-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, UnCh8F4HqruPXEgJAFa1dK2UBxB4IjAZQ/2T9KxOyb9M6udq5gNogk2wQjl35uXe D2zwVRutJRhynNoffi3hqA== 0000216275-97-000017.txt : 19971216 0000216275-97-000017.hdr.sgml : 19971216 ACCESSION NUMBER: 0000216275-97-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19971031 FILED AS OF DATE: 19971215 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: JLG INDUSTRIES INC CENTRAL INDEX KEY: 0000216275 STANDARD INDUSTRIAL CLASSIFICATION: CONSTRUCTION MACHINERY & EQUIP [3531] IRS NUMBER: 251199382 STATE OF INCORPORATION: PA FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12123 FILM NUMBER: 97738094 BUSINESS ADDRESS: STREET 1: JLG DR CITY: MCCONNELLSBURG STATE: PA ZIP: 17233 BUSINESS PHONE: 7174855161 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark One) [X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the quarterly period ended October 31, 1997 or [ ] 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 JLG INDUSTRIES, INC. (Exact name of registrant as specified in its charter) PENNSYLVANIA (State or other jurisdiction of incorporation or organization) 25-1199382 (I.R.S. Employer Identification No.) 1 JLG Drive, McConnellsburg, PA (Address of principal executive offices) 17233-9533 (Zip Code) Registrant's telephone number, including area code: (7l7) 485-5161 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ______ At November 17, 1997, there were 44,014,836 shares of capital stock of the Registrant outstanding. PART I FINANCIAL INFORMATION JLG INDUSTRIES, INC. CONDENSED CONSOLIDATED BALANCE SHEETS October 31, July 31, 1997 1997 (in thousands) (Unaudited) ASSETS Current Assets Cash $16,502 $25,436 Accounts receivable 65,966 70,164 Inventories: Finished goods 35,092 30,441 Work in process 6,885 12,132 Raw materials 10,258 11,154 52,235 53,727 Future income tax benefits 4,113 4,133 Other current assets 4,193 2,248 Total Current Assets 143,009 155,708 Property, Plant and Equipment - net 56,747 56,064 Equipment Held for Rental - net 26,435 24,951 Other Assets 14,816 12,669 $241,007 $249,392 LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities Accounts payable $30,765 $43,027 Other current liabilities 25,694 28,043 Total Current Liabilities 56,459 71,070 Long-Term Debt 3,637 3,685 Contingent and Other Liabilities 11,959 12,692 Shareholders' Equity Capital stock: Authorized shares: 100,000 at $.20 par Outstanding shares: Fiscal 1998 - 44,015 shares; Fiscal 1997 - 43,726 shares 8,803 8,745 Additional paid-in capital 14,664 11,391 Equity adjustment from translation (2,910) (2,180) Retained earnings 148,395 143,989 Total Shareholders' Equity 168,952 161,945 $241,007 $249,392 The accompanying notes are an integral part of these financial statements. JLG INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended October 31, (in thousands, except per share data) 1997 1996 Net Sales $95,644 $120,205 Cost of sales 74,476 87,503 Gross Profit 21,168 32,702 Selling, administrative and product development expenses 12,134 13,484 Restructuring charges 1,689 Income from Operations 7,345 19,218 Other income (deductions): Interest expense (63) (41) Miscellaneous, net (273) 413 Income before Income Taxes 7,009 19,590 Income tax provision 2,383 7,248 Net Income $4,626 $12,342 Net Income per Share $.11 $.28 Weighted Average Shares 43,911 43,472 Dividends per Share $.005 $.005 The accompanying notes are an integral part of these financial statements. JLG INDUSTRIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Unaudited) Three Months Ended October 31, (in thousands) 1997 1996 Operations Net income $4,626 $12,342 Adjustments to reconcile net income to cash provided by (used for) operating activities: Depreciation and amortization 3,589 2,389 Provision for self-insured losses 960 900 Deferred income taxes 122 (130) 9,297 15,501 Changes in operating assets and liabilities (10,831) (9,524) Changes in other assets and liabilities (787) (1,408) Cash (used for) provided by operations (2,321) 4,569 Investments Purchases of property, plant and equipment (3,143) (3,181) Additions to equipment held for rental (2,693) (3,655) Cash used for investments (5,836) (6,836) Financing Repayment of long-term debt (66) (52) Payment of dividends (220) (217) Exercise of stock options 240 1,743 Cash (used for) provided by financing (46) 1,474 Currency Adjustments Effect of exchange rate changes on cash flows (731) (40) Cash Net change in cash (8,934) (833) Beginning balance 25,436 30,438 Ending balance $16,502 $29,605 The accompanying notes are an integral part of these financial statements. JLG INDUSTRIES, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 1997 (unaudited) BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Interim results for the three months ended October 31, 1997 are not necessarily indicative of the results that may be expected for the fiscal year as a whole. For further information, refer to consolidated financial statements and notes thereto included in the Company's annual report on Form 10-K for the fiscal year ended July 31, 1997. NET INCOME PER COMMON SHARE Net income per share is computed by dividing net income by the weighted average shares outstanding during the period. The effect of capital stock equivalents is immaterial to net income per share. In February 1997, the Financial Accounting Standards Board issued Statement No. 128, "Earnings per Share," which is required to be adopted for periods ending after December 15, 1997. Earlier application is not permitted. At that time, the Company will be required to change the method currently used to compute earnings per share and to restate all prior periods. Under the new requirements for calculating primary earnings per share, the dilutive effect of options will be excluded. As a result of adopting Statement 128, no change is anticipated in the previously reported primary earnings per share for the fiscal 1998 and 1997 comparative amounts. The impact of Statement 128 on the calculation of fully diluted earnings per share is not expected to be material. INVENTORIES AND COST OF SALES A precise inventory valuation under the LIFO (last-in, first-out) method can only be made at the end of each fiscal year; therefore, interim LIFO inventory valuation determinations, including the determination at October 31, 1997, must necessarily be based on management's estimate of expected fiscal year-end inventory levels and costs. COMMITMENTS AND CONTINGENCIES The Company is a party to personal injury and property damage litigation arising out of incidents involving the use of its products. The Company's insurance program for fiscal year 1998 is comprised of a self-insured retention of $5 million and catastrophic coverage of $50 million in excess of the retention. The Company contracts with an independent insurance firm to provide claims handling and adjustment services. The Company's estimates with respect to claims are based on internal evaluations of the merits of individual claims and the reserves assigned by the Company's independent insurance 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 $9.8 million and $9.6 million were established at October 31, 1997 and July 31, 1997, 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 October 31, 1997 and July 31, 1997, there were no insurance recoverables or offset implications and there were no claims by the Company being contested by insurers. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results for the First Quarters of Fiscal 1998 and 1997 Sales for the quarter were $95.6 million, $24.6 million or 20% below the first quarter of 1997 primarily due to decreased domestic sales and higher discounts resulting from competitive pricing pressures in the marketplace. Lower domestic sales were partially offset by an increase in sales to customers outside the United States, which were 41% and 30% of total sales for the first quarters of 1998 and 1997, respectively. Sales from new and redesigned products introduced during the past two years represented 44% of sales for the first quarter of 1998. Gross profit, as a percent of sales, decreased to 22% in the first quarter of 1998 compared to 27% for the same period of 1997. The major contributors to this decrease were the effects of fixed costs spread over lower production levels, unfavorable product mix weighted towards smaller, less profitable machines; lower prices due principally to foreign currency movements and increased sales discounts; and higher spending for labor, depreciation and consumables. Partially offsetting these reductions were increased service parts sales which have higher margins. Selling, administrative and product development expenses were 10% or $1.4 million below the prior year first quarter. As a percent of sales, they were 13% and 11% for the current and last year first quarter, respectively. The decrease in dollars over the last year quarter was primarily due to the Company's decision to resize the business for current market conditions and included lower personnel and related costs; reduced advertising expenses and lower consulting costs. Partially offsetting these reductions were higher product development costs in support of new and improved products and higher selling expenses associated with increased international business. The current year quarter includes $1.7 million in restructuring charges related to workforce reductions. Miscellaneous expense was $336,000 versus last year income of $372,000, primarily due to currency losses in the current year first quarter resulting from the strength of the U.S. dollar against the Australian dollar. The effective tax rate for the quarter was 34% compared to last year's 37%. The lower rate for the current quarter is primarily related to tax benefits resulting from higher international sales. Financial Condition The Company continues to maintain a strong financial position, funding capital projects and working capital needs principally out of operating cash flow and cash reserves, while remaining virtually debt-free. At July 31, 1997, the Company had unused credit lines totaling $28.9 million and cash balances of $16.5 million. The Company considers these resources, coupled with cash expected to be generated by operations, adequate to meet its foreseeable funding needs, including anticipated additional fiscal 1998 expenditures of $10 million for capital projects and $10 million in additions to its 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 Condensed 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 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 believes that the Company's performance will improve as the 1998 fiscal year progresses, especially during the second half of the year. This forecast is supported by customer surveys and industry analyses, which predict ongoing growth in industrial and construction markets, as well as in the rental industry during calendar 1998. These trends assume continued stability in U.S. interest rates and ongoing, steady growth in the domestic economy. Although backlogs were significantly below the year-ago levels, they increased during the first quarter of fiscal 1998 and were above the level at fiscal 1997 year-end. In addition, the second half of the fiscal year is usually a stronger buying season for the Company's products. Provided rental fleet utilization rates remain strong and rental rates continue to improve, management expects a resumption in the expansion of its customers' rental fleets. The Company plans a significant worker recall for boom lift production beginning in December 1997 in order to support its planned production increases to meet the expected stronger second half demand. The Company's cost reduction expectations are on track, which management believes will help to offset continuing pricing pressures in the marketplace. Management continues to pursue specific improvement goals during fiscal 1998 including: improve processes and reduce costs; accelerate new product development; expand global distribution; enhance customer support services; grow JLG Equipment Services; strengthen employee involvement and pursue strategic acquisitions. The goal of this business plan is to position the Company for long-term profitable growth and enhanced shareholder value. Ernst & Young LLP Independent Accountants' Review Report To The Board of Directors JLG Industries, Inc. McConnellsburg, Pennsylvania We have reviewed the accompanying condensed consolidated balance sheet of JLG Industries, Inc. and subsidiaries as of October 31, 1997, and the related condensed consolidated statements of income and cash flows for the three-month periods ended October 31, 1997 and 1996. These financial statements are the responsibility of the Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data, and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, which will be performed for the full year with the objective of expressing an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to the accompanying condensed consolidated financial statements referred to above for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheet of JLG Industries, Inc. as of July 31, 1997, and the related consolidated statements of income, shareholders' equity and cash flows for the year then ended, not presented herein, and in our report dated September 4, 1997, we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheet as of July 31, 1997, is fairly stated, in all material respects, in relation to the consolidated balance sheet from which it has been derived. /s/Ernst & Young LLP Baltimore, Maryland November 13, 1997 PART II OTHER INFORMATION ITEMS 1 - 3 and 5 None/not applicable. ITEM 4 The Company held its Annual Meeting of Shareholders on November 17, 1997. Management solicited proxies for the election of eight directors and for ratification of the appointment of Ernst & Young LLP as the Company's independent auditors for the 1998 fiscal year. Of the 44,009,117 shares of capital stock outstanding on the record date, 41,123,971 or 93% were voted in person or by proxy at the meeting date. The tabulated results are set forth below: Election of directors FOR AGAINST L. D. Black 40,737,446 386,525 C. H. Diller, Jr. 40,738,435 385,536 G. R. Kempton 40,750,407 373,564 J. A. Mezera 40,739,180 384,791 G. Palmer 40,736,447 387,524 S. Rabinowitz 40,734,000 389,971 T. C. Wajnert 40,736,800 387,171 C. O. Wood, III 40,752,727 371,244 Ratification of the appointment of Ernst & Young LLP as independent auditors for the ensuing year. For Against Abstain 40,833,403 70,242 220,326 ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K (a) The following exhibits are included herein: 15 Letter re: Unaudited Interim Financial Information 27 Financial Data Schedule 99 Cautionary Statements Pursuant to the Securities Litigation Reform Act (b) The Company was not required to file Form 8-K pursuant to requirements of such form for any of the three months ended October 31, 1997. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized who is also signing in his capacity as principal financial officer. JLG INDUSTRIES, INC. (Registrant) /s/ Charles H. Diller, Jr. Charles H. Diller, Jr. Executive Vice President and Chief Financial Officer EX-15 2 [DESCRIPTION] LETTER RE UNAUDITED INTERIM FINANCIAL INFORMATION EXHIBIT 15 We are aware of the incorporation by reference in the Registration Statements on Form S-8, No. 33-60366, No. 33-61333 and No. 33-75746 of JLG Industries, Inc. of our report dated November 13, 1997, relating to the unaudited condensed consolidated interim financial statements of JLG Industries, Inc. which are included in its Form 10-Q for the quarter ended October 31, 1997. Pursuant to Rule 436(c) of the Securities Act of 1933 our report is not a part of the registration statement prepared or certified by accountants within the meaning of Section 7 or 11 of the Securities Act of 1933. /s/ Ernst & Young LLP Baltimore, Maryland November 13, 1997 EX-27 3 ARTICLE 5 FINANCIAL DATA SCHEDULE
5 1000 3-MOS JUL-31-1997 OCT-31-1997 16502 0 67340 1374 52235 143009 87043 30296 241007 56459 0 8803 0 0 160149 241007 95644 95644 74476 88299 274 0 63 769 2383 4626 0 0 0 4626 .11 .11
EX-99 4 CAUTIONARY STATEMENTS PURSUANT TO SECURITIES LITIGATION REFORM ACT OF 1995 EXHIBIT 99 Cautionary Statements Pursuant to the Securities Litigation Reform Act of 1995 The Company wishes to inform its investors of the following important factors that in some cases have affected, and in the future could affect, the Company's results of operations and that could cause such future results of operations to differ materially from those expressed in any forward looking statements made by or on behalf of the Company. Disclosure of these factors is intended to permit the Company to take advantage of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Many of these factors have been discussed in prior SEC filings by the Company. Though the Company has attempted to list comprehensively these important cautionary factors, the Company wishes to caution investors that other factors may in the future prove to be important in affecting the Company's results of operations. Cyclical Demand -- Demand for new equipment manufactured by the Company tends to be cyclical, responding historically to varying levels of construction and industrial activity, principally in the United States and, to a lesser extent, in other industrialized nations. Other factors affecting demand include the availability and cost of financing for equipment purchases and the market availability of used equipment. Company management regularly monitors these and other factors that affect demand for the Company's equipment. However, predicting levels of demand beyond a short term is necessarily imprecise and demand may at times change dramatically. Consolidating Customers Base; Rental Companies -- The principal customers for the Company's new equipment are over 110 independent equipment rental companies that rent the Company's products and provide service support to equipment users. In recent years, growth in sales to equipment rental companies has outpaced growth in direct sales to end-users, resulting in equipment rental companies comprising a larger share of total sales. At the same time, there has been substantial consolidation in ownership among rental companies, resulting in a more limited number of major customers comprising a substantial portion of total sales. A change in purchasing decisions by any of these major customers could materially affect overall demand for the Company's products and the Company's financial performance. More generally, during recessionary conditions, demand for equipment by equipment rental companies typically declines more sharply than demand for equipment purchased by end-users. Manufacturing Capacity -- 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 unanticipated variances between actual liabilities for known incidents and Company estimates may adversely affect the Company's financial performance. Availability of Product Components -- The Company obtains raw materials and certain manufactured components from third-party suppliers. To reduce materials costs and inventories, the Company relies on supplier partnership arrangements with preferred vendors as a sole source for "just-in-time" delivery of many raw materials and manufactured components. Because the Company maintains limited raw material inventories, even brief unanticipated delays in delivery by suppliers, including due to labor disputes, impaired financial condition of suppliers, weather emergencies or other natural disasters, may adversely affect the Company's ability to satisfy its customers on a timely basis and thereby affect the Company's financial performance. Foreign Sales; Currency Risks -- A growing component of the Company's business has been export sales to Europe, Latin America and Asia. Maintenance and continued growth of this segment of the Company's business may be affected by changes in trade, monetary and fiscal policies, laws and regulations of the United States and other trading nations and by foreign currency exchange rate fluctuations and the ability or inability of the Company to hedge against exchange rate risks. Competition; Continued Innovation -- The Company faces substantial competition in the market for its products and some of the Company's competitors are, or in the future may be, owned by larger enterprises that may have greater financial resources and offer wider product lines than the Company. Product line expansion by existing competitors and potential entry by new competitors also may affect the Company's market position. Throughout its history, the Company has devoted substantial resources to product development and has generally succeeded in being a market leader in introducing new high-reach products or incorporating new features and functions into existing products. The Company also holds certain patents which it believes are valuable. Successful product innovation by competitors that reach the market prior to comparable innovation by the Company or that are amenable to patent protection may adversely affect the Company's financial performance. 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. 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. -----END PRIVACY-ENHANCED MESSAGE-----