1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the quarterly period ended October 31, 2000
or
[ ] Transition Report Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the transition period from to
---------------------- ----------------------
Commission file number: 0-8454
JLG INDUSTRIES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 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
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
--- ---
The number of shares of capital stock outstanding as of November 24, 2000 was
42,348,740.
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TABLE OF CONTENTS
PART 1
Item 1. Financial Information.......................................... 1
Condensed Consolidated Balance Sheets.......................... 1
Condensed Consolidated Statements of Income.................... 2
Condensed Consolidated Statements of Cash
Flows.......................................................... 3
Notes to Condensed Consolidated Financial
Statements..................................................... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations........................... 7
Item 3. Quantitative and Qualitative Disclosures about
Market Risk................................................... 9
Independent Accountants' Review Report.................................... 10
PART II
Item 4. Submission of Matters to a Vote of Security Holders........... 11
Item 6. Exhibits and Reports on Form 8-K............................... 12
Signature ............................................................... 12
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PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JLG INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
October 31, July 31,
2000 2000
----------- --------
(Unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 14,103 $ 25,456
Accounts receivable-net 187,863 172,511
Inventories 188,048 147,991
Other current assets 17,119 10,594
-------- --------
Total current assets 407,133 356,552
Property, plant and equipment - net 103,728 105,879
Equipment held for rental - net 15,093 12,153
Goodwill - net 144,633 145,867
Other assets 28,876 33,136
-------- --------
$699,463 $653,587
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term debt $ 21,017 $ 9,184
Accounts payable 109,867 116,616
Accrued expenses 58,965 64,829
-------- --------
Total current liabilities 189,849 190,629
Long-term debt 138,551 89,118
Accrued post-retirement benefits 22,930 22,943
Other long-term liabilities 13,302 12,623
Provisions for contingencies 8,480 14,223
Shareholders' equity
Capital stock:
Authorized shares: 100,000 at $.20 par
Issued and outstanding shares: 42,884 fiscal 2000 - 43,648 8,577 8,729
Additional paid-in capital 12,679 12,514
Retained earnings 312,248 308,966
Unearned compensation (1,451) (1,474)
Accumulated other comprehensive income (5,702) (4,684)
-------- --------
Total shareholders' equity 326,351 324,051
-------- --------
$699,463 $653,587
======== ========
The accompanying notes are an integral part of these financial statements.
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JLG INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share data)
(Unaudited)
Three Months Ended
October 31,
2000 1999
-------- --------
Net sales $232,710 $217,995
Cost of sales 180,220 165,422
-------- --------
Gross profit 52,490 52,573
Selling, administrative and
product development expenses 25,819 27,055
Goodwill amortization 1,492 1,561
-------- --------
Income from operations 25,179 23,957
Other income (deductions):
Interest expense (4,056) (3,434)
Miscellaneous, net (476) 506
-------- --------
Income before taxes 20,647 21,029
Income tax provision 7,639 7,781
-------- --------
Net income $ 13,008 $ 13,248
======== ========
Earnings per common share $ .30 $ .30
======== ========
Earnings per common share -
assuming dilution $ .30 $ .29
======== ========
Cash dividends per share $ .01 $ .005
======== ========
The accompanying notes are an integral part of these financial statements.
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JLG INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Three Months Ended
October 31,
2000 1999
-------- --------
Operations
Net income $ 13,008 $ 13,248
Adjustments to reconcile net income to
cash flow from operating activities:
Gain on sale of joint venture (1,008) --
Non-cash charges and credits:
Depreciation and amortization 7,338 6,983
Other 2,625 1,224
Changes in selected working capital items:
Accounts receivable (15,357) (33,884)
Inventories (40,057) (49,962)
Other operating assets and liabilities (19,278) (11,920)
Changes in other assets and liabilities (6,650) (3,490)
-------- --------
Cash flow from operating activities (59,379) (77,801)
Investments
Net purchases of property, plant and equipment (2,857) (9,977)
Net (additions) retirements to equipment held for rental (3,778) 5,612
Proceeds from sale of joint venture 4,000 --
-------- --------
Cash flow from investing activities (2,635) (4,365)
Financing
Net increase in short-term debt 12,017 5,208
Issuance of long-term debt 110,400 65,169
Repayment of long-term debt (61,152) (64)
Payment of dividends (437) (221)
Purchase of common stock (9,444) --
Exercise of stock options and issuance of restricted awards 180 514
-------- --------
Cash flow from financing activities 51,564 70,606
Effect of exchange rate changes on cash (903) (156)
-------- --------
Cash
Net change in cash and cash equivalents (11,353) (11,716)
Beginning balance 25,456 19,033
-------- --------
Ending balance $ 14,103 $ 7,317
======== ========
The accompanying notes are an integral part of these financial statements.
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JLG INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2000
(in thousands, except per share data)
(Unaudited)
BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all information and notes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included.
Interim results for the three month period ended October 31, 2000 are not
necessarily indicative of the results that may be expected for the fiscal year
as a whole. For further information, refer to consolidated financial statements
and notes thereto included in the Company's annual report on Form 10-K for the
fiscal year ended July 31, 2000.
Effective August 1, 2000, the Company adopted Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities" which
requires that an entity record all derivatives in the statement of financial
position at their fair value. It also requires changes in the fair value of
derivatives to be recorded each period in current earnings or other
comprehensive income, depending on whether a derivative is designated as part of
a hedge transaction and, if it is, the type of hedge transaction. Upon adoption,
FAS 133 did not have a material effect on the Company's financial statements
because the Company has not entered into significant derivative or hedging
instruments as of August 1 and October 31, 2000.
INVENTORIES AND COST OF SALES
A precise inventory valuation under the LIFO (last-in, first-out) method can
only be made at the end of each fiscal year; therefore, interim LIFO inventory
valuation determinations, including the determination at October 31, 2000, must
necessarily be based on management's estimate of expected fiscal year-end
inventory levels and costs.
Inventories consist of the following:
October 31, July 31,
2000 2000
---------- --------
Finished goods $126,720 $ 97,858
Raw materials and work in process 64,150 52,775
-------- --------
190,870 150,633
Less LIFO provision 2,822 2,642
-------- --------
$188,048 $147,991
======== ========
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REPURCHASE OF CAPITAL STOCK
During the first quarter ended October 31, 2000, the Company repurchased 777
thousand shares of its capital stock at an aggregate cost of $9.4 million. At
October 31, 2000, the Company had remaining Board authorization to repurchase an
additional 3.4 million shares of its capital stock.
BASIC AND DILUTED EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share for the three months ended October 31:
2000 1999
------- -------
Net income $13,008 $13,248
======= =======
Denominator for basic earnings per share --
weighted average shares 43,185 43,969
Effect of dilutive securities - employee stock options and
unvested restricted shares 315 1,528
------- -------
Denominator for diluted earnings per share --
weighted average shares adjusted for
dilutive securities 43,500 45,497
======= =======
Earnings per common share $ .30 $ .30
======= =======
Earnings per common share - assuming dilution $ .30 $ .29
======= =======
During the quarter ended October 31, 2000, options to purchase 1.3 million
shares of capital stock at a range of $11.84 to $21.94 were not included in the
computation of diluted earnings per share because the options' exercise price
was greater than the average market price of the capital stock.
COMPREHENSIVE INCOME
On an annual basis, comprehensive income is disclosed in the Statement of
Shareholders' Equity. This statement is not presented on a quarterly basis. The
following table sets forth the components of comprehensive income for the three
months ended October 31:
2000 1999
------- -------
Net income $13,008 $13,248
Aggregate currency translation adjustment 1,399 141
------- -------
$14,407 $13,389
======= =======
SEGMENT INFORMATION
The Company has organized its business into two segments consisting of
manufactured products and services. The Machinery segment contains the design,
manufacture and sale of new equipment, and the Equipment Services segment
contains after-sales service and support, including parts sales, equipment
rentals, used equipment sales and rebuilt equipment. The Company evaluates
performance and allocates resources based on operating profit before interest,
miscellaneous income/ expense and income taxes. Intersegment sales and transfers
are not significant. The accounting policies of the reportable segments are the
same as those described in the summary of significant accounting policies.
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Business segment information consisted of the following for the three months
ended October 31:
2000 1999
--------- ---------
External sales:
Machinery $209,693 $182,129
Equipment services 23,017 35,866
-------- --------
$232,710 $217,995
======== ========
Segment profit (loss):
Machinery $ 29,291 $ 24,193
Equipment services 7,782 11,087
General corporate (11,894) (11,323)
-------- --------
$ 25,179 $ 23,957
======== ========
The Company manufactures its products in the United States and sells these
products globally, but principally in North America, Europe, Australia and South
America. No single foreign country is significant to the consolidated
operations. Sales by geographic area were as follows for the three months ended
October 31:
2000 1999
-------- --------
United States $183,105 $162,915
Europe 36,053 39,571
Other 13,552 15,509
-------- --------
$232,710 $217,995
======== ========
COMMITMENTS AND CONTINGENCIES
The Company is a party to personal injury and property damage litigation arising
out of incidents involving the use of its products. The Company's insurance
program for fiscal year 2000 is 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 $75
million in excess of the retention and international primary coverage. The
Company contracts with an independent firm to provide claims handling and
adjustment services. The Company's estimates with respect to claims are based on
internal evaluations of the merits of individual claims and the reserves
assigned by the Company's independent firm. The methods of making such estimates
and establishing the resulting accrued liability are reviewed frequently, and
any adjustments resulting therefrom are reflected in current earnings. Claims
are paid over varying periods, which generally do not exceed five years. Accrued
liabilities for future claims are not discounted.
With respect to all product liability claims of which the Company is aware,
accrued liabilities of $16.2 million and $16.1 million were established at
October 31, 2000 and July 31, 2000, respectively. While the Company's ultimate
liability may exceed or be less than the amounts accrued, the Company believes
that it is unlikely that it would experience losses that are materially in
excess of such reserve amounts. As of October 31, 2000 and July 31, 2000, there
were no insurance recoverables or offset implications and there were no claims
by the Company being contested by insurers.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS FOR THE FIRST QUARTERS OF FISCAL 2001 AND 2000
Sales for the first quarter of fiscal 2001 were $232.7 million, up 7% over the
$218.0 million in the comparable year-ago period. Machinery sales for the
current year quarter were $209.7 million an increase of $27.6 million, or 15%,
from the $182.1 million for the comparable prior year quarter. The increase is
principally attributable to strong North American aerial work platform sales
offset in part by lower international volume resulting from the strong U. S.
dollar. Equipment Services sales for the current year quarter were $23.0 million
a decrease of $12.8 million, or 36%, from the $35.9 million for the comparable
prior year quarter. The first quarter of fiscal 2000 benefited from a large sale
by Equipment Services.
Domestic sales for the first quarter of fiscal 2001 were $183.1 million, up 12%
from the comparable year-ago period sales of $162.9 million. International sales
for the first quarter of fiscal 2001 were $49.6 million, down 10% from the
corresponding quarter of the previous year. Sales from new and redesigned
products, defined as those introduced over a two-year period, represented 28% of
sales.
The Company's sales by product (in thousands) consisted of the following for the
first quarter ended October 31:
2000 1999
-------- --------
Aerial work platforms $177,327 $151,753
Material handlers 20,368 18,332
Excavators 11,998 12,044
Parts sales, equipment rentals, rebuilt
equipment and sales of rental fleet
and used equipment 23,017 35,866
-------- --------
$232,710 $217,995
======== ========
Gross profit margins declined to 22.6% for the first quarter over the comparable
year-ago quarter's 24.1%. The principal contributors to this reduction were the
dramatic strengthening of the US dollar against foreign currencies, particularly
the Euro, British pound and Australian dollar, and competitive pricing
pressures. These reductions were partially offset by ongoing cost savings
initiatives.
Selling, administrative and product development expenses as a percent of sales
improved to 11.1% for the current year first quarter from 12.4% for the prior
year first quarter as the Company leveraged slightly lower expenses in fiscal
2001 over a larger sales base. In terms of dollars, the reduction reflects lower
bonus and profit sharing costs offset in part by pension charges due to early
retirements.
Miscellaneous expense included currency losses of $2.1 million in first quarter
of fiscal 2001 compared to $124 thousand in the corresponding prior year period.
The current year period also benefited from a $1.0 million gain on the sale of
the Company's interest in its Brazilian joint venture.
The effective tax rate was 37% for the current and prior year periods.
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FINANCIAL CONDITION
Cash flow from operating activities was $59.4 million in the first quarter of
fiscal 2001 versus $77.8 million in the comparable quarter of fiscal 2000. The
most significant factor underlying the change was the $53.8 million in accounts
receivable securitization, which was partially offset by an increase in accounts
receivable due to extended credit terms.
Investing activities during the first quarter of fiscal 2001 used $2.6 million
of cash compared to $4.4 million for last year's first quarter. The decrease in
cash usage was principally due to net expenditures for equipment held for rental
in the current fiscal year, while in fiscal 2000 there was a net retirement. In
addition, the current year period included proceeds from the sale of the
Company's interest in its Brazilian joint venture and a decline in capital
expenditures compared to the corresponding period of fiscal 2000, which included
expenditures on new facilities in Shippensburg, Pennsylvania and Orrville, Ohio.
Financing activities provided cash of $51.6 million for the first quarter of
fiscal 2001 compared to $70.6 million for the first quarter of fiscal 2000. The
decrease in cash provided from financing activities largely resulted from lower
borrowings under the Company's credit facilities due to the receivables
securitization discussed above. In conjunction with the Company's share
repurchase program, the first quarter of fiscal 2001 included the repurchase of
777 thousand shares at an aggregate cost of $9.4 million.
At October 31, 2000, the Company had unused credit lines totaling $238 million.
In order to meet its future cash requirements, the Company intends to use
internally generated funds and to borrow under its credit facilities. Based on
its forecasting process, the Company believes that these resources will be
sufficient to meet its cash requirements over the next 12 months.
In addition to measuring its cash flow generation and usage based upon the
operating, investing, and financing classifications included in the Consolidated
Statements of Cash Flows, the Company also measures its free cash flow. Free
cash flow, a measure commonly employed by the financial community, is defined by
the Company as cash flow from operating activities less capital expenditures
including equipment held for rental, plus proceeds from the disposal of assets
and unrealized currency gains or losses. During the first quarter of fiscal
2001, the Company had negative free cash flow of $60 million compared to
negative free cash flow of $82 million for the corresponding period in fiscal
2000.
The Company's exposure to product liability claims is discussed in the note
entitled Commitments and Contingencies of the Notes to Condensed Consolidated
Financial Statements of this report. Future results of operations, financial
condition and liquidity may be affected to the extent that the Company's
ultimate exposure with respect to product liability varies from current
estimates.
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OUTLOOK
This Outlook section and other parts of this Management's Discussion and
Analysis contain forward-looking information and involve certain risks and
uncertainties that could significantly impact expected results. Certain
important factors that, in some cases have affected, and in the future could
affect, the Company's results of operations and that could cause such future
results of operations to differ are described in "Cautionary Statements Pursuant
to the Securities Litigation Reform Act" which is an exhibit to this report.
Management is cautiously optimistic concerning the outlook for the whole year.
Management's plan assumes market share gains in an overall contracting North
American market. In Europe, management's plans assume no worsening of currency
rates. Management believes that based on the foregoing and the combination of
the Company's market leadership, manufacturing efficiency, and commitment to
product innovation, combined with first quarter actual results, confirms its
previously stated range of $1.55 to $1.60 in earnings per share for fiscal 2001
with a quarterly pattern similar to fiscal 2000.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk from changes in interest rates and foreign
currency exchange rates, which could affect its future results of operations and
financial condition. The Company manages exposure to these risks principally
through its regular operating and financing activities.
While the Company is exposed to changes in interest rates as a result of its
outstanding debt, the Company does not currently utilize any derivative
financial instruments related to its interest rate exposure. Total interest
bearing liabilities at October 31, 2000 consisted of $154 million in variable
rate borrowing, $54 million in accounts receivable securitization and $5 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 $1.5 million on an annual basis. A hypothetical 10%
change in interest rates would not result in a material change in the fair value
of the Company's fixed rate debt.
The Company does not have a material exposure to financial risk from using
derivative financial instruments to manage its foreign currency exposures. For
additional information, reference is made to Item 7 in the Company's annual
report on Form 10-K for the fiscal year ended July 31, 2000.
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Independent Accountants' Review Report
The Board of Directors
JLG Industries, Inc.
We have reviewed the accompanying condensed consolidated balance sheet of JLG
Industries, Inc. (the "Company") as of October 31, 2000, and the related
condensed consolidated statements of income and cash flows for the three-month
periods ended October 31, 2000 and 1999. These financial statements are the
responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material modifications that should
be made to the accompanying financial statements referred to above for them to
be in conformity with generally accepted accounting principles.
We have previously audited, in accordance with auditing standards generally
accepted in the United States, the consolidated balance sheet of JLG Industries,
Inc. as of July 31, 2000, and the related consolidated statements of income,
shareholders' equity, and cash flows for the year then ended (not presented
herein), and in our report dated September 6, 2000, we expressed an unqualified
opinion on those consolidated financial statements. In our opinion, the
information set forth in the accompanying condensed consolidated balance sheet
as of July 31, 2000, is fairly stated, in all material respects, in relation to
the consolidated balance sheet from which it has been derived.
/s/ Ernst & Young LLP
Baltimore, Maryland
November 15, 2000
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PART II OTHER INFORMATION
ITEMS 1 - 3 AND 5
None/not applicable.
ITEM 4
The Company held its Annual Meeting of Shareholders on November 20, 2000.
Management solicited proxies for the election of nine directors and for
ratification of the appointment of Ernst & Young LLP as the Company's
independent auditors for the 2001 fiscal year. Of the 43,601,277 shares of
capital stock outstanding on the record date, 42,837,914 or 98% were voted in
person or by proxy at the meeting date.
The tabulated results are set forth below:
Election of directors
For Against
--- -------
R. V. Armes 42,425,076 412,838
L. D. Black 42,507,229 330,685
G. R. Kempton 42,514,613 323,301
W. M. Lasky 42,514,010 323,904
J. A. Mezera 42,470,313 367,601
S. Rabinowitz 42,514,913 323,001
R. C. Stark 42,425,576 412,338
T. C. Wajnert 42,512,051 325,863
C. O. Wood, III 42,459,734 378,180
Ratification of the appointment of Ernst & Young LLP as independent auditors for
the ensuing year.
For Against Abstain Broker non-votes
--- ------- ------- ----------------
42,601,168 187,562 49,184 0
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ITEM 6 -- EXHIBITS AND REPORTS ON FORM 8-K
(a) The following exhibits are included herein:
15 Letter re: Unaudited Interim Financial Information
27 Financial Data Schedule
99 Cautionary Statements Pursuant to the Securities Litigation
Reform Act
(b) The Company was not required to file Form 8-K pursuant to requirements of
such form for any of the three months ended October 31, 2000.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized who is also signing in his capacity as
principal financial officer.
JLG INDUSTRIES, INC.
(Registrant)
/s/ James H. Woodward, Jr.
--------------------------
James H. Woodward, Jr.
Senior Vice President and
Chief Financial Officer
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