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 April 30, 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 May 22, 1997, there were 43,706,232 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 $620,186,273.
PART I FINANCIAL INFORMATION
JLG INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
April 30, July 31,
1997 1996
(Unaudited)
ASSETS
Current assets
Cash $10,274 $30,438
Accounts receivable 74,291 54,342
Inventories:
Finished goods 31,480 12,925
Work in process 15,945 13,972
Raw materials 13,093 12,536
60,518 39,433
Future income tax benefits 3,997 3,908
Other current assets 3,699 741
Total Current Assets 152,779 128,862
Property, plant and equipment - net 45,034 34,094
Equipment held for rental - net 22,050 13,459
Other assets 8,655 6,213
$228,518 $182,628
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $174 $243
Accounts payable 35,586 34,535
Accrued expenses 27,273 22,277
Total Current Liabilities 63,033 57,055
Long-term debt, less current portion 1,861 1,951
Other liabilities and deferred credits 11,716 10,414
Shareholders' equity
Capital stock:
Authorized shares: 100,000 at $.20 par
Outstanding shares: Fiscal 1997- 43,706
shares; Fiscal 1996- 43,382 shares 8,741 8,676
Additional paid-in capital 10,775 7,879
Equity adjustment from translation (2,158) (2,060)
Retained earnings 134,550 98,713
Total Shareholders' Equity 151,908 113,208
$228,518 $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 Nine Months Ended
April 30, April 30,
1997 1996 1997 1996
Net sales $143,642 $113,217 $385,093 $287,476
Cost of sales 107,951 81,921 285,703 212,228
Gross profit 35,691 31,296 99,390 75,248
Selling, general and
administrative expenses 14,613 12,145 41,380 31,702
Income from operations 21,078 19,151 58,010 43,546
Other income (deductions):
Interest expense (183) (145) (276) (248)
Miscellaneous, net (385) 164 187 563
Income before taxes 20,510 19,170 57,921 43,861
Income tax provision 7,589 6,709 21,431 15,351
Net income $12,921 $12,461 $36,490 $28,510
Net income per share $.30 $.28 $.84 $.65
Dividends per share $.005 $.0033 $.015 $.01
Weighted average shares
outstanding 43,646 44,568 43,567 44,201
The accompanying notes are an integral part of these financial statements.
JLG INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Nine Months Ended
April 30,
1997 1996
OPERATIONS:
Net income $36,490 $28,510
Adjustments to reconcile net income to cash
provided by (used for) operating activities:
Depreciation and amortization 6,591 4,633
Provision for self-insured losses 2,100 2,280
Deferred income taxes 142 50
45,323 35,473
Changes in operating assets and liabilities (38,145) (20,645)
Changes in other assets and liabilities (3,224) (2,229)
Changes in equipment held for rental (9,871) (6,241)
Cash (used for) provided by operations (5,917) 6,358
INVESTMENTS: Purchases of property, plant
and equipment (16,297) (7,457)
FINANCING:
Repayment of long-term debt (159) (257)
Payment of dividends (654) (431)
Proceeds from exercise of stock options 2,960 1,817
Cash provided by financing 2,147 1,129
CURRENCY ADJUSTMENTS: Effect of exchange rate
changes on cash flows (97) 74
CASH:
Net (decrease) increase (20,164) 104
Beginning balance 30,438 12,973
Ending balance $10,274 $13,077
The accompanying notes are an integral part of these financial statements.
JLG INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
April 30, 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 nine months ended April 30, 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 and, for fiscal 1996,
dilutive stock options outstanding for the period.
In February 1997, the Financial Accounting Standards Board issued Statement No.
128, Earnings per Share, which is required to be adopted for periods ending
after December 31, 1997. Earlier application is not permitted. At that time,
the Company will be required to change the method currently used to compute
earnings per share and to restate all prior periods. Under the new
requirements for calculating primary earnings per share, the dilutive effect of
options will be excluded. The impact is expected to result in an increase in
earnings per share for the three and nine months ended April 30, 1996 of $.01
per share. No change is anticipated for the fiscal 1997 comparative amounts.
The impact of Statement 128 on the calculation of fully diluted earnings per
share is not expected to be material.
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, 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 April 30, 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 April 30, 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 its JLG Equipment Services operations.
Results for the Third Quarters of Fiscal 1997 and 1996
Sales for the third quarter of fiscal 1997 were a record high of $143.6
million, an increase of 27% over fiscal 1996's third quarter sales of $113.2
million. The increase was 35% when sales from the Company's divested Material
Handling Division are excluded from fiscal 1996 sales for comparative
purposes. The growth in sales was generally across all product classes and
geographic markets. Sales to customers outside the United States were 27% and
21% of total sales for the third quarter of fiscal 1997 and 1996,
respectively. Sales from new and redesigned products introduced over the past
two years represented 51% of sales for the third quarter of fiscal 1997.
Gross profit, as a percent of sales, was 25% for the third quarter of fiscal
1997 compared to 28% for the same period of fiscal 1996. The decrease in
gross profit percent between the comparative periods was primarily due to a
shift in product mix to smaller, less profitable models and the effect of
increased sales discounts related to higher volume purchases and increased
participation in Company incentive programs.
Selling, general and administrative expenses were $2.5 million higher in the
third quarter of fiscal 1997 compared to the same quarter last year, but were
.5% lower as a percent of sales. The dollar increase included higher
personnel and related costs; increased 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 third quarter of
fiscal 1997 and 1996, respectively. The lower effective rate for the fiscal
1996 third quarter was due to projected tax benefits related to export sales.
Results for the First Nine Months of Fiscal 1997 and 1996
Sales for the first nine months of fiscal 1997 were a record $385.1 million,
an increase of 34% over the previous year's comparable period. The increase
in sales reflected generally stronger demand across all product classes and
markets. Excluding the divested Material Handling Division, the increase was
42%. Sales to customers outside the United States were 29% and 25% of total
sales for the first nine months of fiscal 1997 and 1996, respectively. Sales
from new and redesigned products introduced over the past two years
represented 46% of sales for the nine month period of fiscal 1997.
Gross profit, as a percent of sales, was 26% for both the first nine months of
fiscal 1997 and fiscal 1996. The effect of higher prices for the first nine
months of fiscal 1997 was partially offset due to a shift in product mix to
smaller, less profitable models; the effects of increased sales discounts
related to higher volume purchases and increased participation in Company
incentive programs; and costs related to the introduction of a large number of
new products.
Selling, general and administrative expenses were $9.7 million higher in the
first nine 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 third quarter comparison.
The effective income tax rates were 37% and 35% for the first nine months of
fiscal 1997 and 1996, respectively. The factor effecting the lower percentage
for the first nine months of fiscal 1997 is the same as discussed in the third
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 $17.9
million to $89.7 million at April 30, 1997 principally as a result of increased
sales growth, including higher inventory and receivable levels to support
increased international business.
At April 30, 1997, the Company had unused credit lines totaling $26.2 million
and cash balances of $10.3 million. The Company also intends to finance $3
million of capital projects with borrowed funds. The Company considers these
resources, coupled with cash expected to be generated by operations, adequate
to meet its planned funding needs. Planned major items through July, 1997 are
approximately $3 million to further expand the JLG Equipment Services fleet of
rental machines and $1.3 million to complete the expansion of the Company's new
scissor lift plant. The Company plans to spend $7.2 million for construction
of its boom lift manufacturing capacity expansion to be completed by the end of
calendar 1997.
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 that could significantly impact expected results. Certain
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 are described in "Cautionary Statements
Pursuant to the Securities Litigation Reform Act" which is an exhibit to this
report.
Despite the record third quarter results, the Company's domestic order rate
softened during the quarter. The contributing factors include lower than
expected customer rental fleet utilization rates, reflecting the high level of
product deliveries during the traditionally slower winter months and prolonged
severe weather conditions in some parts of the country; delayed orders from a
large customer related to project delays by its end-user customers; and
changing customer order patterns due to improved Company product delivery lead-
times. Rental fleet utilization rates for domestic customers did improve
modestly in April, but they have not returned to the higher levels that helped
support demand throughout most of 1995 and 1996. In response, management is
redoubling the Company's cost reduction efforts and appropriately adjusting
its production plans and employment levels. Nevertheless, based on customer
confidence that domestic rental demand will continue to recover, due
in part to the onset of better spring weather and predictions that
nonresidential activity will remain robust, management believes that the
Company's order rate should likewise improve. Although management's outlook is
somewhat uncertain due to the recent order softness, management believes that
the fourth quarter will set another record and that margins should continue to
reflect the same factors as in the third quarter.
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, 1997, and the related
condensed consolidated statements of income for the three-month and nine-month
periods ended April 30, 1997 and 1996, and the condensed consolidated
statements of cash flows for the nine-month periods ended April 30, 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
May 12, 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
27 Financial Data Schedule
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,
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.
Charles H. Diller, Jr.
Executive Vice President and
Chief Financial Officer
[DESCRIPTION] LETTER RE UNAUDITED INTERIM FINANCIAL INFORMATION
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 12, 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 April 30, 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
May 12, 1997
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<FISCAL-YEAR-END> JUL-31-1997 JUL-31-1997
<PERIOD-END> APR-30-1997 APR-30-1997
<CASH> 10274 10274
<SECURITIES> 0 0
<RECEIVABLES> 75291 75291
<ALLOWANCES> 1305 1305
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<CURRENT-ASSETS> 152779 128862
<PP&E> 70640 70640
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0 0
0 0
<OTHER-SE> 143167 143167
<TOTAL-LIABILITY-AND-EQUITY> 228518 228518
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<OTHER-EXPENSES> 385 (187)
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<INCOME-TAX> 7589 21431
<INCOME-CONTINUING> 12921 36490
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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. A change in 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.
Sales from new and redesigned products introduced over the past two years
represent 46% of total revenues for the nine months ended April 30, 1997. 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.
