UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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, 2002
|_| 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
Securities registered pursuant to Section 12(b) of the Act:
(Title of class) (Name of exchange on which registered)
Capital Stock ($.20 par value) New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes |X| No|_|
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. |X|
At September 26, 2002, there were 42,916,960 shares of capital stock of the
Registrant outstanding, and the aggregate market value of the voting stock held
by non-affiliates of the Registrant at that date was $348,132,009.
Documents Incorporated by Reference
Portions of the Proxy Statement for the 2002 Annual Meeting of Shareholders are
incorporated by reference into Part III.
TABLE OF CONTENTS
Item
PART I
1. Business................................................................ 1
Products and Services............................................... 1
Segment Information................................................. 3
Marketing and Distribution.......................................... 3
Product Development................................................. 3
Competition......................................................... 3
Material and Supply Arrangements.................................... 3
Product Liability................................................... 4
Employees........................................................... 4
Environmental....................................................... 4
Foreign Operations.................................................. 4
Executive Officers of the Registrant................................ 5
2. Properties.............................................................. 6
3. Legal Proceedings....................................................... 6
4. Submission of Matters to a Vote of Security Holders..................... 6
PART II
5. Market for the Registrant's Common Equity
and Related Stockholder Matters....................................... 7
6. Selected Financial Data................................................. 8
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations......................... 10
Results of Operations............................................... 10
Critical Accounting Policies and Estimates.......................... 13
Financial Condition................................................. 14
Outlook............................................................. 17
Market Risk......................................................... 17
8. Financial Statements and Supplementary Data............................. 19
Consolidated Balance Sheets......................................... 19
Consolidated Statements of Income................................... 20
Consolidated Statements of Shareholders' Equity..................... 21
Consolidated Statements of Cash Flows............................... 22
Notes to Consolidated Financial Statements.......................... 23
Report of Management ............................................... 46
Report of Independent Auditors...................................... 47
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure............................... 48
PART III
10. Directors and Executive Officers of the Registrant...................... 48
11. Executive Compensation.................................................. 48
12. Security Ownership of Certain Beneficial Owners
and Management....................................................... 48
13. Certain Relationships and Related Transactions.......................... 48
PART IV
14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K.................................................. 48
Financial Statement Schedule........................................ 48
Exhibits............................................................ 48
Reports on Form 8-K..................................................... 50
Signatures ................................................................. 51
-1-
PART I
ITEM 1. BUSINESS
Founded in 1969, we are the world's leading producer of aerial work platforms
and a leading global manufacturer of variable-reach rough-terrain material
handlers (telehandlers) and telescopic hydraulic excavators (excavators). Our
products are marketed under the JLG(R) and Gradall(R) brand names, which are
widely recognized by end-users as symbols of outstanding product quality,
innovative design, reliability and life cycle cost effectiveness. In addition to
designing and manufacturing our products, we provide our customers with
after-sales service and support and financing and leasing solutions. With sales
and service offices on six continents, we market our products worldwide
primarily to equipment rental companies and distributors who in turn rent and
sell our products to a diverse customer base in the construction, industrial,
and commercial markets. We maintain five manufacturing facilities in
Pennsylvania, Ohio, and Belgium and 23 sales and service facilities throughout
the world.
Products and Services
We are organized in three business segments, Machinery, Equipment Services, and
Access Financial Solutions.
Machinery
Our Machinery segment consists of the design, manufacture and sale of new aerial
work platforms, telehandlers and telescoping hydraulic excavators.
Our aerial work platforms are designed to permit workers to position themselves,
their tools and materials efficiently and safely to elevated work areas of up to
150 feet that otherwise might have to be reached by the erection of scaffolding,
by the use of ladders, or through other devices. We produce three basic types of
mobile aerial work platforms under the JLG brand: boom lifts, scissor lifts, and
vertical mast lifts. These work platforms are mounted 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 chassis. Various standard
accessories for specified end-user applications also may be incorporated into
certain aerial work platform models. Our aerial work platforms are primarily
used in construction and industrial applications and are powered by electric
motors or gasoline, diesel, or propane engines; other models are push-around
units. All of our aerial work platforms are designed for stable operation in
elevated positions.
Our boom lifts are especially useful for reaching over machinery and equipment
that is mounted on floors and for reaching other elevated positions not
effectively approached by other vertical lifting devices. We produce boom lift
models of various sizes with platform heights of up to 150 feet. The boom may be
rotated continuously or 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 three by eight feet, and the rated lift capacities range from
500 to 1,000 pounds.
Our 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 six
feet. Scissor lifts are available in various models, with maximum platform
heights of up to 50 feet and various platform sizes up to seven by 25 feet. The
rated lift capacities range from 500 to 2,500 pounds.
Our 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. In addition, our Stock Picker models can
reach up to 21 feet and have a capacity of up to 500 pounds.
Our Gradall and JLG brand telehandlers are typically used by residential,
non-residential and institutional building contractors and agricultural workers
for lifting, transporting and placing a wide variety of materials at their point
of use or storage. We manufacture and market telehandlers with rated lift
capacities ranging from 6,000 to 10,000 pounds, lifting heights of up to 55 feet
and a variety of material handling attachments. During 2002, we launched our
first European-design telehandler product. Similar to the U.S. market, our
rental company customers who purchase aerial work platforms typically also have
large fleets of telehandlers. Our new European-design telehandler line will
target both construction and agricultural markets and will leverage our existing
European-based manufacturing and wholly owned sales and service operations.
-2-
Our Gradall brand excavators are typically used by contractors and government
agencies for ditching, sloping, finish grading and general maintenance and
infrastructure projects. Our excavators are distinguished from other types of
excavators by their telescoping, rotating booms. The boom's arm-like motion
increases the machine's versatility, optimizing the potential of the machine to
use a wide variety of attachments. We manufacture and market a variety of
track-mounted and wheel-mounted excavators, including specialized models used in
mining and hazardous waste removal. We are the leading supplier of highway-speed
wheel-mounted excavators in North America.
Equipment Services
Our Equipment Services segment focuses on after-sales service and support
activities that enhance our ability to generate additional revenues throughout
the life cycle of the products that we sell. For example, we re-manufacture,
re-condition and re-furbish used equipment that we then resell at lower prices
than our new equipment. We offer a variety of service warranties on these
machines. We are the only access equipment manufacturer with complete
re-manufacturing capability and which sells re-manufactured equipment with a
full warranty. This operation has been certified as meeting ISO 9002 standards
relating to customer service quality.
We distribute replacement parts for our and competing brand equipment through
supplier-direct shipment programs and a system of two parts depots in North
America and single parts depots in each of Europe and Australia. Sales of
replacement parts have historically been less cyclical and typically generate
higher margins than sales of new equipment. We have been expanding our reliance
on and utilization of e-commerce using Internet-based technology in an effort to
develop ever-closer relationships with our customers. For example, we handle
most of our warranty transactions and nearly half of our parts orders via the
Internet.
As another service to our customers, we have a rental fleet of over 900 units
that we deploy in North America to support our rental company customer demands
for rent-to-purchase financing and short-term rental contracts. Through a joint
venture, we also operate a smaller rental fleet in Europe. Both of these
operations are designed as rent-to-rent fleets to support, rather than compete
with, our rental company customers. This program offers added fleet management
flexibility for our rental company customers by making additional machines
available on short term leases to meet levels of peak demand or needs of
particular large products. Also internationally, we operate a small fleet of
service vehicles that is a prototype for a similar service business that we plan
to launch in North America under the name ServicePlus(TM).
We support the sales, service, and rental programs of our customers with product
advertising, co-operative promotional programs, major trade show participation,
and training programs covering service, products and safety. We supplement
domestic sales and service support to our international customers through
overseas facilities in Australia, Brazil, France Germany, Italy, Norway, Poland,
South Africa, Spain, Sweden and the United Kingdom, and a joint venture in the
Netherlands.
Access Financial Solutions
Our newest segment, Access Financial Solutions, focuses on "pre-sales services"
by providing equipment financing and leasing solutions in connection with sales
of our products that are tailored to meet our customers' and end-users'
individual economic, capital structure and operational requirements. We conduct
this business through our wholly owned subsidiary Access Financial Solutions,
Inc. ("AFS"). Financing arrangements offered by AFS include installment sale
contracts, capital leases, synthetic leases, operating leases and rental
purchase guarantees. Terms vary depending on the type of transaction, but
typically range between 36 and 72 months. During the financing term, the
customer generally is responsible for insurance, taxes and maintenance of the
equipment, and the customer bears the risk of damage to or loss of the
equipment.
The 11-person North American staff of AFS is comprised of seasoned professionals
who are experienced in credit analysis and financial services support. AFS
adheres to credit policies that require various levels of credit approval
depending on the transaction size and overall credit concentration with any
customer. For example, Chief Executive Officer approval is required for any
single customer credit including open account balance in excess of $10 million
and approval of the Finance Committee of the Board of Directors is required for
any single customer credit in excess of $25 million. Credit decisions to extend
financing to customers are based on the credit review and approval process that
include both financial analyses and the business rationale to support a
particular customer. Once identified as a key customer, AFS will regularly
review the customer's financial results and projections, the business and
expansion plans and monitor our overall credit exposure to the customer.
AFS also maintains a 5-person staff in Europe which assists customers in
locating financing offered by third parties, either with or without credit
enhancement provided by us.
-3-
During fiscal 2002, we supported our customers in directly financing $112.8
million in sales, and arranging with or without credit enhancement by using
third party financing for an additional $68.7 million in sales or nearly 18% and
11% of our total machinery sales, respectively. Our senior credit facility
permits us to have up to $150 million of customer financing transactions
outstanding at any time. So that we may continue to offer financing solutions to
our customers, we intend to monetize a substantial portion of the receivables
created by AFS through an on-going program of securitizations, syndications,
limited recourse financings and other monetization transactions. During fiscal
2002, we monetized through seven different third parties approximately $101.9
million in finance receivables. In connection with some of these monetization
transactions, we have limited recourse obligations relating to possible defaults
by the obligors under the terms of the contracts which comprise the finance
receivables. Depending on the nature of the AFS monetization transaction, we
either retain servicing of the finance receivables and remit collections to the
third party purchaser or lender, as the case may be, or we engage a third-party
servicer. These monetization transactions allow us to provide on-going liquidity
for our customer financing activities.
Segment Financial Information
Financial information regarding each of our segments appears in the note
entitled "Segment Information" of the Notes to Consolidated Financial
Statements, Item 8 of Part II of this report.
Marketing and Distribution
Our products are marketed internationally through independent rental companies
and distributors that rent and sell our products and provide service support as
well as through other sales and service branches or organizations in which we
hold equity positions. North American customers are located in all 50 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. We have
branches or own controlling interests in sales and service operations in
Australia, Brazil, France, Germany, Italy, Norway, Poland, South Africa, Spain,
Sweden and the United Kingdom, and are a party to a joint venture arrangement
which serves as a rental operation in the Netherlands. Our sales force comprises
over 100 employees worldwide. In North America teams of sales employees and
agents are dedicated to specific major customers or geographic regions. Our
sales employees in Europe and the rest of the world are spread among our 20
international sales and service organizations.
Sales to one customer, United Rentals, Inc., accounted for 21%, 20% and 19% of
our consolidated revenues for the years ended July 31, 2002, 2001 and 2000,
respectively. For 2000, sales to another customer, Rental Service Corp.,
accounted for 13% of consolidated revenues.
Certain of our operations have been certified as meeting ISO 9001 and 9002
standards. We believe that certification is valuable because a number of
customers require certification as a condition to doing business.
Product Development
We invest significantly in product development and diversification, including
improvement of existing products and modification of existing products for
special applications. Our product development staff comprises 144 employees.
Product development expenditures totaled approximately $15.6 million, $15.9
million, and $15.8 million for the fiscal years 2002, 2001 and 2000,
respectively.
We have various registered trademarks and patents relating to our products and
business including registered trademarks for the JLG and Gradall brand names.
While we consider them to be beneficial in the operation of our business, we are
not dependent on any single patent or trademark or group of patents or
trademarks.
Competition
We operate in the global construction and industrial equipment market. Our
competitors range from some of the world's largest multi-national industrial
equipment manufacturers to small single-product niche manufacturers. Within this
global market segment, we face competition principally from three significant
aerial work platform manufacturers and approximately 26 smaller manufacturers,
eight major telehandler manufacturers and numerous other manufacturers of other
niche products such as boom trucks, cherry pickers, mast climbers, straight mast
and truck-mounted forklifts, rough- and all-terrain and truck-mounted cranes,
portable material lifts and various types of earth moving equipment that offer
similar or overlapping functionality to our products. We believe that we are the
world's leading manufacturer of aerial work platforms and one of the world's
leading manufacturers of telehandlers. We are currently a niche supplier of
excavators, but within the narrow category of highway-speed, wheeled-mounted
excavators, we are the leading supplier in North America.
Material and Supply Arrangements
We obtain raw materials, principally steel; other component parts, most notably
engines, drive motors, tires, bearings and hydraulics; and supplies from third
parties. We also outsource certain assemblies and fabricated parts. We rely on
preferred
-4-
vendors as a single source for "just-in-time" delivery of many raw materials and
manufactured components. We believe these arrangements have resulted in reduced
investment requirements, greater access to technology developments and lower
per-unit costs. Although we rely on certain specific suppliers as preferred
vendors, no single component part or raw material is available only from one
vendor. Because we maintain limited raw material and component inventories, even
brief unanticipated delays in delivery by suppliers may adversely affect our
ability to satisfy our customers on a timely basis and thereby affect our
financial performance.
Product Liability
We have rigorous product safety standards and work continually to improve the
safety and reliability of our products. We monitor accidents and possible claims
and establish liability estimates with respect to claims based on internal
evaluations of the merits of individual claims and the reserves assigned by our
independent insurance claims adjustment firm. The methods of making such
estimates and establishing the resulting accrued liability are reviewed
frequently, and any adjustments resulting from such reviews are reflected in
current earnings. Reserves are based on actual incidents and do not necessarily
directly relate to sales activity. Based upon our best estimate of anticipated
losses, product liability costs approximated 1.1%, 0.7% and 0.6% of net
revenues, for the years ended July 31, 2002, 2001 and 2000, respectively.
For additional information relative to product liability insurance coverage and
cost, see the note entitled "Commitments and Contingencies" of the Notes to
Consolidated Financial Statements, Item 8 of Part II of this report.
Employees
We had 2,801 and 3,300 employees as of July 31, 2002 and 2001, respectively. We
believe our employee relations are good. Approximately 11% of our employees are
represented by a union under a contract, which expires April 22, 2006.
Environmental
Our operations are subject to various international, federal, state and local
environmental laws and regulations. These laws and regulations are administered
by international, federal, state and local agencies. Among other things, these
laws and regulations regulate the discharge of materials into the water, air and
land, and govern the use and disposal of hazardous and non-hazardous substances.
We believe that our operations are in substantial compliance with all applicable
environmental laws and regulations, except for violations that we believe would
not have a material adverse effect on our business or financial position.
Foreign Operations
We manufacture our products in the U.S. and Belgium for sale throughout the
world. Revenues to customers outside the U.S. were 28%, 26% and 24% of total net
revenues for 2002, 2001 and 2000, respectively. Revenues from European customers
were 22%, 19% and 17% of total net revenues for 2002, 2001 and 2000,
respectively. Additional financial information regarding our foreign operations
appears in the note entitled "Segment Information" of the Notes to Consolidated
Financial Statements, Item 8 of Part II of this report.
-5-
Executive Officers of the Registrant
- ------------------------------------
Positions with the Company and business
experience during past five years
Name Age (date of initial election)
- ---- --- --------------------------
William M. Lasky 55 Chairman of the Board, President and Chief
Executive Officer (2001); prior to 2000,
President and Chief Executive Officer; prior
to 2000, President and Chief Operating
Officer; prior to 1999, President, Dana
Corporation, Worldwide Filtration Products
Group; prior to 1997, Vice President and
General Manager, Dana Corporation, North
America Filtration Group.
James H. Woodward, Jr. 49 Executive Vice President and Chief Financial
Officer (2002); prior to 2002, Senior Vice
President and Chief Financial Officer; prior
to 2000, Vice President, Director
E-Business, Dana Corporation; prior to 2000,
Vice President and Corporate Controller,
Dana Corporation; prior to 1997, Vice
President and Controller, Dana Corporation,
North American Operations.
Peter L. Bonafede, Jr. 52 Senior Vice President - Manufacturing
(2000); prior to 2000, President, Global
Chemical Technologies; prior to 1999, Vice
President and General Manager,
Ingersoll-Rand Company, Blaw-Knox Division;
prior to 1997, Plant Manager, Federal-Mogul
Corporation.
Craig E. Paylor 46 Senior Vice President - Sales, Marketing and
Customer Support (2001); prior to 2001,
Senior Vice President - Sales and Market
Development; prior to 1999, Vice President
- Sales and Marketing.
Wayne P. MacDonald 49 Senior Vice President - Engineering (2002);
prior to 2002, Vice President - Engineering;
prior to 2000, Director, Advanced Technology
Development and Applications Engineering.
Barry L. Phillips 61 President and Chief Executive Officer,
Gradall Industries, Inc. (1995).
Philip H. Rehbein 52 Senior Vice President - Finance (August
2002), Vice President - Finance (May 2002);
prior to 2002, Vice President and General
Manager - Gradall; prior to 2001, Vice
President Finance; prior to 1999, Vice
President and Corporate Controller; prior to
1998, Corporate Controller.
Thomas D. Singer 50 Senior Vice President, General Counsel and
Secretary (2001); prior to 2000, Vice
President, General Counsel and Assistant
Secretary.
-6-
Significant Employees
- ---------------------
Israel Celli 49 Vice President - International Sales,
Marketing and Customer Support (2002); prior
to 2002, General Manager of Latin America;
prior to 2000, Marketing Director for Latin
America, Case Brasil and Cia. (CNH Global);
prior 1998, National Manager of Marketing,
Sales and Distribution, Clark Empilhadeiras
do Brasil Ltda.; prior to 1997, National
Manager of Product and Marketing, Buettner
Ind. & Com. Ltda.
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
We own and operate four facilities in Pennsylvania and Ohio containing
manufacturing and office space, totaling 1.4 million square feet and situated on
210 acres of land. Our properties are considered to be in good operating
condition, well-maintained and suitable for their present purposes. We lease an
80,000-square-foot manufacturing facility in Belgium. The locations, sizes and
principal products manufactured at each of the facilities is as follows:
Location Size Owned/Leased Products
-------- ---- ------------ --------
New Equipment
McConnellsburg, Pennsylvania 530,000 sq. ft. Owned Boom lifts, Scissor lifts, Telehandlers
Shippensburg, Pennsylvania 300,000 sq. ft. Owned Boom lifts, Scissor lifts, Vertical Mast
lifts
Bedford, Pennsylvania (Sunnyside) 130,000 sq. ft. Owned Scissor lifts
Maasmechelin, Belgium 80,000 sq. ft. Leased Scissor lifts, Telehandlers
New Philadelphia, Ohio 430,000 sq. ft. Owned Excavators
Used Equipment
McConnellsburg, Pennsylvania 27,000 sq. ft. Leased Equipment Services
Port Macquerie, Australia 25,000 sq. ft. Leased Equipment Services
Our McConnellsburg and Bedford, Pennsylvania facilities are encumbered as
security for long-term borrowings.
We also lease executive offices in Hagerstown, Maryland and a number of small
distribution, administration or service facilities throughout the world.
We completed the permanent closure of our Orrville, Ohio, facility and
relocation of telehandler production to McConnellsburg, on July 31, 2002. We
have placed this 340,000-square-foot facility for sale. We also own a
75,000-square-foot facility in Bedford (Weber Lane), Pennsylvania that is no
longer used for manufacturing, which we have placed for sale.
ITEM 3. LEGAL PROCEEDINGS
We make 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 and the discussion in Part I, Item 1 of this report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
-7-
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Our capital stock is traded on the New York Stock Exchange under the symbol JLG.
The table below sets forth the high and low closing prices and average shares
traded daily for the past two fiscal years.
- ------------------------------------------------------------------------------------------------------------
Average Shares
Price per Share Traded Daily
Quarter ---------------------------------------------------------------------------------------
Ended 2002 2001 2002 2001
- ------------------------------------------------------------------------------------------------------------
High Low High Low
October 31 $11.82 $8.98 $13.94 $9.44 97,390 175,214
January 31 $11.65 $9.55 $15.13 $9.63 123,154 156,848
April 30 $17.53 $10.05 $13.97 $11.46 167,580 171,138
July 31 $16.46 $9.00 $12.35 $10.77 182,215 97,781
- ------------------------------------------------------------------------------------------------------------
Our quarterly cash dividend rate is currently $.005 per share, or $.02 on an
annual basis. The dividend rate was decreased to the current rate in November
2001, prior to which the quarterly rate had been $.01 per share.
As of September 12, 2002, there were approximately 2,000 shareholders of record
of our capital stock and another 13,000 shareholders in street names.
For tabular information regarding securities authorized for issuance under
equity compensation plans, see the note entitled "Stock Based Incentive Plans"
of the Notes to Consolidated Financial Statements, Item 8 of Part II of this
report.
-8-
ITEM 6. SELECTED FINANCIAL DATA
ELEVEN-YEAR FINANCIAL SUMMARY
(in thousands of dollars, except per share data and number of employees)
- ----------------------------------------------------------------------------------------------------------
Years ended July 31 2002 2001 2000
- ----------------------------------------------------------------------------------------------------------
RESULTS OF OPERATIONS
Net revenues $770,070 $963,872 $1,056,168
Gross profit 132,087 188,794 231,086
Selling, administrative and
product development expenses (95,279) (104,585) (109,434)
Goodwill amortization -- (6,052) (6,166)
Restructuring charge (6,091) (4,402) --
Income (loss) from operations 30,717 73,755 115,486
Interest expense (16,255) (22,195) (20,589)
Other income (expense), net 4,759 2,737 1,146
Income (loss) before taxes and cumulative effect of change in
accounting principle 19,221 54,297 96,043
Income tax (provision) benefit (6,343) (20,091) (35,536)
Income (loss) before cumulative effect of change in accounting
principle 12,878 34,206 60,507
Cumulative effect of change in accounting principle (114,470) -- --
Net (loss) income (101,592) 34,206 60,507
PER SHARE DATA
Earnings per common share before cumulative effect of change in
accounting principle $.31 $.81 $1.39
Cumulative effect of change in accounting principle (2.72) -- --
(Loss) earnings per common share (2.41) .81 1.39
Earnings per common share -- assuming dilution before cumulative
effect of change in accounting principle .30 .80 1.37
Cumulative effect of change in accounting principle (2.65) -- --
(Loss) earnings per common share -- assuming dilution (2.35) .80 1.37
Cash dividends .025 .04 .035
PERFORMANCE MEASURES (before cumulative effect of change in
accounting principle)
Return on revenues 1.7% 3.5% 5.7%
Return on average assets 1.6% 4.4% 8.5%
Return on average shareholders' equity 3.8% 10.5% 20.8%
FINANCIAL POSITION
Working capital $231,203 $254,752 $165,923
Current assets as a percent of current liabilities 188% 250% 187%
Property, plant and equipment, net 84,370 98,403 105,879
Total assets 778,241 825,589 653,587
Total debt 279,329 299,187 98,302
Adjusted total debt 198,884 368,637 142,871
Shareholders' equity 236,042 333,441 324,051
Total debt as a percent of total capitalization 54% 47% 23%
Book value per share 5.52 7.91 7.42
OTHER DATA
Product development expenditures $15,586 $15,858 $15,751
Capital expenditures, net of retirements 12,390 10,685 22,251
Net additions (retirements) to rental fleet 5,554 12,437 (8,016)
Depreciation and amortization 20,959 28,775 25,970
Employees 2,801 3,300 3,770
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. Amounts subsequent to 1998 reflect the
acquisition of Gradall Industries, Inc. in June 1999.
-9-
- -------------------------------------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995 1994 1993 1992
- -------------------------------------------------------------------------------------------------------------------------
$720,224 $530,859 $526,266 $413,407 $269,211 $176,443 $123,034 $110,479
166,953 128,157 130,005 108,716 65,953 42,154 28,240 22,542
(75,431) (55,388) (56,220) (44,038) (33,254) (27,147) (23,323) (22,024)
(750) -- -- -- -- -- -- --
-- (1,689) (1,897) -- -- -- -- (4,922)
90,772 71,080 71,888 64,678 32,699 15,007 4,917 (4,404)
(1,772) (254) (362) (293) (376) (380) (458) (1,218)
2,016 (356) (288) 1,281 376 (24) 180 (149)
91,016 70,470 71,238 65,666 32,699 14,603 4,639 (5,771)
(29,745) (23,960) (25,090) (23,558) (11,941) (5,067) (1,410) 2,733
61,271 46,510 46,148 42,108 20,758 9,536 3,229 (3,038)
-- -- -- -- -- -- -- --
61,271 46,510 46,148 42,108 20,758 9,536 3,229 (3,038)
$1.40 $1.07 $1.06 $.98 $.49 $.23 $.08 ($.07)
-- -- -- -- -- -- -- --
1.40 1.07 1.06 .98 .49 .23 .08 (.07)
1.36 1.05 1.04 .96 .48 .23 .08 (.07)
-- -- -- -- -- -- -- --
1.36 1.05 1.04 .96 .48 .23 .08 (.07)
.02 .02 .02 .015 .0092 .0083 -- .005
8.5% 8.8% 8.8% 10.2% 7.7% 5.4% 2.6% (2.8%)
17.3% 17.9% 21.7% 28.5% 20.2% 12.1% 4.6% (4.0%)
28.1% 26.2% 33.6% 47.9% 37.1% 23.8% 8.5% (7.9%)
$176,315 $122,672 $84,129 $71,807 $45,404 $32,380 $26,689 $33,304
226% 248% 218% 226% 216% 208% 217% 268%
100,534 57,652 56,064 34,094 24,785 19,344 13,877 13,511
625,817 307,339 248,374 182,628 119,708 91,634 72,518 73,785
175,793 3,708 3,952 2,194 2,503 7,578 4,471 12,553
156,760 (53,085) (21,484) (28,244) (10,470) (510) (377) 7,613
271,283 207,768 160,927 113,208 68,430 45,706 38,939 37,186
39% 2% 2% 2% 4% 14% 10% 25%
6.13 4.71 3.68 2.61 1.60 1.09 .89 .86
$9,279 $9,579 $7,280 $6,925 $5,542 $4,373 $3,385 $3,628
24,838 13,577 29,757 16,668 8,618 7,762 3,570 1,364
4,645 5,377 14,199 9,873 1,548 1,455 273 3,470
19,530 15,750 10,389 6,505 3,875 2,801 2,500 2,569
3,960 2,664 2,686 2,705 2,222 1,620 1,324 1,014
-10-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
For the year ended July 31, 2002, our revenues were $770.1 million, down 20%
from the $963.9 million reported for fiscal 2001. Our revenues for the year
ended July 31, 2001 were $963.9 million, down 9% from the $1.056 billion
reported for fiscal 2000.
The following tables outline our revenues by segment, product, and geography (in
thousands) for the years ended July 31:
Years Ended July 31,
----------------------------------
2002 2001 2000
-------- ---------- ----------
Segment:
Machinery $621,283 $835,893 $931,048
Equipment Services 133,058 122,650 125,120
Access Financial Solutions (a) 15,729 5,329 --
----------------------------------
$770,070 $963,872 $1,056,168
==================================
Products:
Aerial work platforms $475,241 $682,689 $745,155
Telehandlers 87,443 87,704 125,749
Excavators 58,599 65,500 60,144
After-sales service and support,
including parts sales, and used and
reconditioned equipment sales 124,587 116,376 120,616
Financial products (a) 14,227 3,889 --
Rentals 9,973 7,714 4,504
----------------------------------
$770,070 $963,872 $1,056,168
==================================
Geographic:
United States $556,252 $709,412 $805,955
Europe 167,940 187,924 178,230
Other 45,878 66,536 71,983
----------------------------------
$770,070 $963,872 $1,056,168
==================================
(a) Revenues for Access Financial Solutions and for financial products
are not the same because Access Financial Solutions also receives
revenues from rental purchase agreements that are recorded for
accounting purposes as rental revenues from operating leases.
The decrease in Machinery segment sales from $835.9 million for fiscal 2001 to
$621.3 million for fiscal 2002, or 26%, was primarily attributable to lower
aerial work platform sales resulting from lower market demand due principally to
a weakened North American economy and related factors, a slowing of
consolidation in the North American rental industry and coincident efforts of
large national rental companies to rationalize their equipment fleets, and
tightened credit conditions for equipment purchases in Europe. The increase in
Equipment Services segment revenues from $122.7 for fiscal 2001 to $133.1
million for fiscal 2002, or 8%, was principally attributable to increased
revenues from the conversion of rental purchase agreements, sales of aerial work
platform replacement parts and sales of remanufactured, reconditioned and
refurbished equipment partially offset by the absence in fiscal 2002 of the
$19.9 million sale-leaseback of rental fleet assets that occurred during fiscal
2001. The increase in Access Financial Solutions segment revenues from $5.3
million to $15.7 million was principally attributable to increased financing
activities resulting from our larger investment in this new business activity.
The decrease in Machinery segment sales from $931.0 million for fiscal 2000 to
$835.9 million for 2001, or 10%, was primarily attributable to reduced sales of
aerial work platforms and telehandlers in North America due to recessionary
conditions in the manufacturing and industrial sectors of the economy, offset in
part by market share gains. Overall demand for these products in North America
was weaker in fiscal 2001 than it was in fiscal 2000. The decline in sales in
North America was partially offset by an increase in sales of machinery in
Europe due to our penetration into additional European countries during fiscal
2001. Equipment Services segment revenues for fiscal 2001 were $122.7 million,
down $2.5 million, or 2%, compared to the prior year. The reduction in revenues
in our Equipment Services segment primarily resulted from the
-11-
reduced size of our rental fleet during 2000. This reduction was partially
offset by increased revenues from replacement parts due to continued strong
fleet utilization, additional product offerings to expand into new markets and a
new pricing strategy.
Our domestic revenues for fiscal 2002 were $556.3 million, down 22% from fiscal
2001 revenues of $709.4 million. The decrease in our domestic revenues was
primarily attributable to lower aerial work platform sales in the weakened
domestic economy and the $19.9 million sale-leaseback of rental fleet assets
during the second and third quarters of fiscal 2001. Revenues generated from
sales outside the United States during fiscal 2002 were $213.8 million, down 16%
from fiscal 2001. The decrease in our revenues generated from sales outside the
United States was primarily attributable to lower aerial work platform sales
primarily as a result of a softer European economy, a tight credit environment
for many of our European customers which reduced demand for our products, and
$3.1 million in deferred manufacturing profit recognized in the first quarter of
fiscal 2001 related to the sale of our 50% interest in a Brazilian joint
venture.
Our domestic revenues for fiscal 2001 were $709.4 million, down 12% from fiscal
2000 revenues of $806.0 million primarily due to weaker demand and lower prices
for aerial work platforms and telehandlers due principally to recessionary
conditions in North America manufacturing and industrial sectors. Revenues
generated from sales outside the United States during fiscal 2001 were $254.5
million, up 2% from fiscal 2000.
As a percentage of revenues, international revenues were 28%, 26% and 24% of
total net revenues for fiscal 2002, 2001 and 2000, respectively. The increase in
the percentage for fiscal 2002 as compared to fiscal 2001 primarily resulted
from a reduction in the North American machinery sales as discussed above. The
increase in the percentage for fiscal 2001 as compared to fiscal 2000 primarily
resulted from stronger European sales and a reduction in North American
machinery sales as discussed above.
Our gross profit margin decreased to 17.2% in fiscal 2002 from 19.6% in fiscal
2001. The decline was attributable to lower margins in our Machinery and
Equipment Services segments offset in part by higher margins in our Access
Financial Solutions segment. The gross profit margin of our Machinery segment
was 14.2% for fiscal 2002 compared to 18.6% for fiscal 2001. The gross profit
margin of our Machinery segment declined in fiscal 2002 principally due to
volume-related production costs resulting from shutdowns in the second quarter
of the current fiscal year. In order to accelerate reduction of finished goods
inventories in response to lower demand for our products, during the second
quarter we shut down all manufacturing facilities for nearly half of the
available production days resulting in higher average production costs. The
effect of the shutdowns flowed through the income statement as the inventory
produced during that quarter was sold. Partially offsetting the decline in gross
profit margin was the elimination of our discretionary profit sharing
contribution related to production personnel for calendar year 2001. The gross
profit margin of our Equipment Services segment was 22.0% for fiscal 2002
compared to 23.8% for fiscal 2001. The gross profit margin of our Equipment
Services segment decreased in fiscal 2002 primarily due to general economic
conditions which have had an impact on used machine pricing and lower margins on
our material handlers and excavator replacement parts. The gross profit margin
of our Access Financial Solutions segment increased in fiscal 2002 compared to
fiscal 2001 primarily because of increased revenues resulting from the start-up
of this segment during the prior year period. Because the costs associated with
these revenues are principally selling and administrative expenses and interest
expense, gross margins are typically higher in this segment.
Our gross profit margin decreased to 19.6% in fiscal 2001 from 21.9% in fiscal
2000. The gross profit margin of our Machinery segment was 18.6% for fiscal 2001
compared to 20.4% for fiscal 2000. The gross profit margin of our Machinery
segment declined in fiscal 2001 in large part because of unfavorable exchange
rates, particularly with regard to the Euro, British pound and Australian dollar
and because of lower prices due to increasing competition on the basis of price.
These factors were partially offset by the effect of ongoing cost reduction
initiatives and by selling a more profitable mix of products. The gross profit
margin of our Equipment Services segment was 23.8% for fiscal 2001 compared to
33.0% for fiscal 2000. The gross profit margin of our Equipment Services segment
declined in fiscal 2001 primarily because of the negative impact of the $19.9
million in rental fleet sale-leaseback transactions during the second and third
quarters. During fiscal 2001, we began offering our customers financial
products. Because the costs associated with these revenues are principally
selling and administrative expenses and interest expense, gross margins are
typically higher in this segment.
Our selling, administrative and product development expenses as a percent of
revenues were 12.4% for fiscal 2002 compared to 10.9% for fiscal 2001. In dollar
terms, these expenses were $9.3 million lower in fiscal 2002 than in fiscal
2001. Our Machinery segment's selling, administrative and product development
expenses decreased $13.7 million in fiscal 2002 due primarily to reductions in
bad debt provisions, contract services and consulting expenses and the
elimination of our discretionary profit sharing contribution related to selling
and administrative personnel for calendar year 2001. Our Equipment Services
segment's selling and administrative expenses increased $0.7 million in fiscal
2002 mainly due to increased payroll and related costs, freight expense and
commission costs partially offset by the elimination of our discretionary profit
sharing contribution related to selling and administrative personnel for
calendar year 2001. Our Access Financial Solutions segment's selling and
administrative expenses increased $1.1 million in fiscal 2002 due primarily to
costs
-12-
associated with the start-up of this business. Our general corporate selling,
administrative and product development expenses increased $2.5 million in fiscal
2002 primarily due to increased bad debt provisions for specific reserves
related to certain customers, consulting expenses, costs associated with the
vesting of stock awards, and costs related to establishing our shared service
center in Europe partially offset by lower pension charges, advertising
expenses, payroll and related costs and the elimination of our discretionary
profit sharing contribution. Prior year pension expense was higher due to the
early retirement of three senior officers.
Our selling, administrative and product development expenses as a percentage of
revenues were 10.9% for fiscal 2001 compared to 10.4% for fiscal 2000. In dollar
terms, these expenses were $4.8 million lower in fiscal 2001 than in fiscal
2000. Our Machinery segment's selling, administrative and product development
expenses increased $1.9 million in fiscal 2001 due primarily to increased
payroll and related costs, which were partially offset by lower bonus costs
resulting from our earnings not reaching the threshold for payments under our
management incentive plan. Our Equipment Services segment's selling and
administrative expenses increased $0.4 million in fiscal 2001 due primarily to
the same reasons as described for our Machinery segment. Our Access Financial
Solutions segment's selling and administrative expenses increased $3.3 million
in fiscal 2001 due primarily to costs associated with the start-up of this
business during the year including the addition of personnel. Our general
corporate selling, administrative and product development expenses decreased
$10.5 million in fiscal 2001 primarily due to lower bonus, employee retirement
and legal costs.
During fiscal 2002, we ceased manufacturing at our facility in Orrville, Ohio as
part of our capacity rationalization plan for our Machinery segment. Operations
at this facility have been integrated into our McConnellsburg, Pennsylvania
facility and the closure will result in a reduction of approximately 170 people.
As a result, we anticipate incurring a pre-tax charge of $7.7 million,
consisting of $6.1 million in restructuring costs associated with personnel
reductions and the write-down of idle facilities and $1.6 million in charges
related to relocating certain plant assets and start-up costs associated with
the move of the Orrville operations to McConnellsburg. The $7.7 million consists
of $3.4 million in cash charges and $4.3 million in non-cash charges. At July
31, 2002, we had incurred $6.7 million of the pre-tax charge discussed above,
consisting of an accrual of $1.2 million for termination benefit costs and a
$4.9 million asset write-down and $0.6 million in production relocation costs.
We reported $6.1 million in restructuring costs and $0.6 million in cost of
sales. During fiscal 2002, 132 employees were terminated, and we paid and
charged $0.2 million of termination benefit and lease termination costs against
the accrued liability.
During fiscal 2001, we announced a repositioning plan that involved a pre-tax
charge of $15.8 million. Of the $15.8 million, approximately $4.9 million was
associated with the personnel reductions and plant closing, $5.3 million
reflected current period charges due to idle facilities associated with the
fourth quarter production shutdowns and $3.7 million was for the re-valuation of
used equipment inventory. The remaining $1.9 million included costs relating to
reorganizing existing distribution relationships in Europe and the Pacific Rim
regions. Cash charges totaled $5.2 million out of the $15.8 million.
As part of the $15.8 million, we recorded a restructuring charge of $4.4 million
to rationalize manufacturing capacity in our Machinery segment and, of the
remainder, $9.5 million is reflected in cost of sales, $1.0 million is recorded
in selling, administrative and product development expenses, and $0.9 million is
reflected in miscellaneous, net. The restructuring charge included the permanent
closure of a manufacturing facility in Bedford, Pennsylvania resulting in a
reduction of approximately 265 people. In addition, aligning our workforce with
then current economic conditions at other facilities worldwide resulted in a
further reduction of approximately 370 people during the fourth quarter of
fiscal 2001 for a total of 635 people.
We were affected by the early adoption of Statement of Financial Accounting
Standards ("SFAS") No. 142, "Goodwill and Other Intangible Assets." As a result
of this new accounting standard, we no longer amortize goodwill. This led to the
reduction of $6.1 million in goodwill amortization during fiscal 2002 compared
to fiscal 2001. For fiscal 2001 and 2000, goodwill amortization was $6.1 million
and $6.2 million, respectively, primarily due to the Gradall acquisition in
1999.
The decrease in interest expense of $5.9 million for fiscal 2002 was primarily
due to a decrease in average borrowings under our credit facilities partially
offset by the sale of $175.0 million principal amount of 8 3/8% senior
subordinated notes in June 2002 discussed below. The increase in interest
expense of $1.6 million for fiscal 2001 was due to an increase in average
borrowings to fund the finance receivables and increased inventory investments.
Our miscellaneous income (deductions) category included currency gains of $2.9
million in fiscal 2002 compared to losses of $0.9 million in the corresponding
prior year period. The increase in currency gains is primarily attributable to
the weakening of the U.S. dollar against the Euro during fiscal 2002 compared to
fiscal 2001. In the first quarter of fiscal 2001, we gained $1.0 million from
the sale of our interest in a Brazilian joint venture, which was included in the
miscellaneous income (deductions) category.
-13-
Our effective tax rate in fiscal 2002 was 33% as compared to 37% for both fiscal
2001 and 2000. Since the amortization of goodwill is not deductible for tax
purposes, the elimination of its amortization reduced our effective tax rate.
During the fourth quarter of fiscal 2002, we completed our review of our
goodwill for impairment as required by SFAS No. 142. As a result, we recorded a
transitional impairment loss, in accordance with the transition rules of SFAS
No. 142, of $114.5 million, or $2.65 per share on a diluted basis, primarily
associated with our Gradall acquisition. This write-off was reported as a
cumulative effect of change in accounting principle in our Consolidated
Statements of Income.
We reported net income, excluding the cumulative effect of change in accounting
principle related to the adoption of SFAS No. 142 of $12.9 million, or $.30 per
share on a diluted basis, for fiscal 2002, compared to net income of $34.2
million, or $.80 per share on a diluted basis, for fiscal 2001, and $60.5
million, or $1.37 per share on a diluted basis, for fiscal 2000. As discussed
above and more fully described in the note to our consolidated financial
statements entitled "Repositioning and Restructuring Costs," earnings for 2002
and 2001 included charges of $6.7 million ($4.5 million net of tax) and of $15.8
million ($10.0 million net of tax), respectively, related to repositioning our
operations to more appropriately align our costs with our business activity.
Excluding these charges and the cumulative effect of change in accounting
principle, net income for fiscal 2002 would have been $17.4 million, or $.40 per
share on a diluted basis, and net income for fiscal 2001 would have been $44.2
million, or $1.04 per share on a diluted basis.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles ("GAAP") requires our management to make estimates and
assumptions about future events that affect the amounts reported in the
financial statements and related notes. Future events and their effects cannot
be determined with absolute certainty. Therefore, the determination of estimates
requires the exercise of judgment. Actual results inevitably will differ from
those estimates, and such differences may be material to the financial
statements.
We have identified the following accounting policies as critical to our business
operation and the understanding of our results of operations and financial
position.
Allowance for Doubtful Accounts and Reserves for Finance Receivables: We
evaluate the collectibility of accounts and finance receivables based on a
combination of factors. In circumstances where we are aware of a specific
customer's inability to meet its financial obligations, a specific reserve is
recorded against amounts due to reduce the net recognized receivable to the
amount reasonably expected to be collected. Additional reserves are established
based upon our perception of the quality of the current receivables, the current
financial position of our customers and past experience of collectibility. If
the financial condition of our customers were to deteriorate resulting in an
impairment of their ability to make payments, additional allowances would be
required.
Income Taxes: We record the estimated future tax effects of temporary
differences between the tax bases of assets and liabilities and amounts reported
in the accompanying consolidated balance sheets, as well as operating loss and
tax credit carry-forwards. We evaluate the recoverability of any tax assets
recorded on the balance sheet and provide any necessary allowances as required.
The carrying value of the net deferred tax assets assumes that we will be able
to generate sufficient future taxable income in certain tax jurisdictions, based
on estimates and assumptions. If these estimates and related assumptions change
in the future, we may be required to record additional valuation allowances
against our deferred tax assets resulting in additional income tax expense in
our consolidated statement of operations. In assessing the realizability of
deferred tax assets, we consider whether it is more likely than not that some
portion or all of the deferred tax assets will not be realized. We consider the
scheduled reversal of deferred tax liabilities, projected future taxable income,
carry back opportunities, and tax planning strategies in making the assessment.
We evaluate the realizability of the deferred tax assets and assess the need for
additional valuation allowances quarterly.
Inventory Valuation: Inventories are valued at the lower of cost or market.
Certain items in inventory may be considered impaired, obsolete or excess, and
as such, we may establish an allowance to reduce the carrying value of these
items to their net realizable value. The amounts in these inventory allowances
are determined by us based on certain estimates, assumptions and judgments made
from the information available at that time. If these estimates and related
assumptions or the market change, we may be required to record additional
reserves.
Guarantees of the Indebtedness of Others: We enter into agreements with finance
companies whereby our equipment is sold to a finance company which, in turn,
sells or leases it to a customer. We retain a liability in the event the
customer defaults on the financing. Under certain terms and conditions where we
are aware of a customer's inability to meet its financial obligations, we
establish a specific reserve against the liability. Additional reserves have
been established related to these guarantees based upon the current financial
position of these customers based on estimates and judgments made from
-14-
information available at that time. If the financial condition of our customers
were to deteriorate resulting in an impairment of their ability to make
payments, additional allowances would be required.
Product liability: Our business exposes us to possible claims for personal
injury or death and property damage resulting from the use of equipment that we
rent or sell. We maintain insurance through a combination of self-insurance
retentions and excess insurance coverage. We monitor claims and potential claims
of which we become aware and establish liability reserves for the self-insurance
amounts based on our liability estimates for such claims. Our liability
estimates with respect to claims are based on internal evaluations of the merits
of individual claims and the reserves assigned by our independent insurance
claims adjustment firm. The methods of making such estimates and establishing
the resulting accrued liability are reviewed frequently, and adjustments
resulting therefrom are reflected in current earnings. If these estimates and
related assumptions change, we may be required to record additional reserves.
Revenue Recognition: Sales of equipment and service parts are generally
unconditional sales that are recorded when product is shipped and invoiced to
independently owned and operated distributors and customers. Normally our sales
terms are "free on board" shipping point (FOB shipping point); however, certain
sales may be invoiced prior to the time customers take physical possession. In
such cases, revenue is recognized only when the customer has a fixed commitment
to purchase the equipment, the equipment has been completed and made available
to the customer for pickup or delivery, and the customer has requested that we
hold the equipment for pickup or delivery at a time specified by the customer.
In such cases, the equipment is invoiced under our customary billing terms,
title to the units and risks of ownership passes to the customer upon invoicing,
the equipment is segregated from our inventory and identified as belonging to
the customer and we have no further obligations under the order. During fiscal
2002, approximately 1% of our European sales were invoiced and the revenue
recognized prior to the customer taking physical possession.
Revenue from certain equipment lease contracts is accounted for as sales-type
leases. The present value of all payments, net of executory costs (such as legal
fees), is recorded as revenue and the related cost of the equipment is charged
to cost of sales. The associated interest is recorded over the term of the lease
using the interest method. In addition, net revenues include rental revenues
earned on the lease of equipment held for rental. Rental revenues are recognized
in the period earned over the lease term.
Warranty: We establish reserves related to warranties we provide on our
products. Specific reserves are maintained for programs related to machine
safety and reliability issues. Estimates are made regarding the size of the
population, the type of program, costs incurred by us and estimated
participation. Additional reserves are maintained based on the historical
percentage relationships of such costs to machine sales and applied to current
equipment sales. If these estimates and related assumptions change, we may be
required to record additional reserves.
Additional information regarding our critical accounting policies is included in
the note to our consolidated financial statements entitled "Summary of
Significant Accounting Policies" included in this report.
FINANCIAL CONDITION
Cash flow generated from operating activities was $23.1 million for fiscal 2002
versus cash used of $174.1 million in fiscal 2001. The increase in cash
generated from operations in fiscal 2002 was primarily driven by a decrease in
our inventory investment of $24.5 million as we shut down production facilities
to synchronize inventory and sales levels, and an increase in accounts payable
as days purchasing outstanding increased to 67 days at July 31, 2002 compared to
46 days at July 31, 2001. The increase in accounts payable reflects production
shutdowns during July 2001 due to the slowing economy and the resulting
reduction in material purchases. Partially offsetting these effects were
increases in trade and finance receivables. The increase in trade receivables
principally reflects the termination of our receivables securitization agreement
during February 2002 and the repurchase of any outstanding amounts under the
purchase agreement. Access Financial Solutions' finance receivables increased
due to monetization activities, which resulted in $88.7 million in pledged
receivables and the related limited recourse debt, offset by decreased lease
obligations due to lower sales. The fiscal 2001 increase in cash usage was
primarily driven by investments in finance receivables and inventories and a
reduction in accounts payable due to lower production levels.
During fiscal 2002, we used a net of $9.9 million of cash for investing
activities compared to $19.1 million for fiscal 2001. Our decrease in cash usage
was principally due to a decrease in purchases of rental fleet equipment and
lower capital investments partially offset by the rental fleet sale-leaseback
transactions and the sale of our interest in our Brazilian joint venture that
occurred during fiscal 2001. We did not have any comparable transactions during
fiscal 2002. Our increase in cash used by investing activities for fiscal 2001
was principally due to an increase in our rental fleet during fiscal 2001
compared to a decrease in our rental fleet during fiscal 2000 partially offset
by lower capital investments compared to the prior year period.
-15-
We used a net of $15.5 million of cash for financing activities for fiscal 2002
compared to net cash received of $176.9 million for fiscal 2001. The decrease in
cash provided from financing activities largely resulted from lower borrowings
under our credit facilities due to working capital reductions discussed above.
In addition, financing activities for fiscal 2001 included expenditures incurred
to repurchase 1.7 million shares of our capital stock at an aggregate cost of
$22.2 million. We did not repurchase any of our stock in fiscal 2002. Partially
offsetting the increase in cash used for financing activities was the proceeds
from the sale of our $175 million 8 3/8% senior subordinated notes and the
proceeds from the monetization of our finance receivables. The increase in cash
provided from financing activities in fiscal 2001 largely resulted from higher
borrowings under our credit facilities due to the working capital investments
and the repurchase of 1.7 million shares discussed above.
The following table provides a summary of our contractual obligations (in
thousands) at July 31, 2002:
Payments Due by Period
-------------------------------------------------
Less than After 5
Total 1 Year 1-3 Years 4-5 Years Years
-------- --------- --------- --------- --------
Short and long-term debt (a) $191,758 $14,427 $ 394 $ 278 $176,659
Limited recourse debt 87,571 34,850 28,878 22,053 1,790
Operating leases (b) 32,940 6,056 11,099 12,984 2,801
-------- ------- ------- ------- --------
Total contractual obligations $312,269 $55,333 $40,371 $35,315 $181,250
======== ======= ======= ======= ========
(a) Included in long-term debt is our secured revolving credit facility with a
group of financial institutions that provide an aggregate commitment of
$250 million. We also have a $25 million secured bank revolving line of
credit with a term of one year, renewable annually. The credit facilities
contain customary affirmative and negative covenants including financial
covenants requiring the maintenance of specified consolidated interest
coverage, leverage ratios and a minimum net worth. If we were to become in
default of these covenants, the financial institutions could call the
loans.
(b) In accordance with SFAS No. 13, "Accounting for Leases," operating lease
obligations are not reflected in the balance sheet.
The following table provides a summary of our other commercial commitments (in
thousands) at July 31, 2002:
Amount of Commitment Expiration Per Period
-------------------------------------------
Total
Amounts Less than Over 5
Committed 1 Year 1-3 Years 4-5 Years Years
--------- --------- --------- --------- -------
Standby letters of credit $ 2,411 $2,411 $ -- $ -- $ --
Guarantees (a) 104,264 597 18,443 60,232 24,992
-------- ------ ------- ------- -------
Total commercial commitments $106,675 $3,008 $18,443 $60,232 $24,992
======== ====== ======= ======= =======
(a) We discuss our guarantee agreements in the note to our consolidated
financial statements entitled "Commitments and Contingencies" included in
this report.
We also monitor our net debt, which is a non-GAAP measure. Net debt reflects the
sum of total debt, accounts receivables securitizations and other off-balance
sheet financing, minus cash and limited and non-recourse debt arising from our
monetizations of customer finance receivables. The following presents net debt
(in thousands) as of:
July 31, July 31,
2002 2001
-------- --------
Total debt $279,329 $299,187
Accounts receivable securitization -- 50,600
Rental fleet sale/leaseback 5,582 16,656
Equipment sale/leaseback 7,749 11,448
-------- --------
Gross debt 292,660 377,891
Less cash 6,205 9,254
Less limited and non-recourse debt 87,571 --
-------- --------
Net debt $198,884 $368,637
======== ========
In June 2002, we sold $175 million principal amount of our 8 3/8% senior
subordinated notes due 2012 and amended our $250 million senior credit facility
and our $25 million bank overdraft facility to provide greater flexibility for
our operations. The net proceeds of the offering were used to repay outstanding
debt under our existing $250 million revolving credit facility
-16-
and to terminate an $83 million working capital facility. As of July 31, 2002,
we had unused credit lines totaling $261.1 million. In order to meet our future
cash requirements, we intend to use internally generated funds and to borrow
under our credit facilities. Availability of these credit lines depends upon our
continued compliance with certain covenants, including certain financial ratios.
Although we are currently in compliance with all financial covenants in our
senior credit facilities, we received waivers to allow us to be in compliance at
July 31, 2002 and the senior credit facilities were amended during August 2002
to modify the definitions of Adjusted EBIT and EBITDA, to neutralize our
goodwill impairment charge related to Gradall and any expenses relating to stock
options, and to revise certain financial and other covenants.
We also borrow under our credit lines to fund originations of customer finance
receivables in our Access Financial Solutions segment. Our senior lenders have
agreed to permit Access Financial Solutions to originate and have outstanding no
more than $150 million in finance receivables, other than pledged receivables
that secure on-balance sheet, limited recourse and non-recourse monetizations.
Our business plan anticipates that we will originate substantially more than
$150 million in finance receivables. Accordingly, our plans require that we be
able to monetize our finance receivables through various means, including
syndications, securitizations or other limited or non-recourse transactions. We
do not have in place any guaranteed facility to monetize all of our finance
receivables, and there can be no assurance that we will be able to monetize
sufficient finance receivables to avoid being constrained by the $150 million
limit imposed in our senior credit facilities. However, during fiscal 2002, we
monetized approximately $101.9 million in finance receivables, and we are
continuing to examine other financing and monetization alternatives for Access
Financial Solutions.
In addition to measuring our cash flow generation and usage based upon the
operating, investing, and financing classifications included in the Consolidated
Statements of Cash Flows, we also measure our free cash flow. Our measure of
free cash flow may not be comparable to similarly titled measures being
disclosed by other companies and is not a measure of financial performance that
is in accordance with GAAP. With the commencement of reporting Access Financial
Solutions as a separate segment, we modified our definition of free cash flow
during the third quarter of fiscal 2002 to include in cash flow proceeds from
on-balance sheet, limited and non-recourse monetization transactions in our
Access Financial Solutions segment.
We define free cash flow, a non-GAAP measure commonly employed by the financial
community, as:
(1) cash flow from operating activities plus
(2) cash flow from investing activities, less
(3) (a) unrealized currency gains or losses, (b) proceeds from the
disposal and monetization of assets and (c) changes in accounts
receivable securitization and off-balance sheet debt.
During fiscal 2002, we had free cash flow of $163.4 million compared to negative
free cash flow of $201.1 million for fiscal 2001 and free cash flow of $22.3
million for fiscal 2000. The changes in free cash flow were attributable
principally to the same factors impacting cash flow described above. The
following table provides a reconciliation of our cash flow from operating
activities to our free cash flow (in thousands) for the years ended July 31:
Years Ended July 31,
--------------------------------------
2002 2001 2000
--------- --------- --------
Cash flow from operating activities $ 23,095 $(174,097) $ 89,586
Cash flow from investing activities (9,882) (19,066) 1,862
Unrealized currency (gains) losses (3,914) 746 892
Changes in accounts receivable securitization, pledged
receivables monetization and off-balance sheet debt (a) 154,061 (8,679) (70,025)
--------- --------- --------
Free cash flow $ 163,360 $(201,096) $ 22,315
========= ========= ========
(a) Pledged receivables monetization reflects the proceeds of our sales, on a
non-recourse or limited recourse basis, of finance receivables and related
assets to third parties in transactions that are treated as debt for
purposes of GAAP but that are excluded from the definition of total debt
under our senior credit facilities, except to the extent of any expected
recourse liability.
Our exposure to product liability claims is discussed in the note entitled
"Commitments and Contingencies" to the Notes to Consolidated Financial
Statements, Item 8 of Part II of this report. Future results of operations,
financial condition and
-17-
liquidity may be affected to the extent that our 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 statements within the meaning of the Private
Securities Litigation Reform Act of 1995. Forward-looking statements are
identified by words such as "may," "believes," "expects," "plans" and similar
terminology. These statements are not guarantees of future performance, and
involve a number of risks and uncertainties that could cause actual results to
differ materially from those indicated by the forward-looking statements.
Important factors that could cause actual results to differ materially from
those suggested by the forward-looking statements which include, but are not
limited to, the following: (i) general economic and market conditions; (ii)
varying and seasonal levels of demand for our products and services; (iii)
competition and a consolidating customer base; (iv) risks from our customer
activities and limits on our abilities to finance customer purchases; (v)
interest and foreign currency exchange rates; (vi) costs of raw materials and
energy; and (vii) product liability and other litigation, as well as other risks
as described in "Cautionary Statements Pursuant to the Securities Litigation
Reform Act" which is an exhibit to this report. Actual future results could
differ materially from those projected herein.
While uncertain economic conditions remain as we enter the first half of our new
fiscal year, we remain committed to access industry leadership by providing
innovative, cost-effective and reliable equipment to our end-users.
Traditionally our weakest seasonal period, the next two fiscal quarters will be
very challenging. Although visibility at present is limited, our current
forecast includes the assumption of a stronger North American economy in the
spring and summer of calendar 2003. We are encouraged about low interest rates
and the continuing improvement in residential construction in North America.
Historically, an increase in residential construction has often preceded an
increase in non-residential construction activity. However, disappointing
corporate returns, worldwide tight credit conditions, including those of our
European customers, terrorism and international unrest, and unemployment worries
are contributing to uncertain economic conditions. During this downturn, many of
our customers have aged their fleets, and we expect they will need to begin to
refresh their equipment when the economy improves. As we have stated in the
past, the replacement cycle is dependent on three factors. First, there must be
a healthy non-residential construction market. Next, the secondary market for
used equipment must be healthy, enabling our customers to turn their used assets
at acceptable values. Finally, there must be available financing for our
customers' fleet acquisition plans.
While we cannot predict the exact timing of an economic recovery, with fewer
competitors, a lower cost structure and decreased leverage, we are well
positioned to take advantage of the eventual upturn. In addition, we expect to
see additional growth as rental company consolidation takes hold in Europe and
as we continue to penetrate new market segments, particularly with our new
European-style and North American crab-steer families of telehandlers.
MARKET RISK
We are exposed to market risk from changes in interest rates and foreign
currency exchange rates, which could affect our future results of operations and
financial condition. We manage exposure to these risks principally through our
regular operating and financing activities.
We are exposed to changes in interest rates as a result of our outstanding debt.
In June 2002, we entered into an $87.5 million notional fixed-to-variable
interest rate swap agreement with a fixed rate receipt of 8 3/8% in order to
mitigate our interest rate exposure. The basis of the variable rate paid is the
London Interbank Offered Rate (LIBOR) plus 2.76%. Total interest bearing
liabilities at July 31, 2002 consisted of $102.3 million in variable-rate
borrowing and $177.0 million in fixed-rate borrowing. At the current level of
variable rate borrowing, a hypothetical 10% increase in interest rates would
decrease pre-tax current year earnings by approximately $0.4 million on an
annual basis. A hypothetical 10% change in interest rates would not result in a
material change in the fair value of our fixed-rate debt.
We manufacture our products principally in the United States and sell these
products in North America and Europe as well as other international markets. As
a result of the sales of our products in foreign markets, our earnings are
affected by fluctuations in the value of the U.S. dollar, as compared to foreign
currencies resulting from transactions in foreign markets. At July 31, 2002, the
result of a uniform 10% strengthening in the value of the dollar relative to the
currencies in which our transactions are denominated would have the effect of
reducing gross profits for the year ended July 31, 2002 by approximately $18.2
million. This calculation assumes that each exchange rate would change in the
same direction relative to the U.S. dollar.
-18-
In addition to the direct effects of changes in exchange rates, such changes
also affect the volume of sales or the foreign currency sales price as
competitors' products become more or less attractive. Our sensitivity analysis
of the effects of changes in foreign currency exchange rates does not factor in
potential changes in sales levels or local currency prices.
We enter into certain foreign currency contracts, principally forward exchanges,
to manage some of our foreign exchange risk. Some natural hedges are also used
to mitigate transaction and forecasted exposures. At July 31, 2002, we were
managing approximately $59.2 million of foreign currency contracts. Through our
foreign currency hedging activities, we seek primarily to minimize the risk that
cash flows resulting from the sales of our products will be affected by changes
in exchange rates.
During fiscal years 2002 and 2001, we entered into certain currency forward
contracts to mitigate our economic risk to foreign exchange risk that qualify as
derivative instruments under SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." However, we have not designated these
instruments as hedge transactions under SFAS No. 133 and, accordingly, the
mark-to-market impact of these derivatives is recorded each period to current
earnings. These foreign currency contracts have not historically been material
to our financial position and results of operations.
Additional information regarding our management of exposure to market risks is
included in the note entitled "Summary of Significant Accounting Policies -
Derivative Instruments" to the Notes to Consolidated Financial Statements, Item
8 of Part II of this report.
-19-
ITEM 8. FINANCIAL STATEMENT AND SUPPLEMENTARY DATA CONSOLIDATED BALANCE SHEETS
July 31
---------------------------
(in thousands, except per share data) 2002 2001
- ---------------------------------------------------------------------------------------------------------------------------
ASSETS Current Assets
Cash and cash equivalents $6,205 $9,254
Accounts receivable, less allowance for doubtful accounts
of $7,072 in 2002 and $5,586 in 2001 227,809 189,913
Finance receivables, less provision for losses of $2,381 in
2002 and $958 in 2001 27,529 16,760
Pledged finance receivables 34,985 --
Inventories 165,536 189,841
Other current assets 31,042 18,787
---------------------------
Total Current Assets 493,106 424,555
Property, Plant and Equipment 84,370 98,403
Equipment Held for Rental, net of accumulated depreciation
of $5,878 in 2002 and $4,409 in 2001 20,979 20,002
Finance receivables, less current portion 45,412 115,071
Pledged finance receivables, less current portion 53,703 --
Goodwill, net of accumulated amortization of $12,968 in
2002 and 2001 28,791 140,164
Other assets 51,880 27,394
---------------------------
$778,241 $825,589
===========================
LIABILITIES AND Current Liabilities
SHAREHOLDERS' Short-term debt $13,934 $21,685
EQUITY Current portion of long-term debt 493 508
Current portion of limited recourse debt 34,850 --
Accounts payable 129,317 76,723
Accrued expenses 83,309 70,887
---------------------------
Total Current Liabilities 261,903 169,803
Long-term debt, less current portion 177,331 276,994
Limited recourse debt, less current portion 52,721 --
Accrued post-retirement benefits 24,989 23,757
Other long-term liabilities 10,807 9,601
Provisions for contingencies 14,448 11,993
Shareholders' Equity
Capital stock:
Authorized shares: 100,000 at $.20 par value
Issued and outstanding shares: 2002 - 42,728 shares;
2001 - 42,144 shares 8,546 8,429
Additional paid-in capital 18,846 14,256
Retained earnings 216,957 319,607
Unearned compensation (1,649) (3,377)
Accumulated other comprehensive income (6,658) (5,474)
---------------------------
Total Shareholders' Equity 236,042 333,441
---------------------------
$778,241 $825,589
===========================
The accompanying notes are an integral part of these financial statements.
-20-
CONSOLIDATED STATEMENTS OF INCOME
Years Ended July 31
-------------------------------------------
(in thousands, except per share data) 2002 2001 2000
- ------------------------------------------------------------------------------------------------------
Revenues
Net sales $745,870 $952,269 $1,051,664
Financial products 14,227 3,889 --
Rentals 9,973 7,714 4,504
------------------------------------------
770,070 963,872 1,056,168
Cost of sales 637,983 775,078 825,082
------------------------------------------
Gross profit 132,087 188,794 231,086
Selling and administrative expenses 79,693 89,145 94,104
Product development expenses 15,586 15,440 15,330
Goodwill amortization -- 6,052 6,166
Restructuring charges 6,091 4,402 --
------------------------------------------
Income from operations 30,717 73,755 115,486
Interest expense (16,255) (22,195) (20,589)
Miscellaneous, net 4,759 2,737 1,146
------------------------------------------
Income before taxes and cumulative effect of change
in accounting prin 19,221 54,297 96,043
Income tax provision 6,343 20,091 35,536
------------------------------------------
Income before cumulative effect of change
in accounting prin 12,878 34,206 60,507
Cumulative effect of change in accounting principle (114,470) -- --
------------------------------------------
Net (loss) income $(101,592) $34,206 $60,507
==========================================
Earnings (loss) per Common Share:
Earnings per Common Share before cumulative
effect of change in accounting principle $.31 $.81 $1.39
Cumulative effect of change in accounting principle (2.72) -- --
------------------------------------------
(Loss) earnings per Common Share $(2.41) $.81 $1.39
==========================================
Earnings (loss) per Common Share -- assuming dilution:
Earnings per Common Share -- assuming
dilution before cumulative effect of change in
accounting principle $.30 $.80 $1.37
Cumulative effect of change in accounting principle (2.65) -- --
------------------------------------------
(Loss) earnings per Common Share -- assuming
dilution $(2.35) $.80 $1.37
==========================================
Cash dividends per share $.025 $.04 $.035
==========================================
Weighted average shares outstanding 42,082 42,155 43,687
==========================================
Weighted average shares outstanding -- assuming
dilution 43,170 42,686 44,069
==========================================
The accompanying notes are an integral part of these financial statements.
-21-
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Accumulated
Capital Stock Other Total
----------------- Additional Comprehensive Share-
Par Paid-in Retained Unearned Income holders'
(in thousands, except per share data) Shares Value Capital Earnings Compensation (Loss) Equity
- ---------------------------------------------------------------------------------------------------------------------------------
Balances at July 31, 1999 44,250 $8,850 $17,246 $250,006 $(1,324) $(3,495) $271,283
Comprehensive income:
Net income for the year 60,507
Aggregate translation adjustment,
net of deferred tax benefit of $334 (808)
Minimum pension liability, net of
deferred tax benefit of $262 (381)
Total comprehensive income 59,318
Dividends paid: $.035 per share (1,547) (1,547)
Purchase and retirement of common
Stock (795) (159) (6,630) (6,789)
Shares issued under employee
stock plans 193 38 1,655 (1,616) 77
Tax benefit related to exercise of
nonqualified stock options 243 243
Amortization of unearned compensation 1,466 1,466
-----------------------------------------------------------------------------
Balances at July 31, 2000 43,648 8,729 12,514 308,966 (1,474) (4,684) 324,051
-----------------------------------------------------------------------------
Comprehensive income:
Net income for the year 34,206
Aggregate translation adjustment,
net of deferred tax benefit of $334 (909)
Minimum pension liability, net of
deferred tax benefit of $82 119
Total comprehensive income 33,416
Dividends paid: $.04 per share (1,699) (1,699)
Purchase and retirement of common
Stock (1,672) (334) (21,866) (22,200)
Shares issued under employee
stock plans 168 34 1,506 (2,558) (1,018)
Tax benefit related to exercise of
nonqualified stock options 236 236
Amortization of unearned compensation 655 655
-----------------------------------------------------------------------------
Balances at July 31, 2001 42,144 8,429 14,256 319,607 (3,377) (5,474) 333,441
-----------------------------------------------------------------------------
Comprehensive loss:
Net loss for the year (101,592)
Aggregate translation adjustment,
net of deferred tax benefit of $334 (753)
Minimum pension liability, net of
deferred tax benefit of $232 (431)
Total comprehensive loss (102,776)
Dividends paid: $.025 per share (1,058) (1,058)
Shares issued under employee
stock plans 584 117 1,876 29 2,022
Tax benefit related to exercise of
nonqualified stock options 2,714 2,714
Amortization of unearned compensation 1,699 1,699
-----------------------------------------------------------------------------
Balances at July 31, 2002 42,728 $8,546 $18,846 $216,957 $(1,649) $(6,658) $236,042
=============================================================================
The accompanying notes are an integral part of these statements.
-22-
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended July 31
--------------------------------------------
(in thousands) 2002 2001 2000
- -----------------------------------------------------------------------------------------------------------------------
OPERATIONS Net (loss) income $(101,592) $34,206 $60,507
Adjustments to reconcile net income to
cash flow from operating activities:
Gain on sale of joint venture -- (1,008) --
Loss on sale of property, plant and
equipment 392 2,770 552
Gain on sale of equipment held for rental (8,049) (3,371) (16,649)
Non-cash charges and credits:
Cumulative effect of change in
accounting principle 114,470 -- --
Depreciation and amortization 20,959 28,775 25,970
Provision for self-insured losses 7,943 6,450 5,669
Deferred income taxes (4,635) (2,017) (5,414)
Other 3,689 2,163 2,337
Changes in selected working capital items:
Accounts receivable (40,110) (18,949) (11,954)
Inventories 24,462 (41,807) (22,447)
Accounts payable 52,685 (39,897) 37,825
Other operating assets and liabilities 15,194 (2,900) 11,719
Changes in finance receivables (34,177) (132,790) --
Changes in other assets and liabilities (28,136) (5,722) 1,471
-------------------------------------------
Cash flow from operating activities 23,095 (174,097) 89,586
INVESTMENTS Purchases of property, plant and equipment (12,954) (15,787) (22,862)
Proceeds from the sale of property, plant
and equipment 172 416 59
Purchases of equipment held for rental (26,429) (33,406) (29,024)
Proceeds from the sale of equipment held
for rental 28,924 31,251 53,689
Proceeds from sale of joint venture -- 4,000 --
Other 405 (5,540) --
-------------------------------------------
Cash flow from investing activities (9,882) (19,066) 1,862
FINANCING Net (decrease) increase in short-term debt (7,771) 13,009 5,865
Issuance of long-term debt 617,000 571,505 355,087
Repayment of long-term debt (717,572) (383,629) (438,443)
Issuance of limited recourse debt 90,214 -- --
Payment of dividends (1,058) (1,699) (1,547)
Purchase of common stock -- (22,201) (6,789)
Exercise of stock options and issuance
of restricted awards 3,732 (126) 1,544
-------------------------------------------
Cash flow from financing activities (15,455) 176,859 (84,283)
CURRENCY ADJUSTMENTS Effect of exchange rate changes (807) 102 (742)
on cash
CASH Net change in cash and cash equivalents (3,049) (16,202) 6,423
Beginning balance 9,254 25,456 19,033
-------------------------------------------
Ending balance $6,205 $9,254 $25,456
===========================================
The accompanying notes are an integral part of these statements.
-23-
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share data and unless otherwise indicated)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICES
Principles of Consolidation and Statement Presentation
The consolidated financial statements include our accounts and our subsidiaries.
Significant intercompany accounts and transactions have been eliminated in
consolidation.
Reclassifications
Where appropriate, we have reclassified certain prior year amounts in the
consolidated financial statements to conform to the fiscal 2002 presentation.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and related notes.
Actual results may differ from those estimates.
Revenue Recognition
Sales of equipment and service parts are generally unconditional sales that are
recorded when product is shipped and invoiced to independently owned and
operated distributors and customers. Normally our sales terms are "free on
board" shipping point (FOB shipping point); however, certain sales may be
invoiced prior to the time customers take physical possession. In such cases,
revenue is recognized only when the customer has a fixed commitment to purchase
the equipment, the equipment has been completed and made available to the
customer for pickup or delivery, and the customer has requested that we hold the
equipment for pickup or delivery at a time specified by the customer. In such
cases, the equipment is invoiced under our customary billing terms, title to the
units and risks of ownership passes to the customer upon invoicing, the
equipment is segregated from our inventory and identified as belonging to the
customer and we have no further obligations under the order.
Revenue from certain equipment lease contracts is accounted for as sales-type
leases. The present value of all payments, net of executory costs, is recorded
as revenue and the related cost of the equipment is charged to cost of sales.
The associated interest is recorded over the term of the lease using the
interest method. In addition, net revenues include rental revenues earned on the
lease of equipment held for rental. Rental revenues are recognized in the period
earned over the lease term. Provisions for warranty are estimated and accrued at
the time of sale. Actual warranty costs do not materially differ from estimates.
We adopted Staff Accounting Bulletin No. 101 ("SAB 101") on revenue recognition
effective at the beginning of our fourth quarter of fiscal 2001. The adoption of
SAB 101 did not result in any restatement to prior years and had no effect on
our current year financial position.
We adopted the provisions of Emerging Issue Task Force ("EITF") No. 00-10,
"Accounting for Shipping and Handling Fees and Costs" as required at the same
time we adopted SAB 101 noted above. As a result of this adoption of EITF 00-10,
we now reflect shipping and handling fees billed to customers as sales while the
related shipping and handling costs are included in cost of goods sold. Prior to
adoption, some fees and costs were netted in cost of goods sold and selling
expenses. The amount of such shipping and handling costs were not material to
the financial statements.
Cash and Cash Equivalents
We consider all highly liquid investments with a maturity of three months or
less when purchased to be cash equivalents and classifies such amounts as cash.
-24-
Inventories
Inventories are stated at the lower of cost or market. Cost is determined using
the LIFO (last-in, first-out) method.
Our inventories consist of the following at July 31:
- -------------------------------------------------------------------------------
2002 2001
- -------------------------------------------------------------------------------
Finished goods $104,680 $137,500
Raw materials and work in process 65,579 56,185
------------------------
170,259 193,685
Less LIFO provision 4,723 3,844
------------------------
$165,536 $189,841
========================
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.
Depreciation expense was $20.9 million, $22.7 million and $19.8 million for the
fiscal years 2002, 2001 and 2000, respectively.
Impairment of Long-lived Assets
We account for the impairment and disposition of long-lived assets in accordance
with Statement of Financial Accounting Standards ("SFAS") No. 121 "Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of." We review for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be fully recoverable. If
an impairment indicator is present, we evaluate whether an impairment exists on
the basis of undiscounted expected future cash flows from operations for the
remaining amortization period. If an impairment exists, the asset is reduced by
the estimated shortfall of discounted cash flows.
Goodwill
Goodwill represents the difference between the total purchase price and the fair
value of identifiable assets and liabilities acquired in business acquisitions.
In July 2001, the Financial Accounting Standards Board ("FASB") issued SFAS No.
142, "Goodwill and Other Intangible Assets," establishing new financial
reporting standards for acquired goodwill and other intangible assets. On August
1, 2001, we elected early adoption of SFAS No. 142, "Goodwill and Other
Intangible Assets." Under SFAS No. 142, goodwill and intangible assets deemed to
have indefinite lives will no longer be amortized but will be subject to annual
impairment tests. Other intangible assets will continue to be amortized over
their useful lives. Accordingly, we ceased amortization of all goodwill. The
amount of goodwill impairment, if any, is measured by comparing its implied fair
value with its carrying amount and writing down its carrying amount to its
implied fair value. Intangible assets that have finite useful lives continue to
be amortized over their useful lives. In addition, these assets continue to be
reviewed for possible impairment whenever events or changes in circumstances
indicate carrying value may not be recoverable.
Prior to the adoption of SFAS No. 142 in August 2001, we amortized goodwill on a
straight-line basis over periods ranging from 10 to 25 years. If an impairment
indicator was present, we evaluated whether an impairment existed on the basis
of undiscounted expected future cash flows from operations for the remaining
amortization period.
Income Taxes
Deferred income tax assets and liabilities arise from differences between the
tax basis of assets or liabilities and their reported amounts in the financial
statements. Deferred tax balances are determined by using the tax rate expected
to be in effect when the taxes are paid or refunds received.
Product Development
We incurred product development and other engineering expenses of $15.6 million,
$15.9 million and $15.8 million in 2002, 2001 and 2000, respectively, which were
charged to expense as incurred.
Concentrations of Credit Risk
Financial instruments, which potentially expose us to concentrations of credit
risk, consist primarily of trade and finance receivables. As of July 31, 2002,
approximately 23% of our trade receivables and 54% of our finance receivables
were due
-25-
from two customers. In addition, one customer accounted for approximately 19% of
our trade receivables and that same customer accounted for approximately 33% of
our finance receivables. We continuously evaluate the creditworthiness of our
customers and secure transactions with letters of credit where we believe the
risk warrants it. Finance receivables are usually collateralized by a security
interest in the underlying assets. Write-offs for uncollected receivables have
not been significant.
Advertising and Promotion
All costs associated with advertising and promoting products are expensed in the
year incurred. Advertising and promotion expense was $3.4 million, $6.0 million
and $7.1 million in 2002, 2001, and 2000, respectively.
Foreign Currency Translation
The financial statements of our foreign operations are generally measured in
their 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 our Scottish 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 of foreign currency transactions included in the results of
operations were a gain of $2.9 million in 2002 and losses of $0.9 million and
$1.9 million in 2001 and 2000, respectively.
Derivative Instruments
Effective August 1, 2000, we adopted SFAS 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 so, the type of
hedge transaction. Upon adoption, SFAS No. 133 did not have a material effect on
our financial statements because we had not designated our foreign currency
derivatives as part of a hedge transaction and such derivatives were stated at
market on August 1, 2000 on the date of adoption.
We are exposed to market risks from changes in interest rates and foreign
currency exchange rates. During June 2002, we entered into an interest rate swap
agreement to manage our interest rate exposure in order to achieve a
cost-effective mix of fixed and variable rate indebtedness. We do not utilize
derivatives that contain leverage features. On the date on which we enter into a
derivative, the derivative is designated as a hedge of the identified exposure.
We formally document all relationships between hedging instruments and hedged
items, as well as our risk management objective and strategy for undertaking
hedge transactions. In this documentation, we specifically identify the hedged
item and state how the hedging instrument is expected to reduce the risks
related to the hedged item.
We have designated our outstanding interest rate swap agreement as a fair value
hedge of the underlying fixed rate obligation. The objective of our hedge is to
protect the debt against changes in fair value due to changes in the benchmark
interest rate. The fair value of the interest rate swap agreement is recorded in
other assets or other long-term liabilities with a corresponding increase or
decrease in the fixed rate obligation. The changes in the fair value of the
interest rate swap agreement and the underlying fixed rate obligation is
recorded as equal and offsetting unrealized gains and losses in interest expense
in the Consolidated Statements of Income. We have structured our interest rate
swap agreement to be 100% effective. As a result, there is no current impact on
earnings resulting from hedge ineffectiveness.
Our interest rate swap instrument at July 31, 2002, consisted of an $87.5
million notional fixed-to-variable rate swap with a fixed rate receipt of 8
3/8%. The basis of the variable rate paid is the London Interbank Offered Rate
(LIBOR) plus 2.76%. The fair value of our interest rate hedge was $0.9 million
at July 31, 2002 and reflects the estimated amount that we would receive to
terminate the contract at the reporting date.
We enter certain foreign currency contracts, principally forward exchanges, to
manage some of our foreign exchange risk. Some natural hedges are also used to
mitigate transaction and forecasted exposures. Through our foreign currency
hedging activities, we seek primarily to minimize the risk that cash flows
resulting from the sales of our products will be affected by changes in exchange
rates.
-26-
During the year, we entered into certain currency forward contracts to mitigate
our economic risk to foreign exchange risk that qualify as derivative
instruments under SFAS No. 133. However, we have not designated these
instruments as hedge transactions under SFAS No. 133 and, accordingly, the
mark-to-market impact of these derivatives is recorded each period in current
earnings. The fair value of foreign currency related derivatives are generally
included in the Consolidated Balance Sheet in other current assets and other
current liabilities. Mark-to-market charges related to the above forwards were
approximately $2.4 million, $0.4 million and $0.1 million at July 31, 2002, 2001
and 2000, respectively, and are included in Miscellaneous, net in the
Consolidated Statements of Income.
Recent Accounting Pronouncements
Effective August 1, 2001, we adopted the provisions of EITF 00-25, "Vendor
Income Statement Characterization of Consideration Paid to a Reseller of the
Vendor's Products," as codified in EITF 01-09, "Accounting for Consideration
Given by a Vendor to a Customer or a Reseller of the Vendor's Products." As a
result of the adoption, we now classify the costs associated with sales
incentives provided to retailers as a reduction in net sales. These costs were
previously included in selling, general and administrative expenses. This
reclassification was not material to the applicable individual line items of the
financial statements and had no impact on reported income before income taxes,
net income or income per share amounts.
In June 2001, the FASB issued SFAS No. 143 "Accounting for Asset Retirement
Obligations," which is required to be adopted for financial statements issued
for fiscal years beginning after June 15, 2002. This statement establishes the
accounting and reporting standards for obligations associated with the
retirement of tangible long-lived assets and the associated asset retirement
costs. We do not expect adoption of this statement to have a significant impact
on our results of operations or financial position.
In August 2001, the FASB issued SFAS No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets." This statement addresses financial accounting
and reporting for the impairment or disposal of long-lived assets and supersedes
SFAS No. 121 "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of." We adopted SFAS No. 144 on August 1, 2002.
The adoption of SFAS No. 144 did not have an impact on our consolidated
financial position or results of operations.
In May 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements No. 4,
44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." This
statement requires, among other things, that gains and losses on the early
extinguishment of debt be classified as extraordinary only if it meets the
criteria for extraordinary treatment set forth in Accounting Principles Board
Opinion No. 30. We adopted SFAS No. 145 effective June 1, 2002. As a result,
$0.1 million of deferred financing costs related to our former $83 million
senior credit facility that was expensed during the fourth quarter of fiscal
2002 is included in interest expense on our Consolidated Statements of Income.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." This statement addresses financial accounting
and reporting for costs associated with exit or disposal activities when they
are incurred rather than at the date of a commitment to an exit or disposal
plan. This statement nullifies EITF Issue No. 94-3, "Liability Recognition for
Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)" and is effective for exit
or disposal activities initiated after December 31, 2002.
ACCOUNTS RECEIVABLE SECURITIZATION
In June 2000, we entered into a three-year receivables purchase agreement with
an independent issuer of receivables-backed commercial paper. Under the terms of
the agreement, we agreed to sell to our special purpose, wholly owned
subsidiary, on an ongoing basis and without recourse, a designated pool of
accounts receivable. This entity sells an undivided percentage ownership
interest in all the receivables to a third-party. To maintain the balance in the
pool of accounts receivable sold, we were obligated to sell new receivables as
existing receivables are collected. The agreement permitted the sale of the
undivided interest in accounts receivable through June 2003 of up to $65
million. During February 2002, we terminated our receivables purchase agreement
by repurchasing for $18.1 million the undivided interest in pool receivables
owned by our securitization subsidiary.
At July 31, 2001, the undivided interest in our pool of accounts receivable that
had been sold to the purchasers aggregated $50.6 million, which was used to
retire debt outstanding under our revolving credit facilities. Sales of accounts
receivable are reflected as a reduction of accounts receivable in the
consolidated balance sheets and the proceeds are included in cash flows from
operating activities in the Consolidated Statements of Cash Flows. The ongoing
costs of this program were charged to interest expense in the Consolidated
Statements of Income.
-27-
FINANCE RECEIVABLES
Finance receivables represent sales-type leases resulting from the sale of our
products. Our net investment in finance receivables was as follows at July 31:
- ------------------------------------------------------------------------------
2002 2001
- ------------------------------------------------------------------------------
Gross finance receivables $155,786 $123,124
Estimated residual value 44,608 45,067
---------------------
200,394 168,191
Unearned income (36,384) (35,402)
---------------------
Net finance receivables 164,010 132,789
Provision for losses (2,381) (958)
---------------------
$161,629 $131,831
=====================
Of the finance receivables balance at July 31, 2002, $88.7 million are pledged
receivables resulting from the sale of finance receivables through limited
recourse and non-recourse monetization transactions during fiscal 2002. In
compliance with SFAS No. 140, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishment of Liabilities," these transactions are
accounted for as debt on our Consolidated Balance Sheets. Under terms of the
limited recourse agreements, the purchaser may seek recourse from us if a
finance receivable contract remains unpaid for 60 days or more. We are obligated
to either make payments in the customer's place, substitute the contracts, or
buy back the contracts.
The following table displays the contractual maturity of our finance
receivables. It does not necessarily reflect future cash collections because of
various factors including the possible refinancing or sale of lease receivables
and repayments prior to maturity.
For the twelve-month periods ended July 31:
2003 $33,092
2004 35,147
2005 31,108
2006 29,174
2007 18,717
Thereafter 8,548
Residual value in equipment at lease end 44,608
Less: unearned finance income (36,384)
--------
Net investment in leases $164,010
========
Provisions for losses on finance receivables are charged to income in amounts
sufficient to maintain the allowance at a level considered adequate to cover
losses in the existing receivable portfolio.
PROPERTY, PLANT AND EQUIPMENT
Our property, plant and equipment consists of the following at July 31:
- --------------------------------------------------------------------------------
2002 2001
- --------------------------------------------------------------------------------
Land and improvements $7,480 $8,113
Buildings and improvements 51,092 52,737
Machinery and equipment 115,522 114,776
-------- --------
174,094 175,626
Less allowance for depreciation 89,724 77,223
-------- --------
$84,370 $98,403
======== ========
GOODWILL
In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets," establishing new financial reporting standards for acquired goodwill
and other intangible assets. On August 1, 2001, we elected early adoption of
SFAS No. 142, "Goodwill and Other Intangible Assets." Under SFAS No. 142,
goodwill and intangible assets deemed to have indefinite lives will no longer be
amortized but will be subject to annual impairment tests. Other intangible
assets will continue to be amortized over their useful lives. Accordingly, we
ceased amortization of all goodwill.
-28-
In the year of adoption, SFAS No. 142 requires the first step of the goodwill
impairment test to be completed within the first six months of adoption and the
final step to be completed within twelve months. The first step is to screen for
potential impairment and the second measures the amount of impairment, if any.
During the second quarter of fiscal 2002, we performed an initial impairment
test by reporting unit, which indicated potential impairment of goodwill
attributable to our Gradall reporting unit, which is part of our Machinery
segment, resulting from changing business conditions including consolidation of
the telehandler market, unplanned excess manufacturing capacity costs and eroded
margins due to competitive pricing pressures. During the fourth quarter of
fiscal 2002, we calculated the fair value of the Gradall and foreign reporting
units using third party appraisals and expected future discounted cash flows. As
a result of this analysis, we concluded that goodwill was impaired and recorded
an impairment charge of $114.5 million, or $2.65 per diluted share, which is
reflected as a cumulative effect of change in accounting principle in the
Consolidated Statements of Income. There was no income tax effect on this change
in accounting principle.
This table presents our comparative net income and earnings per common share
before the cumulative effect of accounting change and goodwill amortization
under SFAS No. 142 for the years ended July 31:
- -------------------------------------------------------------------------------------------------------------
2002 2001 2000
- -------------------------------------------------------------------------------------------------------------
Reported net income before cumulative effect of change
in accounting principle $12,878 $34,206 $60,507
Add: goodwill amortization -- 6,052 6,166
----------------------------------------------
Adjusted net income before cumulative effect of change
in accounting principle 12,878 40,258 66,673
Cumulative effect of change in accounting principle (114,470) -- --
----------------------------------------------
Adjusted net (loss) income $(101,592) $40,258 $66,673
==============================================
Earnings per common share:
Reported earnings per common share before cumulative
effect of change in accounting principle $.31 $.81 $1.39
Goodwill amortization -- .14 .14
Adjusted earnings per common share before cumulative
effect of change in accounting principle .31 .95 1.53
Cumulative effect of change in accounting principle (2.72) -- --
----------------------------------------------
Adjusted (loss) earnings per common share $(2.41) $.95 $1.53
==============================================
Earnings per common share - assuming dilution:
Reported earnings per common share - assuming dilution
before cumulative effect of change in accounting
principle $.30 $.80 $1.37
Goodwill amortization -- .14 .14
----------------------------------------------
Adjusted earnings per common share - assuming dilution
before cumulative effect of change in accounting
principle .30 .94 1.51
Cumulative effect of change in accounting principle (2.65) -- --
----------------------------------------------
Adjusted (loss) earnings per common share - assuming
dilution $(2.35) $.94 $1.51
==============================================
This table presents our reconciliation of the recorded goodwill during the
period from July 31, 2001 to July 31, 2002:
Balance as of August 1, 2001 $140,164
Additions 3,097
Impairment charge recorded (114,470)
---------
Balance as of July 31, 2002 $28,791
=========
-29-
ACCRUED EXPENSES
Our accrued expenses consist of the following at July 31:
- --------------------------------------------------------------------------------
2002 2001
- --------------------------------------------------------------------------------
Accrued taxes $13,276 $1,753
Accrued payroll and related taxes and benefits 13,169 15,898
Accrued warranty 9,375 9,531
Current portion of product liability 6,723 8,208
Accrued dealer costs 6,463 1,944
Accrued sales rebate 4,697 5,240
Accrued allowance for contingent liabilities 4,137 4,564
Accrued interest 2,460 1,937
Accrued commissions 1,567 2,518
Unearned income 421 4,318
Other accrued expenses 21,021 14,976
----------------------
$83,309 $70,887
======================
OPERATING LEASES
Our total rental expense for operating leases was $9.2 million, $6.3 million and
$3.4 million in 2002, 2001 and 2002, respectively. At July 31, 2002, our future
minimum lease payments under operating leases amounted to $6.1 million, $5.8
million, $5.3 million, $7.5 million, $5.5 million and $2.8 million in 2003,
2004, 2005, 2006, 2007 and thereafter, respectively.
CHANGES IN ACCOUNTING ESTIMATES
During the second quarter of fiscal 2002, we determined that certain
volume-related customer incentives would not be achieved and that we would not
make a discretionary profit sharing contribution for calendar year 2001. The
reversal of the accrual related to volume-related customer incentives resulted
in an increase in net income of $2.3 million, or $.06 per diluted share for
fiscal 2002. The reversal of the accrual related to the discretionary profit
sharing contribution for calendar year 2001 resulted in an increase in net
income of $1.8 million, or $.04 per diluted share for fiscal 2002.
SEGMENT INFORMATION
We have organized our business into three segments - Machinery, Equipment
Services and Access Financial Solutions. The Machinery segment contains the
design, manufacture and sale of new equipment. The Equipment Services segment
contains after-sales service and support, including parts sales, equipment
rentals, and used and reconditioned equipment sales. The Access Financial
Solutions segment contains financing and leasing activities including the
operations of our wholly owned subsidiary, Access Financial Solutions, Inc. We
evaluate performance of the Machinery and Equipment Services segments and
allocate resources based on operating profit before interest, miscellaneous
income/expense and income taxes. We evaluate performance of the Access Financial
Solutions segment and allocate resources based on its operating profit less
interest expense. Intersegment sales and transfers are not significant. The
accounting policies of the reportable segments are the same as those described
in the summary of significant accounting policies.
Our business segment information consisted of the following for the years ended
July 31:
- -------------------------------------------------------------------------------
2002 2001 2000
- -------------------------------------------------------------------------------
Revenues:
Machinery $621,283 $835,893 $931,048
Equipment Services 133,058 122,650 125,120
Access Financial Solutions 15,729 5,329 --
--------------------------------------------
$770,070 $963,872 $1,056,168
============================================
-30-
Segment profit (loss):
Machinery $29,038 $78,501 $118,994
Equipment Services 24,686 25,268 37,761
Access Financial Solutions 5,288 (223) --
General corporate expenses (33,347) (30,797) (41,269)
-------------------------------------
$25,665 $72,749 $115,486
=====================================
Depreciation and amortization:
Machinery $14,994 $23,344 $21,289
Equipment Services 3,613 2,917 3,174
Access Financial Solutions 781 1,197 --
General corporate 1,571 1,317 1,507
-------------------------------------
$20,959 $28,775 $25,970
=====================================
Expenditures for long-lived assets:
Machinery $12,350 $14,324 $28,258
Equipment Services 22,236 26,154 23,352
Access Financial Solutions 4,661 5,372 --
General corporate 136 3,343 276
-------------------------------------
$39,383 $49,193 $51,88
=====================================
Assets:
Machinery $462,399 $564,345 $579,710
Equipment Services 45,361 41,231 33,798
Access Financial Solutions 187,153 137,136 --
General corporate 83,328 82,877 40,079
-------------------------------------
$778,241 $825,589 $653,587
=====================================
Sales to one customer accounted for 22%, 22% and 20% of Machinery revenues for
the years ended July 31, 2002, 2001 and 2000, respectively; 12% and 11% of
Equipment Services revenues for the years ended July 31, 2002 and 2001,
respectively; and 30% of Access Financial Solutions revenues for the year ended
July 31, 2002. Another customer accounted for 34% of Access Financial Solutions
revenues for the year ended July 31, 2002. Sales to another customer accounted
for 13% of Machinery revenues and 15% of Equipment Services revenues for the
year ended July 31, 2000. Sales to another customer accounted for 17% of
Equipment Service revenues for the year ended July 31, 2000.
Our revenues by product group consisted of the following for the years ended
July 31:
- ------------------------------------------------------------------------------------------------------------
2002 2001 2000
- ------------------------------------------------------------------------------------------------------------
Aerial work platforms $475,241 $682,689 $745,155
Telehandlers 87,443 87,704 125,749
Excavators 58,599 65,500 60,144
After-sales service and support, including parts
sales, and used and reconditioned equipment sales 124,587 116,376 120,616
Financial products 14,227 3,889 --
Rentals 9,973 7,714 4,504
-----------------------------------------------
$770,070 $963,872 $1,056,168
===============================================
We manufacture our products in the United States and Belgium and sell these
products globally, but principally in North America, Europe, Australia and South
America. No single foreign country is significant to the consolidated
operations. Our revenue by geographic area consisted of the following for the
years ended July 31:
- ------------------------------------------------------------------------------------------------------------
2002 2001 2000
- ------------------------------------------------------------------------------------------------------------
United States $556,252 $709,412 $805,955
Europe 167,940 187,924 178,230
Other 45,878 66,536 71,983
-----------------------------------------------
$770,070 $963,872 $1,056,168
===============================================
-31-
SUPPLEMENTAL INFORMATION
The following supplemental consolidated data submitted with the consolidated
financial statements is presented for the sole purpose of facilitating the
analysis of the results of our Equipment Operations and Financial Services
businesses as included in the consolidated financial statements. These two
operations are engaged in fundamentally different businesses and cannot be
easily analyzed on a consolidated basis. Equipment Operations includes the
operations of our Machinery and Equipment Services segments with Financial
Services reflected on the equity basis. Access Financial Solutions consists of
our financial services business. In addition to the monthly amortization of
monetizations, Access Financial Solutions recognizes an allocation of interest
expense. The amount of interest expense that is transferred from Equipment
Operations is based upon the monthly weighted cost of debt multiplied by Access
Financial Solutions' portfolio balance less the initial investment in Access
Financial Solutions of $30.0 million. Amounts are for the years ended or as of
July 31:
CONDENSED STATEMENTS OF INCOME
Equipment Operations with Access Financial Solutions on the Equity Basis
- ------------------------------------------------------------------------------------------------------
2002 2001 2000
- ------------------------------------------------------------------------------------------------------
Revenues:
Net sales $745,870 $952,269 $1,051,664
Rentals 8,471 6,274 4,504
-------------------------------------------
754,341 958,543 $1,056,168
Costs of sales 637,065 773,871 825,082
-------------------------------------------
Gross profit 117,276 184,672 231,086
Selling, administrative and product development
expenses 90,807 101,246 109,434
Restructuring charges 6,091 4,402 --
Goodwill amortization -- 6,052 6,166
-------------------------------------------
Income from operations 20,378 72,972 115,486
Interest expense (11,204) (21,189) (20,589)
Miscellaneous, net 4,759 2,737 1,146
-------------------------------------------
Income before taxes and cumulative effect of change in
accounting principle 13,933 54,520 96,043
Income tax provision (4,598) (20,174) (35,536)
Equity in income (loss) of Access Financial Solutions 3,543 (140) --
-------------------------------------------
Income before cumulative effect of change in
accounting principle 12,878 34,206 60,507
Cumulative effect of change in accounting principle (114,470) -- --
-------------------------------------------
Net (loss) income $(101,592) $34,206 $60,507
===========================================
CONDENSED STATEMENTS OF INCOME
Financial Services
Access Financial Solutions
- ------------------------------------------------------------------------------------------------------
2002 2001 2000
- ------------------------------------------------------------------------------------------------------
Revenues:
Financial products $14,227 $3,889 $ --
Rentals 1,502 1,440 --
-------------------------------------------
15,729 5,329 --
Operating expenses:
Administrative and other expenses 5,390 4,546
Interest expense 5,051 1,006 --
-------------------------------------------
Total operating expenses 10,441 5,552 --
-------------------------------------------
Income (loss) from operations 5,288 (223) --
Income tax provision 1,745 (83) --
-------------------------------------------
Net income (loss) $3,543 $(140) $ --
===========================================
-32-
CONDENSED BALANCE SHEETS
Equipment Operations with Access Financial Solutions on the Equity Basis
- --------------------------------------------------------------------------------
2002 2001
- --------------------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents $6,205 $9,254
Accounts receivable, net 204,779 189,913
Inventories 165,536 189,841
Other current assets 31,042 18,787
-----------------------
Total current assets 407,562 407,795
Property, plant and equipment, net 84,354 98,403
Equipment held for rental, net 17,576 14,768
Goodwill, net 28,791 140,164
Investment in Access Financial Solutions 33,403 29,860
Receivable from Access Financial Solutions 64,106 107,276
Other assets 52,805 27,323
-----------------------
$688,597 $825,589
=======================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt $14,427 $22,193
Accounts payable 129,317 76,723
Accrued expenses 81,236 70,887
-----------------------
Total current liabilities 224,980 169,803
Long-term debt 177,331 276,994
Accrued post-retirement benefit 24,989 23,757
Other long-term liabilities 10,807 9,601
Provisions for contingencies 14,448 11,993
Shareholders' equity 236,042 333,441
-----------------------
$688,597 $825,589
=======================
-33-
CONDENSED BALANCE SHEETS
Financial Services
Access Financial Solutions
- --------------------------------------------------------------------------------
2002 2001
- --------------------------------------------------------------------------------
ASSETS
Current Assets
Accounts receivable, net $23,030 $ --
Finance receivables, net 27,529 16,760
Pledged finance receivables 34,985 --
--------------------
Total current assets 85,544 16,760
Property, plant and equipment, net 16 --
Finance receivables, less current portion 45,412 115,071
Pledged finance receivables, less current portion 53,703 --
Other assets 2,478 5,305
--------------------
$187,153 $137,136
====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of limited recourse debt $34,850 $ --
Accrued expenses 2,073 --
--------------------
Total current liabilities 36,923 --
Limited recourse debt, less current portion 52,721 --
Payable to JLG Industries, Inc. 64,106 107,276
Shareholders' equity 33,403 29,860
--------------------
$187,153 $137,136
====================
CONDENSED STATEMENTS OF CASH FLOWS
Equipment Operations with Access Financial Solutions on the Equity Basis
- --------------------------------------------------------------------------------
2002 2001 2000
- --------------------------------------------------------------------------------
Cash flow from operating activities $71,307 $(44,043) $89,586
Cash flow from investing activities (11,050) (41,844) 1,862
Cash flow from financing activities (62,499) 69,583 (84,283)
Effect of exchange rate changes on cash (807) 102 (742)
---------------------------------
Net change in cash and cash equivalents (3,049) (16,202) 6,423
Beginning balance 9,254 25,456 19,033
---------------------------------
Ending balance $6,205 $9,25 $25,456
=================================
CONDENSED STATEMENTS OF CASH FLOWS
Financial Services
Access Financial Solutions
- -------------------------------------------------------------------------------
2002 2001 2000
- -------------------------------------------------------------------------------
Cash flow from operating activities $(44,669) $(130,194) $ --
Cash flow from investing activities (2,375) (7,082) --
Cash flow from financing activities 47,044 137,276 --
---------------------------------
Net change in cash and cash equivalents -- -- --
Beginning balance -- -- --
---------------------------------
Ending balance $ -- $ -- $ --
=================================
-34-
INCOME TAXES
Our income tax provision consisted of the following for the years ended July 31:
- ----------------------------------------------------------------------------------
2002 2001 2000
- ----------------------------------------------------------------------------------
United States:
Current $10,611 $21,991 $40,231
Deferred (4,635) (2,017) (5,414)
----------------------------------
5,976 19,974 34,817
----------------------------------
Other countries:
Current 367 117 719
----------------------------------
$6,343 $20,091 $35,536
==================================
We made income tax payments of $0.9 million, $25.6 million and $34.0 million in
2002, 2001, and 2000, respectively.
The difference between the U.S. federal statutory income tax rate and our
effective tax rate is as follows for the years ended July 31:
- --------------------------------------------------------------------------------
2002 2001 2000
- --------------------------------------------------------------------------------
Statutory U.S. federal income tax rate 35% 35% 35%
Effect of export profits taxed at lower rates (5) (4) (2)
Non-deductibility of goodwill -- 4 2
Other 3 2 2
--------------------------------
Effective tax rate 33% 37% 37%
================================
Our components of deferred tax assets and liabilities were as follows at
July 31:
- --------------------------------------------------------------------------------
2002 2001
- --------------------------------------------------------------------------------
Future income tax benefits:
Employee benefits $15,859 $16,208
Contingent liabilities provisions 11,620 11,717
Operating loss carryforwards 3,481 --
Other 6,392 4,440
---------------------
37,352 32,365
---------------------
Deferred tax liabilities for
depreciation and asset basis differences 8,938 8,586
---------------------
Net deferred tax assets $28,414 $23,779
=====================
The current and long-term deferred tax asset amounts are included in other
current assets and other asset balances on the Consolidated Balance Sheets. The
operating loss carryforwards begin expiring in the fiscal year ending July 31,
2007.
-35-
STOCK BASED INCENTIVE PLANS
Our stock incentive plan has reserved 2.2 million shares of capital stock that
may be awarded to key employees in the form of options to purchase capital
stock, restricted shares or bonus shares. Our Board of Directors sets the option
price and vesting terms of options and restricted shares in accordance with the
terms of our stock incentive plan. For all options currently outstanding, the
option price is the fair market value of the shares on their date of grant.
Our stock option plan for directors provides for an annual grant to each outside
director of a single option to purchase six thousand shares of capital stock,
providing we earned a net profit, before extraordinary items, for the prior
fiscal year. The option exercise price shall be equal to the shares' fair market
value on their date of grant. An aggregate of 1.5 million shares of capital
stock is reserved to be issued under the plan.
Our equity compensation plans in effect as of July 31, 2002 are as follows:
- -------------------------------------------------------------------------------------------------------
Number of
Securities
Number of Weighted Remaining
Securities to be Average Available for
Issued Upon Exercise Price Future Issuance
Exercise of of Outstanding Under Equity
Plan Category Outstanding Options Options Compensation Plans
- -------------------------------------------------------------------------------------------------------
Equity compensation plans approved by
security holders 3,335 $12.40 3,646
Equity compensation plans not approved by
security holders -- -- --
----------------------------------------------------------
Total 3,335 $12.40 3,646
==========================================================
Our outstanding options and transactions involving the plans are summarized as
follows:
- ---------------------------------------------------------------------------------------------------------------------
2002 2001 2000
---- ---- ----
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
- ---------------------------------------------------------------------------------------------------------------------
Outstanding options at the
beginning of the year 4,260 $11.13 3,105 $11.12 2,164 $10.81
Options granted 42 11.30 1,298 11.06 1,092 11.11
Options canceled (336) 11.60 (92) 14.34 (50) 15.29
Options exercised (631) 4.16 (51) 2.62 (101) 2.35
-------------------------------------------------------------------------------
Outstanding options at the
end of the year 3,335 $12.40 4,260 $11.13 3,105 $11.12
===============================================================================
Exercisable options at the
end of the year 2,174 $13.03 2,278 $10.63 1,561 $8.73
===============================================================================
-36-
Our information with respect to stock options outstanding at July 31, 2002 is as
follows:
- -----------------------------------------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
------------------- -------------------
Range of Exercise Number Weighted Average Weighted Average Number Weighted Average
Prices Outstanding Remaining Life Exercise Price Exercisable Exercise Price
- -----------------------------------------------------------------------------------------------------------------------
$1.12 to $1.59 84 1 $1.25 84 $1.25
2.93 to 3.30 123 2 3.12 123 3.12
5.64 to 10.91 1,861 8 10.58 892 10.35
11.30 to 14.75 602 6 13.27 420 13.39
17.31 to 17.69 249 6 17.61 249 17.61
18.09 to 21.94 416 7 21.19 406 21.16
We have elected to apply Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" and related interpretations in accounting for our
stock options. Under this opinion, we do not recognize compensation expense
arising from such grants because the exercise price of our 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 we had accounted for our 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:
- -----------------------------------------------------------------------------------------
2002 2001 2000
- -----------------------------------------------------------------------------------------
Volatility factor .571 .596 .524
Expected life in years 3.0 4.9 3.9
Dividend yield .18% .36% .40%
Interest rate 3.06% 4.57% 6.12%
Weighted average fair market value at date of grant $4.56 $5.88 $5.06
For purposes of pro forma disclosures, the estimated fair value of the options
is amortized over the options' vesting period. Our pro forma information follows
for the years ended July 31:
- -----------------------------------------------------------------------------------------
2002 2001 2000
- -----------------------------------------------------------------------------------------
Net (loss) income $(104,455) $32,522 $58,398
(Loss) earnings per common share (2.48) .77 1.33
(Loss) earnings per common share - assuming dilution (2.42) .76 1.33
-37-
BASIC AND DILUTED EARNINGS PER SHARE
This table presents our computation of basic and diluted earnings per share for
the years ended July 31:
- ---------------------------------------------------------------------------------------------
2002 2001 2000
- ---------------------------------------------------------------------------------------------
Net income before cumulative effect of change in
accounting principle $12,878 $34,206 $60,507
Cumulative effect of change in accounting (114,470) -- --
-------------------------------
Net (loss) income $(101,592) $34,206 $60,507
===============================
Denominator for basic earnings per share - weighted
average shares 42,082 42,155 43,687
Effect of dilutive securities - employee stock options
and unvested restricted shares 1,088 531 382
-------------------------------
Denominator for diluted earning per share -
weighted average shares adjusted for dilutive securities 43,170 42,686 44,069
===============================
Earnings per common share before cumulative effect of
change in accounting principle $.31 $.81 $1.39
Cumulative effect of change in accounting principle (2.72) -- --
-------------------------------
(Loss) earnings per common share $(2.41) $.81 $1.39
===============================
Earnings per common share - assuming dilution before
cumulative effect of change in accounting principle $.30 $.80 $1.37
Cumulative effect of change in accounting principle (2.65) -- --
-------------------------------
(Loss) earnings per common share - assuming dilution $(2.35) $.80 $1.37
===============================
During fiscal 2002, options to purchase 2.0 million shares of capital stock at a
range of $10.53 to $21.94 per share were not included in the computation of
diluted earnings per share because exercise prices for the options were more
than the average market price of the capital stock.
SHAREHOLDER RIGHTS PLAN
Effective May 24, 2000, our Board of Directors declared a distribution of one
Right for each outstanding share of capital stock to shareholders of record at
the close of business on June 15, 2000. Each Right entitles the registered
holder to purchase from us one-tenth of a share of our capital stock at a
purchase price of $40 per whole share of our capital stock. The Rights will
expire on May 24, 2010 unless redeemed earlier by us or exchanged for capital
stock.
Separate certificates for Rights will not be distributed, nor will the Rights be
exercisable unless a person or group (an "Acquiring Person") acquires 15% or
more, or announces an offer that could result in acquiring 15% or more of our
capital shares unless such acquisition or offer is pursuant to a Permitted Offer
approved by a majority of directors who are not our officers or affiliates of
the Acquiring Person. Following an acquisition of 15% or more of our capital
shares (a "Stock Acquisition"), each Rightholder, except the 15% or more
stockholder, has the right to receive, upon exercise, capital shares valued at
twice the then applicable exercise price of the Right (or, under certain
circumstances, cash, property or other of our securities.)
Similarly, unless certain conditions are met, if we engage in a merger or other
business combination following a Stock Acquisition where we do not survive or
survive a change or exchange of all or part of our capital shares or if 50% or
more of our assets or earning power is sold or transferred, the Rights become
exercisable for shares of the acquirer's stock having a value of twice the
exercise price (or, under certain circumstances, cash or property.) The Rights
are not exercisable, however, until our right of redemption described below has
expired.
At any time until 10 business days following public announcement that a 15% or
greater position has been acquired in our stock, a majority of our Board of
Directors may redeem the Rights in whole, but not in part, at a price of $0.001
per Right, payable, at the election of such majority of our Board of Directors
in cash or shares of our capital stock. Immediately upon the action of a
majority of our Board of Directors ordering the redemption of the Rights, the
Rights will terminate and the only right of the holders of Rights will be to
receive the redemption price.
-38-
REPURCHASE OF CAPITAL STOCK
During the year ended July 31, 2001, we repurchased 1.7 million shares of our
capital stock at an aggregate cost of $22.2 million.
EMPLOYEE RETIREMENT PLANS
Substantially all of our employees participate in defined contribution or
non-contributory defined benefit plans. Approximately 11% of our employees are
covered by union-sponsored, collectively bargained multi-employer pension plans
and a union employment contract which expires April 2006. The expense related to
funding the multi-employer plan was $0.2 million, $0.5 million and $0.5 million
in 2002, 2001 and 2000, respectively.
We have discretionary, defined contribution retirement plans covering our
eligible U.S. employees. Our policy is to fund the cost as accrued. Plan assets
are invested in mutual funds and our capital stock. The aggregate expense
relating to these plans was $0.8 million, $7.1 million and $7.2 million in 2002,
2001 and 2000, respectively. We also have non-qualified defined benefit plans
that provide senior management with supplemental retirement, medical, disability
and death benefits.
This table presents our defined benefit pension and postretirement plans' funded
status and amounts recognized in our consolidated financial statements:
- ------------------------------------------------------------------------------------------------------
Pension Benefits Postretirement Benefits
---------------- -----------------------
20002 2001 2002 2001
- ------------------------------------------------------------------------------------------------------
Change in benefit obligation:
Benefit obligation at beginning of year $22,123 $22,530 $24,791 $23,456
Service cost 1,203 3,580 1,083 890
Interest cost 1,574 1,651 1,788 1,757
Change in assumptions 913 (1,109) -- --
Change in participation -- (197) (247) (38)
Actuarial (gain)/loss 662 696 2,003 (20)
Benefits paid (1,165) (5,028) (1,333) (1,254)
--------------------------------------------
Benefit obligation at end of year $25,310 $22,123 $28,085 $24,791
============================================
Change in plan assets:
Fair value of plan assets at
beginning of year $12,597 $11,144 $ -- $ --
Actual return on plan assets (242) 1,517 -- --
Contributions 941 4,964 1,333 1,254
Benefits paid (1,165) (5,028) (1,333) (1,254)
--------------------------------------------
Fair value of plan assets at end of year $12,131 $12,597 $ -- $ --
============================================
Funded status $(13,179) $(9,526) $(28,085) $(24,791)
Unrecognized net actuarial (gain)/loss 2,807 (111) 5,387 3,721
Unrecognized transition obligation 60 91 125 150
Unrecognized prior service cost 1,023 1,279 (2,187) (2,609)
--------------------------------------------
Accrued benefit cost $(9,289) $(8,267) $(24,760) $(23,529)
============================================
Amounts recognized in the consolidated balance sheet:
Accrued benefit cost $(10,396) $(8,710) $(24,760) $(23,649)
Intangible asset -- -- -- 120
Accumulated other comprehensive income 1,107 443 -- --
--------------------------------------------
Net amount recognized $(9,289) $(8,267) $(24,760) $(23,529)
============================================
-39-
Our components of pension and postretirement expense were as follows for the
years ended July 31:
- ------------------------------------------------------------------------------------------------------------------------------------
Pension Benefits Postretirement Benefits
---------------- -----------------------
2002 2001 2000 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Service cost $1,203 $3,580 $1,773 $1,083 $890 $750
Interest cost 1,574 1,651 1,504 1,788 1,757 1,542
Expected return (1,065) (459) (962) -- -- --
Amortization of prior service cost 256 256 256 (421) -- --
Amortization of transition
Obligation 32 32 32 26 -- (9)
Amortization of net (gain)/loss (37) -- -- 90 -- --
--------------------------------------------------------------------------------
$1,963 $5,060 $2,603 $2,566 $2,647 $2,283
================================================================================
Our weighted average actuarial assumptions as of July 31 were as follows:
- ------------------------------------------------------------------------------------------------------------------------------------
Pension Benefits Postretirement Benefits
---------------- -----------------------
2002 2001 2000 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------------
Discount rate 7.25% 7.5% 7.75% 7.25% 7.5% 7.75%
Expected return on plan assets 8.5% 8.5% 8.5% -- -- --
Rate of compensation increase 4.5% 4.5% 4.5% -- -- --
For measurement purposes, a 13% annual rate increase in the per capita cost of
covered health care benefits was assumed for 2002. The rate was assumed to
decrease gradually to 5% by 2012, and remain at that level thereafter. Assumed
health care cost trend rates have a significant effect on the postretirement
benefit reported as follows:
- ------------------------------------------------------------------------------
One Percentage Point
--------------------------------
Increase Decrease
- ------------------------------------------------------------------------------
Postretirement benefit obligation $3,210 $2,719
Service and interest cost components $321 $284
REPOSITIONING AND RESTRUCTURING COSTS
During the third quarter of fiscal 2002, we announced the closure of our
manufacturing facility in Orrville, Ohio as part of our capacity rationalization
plan for our Machinery segment. Operations at this facility have been integrated
into our McConnellsburg, Pennsylvania facility and the closure will result in a
reduction of approximately 170 people. As a result, we anticipate incurring a
pre-tax charge of $7.7 million, consisting of $6.1 million in restructuring
costs associated with personnel reductions and the write-down of idle facilities
and $1.6 million in charges related to relocating certain plant assets and
start-up costs associated with the move of the Orrville operations to
McConnellsburg. The $7.7 million consists of $3.4 million in cash charges and
non-cash charges of $4.3 million. At July 31, 2002, we had incurred $6.7 million
of the pre-tax charge discussed above, consisting of an accrual of $1.2 million
for termination benefit costs and a $4.9 million asset write-down and $0.6
million on production relocation costs. We reported $6.1 million in
restructuring costs and $0.6 million in cost of sales. During the third and
fourth quarters of fiscal 2002, 132 employees were terminated and we paid and
charged $0.2 million of the termination benefit and lease termination costs
against the accrued liability. Our accrued liability for the remaining
termination benefits and lease termination costs as of July 31, 2002 was $1.3
million.
At July 31, 2002, we included $6.0 million in assets held for sale on the
Consolidated Balance Sheets in other current assets and ceased depreciating
these assets during the third quarter of fiscal 2002.
During the fourth quarter of fiscal 2001, we announced a repositioning plan that
involved a pre-tax charge of $15.8 million. Of the $15.8 million, approximately
$4.9 million was associated with the personnel reductions and plant closing,
$5.3 million reflected current period charges due to idle facilities associated
with the fourth quarter production shutdowns and $3.7 million was for the
re-valuation of used equipment inventory. The remaining $1.9 million included
costs relating to reorganizing existing distribution relationships in Europe and
the Pacific Rim regions. Cash charges totaled $5.2 million out of the $15.8
million.
As part of the $15.8 million, we recorded a restructuring charge of $4.4 million
to rationalize manufacturing capacity in our Machinery segment and, of the
remainder, $9.5 million is reflected in cost of sales, $1.0 million is recorded
in selling, administrative and product development expenses, and $0.9 million is
reflected in miscellaneous, net. The restructuring
-40-
charge included the permanent closure of a manufacturing facility in Bedford,
Pennsylvania resulting in a reduction of approximately 265 people. In addition,
aligning our workforce with then current economic conditions at other facilities
worldwide resulted in a further reduction of approximately 370 people during the
fourth quarter of fiscal 2001 for a total of 635 people. We accrued $3.3 million
for termination costs and a $1.1 million write-down related to the closure of
the facility.
At July 31, 2002 and 2001, we included $1.3 million and $1.9 million,
respectively, in assets held for sale on the Consolidated Balance Sheets in
other current assets and ceased depreciating these assets during the fourth
quarter of fiscal 2001.
COMMITMENTS AND CONTINGENCIES
We are a party to personal injury and property damage litigation arising out of
incidents involving the use of our products. Our insurance program for 2002 was
comprised of a self-insured retention of $7 million for domestic claims,
insurance coverage of $2 million for international claims and catastrophic
coverage for domestic and international claims of $100 million in excess of the
retention and primary coverage. We contract with an independent firm to provide
claims handling and adjustment services. Our estimates with respect to claims
are based on internal evaluations of the merits of individual claims and the
reserves assigned by our independent insurance claims adjustment firm. We
frequently review the methods of making such estimates and establishing the
resulting accrued liability, and any resulting adjustments 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 we are aware, we
established accrued liabilities of $18.8 million and $17.8 million at July 31,
2002 and 2001, respectively. These amounts are included in other current
liabilities and provisions for contingencies on our Consolidated Balance Sheets.
While our ultimate liability may exceed or be less than the amounts accrued, we
believe that it is unlikely that we would experience losses that are materially
in excess of such reserve amounts. The provisions for self-insured losses are
included within cost of sales in our Consolidated Statements of Income. As of
July 31, 2002 and 2001, there were $0.1 million and $0 of insurance recoverables
or offset implications, respectively, and no claims by us being contested by
insurers.
At July 31, 2002, we are a party to multiple agreements whereby we guarantee
$104.3 million in indebtedness of others. Under the terms of these and various
related agreements and upon the occurrence of certain events, we generally have
the ability, among other things, to take possession of the underlying assets
and/or make demand for reimbursement from other parties for any payments made by
us under these agreements. At July 31, 2002, we had a $3.4 million reserve
related to these agreements. We believe that it is unlikely that we would
experience losses under these agreements that are materially in excess of the
reserve amount.
BANK CREDIT LINES AND LONG-TERM DEBT
We have a syndicated revolving credit facility with an aggregate commitment of
$250 million, which expires on June 18, 2004. Borrowings under the facility bear
interest equal to either LIBOR plus a margin ranging from 0.55% to 2.0%,
depending on our ratio of funded debt to EBITDA; or the greater of prime or
federal funds rate plus 0.50%. Loans made under this facility are secured by a
security interest in certain of our inventory, equipment, and accounts and
finance receivables. We are required to pay an annual administrative fee of $35
thousand and a facility fee ranging from 0.20% to 0.275%, depending on our ratio
of funded debt to EBITDA.
We also have a $25 million bank revolving line of credit with a term of one
year, renewable annually, and at an interest rate of the greater of prime or
federal funds rate plus 0.50% or a spread over LIBOR. Loans made under this
facility are secured by a security interest in certain of our inventory,
equipment, and accounts and finance receivables. During 2002, we terminated our
$2.5 million in loan facilities with a term of one year, renewable annually, and
at a fixed weighted average interest rate of 5.7%. Outstanding amounts under
these lines of credit were $13.9 million and $21.7 million at July 31, 2002 and
2001, respectively.
The credit facilities contain customary affirmative and negative covenants
including financial covenants requiring the maintenance of specified
consolidated interest coverage, leverage ratios and a minimum net worth. For the
quarter ended July 31, 2002, we received waivers from compliance with two of
these ratios -- adjusted EBITDA to leverage ratio and adjusted interest coverage
ratio -- and on August 30, 2002, we entered amendments to the credit agreements
which principally modified the definition of Adjusted EBIT and EBITDA, revised
certain financial and other covenants to provide greater flexibility and
increased the applicable LIBOR margin to 2.25% at certain leverage ratios. Based
on the amendments to the credit facilities and our forecasted ability to comply
with the revised covenants, we continue to classify this debt as long-term.
-41-
In June 2002, we sold $175.0 million principal amount of our 8 3/8% senior
subordinated notes due 2012. The net proceeds of the offering were used to repay
outstanding debt under our existing $250 million revolving credit facility and
to terminate an $83 million working capital facility. Interest on the notes will
accrue from June 15, 2002 and we will pay interest twice a year, beginning
December 15, 2002. The notes will be unconditionally guaranteed on a general
unsecured senior subordinated basis by all of our existing and future material
domestic restricted subsidiaries.
Our long-term debt was as follows at July 31:
- ----------------------------------------------------------------------------------------
2002 2001
- ----------------------------------------------------------------------------------------
Revolving credit facilities due 2004 with an average interest rate
of 4.9% at July 31, 2001 $ -- $275,000
8 3/8% Senior Subordinated Notes due 2012 175,000 --
Other 1,910 2,502
Fair value hedging adjustment 914 --
-------------------
177,824 277,502
Less current portion 493 508
-------------------
$177,331 $276,994
===================
Interest paid on all borrowings was $12.7 million, $21.2 million and $20.0
million in 2002, 2001 and 2000, respectively. The aggregate amounts of long-term
debt outstanding at July 31, 2002 which will become due in 2003 through 2007
are: $0.5 million, $0.3 million, $0.1 million, $0.1 million and $0.1 million,
respectively.
The fair value of our long-term debt is estimated to approximate the carrying
amount reported in the Consolidated Balance Sheets based on current interest
rates for similar types of borrowings.
LIMITED RECOURSE DEBT
As a result of the sale of finance receivables through limited recourse and
non-recourse monetization transactions during fiscal 2002, we have $87.6 million
of limited recourse debt outstanding as of July 31, 2002. The aggregate amounts
of limited recourse debt outstanding at July 31, 2002 which will become due in
2003 through 2007 are: $34.9 million, $14.0 million, $14.9 million, $15.9
million and $6.1 million, respectively.
-42-
CONDENSED CONSOLIDATING FINANCIAL INFORMATION OF GUARANTOR SUBSIDIARIES
Certain of our indebtedness is guaranteed by our significant subsidiaries (the
"guarantor subsidiaries") but is not guaranteed by our other subsidiaries (the
"non-guarantor subsidiaries"). The guarantor subsidiaries are all wholly owned
and the guarantees are made on a joint and several basis and are full and
unconditional subject to subordination provisions and subject to a standard
limitation which provides that the maximum amount guaranteed by each guarantor
will not exceed the maximum amount guaranteed without making the guarantee void
under fraudulent conveyance laws. Separate financial statements of the guarantor
subsidiaries have not been presented because management believes it would not be
material to investors. The principal elimination entries eliminate investment in
subsidiaries, intercompany balances and transactions and certain other
eliminations to properly eliminate significant transactions in accordance with
our accounting policy for the principles of consolidated and statement
presentation. The condensed consolidating financial information of the Company
and its subsidiaries are as follows:
CONDENSED CONSOLIDATED BALANCE SHEET
As of July 31, 2002
--------------------------------------------------------------------------
Guarantor Non-Guarantor Other and Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Accounts receivable - net $204,161 $19,215 $37,857 $(33,424) $227,809
Finance receivables - net -- 73,138 -- (197) 72,941
Pledged finance receivables -- 88,688 -- -- 88,688
Inventories 91,649 49,107 25,432 (652) 165,536
Property, plant and equipment - net 31,376 46,874 6,548 (428) 84,370
Equipment held for rental - net 4,263 16,373 488 (145) 20,979
Investment in subsidiaries 248,114 -- 2,659 (250,773) --
Other assets 88,456 15,851 13,809 (198) 117,918
--------------------------------------------------------------------------
$668,019 $309,246 $86,793 $(285,817) $778,241
==========================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses $158,046 $31,035 $44,902 $(21,357) $212,626
Long-term debt, less current portion 177,309 22 -- -- 177,331
Limited recourse debt,
less current portion -- 52,721 -- -- 52,721
Other liabilities (108,932) 221,240 (1,492) (11,295) 99,521
--------------------------------------------------------------------------
Total liabilities 226,423 305,018 43,410 (32,652) 542,199
--------------------------------------------------------------------------
Shareholders' equity 441,596 4,228 43,383 (253,165) 236,042
--------------------------------------------------------------------------
$668,019 $309,246 $86,793 $(285,817) $778,241
==========================================================================
-43-
CONDENSED CONSOLIDATED BALANCE SHEET
As of July 31, 2001
--------------------------------------------------------------------------
Guarantor Non-Guarantor Other and Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
- ------------------------------------------------------------------------------------------------------------------------------------
ASSETS
Accounts receivable - net $173,232 $(42,553) $91,893 $(32,659) $189,913
Finance receivables - net -- 131,831 -- -- 131,831
Inventories 108,030 74,944 6,565 302 189,841
Property, plant and equipment - net 35,942 61,402 1,543 (484) 98,403
Equipment held for rental - net 3,544 15,484 1,550 (576) 20,002
Investment in subsidiaries 218,336 -- 2,251 (220,587) --
Other assets 40,429 144,729 12,198 (1,757) 195,599
--------------------------------------------------------------------------
$579,513 $385,837 $116,000 $(255,761) $825,589
==========================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable and accrued expenses $109,913 $35,218 $38,236 $(35,757) $147,610
Long-term debt, less current portion 276,660 334 -- -- 276,994
Other liabilities (198,297) 229,795 35,111 935 67,544
--------------------------------------------------------------------------
Total liabilities 188,276 265,347 73,347 (34,822) 492,148
--------------------------------------------------------------------------
Shareholders' equity 391,237 120,490 42,653 (220,939) 333,441
--------------------------------------------------------------------------
$579,513 $385,837 $116,000 $(255,761) $825,589
==========================================================================
CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the Year Ended July 31, 2002
--------------------------------------------------------------------------
Guarantor Non-Guarantor Other and Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
- ------------------------------------------------------------------------------------------------------------------------------------
Revenues $520,349 $231,624 $101,169 $(83,072) $770,070
Gross profit (loss) 125,928 (853) 5,867 1,145 132,087
Other expenses (income) 87,539 139,084 8,374 (1,318) 233,679
Net income (loss) $38,389 $(139,937) $(2,507) $2,463 $(101,592)
CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the Year Ended July 31, 2001
--------------------------------------------------------------------------
Guarantor Non-Guarantor Other and Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
- ------------------------------------------------------------------------------------------------------------------------------------
Revenues $703,895 $241,441 $73,367 $(54,831) $963,872
Gross profit (loss) 194,528 (11,664) 6,005 (75) 188,794
Other expenses (income) 132,496 29,044 (6,965) 13 154,588
Net income (loss) $62,032 $(40,708) $12,970 $(88) $34,206
-44-
CONDENSED CONSOLIDATED STATEMENT OF INCOME
For the Year Ended July 31, 2000
--------------------------------------------------------------------------
Guarantor Non-Guarantor Other and Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
- ------------------------------------------------------------------------------------------------------------------------------------
Revenues $760,014 $284,471 $45,141 $(33,458) $1,056,168
Gross profit (loss) 210,277 15,715 6,966 (1,872) 231,086
Other expenses (income) 148,769 30,118 (6,641) (1,667) 170,579
Net income (loss) $61,508 $(14,403) $13,607 $(205) $60,507
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Year Ended July 31, 2002
--------------------------------------------------------------------------
Guarantor Non-Guarantor Other and Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flow from operating activities $150,568 $(134,013) $2,138 $4,402 $23,095
Cash flow from investing activities (31,138) (3,260) (5,181) 29,697 (9,882)
Cash flow from financing activities (103,573) 119,873 1,609 (33,364) (15,455)
Effect of exchange rate changes on cash 1,058 (431) (109) (1,325) (807)
--------------------------------------------------------------------------
Net change in cash and cash equivalents 16,915 (17,831) (1,543) (590) (3,049)
Beginning balance 6,034 (1,714) 4,636 298 9,254
--------------------------------------------------------------------------
Ending balance $22,949 $(19,545) $3,093 $(292) $6,205
==========================================================================
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Year Ended July 31, 2001
--------------------------------------------------------------------------
Guarantor Non-Guarantor Other and Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flow from operating activities $(186,658) $6,201 $5,364 $996 $(174,097)
Cash flow from investing activities (1,189) (12,308) (3,560) (2,009) (19,066)
Cash flow from financing activities 177,347 (3,959) 2,201 1,270 176,859
Effect of exchange rate changes on cash 236 119 (294) 41 102
--------------------------------------------------------------------------
Net change in cash and cash equivalents (10,264) (9,947) 3,711 298 (16,202)
Beginning balance 16,298 8,233 925 -- 25,456
--------------------------------------------------------------------------
Ending balance $6,034 $(1,714) $4,636 $298 $9,254
==========================================================================
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
For the Year Ended July 31, 2000
--------------------------------------------------------------------------
Guarantor Non-Guarantor Other and Consolidated
Parent Subsidiaries Subsidiaries Eliminations Total
- ------------------------------------------------------------------------------------------------------------------------------------
Cash flow from operating activities $106,168 $(7,338) $(5,696) $(3,548) $89,586
Cash flow from investing activities (20,113) 8,659 (2,594) 15,910 1,862
Cash flow from financing activities (85,650) 6,817 9,089 (14,539) (84,283)
Effect of exchange rate changes on cash (867) -- 125 -- (742)
--------------------------------------------------------------------------
Net change in cash and cash equivalents (462) 8,138 924 (2,177) 6,423
Beginning balance 16,760 95 1 2,177 19,033
--------------------------------------------------------------------------
Ending balance $16,298 $8,233 $925 $-- $25,456
==========================================================================
-45-
UNAUDITED QUARTERLY FINANCIAL INFORMATION
Our unaudited financial information was as follows for the fiscal quarters
within the years ended July 31:
- --------------------------------------------------------------------------------------------------------------------------------
Net Earnings Per Earnings Per
Income Common Share Common Share -
Before Before Assuming
Cumulative Cumulative Dilution Before
Effect of Effect of Cumulative Effect
Change in Change in of Change in
Accounting Accounting Accounting
Net Revenues Gross Profit Principle Principle Principle
- --------------------------------------------------------------------------------------------------------------------------------
2002
October 31 $156,162 $30,060 $2,366 $.06 $.06
January 31 156,352 24,530 1,334 .03 .03
April 30 208,732 34,267 836 .02 .02
July 31 248,824 43,230 8,342 .20 .19
------------------------------------------------------------------------------------
$770,070 $132,087 $12,878 $.31 $.30
====================================================================================
2001
October 31 $232,710 $52,490 $13,008 $.30 $.30
January 31 230,093 41,475 4,897 .12 .12
April 30 219,473 47,178 10,661 .26 .25
July 31 281,596 47,651 5,640 .13 .13
------------------------------------------------------------------------------------
$963,872 $188,794 $34,206 $.81 $.80
====================================================================================
Results for the third quarter of 2002 included a restructuring charge of $6.1
million ($4.1 million net of tax). Results for the fourth quarter of 2001
included a restructuring charge of $4.4 million ($2.8 million net of tax).
-46-
REPORT OF MANAGEMENT
The consolidated financial statements of JLG Industries, Inc. in this report
were prepared by its management, which is responsible for their content. In
management's opinion, the financial statements reflect amounts based upon its
best estimates and informed judgments and present fairly the financial position,
results of operations and cash flows of the Company in conformity with generally
accepted accounting principles.
The Company maintains a system of internal accounting controls and procedures
which are intended, consistent with justifiable cost, to provide reasonable
assurance that transactions are executed as authorized, that they are properly
recorded to produce reliable financial records, and that accountability for
assets is maintained. The accounting controls and procedures are supported by
careful selection and training of personnel, examination by an internal auditor
and continuing management commitment to the integrity of the internal control
system.
The financial statements have been audited by Ernst & Young LLP, independent
auditors. The independent auditors have evaluated the Company's internal
controls and performed tests of procedures and accounting records in connection
with the issuance of their reports on the fairness of the financial statements.
The Board of Directors has appointed an Audit Committee composed entirely of
directors who are not employees of the Company. The Audit Committee meets with
representatives of management, the internal auditor and independent auditors
both separately and jointly. Its functions include recommending the selection of
independent auditors; conferring with the independent auditors and reviewing the
scope and fees of the annual audit and the results thereof; reviewing the
Company's annual report to shareholders and annual filings with the Securities
and Exchange Commission; reviewing the adequacy of the Company's internal audit
function, as well as the accounting and financial controls and procedures; and
approving the nature and scope of nonaudit services performed by the independent
auditors.
/s/ William M. Lasky /s/ James H. Woodward, Jr.
- -------------------- --------------------------
William M. Lasky James H. Woodward, Jr.
Chairman of the Board, President and Executive Vice President
Chief Executive Officer and Chief Financial Officer
September 30, 2002
-47-
REPORT OF 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, 2002 and 2001, and the related consolidated statements of
income, shareholders' equity, and cash flows for each of the three years in the
period ended July 31, 2002. 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 auditing standards generally accepted
in the United States. 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, 2002 and 2001, and the consolidated results of its operations
and its cash flows for each of the three years in the period ended July 31,
2002, in conformity with accounting principles generally accepted in the United
States.
/s/ Ernst & Young LLP
Baltimore, Maryland
September 16, 2002
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by this Item 10 relating to identification of directors
is set forth under the caption "Election of Directors" in our 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 our 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 in Item 5 of this report
and under the caption "Voting Securities and Principal Holders" in our 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, 1996), is hereby incorporated by reference.
3.2 By-laws of JLG Industries, Inc., which appears as Exhibit 3.1 to the
Company's Form 10-Q (File No. 0-8454 -- filed December 14, 1999), is
hereby incorporated by reference.
4.1 Rights Agreement, dated as of May 24, 2000, between JLG Industries, Inc.
and American Stock Transfer and Trust Company, which appears as Exhibit 1
to the Company's Form 8-A12B (File No. 0-8454 -- filed May 21, 2001), is
hereby incorporated by reference.
4.2 Purchase Agreement, dated June 12, 2002, among JLG Industries, Inc., the
Note Guarantors, Wachovia Securities, Inc. Credit Suisse First Boston
Corporation, J.P. Morgan Securities, Inc., Banc One Capital Markets, Inc.,
BMO Nesbitt Burns Corp., BNY Capital Markets, Inc., and Credit Lyonnais
Securities (USA) Inc., which appears as Exhibit 1.1 to the Company's Form
S-4 (File No. 0-8454 -- filed September 6, 2002), is hereby incorporated
by reference.
4.3 Indenture dated June 17, 2002, by and among JLG Industries, Inc., the Note
Guarantors, and the Bank of New York, as Trustee, which appears as Exhibit
4.1 to the Company's Form S-4 (File No. 0-8454 -- filed September 6,
2002), is hereby incorporated by reference.
4.4 Registration Rights Agreement, dated June 17, 2002, by and among JLG
Industries, Inc., the Note Guarantors, and Wachovia Securities, Inc.,
Credit Suisse First Boston Corporation, J.P. Morgan Securities Inc., Banc
One Capital Markets, Inc., BMO Nesbitt Burns Corp., BNY Capital Markets,
Inc., and Credit Lyonnais Securities (USA) Inc., which appears as Exhibit
4.2 to the Company's Form S-4 (File No. 0-8454 -- filed September 6,
2002), is hereby incorporated by reference.
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10.1 Amended and Restated Credit Agreement, dated June 17, 2002, by and among,
JLG Industries, Inc., Fulton International, Inc., JLG Equipment Services,
Inc., JLG Manufacturing, LLC, Gradall Industries, Inc., The Gradall
Company, The Gradall Orrville Company, Access Financial Solutions, Inc. as
Borrowers, the Lenders (as defined herein), Wachovia Bank, National
Association, as Administrative Agent and Documentation Agent, and Bank
One, Michigan, as Syndication Agent, which appears as Exhibit 10.1 to the
Company's Form S-4 (File No. 0-8454 -- filed September 6, 2002), is hereby
incorporated by reference.
10.2 Amendment number one to the Amended and Restated Credit Agreement, dated
August 30, 2002, by and among, JLG Industries, Inc., JLG Equipment
Services, Inc., JLG Manufacturing, LLC, Fulton International, Inc.,
Gradall Industries, Inc., The Gradall Company, Access Financial Solutions,
Inc. as Borrowers, the Lenders (as defined herein), Wachovia Bank,
National Association, as Administrative Agent and Documentation Agent, and
Bank One, Michigan, as Syndication Agent, which appears as Exhibit 10.2 to
the Company's Form S-4 (File No. 0-8454 -- filed September 6, 2002), is
hereby incorporated by reference.
10.3 JLG Industries, Inc. Directors' Deferred Compensation Plan amended and
restated as of August 1, 1998 which appears as Exhibit 10.2 to the
Company's Form 10-K (File No. 0-8454 -- filed October 13, 1998, is hereby
incorporated by reference.
10.4 JLG Industries, Inc. Stock Incentive Plan amended and restated as of
September 12, 2001, which appears as Exhibit 10.2 to the Company's Form
10-K (File No. 0-8454 -- filed October 9, 2001), is hereby incorporated by
reference.
10.5 JLG Industries, Inc. Directors Stock Option Plan amended and restated as
of August 1, 1998, which appears as Exhibit 10.6 to the Company's Form
10-K (File No. 0-8454 -- filed October 13, 1998), is hereby incorporated
by reference.
10.6 JLG Industries, Inc. Supplemental Executive Retirement Plan effective
September 6, 2001, which appears as Exhibit 10.1 to the Company's Form
10-Q (File No. 0-8454 -- filed June 14, 2001), is hereby incorporated by
reference.
10.7 JLG Industries, Inc. Executive Retiree Medical Benefits Plan effective
June 1, 1995, which appears as Exhibit 10.9 to the Company's Form 10-K
(File No. 0-8454 -- filed October 6, 1997), is hereby incorporated by
reference.
10.8 JLG Industries, Inc. Executive Severance Plan effective February 16, 2000,
which appears as Exhibit 10.10 to the Company's Form 10-Q (File No. 0-8454
-- filed June 5, 2000), is hereby incorporated by reference.
10.9 Amended and Restated Employment Agreement dated May 10, 1999 between
Gradall Industries, Inc. and Barry L. Phillips which appears as Exhibit
10.9 to the Company's Form 10-K (File No. 0-8454 -- filed October 12,
1999), is hereby incorporated by reference.
10.10 Deferred Compensation Agreement between The Gradall Company and Barry L.
Phillips which appears as Exhibit 10.10 to the Company's Form 10-K (File
No. 0-8454 -- filed October 12, 1999), is hereby incorporated by
reference.
10.11 The Gradall Company Amended and Restated Supplemental Executive Retirement
Plan effective March 1, 1988 which appears as Exhibit 10.11 to the
Company's Form 10-K (File No. 0-8454 -- filed October 12, 1999), is hereby
incorporated by reference.
10.12 The Gradall Company Benefit Restoration Plan which appears as Exhibit
10.12 to the Company's Form 10-K (File No. 0-8454 -- filed October 12,
1999), is hereby incorporated by reference.
10.13 Split-Dollar Life Insurance Agreement dated as of August 30, 1995 between
The Gradall Company and Barry L. Phillips which appears as Exhibit 10.13
to the Company's Form 10-K (File No. 0-8454 -- filed October 12, 1999), is
hereby incorporated by reference.
10.14 Employment Agreement dated November 1, 1999 between JLG Industries, Inc.
and William M. Lasky, which appears as Exhibit 10.2 to the Company's Form
10-Q (File No. 0-8454 -- filed December 14, 1999), is hereby incorporated
by reference.
10.15 Employment Agreement dated July 18, 2000 between JLG Industries, Inc. and
James H. Woodward, Jr. which appears as Exhibit 10.14 to the Company's
Form 10-K (File No. 0-8454 -- filed October 6, 2000), is hereby
incorporated by reference.
10.16 JLG Industries, Inc. Executive Deferred Compensation Plan amended and
restated as of January 1, 2002, which appears as Exhibit 10.1 to the
Company's Form 10-Q (File No. 0-8454 -- filed March 15, 2002), is hereby
incorporated by reference.
12 Statement Regarding Computation of Ratios
21 Subsidiaries of the Registrant, which appears as Exhibit 21 to the
Company's From S-4 (File No. 0-8454 -- filed September 6, 2002), is hereby
incorporated by reference.
23 Consent of Independent Auditors
99.1 Cautionary Statements Pursuant to the Securities Litigation Reform Act of
1995
99.2 Certification of Chief Executive Officer.
99.3 Certification of Chief Financial Officer.
-50-
(b) Reports on Form 8-K
We filed a Current Report on Form 8-K on May 29, 2002, which included our Press
Release dated May 28, 2002. The items reported on such Form 8-K were Item 5.
(Other Events) and Item 7. (Financial Statements and Exhibits). We filed a
Current Report on Form 8-K on May 30, 2002, which included our Press Release
dated May 30, 2002. The items reported on such Form 8-K were Item 5. (Other
Events) and Item 7. (Financial Statements and Exhibits). We filed a Current
Report on Form 8-K on June 17, 2002, which included our Press Release dated June
17, 2002. The items reported on such Form 8-K were Item 5. (Other Events) and
Item 7. (Financial Statements and Exhibits). We filed a Current Report on Form
8-K on July 17, 2002, which included our Press Release dated July 16, 2002. The
items reported on such Form 8-K were Item 5. (Other Events) and Item 7.
(Financial Statements and Exhibits).
-51-
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 30, 2002.
JLG INDUSTRIES, INC.
(Registrant)
/s/ William M. Lasky
--------------------------------------------
William M. Lasky, 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 30, 2002.
/s/ James H. Woodward, Jr.
- ------------------------------------------------------
James H. Woodward, Jr., Executive Vice President and
Chief Financial Officer
/s/ Roy V. Armes
- ------------------------------------------------------
Roy V. Armes, Director
/s/ George R. Kempton
- ------------------------------------------------------
George R. Kempton, Director
/s/ James A. Mezera
- ------------------------------------------------------
James A. Mezera, Director
/s/ Stephen Rabinowitz
- ------------------------------------------------------
Stephen Rabinowitz, Director
/s/ Raymond C. Stark
- ------------------------------------------------------
Raymond C. Stark, Director
/s/ Charles O. Wood, III
- ------------------------------------------------------
Charles O. Wood, III, Director
-52-
Sarbanes-Oxley Section 302 Certification
I, William M. Lasky, certify that:
1. I have reviewed this annual report on Form 10-K of JLG Industries,
Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.
Date: September 30, 2002
/s/ William M. Lasky
----------------------------------------
William M. Lasky
Chairman, President and Chief Executive
Officer
- --------------------------------------------------------------------------------
I, James H. Woodward, Jr., certify that:
1. I have reviewed this annual report on Form 10-K of JLG Industries,
Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this annual report.
Date: September 30, 2002
/s/ James H. Woodward, Jr.
----------------------------------------
James H. Woodward, Jr.
Executive Vice President and Chief
Financial Officer