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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
/X/ Annual Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the fiscal year ended July 31, 1999
/ / Transition Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the transition period from ______________ to ______________
Commission file number 0-8454
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JLG INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 25-1199382
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 JLG DRIVE, MCCONNELLSBURG, PA 17233-9533
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(717) 485-5161
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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<S> <C>
(Title of class) (Name of exchange on which registered)
CAPITAL STOCK ($.20 PAR VALUE) NEW YORK STOCK EXCHANGE
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
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 / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
At October 1, 1999, there were 44,280,539 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 $635,231,276.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement for the 1999 Annual Meeting of Shareholders
are incorporated by reference into Part III.
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TABLE OF CONTENTS
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<CAPTION>
ITEM
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PART 1
1. BUSINESS............................................................................................ 1
Machinery Products................................................................................ 1
Marketing and Distribution........................................................................ 1
Customer Service and Support...................................................................... 2
Product Development............................................................................... 3
Competition....................................................................................... 3
Material and Supply Arrangements.................................................................. 3
Product Liability................................................................................. 3
Employees......................................................................................... 4
Foreign Operations................................................................................ 4
Executive Officers of the Registrant.............................................................. 4
2. PROPERTIES.......................................................................................... 4
3. LEGAL PROCEEDINGS................................................................................... 5
4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................................................. 5
PART II
5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS........................... 5
6. SELECTED FINANCIAL DATA............................................................................. 6
7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS............... 7
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA......................................................... 11
Consolidated Balance Sheets....................................................................... 11
Consolidated Statements of Income................................................................. 12
Consolidated Statements of Shareholders' Equity................................................... 13
Consolidated Statements of Cash Flows............................................................. 14
Notes to Consolidated Financial Statements........................................................ 15
Report of Ernst & Young LLP, Independent Auditors 27
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE................ 28
PART III
10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.................................................. 28
11. EXECUTIVE COMPENSATION.............................................................................. 28
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...................................... 28
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................................................... 28
PART IV
14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K..................................... 28
Financial Statement Schedule...................................................................... 28
Exhibits.......................................................................................... 28
SIGNATURES..................................................................................................... 30
</TABLE>
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PART I
ITEM 1. BUSINESS
JLG Industries, Inc., a diversified construction and industrial equipment
manufacturer, is the world's leading producer of mobile aerial work platforms
and a leading producer of telescopic material handlers and telescopic hydraulic
excavators. The Company's products are marketed under the JLG and Gradall
trademarks. Sales are made principally to independent equipment rental companies
and distributors that rent and sell the Company's products to a diverse customer
base, which includes users in the industrial, commercial, institutional and
construction markets, 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.
MACHINERY PRODUCTS
Aerial work platforms are designed to permit workers to position themselves
and their tools and materials easily and quickly in elevated work areas that
otherwise might have to be reached by the erection of scaffolding, by the use of
ladders, or through other devices. Aerial work platforms consist of boom,
scissor and vertical mast lifts. These work platforms are mounted either at the
end of telescoping and/or articulating booms or on top of scissor-type or other
vertical lifting mechanisms, which, in turn, are mounted on mobile, four-wheel
chassis. The Company offers aerial work platforms powered by electric motors or
gasoline, diesel, or propane engines. All of the Company's aerial work platforms
are designed for stable operation in elevated positions.
JLG boom lifts are especially useful for reaching over machinery and
equipment that is mounted on floors and for reaching other elevated positions
not easily approached by other vertical lifting devices. The Company produces
boom lift models of various sizes with platform heights of up to 150 feet. The
boom may be rotated up to 360 degrees in either direction, raised or lowered
from vertical to below horizontal, and extended while the work platform remains
horizontal and stable. These machines can be maneuvered forward or backward and
steered in any direction by the operator from the work platform, even while the
boom is extended. Boom-type models have standard-sized work platforms, which
vary in size up to 3 by 8 feet, and the rated lift capacities range from 500 to
1,000 pounds.
JLG scissor lifts are designed to provide larger work areas, and generally
to allow for heavier loads than boom lifts. Scissor lifts may be maneuvered in a
manner similar to boom lifts, but the platforms may be extended only vertically,
except for an available option that extends the deck horizontally up to 6 feet.
Scissor lifts are available in various models, with maximum platform heights of
up to 50 feet and various platform sizes up to 6 by 14 feet. The rated lift
capacities range from 500 to 2,500 pounds.
JLG self-propelled and push-around vertical mast lifts consist of a work
platform attached to an aluminum mast that extends vertically, which, in turn,
is mounted on either a push-around or self-propelled base. Available in various
models, these machines in their retracted position can fit through standard door
openings, yet reach platform heights of up to 41 feet when fully extended. The
rated lift capacity is 350 pounds.
Gradall rough-terrain, variable-reach material handlers are typically used
by residential, non-residential and institutional building contractors for
lifting, transporting and placing a wide variety of materials at their point of
use or storage. The Company manufactures and markets rough-terrain, variable-
reach material handlers with rated lift capacities ranging from 6,000 to 10,000
pounds and lifting heights of up to 55 feet.
Gradall excavators are distinguished by their telescoping, rotating booms.
The boom's arm-like motion increases the machine's versatility, maximizing the
potential of the machine to use a wide variety of attachments. Excavators are
typically used by contractors and government agencies for ditching, sloping,
1
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finish grading, general maintenance and infrastructure projects. Specialized
excavator models are used in mining and railroad maintenance applications.
MARKETING AND DISTRIBUTION
The Company's products are marketed internationally through independent
rental companies and a network of independent distributors who rent and sell the
Company's products and provide service support. North American customers are
located in all fifty states in the U.S., as well as in Canada and Mexico.
International customers are located in Europe, the Asia/Pacific region,
Australia, Japan, South America, the Middle East and South Africa. The Company
is a party to joint venture arrangements which serve as distributors in Brazil
and Thailand and as a rental operation in Europe.
The equipment rental marketplace is undergoing significant changes. During
the past two years, numerous equipment rental operations have become public
companies through initial public offerings, providing more capital for
additional equipment purchases to keep pace with increased demand and usage.
Growth through acquisitions and geographic expansion among these companies has
also boosted demand for rental equipment.
These large and growing equipment rental companies are working to reduce
costs by rationalizing their product offerings and are attracted to suppliers
that offer the widest array of products available. With this rationalization has
also come the requirement to expand and upgrade rental fleets, especially in
equipment to meet the specialized needs of end-users, thereby favoring increased
demand for the breadth of products that JLG offers.
The Company has been certified as meeting ISO-9001 and 9002 standards. The
Company believes that certification is valuable because a number of customers
require certification as a condition to doing business.
CUSTOMER SERVICE AND SUPPORT
The Company's customer service and support operations, which includes its
JLG Equipment Services operations, focus on after-sales service and support
activities, including replacement parts sales, equipment rentals, used equipment
sales, reconditioning used equipment and training. The service and support
business is a significant factor in overall customer satisfaction and a strong
contributor to the equipment purchase decision.
The Company distributes replacement parts to customers through a system of
parts depots and supplier direct shipment programs. These parts depots provide
the Company's customers with immediate access to substantially all the parts
required to support the Company's equipment. Sales of replacement parts have
historically been less cyclical and typically generate higher margins than sales
of new equipment.
The Company's rental fleet is used to support customer demands for
rent-to-purchase financing and long-term rental contracts. This business also
re-markets customer trade-ins and repairs and rebuilds equipment from their
rental fleets. This operation has been certified as meeting ISO 9002 standards
relating to customer service quality.
The Company supports the sales, service, and rental programs of its
customers with product advertising, cooperative promotional programs, major
trade show participation, and training programs covering service, products and
safety. The Company supplements domestic sales and service support to its
international customers through its overseas facilities in Australia, Germany,
Italy, South Africa and the United Kingdom and joint ventures in Brazil,
Thailand and the Netherlands.
To facilitate the sale of its products, the Company provides an array of
financing and leasing services to its customers and end-users through its JLG
Financial Services operation. These programs are diverse
2
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and provide customers with various financing options and are generally funded
through third party financial institutions, with limited recourse to the
Company.
PRODUCT DEVELOPMENT
The Company invests significantly in product development and
diversification, including improvement of existing products and modification of
existing products for special applications. Product development expenditures
totaled $9,279,000, $9,579,000 and $7,280,000 for the fiscal years 1999, 1998
and 1997, respectively. New and redesigned aerial work platform products
introduced in the past two years accounted for approximately 30% of fiscal 1999
sales.
The Company has various registered trademarks and patents relating to its
products and business. While the Company considers them to be beneficial in the
operation of its business, the Company is not dependent on any single patent or
trademark or group of patents or trademarks.
COMPETITION
The Company operates in the global construction and industrial equipment
market. The Company's competitors range from some of the world's largest
multinational industrial equipment manufacturers to small single-product niche
manufacturers. Within this global market segment, the Company faces competition
from at least 30 aerial work platform manufacturers, four variable-reach
material handler manufacturers, four manufacturers of excavators and numerous
manufacturers of other products, such as boom trucks, cherry pickers, mast
climbers, and various types of earth moving equipment that offer similar or
overlapping functionality to the Company's products. The Company believes it is
the world's leading manufacturer of boom lifts and scissor lifts, and one of the
world's leading manufacturers of vertical mast lifts and telescoping material
handlers. The Company is currently a niche provider of excavators, but within
the narrow category of highway-speed, wheeled, telescoping excavators, the
Company believes that it is the world's leading supplier.
MATERIAL AND SUPPLY ARRANGEMENTS
The Company obtains raw materials, principally steel; other component parts,
most notably engines, drive motors, tires, bearings and hydraulics; and supplies
from third parties. 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. The Company believes this arrangement has
resulted in reduced investment requirements, provided greater access to
technology developments and resulted in lower per-unit costs. Because the
Company maintains limited raw material and component inventories, even brief
unanticipated delays in delivery by suppliers may adversely affect the Company's
ability to satisfy its customers on a timely basis and thereby affect the
Company's financial performance.
PRODUCT LIABILITY
Because the Company's products are used to elevate and move personnel and
materials above the ground, use of the Company's products involves exposure to
personal injury, as well as property damage, particularly if operated carelessly
or without proper maintenance. Based upon the Company's best estimate of
anticipated losses, product liability costs approximated 0.7%, 1.0% and 0.7% of
net sales, for the years ended July 31, 1999, 1998 and 1997, respectively.
For additional information relative to product liability insurance coverage
and cost, see the note entitled Commitments and Contingencies of the Notes to
Consolidated Financial Statements, Item 8 of Part II of this report.
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EMPLOYEES
The Company had 3,960 and 2,664 persons employed as of July 31, 1999 and
1998, respectively. The Company believes its employee relations are good.
Approximately 12% of the Company's employees are represented by a union under a
contract which expires April 20, 2003.
FOREIGN OPERATIONS
The Company manufactures its products in the U.S. for sale throughout the
world. Sales to customers outside the U.S. were 27%, 32% and 30% of total net
sales for 1999, 1998 and 1997, respectively.
EXECUTIVE OFFICERS OF THE REGISTRANT
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<CAPTION>
POSITIONS WITH THE COMPANY
NAME AGE (DATE OF INITIAL ELECTION)
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L. David Black............................ 62 Chairman of the Board, President and Chief Executive Officer
(1993).
Charles H. Diller, Jr..................... 54 Executive Vice President and Chief Financial Officer (1990).
Rao G. Bollimpalli........................ 61 Senior Vice President--Engineering (1990).
Peter L. Bonafede, Jr..................... 49 Senior Vice President--Manufacturing (1999); prior to 1999,
President, Global Chemical Technologies; prior to 1998, Vice
President and General Manager, Ingersoll-Rand Company,
Blaw-Knox Division; prior to 1997, Plant Manager, Federal-Mogul
Corporation.
Raymond F. Treml.......................... 59 Senior Vice President--Operations (1998); prior to 1998, Senior
Vice President--Manufacturing (1990).
Barry L. Phillips......................... 58 President and Chief Executive Officer, Gradall Industries, Inc.
(1999).
</TABLE>
All executive officers listed above are elected to hold office for one year
or until their successors are elected and qualified, and have been employed in
the capacities noted for more than five years, except as indicated. No family
relationship exists among the above-named executive officers.
ITEM 2. PROPERTIES
The Company owns and operates six facilities in Pennsylvania and Ohio
containing manufacturing and office space, totaling 1.5 million square feet and
situated on 226 acres of land. In June 1999, the Company acquired a
manufacturing facility located in Shippensburg, Pennsylvania which contains
307,000 square feet on a 40-acre site This facility will produce both boom and
scissor lift products. The Company is also currently in the process of
transferring its material handler production to its Orrville, Ohio facility,
freeing capacity at its New Philadelphia, Ohio plant for growth in the excavator
product line. The Company expects both of these facilities to be fully
operational during calendar 2000. The Company also leases two manufacturing
facilities totaling 52,000 square feet in Pennsylvania and various sales and
service offices throughout the world. The Company's properties are considered to
be in good operating condition, well-maintained and suitable for their present
purposes. The Company's McConnellsburg and Bedford Pennsylvania facilities are
encumbered as security for long-term borrowings.
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ITEM 3. LEGAL PROCEEDINGS
The Company makes provisions relating to probable product liability claims.
For information relative to product liability claims, see the note entitled
Commitments and Contingencies of the Notes to Consolidated Financial Statements,
Item 8 of Part II of this report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The Company's capital stock is traded on the New York Stock Exchange under
the symbol JLG. The table below sets forth the market prices and average shares
traded daily for the past two fiscal years.
<TABLE>
<CAPTION>
AVERAGE SHARES
PRICE PER SHARE TRADED DAILY
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QUARTER ENDED 1999 1998 1999 1998
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HIGH LOW HIGH LOW
<S> <C> <C> <C> <C> <C> <C>
October 31.............................. $ 17.25 $ 13.69 $ 13.44 $ 11.00 137,119 247,997
January 31.............................. $ 19.13 $ 14.00 $ 14.88 $ 11.38 107,991 159,738
April 30................................ $ 16.25 $ 11.50 $ 17.25 $ 13.00 127,766 228,716
July 31................................. $ 21.94 $ 15.88 $ 20.75 $ 15.50 143,008 135,681
</TABLE>
The Company's quarterly cash dividend rate is currently $.005 per share, or $.02
on an annual basis.
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ITEM 6. SELECTED FINANCIAL DATA
ELEVEN-YEAR FINANCIAL SUMMARY
(in thousands of dollars, except per share data)
<TABLE>
<CAPTION>
YEARS ENDED JULY 31 1999 1998 1997 1996 1995 1994 1993 1992
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
RESULTS OF OPERATIONS
Net sales.............................. $ 720,224 $ 530,859 $ 526,266 $ 413,407 $ 269,211 $ 176,443 $ 123,034 $ 110,479
Gross profit........................... 166,953 128,157 130,005 108,716 65,953 42,154 28,240 22,542
Selling, administrative and product
development expenses................. (75,431) (55,388) (56,220) (44,038) (33,254) (27,147) (23,323) (22,024)
Goodwill amortization.................. (750) -- -- -- -- -- -- --
Restructuring charge................... -- (1,689) (1,897) -- -- -- -- (4,922)
Income (loss) from operations.......... 90,772 71,080 71,888 64,678 32,699 15,007 4,917 (4,404)
Interest expense....................... (1,772) (254) (362) (293) (376) (380) (458) (1,218)
Other income (expense), net............ 2,016 (356) (288) 1,281 376 (24) 180 (149)
Income (loss) before taxes............. 91,016 70,470 71,238 65,666 32,699 14,603 4,639 (5,771)
Income tax (provision) benefit......... (29,745) (23,960) (25,090) (23,558) (11,941) (5,067) (1,410) 2,733
Net income (loss)...................... 61,271 46,510 46,148 42,108 20,758 9,536 3,229 (3,038)
PER SHARE DATA
Earnings per common share.............. 1.40 1.07 1.06 .98 .49 .23 .08 (.07)
Earnings per common share--assuming
dilution............................. 1.36 1.05 1.04 .96 .48 .23 .08 (.07)
Cash dividends......................... .02 .02 .02 .015 .0092 .0083 -- .005
PERFORMANCE MEASURES
Return on sales........................ 8.5% 8.8% 8.8% 10.2% 7.7% 5.4% 2.6% (2.8%)
Return on average assets............... 17.3% 17.9% 21.7% 28.5% 20.2% 12.1% 4.6% (4.0%)
Return on average shareholders'
equity............................... 28.1% 26.2% 33.6% 47.9% 37.1% 23.8% 8.5% (7.9%)
FINANCIAL POSITION
Working capital........................ 176,315 122,672 84,129 71,807 45,404 32,380 26,689 33,304
Current assets as a percent of current
liabilities.......................... 226% 248% 218% 226% 216% 208% 217% 268%
Property, plant and equipment, net..... 100,534 57,652 56,064 34,094 24,785 19,344 13,877 13,511
Total assets........................... 625,817 307,339 248,374 182,628 119,708 91,634 72,518 73,785
Total debt............................. 175,793 3,708 3,952 2,194 2,503 7,578 4,471 12,553
Shareholders' equity................... 271,283 207,768 160,927 113,208 68,430 45,706 38,939 37,186
Total debt as a percent of total
capitalization....................... 39% 2% 2% 2% 4% 14% 10% 25%
Book value per share................... 6.13 4.71 3.68 2.61 1.60 1.09 .89 .86
OTHER DATA
Product development expenditures....... 9,279 9,579 7,280 6,925 5,542 4,373 3,385 3,628
Capital expenditures, net of
retirements.......................... 24,838 13,577 29,757 16,668 8,618 7,762 3,570 1,364
Additions to rental fleet, net of
disposals............................ 4,645 5,377 14,199 9,873 1,548 1,455 273 3,470
Depreciation and amortization.......... 19,530 15,750 10,389 6,505 3,875 2,801 2,500 2,569
Employees.............................. 3,960 2,664 2,686 2,705 2,222 1,620 1,324 1,014
<CAPTION>
YEARS ENDED JULY 31 1991 1990 1989
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<S> <C> <C> <C>
RESULTS OF OPERATIONS
Net sales.............................. $ 94,439 $ 149,281 $ 121,330
Gross profit........................... 20,113 37,767 32,384
Selling, administrative and product
development expenses................. (21,520) (21,834) (18,974)
Goodwill amortization.................. -- -- --
Restructuring charge................... (2,781) (1,015) --
Income (loss) from operations.......... (4,188) 14,918 13,410
Interest expense....................... (1,467) (2,344) (1,375)
Other income (expense), net............ (707) 858 399
Income (loss) before taxes............. (6,362) 13,432 12,434
Income tax (provision) benefit......... 3,122 (4,950) (4,882)
Net income (loss)...................... (3,240) 8,482 7,552
PER SHARE DATA
Earnings per common share.............. (.08) .20 .18
Earnings per common share--assuming
dilution............................. (.08) .20 .18
Cash dividends......................... .0208 .0167 .0125
PERFORMANCE MEASURES
Return on sales........................ (3.4%) 5.7% 6.2%
Return on average assets............... (4.2%) 10.4% 11.9%
Return on average shareholders'
equity............................... (7.7%) 21.8% 23.5%
FINANCIAL POSITION
Working capital........................ 36,468 47,289 34,745
Current assets as a percent of current
liabilities.......................... 266% 304% 254%
Property, plant and equipment, net..... 13,726 14,402 11,343
Total assets........................... 74,861 86,741 70,570
Total debt............................. 14,175 18,404 13,799
Shareholders' equity................... 38,596 44,109 35,331
Total debt as a percent of total
capitalization....................... 27% 29% 28%
Book value per share................... .90 1.05 .84
OTHER DATA
Product development expenditures....... 3,430 3,520 2,904
Capital expenditures, net of
retirements.......................... 1,637 4,615 4,054
Additions to rental fleet, net of
disposals............................ 534 -- (1,437)
Depreciation and amortization.......... 1,953 1,771 1,609
Employees.............................. 1,182 1,565 1,455
</TABLE>
This summary should be read in conjunction with Management's Discussion and
Analysis. All share and per share data have been adjusted for the two-for-one
stock splits distributed in April and October 1995 and the three-for-one stock
split distributed in July 1996.
Fiscal year 1999 reflects the acquisition of Gradall Industries, Inc. in June
1999.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
For the fiscal year ended July 31, 1999, the Company reported record sales
of $720.2 million, an increase of 36% from $530.9 million in the prior year.
Domestic sales were $527.0 million, up 46% from $362.1 million. International
sales were $193.2 million, representing 27% of total revenues and up 15% from
the $168.7 million for the previous year. The acquisition of Gradall on June 18,
1999 contributed $28.2 million to 1999 sales.
The 36% top line growth for 1999 is principally attributable to steps the
Company took to substantially expand its customer base, a continuing strong
market for its products, the strong customer acceptance of new products, and the
contribution of Gradall. The modest increase in sales from 1997 to 1998
reflected record international sales that were partially offset by lower
domestic sales. Sales from new and redesigned products, defined as those
introduced over a two-year period, represented 30%, 32% and 46% of sales in
1999, 1998 and 1997, respectively.
Gross profit, as a percent of sales, decreased to 23% in 1999 from 24% in
1998. Gross profit was impacted by competitive and program-related pricing,
costs of meeting higher product demand and costs relating to new product
introductions. These higher costs were partially offset by ongoing cost
reduction efforts. Gross profit, as a percent of sales, decreased to 24% in 1998
from 25% in 1997. The major contributors to this decrease were the effects of
increased sales discounts associated with higher volume program pricing and
competitive market conditions as well as unfavorable currency effects due to the
strength of the U.S. dollar. These reductions were partially offset by the
effects of cost improvement programs.
Selling, general and product development expenses increased by $20.0 million
in 1999 compared to a decrease of $832,000 in 1998. As a percent of sales, these
expenses were 11% in 1999 and 1997, and 10% in 1998. For 1999, the increase in
dollars is primarily the result of higher personnel and related costs associated
with the Company's expanding customer base and the impact of the Gradall
acquisition. For 1998, the decrease in dollars compared to 1997 was primarily
attributable to reduced personnel and related costs and consulting expenses.
Partially offsetting these reductions were higher product development costs.
For 1999, higher interest expense related to borrowings to finance the
Gradall acquisition. Miscellaneous income included higher investment income
earned on cash balances and lower currency conversion losses. In 1998,
miscellaneous expense was primarily comprised of currency conversion losses of
$1.6 million, partially offset by investment income.
The effective income tax rates were 33%, 34% and 35% for 1999, 1998 and
1997, respectively. The decreases in the effective income tax rates are
primarily due to tax benefits related to the increasing level of export sales.
The current year's rate also included a $1.2 million benefit to net income
resulting from a change in accounting estimate, primarily attributable to
additional tax incentives related to export sales for the prior year.
FINANCIAL CONDITION
Working capital increased by $54 million in 1999. The increase included
additional inventory to support the Company's strategic decision to provide a
higher level of product availability to its worldwide customer base, the effect
of the Gradall acquisition and higher accounts receivable balances principally
attributable to higher sales volume and extended payment terms resulting from
competitive market pressures. Working capital increased by $39 million in 1998
primarily due to increased cash and higher receivable balances associated with
extended payment terms and a higher percent of international sales which
typically have longer payment terms.
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On June 18, 1999, the Company acquired Gradall Industries, Inc., a leading
manufacturer of rough-terrain, telescopic material handlers and telescopic
hydraulic excavators for $208.3 million. Gradall products are used in
infrastructure, residential, non-residential, and institutional construction.
This transaction was financed principally using a $250 million five-year,
unsecured revolving credit facility.
At July 31, 1999, the Company had unused credit lines totaling $101 million.
The Company believes these resources coupled with cash expected to be generated
by operations to be sufficient to fund its ongoing operations and
capital-related projects for fiscal 2000. These expenditures are expected to
consist of higher inventory levels associated with a change in manufacturing
strategy, $55 million for capital projects primarily for the Shippensburg,
Pennsylvania and Orrville, Ohio facilities and additions to equipment held for
rental.
The Company's exposure to product liability claims is discussed in the note
entitled Commitments and Contingencies of the Notes to Consolidated Financial
Statements of this report. 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 certain 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.
Management expects fiscal 2000 to be another challenging, but rewarding
year. Management expects it to be a year of growth fueled by a continuing
favorable economy, strong market demand for the Company's products, the
contribution of Gradall, and another active year for new products with more than
20 machines currently under development. It will also be a year of assimilating
the substantial investments that were made in fiscal 1999.
In calendar 2000, the Company's new Shippensburg, Pennsylvania plant should
be coming on line, and the transfer of material handler products to a dedicated
plant in Orrville, Ohio should be nearing completion. These two facilities will
not only give the Company additional capacity to expand its major product
groups, but will also free up the New Philadelphia, Ohio plant to support
expected excavator sales growth. Additionally, these moves will allow improved
processes and manufacturing efficiencies to be implemented at all three plants,
leading to a lower product cost structure and better production lead times over
the long term.
During fiscal 2000, the Company also intends to adopt a manufacturing
strategy that will enable it to maintain a relatively constant level of
production throughout the year. Although this strategy will most likely result
in elevated inventory levels in the historically slower first half of the year,
it will smooth the manufacturing cycle throughout the year, giving the Company
more efficient use of its facilities, people and suppliers.
As the Company enters the new millennium, management expects to continue
enhancing the Company's industry leadership position by expanding its markets,
adding new products, bringing the new plants on line, and increasing its
customer service and support functions. Increased costs associated with its
growth strategy will likely impact the gross and operating margin percentages in
the first half of the new year. However, as the synergies and cost savings
stemming from the integration of Gradall are realized and as the Company attains
the expected return on its investment in new plants, markets, products and
people, beginning in the second half, management looks forward to higher margins
and improved levels of profitability.
8
<PAGE>
YEAR 2000
The year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. These programs treat
years as occurring between 1900 and the end of 1999 and do not self-convert to
reflect the upcoming change in the century. If not corrected, computer
applications could fail or create erroneous results in date sensitive
applications.
The Company has undertaken a program to understand the nature and extent of
the work required to make its systems year 2000 compliant. This program
encompasses information systems, shop floor equipment and facilities systems,
the Company's products, and the readiness of the Company's suppliers and
customers. The program includes the following phases: identification and
assessment; compliance plan development; remediation and testing; production
implementation; and contingency plan development for critical areas.
The Company has completed identification and assessment, compliance plan
development, remediation and testing, and production implementation for its
critical activities and systems. The financial software in the Company's
Australian operation is being upgraded and is expected to be completed prior to
the end of calendar 1999. The Company has determined that it has no exposure to
contingencies related to the year 2000 issue for products it has sold. The
Company has received assurances from most of its significant suppliers and
customers that they are addressing this issue to ensure that there will be no
major disruptions to the Company's business. The Company has developed
contingency plans where applicable.
The total cost of the year 2000 project to date has not been material and,
based on its program to date, the Company does not expect that future costs
related to the project will have a material adverse effect on the Company's
financial position or results of operations. Because the Company believes that
its internal systems are substantially year 2000 compliant, the Company believes
that the most reasonably likely worst case year 2000 scenario would result from
suppliers' or other third parties' failures to be year 2000 compliant. Depending
upon the number of third parties, their identity and the nature of the
non-compliance, the year 2000 issue could have a material adverse effect on the
Company's financial position or results of operations. Altogether, the Company
does not expect year 2000 problems to result in any material adverse effect on
the Company's financial position or results of operations.
MARKET RISK
The Company is exposed to market risk from changes in interest rates and
foreign currency exchange rates, which could affect its future results of
operations and financial condition. The Company manages its exposure to these
risks principally through its regular operating and financing activities.
While the Company is exposed to changes in interest rates as a result of its
outstanding debt, the Company does not currently utilize any derivative
financial instruments related to its interest rate exposure. Total short-term
and long-term debt outstanding at July 31, 1999 was $175.8 million, consisting
of $169.9 million in variable rate borrowing and $5.9 million in fixed rate
borrowing. At this level of variable rate borrowing and 45 days of outstanding
debt since the Gradall acquisition, a hypothetical 10% increase in interest
rates would decrease pre-tax current year earnings by approximately $141,000 for
that period ended July 31, 1999. A hypothetical 10% change in interest rates
would not result in a material change in the fair value of the Company's fixed
rate debt.
The Company manufactures its products in the United States and sells these
products in that market as well as international markets, principally Europe and
Australia. As a result of the sales of its products in foreign markets, the
Company's earnings are affected by fluctuations in the value of the U.S. dollar,
as compared to foreign currencies resulting from transactions in foreign
markets. At July 31, 1999, the result of a uniform 10% strengthening in the
value of the dollar relative to the currencies in which the Company's
transactions are denominated would result in a decrease in operating income of
approximately $10.8 million for the year ending July 31, 1999. This calculation
assumes that each exchange rate would change in
9
<PAGE>
the same direction relative to the U.S. dollar. In addition to the direct
effects of changes in exchange rates, which are a changed dollar value of the
resulting sales, changes in exchange rates also affect the volume of sales or
the foreign currency sales price as competitors' services become more or less
attractive. The Company's sensitivity analysis of the effects of changes in
foreign currency exchange rates does not factor in a potential change in sales
levels or local currency prices.
10
<PAGE>
ITEM 8. FINANCIAL STATEMENT AND SUPPLEMENTARY DATA
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share data)
ASSETS
<TABLE>
<CAPTION>
JULY 31
----------------------
1999 1998
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash...................................................................................... $ 19,033 $ 56,793
Accounts receivable, less allowance for doubtful accounts of $2,985 in 1999 and $1,597 in
1998.................................................................................... 162,820 94,610
Inventories............................................................................... 125,571 47,568
Other current assets...................................................................... 8,563 6,544
---------- ----------
Total Current Assets.................................................................. 315,987 205,515
PROPERTY, PLANT AND EQUIPMENT
Land and improvements..................................................................... 7,417 5,140
Buildings and improvements................................................................ 40,152 28,778
Machinery and equipment................................................................... 102,185 61,592
---------- ----------
149,754 95,510
Less allowance for depreciation........................................................... 49,220 37,858
---------- ----------
100,534 57,652
EQUIPMENT HELD FOR RENTAL, net of accumulated depreciation of $7,692 in 1999 and $5,166 in
1998.................................................................................... 23,068 25,103
GOODWILL, net of accumulated amortization of $750......................................... 155,655 --
OTHER ASSETS.............................................................................. 30,573 19,069
---------- ----------
$ 625,817 $ 307,339
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS EQUITY
CURRENT LIABILITIES
Short-term debt........................................................................... $ 2,656 $ --
Current portion of long-term debt......................................................... 625 1,253
Accounts payable.......................................................................... 78,793 43,119
Accrued payroll and related taxes......................................................... 16,708 11,652
Income taxes.............................................................................. 8,097 7,251
Other current liabilities................................................................. 32,793 19,568
---------- ----------
Total Current Liabilities............................................................. 139,672 82,843
LONG-TERM DEBT............................................................................ 172,512 2,455
ACCRUED POST-RETIREMENT BENEFITS.......................................................... 21,471 412
OTHER LONG-TERM LIABILITIES............................................................... 9,463 5,473
PROVISIONS FOR CONTINGENCIES.............................................................. 11,416 8,388
SHAREHOLDERS' EQUITY
Capital stock:
Authorized shares: 100,000 at $.20 par value
Issued and outstanding shares:
1999--44,250 shares; 1998--44,096 shares................................................ 8,850 8,819
Additional paid-in capital................................................................ 17,246 15,626
Unearned compensation..................................................................... (1,324) (2,633)
Accumulated other comprehensive income.................................................... (3,495) (3,662)
Retained earnings......................................................................... 250,006 189,618
---------- ----------
Total Shareholders' Equity............................................................ 271,283 207,768
---------- ----------
$ 625,817 $ 307,339
---------- ----------
---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
<TABLE>
<CAPTION>
YEARS ENDED JULY 31,
----------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
NET SALES.................................................................... $ 720,224 $ 530,859 $ 526,266
Cost of sales................................................................ 553,271 402,702 396,261
---------- ---------- ----------
GROSS PROFIT................................................................. 166,953 128,157 130,005
Selling, administrative and product development expenses..................... 75,431 55,388 56,220
Goodwill amortization........................................................ 750 -- --
Restructuring charges........................................................ -- 1,689 1,897
---------- ---------- ----------
INCOME FROM OPERATIONS....................................................... 90,772 71,080 71,888
Other income (deductions):
Interest expense........................................................... (1,772) (254) (362)
Miscellaneous, net......................................................... 2,016 (356) (288)
---------- ---------- ----------
INCOME BEFORE TAXES.......................................................... 91,016 70,470 71,238
Income tax provision......................................................... 29,745 23,960 25,090
---------- ---------- ----------
NET INCOME................................................................... $ 61,271 $ 46,510 $ 46,148
---------- ---------- ----------
---------- ---------- ----------
EARNINGS PER COMMON SHARE.................................................... $ 1.40 $ 1.07 $ 1.06
---------- ---------- ----------
---------- ---------- ----------
EARNINGS PER COMMON SHARE--ASSUMING DILUTION................................. $ 1.36 $ 1.05 $ 1.04
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(in thousands, except share data)
<TABLE>
<CAPTION>
ACCUMULATED
CAPITAL STOCK ADDITIONAL OTHER
------------------------ PAID-IN UNEARNED COMPREHENSIVE RETAINED
SHARES PAR VALUE CAPITAL COMPENSATION INCOME EARNINGS
----------- ----------- ----------- --------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT JULY 31, 1996.......... 43,382 $ 8,676 $ 7,879 ($ 2,060) $ 98,713
Comprehensive income:
Net income for the year.......... 46,148
Aggregate translation adjustment,
net of deferred tax benefit of
$168........................... (120)
Total comprehensive income.........
Dividends paid: $.02 per share..... (872)
Shares issued under stock option
plans and restricted share
awards........................... 344 69 3,512 (1,516)
Amortization of unearned
compensation..................... 498
----------- ----------- ----------- ------- ------- -----------
BALANCES AT JULY 31, 1997.......... 43,726 8,745 11,391 (1,018) (2,180) 143,989
----------- ----------- ----------- ------- ------- -----------
Comprehensive income:
Net income for the year.......... 46,510
Aggregate translation adjustment,
net of deferred tax benefit of
$200........................... (1,482)
Total comprehensive income.........
Dividends paid: $.02 per share..... (881)
Shares issued under stock option
plans and restricted share
awards........................... 370 74 4,235 (3,219)
Amortization of unearned
compensation..................... 1,604
----------- ----------- ----------- ------- ------- -----------
BALANCES AT JULY 31, 1998.......... 44,096 8,819 15,626 (2,633) (3,662) 189,618
----------- ----------- ----------- ------- ------- -----------
Comprehensive income:
Net income for the year.......... 61,271
Aggregate translation adjustment,
net of deferred tax benefit of
($334)......................... 167
Total comprehensive income.........
Dividends paid: $.02 per share..... (883)
Shares issued under stock option
plans and restricted share
awards........................... 154 31 1,620 (259)
Amortization of unearned
compensation..................... 1,568
----------- ----------- ----------- ------- ------- -----------
BALANCES AT JULY 31, 1999.......... 44,250 $ 8,850 $ 17,246 ($ 1,324) ($ 3,495) $ 250,006
----------- ----------- ----------- ------- ------- -----------
----------- ----------- ----------- ------- ------- -----------
<CAPTION>
TOTAL
SHAREHOLDERS'
EQUITY
-------------
<S> <C>
BALANCES AT JULY 31, 1996.......... $ 113,208
Comprehensive income:
Net income for the year..........
Aggregate translation adjustment,
net of deferred tax benefit of
$168...........................
Total comprehensive income......... 46,028
Dividends paid: $.02 per share..... (872)
Shares issued under stock option
plans and restricted share
awards........................... 2,065
Amortization of unearned
compensation..................... 498
-------------
BALANCES AT JULY 31, 1997.......... 160,927
-------------
Comprehensive income:
Net income for the year..........
Aggregate translation adjustment,
net of deferred tax benefit of
$200...........................
Total comprehensive income......... 45,028
Dividends paid: $.02 per share..... (881)
Shares issued under stock option
plans and restricted share
awards........................... 1,090
Amortization of unearned
compensation..................... 1,604
-------------
BALANCES AT JULY 31, 1998.......... 207,768
-------------
Comprehensive income:
Net income for the year..........
Aggregate translation adjustment,
net of deferred tax benefit of
($334).........................
Total comprehensive income......... 61,438
Dividends paid: $.02 per share..... (883)
Shares issued under stock option
plans and restricted share
awards........................... 1,392
Amortization of unearned
compensation..................... 1,568
-------------
BALANCES AT JULY 31, 1999.......... $ 271,283
-------------
-------------
</TABLE>
The accompanying notes are an integral part of these statements.
13
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
YEARS ENDED JULY 31
----------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
OPERATIONS
Net income................................................................... $ 61,271 $ 46,510 $ 46,148
Adjustments to reconcile net income to cash provided by operating activities:
Depreciation and amortization.............................................. 19,530 15,750 10,389
Provision for self-insured losses.......................................... 5,100 4,844 2,745
Deferred income taxes...................................................... (2,880) 1,924 775
Changes in operating assets and liabilities:
Accounts receivable...................................................... (42,434) (24,446) (15,822)
Inventories.............................................................. (25,284) 6,159 (14,294)
Other current assets..................................................... (1,158) (672) (997)
Accounts payable......................................................... 17,521 92 8,492
Accrued expenses and other current liabilities........................... 4,946 9,148 5,499
Changes in other assets and liabilities...................................... (2,658) (9,085) (7,310)
---------- ---------- ----------
Cash provided by operations.................................................. 33,954 50,224 35,625
INVESTMENTS
Purchases of property, plant and equipment................................... (24,838) (13,577) (29,757)
Additions to equipment held for rental....................................... (4,645) (5,377) (14,199)
Purchase of Gradall Industries, Inc. net of cash received of $5,065.......... (203,192) -- --
---------- ---------- ----------
Cash used for investments.................................................... (232,675) (18,954) (43,956)
FINANCING
Net issuance of short-term debt.............................................. 2,656 -- --
Issuance of long-term debt................................................... 206,500 -- 2,000
Repayment of long-term debt.................................................. (50,378) (244) (242)
Payment of dividends......................................................... (883) (881) (872)
Exercise of stock options and issuance of restricted awards.................. 2,960 2,694 2,563
---------- ---------- ----------
Cash provided by financing................................................... 160,855 1,569 3,449
CURRENCY ADJUSTMENTS
Effect of exchange rate changes on cash...................................... 106 (1,482) (120)
CASH
Net change in cash........................................................... (37,760) 31,357 (5,002)
Beginning balance............................................................ 56,793 25,436 30,438
---------- ---------- ----------
Ending balance............................................................... $ 19,033 $ 56,793 $ 25,436
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The accompanying notes are an integral part of these statements.
14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA AND UNLESS OTHERWISE INDICATED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICES
PRINCIPLES OF CONSOLIDATION AND STATEMENT PRESENTATION
The consolidated financial statements include the accounts of the Company
and its subsidiaries. Significant intercompany accounts and transactions have
been eliminated in consolidation. Certain prior year amounts in the consolidated
financial statements have been reclassified to conform to the presentation used
for 1999.
CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents and classifies such amounts
as cash.
REVENUE RECOGNITION
Sales of machinery and service parts are generally unconditional sales that
are recorded when product is shipped and invoiced to independently owned and
operated distributors and customers. Provisions for warranty are estimated and
accrued at the time of sale. Actual warranty costs do not materially differ from
estimates. In addition, net sales include rental revenues earned on the lease of
equipment held for rental. Rental revenues are recognized in the period earned
over the lease term.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
related notes. Actual results may differ from those estimates.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the LIFO (last-in, first-out) method because it results in a better
matching of current product costs and revenues.
Inventories consist of the following at July 31:
<TABLE>
<CAPTION>
1999 1998
---------- ---------
<S> <C> <C>
Finished goods............................................................................. $ 68,994 $ 27,784
Work in process............................................................................ 12,544 9,291
Raw materials.............................................................................. 48,561 15,067
---------- ---------
130,099 52,142
Less LIFO provision........................................................................ 4,528 4,574
---------- ---------
$ 125,571 $ 47,568
---------- ---------
---------- ---------
</TABLE>
PROPERTY, PLANT AND EQUIPMENT AND EQUIPMENT HELD FOR RENTAL
Property, plant and equipment and equipment held for rental are stated at
cost, net of accumulated depreciation. Depreciation is computed using the
straight-line method, based on useful lives of 15 years for land improvements,
10 to 20 years for buildings and improvements, three to 10 years for machinery
and equipment, and three to seven years for equipment held for rental.
15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND UNLESS OTHERWISE INDICATED)
GOODWILL
Goodwill represents the difference between the total purchase price and the
fair value of identifiable assets and liabilities acquired in business
acquisitions. Goodwill is amortized on a straight-line basis over periods
ranging from ten to twenty-five years.
Long-lived assets, including intangible assets, are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
an asset may not be fully recoverable. If an impairment indicator is present,
the Company evaluates whether an impairment exists on the basis of undiscounted
expected future cash flows from operations for the remaining amortization
period. If an impairment exists, the asset is reduced by the estimated shortfall
of discounted cash flows.
EMPLOYEES
Twelve percent of the Company's employees at July 31, 1999 are represented
by a union under a contract which expires April 20, 2003.
INCOME TAXES
Deferred income tax assets and liabilities arise from differences between
the tax basis of assets or liabilities and their reported amounts in the
financial statements. Deferred tax balances are determined by using the tax rate
expected to be in effect when the taxes are paid or refunds received.
PRODUCT DEVELOPMENT
The Company incurred product development and other engineering expenses of
$9,279, $9,579 and $7,280 in 1999, 1998 and 1997, respectively, which were
charged to expense as incurred.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially expose the Company to concentrations
of credit risk consist primarily of trade receivables. This concentration of
credit risk is mitigated by a geographically diverse customer base and the
Company's credit and collection process. The Company performs credit evaluations
for all customers and secures transactions with letters of credit where it
believes the risk warrants it. Write-offs for uncollected trade receivables have
not been significant.
ADVERTISING AND PROMOTION
All costs associated with advertising and promoting products are expensed in
the year incurred. Advertising and promotion expense was $5,742, $2,928 and
$3,461 in 1999, 1998, and 1997, respectively.
TRANSLATION OF FOREIGN CURRENCIES
The financial statements of the Company's Australian operation are measured
in its local currency and then translated into U.S. dollars. All balance sheet
accounts have been translated using the current rate of exchange at the balance
sheet date. Results of operations have been translated using the average rates
prevailing throughout the year. Translation gains or losses resulting from the
changes in the exchange rates from year-to-year are accumulated in a separate
component of shareholders' equity.
The financial statements of the Company's European operation are prepared
using the U.S. dollar as its functional currency. The transactions of this
operation that are denominated in foreign currencies have been remeasured in
U.S. dollars, and any resulting gain or loss is reported in income.
16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND UNLESS OTHERWISE INDICATED)
The aggregate of foreign currency transaction losses included in the results
of operations were $398, $1,611 and $768 in 1999, 1998 and 1997, respectively.
RECENT ACCOUNTING PRONOUNCEMENTS
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position 98-1, "Accounting for the Costs of Developing or Obtaining
Computer Internal-Use Software." This statement will require the capitalization
of certain costs incurred after the date of adoption in connection with
developing or obtaining software for internal use. It is effective for the
Company beginning August 1, 1999. The Company does not believe its adoption will
have a material impact on its results of operations or financial position.
In June 1998, the Financial Accounting Standards Board issued Statement No.
133, "Accounting for Derivative Instruments and Hedging Activities," which
requires that an entity record all derivatives in the statement of financial
position at their fair value. It also requires changes in the fair value of
derivatives to be recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and, if it is, the type of hedge transaction. The Company is
required to adopt this new accounting standard beginning August 1, 2000. The
Company does not expect adoption of this statement to have a significant impact
on its results of operations or financial position.
ACQUISITION
The Company acquired Gradall Industries, Inc. in June 1999 for $208,257.
Gradall is a leading manufacturer of rough-terrain, telescopic material handlers
and telescopic hydraulic excavators used in infrastructure, residential,
non-residential and institutional construction. The excess of purchase price
over the fair values of the net assets acquired was $155,531, and has been
recorded as goodwill, which is being amortized on a straight-line basis over 25
years.
The following unaudited pro forma financial information reflects the
consolidated results of operations of the Company as if the Gradall acquisition
had taken place at the beginning of the respective periods. The pro forma
financial information is not necessarily indicative of the results of operations
had the transactions been effected on the assumed dates.
<TABLE>
<CAPTION>
1999 1998
---------- ---------
<S> <C> <C>
Net sales.................................................................................. $ 874,273 706,582
Net income................................................................................. 60,246 45,030
Earnings per common share.................................................................. 1.37 1.03
Earnings per common share--assuming dilution............................................... 1.34 1.01
</TABLE>
BANK CREDIT LINES AND LONG-TERM DEBT
The Company has a credit agreement with a group of financial institutions
that provides for a five-year, unsecured revolving credit facility with an
aggregate commitment of $250 million. Borrowings under the agreement bear
interest equal to either LIBOR plus a margin ranging from 0.55% to 1.125%,
depending on the Company's ratio of funded debt to EBITDA; or the greater of
prime or federal funds rate plus 0.50%. The Company is required to pay an annual
administrative fee of $35 and a facility fee ranging from 0.20% to 0.275%,
depending on the Company's ratio of funded debt to EBITDA. The agreement
contains customary affirmative and negative covenants including financial
covenants requiring the maintenance of specified consolidated interest coverage,
leverage ratios and a minimum net worth.
17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND UNLESS OTHERWISE INDICATED)
The Company also has available a $20 million unsecured bank revolving line of
credit with a term of one year, renewable annually, and at an interest rate of
prime or a spread over LIBOR. The Company also has $2.5 million in loan
facilities with a term of one year, renewable annually, and at a fixed weighted
average interest rate of 5.7%.
Long-term debt was as follows at July 31:
<TABLE>
<CAPTION>
1999 1998
---------- ---------
<S> <C> <C>
Revolving credit facility due 2004 with an average interest rate of 6.2% at
July 31, 1999............................................................................. $ 169,912 $ --
Other....................................................................................... 3,225 3,708
---------- ---------
173,137 3,708
Less current portion........................................................................ 625 1,253
---------- ---------
$ 172,512 $ 2,455
---------- ---------
---------- ---------
</TABLE>
Interest paid on all borrowings was $811, $251 and $348 in 1999, 1998 and
1997, respectively. The aggregate amounts of long-term debt outstanding at July
31, 1999 which will become due in 2000 through 2004 are: $625, $535, $328, $328
and $170,000, respectively.
The fair value of the Company's long-term debt is estimated to approximate
the carrying amount reported in the consolidated balance sheet based on current
interest rates for similar types of borrowings.
EMPLOYEE RETIREMENT PLANS
Substantially all employees of the Company participate in defined
contribution or noncontributory defined benefit plans. Approximately 12% of the
Company's employees are covered by union-sponsored, collectively bargained
multi-employer pension plans. The expense related to funding the multi-employer
plan for the year ended July 31, 1999 was $48.
The Company has discretionary, defined contribution retirement plans
covering its eligible U.S. employees. The Company's policy is to fund the cost
as accrued. Plan assets are invested in mutual funds and the Company's common
stock. The aggregate expense relating to these plans was $6,565, $5,332 and
$4,716 in 1999, 1998 and 1997, respectively. The Company also has non-qualified
defined benefit plans that provide senior management with supple-mental
retirement, medical, disability and death benefits.
Pension benefits are included in other long-term liabilities on the
consolidated balance sheets.
18
<PAGE>
\
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND UNLESS OTHERWISE INDICATED)
The following table sets forth the defined benefit pension and
postretirement plans' funded status and amounts recognized in the Company's
consolidated financial statements:
<TABLE>
<CAPTION>
POSTRETIREMENT
PENSION BENEFITS BENEFITS
-------------------- ---------------------
<S> <C> <C> <C> <C>
1999 1998 1999 1998
--------- --------- ---------- ---------
Change in benefit obligation:
Benefit obligation at beginning of year................................. $ 3,217 $ 4,647 $ 412 $ 395
Acquisition............................................................. 13,806 -- 20,798 --
Service cost............................................................ 300 220 113 22
Interest cost........................................................... 348 199 227 25
Change in assumptions................................................... 962 -- -- --
Change in participation................................................. -- (1,720) 60 (30)
Benefits paid........................................................... (64) (129) (139) --
--------- --------- ---------- ---------
Benefit obligation at end of year....................................... $ 18,659 $ 3,217 $ 21,471 $ 412
--------- --------- ---------- ---------
--------- --------- ---------- ---------
Change in plan assets:
Acquisition............................................................. $ 12,477 $ -- $ -- $ --
Actual return on plan assets............................................ 128 -- -- --
Contributions........................................................... 64 129 -- --
Benefits paid........................................................... (64) (129) -- --
--------- --------- ---------- ---------
Fair value of plan assets at end of year................................ $ 12,605 $ -- $ -- $ --
--------- --------- ---------- ---------
--------- --------- ---------- ---------
Funded status........................................................... ($5,964) ($3,217) ($21,471) ($412)
Unrecognized net actuarial (gain)/loss.................................. (2,014) (3,241) -- --
Unrecognized transition obligation...................................... 155 187 -- --
Unrecognized prior service cost......................................... 1,791 2,047 -- --
--------- --------- ---------- ---------
Accrued benefit cost.................................................... ($6,032) ($4,224) ($21,471) ($412)
--------- --------- ---------- ---------
--------- --------- ---------- ---------
</TABLE>
Components of pension and postretirement expense for the years ended July
31:
<TABLE>
<CAPTION>
POSTRETIREMENT BENEFITS
PENSION BENEFITS
------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C>
1999 1998 1997 1999 1998 1997
--------- --------- --------- --------- ----- -----
Service cost....................... $ 300 $ 220 $ 473 $ 113 $ 22 $ 37
Interest cost...................... 348 199 276 227 25 23
Expected return.................... (128) -- -- -- -- --
Amortization of prior service
cost............................. 255 255 255 -- -- --
Amortization of transition
obligation....................... 32 32 32 28 26 27
Amortization of net gains.......... (265) (295) (140) -- -- --
--------- --------- --------- --------- --- ---
$ 542 $ 411 $ 896 $ 368 $ 73 $ 87
--------- --------- --------- --------- --- ---
--------- --------- --------- --------- --- ---
</TABLE>
19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND UNLESS OTHERWISE INDICATED)
Weighted average actuarial assumptions as of July 31 were as follows:
<TABLE>
<CAPTION>
POSTRETIREMENT BENEFITS
PENSION BENEFITS
------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C>
1999 1998 1997 1999 1998 1997
--------- --------- --------- --------- ----- -----
Discount rate...................... 7.5% 7% 7% 7.5% 7% 7%
Expected return on plan assets..... 8.5% 8% 8% -- -- --
Rate of compensation increase...... 4.5% 6% 6% -- -- --
</TABLE>
For measurement purposes, a 7.75% annual rate increase in the per capita
cost of covered health care benefits was assumed for 1999. The rate was assumed
to decrease gradually to 5% by 2011 and remain at that level thereafter. Assumed
health care cost trend rates have a significant effect on the postretirement
benefit reported as follows:
<TABLE>
<CAPTION>
ONE PERCENTAGE POINT
------------------------
<S> <C> <C>
INCREASE DECREASE
----------- -----------
Service and interest cost components......................................................... $ 325 $ 240
Postretirement benefit obligation............................................................ 2,746 2,277
</TABLE>
SEGMENT INFORMATION
The Company operates in a single industry segment--the design, manufacture
and marketing of mobile, hydraulically operated construction and industrial
equipment. The Company groups its products and services into two categories:
machinery, which consists of the design, manufacture and sale of new equipment,
and customer services and support, which consists of after-sales service and
support, including parts sales, equipment rentals, used equipment sales and
rebuilding used equipment. The Company evaluates performance and allocates
resources based on operating profit before interest, miscellaneous income/
expense and income taxes. Intersegment sales and transfers are not significant.
The accounting policies of the reportable segments are the same as those
described in the summary of significant accounting policies. One customer
accounted for 12% and 13% of machinery sales for 1998 and 1997, respectively. No
single customer accounted for 10% or more of sales for 1999.
20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND UNLESS OTHERWISE INDICATED)
Business segment information consisted of the following for the years ended
July 31:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
External sales:
Machinery.................................................................. $ 645,479 $ 463,638 $ 475,065
Customer services and support.............................................. 74,745 67,221 51,201
---------- ---------- ----------
$ 720,224 $ 530,859 $ 526,266
---------- ---------- ----------
---------- ---------- ----------
Segment profit (loss):
Machinery.................................................................. $ 101,417 $ 71,946 $ 81,867
Customer services and support.............................................. 23,544 23,338 18,011
General corporate.......................................................... (34,189) (24,204) (27,990)
---------- ---------- ----------
$ 90,772 $ 71,080 $ 71,888
---------- ---------- ----------
---------- ---------- ----------
Depreciation and amortization:
Machinery.................................................................. $ 10,820 $ 8,853 $ 5,617
Customer services and support.............................................. 6,587 5,265 3,490
General corporate.......................................................... 2,123 1,632 1,282
---------- ---------- ----------
$ 19,530 $ 15,750 $ 10,389
---------- ---------- ----------
---------- ---------- ----------
Expenditures for long-lived assets:
Machinery.................................................................. $ 22,223 $ 12,181 $ 26,900
Customer services and support.............................................. 4,611 5,549 14,838
General corporate.......................................................... 2,649 1,224 2,218
---------- ---------- ----------
$ 29,483 $ 18,954 $ 43,956
---------- ---------- ----------
---------- ---------- ----------
Assets:
Machinery.................................................................. $ 541,386 $ 187,178 $ 169,515
Customer services and support.............................................. 41,340 43,337 33,308
General corporate.......................................................... 43,091 76,824 45,551
---------- ---------- ----------
$ 625,817 $ 307,339 $ 248,374
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
21
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND UNLESS OTHERWISE INDICATED)
The Company manufactures its products in the United States and sells these
products in that market as well as international markets, principally Europe and
Australia. No single foreign country is significant to the consolidated
operations. Sales by geographic area were as follows for the years ended July
31:
<TABLE>
<CAPTION>
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
United States................................................................ $ 526,984 $ 362,144 $ 366,086
Europe....................................................................... 137,805 93,554 80,445
Other........................................................................ 55,435 75,161 79,735
---------- ---------- ----------
$ 720,224 $ 530,859 $ 526,266
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
INCOME TAXES
The income tax provision consisted of the following for the years ended July
31:
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal........................................................................ $ 30,507 $ 23,900 $ 23,442
State.......................................................................... 2,118 1,984 2,423
--------- --------- ---------
32,625 25,884 25,865
Deferred:
Federal........................................................................ (2,620) (1,828) (674)
State.......................................................................... (260) (96) (101)
--------- --------- ---------
(2,880) (1,924) (775)
--------- --------- ---------
$ 29,745 $ 23,960 $ 25,090
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company made income tax payments of $29,505, $16,790 and $24,928 in
1999, 1998, and 1997, respectively.
The difference between the U.S. federal statutory income tax rate and the
Company's effective tax rate is as follows for the years ended July 31:
<TABLE>
<CAPTION>
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
Statutory U.S. federal income tax rate....................................................... 35% 35% 35%
State tax provision, net of federal effect................................................... 1 1 2
Effect of export profits taxed at lower rates................................................ (3) (2) (2)
-- -- --
33% 34% 35%
-- -- --
-- -- --
</TABLE>
22
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND UNLESS OTHERWISE INDICATED)
Components of deferred tax assets and liabilities were as follows at July
31:
<TABLE>
<CAPTION>
1999 1998
--------- ---------
<S> <C> <C>
Future income tax benefits:
Employee benefits............................................................................ $ 15,485 $ 2,736
Contingent liabilities provisions............................................................ 8,679 5,908
Translation adjustments...................................................................... 1,227 1,561
Other........................................................................................ 1,676 1,471
--------- ---------
27,067 11,676
Deferred tax liabilities for depreciation and asset basis differences........................ 10,719 2,307
--------- ---------
Net deferred tax assets...................................................................... $ 16,348 $ 9,369
--------- ---------
--------- ---------
</TABLE>
The current and long-term deferred tax asset amounts are included in other
current and other asset balances on the consolidated balance sheets.
STOCK BASED INCENTIVE PLANS
The Company's stock incentive plan has reserved 4,859 common shares that may
be awarded to key employees in the form of options to purchase capital stock or
restricted shares. The option price is set by the Company's Board of Directors.
For all options currently outstanding, the option price is the fair market value
of the shares on their date of grant.
The Company's stock option plan for directors provides for an annual grant
to each outside director of a single option to purchase six thousand shares of
capital stock, providing the Company earned a net profit, before extraordinary
items, for the prior fiscal year. The option exercise price shall be equal to
the shares' fair market value on their date of grant. An aggregate of 1,849
shares of capital stock is reserved to be issued under the plan.
Outstanding options and transactions involving the plans are summarized as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
------------------------ ------------------------ ------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding options at the
beginning of the year............ 1,795 $ 7.51 1,466 $ 4.88 1,705 $ 4.28
Options granted.................... 522 20.78 479 14.59 36 17.44
Options canceled................... (10) 17.46 (40) 8.66 (34) 3.96
Options exercised.................. (143) 5.21 (110) 3.00 (241) 2.33
----- ----------- ----- ----- ----- -----
Outstanding options at the end of
the year......................... 2,164 $ 10.81 1,795 $ 7.51 1,466 $ 4.88
----- ----------- ----- ----- ----- -----
----- ----------- ----- ----- ----- -----
Exercisable options at the end of
the year......................... 1,366 $ 6.18 1,281 $ 4.63 1,082 $ 3.95
----- ----------- ----- ----- ----- -----
----- ----------- ----- ----- ----- -----
</TABLE>
23
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND UNLESS OTHERWISE INDICATED)
Information with respect to stock options outstanding at July 31, 1999 is as
follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C>
RANGE OF NUMBER WEIGHTED AVERAGE WEIGHTED AVERAGE NUMBER WEIGHTED AVERAGE
EXERCISE PRICES OUTSTANDING REMAINING LIFE EXERCISE PRICE EXERCISABLE EXERCISE PRICE
- ------------------ --------------- --------------------- ----------------- --------------- -----------------
$1.12 to $1.59..... 439 4 $ 1.15 439 $ 1.15
$2.93 to $3.30..... 298 5 3.01 298 3.01
$5.64 to $9.21..... 281 6 6.78 281 6.78
$11.41 to $15.19... 386 8 12.99 242 13.57
$17.31 to $21.94... 759 10 19.85 105 17.62
</TABLE>
The Company has elected to apply Accounting Principals Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and related interpretations in
accounting for its stock options. Under this Opinion, the Company does not
recognize compensation expense arising from such grants because the exercise
price of the Company's stock options equals the market price of the underlying
stock on the date of grant. Pro forma information regarding net income and
earnings per share has been determined as if the Company had accounted for its
employee stock options under the fair value method. The fair value for these
options was estimated at the date of grant using a Black-Scholes option pricing
model with the following assumptions:
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Volatility factor.............................................................. .475 .478 .484
Expected life in years......................................................... 2.8 3.0 2.0
Dividend yield................................................................. .10% .15% .11%
Interest rate.................................................................. 5.38% 5.73% 5.69%
Weighted average fair market value at date or grant............................ $ 3.96 $ 5.12 $ 5.37
</TABLE>
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized over the options' vesting period. The Company's pro forma
information follows for the years ending July 31:
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Net income....................................................................... $ 60,142 $ 46,021 $ 45,837
Earnings per common share........................................................ 1.37 1.05 1.05
Earnings per common share--assuming dilution..................................... 1.34 1.03 1.03
</TABLE>
BASIC AND DILUTED EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings
per share for the years ended July 31:
<TABLE>
<CAPTION>
1999 1998 1997
--------- --------- ---------
<S> <C> <C> <C>
Net income....................................................................... $ 61,271 $ 46,510 $ 46,148
Denominator for basic earnings per share--weighted average shares................ 43,846 43,666 43,606
Effect of dilutive securities--employee stock options and unvested restricted
shares......................................................................... 1,116 765 795
--------- --------- ---------
Denominator for diluted earning per share--weighted average shares adjusted for
dilutive securities............................................................ 44,962 44,431 44,401
--------- --------- ---------
--------- --------- ---------
Earnings per common share........................................................ $ 1.40 $ 1.07 $ 1.06
--------- --------- ---------
--------- --------- ---------
Earnings per common share--assuming dilution..................................... $ 1.36 $ 1.05 $ 1.04
--------- --------- ---------
--------- --------- ---------
</TABLE>
24
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND UNLESS OTHERWISE INDICATED)
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 1999 was comprised of a self-insured retention of $5
million for domestic claims, insurance coverage of $2 million for international
claims and catastrophic coverage for domestic and international claims of $75
million in excess of the retention and primary coverage. The Company contracts
with an independent 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 firm. 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 product liability claims of which the Company is aware,
accrued liabilities of $14.1 million and $12.4 million were established at July
31, 1999 and 1998, 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 July 31, 1999 and 1998, there were no insurance
recoverables or offset implications and there were no claims by the Company
being contested by insurers.
RESTRUCTURING COSTS
During the calendar year 1997, the Company downsized and rationalized its
operations. This resulted in restructuring charges for severance and termination
benefits, costs associated with closing a smaller, less productive manufacturing
facility and other asset impairments of $1,689 and $1,897 for 1998 and 1997,
respectively.
UNAUDITED QUARTERLY FINANCIAL INFORMATION
Unaudited financial information was as follows for the fiscal quarters
within the years ended July 31:
<TABLE>
<CAPTION>
EARNINGS PER
GROSS NET EARNINGS PER COMMON SHARE--
NET SALES PROFIT INCOME COMMON SHARE ASSUMING DILUTION
---------- ----------- --------- --------------- -------------------
<S> <C> <C> <C> <C> <C>
1999
October 31............................... $ 128,655 $ 29,725 $ 10,253 $ .23 $ .23
January 31............................... 138,235 31,508 11,327 .26 .25
April 30................................. 196,747 44,111 17,299 .40 .39
July 31.................................. 256,587 61,609 22,392 .51 .49
---------- ----------- --------- ----- -----
$ 720,224 $ 166,953 $ 61,271 $ 1.40 $ 1.36
---------- ----------- --------- ----- -----
---------- ----------- --------- ----- -----
1998
October 31............................... $ 95,644 $ 21,168 $ 4,626 $ .11 $ .10
January 31............................... 111,707 24,885 7,646 .17 .17
April 30................................. 146,323 35,954 14,071 .32 .32
July 31.................................. 177,185 46,150 20,167 .47 .46
---------- ----------- --------- ----- -----
$ 530,859 $ 128,157 $ 46,510 $ 1.07 $ 1.05
---------- ----------- --------- ----- -----
---------- ----------- --------- ----- -----
</TABLE>
25
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS, EXCEPT PER SHARE DATA AND UNLESS OTHERWISE INDICATED)
REPORT OF MANAGEMENT
The consolidated financial statements of JLG Industries, Inc. in this report
were prepared by its management, which is responsible for their content. In
management's opinion, the financial statements reflect amounts based upon its
best estimates and informed judgments and present fairly the financial position,
results of operations and cash flows of the Company in conformity with generally
accepted accounting principles.
The Company maintains a system of internal accounting controls and
procedures which are intended, consistent with justifiable cost, to provide
reasonable assurance that transactions are executed as authorized, that they are
properly recorded to produce reliable financial records, and that accountability
for assets is maintained. The accounting controls and procedures are supported
by careful selection and training of personnel, examination by an internal
auditor and continuing management commitment to the integrity of the internal
control system.
The financial statements have been audited by Ernst & Young LLP, independent
auditors. The independent auditors have evaluated the Company's internal
controls and performed tests of procedures and accounting records in connection
with the issuance of their reports on the fairness of the financial statements.
The Board of Directors has appointed an Audit Committee composed entirely of
directors who are not employees of the Company. The Audit Committee meets with
representatives of management, the internal auditor and independent auditors
both separately and jointly. Its functions include recommending the selection of
independent auditors; conferring with the independent auditors and reviewing the
scope and fees of the annual audit and the results thereof; reviewing the
Company's annual report to shareholders and annual filings with the Securities
and Exchange Commission; reviewing the adequacy of the Company's internal audit
function, as well as the accounting and financial controls and procedures; and
approving the nature and scope of nonaudit services performed by the independent
auditors.
<TABLE>
<S> <C>
[LOGO] [LOGO]
L. David Black Charles H. Diller, Jr.
Chairman of the Board, Executive Vice President
President and and Chief Financial Officer
Chief Executive Officer
</TABLE>
October 5, 1999
26
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To The Board of Directors and Shareholders
JLG Industries, Inc.
McConnellsburg, Pennsylvania
We have audited the accompanying consolidated balance sheets of JLG
Industries, Inc. as of July 31, 1999 and 1998, and the related consolidated
statements of income, shareholders' equity, and cash flows for each of the three
years in the period ended July 31, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of JLG Industries,
Inc. at July 31, 1999 and 1998, and the, consolidated results of its operations
and its cash flows for each of the three years in the period ended July 31,
1999, in conformity with generally accepted accounting principles.
[LOGO]
Baltimore, Maryland
September 9, 1999
27
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item 10 relating to identification of
directors is set forth under the caption "Election of Directors" in the
Company's Proxy Statement and is incorporated herein by reference.
Identification of officers is presented in Item 1 of this report under the
caption "Executive Officers of the Registrant."
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item 11 relating to executive compensation
is set forth under the captions "Board of Directors" and "Executive
Compensation" in the Company's Proxy Statement and is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item 12 relating to security ownership of
certain beneficial owners and management is set forth under the caption "Voting
Securities and Principal Holders" in the Company's Proxy Statement and is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) The consolidated financial statements of the registrant and its
subsidiaries are set forth in Item 8 of Part II of this report.
(2) Financial Statement Schedules
The schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable and, therefore, have been omitted.
(3) Exhibits
<TABLE>
<S> <C>
2.1 Agreement and Plan of Merger dated as of May 10, 1999, among Gradall Industries,
Inc., the Company and JLG Acquisition Corp. (incorporated by reference to Exhibit
(c)(1) to the Company's Report on Form 14D-1 filed on May 17, 1999.)
3.1 Articles of Incorporation of JLG Industries, Inc., which appears as Exhibit 3 to the
Company's Form 10-Q (File No. 0-8454--filed December 13, 1996), is hereby
incorporated by reference.
3.2 By-laws of JLG Industries, Inc., which appears as Exhibit 3.2 to the Company's Form
10-K (File No. 0-8454--filed October 13, 1998), is hereby incorporated by reference.
4.1 Agreement to disclose upon request.
10.1 JLG Industries, Inc. Directors' Deferred Compensation Plan amended and restated as of
August 1, 1998 which appears as Exhibit 10.2 to the Company's 10-K (File No.
0-8454--filed October 13, 1998) is hereby incorporated by reference.
</TABLE>
28
<PAGE>
<TABLE>
<S> <C>
10.2 JLG Industries, Inc. Stock Incentive Plan amended and restated as of August 1, 1998,
which appears as Exhibit 10.2 to the Company's Form 10-K (File No. 0-8454--filed
October 6, 1997), is hereby incorporated by reference.
10.3 JLG Industries, Inc. Directors Stock Option Plan amended and restated as of August 1,
1998, which appears as Exhibit 10.6 to the Company's Form 10-K (File No.
0-8454--filed October 6, 1997), is hereby incorporated by reference.
10.4 JLG Industries, Inc. Supplemental Executive Retirement Plan effective June 1, 1995,
which appears as Exhibit 10.8 to the Company's Form 10-K (File No. 0-8454--filed
October 6, 1997), is hereby incorporated by reference.
10.5 JLG Industries, Inc. Executive Retiree Medical Benefits Plan effective June 1, 1995,
which appears as Exhibit 10.9 to the Company's Form 10-K (File No. 0-8454--filed
October 6, 1997), is hereby incorporated by reference.
10.6 JLG Industries, Inc. Executive Severance Plan effective June 1, 1995, which appears
as Exhibit 10.10 to the Company's Form 10-K (File No. 0-8454--filed October 6, 1997),
is hereby incorporated by reference.
10.7 JLG Industries, Inc. Executive Deferred Compensation Plan amended and restated as of
August 1, 1998 which appears as Exhibit 10.11 to the Company's 10-K (File No.
0-8454--filed October 13, 1998), is hereby incorporated by reference.
10.8 First Union Credit Agreement, which appears as Exhibit 10.2 to the Company's Form
8-K/A (File No. 0-8454--filed August 31, 1999), is hereby incorporated by reference.
10.9 Amended and Restated Employment Agreement dated May 10, 1999 between Gradall
Industries, Inc. and Barry L. Phillips
10.10 Deferred Compensation Agreement between The Gradall Company and Barry L. Phillips
10.11 The Gradall Company Amended and Restated Supplemental Executive Retirement Plan
effective March 1, 1988
10.12 The Gradall Company Benefit Restoration Plan
10.13 Split-Dollar Life Insurance Agreement dated as of August 30, 1995 between The Gradall
Company and Barry L. Phillips
21 Subsidiaries of the registrant
23 Consent of independent auditors
27 Financial Data Schedule
99 Cautionary Statements Pursuant to the Securities Litigation Reform Act of 1995
</TABLE>
(b) Reports on Form 8-K
On May 14, 1999, the company filed a Form 8-K announcing it definitive
agreement to purchase all the outstanding stock of Gradall Industries, Inc. On
August 31, 1999, the company filed a Form 8-K/A to include previously omitted
information regarding the Gradall acquisition including financial statements for
Gradall and pro forma financial information for the Company relative to the
acquisition of Gradall.
29
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on September 23, 1999
JLG INDUSTRIES, INC.
(Registrant)
/s/ L. DAVID BLACK
--------------------------------------
L. David Black, Chairman of the Board,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities indicated as of September 23, 1999.
/s/ CHARLES H. DILLER, JR.
- -------------------------------------------
Charles H. Diller, Jr., Executive Vice President,
Chief Financial Officer, Secretary and Director
/s/ GEORGE R. KEMPTON
- -------------------------------------------
George R. Kempton, Director
/s/ JAMES A. MEZERA
- -------------------------------------------
James A. Mezera, Director
/s/ CHARLES O. WOOD, III
- -------------------------------------------
Charles O. Wood, III, Director
30
<PAGE>
Exhibit 4.1
Agreement To Disclose Upon Request
JLG Industries, Inc. (the "Company") hereby agrees that, with respect to any
agreement relating to long-term debt of the Company that has not been filed as
an exhibit to the Company's reports filed pursuant to the Securities Exchange
Act of 1934 because such filing is not required pursuant to the provisions of
S-K Item 601 (b) (4) (iii) (A), the Company will furnish a copy of any such
agreement to the Securities and Exchange Commission upon request.
JLG INDUSTRIES, INC.
(Registrant)
/s/ Charles H. Diller
----------------------------------------
Charles H. Diller, Jr., Executive Vice
President and Chief Financial Officer
<PAGE>
Exhibit 10.9
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of the 10th day of May, 1999, by and between
GRADALL INDUSTRIES, INC., a Delaware corporation (the "Company"), and BARRY L.
PHILLIPS ("Executive").
WITNESSETH THAT:
WHEREAS, the Executive has been employed by the Company as its
President pursuant to the terms of an employment agreement by and between The
Gradall Company and the Executive dated September 5, 1985, as restated and
amended by agreements dated July 21, 1987, January 19, 1988, July 20, 1988, July
17, 1989, February 5, 1993, October 13, 1995, and January 1, 1998 (the "Prior
Employment Agreement");
WHEREAS, the Company and the Executive desire to amend and restate the
Prior Employment Agreement to provide for the continued employment of the
Executive after the sale of the Company to JLG Industries, Inc.
("JLG") upon the terms and conditions hereinafter set forth; and
WHEREAS, the Executive's services are of great value to the Company and
it is recognized that substantial inducement must be offered to the Executive in
order that the Company may retain his services.
NOW, THEREFORE, in consideration of the mutual covenants hereinafter
set forth, the parties agree as follows:
SECTION 1. DUTIES. The Company hereby agrees to continue to employ the
Executive as President and Chief Executive Officer of the Company, and the
Executive hereby agrees to continue to serve the Company in that capacity in
accordance with the terms and conditions set forth herein:
(a) The Executive shall be vested with all powers and rights
attendant to the office of President and Chief Executive
Officer, and shall have full authority and responsibility,
subject to the general direction, approval and control of the
Board of Directors of the Company, to formulate policies and
administer the Company in all respects.
(b) If elected or appointed by the Board of Directors, the
Executive shall serve as a director of the Company without
additional compensation.
(c) During the term of this Agreement, the Executive shall devote
all of his business time, attention, energy and skill to the
performance of the duties and services described herein, and
shall not engage directly or indirectly in any other business
activity, whether or not such business activity is pursued for
gain, profit or other pecuniary advantage, except with the
written consent of the Company's Board of Directors, provided,
that the provisions of this Section 1(c) shall not restrict
the Executive's investment of his personal assets or the
Executive's participation in any professional, academic or
civic activity.
SECTION 2. TERM. Subject to prior termination as set forth in Section
10 hereof, the term of the Executive's employment under this Agreement shall be
for a period of three (3) years, beginning on the date this Agreement becomes
effective.
<PAGE>
SECTION 3. COMPENSATION. The Company shall pay to the Executive as
compensation for his services hereunder a base salary of Two Hundred Sixty
Thousand Dollars ($260,000) per year, payable in equal semi-monthly
installments, subject to withholding and other applicable taxes. The salary
provided herein shall be subject to adjustment based on annual reviews conducted
by the Company (as so adjusted from time to time, "Base Salary"). Effective on
the date this Agreement becomes effective, "Base Salary" shall include an
additional $12,360.00 per year in lieu of the automobile allowance previously
provided.
SECTION 4. INCENTIVE COMPENSATION. The Executive shall be entitled to
participate in any incentive compensation plans established by the Company from
time to time. The amount payable to the Executive under existing management
incentive compensation plans for 1999 shall be payable on January 3, 2000 in an
amount equal to 7/12 of the bonus that would be payable for calendar year 1999
assuming that the Company would have achieved 24% growth in earnings per share
compared to 1998. Effective as of August 1, 1999, the Executive shall
participate in the management incentive compensation plans and stock based
compensation plans of JLG as approved by the JLG Compensation Committee from
time to time, and shall no longer participate in existing Company management
incentive compensation plans.
SECTION 5. EXPENSES. The Executive is authorized to incur reasonable
expenses in connection with the business of the Company and the performance of
his duties hereunder, including expenses for entertainment, travel and similar
items. The Company will pay or reimburse the Executive for all such expenses
upon the presentation by the Executive of an itemized account of such
expenditures and any other documentation or substantiation of expenses which may
be required for compliance with applicable state and federal tax laws.
SECTION 6. VACATIONS. The Executive shall be entitled to four (4) weeks
of vacation each year, during which time his compensation shall be paid in full.
SECTION 7. [Reserved]
SECTION 8. EXECUTIVE BENEFITS. (a) The Executive shall be entitled to
all benefits offered by the Company to any of its executive or salaried
employees including, but not limited to, major medical health insurance,
hospitalization insurance, life insurance, travel and accident insurance, and
disability insurance, including, but not limited to, those benefits the
Executive currently receives from the Company; provided, however, to the extent
that any benefit provided to the Executive under this Section 8 is, or is
equivalent to, a Broad-Based Benefit, the benefit provided to the Executive
shall reflect any generally applicable change to or reduction of such
Broad-Based Benefit. The term "Broad-Based Benefit" shall mean any applicable
benefit under any plan, program, or arrangement that is provided or made
available to employees generally and shall not include any benefit considered to
be an "executive" benefit that is provided or made available only to upper-level
management.
(b) DISABILITY. The Company shall maintain in full force and effect and
pay all premiums due under that certain disability insurance policy, insuring
the Executive and issued by The New England Insurance Companies under Policy No.
DO99437 (the "Disability Policy"). In the event that the Executive is unable to
perform his duties hereunder by reason of illness or incapacity, the Executive
shall continue to receive all amounts payable under this Agreement, until the
Executive receives payments under the Disability Policy. If the Executive
receives the full benefit amount payable under the Policy, the Company shall
have no further obligation to make payments under this Agreement to the
Executive during the period in which the Executive is receiving the full benefit
under the Disability Policy. During any such period of disability, the
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Executive shall continue to receive all benefits theretofore received by the
Executive. Upon the termination of the Executive's disability and the
Executive's right to receive the full benefit payable under the Disability
Policy, the Executive's full compensation shall be reinstated in full, subject
to the provisions of Section 10(a).
SECTION 9. DEFERRAL OF COMPENSATION. The Executive shall be entitled to
participate in the Company's Supplemental Executive Retirement Plan, the Benefit
Restoration Plan and any other deferred compensation program maintained by the
Company.
SECTION 10. TERMINATION. The Executive's employment hereunder may be
terminated in accordance with the following terms and conditions:
(a) The Company may terminate the Executive's employment hereunder
upon ninety (90) days written notice to the Executive, in the
event that the Executive has been unable to perform his duties
by reason of illness or incapacity, which inability continues
for a consecutive twelve month period, provided, that the
Executive is receiving the full benefit amount payable under
the Disability Policy.
(b) Notwithstanding anything herein to the contrary, the Company
shall have the right to terminate the Executive's employment
hereunder, effective upon written notice of such termination,
and shall not have an obligation to pay any amounts provided
under Section 10(d) hereof upon the happening of any of the
following events:
(i) the failure by the Executive to observe the
restrictive covenants set forth in Sections 11, if
applicable, and 12 hereof, as determined by a court
of competent jurisdiction;
(ii) the commission by the Executive of a material theft
or embezzlement of Company property;
(iii) the conviction of the Executive for a crime resulting
in injury to the business or property of the Company;
or
(iv) the commission of any act by the Executive in the
performance of his duties hereunder adjudged by a
court of competent jurisdiction to amount to gross,
willful or wanton negligence.
(c) The Executive may terminate his employment with the Company
upon ninety (90) days written notice to the Company. Upon the
effective date of such termination, the Company shall have no
further obligation to pay any amounts provided for in this
Agreement, except as set forth in Sections 10(d), 10(f) and
10(h) hereof.
(d) In the event the Executive's employment with the Company (or
any successor company) is terminated within three (3) years
following the date this Agreement becomes effective, and such
termination is due to the Executive's dismissal (other than
pursuant to Sections 10(a) or 10(b)), or the Executive's
resignation for Good Reason, as hereinafter defined, the
Company (or such successor company) shall:
(i) continue to pay the Executive for a period equal to
the remaining term of this Agreement as set forth in
Section 2 (the "Continuation Period") (A) his Base
Salary, including any portion thereof the receipt of
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which the Executive may previously have elected to
defer, plus (B) for each month in the Continuation
Period, 1/12 of his incentive compensation awarded
with respect to services rendered during the calendar
year preceding such termination (including any
portion thereof which the Executive elected to
defer), which incentive compensation shall in no
event be less than forty percent (40%) of his Base
Salary for such year,
(ii) continue for the duration of the Continuation Period
the Executive's participation in the major medical,
health, hospitalization, life, travel and accident
and disability insurance plans or programs provided
to the Executive prior to the date hereof, or provide
equivalent benefits, at no premium cost to him,
provided, however, that to the extent that any
benefit provided to the Executive under this Section
10(d)(ii) is, or is equivalent to, a Broad-Based
Benefit, the benefit provided to the Executive shall
reflect any generally applicable change to or
reduction of such Broad-Based Benefit,
(iii) treat the Executive as if he had retired at the
expiration of the Continuation Period at age 60 for
the purpose of determining benefits due and payable
to him under The Gradall Company's Employees'
Retirement Plan, The Gradall Company Retiree Health
Care Plan as it existed in 1999 and The Gradall
Company Benefit Restoration Plan,
(iv) provide the Executive with outplacement services by a
firm selected by the Executive, at the expense of the
Company, in an amount up to fifteen percent (15%) of
the Executive's Base Salary, and
(v) provide the Executive with the benefits set forth in
Section 15.
(e) The term "Good Reason" shall mean (i) a material breach of
this Agreement by the Company or its successor; (ii) a
reduction in the Executive's Base Salary or employee benefits
referred to in Sections 8 and 9 hereof; provided, however,
that any generally applicable change to or reduction of a
Broad-Based Benefit shall not be considered a reduction in
employee benefits; (iii) a material reduction in fringe
benefits; (iv) a reduction from the present 45% Bonus Target
Percentage applicable to the Executive under the JLG
Management Incentive Plan as in effect for calendar year 1999,
or a variance of the range of the Company Modifier Percentage
or the Individual Performance Modifier from the respective
ranges thereof applicable to other officers of JLG; (v) a
change in the Executive's reporting responsibility to someone
other than the Chief Executive Officer of JLG; (vi) a change
in position, duties or responsibilities that renders the
Executive ineligible to participate in JLG's stock option
plans or reduces the number of shares covered by options
awarded to him thereunder from the number of option shares he
would have been awarded had such change not been made; (vii)
the relocation of the Executive's principal work place without
his consent to a location outside the New Philadelphia, Ohio
metropolitan area.
(f) In the event of termination pursuant to Sections 10(a), 10(b),
10(c), or 10(d) hereof, the Executive shall receive
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the entire balance of any sums earned by him prior to
termination and such other benefits which may be due him
including, but not limited to, a prorata portion of amounts
earned by the Executive under any incentive compensation plans
maintained by the Company or JLG.
(g) Upon termination of his employment, for any reason, the
Executive shall promptly surrender to the Company all property
provided him by the Company for use in relation to his
employment, and, in addition, the Executive shall surrender to
the Company any and all documents, files, records or other
material and information of or pertaining to the Company or
its business operations.
(h) The Company (or any successor company) shall pay or reimburse
the Executive for all costs and expenses including, without
limitation, court costs and reasonable attorneys' fees,
incurred by Executive in connection with any claim, action or
proceeding brought to enforce or interpret any provision of
this Section 10 or challenging the validity or enforceability
of any provision thereof.
SECTION 11. NON-COMPETITION. During the period of his employment with
the Company, the Executive covenants and agrees that he shall not do any of the
following:
(a) Own, manage, operate, join, control, be employed by,
participate in, or be connected in any manner with the
ownership, management, operation, or control of any business
that is competitive with the types of businesses conducted by
the Company at that time within any areas in which the Company
intends to conduct business, as known to Executive by reason
of Executive's affiliation with the Company. Nothing herein
shall prohibit Executive from owning stock or other securities
of a competitor, provided that Executive's equity interest
shall not exceed five percent (5%) of the total outstanding
stock of such competitor, and provided Executive, in fact,
does not have the power to control or direct the management or
policies of such competitor and does not serve as a director
or officer thereof, and is not otherwise associated with any
competitor, except as consented to by the Company.
(b) Induce or influence any employee, independent contractor,
agent, customer or supplier of the Company to terminate or
curtail his, her or its employment or business relationship
with the Company.
(c) Solicit or sell any product or service which is competitive
with those offered by the Company to any customer which did
business with the Company at any time during the term of
Executive's employment with the Company.
SECTION 12. CONFIDENTIALITY. During the period of his employment by the
Company and for a period of six (6) months following its termination, for any
reason, the Executive covenants and agrees that he shall not use, disseminate,
or disclose, for his own benefit, or for the benefit of any person, firm,
business, or other entity, any confidential information pertaining to the
Company unless such information is first made public by the Company; the Company
authorizes, in writing, the use, dissemination, or disclosure of such
information; or as otherwise required by law. For purposes of this subparagraph,
confidential information is information which is not generally known to the
Company's industry, and relates, by way of example and not by way of limitation,
to
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the Company's manufacturing process, cost and pricing data, supply sources,
contracts, and customer lists.
SECTION 13. MITIGATION. The Executive shall not be obligated to seek
other employment following termination of employment hereunder; however, any
amounts owing to Executive under Section 10(d)(other than subsection (ii)
thereof) of this Agreement shall be offset against all amounts earned by the
Executive from other employment (including self employment) beginning one year
after termination of employment hereunder. The Executive's entitlements under
Section 10(d)(ii) shall terminate immediately upon the Executive's becoming
entitled to coverage of a similar nature under benefit plans of a subsequent
employer, subject to the Executive's rights to continuation coverage under the
Company's plans at his expense under COBRA.
SECTION 14. GOLDEN PARACHUTE EXCISE TAX. (a) If any of the payments or
benefits received or to be received by the Executive in connection with a Change
in Control or the Executive's termination of employment (whether pursuant to the
terms of this Agreement or any other plan, arrangement or agreement) (such
payments or benefits, excluding the Gross-Up Payment defined below, being
hereinafter referred to as the "Total Payments") will be subject to the excise
tax imposed under Section 4999 (the "Excise Tax"), then the provisions of either
subclause (i) or (ii) of this section shall apply: (i) if the Total Payments are
less than 115% of the maximum amount of such payments that could be made without
imposition of Excise Tax (the "Safe Harbor Amount"), then the Total Payments
will be reduced to the Safe Harbor Amount; or (ii) if the Total Payments equal
or exceed 115% of the Safe Harbor Amount, the Company shall pay to the Executive
an additional amount (the "Gross-Up Payment") such that the net amount retained
by the Executive, after deduction of any Excise Tax on the Total Payments and
any federal, state and local income and employment taxes and Excise Tax upon the
Gross-Up Payment, shall be equal to the Total Payments.
(b) The calculations necessary to give effect to this section shall be
performed by the accounting firm which was immediately prior to the Change in
Control, the Company's independent auditor (the "Auditor"). For purposes of
determining whether any of the Total Payments will exceed the Safe Harbor Amount
and the amount of the Excise Tax, if any, (i) all of the Total Payments shall be
treated as "parachute payments" (within the meaning of section 280G(b)(2) of the
Code) unless, in the opinion of tax counsel ("Tax Counsel") reasonably
acceptable to the Executive and selected by the Auditor, such payments or
benefits (in whole or in part) do not constitute parachute payments, including
by reason of section 280G(b)(4)(A) of the Code, (ii) all "excess parachute
payments" within the meaning of section 280G(b)(1) of the Code shall be treated
as subject to the Excise Tax unless, in the opinion of Tax Counsel, such excess
parachute payments (in whole or in part) represent reasonable compensation for
services actually rendered (within the meaning of section 280G(b)(4)(B) of the
Code) in excess of the Base Amount allocable to such reasonable compensation, or
are otherwise not subject to the Excise Tax, and (iii) the value of any noncash
benefits or any deferred payment or benefit shall be determined by the Auditor
in accordance with the principles of sections 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of the Gross-Up Payment, the Executive
shall be deemed to pay federal income tax at the highest marginal rate of
federal income taxation in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal rate of
taxation in the state and locality of the Executive's residence on the date of
termination of employment, net of the maximum reduction in federal income taxes
which could be obtained from deduction of such state and local taxes.
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(c) In the event that subclause (i) of this Section 14(a) applies, the
Executive and the Company shall jointly agree on the allocation of any reduction
in the Total Payments.
(d) The provisions of this Section 14 shall be applied without giving
effect to any cap or limitation on benefits under The Gradall Company's Amended
and Restated Supplemental Executive Retirement Plan that is intended to avoid
Excise Tax, and the Company hereby waives the application of any such provision
to the Executive.
SECTION 15. SUPPLEMENTAL RETIREMENT BENEFITS.
(a) In the event that the Executive's employment is terminated under
circumstances entitling him to the payments and benefits set forth in Section
10(d), the Executive shall be entitled to the following additional benefits:
(i) Under The Gradall Company's Amended and Restated
Supplemental Executive Retirement Plan (i) three years of additional service
credit for vesting purposes; and (ii) three additional years of Company
contributions, each in an amount not less than the Company contribution for the
year prior to the year of termination of employment.
(ii) Under the Deferred Compensation Agreement between the
Executive and the Company dated July 19, 1989, the Executive shall be treated as
if he had retired from the Company on or after age 65.
(iii) The Company shall continue to pay all premiums due under
The New England Mutual Life Insurance Company Policy No. 6801161 insuring the
life of Executive in the amount of $500,000 and shall otherwise comply with the
provisions of the Split-Dollar Life Insurance Agreement between the Company and
the Executive dated August 30, 1995.
(b) In the event The Gradall Company's Employees' Retirement Plan or
The Gradall Company Retiree Health Care Plan as it existed in 1999 is suspended
or frozen, the Company shall supplement the benefits due and payable to him
under the said Retirement Plan and Retiree Health Care Plan and The Gradall
Company Benefit Restoration Plan so that he shall receive total benefits upon
his retirement or other termination of employment equal to the benefits he would
have received under such plans had the said Retirement Plan and/or Retiree
Health Care Plan not been suspended or frozen.
SECTION 16. NOTICES. Any notice required or desired to be given
pursuant to this Agreement shall be in writing and sent by certified mail to the
parties at the following addresses, or to such other addresses as either may
designate in writing to the other party:
To the Company: Gradall Industries, Inc.
406 Mill Avenue S.W.
New Philadelphia, Ohio 44663
To Executive: Barry L. Phillips
403 Hillcrest Drive N.E.
New Philadelphia, Ohio 44663
SECTION 17. WAIVER. Failure to insist upon strict compliance with any
of the terms, covenants, or conditions hereof shall not be deemed a waiver of
such term, covenant, or condition, nor shall any waiver or relinquishment of any
right or power hereunder at any one or more times be deemed a waiver or
relinquishment of such right or power at any other time or times.
SECTION 18. SEVERABILITY. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or
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enforceability of any other provision. In the event that any part of a covenant
contained herein is determined by a court of law to be invalid, a judicially
enforceable provision shall be substituted in its place. Any covenant so
modified shall be binding upon the parties and shall have the same force and
effect as if originally set forth in this Agreement.
SECTION 19. MODIFICATION. This Agreement may be amended only in
writing, signed by both parties hereto.
SECTION 20. HEADINGS. The headings in this Agreement are inserted for
convenience only and are not to be considered a construction of the provisions
thereof.
SECTION 21. ASSIGNMENT. The Executive acknowledges that the services to
be rendered by him are unique and personal. Accordingly, the Executive may not
assign any of his rights or delegate any of his duties or obligations under this
Agreement. However, the rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of the Company including, but not limited to, any corporation which
may acquire all or substantially all of the Company's assets and business, or
which may be consolidated or merged with or into the Company.
SECTION 22. GOVERNING LAW. This Agreement shall be construed and
enforced in accordance with the laws of the State of Ohio.
SECTION 23. NOVATION. When it becomes effective, this Agreement will
terminate and supersede the Prior Employment Agreement.
SECTION 24. ENTIRE AGREEMENT. This Agreement constitutes the entire
understanding and agreement between the Company and the Executive with regard to
all matters herein. There are no other agreements, conditions or
representations, oral or written, express or implied, with regard thereto.
SECTION 25. EFFECTIVENESS. This Amended and Restated Employment
Agreement shall become effective only upon the consummation of the merger
contemplated by the Agreement and Plan of Merger among Gradall Industries, Inc.,
JLG Acquisition Corp. and JLG Industries, Inc. dated as of May 10, 1999. Unless
and until such merger is consummated, the Amended and Restated Employment
Agreement between the Company and the Executive dated as January 1, 1998 shall
remain in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement the
day and year first above written.
GRADALL INDUSTRIES, INC.
By:
------------------------
Sangwoo Ahn
Chairman
---------------------------
Barry L. Phillips
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Exhibit 10.10
DEFERRED COMPENSATION AGREEMENT
THIS AGREEMENT entered into this 19th day of July, 1989, by and
between THE GRADALL COMPANY, an Ohio corporation, with principal offices at 406
Mill Avenue, S.W., New Philadelphia, Ohio 44663 (hereinafter called the
"Company"), and BARRY L. PHILLIPS (hereinafter called the "Employee").
W I T N E S S E T H, T H A T
WHEREAS, the Employee is a key executive employee of the Company,
possessing substantial knowledge of and experience in the business of the
Company, and such knowledge and experience has, and continues to be, of great
value to the Company in the conduct of its business; and
WHEREAS, the Company desires to secure for itself the continued
services of the Employee until Employee retires, and to provide certain deferred
compensation for Employee in consideration of Employee's past and future
service;
WHEREAS, the Corporation desires to assist the Executive in paying
for life insurance on the life of the Executive; and
WHEREAS, the Corporation has determined that this assistance in
paying for life insurance can best be provided under a "split-dollar" type
arrangement;
IT IS NOW THEREFORE AGREED AS FOLLOWS:
ARTICLE 1. DEFINITIONS. For purposes of this Agreement the
following terms shall be defined as set forth in this Section 1.
1.1 "RETIREMENT AGE" shall mean the date upon
which employee attains age sixty-five (65), or such later date upon which
Employee, with the consent of the Company, elects to retire after attaining age
sixty-five (65) and to remain continuously in the employ of the Company until
retirement.
1.2 "DESIGNATED BENEFICIARY" shall mean the
person or persons designated by Employee, in accordance with the provisions of
Section 6 hereof, to receive, in the event of Employee's death, any amounts
payable to Employee hereunder.
ARTICLE 2. RETIREMENT OF EMPLOYEE.
2.1 DEFERRED COMPENSATION. Upon attaining
Retirement Age, if Employee has remained continuously in the employ of the
Company, Employee shall retire, whereupon the Company shall pay Employee
annually in twelve (12) approximately equal monthly installments, for a period
<PAGE>
of fifteen (15) years certain, a retirement benefit in the amount of
Seventy-Eight Thousand Six Hundred Eighty Seven Dollars ($78,687).
2.2 DEATH OF EMPLOYEE AFTER RETIREMENT. In
the event the Employee's death shall occur prior to the expiration of fifteen
(15) years from the date of Employee's retirement under this Section 2, the
Company shall pay the annual deferred compensation described in Section 2.1
above to Employee's Designated Beneficiary for the balance of such fifteen (15)
year period.
ARTICLE 3. DEATH OF EMPLOYEE PRIOR TO RETIREMENT.
3.1 DEATH BENEFIT. In the event of
Employee's death prior to retirement pursuant to Section 2 hereof and prior to
any earlier termination of Employee's employment with the Company, the Employee
will be entitled to receive a life insurance benefit out of the proceeds of a
life insurance policy, and, generally income tax exempt to this Employee's
beneficiary but taxable during this Employee's working years to the extent of
the annual value of his life insurance coverage under the split dollar agreement
corresponding to policy # 8167285 issued by The New England Life insurance
company (hereinafter referred to as the "Policy").
ARTICLE 4. TERMINATION OTHER THAN BY REASON OF
DEATH OR RETIREMENT.
4.1 FORFEITURE OF BENEFITS. In the event
that Employee's employment with the Company shall hereafter terminate or be
terminated for any reason, with or without cause, other than Employee's death or
retirement as set forth hereinabove, the Executive shall receive a lump sum
amount equal to the net cash surrender value of the Policy, or the right to
continue the Policy.
ARTICLE 5. DISABILITY BENEFIT.
5.1 If the Employee's employment shall be
terminated by reason of disability while in the employ of the Corporation, the
Employee shall be paid an amount equal to the net cash surrender value of the
Policy, or the right to continue the Policy.
ARTICLE 6. DESIGNATED BENEFICIARY.
6.1 APPOINTMENT OF DESIGNATED BENEFICIARY.
Upon execution of this Agreement, Employee shall designate, in a writing in form
satisfactory to the Board of Directors of the Company, and file with the
Secretary of the Company, the person, persons or entity to whom payments of the
benefits and/or deferred compensation, as set forth in Sections 2 and 3, hereof,
shall be made in the event of Employee's death. Employee shall thereafter be
free to amend, alter or change such designation, provided however, that any such
amendment, alteration or change shall be made by a writing in form satisfactory
to the Board of Directors of the Company and shall
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be filed with the Secretary of the Company.
ARTICLE 7. MISCELLANEOUS.
7.1 NO ASSIGNMENT WITHOUT CONSENT OF COMPANY.
Except as set forth herein, no rights of any kind under this Agreement shall,
without the written consent of the Company, be transferable or assignable by the
Employee, any Designated Beneficiary or any other person, or to be subject to
alienation, encumbrance, garnishment, attachment, execution or levy of any kind,
voluntary or involuntary.
This Agreement shall be binding upon and shall inure to the benefit of the
Company, its successors and assigns.
7.2 INTERPRETATION. All questions of
interpretation, construction or application arising under this Agreement shall
be decided by the Board of Directors of the Company, whose decision shall be
final and conclusive upon all persons.
7.3 SAVINGS CLAUSE. In the event
that any provision or term of this Agreement is determined by any judicial,
quasi-judicial or administrative body to be void or not enforceable for any
reason, it is agreed upon intent of the parties hereto that all other provisions
or terms of the Agreement shall be enforceable as if such void or nonenforceable
provision or term had never been a part hereof.
7.4 CHANGE OF BUSINESS FORM. The Corporation
agrees that it will not merge or consolidate with any other corporation or
organization, or permit its business activities to be taken over by any other
organization, unless and until the succeeding or continuing corporation or other
organization shall expressly assume the rights and obligations of the
Corporation herein set forth. The Corporation further agrees that it will not
cease its business activities or terminate its existence, other than as
heretofore set for in this Paragraph 7.4, without having made adequate provision
for the fulfilling of its obligations hereunder. In the event of any
default with respect to the provisions of this Paragraph 7.4, the Employee (or
other obligee or obligees) shall have transferred assets, until such default be
corrected.
7.5 GOVERNING LAW. This Agreement is
executed in and shall be construed in accordance with governed by the laws of
the State of Ohio.
7.6 EMPLOYMENT OF EMPLOYEE BY COMPANY.
Nothing herein shall be construed as an offer or commitment by the Company to
continue Employee's employment with the Company for any period of time.
ARTICLE 8. AMENDMENT OF AGREEMENT.
8.1 This Agreement may be revoked or amended
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in whole or in part by a writing signed by both of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have hereunto set their
hands as of the day and year first above written.
THE GRADALL COMPANY
By: /s/ Jack D. Rutherford
-------------------------
/s/ Barry L. Phillips
----------------------------
BARRY L. PHILLIPS
"EMPLOYEE"
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Exhibit 10.11
THE GRADALL COMPANY
AMENDED AND RESTATED
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
WITNESSETH THAT:
WHEREAS, effective March 1, 1988, The Gradall Company, an Ohio
corporation (the "Company") adopted a Supplemental Executive Retirement Plan
(the "Plan") for the benefit of certain employees of the Company, as selected by
the Board of Directors of the Company, and
WHEREAS, the Company desires to amend and restate the Plan for the
further benefit of those employees participating in the Plan.
NOW, THEREFORE, the Plan is hereby amended and restated as follows:
ARTICLE I
ESTABLISHMENT OF PLAN AND PURPOSE
1.1 ESTABLISHMENT OF PLAN. The Company hereby establishes a plan to be
known as The Gradall Company Supplemental Executive Retirement Plan (the
"Plan"). The Plan is to be effective as of March 1, 1988.
1.2 PURPOSE OF PLAN. The purpose of the Plan shall be to reward
selected employees of the Company for loyal service rendered to the Company by
providing them with supplemental compensation, the payment of which will be
deferred pursuant to the provisions of this Plan and by permitting those
selected employees to elect to defer the payment to them of all or a portion of
their compensation pursuant to the terms and conditions hereinafter set forth.
1.3 ESTABLISHMENT OF TRUST. The Company has established an irrevocable
grantor trust pursuant to the terms of that certain Trust Agreement dated as of
August 30, 1995, by and between the Company and Barry L. Phillips, Bruce A.
Jonker and Stanley W. Swope, as Trustees (the "Trust"). All amounts heretofore
or hereafter contributed pursuant to the terms of this Plan by the Company or
any Participant, including any investments or life insurance policies purchased
prior to the date of the Trust and any income or other earnings accrued or
realized with respect to such contributions prior to the date of the Trust shall
be paid to the Trustees, to be held, administered and distributed in accordance
with the terms of the Trust.
ARTICLE II
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DEFINITIONS
2.1 "ACCOUNTS" shall mean the following accounts which may be
maintained for Participants in the Plan, adjusted in each case for such
account's share in the increase or decrease in the net worth of the Trust:
(a) "COMPANY ACCOUNT" shall mean the separate bookkeeping
account maintained for each Participant to which shall
be credited the Participant's share of any Company
contributions made to this Plan as provided in Article
IV hereof.
(b) "COMPENSATION DEFERRAL ACCOUNT" shall mean the
separate bookkeeping account maintained for each
Participant to which shall be credited the portion of
the Participant's Compensation for which payment has
been deferred pursuant to Article V.
2.2 "BENEFICIARY" shall mean the person(s) a Participant shall have
selected to receive his or her death benefits, as provided in Section 8.4
hereof.
2.3 "BOARD OF DIRECTORS" shall mean the Board of Directors of the
Company.
2.4 "CLAIMS MANAGER" shall mean the person designated to review claims
pursuant to Section 7.1 hereof.
2.5 "COMMITTEE" shall mean the separate committee established by the
Board of Directors to administer the Plan.
2.6 "COMPANY" shall mean The Gradall Company, an Ohio corporation.
2.7 "COMPENSATION" with respect to any Participant shall mean the total
compensation paid or accrued by the Company for a Plan Year which shall include
regular salary and wages, overtime pay, bonuses and commissions. Amounts paid to
a Participant pursuant to this Plan and the Trust shall not be considered as
Compensation.
2.8 "DISABILITY" shall mean a physical or mental condition of a
Participant resulting from bodily injury, disease or mental disorder which
renders the Participant incapable of continuing his or her usual and customary
employment with the Company for a period of one (1) year or longer. The
Disability of a Participant shall be determined by a licensed physician chosen
by the Company.
2.9 "EMPLOYEE" shall mean any person who is employed by the Company on
a regular and full-time basis.
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2.10 "ELECTION FORM" shall mean the form to be distributed to and
completed by Participants each year electing to defer Compensation, as provided
in Section 5.1 hereof.
2.11 "ENROLLMENT PERIOD" shall mean the period commencing on January 1
and ending on February 15 of each year.
2.12 "PARTICIPANT" shall mean an employee who has been selected for
participation in the Plan as provided in Article III hereof.
2.13 "PLAN" shall mean The Gradall Company Supplemental Executive
Retirement Plan.
2.14 "PLAN ADMINISTRATOR" shall mean the person(s) or entity designated
to administer the Plan in accordance with Section 8.1 hereof.
2.15 "PLAN YEAR" shall mean the twelve (12) month period commencing on
March 1 and ending on the last day of February of each year.
2.16 "RETIREMENT DATE" shall mean the day on which a Participant
attains the age of sixty (60) years.
2.17 "TRUST" shall mean the trust established pursuant to the terms of
The Gradall Company Nonqualified Deferred Compensation Plans Trust Agreement,
dated as of August 30, 1995, by and between the Company and Barry L. Phillips,
Bruce A. Jonker and Stanley W. Swope, as Trustees.
2.18 "TRUSTEES" shall mean the persons who serve as trustees of the
Trust.
ARTICLE III
PARTICIPATION
The Committee shall determine from time to time, by resolution, those
Employees who are eligible to participate in the Plan. The Plan is designed to
be a selective benefit program and only Employees designated to participate in
the Plan by the Committee shall be eligible to participate in the Plan. The
Committee is hereby authorized from time to time to designate for participation
in this Plan, Employees not previously selected for participation in this Plan
and to terminate the eligibility to participate in this Plan of any Employee
previously selected for participation herein; provided, however, the termination
by the Committee of the eligibility to participate in this Plan of any Employee
shall not reduce or eliminate the Accounts of any such Employee, prohibit such
Employee from having his or her Accounts increased by earnings attributable
thereto following such Employee's termination of participation in this Plan or
restrict or otherwise affect the right of the Employee to receive
3
<PAGE>
amounts in his or her Accounts in accordance with the terms of this Plan and
Trust.
ARTICLE IV
COMPANY CONTRIBUTIONS
The Company shall, from time to time, contribute such amounts to the
Trust for the benefit of the Participants as the Board of Directors shall
determine. All Company contributions shall be allocated among the Company
Accounts of the Participants in such manner as the Board of Directors shall
determine, in its sole discretion.
ARTICLE V
PARTICIPANT CONTRIBUTIONS
5.1 PARTICIPANT ELECTIVE CONTRIBUTIONS. Each Participant in the Plan
may elect to defer the payment to him or her of all or any portion of the
Participant's Compensation for any Plan Year. Prior to the commencement of each
Enrollment Period, the Plan Administrator will give each Participant the option
of electing to defer receipt of the payment of all or any portion of such
Participant's Compensation for the ensuing Plan Year by distributing an election
form (an "Election Form") to each Participant which will provide as follows:
(a) That the Employee has the option of reducing all or
any portion of his or her Compensation for such Plan
Year by completing the Election Form;
(b) That the Employee's election to defer receipt of
Compensation will be effective on the first day of the
Plan Year immediately following such Enrollment
Period;
(c) That the Election Form must be completed and returned
to the Plan Administrator prior to the termination of
the Enrollment Period; and
(d) That the Election Form may not be revised or revoked
by the Employee during the Plan Year for any reason.
5.2 FAILURE TO ELECT. If a Participant fails to return an
Election Form to the Plan Administrator prior to the end of an Enrollment
Period, the Participant will not be eligible to have the payment of all or any
portion of the Participant's Compensation deferred for the Plan Year immediately
following such
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<PAGE>
Enrollment Period. However, a Participant who fails to timely submit an Election
Form prior to the end of an Enrollment Period, will be allowed to submit an
Election Form during any subsequent Enrollment Period for subsequent Plan Years.
5.3 REVISION OF ELECTION FORM. No Participant may revise his or her
Election Form during a Plan Year.
ARTICLE VI
DISTRIBUTION OF BENEFITS UPON CESSATION OF EMPLOYMENT
6.1 VESTING IN COMPENSATION DEFERRAL ACCOUNT. Notwithstanding anything
herein contained to the contrary, each Participant shall at all times be fully
vested in such Participant's Compensation Deferral Account. Upon the date a
Participant becomes entitled to a distribution of his or her Company Account as
provided in Sections 6.2 through 6.7 hereof (or in the case of a Participant who
is "Terminated For Cause" as defined in Section 6.5 hereof, upon the date a
Participant would be entitled to a distribution but for the application of
Section 6.5 hereof), the Participant shall also be entitled to receive a
distribution of his or her Compensation Deferral Account.
6.2 DISABILITY AND RETIREMENT. Upon the date a Participant is either
(a) determined to be suffering from a Disability or (b) reaches his or her
Retirement Date, the Participant shall fully vest in the entire balance of his
or her Company Account and such Participant's Company Account shall be
distributed to such Participant in the manner set forth in Section 6.7 hereof.
6.3 TERMINATION OF EMPLOYMENT. In the event any Participant ceases to
be an Employee prior to the Participant's Retirement Date for any reason other
than the death or Disability of the Participant, the Participant shall, subject
to the provisions of Sections 6.5 and 6.6 hereof, become vested in the balance
of his or her Company Account in accordance with the following schedule:
<TABLE>
<CAPTION>
IF TERMINATION OCCURS VESTED PERCENTAGE
--------------------- -----------------
<S> <C>
Prior to Date Employee Attains Age 55 0%
Prior to Date Employee Attains Age 60 50%
But on or after Date Employee
Attains Age 55
On or after Date Employee Attains Age 60 100%
</TABLE>
A Participant who ceases to be an Employee of the Company shall have such vested
amounts of the Participant's Company Account distributed to him or her in the
manner set forth in Section 6.7 hereof and such Participant shall forfeit the
nonvested portion of his or her Account which funds shall revert to and become
the property of the Company.
5
<PAGE>
6.4 DEATH. Upon the death of a Participant, the Participant shall fully
vest in the entire balance of his or her Company Account. Upon the death of a
Participant, all proceeds of life insurance policies, insuring the life of such
Participant and payable to the Trust shall be allocated to such Participant's
Compensation Deferral Account and the entire balance of the
Participant's Company Account and Compensation Deferral Account, including any
life insurance proceeds allocated to such Accounts as set forth above, shall be
distributed to such Participant's Beneficiary in one lump sum within sixty (60)
days following the close of the Plan Year in which the Participant dies (or at
such earlier time as the Plan Administrator shall determine), provided, that, in
the event any life insurance proceeds have not been received by the Trust by
such date, such life insurance proceeds shall be distributed to such
Participant's Beneficiary within sixty (60) days of the Trust's receipt thereof.
6.5 TERMINATION FOR CAUSE. Notwithstanding the provisions of
Section 6.3 hereof, any Participant whose employment with the Company shall be
"Terminated For Cause" prior to the time such Participant has reached his or her
Retirement Date, shall forfeit any and all rights to his or her Company Account
and such funds shall become the property of the Company. For purposes of this
Plan, a Participant shall be deemed to be Terminated For Cause if the Committee
shall have made a good faith determination that:
(a) The Participant has committed gross neglect in the performance
of any duties required by the Company to be performed by such
Participant;
(b) The Participant has committed an act of theft or fraud while
in the employ of the Company; or
(c) The Participant shall commit acts of repeated insubordination
to the Company.
6.6 CHANGE OF CONTROL. Notwithstanding the provisions of Section 6.3
hereof, if at any time there shall be a sale of substantially all of the assets
of the Company or a sale of more than fifty percent (50%) of the outstanding
shares of voting common stock of the Company, each Participant's
Company Account shall fully vest in such Participant and become distributable as
provided in Section 6.7 hereof. The foregoing notwithstanding, a Participant's
Company Account shall fully vest in such Participant and payment thereon may be
made to such Participant pursuant
to this Section only to the extent that such
accelerated vesting or payment would not create an excess parachute payment
under Section 280G or Section 4999 of the Internal Revenue Code of 1986, as
amended. Notwithstanding the above, this Section 6.6 shall not be triggered by
the acquisition of stock in the Company by Morgan, Lewis, Githens & Ahn, Inc.
prior to October 31, 1995.
6.7 DISTRIBUTIONS UPON TERMINATION OF EMPLOYMENT. Upon the termination
of the Participant's full time employment with the Company, for any reason other
than death, whether voluntary or involuntary, with or without cause, the entire
vested balance of the Participant's Company Account and
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<PAGE>
Compensation Deferral Account (subject to the forfeiture as provided for in
Section 6.5 hereof) shall be distributed to such Participant in monthly
installments for a period of sixty (60) months, with the first such installment
being due and payable within sixty (60) days following the termination of the
Participant's employment with the Company, the amount of which installments
shall be equal to that portion of the Participant's vested and nonforfeited
Accounts as is determined by multiplying the balance thereof (including any
allocations of income, earnings, gain or loss) by a fraction, the numerator of
which shall be one (1) and the denominator of which shall be the number of
remaining installment payments to be made. Notwithstanding the above, the Plan
Administrator may accelerate the payment of such distribution if he deems such
acceleration to be in the best interests of such Participant. No Participant
shall have any right to require the acceleration of any distribution to such
Participant. During the period of any installment distribution, the vested and
nonforfeited amounts remaining in such Participant's Account shall continue to
be held by the Trust and invested in accordance with the terms of the Trust.
ARTICLE VII
CLAIMS PROCEDURE
7.1 CLAIMS MANAGER. For claims procedure purposes, the "Claims Manager"
shall be STAN SWOPE, or such other individual who may be appointed by the Board
of Directors.
7.2 EXPLANATION OF DENIAL OF CLAIMS. If for any reason a claim for
benefits under this Plan is denied by the Company, the Plan Administrator shall
deliver to the claimant a written explanation setting forth the specific reasons
for the denial, pertinent references to the Plan section on which the denial is
based, such other data as may be pertinent and information on the procedures to
be followed by the claimant in obtaining a review of his or her claim, all
written in a manner calculated to be understood by the claimant. For this
purpose:
(a) The claim shall be deemed filed when presented orally or in
writing to the Plan Administrator.
(b) The Plan Administrator's explanation shall be in writing and
delivered to the claimant within ninety (90) days of the date
the claim is filed.
(c) If the Plan Administrator does not notify the Participant of
the denial of the claim within the ninety (90) day period
specified in Section 7.2(b) hereof, then the claim shall be
deemed denied.
7.3 REVIEW OF DENIAL OF CLAIMS. The claimant shall have sixty (60) days
following the earlier of (a) the receipt of the denial of the claim
7
<PAGE>
or (b) the effective date of the denial of the claim, as provided in Section
7.2(c) hereof, to file with the Claims Manager a written request for a full and
fair review of the denial. For such review, the claimant or the claimant's
representative may submit pertinent documents and written issues and comments.
The Claims Manager shall decide the issue and furnish the claimant with a
written response within sixty (60) days of receipt of the claimant's request for
review of the claim. The written response shall include specific reasons for the
decision written in a manner calculated to be understood by the claimant, as
well as specific references to the pertinent Plan provisions on which the
decision is based. If a written response is not so furnished to the claimant
within such sixty (60) day period, the claim shall be deemed denied on review.
ARTICLE VIII
MISCELLANEOUS
8.1 ADMINISTRATION. This plan shall be operated and administered by
the Committee, which shall, for the purposes of this Plan, be the Plan
Administrator. The construction and interpretation by the Plan Administrator of
any provision of this Plan shall be final and conclusive, unless otherwise
determined by the Plan Administrator or otherwise decided by the Claims
Manager. No member of the Committee, nor any person to whom the Committee
delegated its authority pursuant to the foregoing, shall be liable for any
action or determination made by him or her in good faith.
8.2 NONALIENATION OF BENEFITS. No Participant shall have the right to
assign, pledge, sell, anticipate, encumber or transfer his or her benefits under
this Plan in any manner whatsoever. No assignment, pledge, sale, anticipation,
encumbrance or transfer of any of the benefits under this Plan made by any
Participant shall be valid or recognized by the Company.
8.3 AMENDMENT OR TERMINATION. This Plan may be amended or terminated by
the Company at any time; provided, however, no such amendment or termination
shall impair or diminish in any manner whatsoever the Participant's rights to
amounts allocated to Participant's Accounts prior to such amendment or
termination.
8.4 RESTRICTIONS ON PARTICIPANTS' RIGHTS. The benefits granted or
allocated to any Participant pursuant to this Plan do not constitute any stock
of the Company nor shall they evidence any indebtedness of the Company, but,
rather, shall constitute only a right to receive benefits which are payable
pursuant to the terms and conditions provided herein. Notwithstanding anything
herein to the contrary, nothing in this Plan shall:
(a) Give any Participant any rights in any stock of the Company
currently outstanding or hereafter issued;
8
<PAGE>
(b) Give any Participant any rights as a creditor of the Company;
or
(c) Create any right of employment in any Participant, limit the
Company's rights to terminate the employment of any
Participant, or evidence any agreement or understanding that
the Company will employ a Participant in any particular
position, at any particular rate of remuneration or for any
particular length of time.
8.4 DESIGNATION OF BENEFICIARY. Each Employee, upon becoming a
Participant, shall file with the Plan Administrator, a notice in writing
designating one or more beneficiaries to whom payments otherwise due the
Participant pursuant to this Plan shall be made in the event of such
Participant's death. A Participant shall have the right to change the
beneficiary or beneficiaries from time to time but no such change shall become
effective until submitted in writing to the Plan Administrator. In the event no
designation of beneficiary is made by a Participant or if all of the
beneficiaries a Participant shall have designated shall be deceased, the
deceased Participant shall be deemed to have designated his or her estate as
beneficiary hereunder.
8.5 GOVERNING LAW. This Plan shall be construed and governed by the
laws of the State of Ohio, to the extent not preempted by Federal law.
8.6 PARTICIPANT AS COMMITTEE MEMBER. No person who is a member of the
Committee shall take part in any decision regarding the eligibility of such
member to become a Participant in this Plan, the eligibility of such member as a
Participant to share in any Company contribution for any Plan Year, the right of
such member to receive an accelerated distribution hereunder, or in any
other election or decision as a Committee member which affects such member's
rights as a Participant hereunder. The provisions of this Section 8.6 shall
apply notwithstanding anything in this Plan or in the Trust to the contrary.
9
<PAGE>
Exhibit 10.12
THE GRADALL COMPANY
BENEFIT RESTORATION PLAN
ARTICLE I - ESTABLISHMENT AND PURPOSE
1.1 ESTABLISHMENT. The Gradall Company (the "Company"), hereby
establishes, effective as of August 30, 1995, an unfunded retirement benefit
plan to be known as the "THE GRADALL COMPANY BENEFIT RESTORATION PLAN" (the
"plan").
1.2 PURPOSE. The general purpose of this plan is to provide the amount
of the benefit which would have otherwise been paid under the Company's
Employees' Retirement Plan (effective October 28, 1983) as it was constituted on
December 31, 1987, but which cannot be paid due to revisions in the Employees'
Retirement Plan As Amended and Restated January 1, 1988 to comply with tax law
changes.
1.3 APPLICATION OF PLAN. The terms of this plan are applicable only to
employees of the Company who are in the active employ of the Company on or after
the effective date of the plan.
ARTICLE II - DEFINITIONS AND CONSTRUCTION
2.1 DEFINITIONS. Unless otherwise indicated, the terms used in this
plan shall have the same meaning as they have under the pension plan in effect
on the applicable date.
2.2 GENDER AND NUMBER. Except when otherwise indicated by the context,
any masculine terminology when used in the plan shall also include the feminine
gender, and the definition of any term in the singular shall also include the
plural.
2.3 SEVERABILITY. In the event any provision of the plan shall be held
invalid or illegal for any reason, any illegality or invalidity shall not affect
the remaining parts of the plan, but the plan shall be construed and enforced as
if the illegal or invalid provision had never been inserted, and the Company
shall have the privilege and opportunity to correct and remedy such questions of
illegality or invalidity by amendment as provided in the plan.
2.4 APPLICABLE LAW. This plan shall be governed and construed in
accordance with the laws of the State of Ohio.
2.5 PLAN NOT AN EMPLOYMENT CONTRACT. This plan is not an employment
contract. It does not give to any person the right to be continued in
<PAGE>
employment, and all employees remain subject to change of salary, transfer,
change of job, discipline, layoff, discharge, or any other change of employment
status.
ARTICLE III - PARTICIPATION
3.1 PARTICIPANTS. The Committee shall determine if an employee of the
Company is eligible to participate in the plan. An employee of the Company shall
be considered for participation in this plan when his annual pension benefit
under the Employees' Retirement Plan (effective October 28, 1983) as it was
constituted on December 31, 1987, is reduced on account of changes in the
pension formula in the Employees' Retirement Plan as Amended and Restated
January 1, 1988.
Attached in Appendix A are the affected participants. Additional employees may
be added as participants if they meet the criteria and are part of the select
group of management or are highly compensated as determined by the Committee.
ARTICLE IV - BENEFITS
4.1 AMOUNT OF BENEFITS.
(a) GENERAL. The monthly benefit payable at actual retirement
under this plan to the participant shall be equal to the difference between the
amount in (1) and the amount in (2) where --
(1) is the amount of the monthly benefit that would
be payable under the Employees' Retirement Plan (effective October 28,
1983) as it was constituted on December 31, 1987, in the form of a
single life annuity.
(2) is the amount of the monthly benefit actually
payable under the Employees' Retirement Plan As Amended and Restated
January 1, 1988, in the form of a single life annuity.
The existence of a qualified domestic relations order does not affect the
calculation of the benefit under (a)(1) or (a)(2).
(b) OTHER FORMS. Alternative forms of benefit payout can be
elected prior to the retirement date. The benefit will be adjusted using
actuarial factors used in the pension plan. In addition, a lump sum amount will
be calculated and will be included as an alternative form of benefit under this
plan.
(c) PLAN TERMINATION. In the event that the pension plan is
terminated, one of the following should occur --
2
<PAGE>
(1) If the pension plan is merged or replaced, then
the benefit calculated in 4.1(a)(2) will be based on the pension plan
in effect.
(2) If the pension plan is settled through the
purchase of deferred annuities or a lump sum payment in cash, then the
benefit in 4.1 will be determined and settled in a similar fashion at
the effective date of the settlement.
4.2 COMMENCEMENT DATE. Benefits payable under this plan shall commence
on or about the same date that benefits commence under the pension plan.
4.3 VESTING. A participant shall become vested in the benefit payable
under Section 4.1 at the same time that he becomes vested under the pension
plan.
4.4 DEATH BENEFITS. No death benefit shall be paid under this plan
except as provided in this section. A death benefit shall be payable to a
surviving spouse or other designated beneficiary of the participant if a death
benefit is payable under the terms of the pension plan. Such death benefit shall
be computed using the same factors and assumptions used to compute the
applicable death benefit under the pension plan and shall be paid in the same
form as such death benefit, except that the amount of the death benefit shall be
computed with respect to the amount of the benefit the participant accrues under
this plan.
4.5 FUNDING. All amounts paid under this plan shall be paid in cash
from the general assets of the Company. Benefits shall be reflected on the
accounting records of the Company but shall not be construed to create, or
require the creation of, a trust, custodial or escrow account. No employee shall
have any right, title, or interest whatever in or to any investment reserves,
accounts, or funds that the Company may purchase, establish, or accumulate to
aid in providing the benefits described in this plan. Nothing contained in this
plan, and no action taken pursuant to its provisions, shall create or be
construed to create a trust or a fiduciary relationship of any kind between the
Company and an employee or any other person. Neither an employee or a
beneficiary of an employee shall acquire any interest greater than that of an
unsecured creditor.
4.6 TAX WITHHOLDING. The Company may withhold from a payment any
federal, state, or local taxes required by law to be withheld with respect to
such payment and such sum as the Company may reasonably estimate as necessary to
cover any taxes for which the Company may be liable and which may be assessed
with regard to such payment.
4.7 NONTRANSFERABILITY. An employee or his beneficiary shall have no
rights by way of anticipation or otherwise to assign or otherwise dispose of any
interest under this plan, nor shall rights be assigned or transferred by
operation of law.
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<PAGE>
ARTICLE V - ADMINISTRATION
5.1 ADMINISTRATION. The plan shall be administered by the Compensation
Committee of the Board.
5.2 FINALITY OF DETERMINATION. The determination of the Committee as to
any disputed questions arising under this plan, including questions of
construction and interpretation, shall be final, binding, and conclusive upon
all persons.
5.3 EXPENSES. The expenses of administering the plan shall be borne by
the Company.
5.4 INDEMNIFICATION AND EXCULPATION. The members of the Committee, its
agents, and officers, directors, and employees of the Company and its affiliates
shall be indemnified and held harmless by the Company against and from any and
all loss, cost, liability, or expense that may be imposed upon or reasonably
incurred by them in connection with or resulting from any claim, action, suit,
or proceeding to which they may be a party or in which they may be involved by
reason of any action taken or failure to act under this plan and against and
from any and all amounts paid by them in settlement (with the Company's written
approval) or paid by them in satisfaction of a judgment in any such action,
suit, or proceeding. The foregoing provision shall not be applicable to any
person if the loss, cost, liability, or expense is due to such person's gross
negligence or willful misconduct.
ARTICLE VI - CLAIMS PROCEDURE
6.1 WRITTEN CLAIM. Benefits shall be paid in accordance with the
provisions of this agreement. The participant, or a designated recipient or any
other person claiming through the participant shall make a written request for
benefits under this agreement. This written claim shall be mailed or delivered
to the named fiduciary. Such claim shall be reviewed by the named fiduciary or
his delegate. The named fiduciary for this plan shall be the same as the named
fiduciary of the Company's pension plan.
6.2 DENIED CLAIM. If the claim is denied, in full or in part, the named
fiduciary shall provide a written notice within ninety (90) days setting forth
the specific reasons for denial, and any additional material or information
necessary to perfect the claim, and an explanation of why such material or
information is necessary, and appropriate information and explanation of the
steps to be taken if a review of the denial is desired.
6.3 REVIEW PROCEDURE. If the claim is denied and a review is desired,
the participant (or beneficiary) shall notify the named fiduciary in writing
within sixty (60) days (a claim shall be deemed denied if the named fiduciary
does not take any action within the aforesaid ninety (90) day period) after
receipt of the written notice of denial. In requesting a review, the participant
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<PAGE>
or his beneficiary may request a review of the plan document or other pertinent
documents with regard to the employee benefit plan created under this agreement,
may submit any written issues and comments, may request an extension of time for
such written submission of issues and comments, and may request that a hearing
be held, but the decision to hold a hearing shall be within the sole discretion
of the committee.
6.4 COMMITTEE REVIEW. The decision on the review of the denied claim
shall be rendered by the Committee within sixty (60) days after the receipt of
the request for review (if no hearing is held) or within sixty (60) days after
the hearing if one is held. The decision shall be written and shall state the
specific reasons for the decision including reference to specific provisions of
this plan on which the decision is based.
ARTICLE VII - MERGER, AMENDMENT, AND TERMINATION
7.1 MERGER, CONSOLIDATION, OR ACQUISITION. The plan shall be binding
upon the Company, its assigns, and any successor Company which shall succeed to
substantially all of its assets and business through merger, consolidation or
acquisition.
7.2 AMENDMENT AND TERMINATION. The Board of Directors of the Company
may amend, modify, or terminate the plan at any time. In the event of a
termination of the plan pursuant to this section, unpaid benefits shall continue
to be an obligation of the Company and shall be paid as scheduled.
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed by its duly authorized officer on this 31st day of AUGUST, 1995,
effective as of the 30th day of AUGUST, 1995.
THE GRADALL COMPANY
By: /s/ Barry Phillips
-------------------------
ATTEST:
By:
-------------------------
[SEAL]
5
<PAGE>
APPENDIX A
THE GRADALL COMPANY
The participants in the Benefit Restoration Plan are as follows:
James Cahill
Bruce Jonker
John Gano
William English
Stanley Swope
Michael Haberman
Ky Kuehling
Everett Evans
Phillip Keller
<PAGE>
Exhibit 10.13
SPLIT-DOLLAR LIFE INSURANCE AGREEMENT
THIS AGREEMENT is made and entered into as of this 30th day of August,
1995, by and between The Gradall Company (the "Company") and Barry L. Phillips
(the "Executive").
WITNESSETH THAT:
WHEREAS, the Company is the owner of a life insurance policy issued by The
New England Mutual Life Insurance Company (the "Insurer") insuring the life of
the Executive, as further described on Exhibit A hereto (the "Policy");
WHEREAS, the Policy is subject to a split dollar endorsement in favor of
the Executive (the "Split Dollar Endorsement"); and
WHEREAS, the Company and the Executive desire to convert the Policy to a
collateral assignment split dollar arrangement on the terms set forth herein.
NOW, THEREFORE, the parties agree as follows:
1. CONVERSION OF POLICY TO COLLATERAL ASSIGNMENT. The Company shall assign,
set over, and transfer unto the Executive all of the Company's right title and
interest in and to the Policy, subject to and at the same time that the
Executive executes a collateral assignment of the Policy in favor of the
Company, securing the Executive's obligation to pay to the Company the
"Company's Interest" in the Policy, determined in accordance with the provisions
of Section 5 hereof. The Company's Interest in the Policy shall at no time vest
in or inure to the benefit of the Executive, but shall at all times inure to the
benefit of the Company, whether as a result of the Company's ownership of the
Policy, or as a result of the collateral assignment of the Policy to the
Company, which shall be deemed to occur simultaneously with the transfer of
ownership of the Policy to the Executive.
2. PAYMENT OF PREMIUMS BY THE EXECUTIVE. From and after the date of this
Agreement, the Executive shall pay that portion of the premium due under the
Policy as is equal to the lesser of (a) the PS-58 cost of the insurance coverage
provided by the Policy, or (b) the Insurer's current published premium rate for
annually renewable term insurance for standard risks in an amount equal to the
coverage provided by the Policy. Premium amounts payable by the Executive
pursuant to this Section 2 shall be withheld by the Company from compensation
which is otherwise payable to the Executive, including amounts to be paid by the
Company to the Executive pursuant to Section 4 hereof.
3. PAYMENTS OF PREMIUMS BY THE COMPANY. On or before the due date of the
Policy premium, or within any applicable grace period, the Company shall pay the
full
<PAGE>
amount of the premium due on the Policy, including that portion thereof,
withheld from the Executive's compensation, pursuant to Section 2 hereof.
4. BONUS. On or before the due date of the Policy premium, the Company
shall pay the Executive a bonus in an amount equal to 100% of that portion of
the premium on the Policy to be paid by the Executive pursuant to Section 2
hereof. The Company is hereby authorized to withhold from such bonus that
portion of the premium on the Policy to be paid by the Executive pursuant to
Section 2 hereof.
5. REPAYMENT OF THE COMPANY'S INTEREST. Except as provided by Section 7
hereof, the Company shall be repaid an amount equal to the Company's Interest
(as hereinafter defined) upon the earlier to occur of (a) the surrender or
cancellation of the Policy, provided that such cancellation does not result from
the Company's failure to pay premiums on the Policy as required by Section 3
hereof, or (b) the death of the Executive. For the purposes of this Agreement,
the term "Company's Interest" shall mean the sum of (a) the greater of (i) the
cash surrender value of the Policy, as of the date of this Agreement, or (ii)
the cumulative total premium paid by the Company under the Policy since the
effective date of the Split Dollar Endorsement to the date of this Agreement;
plus (b) the cumulative total premium paid by the Company after the date of this
Agreement, pursuant to Section 3 hereof, less the amount paid by or on behalf of
the Executive pursuant to Section 2 hereof (the "Company's Interest"). Except as
provided by Section 7 hereof, and unless otherwise paid by the Executive, the
Company's Interest shall be repaid from the cash surrender value of the Policy
(as defined therein) upon the surrender or cancellation of the Policy, or from
the death proceeds of the Policy upon the death of the Executive.
6. COLLATERAL ASSIGNMENT, OWNERSHIP OF POLICY. To secure the Executive's
obligation to pay the Company the Company's Interest, the Executive has,
contemporaneously herewith, assigned the Policy to the Company as collateral,
pursuant to the form attached hereto as Exhibit B, which collateral assignment
specifically provides that the sole right and interest of the Company in the
Policy is to be paid the Company's Interest pursuant to the terms of Section 5
and Section 6 hereof. Upon the Company's receipt of the Company's Interest or as
provided in Section 7 hereof, the Company shall release the collateral
assignment of the Policy, by execution and delivery to the Executive of an
appropriate instrument of release. Except as set forth in this Section 6, the
Company shall have no rights or interest in the Policy. Subject to the limited
collateral assignment to the Company provided for herein, the Executive shall be
the sole and exclusive owner of the Policy and shall possess and be entitled to
exercise all the rights of the owner of the Policy including, but not limited
to, the right to designate the beneficiaries of and collect the proceeds payable
upon death under the Policy, select settlement and investment options, borrow on
the security of the Policy (to the extent the cash surrender value of the Policy
exceeds the Company's Interest) and to assign, surrender or cancel the Policy.
7. RELEASE OF THE COMPANY'S INTEREST. Upon the termination of the
Executive's employment with the Company, for any reason, whether voluntary or
involuntary, with or without cause, the Company's Interest in the Policy shall
terminate, without any payment to the Company by the Executive or from the
2
<PAGE>
Policy. Upon the termination of the Executive's employment with the Company, the
Company shall release the collateral assignment of the Policy, by execution and
delivery to the Executive of an appropriate instrument of release, without the
payment to the Company of any consideration.
8. TERMINATION OF AGREEMENT. This Agreement shall terminate upon the
earliest to occur of any of the following events:
a. surrender of the Policy by the Executive;
b. delivery by the Executive of written notice of termination to the
Company; or
c. the termination of the Executive's employment with the Company,
whether voluntary or involuntary, with or without cause, for any
reason including the death of the Executive.
Upon the termination of this Agreement all obligations of the Company pursuant
to Sections 3 or 4 hereof shall cease. Notwithstanding the termination of this
Agreement, the provisions of Sections 5, 6 and 7 of the Agreement shall survive
the termination of this Agreement.
9. INSURER. The Insurer shall be fully discharged from its obligations
under the Policy by complying with the terms thereof and those of any collateral
assignment executed by and filed with the Insurer in connection herewith. The
insurer shall not be bound by or deemed to have notice of the provisions of this
Agreement.
10. NAMED FIDUCIARY, DETERMINATION OF BENEFITS, CLAIMS PROCEDURE AND
ADMINISTRATION. The following provisions are intended to meet the requirements
of the Employee Retirement Income Act of 1974.
a. The Company is hereby designated as the named fiduciary under
this Agreement. The named fiduciary shall have authority to
control and manage the operation and administration of this
Agreement, and it shall be responsible for establishing and
carrying out a funding policy and method consistent with the
objectives of this Agreement.
b. (1) Claim. If the Executive believes he is being denied a benefit
to which he is entitled under this Agreement, he may file a
written request for such benefit with the Company, setting forth
his or her claim. The request must be addressed to the President
of the Company at its then principal place of business.
(2) Claim Decision. Upon receipt of a claim, the Company shall
advise the Executive that a reply will be forthcoming within
ninety (90) days and shall, in fact, deliver such reply
within such period. The
3
<PAGE>
Company may, however, extend the reply period for an
additional ninety (90) days for reasonable cause. If the
claim is denied in whole or in part, the Company shall adopt
a written opinion, using language calculated to be
understood by the Executive, setting forth: (a) the specific
reason or reasons for such denial; (b) the specific
reference to pertinent provisions of this Agreement on which
such denial is based; (c) a description of any additional
material or information necessary for the Executive to
perfect his claim and an explanation why such material or
such information is necessary; (d) appropriate information
as to the steps to be taken if the Executive wishes to
submit the claim for review; and (e) the time limits for
requesting a review under subsection (3) and for review
under subsection (4) hereof.
(3) Request for Review. Within sixty (60) days after the receipt
by the Executive of the written opinion described above, the
Executive may request in writing that the Secretary of the
Company review the determination of the Company. Such
request must be addressed to the Secretary of the Company,
at its then principal place of business. The Executive or
his duly authorized representative may, but need not, review
the pertinent documents and submit issues and comments in
writing for consideration by the Company. If the Executive
does not request a review of the Company's determination by
the Secretary of the Company within such sixty (60) day
period, he shall be barred and estopped from challenging the
Company's determination.
(4) Review of Decision. Within sixty (60) days after the
Secretary's receipt of a request for review, he will review
the Company's determination. After considering all materials
presented by the Executive, the Secretary will render a
written opinion, written in a manner calculated to be
understood by the Executive, setting forth the specific
reasons for the decision and containing specific references
to the pertinent provisions of this Agreement on which the
decision is based. If special circumstances require that the
sixty (60) day time period be extended, the Secretary will
so notify the executive and will render the decision as soon
as possible, but no later than one hundred twenty (120) days
after receipt of the request for review.
11. AMENDMENT. This Agreement may not be amended, altered or modified,
except by a written instrument signed by the parties hereto, or their respective
successors or assigns, and may not be otherwise terminated except as provided
herein.
12. BINDING EFFECT. This Agreement shall be binding upon and inure to the
4
<PAGE>
benefit of the Company and its successors and assigns, and the Executive and his
successors, assigns, heirs, executors, administrators and beneficiaries.
13. NOTICE. Any notice, consent or demand required or permitted to be given
under the provisions of this Agreement shall be in writing, and shall be signed
by the party giving or making the same. If such notice, consent or demand is
mailed to a party hereto, it shall be sent by United States certified mail,
postage prepaid, addressed to such party's last known address as shown on the
records of the Company. The date of such mailing shall be deemed the date of
notice, consent or demand.
14. GOVERNING LAW. This Agreement, and the rights of the parties hereunder,
shall be governed by and construed in accordance with the laws of the State of
Ohio.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in
duplicate, as of the day and year first above written.
The Company THE GRADALL COMPANY
By: /s/ Bruce A. Jonker
----------------------
ATTEST:
/s/ Joseph H. Keller Jr.
- ------------------------
Secretary
The Executive /s/ Barry L. Phillips
--------------------------
Barry L. Phillips
EXHIBIT "A"
COMPANY: The New England Mutual Life Insurance Company
POLICY NO.: 6801161
DATE OF POLICY:
INSURED PERSON(S): Barry L. Phillips
DEATH BENEFIT: $500,000
OWNER OF POLICY: The Gradall Company, subject to the transfer of ownership
to the Insured pursuant to the terms of this Agreement
ANNUAL PREMIUM: $9,865.00
5
<PAGE>
Exhibit 21
SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
Percent of
Voting
Securities
Jurisdiction of Owned by
Subsidiary Incorporation the Company
- ---------- ------------- -----------
<S> <C> <C>
Fulton Industries, Inc. Pennsylvania 100%
Fulton International Foreign
Sales Corporation Barbados 100%
Fulton International, Inc. Delaware 100%
Gradall Industries, Inc. Delaware 100%
JLG Industries (Propriety) Limited South Africa 100%
JLG Equipment Services, Inc. Pennsylvania 100%
JLG Industries, GmbH Germany 100%
JLG Manufacturing, LLC Pennsylvania 100%
JLG Premier Limited United Kingdom 100%
JLG Properties Australia Limited Australia 100%
Litra Handelsgesellschaft, mbH Germany 100%
OPR Holdings B.V. Netherlands 100%
The Gradall Company Ohio 100%
The Gradall Orrville Company Ohio 100%
</TABLE>
The financial statements of the above listed subsidiaries are included in the
Company's Consolidated Financial Statements incorporated herein by reference.
<PAGE>
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in the Registration Statements on
Form S-8, No. 33-60366, No. 33-61333 and No. 33-75746 and Form S-3, No.
333-47487 of our report dated September 9, 1999, with respect to the
consolidated financial statements of JLG Industries, Inc. included in the Annual
Report (Form 10-K) for the year ended July 31, 1999.
/s/ Ernst & Young LLP
Baltimore, Maryland
October 7, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUL-31-1999
<PERIOD-END> JUL-31-1999
<CASH> 19,033
<SECURITIES> 0
<RECEIVABLES> 165,805
<ALLOWANCES> 2,985
<INVENTORY> 125,571
<CURRENT-ASSETS> 315,987
<PP&E> 167,216
<DEPRECIATION> 66,682
<TOTAL-ASSETS> 625,817
<CURRENT-LIABILITIES> 139,672
<BONDS> 0
8,850
0
<COMMON> 0
<OTHER-SE> 271,283
<TOTAL-LIABILITY-AND-EQUITY> 625,817
<SALES> 720,224
<TOTAL-REVENUES> 720,224
<CGS> 553,271
<TOTAL-COSTS> 629,452
<OTHER-EXPENSES> (2,016)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,772
<INCOME-PRETAX> 91,016
<INCOME-TAX> 29,745
<INCOME-CONTINUING> 91,016
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 61,271
<EPS-BASIC> 1.40
<EPS-DILUTED> 1.36
</TABLE>
<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.
DEMAND VARIABILITY -- 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, the market
availability of used equipment and alternatives to purchases such as equipment
leases directly from the Company. 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 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 -- Given the cyclical nature of demand, the Company must
periodically expand and contract its manufacturing facilities. Capital
investment to acquire additional manufacturing facilities involves significant
risks. Excess manufacturing capacity adversely affects profitability because
higher fixed costs are spread over a lower sales volume. Insufficient capacity
adversely affects profitability as long lead-times required to fill customer
orders may impair the Company's ability to compete for new business and
subcontracting costs incurred to increase capacity affect profitability.
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 insurance 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
<PAGE>
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 material
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
material inventories, even brief unanticipated delays in delivery by suppliers,
including those due to capacity constraints, labor disputes, Year 2000
readiness, 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; CURRENCY RISKS -- A growing component of the Company's business
has been export sales to Europe, Australia, 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. 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 products or incorporating new features and functions into
existing products. 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.
MERGERS AND ACQUISITIONS -- The Company intends to pursue strategic acquisitions
as a means of increasing sales and earnings and promoting shareholder value.
Acquisitions generally may involve a number of risks that may affect the
Company's financial performance including increased leverage, diversion of
management resources, possible shareholder dilution, assumption of liabilities
of acquired businesses and corporate culture conflicts. In addition, specific
acquisitions may involve other risks unique to the acquired business. Finally,
there is no assurance that the Company will be able to conclude satisfactory
agreements to acquire any businesses as a means to increase sales and earnings.
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.
2
