JLG Reports Net Loss in First Quarter, Announces Price Increase
November 18, 2004 • JLG Industries, McConnellsburg, Pa., announced steel prices continued to affect its business in the fiscal first quarter that ended October 31, 2004, and it reported a net loss of $8.7 million in the fiscal first quarter, compared to the net income of $500,000 for the prior year period. JLG also reported it expects to raise prices by 6 percent after December 31, due to the increasing steel costs.
“We had expected the first quarter to be our most challenging of the current fiscal year,” said Jim Woodward, executive vice president and chief financial officer. “This expectation was based on seasonally lower sales, the anticipated high price of steel and other raw materials, capitalized variances carried into the quarter, continued inefficiencies resulting from capacity constraints in the supply base, and a strong order backlog, which was not subject to our announced September price increase.”
Woodward also said the company forecasted net unrecovered steel costs in the quarter in excess of $20 million, but the actual impact was $27 million. The company previously forecast average steel prices to be up 75 percent over the prior year, but now it forecasts that the increase will be over 100 percent.
According to Bill Lasky, chairman of the board, president, and chief executive officer, the outlook for fiscal 2005 will focus on how the company responds to increasing raw material costs, specifically steel, in the face of the customers' expectations of prices and how they will overcome supplier constraints.
“Although we achieved significant cost reductions and integration synergies last year, the price increases we implemented did not cover the higher cost of steel and associated variances,” Lasky said. “Therefore, we are compelled to pass through additional price increases to our customers to offset these rising costs. We expect to achieve an effective 6 percent price increase in January in the form of an increased steel surcharge, base price increases, and reductions in customer discounts.” Every shipment after December 31, he said, will be subject to the new pricing, including orders currently in the backlog.
Despite the operating losses, the company remains optimistic and reported some good news. Sales hit record highs in the first quarter, demand continued to be strong, and backlog at the end of the quarter was $200 million, essentially the same as the previous quarter. Consolidated revenues reached $306.7 million, an increase of 44 percent from the same quarter last year. JLG expects the second half of the fiscal year to be stronger due to the price increases, reduced supplier shortages, and improved manufacturing efficiencies, and it also reaffirmed its previous growth estimate of 10 to 25 percent for fiscal 2005.
