FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended April 30, 1996
Commission file number 0-8454
JLG Industries, Inc.
(Exact name of registrant as specified in its charter)
Pennsylvania 25-1199382
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1 JLG Drive, McConnellsburg, PA 17233
(Address of Principal Executive Offices) (Zip Code)
(7l7) 485-5161
Registrant's telephone number, including area code
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No _________
At May 31, 1996, there were 14,451,326 shares of capital stock of the
Registrant outstanding, and the aggregate market value of the voting stock held
by nonaffiliates of the Registrant at that date was $1,143,461,170.
<PAGE>
PART I FINANCIAL INFORMATION
<PAGE>
JLG INDUSTRIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
April 30, July 31,
1996 1995
(Unaudited)
ASSETS
Current assets
Cash $13,077 $12,973
Accounts receivable 53,154 33,466
Inventories:
Finished goods 14,088 7,630
Work in process 18,017 13,357
Raw materials 14,557 12,459
46,662 33,446
Future income tax benefits 4,475 4,219
Other current assets 1,107 464
Total Current Assets 118,475 84,568
Property, plant and equipment - net 28,500 24,785
Equipment held for rental - net 10,335 5,052
Other assets 5,435 5,303
$162,745 $119,708
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term borrowings, including
current portion of long-term debt $242 $243
Accounts payable 29,770 20,028
Accrued expenses 22,403 18,893
Total Current Liabilities 52,415 39,164
Long-term debt, less current portion 2,004 2,260
Other liabilities and deferred credits 9,925 9,854
Shareholders' equity
Capital stock:
Authorized shares: 50,967 at $.20 par
Outstanding shares: Fiscal 1996 - 43,245
shares; Fiscal 1995 - 42,825 shares 8,649 8,565
Additional paid-in capital 6,144 4,411
Equity adjustment from translation (1,724) (1,799)
Retained earnings 85,332 57,253
Total Shareholders' Equity 98,401 68,430
$162,745 $119,708
The accompanying notes are an integral part of these financial statements.
<PAGE>
JLG INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands, except per share data)
(Unaudited)
Three Months Ended Nine Months Ended
April 30, April 30,
1996 1995 1996 1995
Net sales $113,217 $75,809 $287,476 $181,708
Cost of sales 81,921 57,727 212,228 137,193
Gross profit 31,296 18,082 75,248 44,515
Selling, general and
administrative expenses 12,145 8,745 31,702 23,249
Income from operations 19,151 9,337 43,546 21,266
Other income (deductions):
Interest expense (145) (97) (248) (333)
Miscellaneous, net 164 217 563 241
Income before taxes 19,170 9,457 43,861 21,174
Income tax provision 6,709 3,368 15,351 7,470
Net income $12,461 $6,089 $28,510 $13,704
Net income per common and
common equivalent share $.28 $.14 $.65 $.32
Dividends per share $.003 $.0025 $.01 $.007
Weighted average shares
outstanding 44,568 42,722 44,201 42,417
The accompanying notes are an integral part of these financial statements.
<PAGE>
JLG INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Nine Months Ended
April 30,
1996 1995
OPERATIONS:
Net income $28,510 $13,704
Adjustments to reconcile net income to cash
provided by (used for) operating activities:
Depreciation and amortization 4,633 2,645
Provision for self-insured losses 2,280 1,900
Deferred income taxes 50 (51)
35,473 18,198
Changes in operating assets and liabilities (20,645) (8,080)
Changes in other assets and liabilities (8,470) (2,937)
Cash provided by operations 6,358 7,181
INVESTMENTS: Purchases of property, plant
and equipment (7,457) (3,619)
FINANCING:
Repayment of long-term debt (257) (5,022)
Payment of dividends (431) (282)
Proceeds from exercise of stock options 1,817 815
Capital stock contributed to retirement plan 1,159
Cash provided by (used for)financing 1,129 (3,330)
CURRENCY ADJUSTMENTS: Effect of exchange rate
changes on cash flows 74 (92)
CASH:
Net increase 104 140
Beginning balance 12,973 8,088
Ending balance $13,077 $8,228
The accompanying notes are an integral part of these financial statements.
<PAGE>
JLG INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
April 30, 1996
(unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all information
and notes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included.
Interim results for the three and nine month periods ended April 30, 1996 are
not necessarily indicative of the results that may be expected for the fiscal
year as a whole. For further information, refer to consolidated financial
statements and notes thereto included in the Company's annual report on Form
10-K for the fiscal year ended July 31, 1995.
NOTE B - NET INCOME PER SHARE
Net income per common and common equivalent share is computed by dividing net
income by the weighted average number of common shares outstanding during the
period plus the incremental shares that would have been outstanding upon the
assumed exercise of dilutive stock options. In 1995, the incremental dilutive
stock option shares that would have been assumed exercised were immaterial, and
therefore, not considered in the calculation of net income per common and
common equivalent share.
NOTE C - INVENTORIES AND COST OF SALES
A precise inventory valuation under the LIFO (last-in, first-out) method can
only be made at the end of each fiscal year; therefore, interim LIFO inventory
valuation determinations, including the determination at April 30, 1996, must
necessarily be based on management's estimate of expected fiscal year-end
inventory levels and costs.
NOTE D - COMMITMENTS AND CONTINGENCIES
The Company is a party to personal injury and property damage litigation
arising out of incidents involving the use of its products. The Company's
insurance program for fiscal year 1996 is comprised of a self-insured retention
of $5 million and catastrophic coverage of $20 million in excess of the
retention. The Company contracts with an independent insurance firm to provide
<PAGE>
claims handling and adjustment services. The Company's estimates with respect
to claims are based on internal evaluations of the merits of individual claims
and the reserves assigned by the Company's independent insurance carrier. The
methods of making such estimates and establishing the resulting accrued
liability are reviewed frequently, and any adjustments resulting therefrom are
reflected in current earnings. Claims are paid over varying periods, which
generally do not exceed five years. Accrued liabilities for future claims are
not discounted.
With respect to all claims of which the Company is aware, accrued liabilities
of $8.5 million and $8.4 million were established at April 30, 1996 and July
31, 1995, respectively. While the Company's ultimate liability may exceed or
be less than the amounts accrued, the Company believes that it is unlikely that
it would experience losses that are materially in excess of such reserve
amounts. As of April 30, 1996 and July 31, 1995, there were no insurance
recoverables or offset implications and there were no claims by the Company
being contested by insurers.
NOTE E - LONG-TERM DEBT
On February 2, 1996, the Company modified its credit agreement with its banks
to increase the borrowing limit to $20 million from $10 million.
NOTE F - SUBSEQUENT EVENT
On May 23, 1996, the Company declared a three-for-one split of the Company's
outstanding common stock. The three-for-one split will be effected by a 200%
stock dividend to be distributed on July 1, 1996 to shareholders of record at
the close of business on June 14, 1996. Accordingly, the number of shares
outstanding and authorized, as well as the per share amounts in the
accompanying financial statements have been restated to give effect to the
stock split.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company is the leading manufacturer, distributor and international marketer
of mobile elevating work platforms used primarily in construction and
industrial applications. Sales are made principally to independent equipment
distributors that rent the Company's products and provide service support to
equipment users. Equipment purchases by end-users, either directly from the
Company or through distributors, comprise a significant, but smaller portion of
sales. The Company also generates notable revenue from sales of equipment and
from equipment rentals and services provided by the Company's Equipment
Services Division.
Demand for the Company's products tends to be cyclical, responding historically
to varying levels of construction and industrial activity, principally in the
United States and, to a lesser extent, in other industrialized nations. During
recessionary conditions, demand for rental equipment typically declines more
sharply than demand for equipment purchased by end-users. Other factors
affecting demand include the availability and cost of financing for equipment
purchases and the market availability of used equipment.
Due to the cyclical demand, the Company's financial performance and cash flows
tend to fluctuate. However, the Company continually strives to reduce
operating costs and increase manufacturing efficiencies. The Company also
considers the development and introduction of new and improved products and
expansion into underserved geographic markets to be important factors in
maintaining and strengthening its market position and reducing cyclical
fluctuations in its financial performance and cash flows.
Certain factors that may affect the Company's future financial performance,
including the forecasted performance described below and under the caption
Outlook, are described in Cautionary Statements Pursuant to the Securities
Litigation Reform Act which is an exhibit to this report.
Results for the Third Quarters of Fiscal 1996 and 1995
Sales for the third quarter of fiscal 1996 were $113.2 million, an increase of
$37.4 million, or 49% over the comparable prior year period. The growth in
sales was generally across all product classes and geographic markets, except
for the Company's material handling products which experienced decline in
demand. Sales to customers outside the United States were 21% and 19% of net
sales for the third quarter of 1996 and 1995, respectively.
Gross profit, as a percent of sales, was 28% for the third fiscal quarter of
1996 and 24% for the comparable period of 1995. The impact of spreading fixed
costs over a larger sales volume, higher selling prices and a more profitable
product mix were the primary contributors to the improvement. The current year
quarter includes higher material costs as a result of outsourcing certain
production processes to meet increased demand.
<PAGE>
Selling, general and administrative expenses were $12.1 million, or 11% of
sales for the third fiscal quarter of 1996 compared to $8.7 million, or 12% of
net sales for the 1995 comparable period. The dollar increase included
increased personnel and related costs, as well as higher advertising,
consulting, depreciation and product development costs.
The effective income tax rates for the third quarter of fiscal 1996 and 1995
were 35% and 36%, respectively. The effective rate for the 1996 third quarter
reflects a lower tax rate related to export sales.
Results for the First Nine Months of Fiscal 1996 and 1995
Sales for the first nine months of fiscal 1996 were $287.5 million, an
increase of $105.8 million or 58% from the previous year's comparable period.
The growth in revenues included increased demand across virtually all product
classes and geographic markets, except for the Company's material handling
products which experienced decline in demand. Sales to customers outside the
United States were 25% and 17% of net sales for the nine month period of 1996
and 1995, respectively. New and redesigned products introduced over the past
two-year period represented 23% of total sales for the 1996 nine-month period.
The gross profit percentage for the first nine months of fiscal 1996 was 26%
compared to 25% for the comparable period of fiscal 1995. In comparing the
1996 gross profit percentage to the prior year, the factors were essentially
the same as discussed in the third quarter comparison.
Selling, general and administrative expenses were $31.7 million, or 11% of
sales, for the first nine months of fiscal 1996 compared to $23.2 million, or
13% of net sales for the 1995 comparable period. The dollar increase was
essentially due to the same factors as discussed in the third quarter
comparison.
The effective tax rate was 35% for both nine month periods. The effective rate
for the 1996 period reflects a lower tax rate related to export sales. The
rate for the 1995 period includes a decrease in estimated taxes payable.
Financial Condition
The Company continues to maintain a strong financial position, not withstanding
the use of cash to increase working capital to support the sales growth.
Working capital was $66.1 million at April 30, 1996, up from $45.4 million at
July 31, 1995.
At April 30, 1996, the Company had unused credit lines totaling $20 million and
cash balances of $13.1 million. The Company considers these resources, coupled
with cash expected to be generated by operations, adequate to meet its planned
funding needs through fiscal 1997. The Company intends to expand its scissor
lift manufacturing facilities to be fully operational by the end of calendar
1996. Acquisition, relocation and refitting costs are estimated to be $15
million; $6.3 million of which will be incurred in fiscal 1996, and $8.7
million in fiscal 1997. Additional expenditures totaling approximately $10
<PAGE>
million are planned in fiscal 1997, including expansion of the McConnellsburg
facility, a new engineering and administrative facility, additional
manufacturing equipment and computer hardware and software. The Company
intends to finance these projects from a combination of cash generated from
operations, the $10.1 million net cash proceeds from the sale of its Material
Handling Division, and borrowed capital.
The Company's exposure to product liability claims is discussed in Note D --
Commitments and Contingencies. Future results of operations, financial
condition and liquidity may be affected to the extent that the Company's
ultimate liability with respect to product liability varies from current
estimates.
Outlook
The outlook for the balance of fiscal 1996 and into fiscal 1997 is very
positive. Demand for the Company's products continues strong and the level of
unfilled orders remains high. Rental fleet utilization also remains strong
throughout the United States and used equipment available for resale is scarce.
The performance for the fourth quarter of fiscal 1996 is expected to exceed the
third quarter in terms of both sales and net income, despite divestiture of the
Company's Material Handling Division completed in May, 1996. Results of the
Division for the first nine months of fiscal 1996 represented 6% of
consolidated sales and 2% of operating income.
Looking beyond fiscal 1996, growing demand for the Company's new products and
from international customers should contribute to additional sales growth.
Additional manufacturing throughput, capacity and efficiency gains in both the
McConnellsburg plant and the new Bedford facility should improve the Company's
ability to satisfy customer demand and should improve margins. Margins should
also benefit from reduced selling, general and administrative costs associated
with the divestiture of the Material Handling Division, from new and redesigned
products and from leveraging fixed manufacturing costs over a higher sales
volume.
<PAGE>
Ernst & Young LLP
Independent Accountants' Review Report
The Board of Directors
JLG Industries, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of JLG
Industries, Inc. and subsidiaries as of April 30, 1996, and the related
condensed consolidated statements of income for the three-month and nine-month
periods ended April 30, 1996 and 1995, and the consolidated statements of cash
flows for the nine-month periods ended April 30, 1996 and 1995. These
financial statements are the responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted
in accordance with generally accepted auditing standards, which will be
performed for the full year with the objective of expressing an opinion
regarding the financial statements taken as a whole. Accordingly, we do not
express such an opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial statements
referred to above for them to be in conformity with generally accepted
accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet of JLG Industries, Inc. as of July
31, 1995, and the related consolidated statements of income, shareholders'
equity and cash flows for the year then ended, not presented herein, and in our
report dated September 7, 1995, we expressed an unqualified opinion on those
consolidated financial statements. In our opinion, the information set forth
in the accompanying condensed consolidated balance sheet as of July 31, 1995,
is fairly stated, in all material respects, in relation to the consolidated
balance sheet from which it has been derived.
Ernst & Young LLP
Baltimore, Maryland
May 13, 1996, except for Note F
as to which the date is May 23, 1996
<PAGE>
PART II OTHER INFORMATION
ITEMS 1 - 5
None/not applicable.
ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included herein:
15 Letter re: Unaudited Interim Financial Information
99 Cautionary Statements Pursuant to the Securities Litigation
Reform Act
(b) The Company was not required to file Form 8-K pursuant to
requirements of such form for any of the three months ended April 30,
1996.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized who is also signing in his capacity as
principal financial officer.
JLG INDUSTRIES, INC.
(Registrant)
/s/ Charles H. Diller, Jr.
Executive Vice President and
Chief Financial Officer
<PAGE>
EXHIBIT 15
The Board of Directors
JLG Industries, Inc.
We are aware of the incorporation by reference in the registration statements
(Form S-8 No. 33-60366, Form S-8 No. 2-87955 and Form S-8 No. 33-75746) of JLG
Industries, Inc. of our report dated May 13, 1996, except for Note F as to
which the date is May 23, 1996, relating to the unaudited condensed
consolidated interim financial statements of JLG Industries, Inc. which are
included in its Form 10-Q for the quarter ended April 30, 1996.
Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not a part
of the registration statement prepared or certified by accountants within the
meaning of Section 7 or 11 of the Securities Act of 1933.
Ernst & Young LLP
Baltimore, Maryland
May 13, 1996
<PAGE>
EXHIBIT 99
Cautionary Statements Pursuant to the Securities
Litigation Reform Act of 1995
The Company wishes to inform its investors of the following important factors
that in some cases have affected, and in the future could affect, the
Company's results of operations and that could cause such future results of
operations to differ materially from those expressed in any forward looking
statements made by or on behalf of the Company. Disclosure of these factors
is intended to permit the Company to take advantage of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. Many of
these factors have been discussed in prior SEC filings by the Company. Though
the Company has attempted to list comprehensively these important cautionary
factors, the Company wishes to caution investors that other factors may in the
future prove to be important in affecting the Company's results of operations.
Cyclical Demand -- Demand for new equipment manufactured by the Company tends
to be cyclical, responding historically to varying levels of construction and
industrial activity, principally in the United States and, to a lesser extent,
in other industrialized nations. Other factors affecting demand include the
availability and cost of financing for equipment purchases and the market
availability of used equipment. Company management continuously monitors
these and other factors that affect demand for the Company's equipment.
However, predicting levels of demand beyond a short term is necessarily
imprecise and demand may at times change dramatically.
Consolidating Customers Base; Rental Companies -- The principal customers for
the Company's new equipment are over 130 independent equipment distributors
that rent the Company's products and provide service support to equipment
users. In recent years, growth in sales to equipment rental companies has
outpaced growth in direct sales to end users, resulting in equipment rental
companies comprising a larger share of total sales. At the same time there
has been substantial consolidation in ownership among rental companies,
resulting in a more limited number of major customers comprising a substantial
portion of total sales. Unanticipated purchasing decisions by any of these
major customers could materially affect overall demand for the Company's
products and the Company's financial performance. More generally, during
recessionary conditions, demand for equipment by equipment rental companies
typically declines more sharply than demand for equipment purchased by end-
users.
Manufacturing Capacity -- Despite continuous improvement programs that have
achieved substantial improvements in manufacturing efficiency and throughput,
the Company's ability to meet additional growth in demand for new equipment is
constrained by manufacturing capacity limits. Long lead-times required to
fill customer orders is a negative factor in the Company's ability to compete
for new business and subcontracting costs incurred to increase capacity affect
<PAGE>
profitability. The Company recently acquired an 109,000 square foot
manufacturing facility which, when fully operational by year-end 1996, should
alleviate capacity constraint for scissor lifts. However, capacity to
manufacture boom lifts, which comprise a larger percentage of sales, is
becoming increasingly limited. Given the cyclical nature of demand, this
investment, or other capital investments to acquire additional lift
manufacturing facilities involves significant risks. The Company is
addressing capacity constraints by outsourcing certain production processes
and relocating certain manufacturing operations to leased facilities.
Ultimately, to service increasing international sales, the Company is
considering establishing a manufacturing presence overseas.
Product Liability -- Use of the Company's products involves risks of personal
injury and property damage and liability exposure for the Company. The Company
insures against this liability through a combination of a self-insurance
retention and catastrophic coverage in excess of the retention. The Company
monitors all incidents of which it becomes aware involving the use of its
products that result in personal injury or property damage and establishes
accrued liability reserves on its financial statements based on liability
estimates with respect to claims arising from such incidents. Future or
unreported incidents involving personal injury or property damage or
unanticipated variances between actual liabilities for known incidents and
Company estimates may adversely affect the Company's financial performance.
Availability of Product Components -- The Company obtains raw materials and
certain manufactured components from third-party suppliers. To reduce
materials costs and inventories, the Company relies on supplier partnership
arrangements with preferred vendors as a sole source for just-in-time
delivery of many raw materials and manufactured components. Because the
Company maintains limited raw materials inventories, even brief unanticipated
delays in delivery by suppliers, including due to labor disputes, impaired
financial condition of suppliers, weather emergencies or other natural
disasters, may adversely affect the Company's ability to satisfy its customers
on a timely basis and thereby affect the Company's financial performance.
Foreign Sales -- A growing component of the Company's business has been export
sales to Europe, Latin America and Asia. Maintenance and continued growth of
this segment of the Company's business may be affected by changes in trade,
monetary and fiscal policies, laws and regulations of the United States and
other trading nations and by foreign currency exchange rate fluctuations and
the ability or inability of the Company to hedge against exchange rate risks.
Competition; Continued Innovation -- The Company faces substantial competition
in the market for its products and some of the Company's competitors are, or
in the future may be, owned by larger enterprises that may have greater
financial resources and offer wider product lines than the Company.
Throughout its history, the Company has devoted substantial resources to
product development and has generally succeeded in being a market leader in
introducing new high-reach products or incorporating new features and
functions into existing products. New products introduced within the prior
<PAGE>
two years account for typically between 20 and 25 percent of product sales in
current years. The Company also holds certain patents which it believes are
valuable. Successful product innovation by competitors that reach the market
prior to comparable innovation by the Company or that are amenable to patent
protection may adversely affect the Company's financial performance.
Unanticipated Litigation -- The Company occasionally has faced unanticipated
intellectual property and shareholder litigation which has involved
significant unbudgeted expenditures. The costs and other effects of any
future, unanticipated legal or administrative proceedings may be significant.
Dependence Upon Key Personnel -- The Company believes that it has developed a
strong management team which intends to continue the Company's growth and
profitability. However, the loss or unavailability of certain key management
personnel, principally L. David Black, the Company's Chairman of the Board,
President and Chief Executive Officer, could adversely affect the Company's
business and prospects.
<PAGE>
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