Positioned For Long-Term Growth

Efforts to position the Company for continuing growth are focused on accelerating our improvement in productivity and profitability, while continuing to reduce our exposure to the market's inherent cyclicality. As an integral part of pursuing our strategies for growth at all levels of the organization, we have set forth a seven-point plan to focus on specific improvement goals for fiscal 1998. Our plans are described in detail in this section of the Annual Report.

Advanced production processes, installed at the new state-of the art scissor lift facility to reduce costs and improve product quality, include a powder-paint coating system and automated storage and retrieval equipment.

1. Improve Processes and Reduce Costs
A key strategy for JLG is to continue to achieve operational excellence in all facets of its business. In carrying out this initiative, the Company's focus has been on improving manufacturing efficiencies and processes, reducing costs and shortening manufacturing lead times.

At the state-of-the-art Sunnyside facility in Bedford, Pennsylvania, the Company manufactures the popular line of electric-powered scissor lift products. The most advanced production processes at that location include synchronous flow assembly and a state-of-the-art powder-paint coating system, which will result in reduced costs and lead times, as well as improved product quality. Manufacturing lead times involve the time elapsed from the initial processing of raw materials until completion of the finished unit, ready for shipment to the customer. Lead times for scissor lifts were reduced 38% during fiscal 1997, and the Company will focus on reducing lead times even further during fiscal 1998.

At the Weber Lane facility, also located in Bedford where rough-terrain scissor lifts are manufactured, the Company plans a plant redesign during fiscal 1998. This will include an upgrade of fixtures and tooling, workflow improvements, and a modernization of the facility, all aimed at further improving manufacturing processes and reducing costs.

At the McConnellsburg location, where boom lift products are made, a major capital project was undertaken during fiscal 1997, part of which became operational in July. A new customer acceptance facility will provide several key advantages, including a contribution to manufacturing lead time reductions, through an uninterrupted flow of machines from the end of assembly through quality assurance. Also, many of the previous outdoor testing activities have now been moved indoors, thereby minimizing weather-related delays.

A complete boom manufacturing cell is scheduled for completion by the end of calendar 1997 and will feature state-of-the- art production equipment. This facility will enhance the implementation of process improvements by streamlining operations through boom welding, boom section assembly and painting.

The Company achieved lead time reductions for boom lifts during fiscal 1997 of 31% and plans to further reduce lead times in fiscal 1998.

To achieve greater production efficiencies for vertical mast products, the Company recently announced its intent to vacate the small manufacturing facility located in Fort Littleton, Pennsylvania, and to transfer these products to the McConnellsburg location.

A strategic plan for procurement cost management is in place, and an outsourcing function has been established to evaluate non-core manufacturing competencies with a goal to further reduce costs. Other manufacturing initiatives include on-site vendor representation and an expanded just-in-time delivery program, all of which should result in lower costs and improved inventory turns.

As a result of these process improvements, sales per employee reached a new high of $189,000 for fiscal 1997, up from the previous year's record of $169,000.

In order to build upon these efficiencies, the Company plans to continue its use of innovative technology in manufacturing, through relationships with institutions providing leading-edge research in production processes and to strengthen its joint technology development efforts with suppliers.

2. Accelerate New Product Development
JLG believes that new products are the lifeblood of any successful organization and, likewise, historically have been a major contributor to the revenue growth of the Company. Since 1993, the percentage of sales from new products introduced in the previous two years has grown from 18% to a record 46% for fiscal 1997. During this time, JLG brought a total of 49 products to market, a level that the Company believes is unmatched in this industry.

The Company has always placed heavy emphasis on innovation in new product design, which is principally focused on safety, reliability and end-user worker productivity. Lowering customers' costs of ownership and maintaining high resale values for JLG machines is also a design priority. JLG also uses advanced technologies in its manufacturing processes, aimed at lowering product costs.

During fiscal 1997, our engineers devoted considerable effort to value-engineering existing products to lower manufacturing costs and to developing 27 new and redesigned products, planned for introduction in fiscal 1998. These new machines will span all three product families.

Some of the design projects focus on developing new product families. These new products will result in incremental sales and greater penetration of important markets. Product redesigns are geared toward improving the performance of existing models to achieve increased productivity for the user and a competitive edge for JLG distributors and their customers.

In order to further strengthen its industry-leading position in new product development, JLG initiated an Advanced Concepts Development Group during the 1997 fiscal year. This Group of highly talented engineers operates independently from day-to-day engineering activities and focuses on leading- edge technology applications that can be incorporated into future products.

The Group obtains input from the marketing department, as well as from customers, end-users, external product development consulting groups and university research centers. It then develops innovative components, systems and concepts for new products. Advanced Concepts is currently at work on several major projects, some of which are geared for market introduction in a year, and others are longer-term in nature. The Company has increased the level of commitment and funding for these efforts during fiscal 1998.

During fiscal 1997, JLG initiated an Advanced Concepts Development Group to further support its industry-leading position in new product development.

JLG believes that it has the most effective channels of distribution in its industry

3. Expand Global Distribution
The overall market for aerial work platforms is estimated at about $1.5 billion, with the North American market representing the largest share. The Company believes that it has the best and most effective channels of distribution in the aerial work platform marketplace. During fiscal 1998, JLG is committed to continue building on this strength, both domestically and internationally.

The major purchasers of JLG equipment are in the commercial and industrial equipment rental industry, which has experienced tremendous growth in recent years. Annual revenues for that industry are estimated to be more than $20 billion, and aerial work platforms have been among its fastest growing products. The rental industry should continue to experience growth because of the trend toward users out-sourcing their equipment needs and avoiding large capital outlays.

In addition to continuing to grow its strong North American market base, the Company believes that there are substantial opportunities to grow the business internationally. JLG has established a goal of attaining 50% of its total sales outside the United States over the next several years. In fiscal 1997, JLG increased international sales 62% to about $160 million, representing 30% of total revenues, which is up from 24% in the prior year. Aerial work platforms are increasingly being recognized as tools of the trade in most industrialized regions of the world, and this concept is gaining acceptance in emerging markets as well.

In recent years, the Company has experienced rapid sales growth in Europe, which is its largest international market. JLG has continued to expand and strengthen its European distribution base and anticipates that this market will continue to offer sizable growth potential. Increasing acceptance of self-propelled machines that can be driven and controlled from full working height is displacing truck-mounted units, which are less maneuverable and usually require two operators.

The Australian operation also posted impressive growth during fiscal 1997, aided by the onset of construction projects for the Olympic Games, scheduled for the year 2000. This operation also achieved ISO 9002 certification in fiscal 1997.

For fiscal 1998, JLG is targeting rapid growth opportunities in Latin America. The recently formed joint venture in Brazil is performing very well, and the Company plans to continue expanding its presence there during fiscal 1998. The Company already has an established presence in Argentina and Mexico, and sees additional potential to grow the market for aerial work platforms there, as well as in other Latin American countries. Sales growth is aided by the increased political stability of the region, emergence of the rental industry and on-going acceptance of the product line in construction and industrial applications.

The Pacific Rim, in which the Company already has an established presence in eight countries, is where JLG is focusing special emphasis in fiscal 1998 to increase its market penetration. Construction activity for major projects remains high, and aerial work platforms are becoming more widely used in this region of the world.

The Company is also intensifying market development activities in China, where the long-term potential for JLG's products is excellent, due primarily to numerous infrastructure projects planned or underway.

Another potentially large market for aerial work platforms is India, where businesses continue to be privatized and the infrastructure is being strengthened. Efforts to increase the acceptance of aerial work platforms there are aided by the presence of numerous United States and European-based companies that have long been familiar with the benefits of the product line, especially its use in speeding completion of construction projects.

4. Enhance Customer Support Services
JLG prides itself on its customer-focused, customer-driven and customer-obsessed philosophy. As a result, the Company is focusing on offering the most comprehensive menu of support activities in its industry. During fiscal 1998, the Company intends to continue to improve upon and expand these services.

During fiscal 1997, sales for parts and services increased 27%, reflecting the growth in the number and the age of JLG machines in the field. JLG's customer support strategies focus on maintaining customers for life and providing one-stop shopping, by supplying a wider array of parts and accessories for the machines.

JLG supports its network of distributors, which is the largest and most extensive in this industry, with a wide array of development programs, including product marketing, joint planning, and after-sales support.

JLG is focused on developing electronic commerce with its distributors, including order entry, invoicing, order status and parts availability, as well as warranty administration. This electronic commerce has been well received by JLG distributors because it speeds transactions and lowers their costs.

In addition, the Company plans to significantly increase the size of its parts distribution facility and to install an automated parts-picking carousel system to further enhance efficiencies, speed parts delivery and facilitate growth.

5. Grow JLG Equipment Services
During fiscal 1997, JLG substantially expanded its successful rental and used equipment sales business, JLG Equipment Services. About $14.2 million was invested to grow its rental fleet of machines, which is principally used to assist JLG distributors in meeting their periods of peak rental demand. The Company expects significant annual revenue growth for this business over the next five years.

In July, JLG Equipment Services achieved ISO 9002 registration. This certification is in recognition of having an efficient, well documented process in place, which, in turn, helps assure that customers receive consistent, high-quality services.

In addition to further developing its North American presence in both rental and the sale of used equipment, JLG Equipment Services also intends to actively promote sales of used equipment in numerous emerging international markets.

During the past few years, the processes for rebuilding used equipment were redesigned to take out costs and reduce throughput times. Reconditioned equipment offers JLG distributors worldwide an additional opportunity to meet varying customers' price-point needs in today's challenging marketplace.

To increase visibility and marketing effectiveness, rebuilt machines are featured on the JLG Web Site. This gives domestic and international customers the ability to view machines and their specifications and to E-mail their inquiries directly to the Company.

6. Strengthen Employee Involvement
In order to continue the integral role that continuous improvement practices have played in JLG's success over the past several years, the Company is stepping up its employee involvement programs. The Human Resources Team has developed a high-integrity plan to support JLG's Strategic Operating Plan. These goals focus on enabling the organization to increase the effectiveness of employees at all levels to continually improve performance and to sustain the Company's long-term growth.

A major strategic initiative is to develop both individual and team competencies to meet the evolving challenges of the organization. Internally, JLG will build effective alliances through initiatives focused on employee safety and performance improvement. Externally, the Company plans to seek alliances with universities for recruitment, diversity training and on-going employee development.

Training will remain an effective means of adding to the battery of skills for employees at all levels, including on-the-job training, journeyman and apprentice opportunities and specialty technical training. In addition, JLG will expand opportunities for professional development by implementing programs through external sources, including educational institutions. The Company will also use internal staff training and mentoring to ensure that employees are ready for additional career opportunities.

Team interaction is an important part of the JLG culture. The Total Quality Management staff will participate in the ongoing and effective utilization of teams within the organization for problem solving, employee empowerment and pursuit of continuous improvement initiatives.

Using an array of best communications practices, JLG will encourage employees to share in the identification and resolution of those issues which impede the quest for quality, speed and cost reductions. JLG's effectiveness is regularly measured through the use of employee surveys, and employee involvement is expected to contribute to many of the advancements that will be made in improving processes and support systems throughout the Company.

JLG's international operations are important partners in developing the employee practices necessary to advance the organization's capabilities on a global basis. The Company has invested in technologies to support the communications challenges of its international locations and is targeting additional employee initiatives to further improve responsiveness to the growing worldwide customer base.

7. Pursue Strategic Acquisitions
Beyond growing the business internally, the Company, during fiscal 1998, plans to intensify its search for strategic acquisitions. JLG will evaluate those businesses that complement its core competencies and that will add to shareholder value within a short period of time.

By aggressively pursuing this seven-point program, the Company will focus on being "Positioned For Long-Term Growth" and will emerge as a stronger organization with industry-leading positions in market share, new product development and international sales, complemented by its solid financial position.