

36
<PAGE> 38

GRADALL INDUSTRIES, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AUDITED FINANCIAL STATEMENTS
Report of Independent Accountants........................... F-2
Consolidated Balance Sheets as of December 31, 1997 and
1996...................................................... F-3
Consolidated Statements of Income for the years ended
December 31, 1997, 1996 and 1995.......................... F-4
Consolidated Statements of Changes in Stockholders' Equity
for the years ended December 31, 1997, 1996 and 1995...... F-5
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1996 and 1995.......................... F-6
Notes to the Consolidated Financial Statements.............. F-7
UNAUDITED FINANCIAL STATEMENTS
Condensed Consolidated Statements of Income for the Three
Months Ended March 31, 1998 and 1997 (unaudited).......... F-21
Condensed Consolidated Balance Sheets as of March 31, 1998
(unaudited) and December 31, 1997......................... F-22
Condensed Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1998 and 1997 (unaudited).... F-23
Notes to Condensed Consolidated Financial Statements
(unaudited)............................................... F-24
</TABLE>

F-1
<PAGE> 39

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and Stockholders
of Gradall Industries, Inc.

We have audited the accompanying consolidated balance sheets of Gradall
Industries, Inc. and Subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income, stockholders' equity and cash flows
for each of the three years in the period ended December 31, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Gradall Industries, Inc. and Subsidiaries as of December 31, 1997 and 1996, and
the consolidated results of their operations and their cash flows for the three
years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.

COOPERS & LYBRAND L.L.P.

Cleveland, Ohio
February 23, 1998

F-2
<PAGE> 40

GRADALL INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1997 1996
------- -------
<S> <C> <C>
ASSETS
Current assets:
Cash...................................................... $ 1,605 $ 215
Accounts receivable -- trade, net of allowance for
doubtful accounts of $56 and $76....................... 25,290 16,846
Inventories............................................... 25,564 21,326
Prepaid expenses and deferred charges..................... 1,645 495
Deferred income taxes..................................... 742 1,151
------- -------
Total current assets................................. 54,846 40,033
Deferred income taxes....................................... 5,402 5,257
Property, plant and equipment, net.......................... 15,108 11,535
Other assets:
Deferred financing costs, net of accumulated amortization
of $404 and $242....................................... 446 608
Other..................................................... 933 793
------- -------
Total other assets................................... 1,379 1,401
------- -------
Total assets......................................... $76,735 $58,226
------- -------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Capital lease obligation, current portion................. $ 297 $ 174
Accounts payable -- trade................................. 17,113 13,405
Accrued other expenses:
Legal..................................................... 452 1,800
Floor plan interest....................................... 1,444 851
Warranty.................................................. 1,075 1,225
Income taxes.............................................. 1,115 1,333
Other..................................................... 6,841 6,338
------- -------
Total current liabilities............................ 28,337 25,126
------- -------
Long term obligations:
Capital lease obligation, net of current portion.......... 412 445
Long-term debt............................................ 9,603 7,291
Accrued post-retirement benefit cost...................... 15,719 14,604
Other long term liabilities............................... 1,445 1,684
------- -------
Total long term obligations.......................... 27,179 24,024
------- -------
Total liabilities.................................... 55,516 49,150
------- -------
Stockholders' equity:
Common stock, $.001 par value; 18,000,000 shares
authorized; 8,940,194 and 8,939,294 issued and
outstanding in 1997 and 1996, respectively............. 9 9
Serial preferred shares, par value $.001 per share,
2,000,000 shares authorized, none issued and
outstanding............................................ -- --
Additional paid-in capital................................ 38,894 38,907
Accumulated deficit....................................... (17,684) (29,840)
------- -------
Total stockholders' equity........................... 21,219 9,076
------- -------
Total liabilities and stockholders' equity........... $76,735 $58,226
------- -------
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 41

GRADALL INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Net sales.................................................. $158,659 $140,909 $118,438
Cost of sales.............................................. 120,663 108,098 92,637
-------- -------- --------
Gross profit............................................... 37,996 32,811 25,801
Research and development and product engineering costs..... 3,644 3,081 2,504
Selling general and administrative expenses................ 13,712 11,815 10,503
-------- -------- --------
Operating income...................................... 20,640 17,915 12,794
Other expense:
Interest expense......................................... 696 3,108 1,642
Other.................................................... 257 1,018 865
-------- -------- --------
Net other expense..................................... 953 4,126 2,507
-------- -------- --------
Income before income taxes and extraordinary item..... 19,687 13,789 10,287
Income tax provision....................................... 7,696 5,503 3,680
-------- -------- --------
Income before extraordinary item........................... 11,991 8,286 6,607
-------- -------- --------
Extraordinary item, loss from early extinguishment of debt,
net of income tax benefit of $622........................ -- 973 --
-------- -------- --------
Net income................................................. $ 11,991 $ 7,313 $ 6,607
-------- -------- --------
Basic:
Weighted average shares outstanding...................... 8,939,605 6,956,507 5,637,244
Earnings per share:
Before extraordinary item................................ $ 1.34 $ 1.19 $ 1.17
After extraordinary item................................. $ 1.34 $ 1.05 $ 1.17
Diluted:
Weighted average shares outstanding...................... 9,013,760 7,003,200 5,637,244
Earnings per share:
Before extraordinary item................................ $ 1.33 $ 1.18 $ 1.17
After extraordinary item................................. $ 1.33 $ 1.04 $ 1.17
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 42

GRADALL INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
ADDITIONAL
ADDITIONAL PAID-IN
COMMON PREFERRED PAID-IN CAPITAL- ACCUMULATED
STOCK STOCK CAPITAL WARRANTS DEFICIT TOTAL
------ --------- ---------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1994......... $-- $ -- $ -- $ -- $ (3,134) $(3,134)
Net income...................... -- -- -- -- 6,607 6,607
Stock dividend.................. 5 -- (4) -- (1) --
Issuance of 4,570,500 shares.... 5 -- 10,495 -- -- 10,500
Issuance of 554,000 shares to
employees.................... 1 -- 1,499 -- -- 1,500
Redemption of 4,570,500
shares....................... (5) -- 4 -- (39,591) (39,592)
Issuance of 449,294 common stock
warrants..................... -- -- -- 1,000 -- 1,000
Issuance of 140 preferred
shares....................... -- 2,000 -- -- (2,000) --
--- ------- ------- ------- -------- -------
Balance December 31, 1995......... 6 2,000 11,994 1,000 (38,119) (23,119)
Issuance of 2,950,000 shares of
common stock................. 3 -- 24,913 -- -- 24,916
Redemption of 140 preferred
shares....................... -- (2,000) 2,000 -- -- --
Redemption of 449,294 common
stock warrants............... -- -- -- (1,000) 1,000 --
Net income...................... -- -- -- -- 7,313 7,313
Change in unfunded pension
obligation................... -- -- -- -- (34) (34)
--- ------- ------- ------- -------- -------
Balance December 31, 1996......... 9 -- 38,907 -- (29,840) 9,076
Additional expense resulting
from the initial public
offering..................... -- -- (19) -- -- (19)
Stock options exercised......... -- -- 6 -- -- 6
Net income...................... -- -- -- -- 11,991 11,991
Change in unfunded pension
obligation................... -- -- -- -- 165 165
--- ------- ------- ------- -------- -------
Balance December 31, 1997......... $ 9 $ -- $38,894 $ -- $(17,684) $21,219
--- ------- ------- ------- -------- -------
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 43

GRADALL INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-----------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................ $11,991 $ 7,313 $ 6,607
Adjustments to reconcile net income to net cash provided by
operating activities:
Extraordinary item, before tax benefit.................... -- 1,595 --
Change in unfunded pension obligation..................... 165 (34) --
Post-retirement benefit transition obligation............. 1,115 780 779
Depreciation.............................................. 1,721 1,391 1,081
Amortization.............................................. 157 344 125
Deferred income taxes..................................... 264 106 (1,161)
Equity loss on investment................................. -- 44 43
(Gain) loss on sale of property, plant and equipment...... (1) (111) 41
Increase in accounts receivable........................... (8,444) (4,710) (492)
Increase in inventory..................................... (4,238) (2,816) (3,618)
Increase in prepaid expenses.............................. (1,150) (51) (157)
(Increase) decrease in other assets....................... (135) (152) 13
Increase in accounts payable and accrued expenses......... 2,204 3,941 3,417
Increase (decrease) in accrued other long-term
liabilities............................................. (239) 28 203
------- ------- -------
Net cash provided by operating activities............. 3,410 7,668 6,881
------- ------- -------
Cash flows from investing activities:
Proceeds from sale of property, plant and equipment....... 12 104 30
Purchase of property, plant and equipment................. (5,305) (2,300) (4,189)
------- ------- -------
Net cash used in investing activities................. (5,293) (2,196) (4,159)
------- ------- -------
Cash flows from financing activities:
Net proceeds from initial public offering................. -- 26,916 --
Payment of term debt...................................... -- (10,000) --
Payment of subordinated debt.............................. -- (10,000) --
Issuance of 900 common shares............................. 6 -- --
Issuance of 4,570,500 common shares....................... -- -- 10,500
Redemption of preferred stock............................. -- (2,000) --
Issuance of 554,000 common shares to employees............ -- -- 1,500
Redemption of 4,570,500 common shares..................... -- -- (39,592)
New debt incurred in connection with the recapitalization,
including $1 million of common stock warrants........... -- -- 38,941
Debt repaid in the recapitalization transaction........... -- -- (10,802)
Recapitalization expenses................................. -- -- (1,654)
Proceeds (repayments) on capital leases................... 90 (172) (102)
Net advances (repayments) on revolving line of credit..... 2,312 (10,808) (825)
Proceeds from (payments of) bank overdraft................ 884 (730) 689
Other..................................................... (19) -- --
Net cash provided by (used in) financing activities... 3,273 (6,794) (1,345)
------- ------- -------
Net increase (decrease) in cash....................... 1,390 (1,322) 1,377
Cash, beginning of year..................................... 215 1,537 160
------- ------- -------
Cash, end of year........................................... $ 1,605 $ 215 $ 1,537
------- ------- -------
Supplemental disclosure:
Cash paid for:
Income taxes.......................................... $ 7,650 $ 2,875 $ 4,460
------- ------- -------
Interest.............................................. $ 604 $ 3,572 $ 1,029
------- ------- -------
Other:
Amounts financed through capital leases............... $ 287 $ 476
------- -------
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 44

GRADALL INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(DOLLARS IN THOUSANDS)

1. NATURE OF BUSINESS AND BASIS OF PRESENTATION:

Gradall Industries, Inc. (the "Company"), Incorporated in Delaware formerly
ICM Industries Inc. (ICM), is a holding company. The consolidated financial
statements include the Company and its wholly-owned subsidiaries, The Gradall
Company and Gradall Investment Company. The Gradall Investment Company was
dissolved in 1996.

The Gradall Company manufacturers and sells excavating and material
handling equipment to public and private sector customers throughout the world
through independent distribution organization.

On September 15, 1995, ICM entered into a Recapitalization Agreement (the
"Recapitalization" or the "Agreement"), which was effective October 13, 1995,
under which ICM (a) issued common shares comprising an 82.5% common equity
interest to MLGA Fund II, L.P. and partners for a price of $10.5 million; (b)
redeemed a portion of the common shares owned by Jack D. Rutherford and David T.
Shelby at a purchase price of $44.5 million, less costs and expenses of the
transaction, certain payments to officers and employees, amounts required to
retire existing indebtedness of The Gradall Company, and further adjusted as
required in the Agreement for working capital, income taxes,property additions
and cash balances as of the effective date of the transaction; (c) issued 140
shares of Preferred Stock with a liquidation preference of $2 million to Messrs.
Rutherford and Shelby; (d) issued common shares representing 10% of its
outstanding common stock to certain officers and employees, and (e) distributed
certain non-Gradall investments to Messrs. Rutherford and Shelby pursuant to a
plan of partial liquidation.

The Recapitalization was financed under a Loan and Security Agreement with
Heller Financial, Inc. for a $10 million term loan repayable in installments
through September 30, 2000 and up to $22 million in revolving loan commitments
for a period of five years, along with a Securities Purchase Agreement with The
Marlborough Capital Investment Fund, L.P. and Mellon Ventures, Inc. for $10
million of 12.5% Senior Subordinated Notes due October 31, 2003 and warrants for
449,294 shares of common stock. These transactions were accounted for as a
leveraged recapitalization under which the existing basis of accounting was
continued, and assets and liabilities of the continuing business were carried
forward. Under the Agreement the name of ICM was changed to Gradall Industries,
Inc.

Sources and uses of cash in connection with these transactions are
summarized below:

<TABLE>
<S> <C>
SOURCES OF CASH:
Purchase of 4,570,500 shares by MLGA Fund II, LP.......... $10,500
Purchase of 554,000 shares by employees................... 1,500
Borrowing from Heller Financial, Inc. -- Term Loan........ 10,000
Borrowing from Heller Financial, Inc. -- Revolvers........ 17,941
12.5% Senior Subordinated Notes........................... 10,000
Company funds............................................. 2,809
-------
$52,750
-------
USES OF CASH:
Repayment of State of Ohio debt........................... $ 1,320
Repayment of Bank One Debt, including accrued interest of
$43.................................................... 9,482
Acquisition of 4,570,500 shares from Rutherford and
Shelby................................................. 39,592
Financing and other transaction costs..................... 2,356
-------
$52,750
-------
</TABLE>

The purchase price was further adjusted based on the actual tax liabilities
as of the closing date including consideration of any taxes resulting from the
distribution of the non-Gradall investments to Messrs. Rutherford

F-7
<PAGE> 45
GRADALL INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLARS IN THOUSANDS)

1. NATURE OF BUSINESS AND BASIS OF PRESENTATION: (CONTINUED)
and Shelby. Subsequent adjustments to date have not had a material impact on the
accompanying financial statements.

Former wholly-owned subsidiaries of ICM, Magna Power and International
Consulting Management were transferred to Messrs. Rutherford and Shelby in
connection with the Recapitalization described above. For purposes of these
consolidated financial statements, this spin-off transaction has been treated as
a change in the reporting entity and these entities have been excluded from the
accompanying financial statements for all periods presented on the basis that
these companies operated in different industries, were autonomous and had only
incidental transactions with the Company. Management fees to these former
subsidiaries of $288 for the year ended December 31, 1995 are included in the
accompanying consolidated statements of income.

The following table summarizes the October 12, 1995 book values of the
companies transferred and excluded from these financial statements:

<TABLE>
<S> <C>
Cash........................................................ $ 944
Accounts receivable......................................... 5,976
Inventory................................................... 6,948
Property and equipment...................................... 3,350
Other....................................................... 579
-------
$17,797
-------
Accounts payable............................................ $ 3,229
Accrued liabilities......................................... 3,044
Debt........................................................ 10,789
Net assets.................................................. 735
-------
$17,797
-------
</TABLE>

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:

<TABLE>
<S> <C>
Repay outstanding term debt................................. $ 9,550
Repay subordinate debt...................................... 10,000
Redeem preferred stock...................................... 2,000
Reduce revolving credit liability........................... 5,379
</TABLE>

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.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

PRINCIPLES OF CONSOLIDATION:

The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated.

F-8
<PAGE> 46
GRADALL INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLARS IN THOUSANDS)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
USE OF ESTIMATES:

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
related notes. Actual results may differ from those estimates.

SOURCE OF SUPPLY OF LABOR:

Virtually all of the Company's hourly employees are represented by the
International Association of Machinists and Aerospace Workers under a three-year
contract which expires April 16, 2000.

REVENUE RECOGNITION:

The Company's revenue recognition policy is to recognize revenue when
products are shipped.

PRODUCT FINANCING:

PRODUCT WARRANTY COSTS:

In general, the Company provides warranty on equipment for a period of up
to twelve months or for a specified period of use after sale or rental by the
distributor. Reserves for estimated warranty costs are established at the time
of sale.

INVENTORIES:

Inventories are stated at cost not in excess of market value using the
last-in, first-out (LIFO) method of inventory costing. Inventory cost includes
materials, direct labor, manufacturing overhead, and outside service costs.
Market value is determined by comparison with recent purchases or realizable
value.

PROPERTY, PLANT AND EQUIPMENT:

Expenditures for property, plant and equipment and for renewals and
betterments which extend the originally estimated economic lives of assets are
capitalized at cost. Expenditures for maintenance and repairs are charged to
expense. Items which are sold, retired, or otherwise disposed of are removed
from the asset and accumulated depreciation accounts and any gains or losses are
reflected in income. The Company's depreciation and amortization methods are as
follows:

<TABLE>
<CAPTION>
DESCRIPTION USEFUL LIFE METHOD
----------- ----------- -------------
<S> <C> <C>
Machinery and equipment........................... 3-10 years Straight-line
Buildings and improvements........................ 10-24 years Straight-line
Furniture and fixtures............................ 3-10 years Straight-line
</TABLE>

PATENTS:

The cost of patents is being amortized on a straight-line basis over the
remaining legal life of the patents.

F-9
<PAGE> 47
GRADALL INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLARS IN THOUSANDS)

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
DEFERRED FINANCING COSTS:

Costs incurred to obtain financing have been capitalized and are being
amortized over the life of the respective financing arrangements.

INCOME TAXES:

The Company follows the provisions of Statement of Financial Accounting
Standards No. 109, "Accounting for Income Taxes". Deferred income taxes arise
from reporting certain items of income and expense for tax purposes in a
different period than for financial reporting purposes. The principle difference
relates to accounting for post-retirement health benefits.

FAIR VALUE OF FINANCIAL INSTRUMENTS:

The Company's financial instruments consist principally of cash, accounts
receivable, accounts payable and accrued liabilities in which the fair value of
these financial instruments approximates the carrying value. The Company's
revolving line of credit provides for periodic changes in interest rates which
approximate current rates and therefore, the fair value of the debt approximates
carrying value.

RESEARCH AND DEVELOPMENT COSTS:

Expenditures relating to the development of new products and processes,
including significant improvements to existing products, are expensed as
incurred. Research and development expenses were $1,722, $1,641 and $1,209 in
1997, 1996 and 1995, respectively. In addition, the Company incurred other
engineering expenses relating to new product development (that do not meet the
accounting definition of "Research and Development") in the amount of $1,922,
$1,440 and $1,295 in 1997, 1996 and 1995, respectively.

STOCK BASED COMPENSATION:

The Company accounts for stock based compensation awards pursuant to
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and its related interpretations which prescribe the use of the
intrinsic value based method. Accordingly, no compensation cost has been
recognized for its fixed stock option plans. However, the Company has adopted
the disclosure requirements of Statement of Financial Accounting Standards No.
123, "Accounting for Stock Based Compensation," See Note 10 for additional
information.

PER SHARE DATA:

The Company adopted Statement of Accounting Standards ("SFAS") No. 128,
"Earnings Per Share", in the fourth quarter of 1997. The impact of implementing
SFAS No. 128 is discussed in Note 14 to the Consolidated Financial Statements.

RECLASSIFICATIONS:

Certain 1996 and 1995 balances have been reclassified to conform to the
current year's presentation.

F-10
<PAGE> 48
GRADALL INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLARS IN THOUSANDS)

3. INVENTORIES:

Inventories are comprised of:

<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Raw materials........................................... $ 921 $ 1,167
Work in process......................................... 24,739 18,402
Finished goods.......................................... 5,474 7,187
------- -------
31,134 26,756
Less LIFO reserve....................................... 5,570 5,430
------- -------
Total inventory......................................... $25,564 $21,326
------- -------
</TABLE>

4. PROPERTY, PLANT AND EQUIPMENT:

The major classes of property, plant and equipment are summarized as
follows:

<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Land.................................................... $ 513 $ 513
Machinery and equipment................................. 16,910 14,836
Buildings and improvements.............................. 5,587 5,587
Furniture and fixtures.................................. 2,277 1,652
Construction in progress................................ 4,109 1,380
------- -------
29,396 23,968
Less accumulated depreciation........................... 14,288 12,433
------- -------
Net property, plant and equipment....................... $15,108 $11,535
------- -------
</TABLE>

5. LONG-TERM DEBT:

Long term debt includes:

<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Revolving credit........................................ $ 9,603 $ 7,291
</TABLE>

In 1996, the Company's Loan and Security Agreement with Heller Financial,
Inc. was amended and restated as of December 20, 1996. This agreement provides
for up to $25 million in revolving loan commitments. There are no aggregate
maturities on the revolving loan commitment. Amounts borrowed based on the
borrowing base, as defined, may be repaid and reborrowed at any time prior to
the earlier of a default or August 31, 1999, the termination date.

The revolving line of credit bears interest at either LIBOR plus 1% or
prime minus .50%. At December 31, 1997, the prime rate was 8.5%, LIBOR was
5.97%, and the average annual interest rate in effect for the revolving line of
credit was 7.86%. At December 31, 1996, the prime rate was 8.25%, LIBOR was
5.66%, and the average annual interest rate in effect for the revolving line of
credit was 9.94%. The Company also pays an unused line fee of 0.25 percent per
annum.

The terms of the financing agreement contain, among other provisions,
restrictions on the level of capital expenditures and various financial ratios,
as defined. The financing agreements are collateralized by substantially all the
assets of the Company.

F-11
<PAGE> 49
GRADALL INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLARS IN THOUSANDS)

6. LEASE OBLIGATIONS:

The Company leases certain machinery and equipment under capital leases
expiring beginning in the year 1998. The assets and liabilities under capital
leases are recorded at the original purchase cost. The assets are depreciated
over their estimated productive lives. Depreciation of assets under capital
leases is included in depreciation expense.

In addition, the Company leases certain equipment under operating leases
having terms up to 5 years which are for equipment. A number of these leases
have renewal options.

The following is a summary of property held under capital leases:

<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Machinery and equipment................................... $1,020 $1,020
Information systems....................................... 287 --
------ ------
Total capital leases...................................... 1,307 --
Less accumulated depreciation............................. 364 230
------ ------
$ 943 $ 790
------ ------
</TABLE>

The following is a summary of future minimum payments under capitalized and
operating leases that have remaining noncancelable lease terms in excess of one
year at December 31, 1997:

<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
Year ending December 31,
1998.................................................. $ 341 $ 117
1999.................................................. 201 67
2000.................................................. 247 31
2001.................................................. -- 18
2002.................................................. -- 14
------- -------
Total minimum lease payments............................ 789 $ 247
-------
Interest................................................ 80
-------
Liability under capital lease payments.................. 709
Current portion......................................... 297
-------
Long-term capitalized lease obligation.................. $ 412
-------
</TABLE>

Rental expense for operating leases amounted to $409, $397, and $319 for
the years ended December 31, 1997, 1996 and 1995, respectively.

7. EMPLOYEE BENEFIT PLANS:

PENSION PLANS:

Substantially all employees are covered by pension plans which provide for
monthly pension payments to eligible former employees who have retired. Prior to
March 24, 1997 the Company sponsored two plans, one for members of the
collective bargaining unit and one for salaried and other eligible employees.

Benefits paid under the collective bargaining unit plan are based on a
benefit multiplier times years of credited service, reduced by benefits under a
prior plan. Such prior plan benefits are guaranteed under the terms of group
annuity contracts. Benefits paid under the salary plan are based on the greater
of a benefit multiplier times years of credited service or a percentage of
pre-retirement earnings. Pension costs are funded as actuarially

F-12
<PAGE> 50
GRADALL INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLARS IN THOUSANDS)

7. EMPLOYEE BENEFIT PLANS: (CONTINUED)
determined and to the extent cash contributions are deductible for federal
income tax purposes. The collective bargaining unit plan uses the entry age
normal actuarial cost method to determine annual contributions to the plan. The
salary plan uses the unit credit actuarial cost method to determine
contributions.

Effective March 24, 1997 the Company adopted the IAM National Pension Plan
to replace the existing collective bargaining unit plan for future service
benefits. The collective bargaining unit plan benefits were frozen and the
Company continues to fund the plan for past service benefits. The expense
related to funding the IAM National Pension Plan from March 24, 1997 to December
31, 1997 was $254.

The components of net periodic pension cost for the years ended December
31, 1997, 1996 and 1995 are as follows:

<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Service cost................................... $ 505 $ 693 $ 566
Interest cost.................................. 819 738 644
Actual return of plan assets................... (1,838) (1,118) (1,399)
Net amortization and deferral.................. 1,117 532 943
Curtailment under FAS 88....................... 17 -- --
------- ------- -------
Total pension cost............................. $ 620 $ 845 $ 754
------- ------- -------
</TABLE>

The funded status of the plans as of December 31, 1997 and 1996 are as
follows:

<TABLE>
<CAPTION>
1997 1996
--------------------- ---------------------
COLLECTIVE COLLECTIVE
BARGAINING SALARIED BARGAINING SALARIED
UNIT PLAN PLAN UNIT PLAN PLAN
---------- -------- ---------- --------
<S> <C> <C> <C> <C>
Accumulated benefit obligation:
Vested.............................................. $6,193 $3,808 $5,612 $3,129
Nonvested........................................... 733 372 699 276
------ ------ ------ ------
6,926 4,180 6,311 3,405
------ ------ ------ ------
Projected benefit obligation.......................... 6,926 5,711 6,311 4,679
Plan assets at fair value, primarily stock and bond
funds............................................... 6,360 4,837 5,213 3,867
------ ------ ------ ------
Projected benefit obligation in excess of plan
assets.............................................. 566 874 1,098 812
Unrecognized net asset................................ -- -- -- 1
Unrecognized net loss................................. 980 247 1,154 218
Unrecognized prior service cost....................... -- 108 17 118
------ ------ ------ ------
(Prepaid asset) pension liability recognized in other
current assets and other current liabilities,
respectively........................................ $ (414) $ 519 $ (73) $ 475
------ ------ ------ ------
</TABLE>

The actuarial assumptions used were as follows:

<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Discount rate........................................ 7.0% 7.5% 7.5%
Rate of increase in compensation levels.............. 4.5% 4.5% 4.5%
Expected long-term rate of return on assets.......... 8.5% 8.5% 8.5%
</TABLE>

Statement of Financial Accounting Standards No. 87 contains a provision
which requires the recognition of a liability (including unfunded accrued
pension costs) that is at least equal to the unfunded accumulated benefit
obligation (the excess of the accumulated benefit obligation over the fair value
of plan assets). Recognition of an

F-13
<PAGE> 51
GRADALL INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLARS IN THOUSANDS)

7. EMPLOYEE BENEFIT PLANS: (CONTINUED)
additional minimum liability is required if an unfunded accumulated benefit
exists and the liability already recognized as unfunded accrued pension cost is
less than the unfunded accumulated benefit obligation. The additional minimum
liability of $980 and $1,171 at December 31, 1997 and 1996, respectively, has
been included in other long-term liabilities and an intangible pension asset of
$17 at December 31, 1996 has been recorded in an amount not exceeding the amount
of unrecognized prior service cost. The difference between the long-term
liabilities and the intangible asset has been reported net of income tax effect
within equity.

SAVINGS AND INVESTMENT PLAN:

Substantially all employees are eligible to participate in a savings and
investment plan. The Company sponsors two plans, one for members of the
collective bargaining unit and one for salaried and other eligible employees.
The plans provide for contributions by employees, through salary reductions, and
for a matching contribution by the Company based on a rate determined for each
plan year by the Board of Directors of the Company. The plans also provide for a
discretionary contribution by the Company.

DEFERRED COMPENSATION PROGRAM:

The Company has a deferred compensation program under which certain
employees may elect to postpone receipt of a portion of their earnings. The
amounts so deferred are deposited in a trust account, but remain assets of the
Company. The trustees of the program are officers and a key employee of the
Company.

PROFIT SHARING PLAN:

The Company maintains a profit sharing plan covering union and salaried
employees. The amount of the profit sharing bonus is determined by the Company's
return on sales and is calculated based upon the wages of eligible employees.

POST-RETIREMENT BENEFITS:

The Company provides eligible retired employees with health care and life
insurance benefits. These benefits are provided on a non-contributory basis for
life insurance and contributory basis for medical coverage. Currently, the
Company does not pre-fund these benefits.

The components of periodic net post-retirement benefit cost for the years
ended December 31, 1997, 1996 and 1995 are as follows:

<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Service cost..................................... $ 584 $ 539 $ 393
Interest cost.................................... 1,232 1,143 1,098
Amortization of loss............................. 34 17 --
------ ------ ------
Net periodic post retirement benefit cost........ $1,850 $1,699 $1,491
------ ------ ------
</TABLE>

F-14
<PAGE> 52
GRADALL INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLARS IN THOUSANDS)

7. EMPLOYEE BENEFIT PLANS: (CONTINUED)
The following table displays the plans' funded status at December 31, 1997
and 1996 based on the most recent actuarial analysis at December 31, 1997 and
1996:

<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Accumulated post-retirement benefit obligations:
Retirees.............................................. $ 8,586 $ 7,155
Fully-eligible active plan participants............... 4,371 4,401
Other active plan participants........................ 5,917 4,959
------- -------
Total.............................................. $18,874 $16,515
------- -------
Plan assets at fair value............................... $ -- $ --
Accumulated post-retirement benefit obligation in excess
of assets............................................. 18,874 16,515
Unrecognized net actuarial loss......................... (3,155) (1,911)
------- -------
Accrued post-retirement benefit cost.................... $15,719 $14,604
------- -------
</TABLE>

For measuring the expected Post-Retirement Benefit Obligation, an 8% annual
rate increase in the per capita cost of covered health care benefits was assumed
for 1997. This rate was assumed to decrease to 5.0% by 2011 and remain constant
thereafter. The weighted average discount rate used in determining the
Accumulated Post-retirement Benefit Obligation was 7.0% and 7.5% respectively at
December 31, 1997 and 1996.

If the health care cost trend rate were increased 1%, the Accumulated
Post-Retirement Obligation as of December 31, 1997 would have increased by
$2,627 and the effect of this change on the aggregate of service and interest
costs for 1997 would be an increase of $157 and $155, respectively.

8. INCOME TAXES:

The provision for income taxes for the years ended December 31, 1997, 1996
and 1995 consisted of the following:

<TABLE>
<CAPTION>
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Federal.......................................... $6,327 $3,433 $3,888
State............................................ 1,105 642 849
Deferred......................................... 264 806 (1,057)
------ ------ ------
7,696 4,881 3,680
Tax effect of extraordinary item (shown
separately).................................... -- 622 --
------ ------ ------
$7,696 $5,503 $3,680
------ ------ ------
</TABLE>

The Company's effective tax rate differed from the federal statutory rate
as follows:

<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Federal statutory rate................................. 35.0% 35.0% 34.0%
Effect of state and local taxes........................ 3.7% 3.6% 4.8%
Change in tax liability................................ -- -- (3.0)%
Other.................................................. 0.4% 1.4% --
---- ---- ----
39.1% 40.0% 35.8%
---- ---- ----
</TABLE>

F-15
<PAGE> 53
GRADALL INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLARS IN THOUSANDS)

8. INCOME TAXES: (CONTINUED)
The components of the net deferred tax benefits (liabilities) as of
December 31, 1997 and 1996 were as follows:

<TABLE>
<CAPTION>
1997 1996
------- -------
<S> <C> <C>
Current:
Inventories............................................ $ (705) $ (762)
Accrued expenses....................................... 1,628 1,882
Other.................................................. (181) 31
------- -------
$ 742 $ 1,151
------- -------
Long-term:
Basis of property and equipment........................ $(1,618) $(1,393)
Post-retirement benefits liability..................... 6,420 5,964
Accrued expenses....................................... 600 686
------- -------
$ 5,402 $ 5,257
------- -------
</TABLE>

The sources of timing differences and the related deferred tax effects were
as follows:

<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -------
<S> <C> <C> <C>
Accrued expenses.................................. $ 340 $ 970 $ (577)
Post-retirement benefits liability................ (456) (318) (308)
Depreciation...................................... 225 212 84
Inventory......................................... (57) (52) 20
Other............................................. 212 (6) (276)
----- ----- -------
$ 264 $ 806 $(1,057)
----- ----- -------
</TABLE>

Valuation allowances are established when necessary to reduce deferred tax
assets to the amounts expected to be realized.

9. PREFERRED STOCK:

The Company is authorized to issue shares of Series A preferred stock in
which each share has one vote with a fixed aggregate of 12% of the total vote.
The holders of this preferred stock will vote together with the holders of the
Company's common stock on all matters submitted to the Company's stockholders.
Holders may require the Company to redeem preferred shares proportionately to
any reduction in shares held by MLGA Fund II, L.P. At December 31, 1997 and 1996
no Series A preferred stock was outstanding.

10. STOCK OPTIONS:

On October 13, 1995, the stockholders approved a qualified incentive stock
option program under which 315,226 shares of the Company's common stock are
reserved for grants to key employees (The "1995 Stock Option Plan"). The option
price is to be determined by the Board, but may not be less than 100% of the
fair market value of the Company's common stock at the time of the grant and
options must be exercised within ten

F-16
<PAGE> 54
GRADALL INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLARS IN THOUSANDS)

10. STOCK OPTIONS: (CONTINUED)
years from the date of grant. The options vest and become exercisable in three
annual installments commencing on the first anniversary of the date of the
grant. On June 3, 1997, the stockholders approved an amendment to the 1995 Stock
Option Plan increasing the number of shares of the Company's common stock
reserved for grants under the program to 515,226.

The following summarizes the changes in the number of Common Shares under
option:

<TABLE>
<CAPTION>
(OPTIONS IN THOUSANDS) 1997 1996 1995
---------------------- ------------ ------------ -----
<S> <C> <C> <C>
Options outstanding at beginning of year............... 278 132 --
Options granted during the year........................ 237 151 132
Options exercised during the year...................... (1) -- --
Options canceled during the year....................... -- (5) --
------------ ------------ -----
Options outstanding at end of year..................... 514 278 132
------------ ------------ -----
Option price range per share........................... $2.71-$13.75 $ 2.71-$6.32 $2.71
</TABLE>

The Company's current option plans, which provide for a total of 514
options, have no options remaining for future grants at December 31, 1997.

The ranges of exercise prices and the remaining contractual life of options
as of December 31, 1997 were:

<TABLE>
<CAPTION>
Range of exercise prices: $2.71 $6.32 $12-13.75
------------------------- ----- ----- ---------
<S> <C> <C> <C>
Options outstanding in thousands:
Outstanding as of December 31, 1997....................... 132 14.5 237
Weighted-average remaining contractual life (in years).... 7.78 8.30 9.45
Weighted-average exercise price........................... $2.71 $6.32 $13.47
Options exerciseable in thousands:
Outstanding as of December 31, 1997....................... 88 10 --
Weighted-average remaining contractual life (in years).... 7.78 8.30 9.45
Weighted-average exercise price........................... $2.71 $6.32 $13.47
</TABLE>

On August 15, 1996, an unqualified stock option for 10,000 shares of common
stock was granted to a director at the exercise price of $2.71.

In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based
Compensation." This statement defines a fair value based method of accounting
for an employee stock option or similar equity instrument. The statement does,
however, allow an entity to continue to measure compensation cost for those
plans using the intrinsic value based method of accounting prescribed by
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued To
Employees."

In 1996, the Company adopted provisions of SFAS No. 123 by providing
disclosures of the pro forma effect on net income and earnings per share that
would result if the fair value compensation element were to be

F-17
<PAGE> 55
GRADALL INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLARS IN THOUSANDS)

10. STOCK OPTIONS: (CONTINUED)
recognized as expense. The following table shows the pro forma earnings and
earnings per share for 1997, 1996 and 1995 along with significant assumptions
used in determining the fair value of the compensation amounts.

<TABLE>
<CAPTION>
1997 1996 1995
--------- ------- ------
<S> <C> <C> <C>
Pro forma amounts:
Net income.................................... $ 11,777 $ 7,242 $6,603
Earnings per share (basic).................... $ 1.32 $ 1.04 $ 1.17
Earnings per share (diluted).................. $ 1.31 $ 1.03 $ 1.17
Assumptions:
Dividend yield................................ 0 0 0
Expected volatility........................... 36.75% 34.46% 35.01%
Risk free interest rate....................... 6.20-6.73% 6.30% 5.70%
4
Expected lives................................ 4 years 4 years years
</TABLE>

During fiscal years 1997, 1996 and 1995 the weighted average grant-date
fair value of options granted was $5.08, $2.31 and $0.98 per share,
respectively.

11. 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.

12. PRO FORMA INFORMATION:

Net income and net income per share are presented below as if the 1995
Recapitalization, the issuance of shares of common stock pursuant to the initial
public offering and the application of the net proceeds thereof to the reduction
in debt, all had occurred as of January 1, 1995.

<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Net income as reported...................................... $ 7,313 $ 6,607
Extraordinary charge........................................ 973 --
Reduction in interest expense using an average interest rate
of 8.2% including the elimination of amortization of
deferred financing costs.................................. 2,013 434
Increase in income taxes related to the pro forma
adjustments............................................... (763) (180)
--------- ---------
Pro forma net income........................................ $ 9,536 $ 6,861
--------- ---------
Average shares outstanding as if the initial public offering
had occurred on January 1, 1995........................... 8,939,294 8,939,294
Pro forma net income per share.............................. $ 1.07 $ .77
</TABLE>

13. EXTRAORDINARY ITEM:

The early repayment of the term debt and subordinated debt with the
proceeds of the initial public offering resulted in the write-off of $723 of
deferred financing costs and unamortized discount on the subordinated debt of
$872 which have been accounted for as an extraordinary charge resulting from
early extinguishment of debt net of applicable income taxes of $622. Total
income before taxes after consideration of these extraordinary expenses amounted
to $12,194 for the year ended December 31, 1996.

F-18
<PAGE> 56
GRADALL INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLARS IN THOUSANDS)

14. EARNINGS PER SHARE:

In the fourth quarter of 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share", which modifies the
calculation of earnings per share. The Standard replaces the previous
presentation of primary and fully diluted earnings per share to basic and
diluted earnings per share.

Basic earnings per share excludes dilution and is computed by dividing
income by the weighted average number of common shares outstanding for the
period. Diluted earnings per share includes the dilution of common stock
equivalents, and is computed similarly to fully diluted earnings per share
pursuant to Accounting Principals Board Opinion 15. All prior periods presented
have been restated to reflect this adoption.

<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Basic earnings per share Income before extraordinary
item................................................... $ 11,991 $ 8,286 $ 6,607
Net income............................................. $ 11,991 $ 7,313 $ 6,607
Weighted average shares outstanding and used in
calculation of basic earnings per share................ 8,939,605 6,956,507 5,637,244
Earnings per share
Income before extraordinary item....................... $ 1.34 $ 1.19 $ 1.17
--------- --------- ---------
Earnings applicable to common shares................... $ 1.34 $ 1.05 $ 1.17
--------- --------- ---------
Diluted earnings per share
Income before extraordinary item....................... $ 11,991 $ 8,286 $ 6,607
Net income............................................. $ 11,991 $ 7,313 $ 6,607
Weighted average shares outstanding and used in
calculation of diluted earnings per share.............. 9,013,760 7,003,200 5,637,244
Earnings per share
Income before extraordinary item....................... $ 1.33 $ 1.18 $ 1.17
--------- --------- ---------
Earnings applicable to common shares................... $ 1.33 $ 1.04 $ 1.17
--------- --------- ---------
Common shares
Weighted average number of shares used in calculating
basic earnings per share............................ 8,939,605 6,956,507 5,637,244
Shares issuable upon exercise of stock options based on
average market prices.................................. 74,155 46,693 --
--------- --------- ---------
Weighted average number of shares used in calculation of
diluted earnings per share............................. 9,013,760 7,003,200 5,637,244
--------- --------- ---------
</TABLE>

F-19
<PAGE> 57

GRADALL INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)

(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)

15. SELECTED SUMMARY QUARTERLY DATA (UNAUDITED):

<TABLE>
<CAPTION>
QUARTERS ENDED(2)
1996 1997
----------------------------------------- -----------------------------------------
MAR. 31, JUN. 30, SEP. 30, DEC. 31, MAR. 31, JUN. 30, SEP. 30, DEC. 31,
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Sales........................ $34,137 $35,499 $35,205 $36,068 $35,910 $38,356 $40,310 $44,083
Gross Profit..................... 7,670 8,313 8,264 8,564 8,618 9,267 9,814 10,297
Operating Income................. 4,155 4,368 4,574 4,818 4,674 4,735 5,310 5,921
Income Before Extraordinary
Item........................... 1,834 1,692 2,095 2,665 4,363 4,231 5,250 5,843
Net Income....................... 1,834 1,692 1,122 2,665 2,657 2,577 3,199 3,558
Earnings Per Share Before
Extraordinary Item(1)
Basic.......................... $ .31 $ .28 $ .30 $ .30 $ .30 $ .29 $ .36 $ .40
Dilutive....................... $ .31 $ .28 $ .30 $ .30 $ .30 $ .29 $ .35 $ .39
Earnings Per Share After
Extraordinary Item(1)
Basic.......................... $ .31 $ .28 $ .16 $ .30 $ .30 $ .29 $ .36 $ .40
Dilutive....................... $ .31 $ .28 $ .16 $ .30 $ .30 $ .29 $ .35 $ .39
</TABLE>

- ---------------
(1) Based on average shares outstanding during the quarter.

(2) The sum of each years quarterly data may not equal the total year results
due to rounding.

F-20
<PAGE> 58

GRADALL INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
MARCH 31, MARCH 31,
1998 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
</TABLE>

The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-21
<PAGE> 59

GRADALL INDUSTRIES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
UNAUDITED AUDITED
--------- ------------
MARCH 31, DECEMBER 31,
1998 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
-------- --------
</TABLE>

The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-22
<PAGE> 60

GRADALL INDUSTRIES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

(DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
MARCH 31, MARCH 31,
1998 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
--------- ---------
</TABLE>

The accompanying notes are an integral part of these condensed consolidated
financial statements.
F-23
<PAGE> 61

GRADALL INDUSTRIES, INC.

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, DECEMBER 31,
1998 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>

F-24
<PAGE> 62

GRADALL INDUSTRIES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS -- (UNAUDITED) (CONTINUED)

4. EARNINGS PER COMMON SHARE:

The computation of the earnings per common share are as follows:

<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1998 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>

5. CONTINGENCIES:

F-25
<PAGE> 63

[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE> 64

============================================================

NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY, THE SELLING STOCKHOLDER OR
ANY UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, SHARES OF COMMON STOCK IN ANY JURISDICTION TO
ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.

------------------

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary......................... 3
Incorporation of Certain Documents by
Reference................................ 6
Risk Factors............................... 7
The Company................................ 10
Use of Proceeds............................ 11
Price Range of Common Stock................ 11
Dividend Policy............................ 11
Capitalization............................. 12
Selected Consolidated Financial Data....... 13
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 14
Business................................... 20
Management................................. 30
Selling Stockholder........................ 32
Description of Capital Stock............... 33
Underwriting............................... 35
Experts.................................... 36
Legal Matters.............................. 36
Available Information...................... 36
Index to Consolidated Financial
Statements............................... F-1
</TABLE>

============================================================
============================================================

2,000,000 SHARES

GRADALL INDUSTRIES, INC.

COMMON STOCK
---------------------

PROSPECTUS

---------------------

MCDONALD & COMPANY
SECURITIES, INC.

SBC WARBURG DILLON
READ INC.

, 1998

============================================================
<PAGE> 65

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the fees and expenses, other than
underwriting discounts and commissions, payable by the Company in connection
with the Offering. All of such expenses except the Securities and Exchange
Commission registration fee and the NASD filing fee are estimated:

<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $10,220.00
NASD filing fee............................................. 3,965.00
Printing and engraving expenses............................. *
Accounting fees and expenses................................ *
Legal fees and expenses..................................... *
Transfer Agent fees and expenses............................ *
Blue Sky fees and expenses and legal fees................... *
Miscellaneous............................................... *
----------
Total............................................. *
</TABLE>

- ---------------
* To be completed by amendment.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the Delaware General Corporation Law, as amended, provides
with regard to indemnification of directors and officers as follows:

145. Indemnification of Officers, Directors, Employees and Agents;
Insurance. (a) A corporation may indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation)
by reason of the fact that he is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of
any action, suit or proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.

(b) A corporation may indemnify any person who was or is a party or is
threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the corporation to procure a judgment
in its favor by reason of the fact that he is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if
he acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the corporation and except that no
indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the Court of Chancery or the
court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all
the circumstances of

II-1
<PAGE> 66

the case, such person is fairly and reasonably entitled to indemnity for
such expenses which the Court of Chancery or such other court shall deem
proper.

(c) To the extent that a director, officer, employee or agent of a
corporation has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsections (a) and (b) of
this section, or in defense of any claim, issue or matter therein, he shall
be indemnified against expenses (including attorneys' fees) actually and
reasonably incurred by him in connection therewith.

(d) Any indemnification under subsections (a) and (b) of this section
(unless ordered by a court) shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification
of the director, officer, employee or agent is proper in the circumstances
because he has met the applicable standard of conduct set forth in
subsections (a) and (b) of this section. Such determination shall be made
(1) by a majority vote of the directors who are not parties to such action,
suit or proceeding, even though less than a quorum, or (2) if there are no
such directors, or if such directors so direct, by independent legal
counsel in a written opinion, or (3) by the stockholders.

(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending any civil, criminal, administrative or investigative
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such director or officer to repay such
amount if it shall ultimately be determined that he is not entitled to be
indemnified by the corporation as authorized in this section. Such expenses
(including attorneys' fees) incurred by other employees and agents may be
so paid upon such terms and conditions, if any, as the board of directors
deems appropriate.

(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, the other subsections of this section shall not be
deemed exclusive of any other rights to which those seeking indemnification
or advancement of expenses may be entitled under any bylaw, agreement, vote
of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding
such office.

(g) A corporation shall have power to purchase and maintain insurance
on behalf of any person who is or was a director, officer, employee or
agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability
under this section.

(h) For purposes of this section, references to "the corporation"
shall include, in addition to the resulting corporation, any constituent
corporation (including any constituent of a constituent) absorbed in a
consolidation or merger which, if its separate existence had continued,
would have had power and authority to indemnify its directors, officers,
and employees or agents, so that any person who is or was a director,
officer, employee or agent of such constituent corporation, or is or was
serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
this section with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.

(i) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include
any excise taxes assessed on a person with respect to any employee benefit
plan; and references to "serving at the request of the corporation" shall
include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by, such
director, officer, employee, or agent with respect to an employee benefit
plan, its participants or beneficiaries; and a person who acted in good
faith and in a manner he reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan shall be deemed
to have acted in a manner "not opposed to the best interests of the
corporation" as referred to in this section.

II-2
<PAGE> 67

(j) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the
heirs, executors and administrators of such a person.

(k) The Court of Chancery is hereby vested with exclusive jurisdiction
to hear and determine all actions for advancement of expenses or
indemnification brought under this section or under any bylaw, agreement,
vote of stockholders or disinterested directors, or otherwise. The Court of
Chancery may summarily determine a corporation's obligation to advance
expenses (including attorneys' fees).

Section 102(b)(7) of the Delaware General Corporation Law, as amended,
provides in regard to the limitation of liability of directors and officers as
follows:

(b) In addition to the matters required to be set forth in the
certificate of incorporation by subsection (a) of this section, the
certificate of incorporation may also contain any or all of the following
matters:

* * *

(7) A provision eliminating or limiting the personal liability of a
director to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, provided that such provision shall
not eliminate or limit the liability of a director: (i) for any breach of
the director's duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under section 174 of this
title; or (iv) for any transaction from which the director derived an
improper personal benefit. No such provision shall eliminate or limit the
liability of a director for any act or omission occurring prior to the date
when such provision becomes effective. All references in this paragraph to
a director shall also be deemed to refer (x) to a member of the governing
body of a corporation which is not authorized to issue capital stock, and
(y) to such other person or persons, if any, who, pursuant to a provision
of the certificate of incorporation in accordance with sec.141(a) of this
title, exercise or perform any of the powers or duties otherwise conferred
or imposed upon the board of directors by this title.

Article Seventh of the Certificate of Incorporation of the Company provides
with regard to indemnification of directors and officers as follows:

SEVENTH: The Corporation shall, to the full extent permitted by
Section 145 of the Delaware General Corporation Law, as amended from time
to time, indemnify all persons whom it may indemnify pursuant thereto.

ITEM 16. EXHIBITS.

The list of exhibits is incorporated herein by reference to the Index to
Exhibits on page E-1.

ITEM 17. UNDERTAKINGS.

The undersigned registrant hereby undertakes that:

(1) The undersigned registrant hereby undertakes to provide to the
underwriter at the closing specified in the underwriting agreements,
certificates in such denominations and registered in such names as required
by the underwriter to permit prompt delivery to each purchaser.

(2) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise,
the Company has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the Company of expenses incurred or paid by a director,
officer or controlling person of the Company in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the
II-3
<PAGE> 68

question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final
adjudication of such issue.

(3) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in
a form of prospectus filed by the Company pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.

(4) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.

II-4
<PAGE> 69

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of New
Philadelphia, State of Ohio, on this 8th day of June, 1998.

GRADALL INDUSTRIES, INC.

By: /s/ Bruce A. Jonker

------------------------------------

Name: Bruce A. Jonker

Title: Vice President, Chief
Financial

Officer and Treasurer

II-5
<PAGE> 70

POWER OF ATTORNEY

The Registrant and each person whose signature appears below constitutes
and appoints Bruce A. Jonker and Barry L. Phillips, and any agent for service
named in this Registration Statement and each of them, his, her or its true and
lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution, for him, her or it and in his her, or its name, place and stead,
in any and all capacities, to sign and file (i) any and all amendments
(including post-effective amendments) to this Registration Statement, with all
exhibits thereto, and other documents in connection therewith, and (ii) a
registration statement, and any and all amendments thereto, relating to the
offering covered hereby filed pursuant to Rule 462(b) under the Securities Act
of 1933, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and things requisite or necessary to be done in
and about the premises, as fully to all intents and purposes as he, she, or it
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>

* President -- Chief Executive Officer June 8, 1998
- ------------------------------------------------ (Principal Executive Officer and
Barry L. Phillips Director)

/s/ Bruce A. Jonker Vice President, Chief Financial June 8, 1998
- ------------------------------------------------ Officer and Treasurer (Principal
Bruce A. Jonker Financial Officer and Principal
Accounting Officer)

* Chairman of the Board and Director June 8, 1998
- ------------------------------------------------
Sangwoo Ahn

* Director June 8, 1998
- ------------------------------------------------
Ernest Green

* Director June 8, 1998
- ------------------------------------------------
Perry J. Lewis

* Director June 8, 1998
- ------------------------------------------------
John A. Morgan

* Director June 8, 1998
- ------------------------------------------------
William C. Ughetta, Jr.

* Director June 8, 1998
- ------------------------------------------------
David S. Williams

* Director June 8, 1998
- ------------------------------------------------
Jack D. Rutherford

By: /s/ Bruce A. Jonker Attorney-in-Fact
- -----------------------------------------------
Bruce A. Jonker
</TABLE>

II-6
<PAGE> 71

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT SEQUENTIAL
NO. DESCRIPTION PAGE NO.
- ------- ----------- ----------
<C> <S> <C>
1.01 Form of Underwriting Agreement*.............................
4.01 Form of Amended and Restated Certificate of Incorporation of
the Registrant (incorporated by reference to Exhibit 3.01 of
Gradall Industries, Inc.'s Annual Report on Form 10-K for
the fiscal year ended December 31, 1997)....................
4.02 Bylaws of the Registrant (incorporated by reference to
Exhibit 3.02 of Gradall Industries, Inc.'s Annual Report on
Form 10-K for the fiscal year ended December 31, 1997)......
4.03 Specimen Certificate for the Common Stock, par value $.001
per share, of the Registrant (incorporated by reference to
Exhibit 4.01 of Gradall Industries, Inc.'s Registration
Statement on Form S-1 (No. 333-06777))......................
5.01 Opinion of Black, McCuskey, Souers & Arbaugh................
10.01 Amended and Restated Shareholders Agreement dated August 20,
1996 (incorporated by reference to Exhibit 10.03 of Gradall
Industries, Inc.'s Registration Statement on Form S-1
(No. 333-06777))............................................
10.02 Rights Agreement dated as of May 29, 1998 between the
Company and ChaseMellon Shareholder Services, L.L.C., as
Rights Agent (incorporated by reference to Exhibit 1 of
Gradall Industries, Inc.'s Registration Statement on Form
8-A dated June 4, 1998).....................................
23.01 Consent of Coopers & Lybrand L.L.P..........................
23.03 Consent of Black, McCuskey, Souers & Arbaugh (included in
their opinion filed
as Exhibit 5.01)............................................
24.01 Powers of Attorney of certain officers and directors of the
Registrant+.................................................
</TABLE>

- ---------------
* To be filed by amendment.

+ Filed previously.

<PAGE> 1
Exhibit 5.01

[BLACK, MCCUSKEY, SOUERS & ARBAUGH]

June 5, 1998

Gradall Industries, Inc.
406 Mill Avenue S.W.
New Philadelphia, Ohio 44663

Ladies and Gentlemen:

Reference is made to your Registration Statement on Form S-3 (File No.
33-55763) filed with the Securities and Exchange Commission with respect to the
proposed sale of up to 2,300,000 shares (the "Shares") of Common Stock, par
value $.001, of Gradall Industries, Inc. (the "Company") of which 1,500,000
shares are to be sold by MGLA Fund II (the "Selling Stockholder") and the
balance are to be sold by the Company.

We have examined the records relating to the incorporation of the
Company, including its Certificate of Incorporation and all amendments thereto,
the records of proceedings taken by its directors and shareholders to date and
the applicable provisions of the laws of the State of Delaware under which the
Company was incorporated.

Based upon the foregoing and upon the examination of such other matters
as we have deemed necessary in order to express the opinions hereafter set
forth, we are of the opinion that:

1. The Shares to be issued and sold by the Company pursuant to the
Registration Statement have been duly authorized and, when issued
and sold upon the terms described in said Registration Statement,
will be validly issued, fully paid and nonassessable.

2. The Shares to be sold by the Selling Stockholder pursuant to the
Registration Statement have been duly authorized, validly issued
and are fully paid and nonassessable.

We consent to the filing of this opinion as an exhibit to said
Registration Statement and to the reference to us in the prospectus included
therein under the caption "Legal Matters." In giving such consent, we do not
admit that we are within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933, as amended, or the rules and
regulations promulgated thereunder.

Very truly yours,

/s/ Black, McCuskey, Souers & Arbaugh

Black, McCuskey, Souers & Arbaugh

<PAGE> 1

EXHIBIT 23.01

[COOPERS & LYBRAND L.L.P.]

CONSENT OF INDEPENDENT ACCOUNTANTS

We consent to the inclusion and incorporation by reference in this
Registration Statement on Form S-3 of our report dated February 23, 1998, on our
audits of the consolidated financial statements of Gradall Industries, Inc. and
Subsidiaries. We also consent to the incorporation by reference in this
Registration Statement of our report dated February 23, 1998, on our audits of
the financial statement schedule of Gradall Industries Inc. for the years ended
December 31, 1997, 1996 and 1995, which report is incorporated by reference in
the Annual Report on Form 10-K. We also consent to the reference to our firm
under the captions "Experts" and "Selected Consolidated Financial Data."

/s/ COOPERS & LYBRAND L.L.P.

Cleveland, Ohio

June 2, 1998