25.09.2006

JLG reports record results

JLG has today announced record financial results for its fourth quarter and full year ending 31 July 2006. The company’s revenues reached an all time high of $2.3 billion a 32 percent increase on 2005, while after tax profits jumped by over 250 percent to $149 million.

The strong result was the product of a rebound in gross margins which reached 19.6 percent of sales, recovering to pre-2004 levels after two years in which margins were hit by rising steel and other raw material prices.

The 2006 results also included a one time pre-tax gain of $14.6 million from the sale of the Gradall excavator business during the third quarter and were negatively affected by $1.9 million of charges associated with the early extinguishment of debt.

In geographic terms, North American sales grew by 28 percent to $1.7 billion with operating income more than doubling to $254 million, (a rise of 222%)

In Europe sales increased by 56 percent, reaching $407 million. European profits increased by over 80 percent to $39 million.

Finally in the rest of the world sales rose by 28 percent but turned in similar operating profits as Europe at $39 million, an increase of just over 20 percent.

Moving to the product split, new aerial lift sales continue to dominate JLG’s business representing 50 percent of revenues.
In 2006 aerial lift sales increased by just over 30 percent to $1.16 billion.

Revenues from Telehandlers grew by more than 50 percent to $776 million representing 33 percent of JLG’s total revenues.

The other sector, Excavators declined by more than 50 percent, following the disposal of that business during the year.

Parts, services and product reconditioning for all JLG products is now a $306 million business.

Finally JLG Financial solutions saw revenues slip to the lowest level in over three years as demand for this product falls and JLG moves away from funding rental fleet growth.

"Along with achieving new records for both quarterly and full-year revenues and earnings, we achieved other significant milestones in 2006," stated Bill Lasky, chairman of the board, president and chief executive officer.

"We completed our manufacturing realignment and capacity expansion in preparation for the Caterpillar alliance and a projected increase in demand for JLG access equipment. Shipments of Caterpillar-branded telehandlers to European dealers began in late July and we will begin shipping to North American dealers in November under our exclusive 20-year private label alliance agreement."

He continued: "Despite some economic uncertainty and reduced residential construction activity, non-residential construction projections continue to be robust into calendar 2007. Combined with increased international activity and the new Caterpillar volume, this will continue to drive demand for JLG access products."


Fiscal-Year 2007 Outlook

"Demand for our products remained strong in the fourth quarter, continuing the pattern we have seen throughout 2006," said Jim Woodward, executive vice president and chief financial officer.

"As a result, our earnings quality improved significantly despite the additional expenses associated with our Caterpillar alliance preparations and other strategic initiatives.

Excluding the gain on the sale of the excavator business, the 2006 operating margin improved to 10.9 percent compared to 6.9 percent in 2005. On a full year basis, we achieved our 23-percent target for incremental operating margin."

"We anticipate continued strong demand in fiscal 2007 and project revenue growth to be 20 to 25 percent greater than our record fiscal 2006 level of $2.3 billion.

With a substantial portion of our manufacturing realignment and capacity expansion behind us, and the start up of shipments under the new Caterpillar alliance, we expect fiscal 2007 earnings per share to be in a range of $1.72 to $1.82."


Vertikal Comment

JLG continues to benefit from its strong position in both the aerial lifts and telehandler markets. The full benefits of its price increases and a moderation in the raw material prices that eroded its gross margins in 2005. The company is still claiming a three to six million negative impact in steel price increases that have not been passed on to its customers. However it is clear that savings and efficiencies have been made elsewhere.

On the costs side, even though spending on research and development increased by 25 percent it fell as a percentage of revenues to 1.3 percent. The same is true of sales, marketing and administration costs, falling by a full percentage point to just over seven percent of sales.

The fiscal year 2007 will be an interesting one as the full impact of the Caterpillar telehandler business will be visible. It is certainly likely to raise revenues and take telehandler sales up to over 40 percent of total revenues. The question is what impact it will have on the company’s profits?

JLG is forecasting a rise of up to 25 percent in revenues for the year that it has just started, this would take sales up to around $2.8 billion. We think that if all goes well the company could actually scrape through the $3 billion level.