SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
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 No. 001-12049
GRADALL INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3381606
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
406 MILL AVENUE S.W., NEW PHILADELPHIA, OHIO 44663
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (330) 339-2211
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $.001 PAR VALUE
(Title of Class)
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
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The aggregate market value of the voting stock held by non-affiliates of
the registrant as of February 26, 1999 was $90,684,360.
The number of shares outstanding of registrant's common stock, par value
.001 per share, as of February 26, 1999 was 9,515,460.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Shareholders for the fiscal
year ended December 31, 1998, are incorporated by reference into Part II of this
Form 10-K.
Portions of the registrant's Proxy Statement to be filed pursuant to
Regulation 14A with respect to the 1999 Annual Meeting of Shareholders are
incorporated by reference into Part III of this Form 10-K.
The Exhibit index appears on sequential page 28.
PART I
------
Item 1. BUSINESS
THE COMPANY
Gradall Industries, Inc. (the "Company") was incorporated in Delaware
in 1985. The Company's principal offices are located at 406 Mill Avenue S.W.,
New Philadelphia, Ohio 44663, and its telephone number is (330) 339-2211.
Unless the context otherwise requires, the "Company" or "Gradall" refers to
Gradall Industries, Inc. and its wholly-owned subsidiaries, The Gradall Company
and The Gradall Orrville Company.
Gradall is a leading manufacturer of hydraulic excavators and rough-terrain
variable reach material handlers as well as related service parts. The
Company's products are marketed under the widely respected Gradall tradename and
are distinguished by their telescopic boom technology, versatility, productivity
and reliability. Gradall's telescopic booms, which are manufactured from
high-strength specialty steel, are unique both in their shape and engineering
design, which provide added strength with minimal weight, and, in the case of
excavators, their ability to rotate a full 360 degrees. Gradall products serve
niche markets within the construction equipment industry and typically command
premium prices. In 1998, total sales were $182.6 million, comprised of $54.6
million in sales of excavators, $110.2 million in sales of material handlers and
$17.9 million in sales of service parts. Excavator shipments were down $2.8
million or 4.9% in 1998 compared to 1997. The abundance of low price crawler
excavators entering the U.S. from Asia contributed to reduced crawler excavator
sales. Material handler sales were up $26.2 million or 31.2% in 1998 compared
to 1997. The introduction of the new D-series family of material handlers plus
strong market demand were key factors for higher material handler sales.
Service parts sales in 1998 were up $0.6 million from 1997. Since January 1994,
the Company has introduced 12 new products which accounted for in excess of 85%
of Gradall's unit sales in 1998.
Gradall excavators are typically used by general contractors and government
agencies for ditching, sloping, finish grading, general maintenance and
infrastructure projects. The Company's excavators are sold through
approximately 46 independent distributors at approximately 168 locations
throughout North America. The introduction and ongoing development of the
Company's XL Series excavators featuring the unique Gradall rotating, telescopic
booms with high-pressure hydraulics have allowed the Company to continue to
dominate its traditional niche market of wheeled, telescopic boom excavators and
to begin to compete in the larger market of conventional crawler excavators, a
market historically dominated by knuckle-boom technology.
Gradall rough-terrain variable reach material handlers are typically used
by residential, non-residential and institutional building contractors for
lifting, transporting and placing a wide variety of materials at their point of
use or storage. The Company's material handlers are sold through approximately
40 independent distributors at approximately 169 locations throughout North
America. In addition, Gradall material handlers are available at national
rental companies at over 490 locations. The Company continues to introduce new
material handlers with Gradall's unique 90 rear-pivot steering, hydrostatic
drive and low profile design which provide an exceptional combination of
maneuverability, versatility and stability. This new product development has
allowed the Company to remain competitive in the rapidly growing rough-terrain
variable reach material handler market.
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Gradall's strategy is to design and produce high quality hydraulic
excavators and material handlers for niche markets while simultaneously reducing
manufacturing costs and increasing production efficiencies. Gradall's ability
to design and customize each of its product lines to fit the specifications of
its customers augments the uniqueness of the Company's products. In 1995, the
Company commenced a multi-year program designed to expand plant capacity and
reduce production costs by increasing labor efficiency and equipment
productivity and improving quality. The Company invested $4.2 million in 1995,
$2.2 million in 1996, $5.3 million in 1997, and $13.3 million in 1998. During
1999 the Company plans to invest approximately $10.5 million for additional
capital improvements under this program. Management believes that these
strategies have enabled the Company to increase substantially its profitability
in recent years.
In addition, during 1998 the Board of Directors approved in principle a
multi-year capacity expansion program (the "Capacity Expansion Program") which
is intended to increase manufacturing capacity in excess of 50% over the next
three to five years. The Capacity Expansion Program will require a $30 to $50
million investment over this time frame. As part of the Capacity Expansion
Program, in October 1998 the Company purchased a 330,000 sq. ft. facility at
Orrville, Ohio to manufacture material handlers and relieve overcrowding at the
New Philadelphia plant. The Company expects operations to begin at the Orrville
facility in April 1999. The acquisition of the Orrville facility and the
purchase of robot welders, machining centers and lasers which total
approximately $8.3 million are the investments in this program through December
31, 1998. The Company may alter or revise the Capacity Expansion Program based
upon changes in market demand and/or economic conditions. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources".
THE INDUSTRY
Gradall competes principally in the construction equipment industry. In
1997, the latest year for which U.S. industry figures have been published, new
orders for construction, mining and material handling equipment exceeded $47
billion. The Company estimates that industry orders for hydraulic excavators
and material handlers exceeded $3 billion, in 1997. The construction equipment
industry is highly competitive and global in scope. The U.S. construction
equipment industry consists of about 700 manufacturers. The demand for
construction equipment is largely driven by general economic conditions.
-3-
Since the beginning of 1994, the construction equipment industry has grown
due to improved general economic conditions, increased public funding for
infrastructure projects and increased demand for rental equipment. The U.S.
Department of Commerce has estimated that more than half of the country's major
highways and one-third of the bridges are in need of some repair. Gradall
management believes that the need for such repairs will continue to benefit the
demand for the Company's products to the extent that funding for such repairs is
available. In addition, construction machinery rentals have increased due to
the need for specific, high-cost equipment for short durations, strong
construction market demand for equipment with broad applications and the lack of
an investment tax credit for purchasers. In particular, the market for material
handlers, which typically are rented by distributors or other rental companies
before being sold in the retail market, has notably increased over the past
several years consistent with the trend towards rental of construction
equipment. Another important element of the current demand for construction
machinery is the replacement of older machines with new and more versatile ones.
The Company believes that the present popularity of machines with multiple
functions, faster work cycles, ease of transport and special attachments, such
as Gradall products, will continue in the future.
Excavators. The total market for hydraulic excavators in North America
grew from approximately 14,500 units in 1994 to over 23,500 units in 1998. The
market growth is due to improved general economic conditions and expanding
applications of hydraulic excavators. Excavators were traditionally used for
earth moving and below-ground applications such as trenching, road construction,
site development, mining and irrigation. The use of excavators has expanded to
include many above-ground applications such as demolition, bridge work,
hazardous waste clean-up, scrap handling and forestry work as well as
applications at industrial sites such as mines and steel mills.
The excavator market may be divided into two product categories consisting
of track-mounted "crawler" excavators (which is further divided into several
size classes) and wheel-mounted "wheeled" excavators, which in recent years have
constituted approximately 97% and 3% of the total market for excavators,
respectively. The conventional crawler excavator market has been traditionally
dominated by knuckle-boom technology. The Company manufactures telescopic boom
crawler excavators in three size classes, 12-14 tons, 19-21 tons and 24-28 tons,
which in 1998 accounted for approximately 8%, 18% and 8% of the total excavator
market, respectively, for a total of approximately 34%. The remainder of the
crawler excavator market is represented by size classes not currently
manufactured by the Company. Based upon industry data, the Company estimates
that its market share of the crawler excavator market that it competes in is
approximately 1%.
Gradall is a leading manufacturer of wheeled telescopic boom excavators.
Based on industry data, the Company estimates that during 1998 its market share
of wheeled excavators exceeded 40% and that its market share of highway speed,
telescopic boom excavators is 85-90%.
Material handlers. The market for rough-terrain variable reach material
handlers has experienced dynamic growth in recent years due to new applications,
increased rental demand and displacement of straight-mast forklifts and small
rough-terrain cranes. The retail market for material handers has grown from
approximately 3,500 units in 1994 to more than 11,000 units in 1998. Material
handlers are typically used for lifting, transporting and placing a wide variety
of materials such as bricks, blocks, lumber, drywall, structural steel and
roofing materials at their point of use or storage. The increased use of new
attachments such as buckets, augers, winches, truss booms, side shifting/fork
positioning carriages and swing carriages has contributed to the development of
new applications of material handlers.
-4-
The rough-terrain variable reach material handler market is divided into
several size classes. The Company manufactures and markets material handlers in
three sizes, 6-7,000 lbs., 8-9,000 lbs. and 10,000 lbs. and over, which in the
aggregate represent over 92% of the total market for material handlers. Based
on industry data, the Company estimates that its market share of rough-terrain
variable reach material handlers in which it competes is approximately 16%.
GROWTH STRATEGY
The Company's growth strategy is to design and produce high quality
hydraulic excavators and material handlers for niche markets while
simultaneously reducing manufacturing costs and increasing production capacity.
Since 1994, the Company has introduced 12 new products, and its sales increased
from $88.8 million in 1994 to $182.6 million in 1998 and operating income
increased from $6.1 million in 1994 to $24.0 million in 1998. The key
components of the Company's strategy are:
Develop unique products. The Company remains committed to devoting
significant resources toward engineering and producing unique excavators and
material handlers. With the development of its XL Series excavators, the
Company introduced new products to the conventional crawler excavator market.
The XL Series excavators are exceptional because they combine the versatility of
the Gradall rotating, telescopic boom with the productivity of high-pressure
hydraulics. Shipments of the XL 2200, the latest XL Series model, which
competes in the 12-14 ton size class, commenced in May 1997, and has been well
received by distributors and customers. In mid-1997 the Company introduced the
XL model, XL2210, which is operated with a remote control device, making it
popular for steel and aluminum metal mill maintenance work as well as hazardous
waste cleanup and other potentially dangerous jobs. Gradall entered the
non-highway speed wheeled excavator market with the introduction of the XL2300
at the BAUMA trade show in Munich, Germany in April 1998. Gradall introduced in
July 1997 a new D Series material handler in the 10,000 lbs. and over size class
which is one of the largest material handlers in the industry. In January 1998,
the Company introduced seven new D Series models, completing the D Series
family. The eight new D Series models provide state of the industry operator
protection, new instrumentation, wider seating and excellent visibility in all
directions. The machines are designed for easy operation, shortening the
operator training process and encouraging faster, more efficient work with
advantages like no-shift transmissions. The Company's product development
engineers are currently designing additional new excavators and material
handlers which Gradall plans to market in the near future.
Target niche markets. The Company is working to continue its leading
position in its traditional niche market of highway speed, telescopic boom
excavators and to gain a strong position in several niche markets in the rough
terrain and conventional crawler market. Prior to 1993, the Company focused on
the wheeled excavator market which represents approximately 3% of the total
excavator market. Although this niche market accounts for a small portion of
the overall excavator market, it is an increasing market that generates
consistent profit margins. With the introduction of the XL Series excavators in
1993, the Company began to compete in several size classes of the conventional
crawler excavator market which in the aggregate currently represent
approximately 34% of the excavator market. Gradall believes that it is
well-positioned to take advantage of the niches in the crawler excavator market
which demand premium full-featured products. In the material handler market,
the Company focuses on the segment which demands a reliable, premium product
that offers a high level of versatility and maneuverability. The Company
believes it is well-positioned to compete in this dynamically growing market.
-5-
Improve manufacturing processes. An important element of Gradall's growth
strategy is to expand profit margins through improved manufacturing processes.
In 1995, the Company commenced a multi-year program designed to expand plant
capacity and reduce production costs by increasing labor efficiency and
equipment productivity and improving quality. The Company invested $4.2 million
in 1995, $2.2 million in 1996, $5.3 million in 1997, and $13.3 million in 1998.
During 1999 the Company plans to invest approximately $10.5 million for
additional capital improvements under this program. Thus far, capital
improvements have included robotic welding systems, laser cutting machines,
paint systems and direct computer-controlled equipment designed for cellular
production. Planned expenditures will include additional robotic welding
systems, laser cutting machines, and an additional machining center. Management
believes that these strategies have enabled the Company to increase
substantially its profitability in recent years.
In addition, during 1998 the Board of Directors approved in principle a
multi-year capacity expansion program (the "Capacity Expansion Program") which
is intended to increase manufacturing capacity in excess of 50% over the next
three to five years. The Capacity Expansion Program will require a $30 to $50
million investment over this time frame As part of the Capacity Expansion
Program, in October 1998 the Company purchased a 330,000 sq. ft. facility at
Orrville, Ohio to manufacture material handlers and relieve overcrowding at the
New Philadelphia plant. The Company expects operations to begin at the Orrville
facility in April 1999. The acquisition of the Orrville facility and the
purchase of robot welders, machining centers and lasers which total
approximately $8.3 million are the investments in this program through December
31, 1998. The Company may alter or revise the Capacity Expansion Program based
upon changes in market demand and/or economic conditions. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources".
Gradall has also adopted programs designed to reward its employees for
improvements in overall productivity and profitability. In addition, the
Company has implemented aggressive quality programs in the areas of statistical
process control and quality assurance. Gradall believes its recent and planned
investments in automation and technology, material control, productivity
incentives and quality programs should improve its manufacturing processes and
benefit profit margins in the future.
Emphasize quality. Gradall has adopted a "continuous improvement" strategy
for every facet of its operation. The Company has carried the continuous
improvement concept beyond the scope of the traditional quality definition to
include product development and employee training and development. This
strategy has led to significant reductions in the Company's total cost of
quality (defined as warranty, rework and scrap expenses), which declined from
2.2% of sales in 1994 to 1.2% in 1998. The Company has implemented statistical
process controls, a monitored product quality review program and a formal
supplier quality assurance program.
-6-
Increase distributor support. The Company believes that its distribution
network is among the strongest in the industry and a core strength for its
future growth. The Company plans to further enhance its distribution network by
continuing to produce unique new products, provide marketing and sales support
through its regional sales managers, and provide technical and service support
through its district service managers.
Expand service parts business. Management has focused on expanding the
Company's service parts business to increase revenues and profits by taking
advantage of the growth in the working population of Gradall excavators and
material handlers. As a part of this focus, the Company offers the Gradall On
Line Distributor ("GOLD") computer system which links the Company and its
distributors to facilitate communications regarding orders, availability and
other information involving Gradall service parts. In 1998 the Company invested
significant resources toward the development of a digital database on CD-ROM for
all technical publications including operator, service, parts and maintenance
manuals. The system named Gradall Plus will be introduced to the distribution
network during the first quarter of 1999. Service parts sales and marketing
activities are supported by eight district product support managers who are
dispersed geographically throughout the U.S.
Pursue joint venture, international business opportunities and strategic
alliances. Although substantially all of the Company's business has been
focused in North American, the Company believes its increased product
development efforts should enable the Company to take advantage of international
opportunities, including emerging markets in Russia, Latin America, Turkey,
China and the Pacific Rim. The Company obtained its ISO 9001 certification in
January 1999, which will assist the international marketing of its products.
The Company believes there is opportunity to participate in the current trend of
consolidation in the construction equipment industry.
-7-
PRODUCTS AND MARKETS
The Company engineers, manufactures and markets premium hydraulic
excavators and material handlers which incorporate Gradall's unique design
features. In addition, the Company manufactures and markets service parts for
its excavators and material handlers. Since January 1994, the Company has
introduced 12 new products which accounted for more than 85% of total unit sales
in 1998.
REVENUE BY PRODUCT CATEGORY
YEAR ENDED DECEMBER 31,
1994(1) 1995(1) 1996 1997 1998(2)
-------- -------- ------ ------ --------
(DOLLARS IN MILLIONS)
Excavators. . . . . . $ 45.2 $ 49.2 $ 55.1 $ 57.4 $ 54.6
Material handlers . . 30.7 53.6 70.4 84.0 110.2
Service parts . . . . 12.9 15.6 15.4 17.3 17.9
-------- -------- ------ ------ --------
Total . . . . . . . . $ 88.8 $ 118.4 $140.9 $158.7 $ 182.6
======== ======== ====== ====== ========
<FN>
_______________
(1) Material handlers and service parts include revenues from a product line
which was discontinued in 1995.
(2) The sum in this column may not equal the indicated total due to rounding.
Excavators
All Gradall excavators are distinguished by their rotating telescopic boom
technology, versatility, productivity and reliability. Gradall excavators are
typically used for ditching, sloping, finished grading and general maintenance
which often require precise boom and bucket movements which conventional
knuckle-boom excavators cannot provide. Gradall excavators are also used at
various construction sites with restricted overhead clearance areas or other
operating requirements where it would be difficult for conventional knuckle-boom
excavators to operate. Gradall's highway speed excavators are particularly
useful to customers who require their equipment to be at multiple locations
within short periods of time. Gradall excavators compete in the wheeled
excavator category and three size classes in the crawler excavator category.
A brief description of Gradall excavator models is as follows:
G3WD Series E. This model is a single-engine highway speed excavator
purchased primarily by state and local government agencies. The mobility and
versatility of this product are its primary market strengths since it enables
the user to do the work of three machines - an excavator, grader and wheeled
loader. The Company's ability to customize this product to meet the
specifications required by government agency bid contracts gives it a particular
competitive advantage.
XL Series. The Company formally introduced the XL Series in March 1993 to
enhance its competitive position in the larger market segment of conventional
crawler excavators. The XL Series products compete in the 12-14 ton, 19-21 ton
and 24-28 ton size classes which in the aggregate constitute approximately 34%
of the total excavator market. The XL Series products combine the versatility of
the Gradall telescopic boom technology with the performance of high-pressure
hydraulics. The XL Series products have more than twice the productivity and
efficiency of the Gradall models they replaced.
-8-
XL2000 Series. Shipments of the new crawler model XL2200 commenced in May
1997, and it competes in the 12-14 ton class which represents approximately 8%
of the total excavator market. This model is designed to meet the needs of
residential and general contractors. In August 1997 the Company commenced
shipments of a remote controlled crawler model XL2210, which is a special
industrial version for use in mines and steel mills. During 1998 the Company
introduced a rough-terrain wheeled version of the XL2000 series.
XL4000 Series. This model competes in the 19-21 ton class which represents
approximately 18% of the total excavator market. The XL4000 Series is available
in both wheeled and crawler versions. This model is widely used by
municipalities and general contractors.
XL5000 Series. This model competes in the 24-28 ton class traditionally
dominated by conventional crawler knuckle-boom excavators. This class accounts
for approximately 8% of the total excavator market. The XL5000 Series is the
largest high-pressure hydraulic excavator manufactured by the Company and is
available in both wheeled and crawler versions. It is well accepted among
infrastructure and highway contractors.
In addition to the above-mentioned models which are primarily used in
construction applications, the Company offers excavators in both wheeled and
crawler versions which are used in industrial applications such as mines and
steel mills, respectively. Certain specialized Gradall crawler models are the
accepted standard in the steel industry for cleaning furnaces and ladles and for
other steel mill applications. Gradall excavators have also been specially
designed for mine scaling applications at limestone and salt mines.
The primary features of Gradall excavators are:
Telescopic boom. The rotating, telescopic boom is well known for its
versatility and strength. The unique design is excellent for production work
such as trenching and earth moving as well as precision work including finished
grading and clean-up.
Wheeled carriers. The Company's highway speed, wheeled carriers are
designed and manufactured by Gradall to meet the needs for a reliable and
durable carrier. They are offered in two, four or six-wheel drive
configurations.
Remote control, single cab operation. All Gradall highway speed wheeled
excavators are designed with two cabs-one for the operation of the carrier
and the other for the operation of the excavator. They are engineered so that
one operator can control the carrier by remote control from the excavator cab.
This allows for greater versatility and adds significantly to the productivity
of the machine.
-9-
Crawler undercarriages. Gradall crawler undercarriages are specifically
designed and manufactured by the Company to provide the speed, increased
productivity and stability requirements of XL Series excavators.
Options/attachments. In addition to a variety of standard features,
Gradall also offers specialized options as requested by customers including air
conditioning, work lights, vandal covers and special end of the boom auxiliary
hydraulics. In 1996 Gradall introduced the "telestick" boom attachment which
extends the reach of the XL4000 and XL5000 Series excavators approximately 50%
to 45'5" and 50'9", respectively.
Material Handlers
All Gradall material handlers are renowned for their maneuverability,
versatility and dependability. Gradall material handlers are typically used for
lifting, transporting and placing a variety of materials such as bricks, blocks,
lumber, drywall, structural steel and roofing materials at their point of use or
storage. The Company manufactures five basic models of material handlers in
three size classes.
A brief description of Gradall material handler models is as follows:
522/524D. The 522/524D was introduced in January 1998 and competes in the
6-7,000 lbs. class which represents approximately 47% of the total material
handler market. It is available in both two-section and three-section booms
which provide a maximum lift height of 24' and 32', respectively. This model is
very cost efficient and is ideally suited for less demanding applications.
534D-6. The 534D-6 was introduced in January 1998 and is the most popular
Gradall material handler. It also competes in the 6-7,000 lbs. class and has two
maximum lift heights, a standard 36' or an optional 42'. This model has been
very well accepted by mason and roofing contractors and by the rental industry.
534D-9. The 534D-9 was introduced in January 1998 and competes in the
8-9,000 lbs. class which represents approximately 33% of the market and has a
maximum lift height of 40'. This model has a strong appeal to framing and
general contractors.
534D-10. The 534D-10 was introduced in January, 1998, and competes in the
10,000 lbs. and over class which represents approximately 12% of the market. It
has a maximum lift height of 40' and is ideally suited for operations requiring
heavy lifting. This model has stabilizers as standard equipment to increase its
overall capacity at full reach.
544D. The 544D was introduced in July 1997 and also competes in the 10,000
lbs. and over class. It is one of the industry's largest material handlers and
has a maximum lift height of 55'. This model permits working on buildings as
high as six stories and also includes stabilizers as standard equipment.
-10-
The primary features of Gradall material handlers are:
90 degree rear-pivot steering. This is the key feature of a Gradall
material handler which provides excellent maneuverability by allowing the
machines to turn within a tight radius. The design keeps the forks and the load
inside the turning radius while providing the ability to maneuver the vehicle in
tight areas.
Strong and versatile boom. Gradall material handlers feature one of the
industry's strongest booms. The Gradall boom is capable of handling a variety of
attachments which leads to a high degree of versatility. In addition, Gradall
has a proprietary design to facilitate changing the attachments called
QuickSwitch.
Low profile. A significant advantage of the Gradall material handler is its
low overall height. The vehicle can move under doorways as low as eight feet
while providing excellent ground clearance.
Hydrostatic drive. Hydrostatic drive provides the benefits of easier,
no-shift operations, inching capability, quick accelerations and a smooth, even
ride.
Stability. Gradall material handlers operate with the industry's longest
wheelbase and shortest overall length which increase their capacity and
stability. The mid-mounted engine within the frame provides uniform weight
distribution and improved visibility.
Service Parts
In addition to engineering, manufacturing and marketing hydraulic
excavators and material handlers, the Company produces and sells related service
parts. This is an important source of revenue and profitability for the Company.
Since the Company's products are kept operational for years with parts and
service support, each Gradall product that enters the market provides the
Company with a potential long-term revenue source. Sales of service parts
typically generate high gross margins and historically have been less sensitive
to industry cycles.
In order to increase sales of service parts in a very competitive market,
the Company focuses on parts availability, marketing and sales activities. As an
element of this focus, the Company offers the Gradall On Line Distributor
("GOLD") computer system which links the Company and its distributors to
facilitate communications regarding orders, availability and other information
involving Gradall service parts. The Company emphasizes the importance of
stocking and marketing service parts and has developed a delivery system to
provide quick shipment of emergency and unit down parts. The Company provides
same day shipment on unit down orders and promotes distributor incentives for
stock orders. In 1998 the Company invested significant resources toward the
development of a digital database on CD-ROM for all technical publications
including operator, service, parts and maintenance manuals. The system named
Gradall Plus will be introduced to the distribution network during the first
quarter of 1999.
-11-
Specialized Machines
Gradall has the ability to modify its products to suit the specific needs
of its customers. This ability to produce specialized machines is a part of
Gradall's overall strategy to serve specialty, higher margin markets within the
construction equipment industry. Approximately 35% of all Gradall excavators are
modified from standard models to meet customer requirements with add-on and/or
special attachments. Gradall is able to design and produce specialized machines
while meeting the delivery schedule of its customers. Some of the specialized
machines developed by the Company are now being marketed as standard models; for
example, special excavators created for mine scaling, steel mills and other
special industrial applications have become Gradall standard models.
MARKETING & DISTRIBUTION
The Company primarily markets and distributes its products through a
network of independent distributors and rental companies who, in turn, sell or
rent the products to end-users. The Company also sells directly through its own
marketing staff to certain major accounts as well as to customers located
outside the United States.
The Company has agreements with its distributors under which the
distributors purchase products from the Company at agreed-upon prices for resale
within the distributor's territory. Although the Company's distributors are not
required to purchase any minimum number of products, they are required to
maintain agreed-upon inventory levels. Either party may terminate the
distributor agreement upon the occurrence of certain events, including
bankruptcy or breach, or in the event either party is dissatisfied with the
other party's performance, upon thirty days notice after a sixty day dispute
resolution procedure. In addition to the Company's products, distributors
typically sell construction equipment manufactured by third parties, including
competitors of the Company.
Gradall excavators are primarily used by general contractors and government
agencies. Gradall material handlers are customarily used by residential,
non-residential and institutional building contractors. Since these are distinct
user bases, the Company markets excavators and material handlers and their
related service parts through two separate distribution networks. The Company's
excavator distribution network is comprised of approximately 46 independent
distributors at approximately 168 locations in North America. The Company's
material handler distribution network is composed of approximately 40
independent distributors at approxi-mately 169 locations. In addition, Gradall
material handlers are available at national rental companies at over 490
locations. Hertz Equipment Rental Corporation, a national rental company,
purchased material handlers which accounted for more than 10% of the Company's
total sales in 1998. No other distributor or rental company accounted for more
that 10% of the Company's total sales in 1998.
The Company believes that its ongoing distributor support and training
programs help enhance the competitiveness and increase the strength of its
distribution network. The Company supports the sales, service and rental
activities of its distributors with product advertising, sales literature,
product training and major trade show participation. The independent
distribution network is serviced by the Company's five regional sales managers
for excavators and six regional sales managers and three national account
managers for material handlers. Each regional sales manager is also responsible
for developing new distributors within his region.
-12-
The Company provides its distributors with product financing through
agreements with third party financing companies. Such financings include a
Wholesale Floor Plan for distributors and a Retail Finance Plan for end-users,
each with reduced interest rates subsidized by the Company, and a Rental Plan
for distributors.
The Company provides parts and service support for its products through the
field product support organization consisting of eight product support district
managers located throughout the United States. The primary responsibility of
the district managers is to provide service training and technical support to
the distribution network. Additionally, they are responsible for after-market
parts sales and act as liaisons among customers, distributors, and the Company
on all product support related matters. This group is supported by an internal
product support team that provides service training, technical publications, and
parts marketing initiatives.
MANUFACTURING
The Company fabricates, welds, machines and assembles the chassis,
telescopic booms, attachments and many component parts for its excavators and
material handlers. The goals of the Company's manufacturing operation are
quality, efficiency, productivity, cost control and on-time delivery. The
Company strives to increase its manufacturing capacity, productivity and quality
through automation and technology, material control, productivity incentives for
employees and quality programs.
Automation and technology. In 1995, the Company commenced a multi-year
program designed to expand plant capacity and reduce production costs by
increasing labor efficiency and equipment productivity and improving quality.
The Company invested $4.2 million in 1995, $2.2 million in 1996, $5.3 million in
1997, and $13.3 million in 1998. During 1999 the Company plans to invest
approximately $10.5 million for additional capital improvements under this
program. Thus far, capital improvements have included robotic welding systems,
laser cutting machines, paint systems and direct computer-controlled equipment
designed for cellular production. Planned expenditures will include additional
robotic welding systems, laser cutting machines, and an additional machining
center. Management believes that these strategies have enabled the Company to
increase substantially its profitability in recent years.
In addition, during 1998 the Board of Directors approved in principle the
Capacity Expansion Program which is intended to increase manufacturing capacity
in excess of 50% over the next three to five years. The Capacity Expansion
Program will require a $30 to $50 million investment over this time frame. As
part of the Capacity Expansion Program, in October 1998 the Company purchased a
330,000 sq. ft. facility at Orrville, Ohio to manufacture material handlers and
relieve overcrowding at the New Philadelphia plant. The Company expects
operations to begin at the Orrville facility in April 1999. The acquisition of
the Orrville facility and the purchase of robot welders, machining centers and
lasers which total approximately $8.3 million are the investments in this
program through December 31, 1998. The Company may alter or revise the Capacity
Expansion Program based upon changes in market demand and/or economic
conditions. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Liquidity and Capital Resources". Gradall believes that
the recently completed capital improvements, which have reduced production
costs, expanded plant capacity and improved quality, and planned capital
improvements, should benefit profit margins in the future.
-13-
Material control. The Company has instituted and continues to institute
material control improvements. These improvements include just-in-time inventory
management, the relocation of certain inventory to the shop floor to support
cell manufacturing, set-up reduction programs and the reduction and control of
obsolete and surplus inventory.
Productivity incentives. The Company operates a productivity sharing plan
for its unionized, hourly employees called Gainsharing. Gainsharing is a group
incentive program that is calculated from a Company-wide measure of
productivity. The productivity of the plant is measured against a base period.
Each employee receives a Gainshare bonus based upon the percentage increase in
productivity. The Company has an active labor management cooperative committee
which is supported by employee positive action teams. These teams implement
changes in the manufacturing processes which improve quality and productivity,
which in turn support the Gainsharing program.
Quality programs. The Company has implemented comprehensive quality
programs, including the following:
Statistical process control. The Company maintains control charts in
machining, welding and assembly as well as a pre-shipment quality audit program
on finished machines. The Company plans to continue expanding the use of
statistical process control charts.
Quality feedback/warranty reduction. Gradall reviews critical quality
issues on an ongoing basis and initiates corrective actions. A computerized
warranty system captures early warning reports from field service managers as
well as details of warranty claims which provide additional input to the quality
feedback program.
Supplier quality assurance. The Company monitors supplier quality through a
computer system which records and tracks reports on defective material allowing
the Company to execute corrective action measures.
Gradall's commitment to automation and technology, material control,
productivity incentives for employees and quality programs have improved the
capacity, productivity and quality of the Company's manufacturing operations.
From 1994 to 1998, the Company increased its unit production by 157% with only a
31% increase in its workforce. The Company's total cost of quality (defined as
warranty, rework and scrap expenses) declined from 2.2% in 1994 to 1.2% of sales
in 1998.
-14-
ENGINEERING AND DESIGN
Gradall believes that its engineering and design capabilities are among the
Company's major strengths. The engineering and design functions are closely
integrated with the Company's manufacturing and marketing activities. This
allows the Company to integrate new production technology with specific needs of
customers, resulting in expanded market opportunities and increased
profitability for the Company. In 1998, approximately 35% of Gradall excavators
were modified from standard models to meet customer requirements with add-on
and/or special attachments.
The Company's manufacturing engineers are involved in both product design
and implementation of capital improvements in order to maximize manufacturing
processes and efficiencies. In addition, the implementation of "concurrent
engineering," in which personnel from engineering, manufacturing, materials
procurement and marketing are simultaneously engaged in new product development
programs, has led to faster new product development time, reduced costs and
improved quality.
Gradall has made significant investments in its engineering systems, which
currently includes a computer-aided design (CAD) system with finite element
analysis (FEA) and three-dimensional solids design capabilities. This system
has greatly expanded Gradall's design capabilities and has significantly reduced
the time required for engineering and design functions.
COMPETITION
The markets in which the Company operates are highly competitive. The
Company faces competition in each of its product lines from a number of
different manufacturers, some of which have greater financial and other
resources than the Company. The principal competitive factors affecting the
markets for the Company's products include performance, functionality, price,
brand recognition, customer service and support, and product availability.
The excavator market may be divided into two product categories -
track-mounted "crawler" excavators (which is further divided into several size
classes) and wheel-mounted "wheeled" excavators. In recent years, crawler
excavators have constituted approximately 97% of the total market for excavators
and wheeled excavators have accounted for 3%. The conventional crawler
excavator market has been traditionally dominated by knuckle-boom technology.
The leading producers of conventional crawler excavators are Caterpillar Inc.,
Deere & Co., Hitachi Corporation and Komatsu, Ltd. The Company manufactures
telescopic boom crawler excavators in three size classes, 12-14 tons, 19-21 tons
and 24-28 tons, which in 1998 accounted for approximately 8%, 18% and 8% of the
total excavator market, respectively, for a total of approximately 34% of the
total excavator market. Gradall's XL Series excavators are designed to appeal
to niche markets in these size classes which require the versatility of the
Gradall telescopic boom technology with the performance of high-pressure
hydraulics. The remainder of the crawler excavator market is represented by
size classes not currently manufactured by the Company. Based upon industry
data, the Company estimates that its market share of the crawler excavator
market that it competes in is approximately 1%.
-15-
Gradall is a leading manufacturer of wheeled telescopic boom excavators.
Based on industry data, the Company estimates that its market share of all
wheeled excavators exceeded 40% and that its market share of highway speed,
telescopic boom excavators is 85-90%. The Company has only one competitor in
the highway speed, telescopic boom excavator market.
The rough-terrain variable reach material handler market is divided into
several size classes. The Company manufactures material handlers in three size
classes, 6-7,000 lbs., 8-9,000 lbs. and 10,000 lbs. and over, which in the
aggregate represent over 92% of the total market for material handlers. Based
on industry data, the Company estimates that its market share of all material
handlers in which it competes is approximately 16%. Other than Gradall, the
principal producers of variable reach material handlers are Caterpillar, Inc.,
Gehl, JCB International Co., Ltd., and Omniquip International
BACKLOG
As of December 31, 1998, the Company's backlog of orders aggregated
approximately $13.6 million compared to approximately $11.3 million at December
31, 1997 and approximately $14.8 million at December 31, 1996. The increase in
backlog of orders at December 31, 1998 was due primarily to orders for the new
excavator model XL2300 which were not in the prior year backlog. Substantially
all backlog orders at December 31, 1998 are expected to be shipped by April 30,
1999.
EMPLOYEES
As of December 31, 1998, Gradall employed 711 people, 469 hourly and 242
salaried. The Company's 469 hourly employees are represented by the
International Association of Machinists and Aerospace Workers (IAM) and are
currently working under a three-year contract which will expire on April 16,
2000. The Company's current contract with the IAM was approved after a
three-week work stoppage which occurred when the union failed to ratify a
proposed new three-year contract. During the three-week work stoppage the
Company was able to continue production and shipment, although at a reduced
level. There can be no assurance that the Company will be able to negotiate
satisfactory contracts with the union in the future or that the Company's union
employees will not participate in any work stoppage which could have a material
adverse effect on the operations of the Company.
SEASONAL TRENDS
Generally, the Company's sales are not subject to significant seasonal
variations; however, its sales and earnings tend to be somewhat lower in January
and February due to adverse weather conditions in the Northern climates.
ENVIRONMENTAL REGULATION
The Company is subject to various federal, state and local environmental
laws and regulations, including those governing discharges into the air and
water, as well as the handling and disposal of solid and hazardous wastes.
Pursuant to these laws and regulations, the Company may be required from time to
time to remediate environmental contamination associated with releases of
hazardous substances. The Company has made and will continue to make capital
and other expenditures to comply with such environmental laws and regulations.
Such expenditures are not presently material and the Company currently
anticipates that such expenditures will not be material in the future.
-16-
Item 2. PROPERTIES
The Company currently operates from a single facility, which it owns. The
facility is located in New Philadelphia, Ohio and contains 429,320 square feet
on a 66 acre site and accommodates the Company's corporate offices,
manufacturing operations and warehouse. In October 1998 the Company acquired a
second facility located in Orrville, Ohio which contains 330,000 square feet on
a 59 acre site. This facility will accommodate offices, manufacturing operations
and warehouse. The Company expects operations to begin at the Orrville facility
in April 1999.
Item 3. LEGAL PROCEEDINGS
Due to the nature of its products, the Company may be subject to
significant claims for product liability. The Company is a party to various
lawsuits seeking damages for alleged product liability arising from the use of
its products. The Company currently maintains product liability insurance with
an annual aggregate limit of $11 million subject to a self-insurance retention
in the amount of $175,000 per claim. There can be no assurance that the
proceeds available under the Company's insurance policy would be adequate to
cover potential product liability claims. A successful claim against the
Company in excess of the Company's insurance coverage, or multiple successful
claims against the Company within the self insurance retention amount, could
have a material adverse effect on the financial results of the Company.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Executive officers of the Company as of February 26, 1999 were as follows:
Name Age Position
- - ------------------ --- -----------------------------------------------------
Barry L. Phillips 57 President - CEO
David S. Williams 58 Vice President , Marketing and Sales
Joseph H. Keller 52 Vice President, Engineering and Secretary
James C. Cahill 46 Vice President, Manufacturing
Bruce A. Jonker 56 Vice President, Chief Financial Officer and Treasurer
-17-
Mr. Phillips has served as President and Chief Executive Officer of the
Company since 1995 and has served as President of The Gradall Company since
1985. Prior to 1985, Mr. Phillips spent 26 years with International Harvester
and was the plant manager of its Farmall Plant in Rock Island, Illinois.
Mr. Williams has served as Vice President, Marketing and Sales of the
Company since 1995 and has served as Vice President, Marketing and Sales of The
Gradall Company since 1986. Prior to that, Mr. Williams served as President of
Claas of America and held various management positions at International
Harvester, including General Sales Manager.
Mr. Keller joined The Gradall Company in 1981 and has served as its Vice
President, Engineering and Secretary since 1987. Mr. Keller has served as Vice
President, Engineering and Secretary of the Company since 1995.
Mr. Cahill joined The Gradall Company in 1982 and has served as its Vice
President, Manufacturing since 1990. Mr. Cahill has served as Vice President,
Manufacturing of the Company since 1995.
Mr. Jonker joined The Gradall Company in 1973 and has served as its Vice
President and Chief Financial Officer since July 1994 and its Treasurer since
November 1995. Mr. Jonker has served as Vice President, Finance and
Administration and Treasurer of the Company since November 1995 and as Vice
President, Chief Financial Officer and Treasurer of the Company since April
1996.
-18-
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
TRADING INFORMATION
The Company's Common Stock has been traded on The Nasdaq National Market
under the symbol "GRDL".
The following table sets forth the high and low sales prices for the Common
Stock of the Company for the periods indicated as reported by the Nasdaq
National Market:
Sale Price
-----------------
High Low
------- --------
1997
- - ---------------------
First Quarter $16 1/4 $ 12
Second Quarter 16 1/4 12
Third Quarter 17 3/8 14 3/4
Fourth Quarter 16 7/8 15
1998
- - ---------------------
First Quarter 18 3/8 15 3/8
Second Quarter 17 7/8 13 1/16
Third Quarter 16 7/8 12 5/8
Fourth Quarter 16 13 3/32
1999
- - ---------------------
First Quarter through
February 26, 1999 15 12 1/4
RECORD HOLDERS
The approximate number of record holders of the Company's equity securities
at February 26, 1999 was as follows:
Title of Class Number of Record Holders
---------------- ------------------------
Common Stock 135
-19-
DIVIDENDS
The Company currently intends to retain its future earnings to finance
growth and development of its business and therefore does not anticipate paying
cash dividends on the Common Stock for the foreseeable future. Any future
determinations to pay dividends will be at the discretion of the Board of
Directors and will be dependent on the Company's financial condition, results of
operations, capital requirements and such other factors as the Board of
Directors deems relevant.
Item 6. SELECTED CONSOLIDATED FINANCIAL DATA
The information required by this item is incorporated by reference to the
"Selected Consolidated Financial Data" on pages 16 and 17 of the 1998 Annual
Report to Shareholders.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by this item is incorporated by reference to
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 36 through 45 of the 1998 Annual Report to Shareholders.
This report including the Management's Discussion and Analysis of Financial
Condition and Results of Operations, incorporated by reference herein, contains
various "forward looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Securities Exchange
Act of 1934, as amended. The Company's Annual Report to Shareholders, any Report
on Form 10-K, Form 10-Q, Form 8-K or any other written or oral statements made
by or on behalf of the Company may include forward looking statements. Forward
looking statements represent the Company's expectations or beliefs concerning
future events. Any forward looking statements made by or on behalf of the
Company are subject to uncertainties and other factors that could cause actual
results to differ materially from such statements.
Undue reliance should not be placed on any forward looking statements made
by or on behalf of the Company as such statements speak only as of the date
made. The Company undertakes no obligation to publicly update or revise any
forward looking statement, whether as a result of new information, the
occurrence of future events or otherwise.
-20-
Item 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company does not have any market risk sensitive instruments at December
31, 1998.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required by this item is incorporated by reference to pages
18 through 35 of the 1998 Annual Report to Shareholders.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
-21-
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information with respect to the directors of the Company is
incorporated by reference to the Company's proxy statement to be filed for its
1999 Annual Meeting of Stockholders.
Item 11. EXECUTIVE COMPENSATION
Information with respect to executive compensation is incorporated herein
by reference to the Company's proxy statement to be filed for its 1999 Annual
Meeting of Stockholders.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information with respect to security ownership of certain beneficial owners
and management is incorporated herein by reference to the Company's proxy
statement to be filed for its 1999 Annual Meeting of Stockholders.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information with respect to certain relationships and related transactions
is incorporated by reference to the Company's proxy statement to be filed for
its 1999 Annual Meeting of Stockholders.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a) Documents filed as part of this report:
1. Financial Statements
The following consolidated financial statements of the Company
and its subsidiaries and the Report of the Independent Accountants included in
the 1998 Annual Report to Shareholders on pages 18 through 35 are incorporated
by reference in Part II, Item 8.
Report of Independent Accountants
Consolidated Balance Sheets - December 31, 1998 and December 31,
1997
Consolidated Statements of Income for the three years ended
December 31, 1998
Consolidated Statements of Changes in Shareholders' Equity for
the three years
ended December 31, 1998
Consolidated Statements of Cash Flows for the three years ended
December 31, 1998
Notes to Consolidated Financial Statements (including unaudited
quarterly financial information)
-22-
2. Financial Statement Schedules
The following financial statement schedules of the Company and
its subsidiaries and the report of independent auditors thereon are filed as
part of this Annual Report on Form 10-K and should be read in conjunction with
the consolidated financial statements of the Company and its subsidiaries
included in the 1998 Annual Report to Shareholders.
Schedule Page No.
-------- --------
Independent Auditors Report 26
Schedule II - Valuation and Qualifying Accounts 27
All other schedules have been omitted because they are not
applicable or not required or because the required information is included in
the consolidated financial statements or the notes thereto.
3. Exhibits
The exhibits in the accompanying Exhibit Index are filed as part
of this Annual Report on Form 10-K.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Company during the last quarter of
the year covered by this report.
-23-
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.
GRADALL INDUSTRIES, INC.
March 26, 1999 By:/s/ Barry L. Phillips
- - ---------------- ----------------------
Date Name: Barry L. Phillips
Title: President
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 and on the dates indicated.
Signature Title Date
- - --------------------------- ---------------------------------------- --------------
/s/ Barry L. Phillips President (Principal Executive Officer
- - ---------------------------
Barry L. Phillips and Director) March 26, 1999
--------------
/s/ Bruce A. Jonker Vice President, Chief Financial Officer
- - ---------------------------
Bruce A. Jonker and Treasurer (Principal Financial
Officer and Principal Accounting
Officer) March 26, 1999
--------------
/s/ Sangwoo Ahn Chairman of the Board and Director
- - ---------------------------
Sangwoo Ahn March 26, 1999
--------------
/s/ Ernest Green Director
- - ---------------------------
Ernest Green March 26, 1999
--------------
/s/ Perry J. Lewis Director
- - ---------------------------
Perry J. Lewis March 26, 1999
--------------
-24-
/s/ John A. Morgan Director
- - ---------------------------
John A. Morgan March 26, 1999
--------------
/s/ William C. Ughetta, Jr. Director
- - ---------------------------
William C. Ughetta, Jr. March 26, 1999
--------------
/s/ David S. Williams Director
- - ---------------------------
David S. Williams March 26, 1999
--------------
/s/ Jack Rutherford Director
- - ---------------------------
Jack Rutherford March 26, 1999
--------------
-25-
REPORT OF INDEPENDENT ACCOUNTANTS
---------------------------------
To the Board of Directors and Stockholders of Gradall Industries, Inc.:
Our report on the consolidated financial statements of Gradall Industries,
Inc., has been incorporated by reference in this Annual Report on Form 10-K from
page 35 of the 1998 Annual Report to Stockholders of Gradall Industries, Inc. In
connection with our audits of such financial statements, we have also audited
the related financial statement schedule listed in the index on page 23 of this
Form 10-K Annual Report.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly, in all material respects, the information required to be
included therein.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Cleveland, Ohio
February 23, 1999
-26-
GRADALL INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996
(DOLLARS IN THOUSANDS)
Additions
----------------------
Balance at Charged to Charged Balance at
Beginning Costs and to Other End of
Description of Period Expenses Accounts Deductions Period
- - ------------------------------------- ----------- ----------- --------- ----------- -----------
LIFO inventory reserve:
Year ended December 31, 1996 . . . . $ 5,161 $ 269 $ 5,430
Year ended December 31, 1997 . . . . 5,430 140 5,570
Year ended December 31, 1998 . . . . 5,570 518 6,088
Allowance for doubtful accounts:
Year ended December 31, 1996 . . . . 62 17 16 (a) 4 (b)
15 (c) 76
Year ended December 31, 1997 . . . . 76 3 4 (a) 11 (b)
16 (c) 56
Year ended December 31, 1998 . . . . 56 91 42 (a) 96 (b)
24 (c) 69
Allowance for inventory obsolescence:
Year ended December 31, 1996 . . . . 856 751 735 (d) 872
Year ended December 31, 1997 . . . . 872 347 407 (d) 812
Year ended December 31, 1998 . . . . 812 154 279 (d) 687
<FN>
(a) Late fees assessed and fully reserved.
(b) Doubtful accounts written off.
(c) Revenue recognized from late fees collected.
(d) Write off of obsolete inventories.
-27-
EXHIBIT INDEX
Exhibit
No. Description
------- ----------------------------------------------------------------------
3.01 Amended and Restated Certificate of Incorporation of the
Registrant - incorporated by reference to Exhibit 3.01 to the
Company's Registration Statement on Form S-1 (No. 333-06777)
3.02 Amended and Restated Bylaws of the Registrant - incorporated by
reference to Exhibit 3.02 to the Company's Registration Statement
on Form S-1 (No. 333-06777)
4.01 Rights Agreement dated as of May 29, 1998 between the Company
and Chase Mellon Shareholder Services, LLC, as Rights Agent -
incorporated by reference to Exhibit 1 of the Company's
Registration Statement on Form 8-A dated June 4, 1998
10.01 Recapitalization Agreement dated as of September 15, 1995 among
ICM Industries, Inc., MLGA Fund II, L.P., Jack D. Rutherford and
David T. Shelby (excluding exhibits and schedules) - incorporated
by reference to Exhibit 10.01 to the Company's Registration
Statement on Form S-1 (No. 333-06777)
10.02 Amendment to Recapitalization Agreement dated as of
October 12, 1995 - incorporated by reference to Exhibit 10.02 to the
Company's Registration Statement on Form S-1 (No. 333-06777)
10.03 Amended and Restated Shareholders Agreement dated as of
August 20, 1996 - incorporated by reference to Exhibit 10.03 to
the Company's Registration Statement on Form
S-1 (No. 333-06777)
** 10.04 Amended and Restated Employment Agreement dated
January 1, 1998 between The Gradall Company and Barry L. Phillips -
incorporated by reference to Exhibit 10.04 of the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1997
-28-
** 10.05 Amended and Restated Employment Agreement dated
January 1, 1998 between The Gradall Company and David S. Williams -
incorporated by reference to Exhibit 10.05 of the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1997
** 10.06 Deferred Compensation Agreement dated July 19, 1989 between
The Gradall Company and Barry L. Phillips - incorporated by
reference to Exhibit 10.06 to the Company's Registration Statement
on Form S-1 (No. 333-06777)
** 10.07 Amended and Restated Deferred Compensation Agreement dated
August 30, 1995 between The Gradall Company and David S.
Williams - incorporated by reference to Exhibit 10.07 to the
Company's Registration Statement on Form S-1 (No. 333-06777)
** 10.08 Split-Dollar Life Insurance Agreement dated as of August 30, 1995
between The Gradall Company and Barry L. Phillips - incorpo
rated by reference to Exhibit 10.08 to the Company's Registration
Statement on Form S-1 (No. 333-06777)
** 10.09 Gradall Industries, Inc. 1995 Stock Option Plan - incorporated by
reference to Exhibit 10.09 to the Company's Registration Statement
on Form S-1 (No. 333-06777)
** 10.10 Amended and Restated Employment Agreement dated as of
January 1, 1998 between The Gradall Company and Bruce A.
Jonker
** 10.11 Employment Agreement dated as of November 1, 1995 between
The Gradall Company and Joseph H. Keller, Jr. - incorporated by
reference to Exhibit 10.11 to the Company's Registration Statement
on Form S-1 (No. 333-06777)
** 10.12 Employment Agreement dated as of November 1, 1995 between
The Gradall Company and James C. Cahill - incorporated by
reference to Exhibit 10.12 to the Company's Registration Statement
on Form S-1 (No. 333-06777)
** 10.13 The Gradall Company Amended and Restated Supplemental
Executive Retirement Plan - incorporated by reference to
Exhibit 10.13 to the Company's Registration Statement on Form
S-1 (No. 333-06777)
-29-
** 10.14 The Gradall Company Benefit Restoration Plan - incorporated by
reference to Exhibit 10.14 to the Company's Registration Statement
on Form S-1 (No. 333-06777)
10.15 Amended and Restated Loan and Security Agreement dated as of
December 20, 1996, among The Gradall Company, Gradall
Industries, Inc. and Heller Financial, Inc., as agent and lender, The
CIT Group/Business Credit, Inc. and Bank One Columbus, N.A.,
as lenders (excluding exhibits and schedules) - incorporated by
reference to Exhibit 10.15 in the Company's annual report on
Form 10-K filed for the year ended December 31, 1996
10.16 Supply Agreement between The Gradall Company and Iowa
Industrial Hydraulics, Inc., dated January 1, 1995 (excluding
exhibits) - incorporated by reference to Exhibit 10.16 to the
Company's Registration Statement on Form S-1 (No. 333-06777)
** 10.17 Gradall Industries, Inc., 1998 Stock Option Plan incorporated by
reference to Exhibit 10.17 of the Company's Annual Report on
Form 10-K filed for the year ended December 31, 1997
* 13.01 Annual Report to Shareholders for the year ended December 31, 1997
(only to the extent expressly incorporated herein by
reference)
21.01 Subsidiaries of the Registrant - incorporated by reference to
Exhibit 21.01 to the Company's Registration Statement on Form
S-1 (No. 333-06777)
* 23.01 Consent of PricewaterhouseCoopers LLP regarding S-8
registrations
* 27.01 Financial Data Schedule
<FN>
_______________
* Filed herewith
** Management contract or compensatory plan or arrangement identified pursuant
to Item 14(c) of this Form 10-K.
-30-