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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 1998
[ ] 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 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:
(7l7) 485-5161
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Securities registered pursuant to Section 12(b) of the Act:
(Title of class) (Name of exchange on which registered)
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Capital Stock ($.20 par value) New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None
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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. [X]
At September 11, 1998, there were 44,095,560 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 $642,691,778.
Documents Incorporated by Reference
Portions of the Proxy Statement for the 1998 Annual Meeting of Shareholders are
incorporated by reference into Part III.
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TABLE OF CONTENTS
Item
PART I
1. Business ............................................................................ 1
Products .......................................................................... 1
Marketing and Distribution ........................................................ 1
Customer Service and Support ...................................................... 1
Product Development ............................................................... 2
Competition ....................................................................... 2
Material and Supply Arrangements .................................................. 2
Product Liability ................................................................. 2
Employees ......................................................................... 3
Foreign Operations ................................................................ 3
Executive Officers of the Registrant .............................................. 3
2. Properties .......................................................................... 3
3. Legal Proceedings ................................................................... 3
4. Submission of Matters to a Vote of Security Holders ................................. 3
PART II
5. Market for the Registrant's Common Equity and Related Stockholder Matters ........... 3
6. Selected Financial Data ............................................................. 4
7. Management's Discussion and Analysis of Financial Condition and Results of Operations 6
8. Financial Statements and Supplementary Data ......................................... 8
Consolidated Balance Sheets ....................................................... 8
Consolidated Statements of Income ................................................. 9
Consolidated Statements of Shareholders' Equity ................................... 9
Consolidated Statements of Cash Flows ............................................. 10
Notes to Consolidated Financial Statements ........................................ 11
Report of Ernst & Young LLP, Independent Auditors ................................. 16
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure ............................................ 16
PART III
10. Directors and Executive Officers of the Registrant .................................. 17
11. Executive Compensation .............................................................. 17
12. Security Ownership of Certain Beneficial Owners and Management ...................... 17
13. Certain Relationships and Related Transactions ...................................... 17
PART IV
14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K ............................................................... 17
Financial Statement Schedules ................................................... 17
Exhibits ........................................................................ 17
Signatures .............................................................................. 19
PART I
ITEM 1. BUSINESS
The Company is the world's leading manufacturer, distributor and international
marketer of aerial work platforms used primarily in industrial, commercial,
institutional and construction applications. Sales are made principally to
independent equipment rental companies that rent the Company's products and
provide service support to equipment users. Equipment purchases by end-users,
either directly from the Company or through distributors, comprise a
significant, but smaller portion of sales. The Company also generates revenues
from sales of used equipment and from equipment rentals and services provided by
its JLG Equipment Services operations.
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.
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. The distributor net price of the Company's standard models at July 31,
1998, ranged from approximately $19,300 to $325,000.
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. The distributor net price of the Company's
standard models at July 31, 1998, ranged from approximately $9,500 to $50,800.
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. The distributor net price of the Company's
standard models at July 31, 1998, ranged from approximately $3,300 to $8,000.
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 and South America, including a joint-venture arrangement in
Brazil.
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 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.
1
The Company distributes replacement parts to customers through a system of
several 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 maintains a national rental fleet of aerial work platforms. The
purpose of this fleet is to assist the Company's customers in servicing large,
one-time projects and in meeting periods of unanticipated rental demand, and to
make available more equipment to customers with growing markets, but limited
financial resources. This business also repairs and reconditions equipment for
its own use or for sale to its customers. 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 the United Kingdom and Australia.
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 business. These programs are diverse and provide customers
with various financing options and are funded through a third party financial
institution generally without 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 $9,579,000,
$7,280,000 and $6,925,000 for the fiscal years 1998, 1997 and 1996,
respectively. New and redesigned products introduced in the past two years
accounted for approximately 32% of fiscal 1998 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 competes principally with nine aerial work platform manufacturers.
The Company believes that its product quality, customer service, experienced
distribution network, national rental fleet and reputation for leadership in
product improvement and development provide significant competitive advantages.
The Company offers the widest breadth of products as well as the widest array of
product capabilities and functions in the aerial work platform industry. The
Company believes this provides a competitive advantage in the marketplace. The
Company believes it commands the largest share of the market for boom lift and
scissor lift products and is one of the three largest producers of vertical mast
lifts.
The Company's products also compete with more traditional means of accomplishing
the tasks performed by aerial work platforms, such as ladders, scaffolding and
other devices. The Company believes that its aerial work platforms in many
applications are safer, more versatile and more efficient, taking into account
labor costs, than traditional methods and that its aerial work platforms enjoy
competitive advantages when the job calls for frequent movement from one
location to another at the same site, or when there is a need to return to the
ground frequently for tools and materials.
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 is currently experiencing constraints in the
supply of certain purchased parts resulting from suppliers operating at or near
capacity. The Company expects these constraints to be resolved in the near
future.
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 1.0%, 0.7% and 0.9% of
net sales, for the years ended July 31, 1998, 1997 and 1996, respectively.
2
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.
Employees
The Company had 2,664 and 2,686 persons employed as of July 31, 1998 and 1997,
respectively. The Company believes its employee relations are good, and it has
experienced no work stoppages as a result of labor problems.
Foreign Operations
The Company manufactures its products in the U.S. for sales throughout the
world. Sales to customers outside the U.S. were 32%, 30% and 24% of total net
sales for 1998, 1997 and 1996, respectively.
Executive Officers of the Registrant
Positions with the Company
Name Age (date of initial election)
- ---- --- --------------------------
L. David Black 61 Chairman of the Board, President and Chief
Executive Officer (1993).
Charles H. Diller, Jr. 53 Executive Vice President and Chief
Financial Officer (1990).
Rao G. Bollimpalli 60 Senior Vice President - Engineering (1990).
Raymond F. Treml 58 Senior Vice President - Operations (1998);
prior to 1998, Senior Vice President -
Manufacturing (1990).
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 has manufacturing plants and office space at five sites in
Pennsylvania totaling 759,000 square feet and situated on 102 acres of land. Of
this, 708,000 square feet are owned, with the remainder under long-term lease.
The Company has several international sales offices under operating leases. The
Company's properties used in its operations are considered to be in good
operating condition, well-maintained and suitable for their present purposes.
The Company's McConnellsburg and Bedford facilities are encumbered as security
for long-term borrowings.
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 SHAREHOLER 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.
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Average Shares
Price per Share Traded Daily
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Quarter Ended 1998 1997 1998 1997
- --------------------------------------------------------------------------------
High Low High Low
- --------------------------------------------------------------------------------
October 31 ....... $13.44 $11.00 $24.25 $13.50 247,997 334,032
January 31 ....... $14.88 $11.38 $20.63 $14.50 159,738 273,575
April 30 ......... $17.25 $13.00 $21.38 $11.50 228,716 375,933
July 31 .......... $20.75 $15.50 $16.25 $11.00 135,681 325,347
- --------------------------------------------------------------------------------
The Company's quarterly cash dividend rate is currently $.005 per share, or $.02
on an annual basis.
3
ITEM 6. SELECTED FINANCIAL DATA
ELEVEN-YEAR FINANCIAL SUMMARY
(in thousands of dollars, except per share data)
==========================================================================================================
Years ended July 31 1998 1997 1996 1995
==========================================================================================================
RESULTS OF OPERATIONS
==========================================================================================================
Net sales ........................................ $ 530,859 $ 526,266 $ 413,407 $ 269,211
Gross profit ..................................... 128,157 130,005 108,716 65,953
Selling, administrative and
product development expenses .................... (55,388) (56,220) (44,038) (33,254)
Restructuring charge ............................. (1,689) (1,897)
Income (loss) from operations .................... 71,080 71,888 64,678 32,699
Interest expense ................................. (254) (362) (293) (376)
Other income (expense), net ...................... (356) (288) 1,281 376
Income (loss) before taxes ....................... 70,470 71,238 65,666 32,699
Income tax (provision) benefit ................... (23,960) (25,090) (23,558) (11,941)
Net income (loss) ................................ 46,510 46,148 42,108 20,758
==========================================================================================================
PER SHARE DATA
==========================================================================================================
Earnings per common share ........................ 1.07 1.06 0.98 0.49
Earnings per common share - assuming dilution .... 1.05 1.04 0.96 0.48
Cash dividends ................................... .02 .02 0.015 0.0092
==========================================================================================================
PERFORMANCE MEASURES
==========================================================================================================
Return on sales .................................. 8.8% 8.8% 10.2% 7.7%
Return on average assets ......................... 17.9% 21.7% 28.5% 20.2%
Return on average shareholders' equity ........... 26.2% 33.6% 47.9% 37.1%
==========================================================================================================
FINANCIAL POSITION
==========================================================================================================
Working capital .................................. 122,672 84,129 71,807 45,404
Current assets as a percent of current liabilities 248% 218% 226% 216%
Property, plant and equipment, net ............... 57,652 56,064 34,094 24,785
Total assets ..................................... 307,339 248,374 182,628 119,708
Total debt ....................................... 3,708 3,952 2,194 2,503
Shareholders' equity ............................. 207,768 160,927 113,208 68,430
Total debt as a percent of total capitalization . 2% 2% 2% 4%
Book value per share ............................. 4.71 3.68 2.61 1.60
==========================================================================================================
OTHER DATA
==========================================================================================================
Product development expenditures ................. 9,579 7,280 6,925 5,542
Capital expenditures, net of retirements ......... 13,577 29,757 16,668 8,618
Additions to rental fleet, net of disposals ...... 5,377 14,199 9,873 1,548
Depreciation and amortization .................... 15,750 10,389 6,505 3,875
Employees ........................................ 2,664 2,686 2,705 2,222
==========================================================================================================
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.
4
====================================================================================================================================
Years ended July 31 1994 1993 1992 1991 1990 1989 1988
====================================================================================================================================
RESULTS OF OPERATIONS
====================================================================================================================================
Net sales ........................................ $176,443 $123,034 $110,479 $ 94,439 $149,281 $121,330 $ 81,539
Gross profit ..................................... 42,154 28,240 22,542 20,113 37,767 32,384 23,598
Selling, administrative and
product development expenses .................... (27,147) (23,323) (22,024) (21,520) (21,834) (18,974) (14,117)
Restructuring charge ............................. (4,922) (2,781) (1,015)
Income (loss) from operations .................... 15,007 4,917 (4,404) (4,188) 14,918 13,410 9,481
Interest expense ................................. (380) (458) (1,218) (1,467) (2,344) (1,375) (925)
Other income (expense), net ...................... (24) 180 (149) (707) 858 399 485
Income (loss) before taxes ....................... 14,603 4,639 (5,771) (6,362) 13,432 12,434 9,041
Income tax (provision) benefit ................... (5,067) (1,410) 2,733 3,122 (4,950) (4,882) (3,766)
Net income (loss) ................................ 9,536 3,229 (3,038) (3,240) 8,482 7,552 5,275
====================================================================================================================================
PER SHARE DATA
====================================================================================================================================
Earnings per common share ........................ 0.23 0.08 (0.07) (0.08) 0.20 0.18 0.13
Earnings per common share - assuming dilution .... 0.23 0.08 (0.07) (0.08) 0.20 0.18 0.13
Cash dividends ................................... 0.0083 0.005 0.0208 0.0167 0.0125 0.0083
====================================================================================================================================
PERFORMANCE MEASURES
====================================================================================================================================
Return on sales .................................. 5.4% 2.6% (2.8%) (3.4%) 5.7% 6.2% 6.5%
Return on average assets ......................... 12.1% 4.6% (4.0%) (4.2%) 10.4% 11.9% 10.8%
Return on average shareholders' equity ........... 23.8% 8.5% (7.9%) (7.7%) 21.8% 23.5% 21.2%
====================================================================================================================================
FINANCIAL POSITION
====================================================================================================================================
Working capital .................................. 32,380 26,689 33,304 36,468 47,289 34,745 27,378
Current assets as a percent of current liabilities 208% 217% 268% 266% 304% 254% 250%
Property, plant and equipment, net ............... 19,344 13,877 13,511 13,726 14,402 11,343 8,677
Total assets ..................................... 91,634 72,518 73,785 74,861 86,741 70,570 57,692
Total debt ....................................... 7,578 4,471 12,553 14,175 18,404 13,799 11,805
Shareholders' equity ............................. 45,706 38,939 37,186 38,596 44,109 35,331 28,465
Total debt as a percent of total capitalization . 14% 10% 25% 27% 29% 28% 29%
Book value per share ............................. 1.09 0.89 0.86 0.90 1.05 0.84 0.68
====================================================================================================================================
OTHER DATA
====================================================================================================================================
Product development expenditures ................. 4,373 3,385 3,628 3,430 3,520 2,904 2,910
Capital expenditures, net of retirements ......... 7,762 3,570 1,364 1,637 4,615 4,054 1,619
Additions to rental fleet, net of disposals ...... 1,455 273 3,470 534 (1,437) (481)
Depreciation and amortization .................... 2,801 2,500 2,569 1,953 1,771 1,609 1,968
Employees ........................................ 1,620 1,324 1,014 1,182 1,565 1,455 972
====================================================================================================================================
5
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
The Company achieved record sales for 1998, marking the fifth consecutive record
year. The modest increase in sales from 1997 to 1998 reflected record
international sales that were partially offset by lower domestic sales. The 27%
increase in sales from 1997 to 1996 resulted from generally stronger demand
across all product classes and markets. Sales to customers outside the United
States were 32%, 30% and 24% in 1998, 1997 and 1996, respectively. Sales from
new and redesigned products introduced over the past two years represented 32%,
46% and 27% of sales in 1998, 1997 and 1996, respectively.
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 related to increasingly competitive market conditions and unfavorable
currency effects due to the strength of the U.S. dollar. These reductions were
partially offset by lower product costs as a result of cost reductions. Gross
profit, as a percent of sales, decreased to 25% in 1997 from 26% in 1996. The
decrease was due to a shift in product mix to smaller, less profitable models;
product pricing pressures; and product introduction costs.
Selling, general and product development expenses decreased $832,000 in 1998
compared to an increase of $12.2 million in 1997 and, as a percent of sales,
were 10% for 1998 compared to 11% for 1997 and 1996. For 1998, the decrease in
dollars was primarily attributable to reduced personnel related costs and
consulting expenses. Partially offsetting these reductions were higher product
development costs in support of new and redesigned products. The dollar increase
for 1997 principally reflected higher personnel and related costs, increased
expenses associated with expanding foreign operations, and increased consulting
expenses.
For 1998, miscellaneous expense was primarily comprised of currency conversion
losses of $1,611,000, partially offset by higher investment income. For 1997,
miscellaneous expense included $768,000 in currency conversion losses compared
to $812,000 in gains for 1996.
The effective income tax rates were 34%, 35% and 36% for 1998, 1997 and 1996,
respectively. The decreases in the effective income tax rate are primarily due
to tax benefits related to the increasing level of export sales and a lower
state income tax expense.
Financial Condition
The Company continues to maintain a strong financial position, with the funding
of capital projects and working capital needs principally out of operating cash
flow and cash reserves, while remaining virtually debt-free. Working capital
increased by $39 million in 1998 and $13 million in 1997, principally due to
increased cash and higher receivable balances associated with extended payment
terms dictated by competitive pressures in the marketplace and a higher percent
of international sales which typically have longer payment terms.
Supplementing its working capital at July 31, 1998, the Company had unused
credit lines totaling $30 million. The Company considers these resources,
coupled with cash expected to be generated by operations, adequate to meet its
foreseeable funding needs for anticipated 1999 expenditures, including higher
inventory levels to support shorter delivery requirements, $32 million for
additional equipment held for rental and $16 million for other capital-related
projects.
The Company's exposure to product liability claims is discussed in the note
entitled Commitments and Contingencies of the Notes to Consolidated Financial
Statements, Item 8 of Part II 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 and accompanying Annual Report 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.
6
Management anticipates another record year for sales and profits in fiscal 1999,
with goals to increase sales by as much as 15% and profit at a somewhat greater
rate. Management's outlook assumes continued economic strength in the U.S. and
in Europe, as well as continued availability of capital to fuel growth in the
rental industry. Management expects that new products, its strategic response to
changing market dynamics and expanding global distribution should allow the
Company to outpace the growth in its industry.
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 by or at the Year 2000.
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's objective is to become Year 2000 compliant with its critical
activities and systems by December 31, 1998, allowing substantial time for
further testing, verification and conversion of less important activities and
systems. The Company has determined that it has no exposure to contingencies
related to the Year 2000 issue for products it has sold and that its information
technology systems are substantially Year 2000 compliant. Testing of the
information systems is scheduled to be completed prior to December 31, 1998. The
Company is also requesting assurances by no later than December 31, 1998 from
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 total cost of the Year 2000 project to date has not been material. Based on
its program to date, the Company does not expect that future costs of
modifications will have a material adverse effect on the Company's financial
position or results of operations. Because the Company expects that its internal
systems will become Year 2000 compliant in a timely manner, the Company believes
that the most reasonably likely worst case Year 2000 scenario would result from
suppliers or other third parties failing to achieve Year 2000 compliance.
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. However, the Company will
develop contingency plans, which should be complete in early 1999, should any
critical problems occur in any of the assessment areas noted above. Accordingly,
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.
Foreign Currency Risk
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 financial results are affected by fluctuations in the value of the
U.S. dollar as compared to foreign currencies. Based on a sensitivity analysis
performed at July 31, 1998, the Company has estimated that a 10% strengthening
in the value of the dollar relative to the currencies in which the Company's
sales are denominated would result in a decrease in operating income of
approximately $6.6 million for the year ended July 31, 1998. 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.
Euro Conversion
On January 1, 1999, certain countries of the European Union are scheduled to
establish fixed conversion rates between their existing currencies and one
common currency, the euro. The euro will then trade on currency exchanges and
may be used in business transactions. Beginning in January 2002, new
euro-denominated currencies will be issued and the existing currencies will be
withdrawn from circulation. The Company is currently evaluating the systems and
business issues raised by the euro conversion. These issues include the need to
adapt computer and other business systems and equipment and the competitive
impact of cross-border transparency. The Company has not yet completed its
estimate of the potential impact likely to be caused by the euro conversion;
however, at present the Company has no reason to believe the euro conversion
will have a material impact on the Company's financial condition or results of
operations.
7
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
CONSOLIDATED BALANCE SHEETS
July 31
----------------------
(in thousands, except per share data) 1998 1997
=======================================================================================
ASSETS
Current Assets
Cash ....................................................... $ 56,793 $ 25,436
Accounts receivable, less allowance for doubtful accounts of
$1,597 in 1998 and $1,282 in 1997 ........................ 94,610 70,164
Inventories ................................................ 47,568 53,727
Other current assets ....................................... 6,544 5,872
-----------------------
Total Current Assets ..................................... 205,515 155,199
Property, Plant and Equipment
Land and improvements ...................................... 5,140 4,124
Buildings and improvements ................................. 28,778 21,266
Machinery and equipment .................................... 61,592 58,592
-----------------------
95,510 83,982
Less allowance for depreciation ............................ 37,858 27,918
-----------------------
57,652 56,064
Equipment Held for Rental, net of accumulated
depreciation of $5,166 in 1998 and $3,626 in 1997 .......... 25,103 24,951
Other Assets ................................................. 19,069 12,160
-----------------------
$ 307,339 $ 248,374
=======================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt .......................... $ 1,253 $ 267
Accounts payable ........................................... 43,119 43,027
Accrued payroll and related taxes .......................... 11,652 10,256
Accrued sales costs ........................................ 3,937 6,025
Income taxes ............................................... 7,251 757
Other current liabilities .................................. 15,631 10,738
-----------------------
Total Current Liabilities ................................ 82,843 71,070
Long-term Debt ............................................... 2,455 3,685
Contingent Liabilities ....................................... 8,800 7,646
Accrued Employee Benefits .................................... 5,473 5,046
Shareholders' Equity
Capital stock:
Authorized shares: 100,000 at $.20 par value
Issued and outstanding shares: 1998 - 44,096 shares;
1997 - 43,726 shares ................................... 8,819 8,745
Additional paid-in capital ................................. 15,626 11,391
Unearned compensation ...................................... (2,633) (1,018)
Accumulated other comprehensive income ..................... (3,662) (2,180)
Retained earnings .......................................... 189,618 143,989
-----------------------
Total Shareholders' Equity ............................... 207,768 160,927
-----------------------
$ 307,339 $ 248,374
=======================
The accompanying notes are an integral part of these financial statements.
8
CONSOLIDATED STATEMENTS OF INCOME
Years Ended July 31
-----------------------------------
(in thousands, except per share data) 1998 1997 1996
==============================================================================================
Net Sales .............................................. $ 530,859 $ 526,266 $ 413,407
Cost of sales .......................................... 402,702 396,261 304,691
-----------------------------------
Gross Profit ........................................... 128,157 130,005 108,716
Selling, administrative and product development expenses 55,388 56,220 44,038
Restructuring charges .................................. 1,689 1,897
-----------------------------------
Income from Operations ................................. 71,080 71,888 64,678
Other income (deductions):
Interest expense ..................................... (254) (362) (293)
Miscellaneous, net ................................... (356) (288) 1,281
-----------------------------------
Income before Taxes .................................... 70,470 71,238 65,666
Income tax provision ................................... 23,960 25,090 23,558
-----------------------------------
Net Income ............................................. $ 46,510 $ 46,148 $ 42,108
===================================
Earnings per Common Share .............................. $ 1.07 $ 1.06 $ .98
===================================
Earnings per Common Share-- Assuming Dilution .......... $ 1.05 $ 1.04 $ .96
===================================
Weighted Average Shares Outstanding ................... 43,666 43,606 43,014
===================================
Weighted Average Shares Outstanding-- Assuming Dilution 44,431 44,401 43,770
===================================
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Accumulated
Capital Stock Additional Other
------------------ Paid-in Unearned Comprehensive Retained
(in thousands except share data) Shares Par Value Capital Compensation Income Earnings
===============================================================================================================
Balances at July 31, 1995 ............... 42,825 $ 8,565 $ 4,411 ($ 1,799) $ 57,253
Comprehensive income:
Net income for the year ............... 42,108
Other comprehensive income -
Aggregate translation adjustment,
net of deferred tax benefit of $737 . (261)
Dividends paid: $.015 per share ......... (648)
Shares issued under stock option plans .. 557 111 3,468
- ---------------------------------------------------------------------------------------------------------------
Balances at July 31, 1996 ............... 43,382 8,676 7,879 (2,060) 98,713
===============================================================================================================
Comprehensive income:
Net income for the year ............... 46,148
Other comprehensive income -
Aggregate translation adjustment,
net of deferred tax benefit of $1,228 (120)
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
Other comprehensive income -
Aggregate translation adjustment,
net of deferred tax benefit of $1,428 (1,482)
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
===============================================================================================================
The accompanying notes are an integral part of these statements
9
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended July 31
---------------------------------
(in thousands) 1998 1997 1996
======================================================================================
Operations
Net income ..................................... $ 46,510 $ 46,148 $ 42,108
Adjustments to reconcile net income to cash
provided by (used for) operating activities:
Depreciation ............................... 15,750 10,389 6,505
Provision for self-insured losses .......... 4,844 2,745 2,938
Deferred income taxes ...................... 1,924 775 502
Changes in operating assets and liabilities:
Accounts receivable ................... (24,446) (15,822) (23,748)
Inventories ........................... 6,159 (14,294) (13,686)
Other current assets .................. (672) (997) (278)
Accounts payable ...................... 92 8,492 16,680
Accrued expenses and other
current liabilities ................. 9,148 5,499 3,076
Changes in other assets and liabilities ........ (9,085) (7,310) (3,406)
---------------------------------
Cash provided by operations ...................... 50,224 35,625 30,691
Investments
Purchases of property, plant
and equipment ................................ (13,577) (29,757) (16,668)
Additions to equipment held for rental ......... (5,377) (14,199) (9,873)
Proceeds from sale of Material Handling
Division ..................................... 10,954
---------------------------------
Cash used for investments ........................ (18,954) (43,956) (15,587)
Financing
Issuance of long-term debt ..................... 2,000
Repayment of long-term debt .................... (244) (242) (309)
Payment of dividends ........................... (881) (872) (648)
Exercise of stock options and issuance
of restricted awards ........................ 2,694 2,563 3,579
---------------------------------
Cash provided by financing ....................... 1,569 3,449 2,622
Currency Adjustments
Effect of exchange rate changes on cash ........ (1,482) (120) (261)
Cash
Net change in cash ............................. 31,357 (5,002) 17,465
Beginning balance .............................. 25,436 30,438 12,973
---------------------------------
Ending balance ................................. $ 56,793 $ 25,436 $ 30,438
=================================
The accompanying notes are an integral part of these statements.
10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands except per share data)
================================================================================
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. In preparing the financial statements, management
is required to make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual results may differ
from those estimates. Certain prior year amounts in the consolidated financial
statements have been reclassified to conform to the presentation used for 1998.
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 aerial work platforms 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.
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:
================================================================================
1998 1997
================================================================================
Finished goods ............................................. $27,784 $33,689
Work in process ............................................ 9,291 13,537
Raw materials .............................................. 15,067 12,371
------------------
52,142 59,597
Less LIFO provision ........................................ 4,574 5,870
------------------
$47,568 $53,727
==================
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.
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.
Capital Stock
The Company distributed a three-for-one stock split in July 1996. The split was
effected by a stock dividend. All share and per share data included in the
financial statements have been restated to reflect the stock split.
Product Development
The Company incurred product development and other engineering expenses of
$9,579, $7,280 and $6,925 in 1998, 1997 and 1996, 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
11
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 credits where necessary. Write-offs for uncollected trade
receivables have not been significant.
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.
The aggregate foreign currency transactions included in the results of
operations were losses of $1,611 and $768 in 1998 and 1997, respectively and
gains of $812 in 1996.
Recent Accounting Pronouncements
In June 1997, the Financial Accounting Standards Board issued Statement No. 131,
"Disclosure about Segments of an Enterprise and Related Information" which
establishes standards for reporting information about operating segments. The
Company is required to adopt this standard effective July 31, 1999. Adoption
will not have any effect on reported results of operations or financial
position.
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, 1999. The Company does not
expect adoption of this statement to have a significant impact on its results of
operations or financial position.
EMPLOYEE RETIREMENT PLAN
The Company has a discretionary, defined-contribution retirement plan covering
all its eligible U.S. employees. The Company's policy is to fund the pension
cost as accrued. Plan assets are invested in mutual funds and the Company's
common stock. The aggregate expense relating to these plans was $5,332, $4,716
and $4,355 in 1998, 1997 and 1996, respectively.
INDUSTRY AND EXPORT DATA
The Company operates in one dominant industry segment - the manufacture and sale
of aerial work platforms. The Company manufactures its products in the U.S., and
the majority of its customers are U.S.-based equipment rental firms. One
customer accounted for 12% of sales for 1998 and 13% for 1997 and 1996. Export
sales were 32%, 30% and 24% of total sales for 1998, 1997 and 1996,
respectively, of which Europe accounted for 18%, 15% and 12% of total sales.
12
INCOME TAXES
The income tax provision consisted of the following for the years ended July 31:
================================================================================
1998 1997 1996
================================================================================
Current:
Federal ................. $ 23,900 $ 23,442 $ 20,476
State ................... 1,984 2,423 2,580
--------------------------------------------
25,884 25,865 23,056
Deferred:
Federal ................. (1,828) (674) 435
State ................... (96) (101) 67
--------------------------------------------
(1,924) (775) 502
--------------------------------------------
$ 23,960 $ 25,090 $ 23,558
============================================
The Company made income tax payments of $16,790, $24,928, and $24,435 in 1998,
1997, and 1996, respectively.
Components of deferred tax assets and liabilities were as follows at July 31:
================================================================================
1998 1997
================================================================================
Future income tax benefits:
Contingent liabilities provisions ................ $ 5,908 $ 4,542
Employee benefits ................................ 2,736 1,910
Translation adjustments .......................... 1,561 1,361
Inventory valuation provisions ................... 959 921
Other ............................................ 512 288
---------------------
11,676 9,022
---------------------
Deferred tax liabilities:
Depreciation and asset basis differences ......... 2,307 1,577
---------------------
Net deferred tax assets ............................ $ 9,369 $ 7,445
=====================
The current and long-term deferred tax asset amounts are included in other
current and other asset amounts on the consolidated balance sheets.
STOCK BASED INCENTIVE PLANS
The Company's stock incentive plan has reserved 4,954 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 annual grants 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 price shall be equal to the shares' fair
market value on their date of grant. An aggregate of 1,917 shares of capital
stock is authorized to be issued under the plan.
Outstanding options and transactions involving the plans are summarized as
follows:
- -----------------------------------------------------------------------------------
1998 1997 1996
- -----------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
- -----------------------------------------------------------------------------------
Outstanding options at the
beginning of the year .. 1,466 $ 4.88 1,705 $ 4.28 1,911 $ 2.58
Options granted .......... 479 14.59 36 17.44 275 12.57
Options canceled ......... (40) 8.66 (34) 3.96 (8) 2.93
Options exercised ........ (110) 3.00 (241) 2.33 (473) 2.07
-----------------------------------------------------
Outstanding options at the
end of the year ........ 1,795 $ 7.51 1,466 $ 4.88 1,705 $ 4.28
=====================================================
Exercisable options at the
end of the year ........ 1,281 $ 4.63 1,082 $ 3.95 778 $ 2.65
=====================================================
13
Information with respect to stock options outstanding at July 31, 1998 is as
follows:
Options Outstanding Options Exercisable
- --------------------------------------------------------------------------------
Weighted Weighted Weighted
Average Average Average
Range of Number Remaining Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
- --------------------------------------------------------------------------------
$1.12 to $1.59 470 5 $ 1.14 470 $ 1.14
$2.93 to $3.30 353 6 3.03 353 3.03
$5.64 to $9.21 321 7 6.84 321 6.84
$11.41 to$17.69 651 9 14.85 137 15.46
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:
- --------------------------------------------------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
Volatility factor ................................. .478 .484 .400
Expected life in years ............................ 3.0 2.0 2.5
Dividend yield .................................... .15% .11% .18%
Interest rate ..................................... 5.73% 5.69% 6.04%
Weighted average fair market value at date of grant $ 5.12 $ 5.37 $ 3.72
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:
- --------------------------------------------------------------------------------
1998 1997 1996
- --------------------------------------------------------------------------------
Pro forma net income .................... $ 46,021 $ 45,837 $ 41,998
Pro forma basic earnings per common share $ 1.05 $ 1.05 $ .96
This pro forma impact only takes into account options granted since January 1,
1995 and is likely to increase in future years as additional options are granted
and amortized over the vesting period.
BASIC AND DILUTED EARNINGS PER SHARE
In 1997, the Financial Accounting Standards Board issued Statement No. 128,
"Earnings per Share". Statement 128 replaced the calculation of primary and
fully diluted earnings per share with basic and diluted earnings per share.
Unlike primary earnings per share, the calculation of basic earnings per share
excludes any dilutive effects of options, warrants and convertible securities.
Diluted earnings per share is very similar to the previously reported fully
diluted earnings per share. All earnings per share amounts for all periods have
been presented, and where appropriate, restated to conform to the Statement 128
requirements.
The following table sets forth the computation of basic and diluted earnings per
share for the years ended July 31:
- ---------------------------------------------------------------------------------------
1998 1997 1996
- ---------------------------------------------------------------------------------------
Net income .............................................. $46,510 $46,148 $42,108
Denominator for basic earnings per share--
weighted average shares ............................... 43,666 43,606 43,014
Effect of dilutive securities - employee stock options
and unvested restricted shares ........................ 765 795 756
---------------------------
Denominator for diluted earning per share--
weighted average shares adjusted for dilutive securities 44,431 44,401 43,770
===========================
Earnings per common share ............................... $ 1.07 $ 1.06 $ .98
===========================
Earnings per common share-- assuming dilution ........... $ 1.05 $ 1.04 $ .96
===========================
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
14
for domestic claims, insurance coverage of $5 million for international claims
and catastrophic coverage of $50 million in excess of the retention and primary
insurance. 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 $12.4 million and $9.6 million were established at July
31, 1998 and 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 July 31, 1998 and 1997, 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 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:
- --------------------------------------------------------------------------------
Earnings
Per
Earnings Common
Per Share
Net Common Assuming
Net Sales Gross Profit Income Share Dilution
- --------------------------------------------------------------------------------
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 .3 .32
July 31 ............ 177,185 46,150 20,167 .47 .46
--------------------------------------------------------
$530,859 $128,157 $ 46,510 $ 1.07 $ 1.05
========================================================
1997
October 31 ......... $120,206 $ 32,703 $ 12,342 $ .28 $ .28
January 31 ......... 121,246 30,996 11,227 .26 .25
April 30 ........... 143,642 35,691 12,921 .30 .29
July 31 ............ 141,172 30,615 9,658 .22 .22
--------------------------------------------------------
$526,266 $130,005 $ 46,148 $ 1.06 $ 1.04
========================================================
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 control
and performed tests of procedures and accounting records in connection with the
issuance of their reports on the fairness of the financial statements.
15
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 independent
auditors and reviewing the scope and fee of the prospective annual audit and the
results of their work; 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.
/s/ L. David Black /s/ Charles H. Diller, Jr.
L. David Black Charles H. Diller, Jr.
Chairman of the Board, Executive Vice President
President and and Chief Financial Officer
Chief Executive Officer
September 11, 1998
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, 1998 and 1997, and the related consolidated statements of
income, shareholders' equity, and cash flows for each of the three years in the
period ended July 31, 1998. 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, 1998 and 1997, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended July 31,
1998, in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Baltimore, Maryland
September 3, 1998
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
16
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
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, 1997), is hereby incorporated by reference.
3.2 By-laws of JLG Industries, Inc.
4.1 Trust Indenture between the Bedford County, Pennsylvania
Industrial Development Authority and the Fulton County National
Bank and Trust Company, as Trustee, which appears as Exhibit B5
to the Company's Form 10-K (File No. 0-8454 - filed October 24,
1979), is hereby incorporated by reference.
4.2 Installment Sale Agreement between Bedford County, Pennsylvania
Industrial Development Authority and JLG Industries, Inc., which
appears as Exhibit B6 to the Company's Form 10-K (File No. 0-8454
-- filed October 24, 1979), is hereby incorporated by reference.
4.3 Agreement to disclose upon request.
10.1 JLG Industries, Inc. Directors' Deferred Compensation Plan
amended and restated as of August 1, 1997 which appears as
Exhibit 10.2 to the Company's 10-K (File No. 0-8454 -- filed
October 6, 1997, is hereby incorporated by reference.
10.2 JLG Industries, Inc. Stock Incentive Plan amended and restated as
of August 1, 1998.
10.3 Credit Agreement dated December 21, 1989 among JLG Industries,
Inc., the First National Bank of Maryland, and CoreStates Bank N.
A., which appears as Exhibit 4.1 to the Company's 10-Q (File No.
0-8454 filed March 12, 1990), is hereby incorporated by
reference.
10.4 First Modification Agreement, dated January 29, 1990 to the
Credit Agreement dated December 21, 1989 among JLG Industries,
Inc., the First National Bank of Maryland, and CoreStates Bank N.
A., which appears as Exhibit 4.3 to the Company's 10-Q (File No.
0-8454 -- filed March 12, 1990), is hereby incorporated by
reference.
17
10.5 Second Modification Agreement, dated September 17, 1993 to the
Credit Agreement dated December 21, 1989 among JLG Industries,
Inc., the First National Bank of Maryland, and CoreStates Bank N.
A., which appears as Exhibit 10.12 to the Company's 10-K (File
No. 0-8454-- filed October 20, 1993), is hereby incorporated by
reference.
10.6 JLG Industries, Inc. Directors Stock Option Plan amended and
restated as of August 1, 1998.
10.7 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 17, 1996),
is hereby incorporated by reference.
10.8 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 17, 1996),
is hereby incorporated by reference.
10.9 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 17, 1996), is hereby
incorporated by reference.
10.10 JLG Industries, Inc. Executive Deferred Compensation Plan amended
and restated as of August 1, 1997 which appears as Exhibit 10.11
to the Company's 10-K (File No. 0-8454 -- filed October 6, 1997,
is hereby incorporated by reference.
22 Listing of subsidiaries
23 Consent of independent auditors
27 Financial Data Schedule
99 Cautionary Statements Pursuant to the Securities Litigation
Reform Act of 1995
(b) The Company was not required to file Form 8-K pursuant to requirements of
such form in the fourth quarter of fiscal 1998
18
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, 1998
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, 1998.
/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/ Gerald Palmer
- ------------------------------------------------
Gerald Palmer, Director
/s/ Charles O. Wood, III
- ------------------------------------------------
Charles O. Wood, III, Director
19
NOTES
20
INVESTOR INFORMATION
================================================================================
Common Stock Data
The Company's capital stock is traded on the New York Stock Exchange under the
symbol JLG.
The Company's quarterly cash dividend rate is currently $.005 per share, or $.02
on an annual basis. When declared, dividends are paid in January, April, July
and October.
The Company believes that approximately 50% of its stock is held by about 126
institutions, mutual funds, banks, insurance and investment companies and
pension funds. In addition, there are about 4,700 shareholders of record,
including 2,300 employees, as well as approximately 20,000 beneficial
shareholders.
Investor Relations Program
The Company has an active investor relations program directed to both individual
and institutional investors. The Company's investor relations mission is to
maintain an ongoing awareness of the Company's performance among its
shareholders and the investment community, in accordance with applicable
reporting requirements.
During the 1998 fiscal year, the Company held numerous meetings with members of
the investment community, participated in various investment conferences and
hosted meetings at its corporate headquarters with security analysts and
portfolio managers. The Company is followed by about ten sell-side analysts, in
addition to Value Line and Standard & Poor's.
In June 1998, the Company hosted a two-day field trip at its corporate
headquarters in McConnellsburg, Pennsylvania which was attended by 30 analysts,
institutional shareholders and potential investors. The theme of the meeting was
"Strategically Positioned for Market Leadership in a New Century."
During fiscal 1998, the Company became a Corporate Member of the National
Association of Investors Corporation (NAIC) and participated in six Investor
Fairs. The Company is ranked among the Top 200 Companies in the NAIC for shares
held by NAIC investment clubs.
The Company's investor relations contact is Charles H. Diller, Jr., Executive
Vice President and Chief Financial Officer, who may be reached at (717)
485-5161.
Corporate Headquarters
JLG Industries, Inc.
1 JLG Drive
McConnellsburg, PA 17233-9533
Telephone: (717) 485-5161
Fax: (717) 485-6417
Annual Meeting of Shareholders
The Annual Meeting will be held at the Company's headquarters in McConnellsburg,
Pennsylvania, at 4:30 p.m., Thursday, November 19, 1998. All shareholders are
cordially invited to attend. Whether planning to attend or not, shareholders are
urged to mark, sign, date, and return their proxy cards promptly, so their
interests will be represented at the Meeting.
Shareholder Services
For prompt assistance regarding address changes, consolidation of duplicate
accounts, lost certificates and related matters, please contact ChaseMellon
Shareholder Services, 85 Challenger Road, Overpeck Centre, Ridgefield Park, NJ
07660, telephone (800) 756-3353.
Shareholders who add to their holdings of the Company's stock are advised to
have their broker or bank register the shares in exactly the same name and
account as those of present holdings. Whenever there is the slightest variation
in the name or address of a shareholder, a separate account must be established.
This leads to duplicate mailings and added expense to the Company.
21
Anyone presently having more than one account registered in his or her name can
assist the Company by consolidating their accounts. To combine such holdings,
shareholders should forward the names and numbers of the accounts involved,
along with a signed request, to the Company's transfer agent.
Shareholder Communications
In order to receive the hard copy circulation of quarterly earnings releases to
shareholders, please request to be placed on a special Direct Mail List by
sending a letter or postcard including your name and complete mailing address
to:
JLG Industries, Inc.
Investor Relations - Direct Mail List
1 JLG Drive
McConnellsburg, PA 17233-9533
Financial information is available by calling the Company's investor line at
(717) 485-6523. The Company also offers investors and shareholders information
via its web site at www.jlg.com where you can view Company product and general
information, the annual report and access to press releases.