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JLG Industries Enters Global Alliance With Caterpillar

Wed November 23, 2005 - Southeast Edition
CEG



JLG Industries Inc. has announced that it has signed definitive agreements to enter into a global alliance with Caterpillar Inc. to design and produce a full Cat branded telehandler product line exclusively for Caterpillar dealers. The alliance will give JLG greater access to global channels to market.

JLG’s reputation for product innovation, quality, and after-sales service and support, coupled with Caterpillar’s global brand, distribution expertise and component capabilities will offer Caterpillar dealers around the world a broad product line to meet their customers’ needs and further enhance JLG’s position as a market leader in telehandler design, manufacture, sales and service, according to the companies.

“We are very pleased to be able to form an alliance with Caterpillar and its global dealer network to build on our core strengths in the access market and provide a broad line of quality telehandlers to customers throughout the world,” commented Bill Lasky, JLG’s chairman of the board, president, and chief executive officer.

“Consistent with our strategy of growth in our core products and diversification of our revenue streams through multiple channels to market, we are excited about this opportunity to further expand our global telehandler presence. We are equally excited to be working with Caterpillar, a manufacturer with an excellent reputation and a well-respected global dealer network. We are honored to have earned its endorsement of JLG’s manufacturing capabilities to produce high-quality telehandlers reflective of the Cat brand, and we look forward to the additional benefit of an expanded Cat relationship as a major component supplier to JLG.”

“This alliance leverages our respective strengths, combining Caterpillar’s global brand, distribution and component expertise with JLG’s strong design capabilities in the telehandler and lift industry, to deliver a world-class telehandler product line to our dealers,” said Ed Rapp, vice president of Caterpillar’s Building Construction Products Division (BCP).

Under the terms of the 20-year strategic alliance agreement, JLG will provide exclusively to Caterpillar dealers a full line up of Cat branded telehandler products. The company will support the North American and Latin American markets from its McConnellsburg, PA, facility and the markets in Europe and the rest of the world from its Maasmechelen, Belgium, facility.

Concurrently, JLG has signed definitive agreements with Caterpillar to acquire certain equipment, tooling, and intellectual property of its telehandler group. The purchase price for Caterpillar’s telehandler assets is $51.4 million, with $46.4 million paid at closing and $5 million upon transition of Cat branded telehandler sales to JLG, currently anticipated to be approximately 12 months from now.

In addition, JLG expects to invest an additional $30 million during the transition period (fiscal year 2006) for the development of the North American Caterpillar product line and for capacity improvements in both Belgium and Pennsylvania to accommodate the additional volume. Of this amount, approximately $14 million will be capitalized and $16 million will be expensed.

“Diluted earnings per share will be impacted by an estimated 20 cents in fiscal year 2006 due to design and capacity investments and the program is projected to be eleven percent accretive in fiscal year 2007,” stated Jim Woodward, JLG’s executive vice president and chief financial officer.

“The value of gaining access to these products, markets and unparalleled distribution system clearly merits the near-term dilution, and further positions JLG as a world-class access industry leader. Based on current forecasts, sales in the first full year of production are expected to be in the range of $325 to $350 million and the program is projected to pass our targets of a 15 percent return on invested capital and less than four times invested capital to EBITDA during the second full year of production.

“As a result of this transaction and an updated review of our current forecast, we reaffirm fiscal 2006 sales are expected to increase between 15 and 20 percent, and earnings per diluted share are anticipated to be in the $1.95 to $2.05 range.”

For more information, visit www.jlg.com.