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 January 31, 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 February 23, 1996, there were 14,383,098 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 $474,642,234.
PART I FINANCIAL INFORMATION
JLG INDUSTRIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands)
January 31, July 31,
1996 1995
(Unaudited)
ASSETS
Current assets
Cash $2,817 $12,973
Accounts receivable 49,303 33,466
Inventories:
Finished goods 13,136 7,630
Work in process 15,757 13,357
Raw materials 14,322 12,459
43,215 33,446
Future income tax benefits 4,117 4,219
Other current assets 1,583 464
Total Current Assets 101,035 84,568
Property, plant and equipment - net 28,322 24,785
Equipment held for rental - net 9,197 5,052
Other assets 5,296 5,303
$143,850 $119,708
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term borrowings, including
current portion of long-term debt $8,591 $243
Accounts payable 22,837 20,028
Accrued expenses 16,198 18,893
Total Current Liabilities 47,626 39,164
Long-term debt, less current portion 2,135 2,260
Other liabilities and deferred credits 9,330 9,854
Shareholders' equity
Capital stock:
Authorized shares: 35,000 at $.20 par
Outstanding shares: Fiscal 1996 - 14,383
shares; Fiscal 1995 - 14,275 shares 2,877 2,855
Additional paid-in capital 11,071 10,121
Equity adjustment from translation (2,204) (1,799)
Retained earnings 73,015 57,253
Total Shareholders' Equity 84,759 68,430
$143,850 $119,708
The accompanying notes are an integral part of these financial statements.
JLG INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
January 31, January 31,
1996 1995 1996 1995
Net sales $87,558 $52,175 $174,259 $105,899
Cost of sales 65,100 38,726 130,307 79,466
Gross profit 22,458 13,449 43,952 26,433
Selling, general and
administrative expenses 9,847 7,717 19,557 14,505
Income from operations 12,611 5,732 24,395 11,928
Other deductions:
Interest expense (58) (125) (103) (237)
Miscellaneous, net 168 137 399 26
Income before taxes 12,721 5,744 24,691 11,717
Income tax provision 4,453 1,992 8,642 4,102
Net income $8,268 $3,752 $16,049 $7,615
Net income per share $.58 $.27 $1.12 $.54
Dividends per share $.01 $.0063 $.02 $.0125
Weighted average shares
outstanding 14,356 14,149 14,325 14,088
The accompanying notes are an integral part of these financial statements.
JLG INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Six Months Ended
January 31,
1996 1995
OPERATIONS:
Net income $16,049 $7,615
Adjustments to reconcile net income to cash
provided by (used for) operating activities:
Depreciation and amortization 2,883 1,567
Provision for self-insured losses 1,480 1,380
Deferred income taxes 498 91
20,910 10,653
Changes in operating assets and liabilities (26,911) (9,577)
Changes in other assets and liabilities (6,783) (2,266)
Cash used for operations (12,784) (1,190)
INVESTMENTS: Purchases of property, plant
and equipment (5,875) (3,183)
FINANCING:
Net issuance of short-term debt 8,350
Repayment of long-term debt (127) (701)
Payment of dividends (287) (176)
Proceeds from exercise of stock options 972 435
Capital stock contributed to retirement plan 1,159
Cash provided by financing 8,908 717
CURRENCY ADJUSTMENTS: Effect of exchange rate
changes on cash flows (405) (168)
CASH:
Net decrease (10,156) (3,824)
Beginning balance 12,973 8,088
$2,817 $4,264
The accompanying notes are an integral part of these financial statements.
JLG INDUSTRIES, INC.
NOTES TO CONSOLIDATED CONDENSED
FINANCIAL STATEMENTS
January 31, 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 six months ended January 31, 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 - 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 January 31, 1996, must
necessarily be based on management's estimate of expected fiscal year-end
inventory levels and costs.
NOTE C - 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
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 continually, 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 $8.0 million and $8.4 million were established at January 31, 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 January 31, 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.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The Company is a leading manufacturer, distributor and international marketer
of mobile elevating work platforms and truck-mounted material handling
equipment 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.
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 additional factors that may affect the Company's financial performance
are described in Cautionary Statements Pursuant to the Securities Litigation
Reform Act which is an exhibit to this report.
Results for the Second Quarters of Fiscal 1996 and 1995
Sales for the second quarter of fiscal 1996 were $87.6 million, an increase of
$35.4 million, or 68% over the comparable prior year period. The growth in
sales was generally across all product classes and markets. New and redesigned
products introduced over the preceding two-year period contributed nearly 20%
of fiscal 1996 second quarter sales.
Gross profit, as a percent of sales, was 26% for the second fiscal quarters of
both 1996 and 1995. Higher material costs as a result of outsourcing
additional production due to capacity limitations, less profitable product mix
and higher product liability costs were largely offset by the impact of
spreading fixed costs over a larger sales volume.
Selling, general and administrative expenses were $9.8 million, or 11% of
sales, for the second fiscal quarter of 1996 compared to $7.7 million, or 15%
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 research and development costs.
The effective income tax rates for the second quarters of both fiscal 1996 and
1995 were 35%. The effective rate for the 1996 second quarter reflects an
increased benefit related to export sales. The rate for the 1995 quarter
includes a decrease in estimated taxes payable.
Results for the First Six Months of Fiscal 1996 and 1995
Sales for the first six months of fiscal 1996 were $174.3 million, an increase
of $68.4 million or 65% from the previous year's comparable period. The
growth in revenues included increased demand across virtually all product
classes and markets, except for the Company's material handling products which
experienced some decline in demand.
The gross profit percentage for both six month periods was 25%. In comparing
the 1996's gross profit percentage to the prior year, the factors were
essentially the same as discussed in the second quarter comparison.
Selling, general and administrative expenses were $19.6 million, or 11% of
sales, for the first six months of fiscal 1996 compared to $14.5 million, or
14% of net sales for the 1995 comparable period. The dollar increase was
essentially due to the same factors as discussed in the second quarter
comparison.
The effective tax rate was 35% for both six month periods. The factors
effecting these percentage comparisons are the same as discussed in the second
quarter comparison.
Financial Condition
The Company continues to maintain a strong financial position, not withstanding
the use of cash and increased borrowings during the second quarter to purchase
a new scissor lift manufacturing facility in Bedford, Pennsylvania, to satisfy
seasonal cash needs and to increase working capital to support the sales
growth. Working capital was $53.4 million at January 31, 1996, up from $45.4
million at July 31, 1995. Total debt as a percent of total capital was 11% at
January 31, 1996 compared to 4% at July 31, 1995.
At January 31, 1996, the Company had unused credit lines totaling $1.7 million
and cash balances of $2.8 million. In February 1996, the Company increased its
credit line by $10 million to provide for cash needs as discussed above. The
Company considers these resources, coupled with cash expected to be generated
by operations, adequate to meet its planned funding needs. In addition, the
Company will expand its scissor lift manufacturing facility in 1996.
Acquisition, relocation and refitting costs are estimated to be $9 million
payable over the next nine months. The Company intends to finance this project
with borrowed capital. Furthermore, the Company expects to generate $10
million from the planned divestiture of its Materials Handling Division prior
to the end of its 1996 fiscal year.
The Company's exposure to product liability claims is discussed in Note C --
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 the Company's fiscal 1996 year is very positive.
Demand for the Company's elevating work platforms continues very strong and the
level of unfilled orders remains high. However, demand for the Company's
material handling products, which represent less than 10% of total sales, has
declined coinciding with reduced residential construction activity and
announcement of the Company's planned divestiture of this product group. The
timing and terms of the proposed divestiture are uncertain, but management does
not expect this transaction to have a material effect on the Company's results
of operations in fiscal 1996. Rental fleet utilization for elevating work
platforms remains strong throughout the United States and demand for used
equipment exceeds its supply. Additionally, new products to be introduced by
the Company during the third fiscal quarter should add incremental sales and
earnings growth. Limitations on adding manufacturing capacity to meet demand,
particularly for scissor lifts, will be an offsetting factor.
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 January 31, 1996, and the related
condensed consolidated statements of income for the three-month and six-month
periods ended January 31, 1996 and 1995, and the consolidated statements of
cash flows for the six-month periods ended January 31, 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.
Baltimore, Maryland Ernst & Young
February 12, 1996
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 January 31,
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.
Charles H. Diller, Jr.
Executive Vice President and
Chief Financial Officer
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 February 12, 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
January 31, 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.
Baltimore, Maryland Ernst & Young LLP
February 12, 1996
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 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 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.
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 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 and President, could adversely affect the Company's business and
prospects.
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