UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended January 31, 1997
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 March 5, 1997, there were 43,637,106 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 $867,287,482.
PART I FINANCIAL INFORMATION
JLG INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
January 31, July 31,
1997 1996
(Unaudited)
ASSETS
Current assets
Cash $5,650 $30,438
Accounts receivable 73,522 54,342
Inventories:
Finished goods 23,065 12,925
Work in process 20,842 13,972
Raw materials 13,516 12,536
57,423 39,433
Future income tax benefits 4,024 3,908
Other current assets 2,128 741
Total Current Assets 142,747 128,862
Property, plant and equipment - net 39,017 34,094
Equipment held for rental - net 17,130 13,459
Other assets 7,714 6,213
$206,608 $182,628
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term borrowings, including
current portion of long-term debt $192 $243
Accounts payable 37,566 34,535
Accrued expenses 18,005 22,277
Total Current Liabilities 55,763 57,055
Long-term debt, less current portion 1,896 1,951
Other liabilities and deferred credits 11,033 10,414
Shareholders' equity
Capital stock:
Authorized shares: 100,000 at $.20 par
Outstanding shares: Fiscal 1997- 43,599
shares; Fiscal 1996- 43,382 shares 8,720 8,676
Additional paid-in capital 9,690 7,879
Equity adjustment from translation (2,341) (2,060)
Retained earnings 121,847 98,713
Total Shareholders' Equity 137,916 113,208
$206,608 $182,628
The accompanying notes are an integral part of these financial statements.
JLG INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
January 31, January 31,
1997 1996 1997 1996
Net sales $121,246 $87,558 $241,452 $174,259
Cost of sales 90,250 65,100 177,753 130,307
Gross profit 30,996 22,458 63,699 43,952
Selling, general and
administrative expenses 13,282 9,847 26,767 19,557
Income from operations 17,714 12,611 36,932 24,395
Other income (deductions):
Interest expense (52) (58) (93) (103)
Miscellaneous, net 159 168 573 399
Income before taxes 17,821 12,721 37,412 24,691
Income tax provision 6,594 4,453 13,842 8,642
Net income $11,227 $8,268 $23,570 $16,049
Net income per share $.26 $.19 $.54 $.37
Dividends per share $.005 $.0033 $.01 $.0066
Weighted average shares
outstanding 43,584 43,067 43,528 42,974
The accompanying notes are an integral part of these financial statements.
JLG INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Six Months Ended
January 31,
1997 1996
OPERATIONS:
Net income $23,570 $16,049
Adjustments to reconcile net income to cash
provided by (used for) operating activities:
Depreciation and amortization 4,473 2,883
Provision for self-insured losses 1,800 1,480
Deferred income taxes (260) 498
29,583 20,910
Changes in operating assets and liabilities (40,253) (26,911)
Changes in equipment held for rental (4,707) (4,708)
Changes in other assets and liabilities (2,025) (2,075)
Cash used for operations (17,402) (12,784)
INVESTMENTS: Purchases of property, plant
and equipment (8,418) (5,875)
FINANCING:
Net issuance of short-term debt 8,350
Repayment of long-term debt (106) (127)
Payment of dividends (436) (287)
Proceeds from exercise of stock options 1,854 972
Cash provided by financing 1,312 8,908
CURRENCY ADJUSTMENTS: Effect of exchange rate
changes on cash flows (280) (405)
CASH:
Net decrease (24,788) (10,156)
Beginning balance 30,438 12,973
Ending balance $5,650 $2,817
The accompanying notes are an integral part of these financial statements.
JLG INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
January 31, 1997
(unaudited)
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated 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 months and six months ended January 31, 1997 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, 1996.
NOTE B - NET INCOME PER SHARE
Net income per share is computed by dividing net income by the weighted average
number of common shares outstanding during the period. The incremental shares
that would have been outstanding upon the assumed exercise of dilutive stock
options were immaterial and therefore, not considered in the calculation.
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 January 31, 1997, 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 1997 is comprised of a self-insured retention
of $5 million and catastrophic coverage of $25 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 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 $9.3 million and $8.9 million were established at January 31, 1997 and July
31, 1996, 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, 1997 and July 31, 1996, 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 the world's leading manufacturer, distributor and international
marketer of mobile elevating work platforms used primarily in industrial,
commercial, institutional and construction applications. Sales are made
principally to independent equipment rental companies 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 revenues from sales of used equipment and from equipment rentals and
services provided by JLG's Equipment Services operations.
Results for the Second Quarters of Fiscal 1997 and 1996
Sales for the second quarter of fiscal 1997 reached $121.2 million, up 38%
from $87.6 million for fiscal 1996's second quarter, which included sales from
the Company's Material Handling Division that was divested in May 1996.
Excluding these sales for comparative purposes, the increase was 47%. The
growth in sales was generally across all product classes and geographic
markets. Sales from new and redesigned products introduced over the past two
years were a significant contributor to sales for the second quarter of 1997.
Gross profit, as a percent of sales, was 26% for both the second quarter of
fiscal 1997 and 1996. The effect of higher prices in the current year's
quarter was offset by a less profitable model mix and costs related to the
introduction of a large number of new products.
Selling, general and administrative expenses were $3.4 million higher in the
second fiscal quarter of 1997 compared to the same quarter last year, but were
11% of sales for both periods. The dollar increase included higher personnel
and related costs; increased freight, consulting, retirement and travel and
entertainment costs; and higher selling expenses associated with increased
international business. These increases were partially offset by elimination
of costs associated with the divested Material Handling Division and lower bad
debt and product development costs.
The effective income tax rates were 37% and 35% for the second quarter of
fiscal 1997 and 1996, respectively. The lower effective rate for the 1996
second quarter was due to projected tax benefits related to export sales.
Results for the First Six Months of Fiscal 1997 and 1996
Sales for the first six months of fiscal 1997 were $241.5 million, an increase
of 39% over the previous year's comparable period. The increase in sales
reflected stronger demand across all product classes and markets. Excluding
the divested Material Handling Division, the increase was 47%. Sales to
customers outside the United States were 30% and 28% for the first six months
of 1997 and 1996, respectively. Sales from new and redesigned products
introduced over the past two years were a significant contributor to sales for
the first six months of 1997.
Gross profit, as a percent of sales, improved to 26% for the first six months
of fiscal 1997 compared to 25% for the same period in fiscal 1996. The effect
of higher prices for the first six months of fiscal 1997 was partially offset
by a less profitable model mix and costs related to the introduction of a
large number of new products.
Selling, general and administrative expenses were $7.2 million higher in the
first six months of fiscal 1997 compared to same period last year, but were
11% of sales for both periods. The dollar increase was essentially due to the
same factors as discussed in the second quarter comparison.
The effective income tax rates were 37% and 35% for the first six months of
fiscal 1997 and 1996, respectively. The factor effecting the lower percentage
for the first six months of fiscal 1997 is the same as discussed in the second
quarter comparison.
Financial Condition
The Company continues to maintain a strong financial position funding capital
projects and working capital needs out of operating cash flow and cash
reserves, while remaining virtually debt-free. Working capital increased $15.2
million to $87.0 million at January 31, 1997 principally as a result of
increased sales growth, including higher inventory and receivable levels to
support increased international business.
At January 31, 1997, the Company had unused credit lines totaling $20 million
and cash balances of $5.7 million. The Company considers these resources,
coupled with cash expected to be generated by operations, adequate to meet its
planned funding needs, which includes approximately $50 million planned for
capital-related projects in fiscal 1997. The major items planned are
approximately $20 million to further expand the JLG Equipment Services fleet of
rental machines, $7 million to complete the expansion of the Company's new
scissor lift plant and $13 million for construction of the Company's boom lift
manufacturing capacity expansion to be completed by the end of calendar 1997.
The Company intends to finance about $3 million of the scissor project with
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 exposure with respect to product liability varies from current
estimates.
Outlook
This Outlook section and other parts of this Management's Discussion and
Analysis contain forward-looking information and involve risks and
uncertainties. Certain factors that could significantly impact expected
results are described in "Cautionary Statements Pursuant to the Securities
Litigation Reform Act" which is an exhibit to this report.
The outlook for the balance of fiscal year 1997 remains positive. Demand for
the Company's products continues to be strong and the level of unfilled orders
remains high. The domestic economy is expected to continue to grow; additional
funding in the form of equity capital is being made available to the rental
industry to purchase equipment; and new OSHA safety rules requiring fall
protection devices for workers continues to drive demand for Company products.
Demand for the Company's new products and from increased distribution globally
should contribute to additional sales growth. Rental fleet utilization also
remains strong throughout most of the United States except for some softening
in the Southeast. Used equipment available for resale continues to be scarce.
Additional manufacturing throughput, capacity and efficiency gains in the
Company's scissor lift production facility should improve its ability to
satisfy customer demand. Profit margins should continue to benefit from the
Company's ongoing emphasis on improving manufacturing efficiencies and reducing
costs. Although product mix is difficult to forecast, projected changes in
that mix are anticipated to partially offset the previously discussed gains.
Provided there is no unanticipated softening in demand, these factors bode well
for a strong second half and another record year of revenues and net income for
fiscal 1997.
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, 1997, and the related
condensed consolidated statements of income for the three-month and six-month
periods ended January 31, 1997 and 1996, and the condensed consolidated
statements of cash flows for the six-month periods ended January 31, 1997 and
1996. 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, 1996, 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 3, 1996, 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, 1996,
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
February 10, 1997
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,
1997.
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
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 10, 1997, 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, 1997.
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
February 10, 1997
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 regularly 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 110 independent equipment rental
companies 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 boom lift
equipment is constrained by manufacturing capacity limits. Long lead-times
required to fill customer orders adversely affect the Company's ability to
compete for new business and subcontracting costs incurred to increase
capacity affect profitability. The completion of the Company's boom lift
facility expansion by the end of calendar 1997 should alleviate this capacity
constraint. Given the cyclical nature of demand, this investment, or other
capital investments to acquire additional manufacturing facilities involves
significant risks. The Company is also addressing capacity constraints by
outsourcing certain production processes and relocating certain manufacturing
operations to leased facilities.
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. Product
line expansion by existing competitors and potential entry by new competitors
also may affect the Company's market position. 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 30 percent of product sales in current years. Due to the large
number of new and redesigned products introduced by the Company during fiscal
1996, this percent is anticipated to increase. 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.
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