FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from To
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Commission file number 001-12049
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Gradall Industries, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 36-3381606
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
406 Mill Avenue S. W., New Philadelphia, OH 44663
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(Address of principal executive offices)
(330) 339-2211
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(Registrant's telephone number, including area code)
Not applicable
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(Former name, former address and former fiscal year, if changed since last
report)
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
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Number of shares outstanding at June 30, 1997
Common Stock, $.001 par value: 8,939,294
GRADALL INDUSTRIES, INC.
FORM 10-Q
QUARTER ENDED MARCH 31, 1997
Index
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Page
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PART I FINANCIAL INFORMATION
Item 1 --Consolidated Financial Statements 1
Item 2 --Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
PART II OTHER INFORMATION
Item 6 --Exhibits and Reports on Form 8-K 9
Signatures 9
PART I - FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
GRADALL INDUSTRIES, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
(Dollars in Thousands, Except Per Share Data)
Three Months Ended Six Months Ended
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June 30, 1997 June 30, 1996 June 30, 1997 June 30, 1996
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Net sales $ 38,356 $ 35,499 $ 74,266 $ 69,636
Cost of sales 29,089 27,186 56,381 53,653
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Gross profit 9,267 8,313 17,885 15,983
Operating expenses:
Engineering 970 807 1,865 1,559
Selling and marketing 1,800 1,773 3,515 3,359
Administrative 1,762 1,365 3,096 2,542
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Operating income 4,735 4,368 9,409 8,523
Interest expense 175 1,032 414 2,050
Other, net 329 534 401 675
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Income before provision
for taxes 4,231 2,802 8,594 5,798
Income tax provision 1,654 1,110 3,360 2,272
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Net income $ 2,577 $ 1,692 $ 5,234 $ 3,526
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Weighted average shares
outstanding 8,939,294 5,989,294 8,939,294 5,989,294
Net income per share: 0.29 $ 0.28 $ 0.59 $ 0.59
Pro Forma(1)
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Weighted average shares
outstanding 8,939,294 8,939,294
Net income per share: $ 0.25 $ 0.51
<FN>
(1) Presented as if the issuance of shares of common stock pursuant to the
initial public offering and the application of the net proceeds thereof had
occurred on January 1, 1996.
The accompanying notes are an integral part of these consolidated financial
statements.
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
Jun 30, 1997 Dec 31, 1996
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ASSETS (unaudited)
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Current assets:
Cash $ 1,706 $ 215
Accounts receivable - trade, net of allowance
for doubtful accounts 19,532 16,846
Inventories 21,770 21,326
Prepaid expenses and deferred charges 305 495
Deferred income taxes 1,151 1,151
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Total current assets 44,464 40,033
Deferred income taxes 5,435 5,257
Property, plant and equipment, net 12,216 11,535
Other assets 1,317 1,401
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Total assets $ 63,432 $ 58,226
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LIABILITIES & STOCKHOLDERS' EQUITY
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Current liabilities:
Current portion long term debt $ 188 $ 174
Accounts payable - trade 12,779 13,405
Accrued other expenses 10,648 11,547
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Total current liabilities 23,615 25,126
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Long term obligations:
Long-term debt, net of current portion 8,713 7,736
Accrued post-retirement benefit cost 15,129 14,604
Other long term liabilities 1,684 1,684
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Total long term obligations 25,526 24,024
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Total liabilities 49,141 49,150
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Stockholders' equity:
Common shares, $.001 par value; 18,000,000
shares authorized; 8,939,294 issued and
outstanding 9 9
Additional paid-in capital 38,888 38,907
Accumulated (deficit) surplus (24,606) (29,840)
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Total stockholders' equity 14,291 9,076
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Total liabilities and
stockholders' equity $ 63,432 $ 58,226
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The accompanying notes are an integral part of these consolidated financial
statements.
GRADALL INDUSTRIES, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in Thousands)
Six Months Ended
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Jun 30, 1997 Jun 30, 1996
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Operating Activities:
Net income $ 5,234 $ 3,526
Adjustments to reconcile net income to net
Cash provided by operating activities:
Post-retirement benefit transition obligation 525 435
Depreciation and amortization 951 953
Deferred income taxes (178) (147)
Gain on sale of property, plant and equipment (7) (81)
Increase in accounts receivable (2,686) (3,398)
Increase in inventory (444) (710)
Decrease (increase) in prepaid expenses 190 (40)
Increase in other asset (203)
(Decrease) increase in accounts payable and
accrued expenses (1,525) 2,478
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Net cash used in operating activities 2,060 2,813
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Investing Activities:
Proceeds from sale of property, plant and
equipment 12 83
Purchase of property, plant and equipment (1,554) (676)
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Net cash used in investing activities (1,542) (593)
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Financing Activities:
Net advances (repayments) on revolving
line of credit 1,085 (323)
Repayments on capital leases (93) (89)
Other (19)
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Net cash provided by financing activities 973 (412)
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Net increase in cash 1,491 1,808
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Cash beginning of year 215 1,537
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Cash end of period $ 1,706 $ 3,345
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The accompanying notes are an integral part of these consolidated financial
statements.
GRADALL INDUSTRIES, INC., AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
The unaudited interim financial information as of June 30, 1997 and 1996, and
for the six months ended June 30, 1997 and 1996, has been prepared on the same
basis as the audited financial statements. In the opinion of management, such
unaudited information includes all adjustments (consisting only of normal
recurring accruals) necessary for a fair presentation of the interim
information. Operating results for the six months ended June 30, 1997, are
not necessarily indicative of the results that may be expected for the entire
year ending December 31, 1997.
2. INVENTORIES:
Inventories were comprised of:
June 30, 1997 December 31, 1996
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Raw materials $ 1,296 $ 1,167
Work in process 18,313 18,402
Finished goods 7,892 7,187
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27,501 26,756
LIFO reserve (5,731) (5,430)
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Total inventory $ 21,770 $ 21,326
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3. PUBLIC OFFERING:
On September 3, 1996, the Company completed an initial public offering in
which 2,950,000 shares of common stock were issued for a total sum of $29.5
million. Expenses incurred in connection with the issue approximated $2.6
million. The net proceeds of the offering were used as follows:
Repay outstanding senior term debt $ 9,550
Repay subordinate debt 10,000
Redeem preferred stock 2,000
Reduce revolving credit liability 5,379
In connection with the offering, the Company increased the number of its
authorized shares of common stock from 2,200 to 18,000,000 and effected a
5,540 to 1 stock split. All applicable share and per share data have been
retroactively adjusted for the stock split.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. CONTINGENCIES:
The Company is involved in certain claims and litigation related to its
operations. Based upon the facts known at this time, management is of the
opinion that the ultimate outcome of all such claims and litigation will not
have a material adverse effect on the financial condition or results of
operations of the Company.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1997, COMPARED TO THREE MONTHS ENDED JUNE 30,
1996.
Net Sales. Net sales for the three months ended June 30, 1997, were $38.4
million, an increase of $2.9 million or 8.0% compared to $35.5 million for the
three months ended June 30, 1996. The increase in net sales was attributable
to significant increases in unit volume of material handlers and service parts
sales.
Gross Profit. Gross profit for the three months ended June 30, 1997, was $9.3
million, an increase of $1.0 million or 11.5%, compared to $8.3 million for
the three months ended June 30, 1996. Gross profit as a percentage of net
sales increased to 24.2% for the three months ended June 30, 1997, from 23.4%
for the three months ended June 30, 1996, primarily due to improved production
efficiencies and a more profitable sales mix within each product line.
Engineering. Engineering expense for the three months ended June 30, 1997
was $1.0 million, an increase of $0.2 million or 20.2%, compared to $0.8
million for the three months ended June 30, 1996. This increase was due to
the addition of engineering personnel to support new product development.
Selling and Marketing. Selling and marketing expenses for the three months
ended June 30, 1997, were $1.8 million, the same amount as the three months
ended June 30, 1996.
Administrative. Administrative expenses for the three months ended June 30,
1997, were $1.8 million, an increase of $0.4 million or 29.1%, compared to
$1.4 million for the three months ended June 30, 1996. This increase was
primarily attributable to wages and benefits and extra outside security during
the three-week work stoppage in March and April.
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RESULTS OF OPERATIONS (CONTINUED)
Interest Expense. Interest expense for the three months ended June 30, 1997,
was $0.2 million, a decrease of $0.9 million or 83.0%, compared to $1.0
million for the three months ended June 30, 1996. This decrease in interest
expense was due to lower borrowings in connection with the debt reduction from
the proceeds of the September 3, 1996, initial public offering.
Income Tax Provision. Income tax expense for the three months ended June 30,
1997, was $1.7 million, an increase of $0.5 million or 49.1%, compared to $1.1
million for the three months ended June 30, 1996, and represented an effective
tax rate of 39.1% and 39.6%, respectively.
Net Income. Income for the three months ended June 30, 1997, was $2.6
million, an increase of $0.9 million or 52.2%, compared to $1.7 million for
the three months ended June 30, 1996. This increase was attributable to the
increased sales volume and lower interest expense.
Net Income Per Share. Net income per share for the three months ended June
30, 1997, was $0.29, an increase of $0.01 per share or 3.6% compared to the
$0.28 per share for the three months ended June 30, 1996. This increase was
attributable to the increased sales volume and lower interest expense.
Pro Forma Net Income Per Share. Net income per share for the three months
ended June 30, 1997, was $0.29, an increase of $0.04 per share or 16.0%
compared to the pro forma net income per share of $0.25 for the three months
ended June 30, 1996. The pro forma net income is presented as if the issuance
of shares of common stock pursuant to the initial public offering and the
application of the net proceeds thereof had occurred on January 1, 1996.
SIX MONTHS ENDED JUNE 30, 1997, COMPARED TO SIX MONTHS ENDED JUNE 30, 1996.
Net Sales. Net sales for the six months ended June 30, 1997, were $74.3
million, an increase of $4.6 million or 6.6% compared to $69.6 million for the
six months ended June 30, 1996. The increase in net sales was attributable to
a significant increase in volume of material handlers and service parts sales.
Gross Profit. Gross profit for the six months ended June 30, 1997, amounted
to $17.9 million, an increase of $1.9 million or 11.9% compared to $16.0
million for the six months ended June 30, 1996. Gross profit as a percentage
of net sales increased to 24.1% for the six months ended June 30, 1997, from
23.0% for the six months ended June 30, 1996, primarily due to improved
production efficiencies and a more profitable sales mix within each product
line.
Engineering. Engineering expense for the six months ended June 30, 1997, was
$1.9 million, an increase of $0.3 million or 19.6% compared to $1.6 million
for the six months ended June 30, 1996. This increase was due to the addition
of engineering personnel to support new product development.
RESULTS OF OPERATIONS (CONTINUED)
Selling and Marketing. Selling and marketing expenses for the six months
ended June 30, 1997, were $3.5 million, an increase of $0.2 million or 4.6%
compared to $3.4 million for the six months ended June 30, 1996. This
increase was primarily attributable the addition of marketing personnel to
support the increased sales volume.
Administrative. Administrative expenses for the six months ended June 30,
1997, were $3.1 million, an increase of $0.6 million or 21.8% compared to $2.5
million for the six months ended June 30, 1996. This increase was primarily
attributable to wage and benefits and extra security during the three-week
work stoppage in March and April.
Interest Expense. Interest expense for the six months ended June 30, 1997,
was $0.4 million, a decrease of $1.6 million or 79.8% compared to $2.1 million
for the six months ended June 30, 1996. This decrease in interest expense was
due to lower borrowings in connection with the debt reduction from the
proceeds of the September 3, 1996, initial public offering.
Income Tax Provision. Income tax expense for the six months ended June 30,
1997, was $3.4 million, an increase of $1.1 million or 47.9% compared to $2.3
million for the six months ended June 30, 1996, and represented an effective
tax rate of 39.1% and 39.2%, respectively.
Net Income. Income for the six months ended June 30, 1997, was $5.2 million,
an increase of $1.7 million or 48.4% compared to $3.5 million for the six
months ended June 30, 1996. This increase was attributed to the increased
sales volume and lower interest expense.
Net Income Per Share. Net income per share for the six months ended June 30,
1997, was $0.59, the same as for the six months ended June 30, 1996. The
higher sales and lower interest expense in 1997 were offset by a lower number
of shares outstanding in 1996.
Pro Forma Net Income Per Share. Net income per share for the six months ended
June 30, 1997, was $0.59, an increase of $0.08 per share, or 15.7% compared to
the pro forma net income per share of $0.51 for the six months ended June 30,
1996. The pro forma income is presented as if the issuance of shares of
common stock pursuant to the initial public offering and the application of
the net proceeds thereof had occurred on January 1, 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company generated net cash from operating activities of $2.1 million
during the first six months of 1997. Net cash from operating activities
resulted from $5.2 million from net income, $1.0 million from depreciation and
$0.3 million from post retirement benefit net of deferred taxes. The sum of
these operating activities prior to changes in working capital totaled $6.5
million which was offset by $4.5 million of net cash used by changes in
operating assets and liabilities, primarily due to an increase in accounts
receivable to support the revenue growth and reduction in accounts payable and
accrued expenses primarily for payment of taxes and settlement of prior year
litigation.
For the first six months of 1997, net cash invested in purchases of new
equipment and permanent tooling was $1.5 million. Management expects to
continue their multi-year capital investment program to increase production
productivity and product output at the New Philadelphia facility.
For the first six months of 1997, net borrowings under the Company's lines of
credit increased as a means of funding cash requirements for operating
activities and new equipment purchases and as a result of an increase in lock
box cash receipts for the last day of the month not yet deducted from lines of
credit.
A substantial amount of the Company's working capital is invested in accounts
receivable and inventories. The Company periodically reviews accounts
receivable for noncollectibility and inventories for obsolescence and
establishes allowances it believes are appropriate.
As of June 30, 1997, the Company has borrowed $8.4 million of its $25 million
bank revolving credit facility which is secured by most of the assets of the
Company. Interest is calculated, at the Company's option, at LIBOR plus 1.0%
or a commercial bank's base rate less 0.5% and requires a commitment fee of
0.25% per annum on the unused portion of the revolving credit commitment. At
June 30, 1997, $16.6 million was available for future borrowings under the
revolver and the Company was in compliance with all financial covenants.
The Company believes that cash flows from operations and funds available under
its revolving credit facility will be adequate to fund its working capital and
capital expenditure requirements for the foreseeable future.
NEW ACCOUNTING STANDARDS
In February, 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard No. 128, "Earnings per Share," which is
effective for financial statements issued for periods after December 15, 1997.
This Statement simplifies the standards for computing earnings per share
("EPS") and makes them comparable to international EPS standards. The Company
will adopt the provisions of SFAS for its fiscal year ending December 31,
1997, but does not expect such adoption to have a material impact on EPS.
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibits: None
b) Reports on Form 8-K filed for the three months ended June 30, 1997:
None
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Gradall Industries, Inc.
Date: August 11, 1997 By: /s/ Barry L. Phillips
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Barry L. Phillips
President and Chief Executive
Officer
Date: August 11, 1997 By: /s/ Bruce A. Jonker
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Bruce A. Jonker
Chief Financial Officer