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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-31187
PROSPECTUS
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Logo of UpRight, Inc. Logo of Horizon High
Reach, Inc.
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W.R. CARPENTER NORTH AMERICA, INC.
OFFER TO EXCHANGE ITS 10 5/8% SENIOR SUBORDINATED NOTES DUE 2007,
WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT, FOR ANY AND ALL
OF ITS OUTSTANDING 10 5/8% SENIOR SUBORDINATED NOTES DUE 2007
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK
CITY TIME, ON DECEMBER 1, 1997, UNLESS EXTENDED.
W.R. Carpenter North America, Inc., a Delaware corporation ("Carpenter" or
the "Company"), hereby offers to exchange (the "Exchange Offer"), upon the terms
and subject to the conditions set forth in this Prospectus and the accompanying
Letter of Transmittal (the "Letter of Transmittal"), up to $105,000,000 in
aggregate principal amount of the Company's new 10 5/8% Senior Subordinated
Notes due 2007 (the "Exchange Notes"), for the $105,000,000 in aggregate
principal amount of the Company's outstanding 10 5/8% Senior Subordinated Notes
due 2007 (the "Original Notes"). The Original Notes and the Exchange Notes are
sometimes referred to herein collectively as the "Notes."
The terms of the Exchange Notes are substantially identical in all respects
(including principal amount, interest rate and maturity) to the terms of the
Original Notes for which they may be exchanged pursuant to this Exchange Offer,
except that (i) the Exchange Notes will be freely transferable by holders
thereof (other than as provided in the next succeeding paragraph) and issued
free of any covenant restricting transfer absent registration and (ii) holders
of the Exchange Notes will not be entitled to certain rights of holders of the
Original Notes under the Registration Rights Agreement (as defined herein),
which rights will terminate upon the consummation of the Exchange Offer. The
Exchange Notes will evidence the same debt as the Original Notes (which they
replace) and will be entitled to the benefits of an Indenture, dated as of June
10, 1997, governing the Original Notes and the Exchange Notes (the "Indenture").
For a complete description of the terms of the Exchange Notes, see "Description
of the Notes." There will be no cash proceeds to the Company from the Exchange
Offer.
Interest on the Notes will be payable in cash semiannually on each June 15
and December 15, commencing December 15, 1997. The Notes are redeemable at the
option of the Company, in whole or in part, at any time on or after June 15,
2002, at the redemption prices set forth herein, plus accrued and unpaid
interest thereon to the redemption date. In addition, the Company may redeem in
the aggregate up to 35% of the original principal amount of the Notes at any
time and from time to time prior to June 15, 2000, at a redemption price equal
to 110.625% of the aggregate principal amount thereof, plus accrued and unpaid
interest thereon to the redemption date, with the Net Proceeds (as defined
herein) of one or more Public Equity Offerings (as defined herein); provided,
that at least $75.0 million of the principal amount of the Notes originally
issued remains outstanding immediately after the occurrence of any such
redemption and that any such redemption occurs within 90 days following the
closing of any such Public Equity Offering. The Registrar is not required to
transfer or exchange any Note selected for redemption. See "Description of the
Notes -- Optional Redemption" and "Description of the Notes -- Transfer and
Exchange."
Upon a Change of Control (as defined herein), the Company will be required
to make an offer to purchase all outstanding Notes at a purchase price equal to
101% of the principal amount thereof, plus accrued and unpaid interest thereon
to the purchase date. See "Description of the Notes -- Change of Control Offer."
In addition, the Company will be obligated in certain instances to make an offer
to purchase the Notes at a purchase price equal to 100% of the principal amount
thereof plus accrued and unpaid interest with the net cash proceeds of certain
asset sales. See "Description of the Notes -- Certain Covenants -- Limitation on
Certain Asset Sales."
The Exchange Notes will bear interest from the most recent date to which
interest has been paid on the Original Notes, or if no interest has been paid on
the Original Notes, from June 10, 1997. Holders whose Original Notes are
accepted for exchange will not receive any payment in respect of interest on
such Original Notes otherwise payable on any interest payment date the record
date for which occurs on or after consummation of the Exchange Offer. See "The
Exchange Offer -- Terms of the Exchange Offer."
The Notes will be general unsecured obligations of the Company and will rank
subordinate in right of payment to all existing and future Senior Indebtedness
(as defined herein) of the Company and senior in right of payment to any
subordinated indebtedness of the Company. The Notes will be unconditionally
guaranteed (the "Guarantees") on an unsecured senior subordinated basis by each
of the Company's subsidiaries (the "Guarantors"). Each Guarantee will be
subordinated to all Senior Indebtedness of such Guarantor. As of June 29, 1997,
after giving effect to the offering of the Original Notes, and the application
of the net proceeds thereof, the Company had no Senior Indebtedness outstanding,
and the Guarantors had $6.6 million of Senior Indebtedness outstanding.
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SEE "RISK FACTORS" BEGINNING ON PAGE 19 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS OF THE NOTES.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS OCTOBER 22, 1997.
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AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-4 under the Securities Act of
1933, as amended (the "Securities Act") with respect to the Exchange Notes
offered hereby. As permitted by the rules and regulations of the Commission,
this Prospectus omits certain information, exhibits and undertakings contained
in the Registration Statement. For further information with respect to the
Company and the Exchange Notes offered hereby, reference is made to the
Registration Statement, including the exhibits thereto and the financial
statements and notes filed as a part thereof. The Registration Statement (and
the exhibits and schedules thereto), as well as the periodic reports and other
information filed by the Company with the Commission, may be inspected and
copied at the Public Reference Section of the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. and at the regional offices of
the Commission located at 7 World Trade Center, Suite 1300, New York, New York
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois.
Copies of such materials may be obtained from the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. Such information can also be reviewed through the Commission's Electronic
Data Gathering, Analysis and Retrieval System which is publicly available
through the Commission's Web Site (http://www.sec.gov). Statements contained in
this Prospectus as to the contents of any contract or other document are not
necessarily complete, and in each instance reference is made to the copy of such
contract or document filed as an exhibit to the Registration Statement, each
such statement being qualified by such reference.
Pursuant to the Indenture, the Company has agreed to furnish to the Trustee
and to registered holders of the Notes, without cost to the Trustee or such
registered holders, copies of all reports and other information that would be
required to be filed by the Company with the Commission under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), whether or not the
Company is then required to file reports with the Commission. As a result of the
Exchange Offer, the Company will become subject to the periodic reporting and
other informational requirements of the Exchange Act. The Company has agreed
that, whether or not the Company is subject to filing requirements under Section
13 or 15(d) of the Exchange Act, and so long as any Notes remain outstanding, it
will file with the Commission (but only if the Commission at such time is
accepting such voluntary filings) and will send the Trustee copies of the
financial information, documents and reports that would have been required to be
filed with the Commission pursuant to the Exchange Act.
The principal address of the Company is 1775 Park Street, Selma, California
93662, telephone number (209) 891-5344.
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CERTAIN DEFINITIONS
For purposes of this Prospectus, the following terms shall have the
meanings indicated herein:
"Aerial work platform" shall mean a mobile device that has an
adjustable position platform, supported from ground level by a structure,
and shall include scissor lifts, boom lifts and portable lifts.
"Boom lift" shall mean a self-propelled integral chassis aerial work
platform having a platform that can be positioned completely beyond the
base by a telescopic or articulated mast used to position personnel, along
with their necessary tools and materials, at work locations. These devices
are power operated with primary functions, including drive, controlled from
the platform, and are intended to be occupied when driven.
"Day utilization" shall mean the number of days that equipment is
rented within a given time period as a percentage of the total number of
days within that given time period.
"Dollar utilization" shall mean the actual rental revenue within a
given time period as a percentage of the "monthly national rate" divided by
28, times the number of days within that given time period. The monthly
national rate is a suggested rental rate per unit for a given type of
equipment which is established by Horizon management as a basis for
internal performance evaluation.
"Portable lift" shall mean a manually-propelled integral chassis
aerial work platform having a platform that can be positioned vertically
above the base, but not completely beyond the base, with a telescopic mast
used to position personnel, along with their necessary tools and materials,
at work locations. These devices are power operated with platform elevation
and descent controlled from the platform but are not intended to be
occupied when moved horizontally.
"Scaffolds" or "Scaffolding" shall mean a temporary elevated platform
and its necessary vertical, diagonal and horizontal members used for
supporting personnel and materials. These devices are mounted on casters
and are manuallypropelled. They are not intended to be occupied when moved
horizontally.
"Scissor lift" shall mean a self-propelled integral chassis aerial
work platform having a platform that can be positioned vertically above the
base, but not completely beyond the base, used to position personnel, along
with their necessary tools and materials, at work locations. These devices
are power operated with primary functions, including drive, controlled from
the platform, and are intended to be occupied when driven.
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and consolidated financial statements, including notes thereto,
appearing elsewhere in this Prospectus or incorporated herein by reference.
Unless the context indicates otherwise, references in this Prospectus to (i) the
"Company" or "Carpenter" are to W.R. Carpenter North America, Inc., and (ii)
"UpRight" are to UpRight, Inc. and "Horizon" are to Horizon High Reach, Inc.,
both wholly-owned subsidiaries of the Company. References to fiscal 1995, fiscal
1996 and fiscal 1997 are to the Company's fiscal years ended July 2, 1995, June
30, 1996 and June 29, 1997, respectively. All financial data presented for
UpRight or Horizon are presented for each such company on a stand-alone basis
prior to giving effect to any eliminations of intercompany balances and
transactions due to consolidation.
THE COMPANY
Carpenter, through its wholly-owned subsidiaries, UpRight and Horizon,
manufactures, sells, rents and services aerial work platform equipment to a
diverse customer base, including construction, industrial, commercial and
institutional end users. For fiscal 1997, Carpenter generated revenue and EBITDA
of $139.9 million and $25.9 million, respectively.
UpRight
UpRight is a leading manufacturer of aerial work platforms, including
scissor lifts, boom lifts and portable lifts, and aluminum scaffolding, which
are distributed through a network of domestic and international dealers and
industrial equipment rental companies to end users in North America and
increasingly in Europe, Asia and Latin America.
UpRight has been manufacturing scissor lifts since 1974 as an outgrowth of
its leadership in the development and sale of aluminum scaffolding. The industry
developed in and is predominantly based in North America. Based on unit shipment
data reported by the Equipment Manufacturers Institute ("EMI"), an industry
trade organization, UpRight's management estimates that of the world's eight
largest aerial work platform manufacturers, seven are headquartered in North
America, generating approximately 90% of the $1.4 billion in worldwide aerial
work platform sales in 1996. According to historical data reported by EMI, the
aerial work platform industry has experienced compound annual growth rates in
total unit shipments of scissor lifts and boom lifts from 1986 to 1996 of 20%
and from 1991 to 1996 of 33%.
UpRight's management believes that the principal factors driving the growth
of the industry are (i) aerial work platforms provide significant cost and
safety advantages over alternative equipment (primarily scaffolding and
ladders), and (ii) the increasing awareness of the benefits of aerial work
platforms and the growth of the industrial equipment rental industry is
expanding the availability of aerial work platforms to more numerous smaller
businesses and from larger industrial metropolitan centers to more
geographically diverse and smaller industrial and non-industrial areas. In
addition, management believes that the industry's pattern of growth in North
America will be repeated in other industrialized regions of the world as
labor-efficient equipment becomes more readily available.
UpRight sells its products through an extensive network of over 140
equipment dealers and rental companies, including national, regional and local
distributors located throughout the United States and 76 distributors located in
51 countries internationally. For fiscal 1997, approximately 39% of UpRight's
revenue was generated by sales to customers in Europe and the Pacific Rim, which
UpRight's management believes is among the highest percentages of revenue from
international sales of any aerial work platform manufacturer. Other than
Horizon, UpRight's ten largest customers for such period accounted for
approximately 63% of UpRight's revenue. UpRight's customers sell and/or rent its
aerial work platforms to end users in construction, industrial, commercial and
institutional markets who use the equipment for a wide variety of applications,
including for the construction, repair and maintenance of industrial plants,
shopping malls, office buildings, schools, hotels, hospitals, elevated roadways,
bridges and other industrial, commercial and institutional structures. UpRight
believes its customer service, including technical support for dealers and
rental companies, repair and maintenance services, spare parts availability,
product upgrades and operational and safety training, enhances its reputation
and improves its competitive position versus other manufacturers.
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Since the beginning of fiscal 1994, UpRight has executed an aggressive
research and product development program, investing in excess of $10.7 million
to: (i) extend existing product lines, particularly in scissor lifts, where
UpRight's management believes that the introduction of numerous new scissor lift
models of various platform sizes, weight capacities and heights has made
UpRight's product line as extensive as that of any other manufacturer in the
industry and has positioned UpRight among the top three scissor lift
manufacturers worldwide; (ii) add new features and enhancements to continually
improve the reliability and operational capability of UpRight's existing
products; and (iii) broaden UpRight's product mix, principally by introducing a
line of boom lifts. UpRight's new products and new models introduced since
January 1, 1994 accounted for approximately 79% of UpRight's revenue for fiscal
1997. UpRight has demonstrated product development leadership with regard to
product enhancements, many of which are now commonly used by other
manufacturers, including speed leveling, tight turning and easy platform
loading, and intends to continue to develop improvements to existing aerial work
platform products. UpRight also recently introduced its first boom lift product
line and is currently developing additional boom lift models, replicating the
line extension strategy it successfully utilized in scissor lifts and leveraging
its domestic and international distribution capabilities to accelerate market
acceptance. Based on historical unit shipment data reported by EMI, UpRight's
management estimates that boom lifts accounted for approximately $847 million of
the $1.4 billion in worldwide aerial work platform shipments in 1996.
Since the beginning of fiscal 1994, in addition to the $10.7 million
invested in research and product development, UpRight has invested approximately
$20.2 million in the construction of modern, highly efficient production
facilities incorporating state-of-the-art equipment, has adopted "just-in-time"
inventory procedures and modified cellular production techniques and has
instituted flexible labor and staffing practices to manage peak volume cycles.
UpRight continually redesigns its products to create cost efficiencies and
improve product reliability by standardizing production components and by
reducing the number of parts in its products. These design improvements reduce
UpRight's total cost of purchased components, minimize assembly time and
simplify repairs and maintenance. UpRight believes that its product designs and
operational efficiencies give it a cost advantage over its competitors and that
its revenue per employee is among the highest in the industry.
Horizon
Horizon is a leading industrial equipment rental, sales and service company
specializing in aerial work platforms, including scissor lifts, boom lifts and
portable lifts, and forklifts and scaffolding, serving a diverse range of more
than 11,000 active customers from 14 domestic locations. Horizon offers a full
service, integrated approach to serving its customers' needs by providing
rentals of equipment, sales of new and used equipment, sales of spare parts and
repair and maintenance services. For fiscal 1997, approximately 51% of Horizon's
revenue was generated by equipment rentals, approximately 44% of Horizon's
revenue was generated by sales of new and used equipment, and the remainder was
generated by training services, sales of spare parts and certain related
customer services. Management believes that, among major industrial equipment
rental companies, Horizon has one of the highest ratios of sales to rentals in
the industry. Within the last three fiscal years, Horizon has strategically
expanded its product offerings to include, in addition to UpRight products,
certain additional product lines from other leading manufacturers. Horizon acts
as a distributor for UpRight products in most of Horizon's designated market
areas. Horizon and UpRight operate independently, and all transactions between
them are conducted on an arm's-length basis.
Horizon's strategy is to focus on small- to mid-sized companies and
contractors, particularly in the construction market, including users in
specialized trades, such as electricians, painters, HVAC and mechanical
contractors, and in the industrial market, including users engaged in the
maintenance of warehouses, manufacturing plants and commercial and institutional
facilities. Management believes that its customers within its target markets are
less price sensitive, more dependent upon service and equipment availability,
less sensitive to economic cycles and more diversified in number than are the
larger end users typically targeted by Horizon's primary competitors. In
addition, small- to mid-sized contractors tend to rent equipment on shorter
notice for shorter periods of time. As a result of the higher turnover of
equipment and Horizon's pricing structure, management believes Horizon generates
higher margins and higher dollar utilization than if Horizon targeted larger end
users. Horizon's rental strategy is complemented by Horizon's
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sales efforts, which primarily target small- to mid-sized companies that often
purchase the most frequently utilized equipment models and rent additional
equipment or specialized equipment for particular projects.
The equipment rental industry serves a wide variety of commercial and
residential construction, industrial and homeowner customers. According to a
survey conducted by the Associated Equipment Distributors ("AED"), an industry
trade organization, the United States equipment rental industry has grown from
approximately $610 million in revenue in 1982 to an estimated $13 billion in
revenue in 1995, a compound annual growth rate of approximately 27%. Horizon's
management estimates that the aerial work platform segment constitutes
approximately 10% to 15% of such industry revenue. Management believes that the
growth in the industry reflects, in part, (i) an increase in outsourcing by
commercial and industrial customers seeking to reduce their capital invested in
equipment and to reduce the costs associated with maintaining and servicing such
equipment by renting rather than purchasing equipment, (ii) an increase in the
number of equipment rental locations and the corresponding increase in
availability of equipment, and (iii) a general decline in inflation-adjusted
rental rates.
According to the Rental Equipment Register, an industry publication,
Horizon is the 34th largest rental equipment company in the United States based
on 1996 rental revenue; however, within the aerial work platform segment,
Horizon is the eighth largest rental equipment company. Horizon's rental fleet
as of June 29, 1997 exceeded 2,400 self-propelled and portable aerial work
platforms and forklifts with an original equipment cost of approximately $38.0
million, and included aluminum scaffolding with an original equipment cost of
approximately $939,000.
Horizon provides a complete range of customer services through its network
of offices and field support personnel, including safety and operational
training, technical and maintenance support, 24-hour emergency repair service,
spare parts supplies and related services. Management believes Horizon is
recognized as a leader in customer service, a significant factor for many of
Horizon's customers, which are generally more dependent on each piece of
equipment and which cannot afford downtime associated with unscheduled
maintenance. Horizon was among the first aerial work platform rental companies
to offer service and maintenance contracts and training programs, and was one of
the first in the industry to comply with all of the safety and operational
standards of the American National Standards Institute ("ANSI"), a private
non-profit membership organization.
THE AERIAL WORK PLATFORM INDUSTRY
The aerial work platform industry began in the United States in the late
1960s with the introduction of scissor lifts, boom lifts and portable lifts.
Since that time, aerial work platforms have gained increasing acceptance as an
economical and safe alternative to scaffolding and ladders. According to
historical data reported by EMI, the aerial work platform industry has
experienced compound annual growth rates in total unit shipments of scissor
lifts and boom lifts from 1986 to 1996 of 20% and from 1991 to 1996 of 33%. In
addition, exports of scissor lifts and boom lifts accounted for 17% and 20%,
respectively, of total unit shipments in 1996 compared to 10% and 1%,
respectively, of total unit shipments in 1986. Based on unit shipment data
reported by EMI, UpRight's management estimates that worldwide sales of aerial
work platforms totaled $1.4 billion in 1996. Despite the growth in export
shipments, the working population of aerial work platform equipment remains
significantly lower internationally than in North America. The Company's
management expects that in the next several years as the cost of labor increases
and labor-efficient equipment becomes more readily available, sales of aerial
work platforms will experience substantial growth internationally, similar to
that experienced in the United States over the past several years.
Scissor lifts and boom lifts are the two principal aerial work platform
industry products, accounting for approximately 97% of total aerial work
platform sales in 1996, according to data reported by EMI and management
estimates. A scissor lift consists of a work platform mounted on top of a
hydraulically actuated scissor-type lifting mechanism. A boom lift consists of a
generally smaller work platform supported from the tip of a telescopic or
articulated boom. The lifting mechanisms of both types of machines are mounted
on a self-propelled, steerable, mobile, four-wheeled chassis. Scissor lifts and
boom lifts can be driven by the operator from the platform while in an elevated
position, thus enabling the operator to move from one location to another
without having to return to the ground. This feature, coupled with the
elimination of the time-
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consuming and more labor-intensive task of erecting, disassembling and moving
scaffolding, generates substantial labor savings and reduces hazards to workers.
Scissor lifts generally are capable of supporting 500 to 2,000 pounds of
payload and can elevate to heights ranging from 12 to 50 feet. Boom lifts
generally are capable of supporting 500 to 750 pounds of payload and can elevate
to heights ranging from 30 to 150 feet.
Aerial work platforms are used in a variety of applications that require
workers to access elevated work areas. The ability to elevate the worker,
equipment and material on a platform which the worker can position while
elevated improves worker safety and productivity. Self-propelled aerial work
platforms are now commonly used by end users in construction, industrial,
commercial and institutional markets who use the equipment for a wide variety of
applications, including for the construction, repair and maintenance of
industrial plants, shopping malls, office buildings, schools, hotels, hospitals,
elevated roadways, bridges and other industrial, commercial and institutional
structures. During the construction of certain large commercial and industrial
projects, contractors can often require in excess of one hundred aerial work
platforms at one time. The wide acceptance of aerial work platforms as a
cost-effective, safe alternative to scaffolding and ladders in the United
States, Canada and parts of Europe has influenced both the design of certain
buildings and construction methods. For example, the construction, maintenance
and usefulness of high-ceilinged warehouses have been made more practical
through the wide acceptance of aerial work platforms.
The aerial work platform industry is cyclical and historically has been
dependent on the United States construction industry. However, several other
factors have affected the growth in total unit shipments, including the
following:
- - New product introductions, new usage applications and the continued expansion
into international markets have increased demand. The aerial work platform
industry has historically been concentrated in North America and has primarily
served the non-residential construction market. As a result, industry growth
was adversely affected by the severe downturn in commercial construction
between 1990 and 1992. However, according to data reported by EMI, scissor
lift unit shipments exported from North America have increased by a compound
annual growth rate of approximately 25% since 1986. Several new products have
been introduced that are specifically designed for non-construction
applications, such as narrow aisle boom lifts which accounted for
approximately 8% of total boom lift unit shipments in 1996.
- - Significant changes in the industrial equipment rental industry. UpRight's
management believes that increasing demand for rentals is helping to fuel the
growth in demand for aerial work platform products. In addition, companies in
the equipment rental industry are reducing the average age of their rental
fleets by accelerating the turnover of their equipment, thereby increasing
sales of aerial work platforms. At the same time, the consolidation of the
historically fragmented equipment rental industry in the United States has led
to the emergence of several national and regional equipment rental companies
(other than Horizon) which have greater access to capital. In addition, these
large industrial equipment rental companies are expanding the availability of
aerial work platforms from larger industrial metropolitan centers to more
geographically diverse and smaller industrial and non-industrial areas.
- - Safety regulations are increasing. Product liability concerns in the United
States and an increase in the number and scope of government-mandated safety
regulations, especially in developing countries, have spurred an increase in
the development of safety features and improved the cost effectiveness of
aerial work platforms compared to scaffolding, cranes, forklifts and ladders.
The aerial work platform industry is highly competitive. In selling its
aerial work platform products, UpRight experiences competition from other
manufacturers of aerial work platforms and from alternative equipment. UpRight
competes in the aerial work platform industry primarily with several competitors
which are part of, or affiliated with, companies that are larger and have
greater financial resources than UpRight. The equipment rental industry is
highly competitive as well. Horizon's competitors include national and
multiregional companies, regional competitors that operate in a small number of
states, small, independent businesses with one or a few rental locations and
equipment vendors and dealers which both sell and rent equipment directly to end
users.
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BUSINESS STRATEGY
The Company intends to actively seek opportunities for continued growth by
providing capital, strategic and financial direction and management support to
assist UpRight and Horizon in executing their respective business strategies as
described below. In addition, the Company continually analyzes and evaluates
acquisition candidates and opportunities for future growth. The Company may make
acquisitions of businesses that are complementary, ancillary or related to those
of UpRight and Horizon.
UpRight
Continually Introduce New Products and Extend Product Line. UpRight
management believes that it is among the leaders in new product development in
the industry. In addition to its extensive scissor lift product line, UpRight
intends to systematically expand its product offerings with a line of
articulated and telescopic boom lifts, the first of which was introduced in
February 1997. UpRight expects to leverage its existing domestic and
international distribution capabilities to accelerate market acceptance and
market share of its boom lifts. The line extension strategy will be targeted to
the most frequently utilized models with broad end user applications and to less
frequently utilized models servicing underserved niches with specific end user
applications. UpRight has recently completed the construction of approximately
80,000 square feet of additional assembly and production capacity and intends to
add over time an additional 300,000 square feet of manufacturing facilities to
accommodate the anticipated growth in its boom lift sales.
Enhance Product Reliability. UpRight believes its products are well
regarded in the industry for their quality, features and reliability and have
among the highest resale values in the used equipment aftermarket. In addition,
management believes that repair and maintenance costs for its equipment compare
favorably to those of its competitors within the industry. UpRight has increased
and expects to continue to increase its research, development and engineering
efforts to integrate new components and materials technology into its products
in order to further enhance product quality and reliability.
Provide High Level of Customer Service. UpRight believes that its level of
customer service is among the highest in the industry and that its reputation
for service is excellent. UpRight's customer service includes technical support
for dealers and rental companies, repair and maintenance services, spare parts
availability, product upgrades and operational and safety training. UpRight
intends to continue to provide operational training, safety instruction and
other services to enhance customer loyalty.
Expand Distribution Network. UpRight intends to expand its distribution
network of domestic and international dealers and industrial equipment rental
companies primarily by (i) adding dealers in existing markets to increase
penetration and market presence, (ii) adding dealers in new markets,
particularly outside the United States, (iii) following existing dealers'
expansion into a greater number of locations, and (iv) expanding its boom lift
line which will make UpRight's product line comprehensive and should enhance its
attractiveness to certain large industrial equipment rental companies.
Improve Production Efficiency. UpRight intends to continue to automate and
upgrade production equipment, redesign and reengineer products to standardize
and simplify parts and components, work closely with its suppliers to reduce
parts and components costs, including inventory costs, and enhance quality
control to reduce production and delivery cycles. In addition, UpRight believes
that its new product development and product line extensions will help it
realize economies of scale.
Expand Through Selective Acquisitions. UpRight intends to make selective
acquisitions of complementary companies to accelerate the expansion of its
product line or distribution network or to vertically integrate the manufacture
of certain parts and components used in its products to improve cost efficiency
and enhance product reliability. Management believes many of the parts and
components used in UpRight's products are manufactured by a number of small
companies which, if acquired, could be integrated into UpRight's research,
design and production capabilities while retaining the existing customer base of
such acquired companies.
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Horizon
Focus on Small- to Mid-Sized Customers. Horizon intends to continue
focusing on small- to mid-sized companies in the construction market, including
users in specialized trades, such as electrical, painting, HVAC and mechanical
contractors, and in the industrial market, including users engaged in the
maintenance of warehouses, manufacturing plants and commercial and institutional
facilities. Management believes that its comprehensive service and technical
support, which includes safety and operational training, 24-hour emergency
repair service, spare part supplies and related services, provides a competitive
advantage with these customers and, further, that focusing on these customers
allows Horizon to achieve higher dollar utilization, more stable day utilization
and higher margins than if Horizon targeted larger end users.
Expand the Number of Locations. Horizon currently operates in 14 locations
dispersed among industrial areas on the East Coast and West Coast and in the
Midwest and Southwest. In late 1995, Horizon began to implement a hub-and-spoke
expansion strategy whereby one branch supports multiple satellite rental offices
to maximize the availability and utilization of its rental fleet within a given
geographic area while cost-efficiently increasing market penetration. Because
many of its customers are small- to mid-sized companies, maintaining a local
presence and relationship is important in retaining customer loyalty. Horizon
has identified several additional markets in which to open branches, as well as
selectively add satellite offices, within the next several years. Satellite
offices are intended to be opened to service existing customers' needs as they
expand or relocate, and to attract new customers. As part of this strategy and
to accelerate its expansion efforts, Horizon may make strategic acquisitions of
regional or local equipment rental and sales companies.
Expand and Upgrade Rental Fleet. Horizon has systematically expanded its
rental fleet primarily to meet the demands of specific markets. Within the next
two fiscal years, Horizon plans to add approximately $11 million (at "dealer
cost," as defined herein) of additional equipment to upgrade its existing fleet
and approximately $6 million (at dealer cost) of additional equipment to offer
greater availability and more comprehensive product mix to its customers. See
"Capital Expansion Program." Horizon does not intend to significantly change the
composition of its rental fleet towards boom lifts, because its existing
customer base has historically utilized scissor lifts and boom lift usage
declines substantially during the winter and poor weather months, which
decreases equipment utilization.
Manage the Revenue Mix of Rentals and Sales. Horizon targets a 50%/40%/10%
mix of revenue generated from (i) rentals, including delivery charges and damage
waivers, (ii) sales of new and used equipment and (iii) miscellaneous sources,
including service revenue on customer-owned equipment, sales of spare parts and
safety training certification fees, respectively. Horizon management believes
this strategy diversifies Horizon's customer base beyond the construction
industry and mitigates the impact of seasonal and economic cycles. Equipment
sales to industrial companies for fiscal 1997 accounted for approximately 70% of
total Horizon sales of new and used equipment. Although Horizon expects that its
new branches and satellite offices will generate higher percentages of rental
revenue, until those branches and satellite offices are more established in
their respective markets, Horizon intends to continue to target a similar
revenue mix through an increase in sales of new and used equipment and spare
parts at its existing locations.
9
<PAGE> 10
THE EXCHANGE OFFER
Purpose of the Exchange
Offer...................... The Original Notes were sold in a transaction
exempt from the registration requirements of the
Securities Act by the Company on June 10, 1997 to
CIBC Wood Gundy Securities Corp. and BancAmerica
Robertson Stephens (formerly BancAmerica
Securities, Inc.) (collectively, the "Initial
Purchasers"). In connection therewith, the Company
executed and delivered, for the benefit of the
holders of the Original Notes, a Registration
Rights Agreement dated June 10, 1997 (the
"Registration Rights Agreement"), which is filed as
an exhibit to the Registration Statement of which
this Prospectus is a part, providing for, among
other things, the Exchange Offer so that the
Exchange Notes will be freely transferable by the
holders thereof without registration or any
prospectus delivery requirements under the
Securities Act, except that a "dealer" or any of
its "affiliates" (as such terms are defined under
the Securities Act), who exchanges Original Notes
held for its own account will be required to
deliver copies of this Prospectus in connection
with any resale of the Exchange Notes issued in
exchange for such Original Notes. See "The Exchange
Offer -- Purposes and Effects of the Exchange
Offer" and "Plan of Distribution."
The Exchange Offer......... The Company is offering to exchange $1,000
principal amount of Exchange Notes for each $1,000
principal amount of Original Notes that are
properly tendered and accepted. The Company will
issue Exchange Notes on or promptly after the
Expiration Date. There is $105,000,000 aggregate
principal amount of Original Notes outstanding. The
Original Notes and the Exchange Notes are
collectively referred to herein as the "Notes." The
terms of the Exchange Notes are substantially
identical in all respects (including principal
amount, interest rate and maturity) to the terms of
the Original Notes for which they may be exchanged
pursuant to the Exchange Offer, except that (i) the
Exchange Notes are freely transferable by holders
thereof (other than as provided herein), and are
not subject to any covenant restricting transfer
absent registration under the Securities Act and
(ii) holders of the Exchange Notes will not be
entitled to certain rights of holders of the
Original Notes under the Registration Rights
Agreement, which rights will terminate upon the
consummation of the Exchange Offer. See "The
Exchange Offer."
The Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Original
Notes being tendered for exchange.
Based on an interpretation by the staff of the
Securities and Exchange Commission (the
"Commission") set forth in no-action letters issued
to third parties, the Company believes that the
Exchange Notes issued pursuant to the Exchange
Offer in exchange for Original Notes may be offered
for resale, resold and otherwise transferred by a
holder thereof (other than (i) a broker-dealer who
purchases such Exchange Notes directly from the
Company to resell pursuant to Rule 144A under the
Securities Act or any other available exemption
under the Securities Act or (ii) a person that is
an affiliate (as defined in Rule 405 under the
Securities Act) of the Company) without compliance
with the registration and prospectus delivery
provisions of the Securities Act, provided that the
holder is acquiring the Exchange Notes in the
ordinary course of its business and is not
participating, and had no arrangement or
understanding with any person to participate, in
the distribution of the
10
<PAGE> 11
Exchange Notes. Each broker-dealer that receives
the Exchange Notes for its own account in exchange
for the Original Notes, where such Notes are
acquired by such broker-dealer as a result of
market-making activities or other trading
activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such
Exchange Notes.
Registration Rights
Agreement.................. The Original Notes were sold by the Company on June
10, 1997 to the Initial Purchasers pursuant to a
Securities Purchase Agreement dated as of June 4,
1997 by and among the Company, the Guarantors named
therein and the Initial Purchasers named therein
(the "Purchase Agreement"). Pursuant to the
Purchase Agreement, the Company and the Initial
Purchasers entered into the Registration Rights
Agreement which grants the holders of the Original
Notes certain exchange and registration rights. See
"The Exchange Offer -- Termination of Certain
Rights." This Exchange Offer is intended to satisfy
such rights, which terminate upon the consummation
of the Exchange Offer. The holders of the Exchange
Notes are not entitled to any exchange or
registration rights with respect to the Exchange
Notes.
Expiration Date............ The Exchange Offer will expire at 5:00 p.m., New
York City time, on December 1, 1997, unless the
Exchange Offer is extended by the Company in its
reasonable discretion, in which case the term
"Expiration Date" shall mean the latest date and
time to which the Exchange Offer is extended.
Accrued Interest on
the Exchange Notes and
Original Notes........... Interest on the Exchange Notes will accrue from the
last interest payment date on which interest was
paid on the Notes surrendered in exchange therefor
or, if no interest has been paid on the Notes, from
June 10, 1997. Holders whose Original Notes are
accepted for exchange will be deemed to have waived
the right to receive any interest accrued on the
Original Notes.
Conditions to the Exchange
Offer.................... The Exchange Offer is subject to certain customary
conditions, which may be waived by the Company, set
forth below. See "The Exchange Offer -- Certain
Conditions to the Exchange Offer." The Exchange
Offer is not conditioned upon any minimum aggregate
principal amount of Original Notes being tendered
for exchange. The Company reserves the right to
terminate or amend the Exchange Offer at any time
prior to the Expiration Date upon the occurrence of
any of the following conditions: (a) any action or
proceeding is instituted or threatened with respect
to the Exchange Offer which, in the reasonable
judgment of the Company might impair the ability of
the Company to proceed with or have a material
adverse effect on the contemplated benefits of the
Exchange Offer to the Company or there shall have
occurred any material adverse development in any
existing action or proceeding with respect to the
Company or its subsidiaries; (b) there shall have
been a material adverse change, or development
involving a prospective change, in the business or
financial affairs of the Company which, in the
reasonable judgment of the Company might impair the
ability of the Company to proceed with or have a
material adverse effect on the contemplated
benefits of the Exchange Offer to the Company; (c)
there shall have been proposed, adopted or enacted
any law, statute, rule or
11
<PAGE> 12
regulation which could reasonably be expected to
impair the ability of the Company to proceed with
or have a material adverse effect on the
contemplated benefits of the Exchange Offer to the
Company; or (d) any governmental approval which the
Company, in its reasonable discretion, deems
necessary for the consummation of the Exchange
Offer shall have not been obtained.
Procedures for Tendering
Original Notes........... Each holder of Original Notes wishing to accept the
Exchange Offer must complete, sign and date the
Letter of Transmittal, or a facsimile thereof, in
accordance with the instructions contained herein
and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together
with the Original Notes and any other required
documentation to the exchange agent (the "Exchange
Agent") at the address set forth herein. Original
Notes may be physically delivered, but physical
delivery is not required if a confirmation of a
book-entry transfer of such Original Notes to the
Exchange Agent's account at The Depository Trust
Company ("DTC" or the "Depository") is delivered in
a timely fashion. By executing the Letter of
Transmittal, each holder will represent to the
Company that, among other things, the Exchange
Notes acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of business
of the person receiving such Exchange Notes,
whether or not such person is the holder, that
neither the holder nor any such other person is
engaged in, or intends to engage in, or has an
arrangement or understanding with any person to
participate in, the distribution of such Exchange
Notes and that neither the holder nor any such
other person is an "affiliate," as defined under
Rule 405 of the Securities Act, of the Company.
Each broker or dealer that receives Exchange Notes
for its own account in exchange for Original Notes,
where such Original Notes were acquired by such
broker or dealer as a result of market-making
activities or other trading activities, must
acknowledge that it will deliver a prospectus in
connection with any resale of such Exchange Notes.
See "The Exchange Offer -- Procedures for
Tendering" and "Plan of Distribution."
Special Procedures for
Beneficial Owners.......... Any beneficial owner whose Original Notes are
registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and
who wishes to tender should contact such registered
holder promptly and instruct such registered holder
to tender on such beneficial owner's behalf. If
such beneficial owner wishes to tender on such
owner's own behalf, such owner must, prior to
completing and executing the Letter of Transmittal
and delivering his Original Notes, either make
appropriate arrangements to register ownership of
the Original Notes in such owner's name or obtain a
properly completed bond power from the registered
holder. The transfer of registered ownership may
take considerable time. See "The Exchange
Offer -- Procedures for Tendering."
Guaranteed Delivery
Procedures............... Holders of Original Notes who wish to tender their
Original Notes and whose Original Notes are not
immediately available or who cannot deliver their
Original Notes, the Letter of Transmittal or any
other documents required by the Letter of
Transmittal to the Exchange Agent prior to the
Expiration Date, must tender their Original Notes
according
12
<PAGE> 13
to the guaranteed delivery procedures set forth in
the "The Exchange Offer -- Guaranteed Delivery
Procedures."
Acceptance of the Original
Notes and Delivery of the
Exchange Notes........... Subject to the satisfaction or waiver of the
conditions to the Exchange Offer, the Company will
accept for exchange any and all Original Notes
which are properly tendered in the Exchange Offer
prior to the Expiration Date. The Exchange Notes
issued pursuant to the Exchange Offer will be
delivered on the earliest practicable date
following the Expiration Date. See "The Exchange
Offer -- Terms of the Exchange Offer."
Withdrawal Rights.......... Tenders of the Original Notes may be withdrawn at
any time prior to the Expiration Date. See "The
Exchange Offer -- Withdrawal of Tenders."
Certain Federal Income Tax
Considerations........... For a discussion of certain federal income tax
considerations relating to the exchange of the
Exchange Notes for the Original Notes, see "Certain
Federal Income Tax Considerations."
Exchange Agent............. U.S. Trust Company of California, N.A. is serving
as the Exchange Agent in connection with the
Exchange Offer. See "The Exchange Offer -- Exchange
Agent."
Effect on Holders of the
Original Notes............. As a result of the making of, and upon acceptance
for exchange of all validly tendered Original Notes
pursuant to the terms of, this Exchange Offer, the
Company will have fulfilled one of the covenants
contained in the Registration Rights Agreement and,
accordingly, there will be no increase in the
interest rate on the Original Notes pursuant to the
applicable terms of the Registration Rights
Agreement due to the Exchange Offer. Holders of the
Original Notes who do not tender their Original
Notes will be entitled to all the rights and
limitations applicable thereto under the Indenture
dated as of June 10, 1997, among the Company and
U.S. Trust Company of California, N.A., as trustee
(the "Trustee"), relating to the Original Notes and
the Exchange Notes (the "Indenture"), except for
any rights under the Indenture or the Registration
Rights Agreement, which by their terms terminate or
cease to have further effectiveness as a result of
the making of, and the acceptance for exchange of
all validly tendered Original Notes pursuant to,
the Exchange Offer. All untendered Original Notes
will continue to be subject to the restrictions on
transfer provided for in the Original Notes and in
the Indenture. To the extent that Original Notes
are tendered and accepted in the Exchange Offer,
the trading market for untendered Original Notes
could be adversely affected.
Use of Proceeds............ There will be no cash proceeds to the Company from
the exchange pursuant to the Exchange Offer.
THE NOTES
The Exchange Notes......... The Exchange Offer applies to $105,000,000
aggregate principal amount of the Original Notes.
The form and terms of the Exchange Notes are the
same as the form and terms of the Original Notes
except that (i) the exchange will have been
registered under the Securities Act and, therefore,
the Exchange Notes will not bear legends
restricting their
13
<PAGE> 14
transfer pursuant to the Securities Act, and (ii)
holders of the Exchange Notes will not be entitled
to certain rights of holders of the Original Notes
under the Registration Rights Agreement, which
rights will terminate upon consummation of the
Exchange Offer. The Exchange Notes will evidence
the same debt as the Notes (which they replace) and
will be issued under, and be entitled to the
benefits of, the Indenture. See "Description of the
Notes" for further information and for definitions
of certain capitalized terms used below.
Issuer..................... W.R. Carpenter North America, Inc.
Maturity Date.............. June 15, 2007.
Interest Payment Dates..... Interest will accrue on the Notes from June 10,
1997, the issue date of the Original Notes (the
"Issue Date") and will be payable semiannually on
each June 15 and December 15, commencing December
15, 1997.
Ranking.................... The Notes will be general unsecured obligations of
the Company and will rank subordinate in right of
payment to any existing and future Senior
Indebtedness of the Company and senior in right of
payment to all subordinated indebtedness of the
Company. As of the date of this Prospectus, other
than the Original Notes, the Company has no
indebtedness ranking pari passu with the Exchange
Notes. As of June 29, 1997, after giving effect to
the offering of the Original Notes and the
application of the net proceeds thereof, the
Company (excluding the indebtedness of its
subsidiaries) would have had no Senior Indebtedness
outstanding. Although the Company has no plans to
issue Senior Indebtedness in the near term, the
Company and its subsidiaries may issue Senior
Indebtedness in the future subject to the
limitations contained in the Indenture. See "Risk
Factors -- Substantial Leverage."
Guarantees................. The Notes will be unconditionally guaranteed on an
unsecured senior subordinated basis, fully and
unconditionally, jointly and severally by each of
the Company's subsidiaries. As of the Issue Date,
UpRight and Horizon comprised all of the operating
subsidiaries of the Company. See "Description of
the Notes -- Certain Covenants -- Limitation on
Creation of Subsidiaries." Each Guarantee will be
subordinated to all Senior Indebtedness of such
Guarantor. As of June 29, 1997, after giving effect
to the offering of the Original Notes and the
application of the net proceeds thereof, UpRight
and Horizon had $6.6 million and $0.0,
respectively, of Senior Indebtedness outstanding.
See "Description of the Notes -- Guarantees."
Optional Redemption........ The Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or
after June 15, 2002 at the redemption prices set
forth herein, plus accrued and unpaid interest
thereon to the redemption date. In addition, the
Company may redeem in the aggregate up to 35% of
the original principal amount of the Notes at any
time and from time to time prior to June 15, 2000,
at a redemption price equal to 110.625% of the
aggregate principal amount thereof, plus accrued
and unpaid interest thereon to the redemption date,
with the Net Proceeds of one or more Public Equity
Offerings; provided, that at least $75.0 million
aggregate principal amount of the Notes originally
issued remain outstanding immediately after the
occurrence of any such redemption and that any such
redemption occurs within 90 days following the
closing of
14
<PAGE> 15
any such Public Equity Offering. See "Description
of the Notes -- Optional Redemption."
Change of Control.......... Upon a Change of Control (as defined herein), the
Company will be required to make an offer to
purchase all outstanding Notes at a price equal to
101% of the principal amount thereof, plus accrued
and unpaid interest thereon to the purchase date.
See "Description of the Notes -- Change of Control
Offer."
Certain Covenants.......... The Indenture (as defined herein) contains
covenants that, among other things, restrict the
ability of the Company and its Restricted
Subsidiaries (as defined herein) to: (i) incur
additional indebtedness; (ii) pay dividends and
make distributions; (iii) issue stock of
subsidiaries; (iv) make certain investments; (v)
repurchase stock; (vi) create liens; (vii) enter
into transactions with affiliates; (viii) enter
into sale and leaseback transactions; (ix) create
dividend or other payment restrictions affecting
Restricted Subsidiaries; (x) merge or consolidate
the Company or any of the Guarantors; and (xi)
transfer or sell assets. These covenants are
subject to a number of important exceptions. See
"Description of the Notes -- Certain Covenants."
Asset Sales Proceeds....... The Company will be obligated in certain instances
to make offers to purchase the Notes at a purchase
price in cash equal to 100% of the principal amount
thereof plus accrued and unpaid interest to the
date of purchase with the net cash proceeds of
certain asset sales. See "Description of the
Notes -- Certain Covenants -- Limitation on Certain
Asset Sales."
For more complete information regarding the Notes, including the
definitions of certain capitalized terms used above, see "Description of the
Notes."
RISK FACTORS
Prospective purchasers of the Notes should carefully consider the
information set forth under the caption "Risk Factors," and all other
information set forth in this Prospectus, in evaluating the Notes and the
Company.
15
<PAGE> 16
SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The following table sets forth summary historical consolidated financial
data with respect to the Company for the periods ended on and as of the dates
indicated. The summary historical consolidated financial data for fiscal years
1995, 1996 and 1997 are derived from and should be read in conjunction with the
consolidated financial statements of the Company audited by Pannell Kerr
Forster, Certified Public Accountants, A Professional Corporation, Los Angeles,
California, including the Company's consolidated balance sheets at June 30, 1996
and June 29, 1997 and the related consolidated statements of operations and cash
flows for each of the three fiscal years in the period ended June 29, 1997 and
the notes thereto appearing elsewhere in this Prospectus. The summary historical
consolidated financial information for the fiscal year ended July 3, 1994 has
been derived from the Company's consolidated financial statements audited by
Pannell Kerr Forster. The summary historical consolidated financial data for the
fiscal year ended June 27, 1993 have been derived from unaudited financial
information prepared by the Company. The unaudited summary pro forma statement
of operations data and other data for the fiscal year ended June 29, 1997 give
effect to the offering of the Original Notes as if it had been completed on July
1, 1996. The pro forma data should be read in conjunction with the Company's
consolidated financial statements and the notes thereto appearing elsewhere in
this Prospectus and "Management's Discussion and Analysis of Financial Condition
and Results of Operations." The pro forma financial data are not necessarily
indicative of the results that would have occurred had the offering of the
Original Notes been completed on the dates indicated or of the Company's actual
or future operating results or financial condition. Other than those pro forma
adjustments reflecting the offering of the Original Notes, the offering of the
Exchange Notes will have no effect on the Company's financial condition and
results of operations.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------------
JUNE 27, JULY 3, JULY 2, JUNE 30, JUNE 29,
1993(1) 1994(1) 1995 1996 1997
-------- ------- ------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA:
Revenue(2)............................................... $ 67,005 $70,387 $85,157 $117,903 $139,904
Cost of revenue.......................................... 44,539 47,365 58,217 78,638 94,315
-------- ------- ------- -------- --------
Gross profit............................................. 22,466 23,022 26,940 39,265 45,589
Research and development expenses........................ 1,457 1,732 1,817 2,865 4,281
Product liability costs.................................. 1,994 1,827 2,094 3,015 3,115
Selling, general and administrative expenses............. 15,884 15,051 13,982 15,124 18,117
-------- ------- ------- -------- --------
Income from operations................................... 3,131 4,412 9,047 18,261 20,076
Interest expense, net.................................... 4,341 3,214 2,566 2,907 3,983
Other expense, net(3).................................... 1,130 4,252 186 539 --
-------- ------- ------- -------- --------
Income (loss) before provision for income taxes.......... (2,340) (3,054) 6,295 14,815 16,093
Provision (benefit) for income taxes..................... 15 (1,221) 2,608 6,047 6,131
Cumulative effect on prior years of accounting change.... -- 6,663 -- -- --
-------- ------- ------- -------- --------
Net income (loss)........................................ $ (2,355) $ 4,830 $ 3,687 $ 8,768 $ 9,962
======== ======= ======= ======== ========
OTHER DATA:
EBITDA(4)................................................ $ 6,812 $ 8,240 $12,626 $ 22,695 $ 25,880
Depreciation and amortization............................ 3,681 3,828 3,579 4,434 5,804
Capital expenditures..................................... 4,014 8,159 7,949 14,720 18,104
Gross margin............................................. 33.5% 32.7% 31.6% 33.3% 32.6%
EBITDA margin............................................ 10.2 11.7 14.8 19.3 18.5
Ratio of EBITDA to interest expense, net................. 1.57x 2.56x 4.92x 7.81x 6.50x
</TABLE>
16
<PAGE> 17
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 29, 1997
------------------------------------
PRO FORMA
ACTUAL ADJUSTMENTS PRO FORMA
-------- ----------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CONDENSED OPERATING STATEMENT DATA(5):
Revenue..................................................... $139,904 $ 139,904
Cost of revenue............................................. 94,315 94,315
-------- --------
Gross profit................................................ 45,589 45,589
Research and development expenses........................... 4,281 4,281
Product liability costs..................................... 3,115 3,115
Selling, general and administrative expenses................ 18,117 18,117
-------- --------
Income from operations...................................... 20,076 20,076
Interest expense, net(6).................................... 3,983 7,747(5a) 11,730
-------- ------ --------
Income before provision for income taxes.................... 16,093 8,346
Provision for income taxes.................................. 6,131 (2,951)(5b) 3,180
-------- ------ --------
Net income.................................................. $ 9,962 $ 5,166
======== ========
OTHER DATA:
EBITDA(4)................................................... $ 25,880 $ 25,880
Depreciation and amortization............................... 5,804 5,804
Capital expenditures........................................ 18,104 18,104
Gross margin................................................ 32.6% 32.6%
EBITDA margin............................................... 18.5% 18.5%
Ratio of EBITDA to interest expense, net.................... 6.50x 2.21x
</TABLE>
<TABLE>
<CAPTION>
JUNE
JUNE 27, JULY 3, JULY 2, 30, JUNE 29,
1993(1) 1994(1) 1995 1996 1997
-------- ------- ------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONDENSED BALANCE SHEET DATA:
Cash and cash equivalents...................... $ 3,341 $ 1,297 $ 4,314 $11,164 $ 77,345
Accounts receivable, net....................... 8,494 10,772 12,426 15,593 23,591
Inventories.................................... 12,138 12,899 9,969 15,301 16,833
Prepaid expenses and other..................... 2,958 3,796 2,768 2,756 2,864
-------- ------- ------- ------- --------
Total current assets................. 26,931 28,764 29,477 44,814 120,633
Property, plant and equipment, net............. 19,254 20,924 21,673 30,816 42,143
Other assets................................... 371 6,337 3,932 355 5,049
-------- ------- ------- ------- --------
Total assets......................... $ 46,556 $56,025 $55,082 $75,985 $167,825
======== ======= ======= ======= ========
Accounts payable............................... $ 9,553 $10,945 $10,054 $10,786 $ 11,585
Accrued expenses............................... 5,883 11,322 4,887 7,493 9,373
Current debt................................... 13,777 7,000 18,807 18,658 840
-------- ------- ------- ------- --------
Total current liabilities............ 29,213 29,267 33,748 36,937 21,798
Long term debt, net of current portion......... 40,327 19,416 11,649 18,341 113,044
Other long-term liabilities.................... 2,365 2,731 1,387 3,638 5,952
-------- ------- ------- ------- --------
Total liabilities.................... 71,905 51,414 46,784 58,916 140,794
Stockholder's equity (deficit)................. (25,349) 4,611 8,298 17,069 27,031
-------- ------- ------- ------- --------
Total liabilities and stockholder's
equity (deficit)................... $ 46,556 $56,025 $55,082 $75,985 $167,825
======== ======= ======= ======= ========
</TABLE>
- ---------------
(1) Results include operations and capital expenditures of Bacon-Universal
Company, Inc. ("Bacon"), a former wholly-owned subsidiary of the Company
sold in July 1994. Results of operations and capital
17
<PAGE> 18
expenditures of the Company excluding the operating results and capital
expenditures of Bacon are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------
JUNE
27, JULY 3,
1993 1994
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Revenue.......................................................... $52,293 $57,429
Gross profit..................................................... 18,400 19,293
Income from operations........................................... 4,419 4,518
EBITDA........................................................... 7,101 7,478
Capital expenditures............................................. 2,822 7,031
Gross margin..................................................... 35.2% 33.6%
EBITDA margin.................................................... 13.6 13.0
</TABLE>
(2) The following details UpRight's and Horizon's revenue, and the elimination
of intercompany sales for fiscal years 1994, 1995, 1996 and 1997:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------
JULY 3, JULY 2, JUNE 30, JUNE 29,
1994 1995 1996 1997
------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
UpRight........................................ $40,694 $ 65,593 $ 93,273 $110,471
Horizon........................................ 25,282 32,236 38,112 44,315
Intercompany sales............................. (8,547) (12,672) (13,482) (14,882)
------- -------- -------- -------
$57,429 $ 85,157 $117,903 $139,904
======= ======== ======== =======
</TABLE>
Fiscal 1994 excludes $13.0 million in revenue from Bacon. See footnote (1)
above. For fiscal years 1992 and 1993, Horizon was a division of UpRight
and did not report financial results separately.
(3) For fiscal 1994, includes $4.0 million loss on sale of Bacon.
(4) EBITDA represents income before extraordinary item, net interest expense,
financing costs, income taxes, depreciation and amortization and other
expenses and income. The Company has included information concerning EBITDA
in this Prospectus because it is used by certain investors as a measure of a
company's ability to service its debt obligations. EBITDA should not be used
as an alternative to, or be considered more meaningful than, operating
income, net income or cash flow as an indicator of the Company's operating
performance.
(5) Pro forma information is presented as though the Notes had been issued at
the beginning of fiscal 1997.
a -- Interest pro forma adjustment assumes the Senior subordinated notes
payable were outstanding for all of fiscal 1997, and debt paid-off with
loan proceeds were not accruing interest charges for all of fiscal 1997.
See "Use of Proceeds."
b -- The provision for income taxes pro forma adjustment reduces the
provision for income taxes at June 29, 1997 by the Company's effective
income tax rate.
(6) Pro forma amount reflects an interest rate of 10.625% on the Notes and
includes amortization of discount. Interest expense, net excludes the
amortization of deferred financing costs, including the amounts estimated to
be incurred in connection with the issuance of the Notes, and includes
actual interest income.
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RISK FACTORS
Prospective investors should consider carefully the following risk factors,
as well as the other information set forth elsewhere in this Prospectus, before
making an investment in the Notes.
SUBSTANTIAL LEVERAGE
The Company is highly leveraged. At June 29, 1997, after giving effect to
the offering of the Original Notes and the application of the net proceeds
thereof, the Company's consolidated indebtedness and stockholder's equity were
$113.9 million and $27.0 million, respectively. The Company's ability to make
scheduled payments of the principal of, or interest on, or to refinance its
indebtedness (including the Notes) depends on its future performance, which to a
certain extent is subject to economic, financial, competitive and other factors
beyond its control.
The Company believes that cash flow from operations of its subsidiaries,
together with borrowings under the credit facilities of UpRight and Horizon,
will be adequate to meet its anticipated requirements for working capital,
capital expenditures, interest payments and scheduled principal payments. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." However, any decline in the
Company's expected operating performance could have a material adverse effect on
the Company's liquidity and on its ability to service its debt and make capital
expenditures. There can be no assurance that the Company's businesses will
generate cash flow at or above expected levels. If the Company is unable to
generate sufficient cash flow from operations in the future to service its debt
and make desired capital expenditures, or if its future earnings are
insufficient to make all required principal or interest payments out of
internally generated funds, the Company may be required to refinance all or a
portion of its existing debt, sell assets or obtain additional financing. There
can be no assurance that any such refinancing or asset sales would be possible
or that any additional financing could be obtained on terms acceptable to the
Company or at all, particularly in view of the Company's high level of debt.
The Company's high level of debt will have several important effects on its
future operations, including the following: (a) the Company will have
significant cash requirements to service debt, reducing funds available for
operations, expansions and improvements and increasing the Company's
vulnerability to adverse general economic and industry conditions; (b) the
financial covenants and other restrictions contained in the credit facilities of
UpRight and Horizon, the Indenture and other agreements relating to the
Company's indebtedness require the Company to meet certain financial tests and
restrict its ability, and the ability of its Restricted Subsidiaries, to borrow
additional funds and to dispose of assets; and (c) because of the Company's debt
service requirements, funds available for working capital, capital expenditures,
acquisitions and general corporate purposes may be limited. The Company's
leveraged position may increase its vulnerability to competitive pressures and
the seasonality and cyclicality of the aerial work platform and construction
industries.
INDUSTRY CYCLICALITY; DEPENDENCE ON CONSTRUCTION INDUSTRY
Demand for new equipment manufactured by UpRight tends to be cyclical,
responding historically to varying levels of construction and industrial
activity, principally in the United States and, to a lesser extent, in other
countries. Industry growth was adversely affected by the severe downturn in
commercial construction between 1990 and 1992. From 1989 to 1991, according to
data reported by EMI, total industry unit shipments of scissor lifts and boom
lifts fell 34%, from 17,806 units to 11,748 units. During the same period,
UpRight's unit shipments of scissor lifts fell 33%, from 2,259 units to 1,508
units. There can be no assurance that the construction industry will not
experience a downturn in the future and that the Company's results of operations
will not be materially adversely impacted. Other factors affecting demand
include the availability and cost of financing for equipment purchases and the
market availability of used equipment. UpRight's management continuously
monitors these and other factors that affect demand for its equipment and
products; however, predicting levels of demand beyond a short period of time is
necessarily imprecise and demand may at times change dramatically.
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The equipment rental industry is also dependent upon the level of activity
in the commercial construction and industrial segments. Accordingly, the
equipment rental industry is sensitive to national, regional and local slowdowns
in commercial construction, as well as in particular industries. A significant
portion of Horizon's revenue is derived from customers in the construction
industry, which is highly cyclical and subject to downturns during economic
slowdowns. Consequently, Horizon's operating results may be materially adversely
affected by events or conditions in a particular region where it operates, such
as regional economic slowdowns and other factors. In addition, the Company's
operating results may be materially adversely affected by increases in interest
rates that may lead to a decline in economic activity and by adverse weather
that may lead to a decline in construction activity. There can be no assurance
that economic slowdowns or adverse conditions would not have a material adverse
affect on the Company's operating results and financial condition.
CONSOLIDATING CUSTOMER BASE; DEPENDENCE UPON MAJOR CUSTOMERS
The principal customers for UpRight's new equipment are independent
equipment distributors that primarily rent UpRight's products and provide
service support to equipment users. In recent years, there has been substantial
consolidation in ownership among rental companies, including certain customers
of UpRight, resulting in a more limited number of major customers comprising a
substantial portion of UpRight's revenue. The Company believes this
consolidation may change the relative bargaining leverage between aerial work
platform manufacturers and their customers, thereby increasing unit pricing
pressure. During fiscal years 1995, 1996 and 1997, other than Horizon, UpRight's
ten largest customers together accounted for approximately 43%, 43% and 63%,
respectively, of UpRight's revenue. Unanticipated purchasing decisions by any of
these major customers could materially adversely affect overall demand for
UpRight's products and the Company's financial performance. During recessionary
conditions, demand for equipment by equipment rental companies typically
declines more sharply than demand for equipment purchased by end users. In
addition, rental companies have accelerated the turnover of their rental fleets,
which has increased sales of aerial work platforms. There can be no assurance
that this trend will continue or that current equipment replacement policies
will be maintained.
RISKS RELATING TO GROWTH
A principal component of the Company's strategy is to continue to grow
profitably in both existing and new markets by expanding its facilities and
product lines and acquiring aerial work platform component manufacturing
companies, in the case of UpRight, and expanding its rental fleet and acquiring
or opening new rental locations, in the case of Horizon. The Company's future
growth will be dependent upon a number of factors, including the Company's
ability to successfully implement its capital expansion programs, identify
acceptable acquisition candidates, consummate acquisitions and obtain sites for
startup locations on favorable terms, successfully integrate acquired businesses
and startup locations with the Company's existing operations, expand its
customer base at existing and acquired locations and obtain financing to support
its acquisitions and planned expansion. Given the cyclical nature of demand in
the aerial work platform industry, capital investments to build or acquire
additional manufacturing facilities involve significant risks. The Company may
postpone, delay or forego any or all of its capital expansion programs depending
on market or economic conditions or the Company's financial results or revised
internal forecasts or budgets. There can be no assurance that the intended
benefits of the capital expansion programs will be realized either by
implementing such programs or, alternatively, growing through acquisitions.
As a result of the planned expansion of its facilities and product lines,
acquisitions and the opening of startup locations, the Company will experience
growth in the number of its employees, the scope of its operating and financial
systems and in the geographic area of its operations. This growth will increase
the operating complexity of the Company and the level of responsibility for both
existing and new management personnel. To manage this expected growth, the
Company intends to invest further in its operating and financial systems and to
continue to expand, train and manage its employee base. There can be no
assurance that the Company will be able to attract and retain qualified
management employees, that the Company's
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current operating and financial systems and controls will be adequate as the
Company grows, or that any steps taken to attract and retain such employees and
to improve such systems and controls will be sufficient.
SIGNIFICANCE OF NEW PRODUCT DEVELOPMENT
UpRight has devoted substantial resources to product development. New
products and models introduced by UpRight since January 1, 1994, accounted for
approximately 76% and 79% of UpRight's revenue during fiscal 1996 and 1997,
respectively. As part of its growth strategy, UpRight is developing and
introducing additional new products, including a full line of boom lifts, and is
enhancing the functions, features and options available on its existing
products. There can be no assurance that UpRight will be able to introduce these
or any other new products or enhancements in a timely manner in accordance with
customer demand, that such products will not become obsolete prior to
introduction, that the capital investments made to develop and market new or
enhanced products will be recovered, or that such products will be accepted by
the market when introduced. Successful product innovation by UpRight's
competitors that reach the market prior to comparable innovation by UpRight or
that are amenable to patent protection may materially adversely affect the
Company's financial performance.
NEED FOR CONTINUAL CAPITAL EXPENDITURES
A principal component of Horizon's strategy is to provide its rental
customers with relatively new, high-quality, well-maintained equipment. Horizon
estimates that to remain competitive it needs to replace approximately 15% of
its rental fleet each year. In addition, Horizon's business strategy
contemplates significant expansion of the size of its rental fleet and the
number of its rental locations. The annual replacement of equipment and the
continued expansion of Horizon's business will require significant capital
expenditures.
Similarly, UpRight's strategy to expand and extend its product lines and to
enhance its manufacturing capacity and efficiency will require significant
capital expenditures. See "Capital Expansion Program." There can be no assurance
that the Company in the future will have capital sufficient to fund such planned
or additional expenditures.
COMPETITION
The Company faces substantial competition, and some of the Company's
competitors are, or in the future may be, owned by larger enterprises that may
have greater financial resources and offer wider product lines than the Company.
The aerial work platform industry is highly competitive. In selling its
aerial work platform products, UpRight experiences two principal types of
competition: from other manufacturers of aerial work platforms and from
alternative equipment. UpRight competes in the aerial work platform industry
primarily with several other manufacturers, including JLG Industries, Grove
Worldwide, Skyjack and Genie Industries, which each manufacture scissor lifts,
boom lifts and portable lifts, Snorkel and Terex, which each manufacture scissor
lifts and boom lifts, and Mayville Engineering Company, which manufactures
scissor lifts and portable lifts. UpRight has recently introduced its first boom
lift product line and is currently developing additional boom lift product
lines. Several of UpRight's competitors currently offer a more comprehensive
boom lift product line. There can be no assurance that UpRight's boom lift
product lines can successfully compete against other leading manufacturers of
boom lifts. UpRight also competes with more traditional means of accomplishing
the tasks performed by aerial work platforms, including truck- and
trailer-mounted booms and, to a more limited extent, ladders, scaffolding and
other devices.
Certain of UpRight's competitors are part of, or are affiliated with,
companies that are larger and have greater financial resources than UpRight.
Several of UpRight's competitors have significantly increased or are in the
process of significantly increasing their manufacturing capacity. There can be
no assurance that this increased manufacturing capacity will not result in
increased unit pricing pressure.
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The equipment rental industry is highly competitive as well. Horizon's
competitors include national and multiregional companies, such as Prime Service,
US Rentals and Hertz Equipment Rental, regional competitors that operate in a
small number of states, small, independent businesses with one or a few rental
locations, and equipment vendors and dealers which both sell and rent equipment
directly to end users. There can be no assurance that manufacturers of the
equipment that Horizon rents will not commence or increase their efforts to rent
or resell such equipment directly to Horizon's customers. In addition, to the
extent existing or future competitors seek to gain or retain market share by
reducing rental rates and/or sales prices, Horizon may be required to lower its
prices, thereby adversely affecting the operating results of the Company.
The Company may also compete for acquisition candidates, thereby possibly
increasing the price for acquisitions or reducing the number of desirable
acquisition candidates and for startup locations, thereby possibly limiting the
number of attractive locations for expansion. There can be no assurance that
Horizon will not encounter increased competition from existing competitors and
new market entrants.
PRODUCT LIABILITY; AVAILABILITY OF INSURANCE
Use of products manufactured by UpRight and sold or rented by Horizon
involves risks of personal injury and property damage for the user and liability
exposure for the Company, UpRight and Horizon. UpRight insures against this
liability through a combination of a self-insurance retention and catastrophic
coverage in excess of the retention. UpRight monitors all incidents of which it
becomes aware involving the use of its products that result in personal injury
or property damage, and establishes accrued liability reserves on its financial
statements based on liability estimates with respect to claims arising from such
incidents. While the Company believes that its current reserves are adequate,
future or unreported incidents involving personal injury or property damage or
unanticipated variances between actual liabilities for known incidents and
Company estimates may adversely affect the Company's financial performance.
Horizon maintains general liability insurance coverage for its operations
and activities. Each of UpRight and Horizon carries coverage for general and
automobile liability and workers' compensation claims from various insurance
carriers. There can be no assurance, however, that existing or future claims
will not exceed the level of such insurance coverage, or that such insurance
will continue to be available on economically reasonable terms, or at all. In
addition, certain types of claims, such as claims for punitive damages or for
damages arising from intentional misconduct, generally are not covered by
UpRight's or Horizon's insurance. See "Business -- Legal Proceedings,
Environmental and Regulatory Matters and Employees."
AVAILABILITY OF PRODUCT COMPONENTS; RELIANCE ON SUPPLIERS
UpRight obtains raw materials and certain manufactured components from
third-party suppliers, including original equipment manufacturers and
independent distributors. To reduce materials costs and inventories, UpRight
relies on arrangements with preferred vendors as a sole source for just-in-time
delivery of many manufactured components, such as hydraulic motors, power units
and cylinders, custom wheels and tires and castings. Because UpRight maintains
limited raw materials inventories and relies on sole source suppliers for
certain of its components, even brief unanticipated delays in delivery by
suppliers, including due to labor disputes, impaired financial condition of
suppliers, weather conditions or other natural disasters, may materially
adversely affect UpRight's ability to satisfy its customers on a timely basis
and thereby adversely affect UpRight's financial performance.
RELIANCE ON FOREIGN SALES
During fiscal years 1995, 1996 and 1997, approximately 27%, 27% and 39%,
respectively, of UpRight's revenue resulted from export sales to Europe and the
Pacific Rim. See "Management's Discussion and Analysis of Financial Condition
and Results of Operations." A key element of UpRight's growth strategy is to
continue to increase export sales, and management expects that export sales as a
percentage of UpRight's revenue will continue to increase. Export sales subject
UpRight to a variety of risks, including changes in political and economic
conditions, differing legal practices, particularly in regard to product
liability claims, extended payment terms and changes in taxation, freight rates
and foreign exchange rates. There can be no
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assurance that the foregoing factors, individually or in the aggregate, will not
have a material adverse effect on UpRight's future revenue from export sales or
its financial performance.
GOVERNMENT AND ENVIRONMENTAL REGULATION
The Company's operations are subject to various federal, state and local
laws and regulations governing, among other things, worker safety, operation of
its delivery fleet, air emissions, water discharge and the generation, handling,
storage, transportation, treatment and disposal of hazardous substances and
wastes. Under such laws, an owner or operator of a facility may be liable for
the costs of removal or remediation of certain hazardous or toxic substances
located on or in, or emanating from, it and related costs of investigation, as
well as property and other damages. Such laws often impose liability without
regard to whether the owner or operator knew of, or was responsible for, the
presence of such substances at its facility. There can be no assurance that
acquired, leased or other operated facilities have been operated in compliance
with all environmental laws and regulations or that future uses or conditions
will not result in the imposition of environmental liability upon the Company or
expose the Company to third-party actions such as tort suits. See
"Business -- Legal Proceedings, Environmental and Regulatory Matters and
Employees."
DEPENDENCE ON FAVORABLE LABOR CONDITIONS
Certain of Horizon's employees are currently represented by a labor union.
See "Business -- Legal Proceedings, Environmental and Regulatory Matters and
Employees -- Employees." Certain of UpRight's employees are approached from time
to time by union representatives. As UpRight and Horizon implement their growth
strategies and become larger, they may become the target of increased union
activity, which may have an adverse effect, in the case of UpRight, on its
flexible staffing policy and manufacturing efficiencies. On August 28, 1997, the
United Paperworkers International Union held an election to certify the union as
the exclusive representative for permanent UpRight employees at its Selma,
California facility. The permanent employees at the Selma facility voted against
unionization and certification of the union. The results of the election were
certified by the National Labor Relations Board. Management of UpRight and
Horizon are unable to predict whether, if solicited in the future, any of their
non-union employees will elect to be represented by a labor union or other
collective bargaining organization. Accordingly, there can be no assurance that
the Company will continue to benefit from its current labor conditions for an
extended period of time. While UpRight management believes that its employee
relations are good, in the event that a future election takes place which
results in unionization of UpRight's Selma employees, there can be no assurance
that the effect thereof would not have a material adverse effect on the
Company's business and financial condition. See "Business -- UpRight --
Manufacturing."
HOLDING COMPANY STRUCTURE
All of the Company's income is generated by its operating subsidiaries,
UpRight and Horizon. As a result, the Company will be dependent on the earnings
and cash flow of, and dividends and distributions or advances from, its
subsidiaries to provide the funds necessary to meet its debt service
obligations, including the payment of principal of and interest on the Notes. In
particular, the Company is heavily dependent upon the operations of UpRight,
which accounted for approximately 68% and 69% of the Company's revenue (after
giving effect to intercompany elimination with Horizon) for fiscal years 1996
and 1997, respectively. There can be no assurance that the Company's
subsidiaries will generate sufficient cash flow to dividend, distribute or
advance funds to the Company. Should the Company fail to satisfy any payment
obligation under the Notes, the holders thereof would have a direct claim
therefor against the Guarantors pursuant to the Guarantees.
SUBORDINATION OF THE NOTES AND THE GUARANTEES
The payment of principal of, premium and interest on, and any other amounts
owing in respect of, the Notes is subordinated to the prior payment in full of
all existing and future Senior Indebtedness of the Company. Similarly, the
Guarantees of the Guarantors will be subordinated in right of payment to all
Senior Indebtedness of the respective Guarantors. At June 29, 1997, UpRight and
Horizon had $6.6 million and $0.0, respectively, of Senior Indebtedness
outstanding. In addition, UpRight and Horizon had $4.0 million and
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$3.0 million, respectively, of undrawn commitments available under their
respective credit facilities. The Indenture limits, but does not prohibit, the
incurrence by the Company and the Guarantors of indebtedness which constitutes
Senior Indebtedness. In the event of the bankruptcy, liquidation, dissolution,
reorganization or other winding up of the Company or its subsidiaries, the
assets of the Company or such subsidiary will be available to pay obligations on
the Notes or the Guarantees, as the case may be, only after all Senior
Indebtedness has been paid in full in cash, and there may not be sufficient
assets remaining to pay amounts due on any or all of the Notes. In addition,
under certain circumstances, the Company and its subsidiaries may not pay
principal of, premium or interest on, or any other amounts owing in respect of,
the Notes, or purchase, redeem or otherwise retire the Notes, if a payment
default or a non-payment default exists with respect to certain Senior
Indebtedness, and, in the case of a non-payment default, a payment blockage
notice has been received by the Trustee (as defined). See "Description of the
Notes -- Subordination."
RESTRICTIONS UNDER DEBT AGREEMENTS
The Indenture contains covenants that, among other things, limit the
ability of the Company and its Restricted Subsidiaries to incur additional
indebtedness, incur liens, pay dividends and make certain other restricted
payments, make investments, consummate certain asset sales, enter into certain
transactions with affiliates, issue subsidiary stock, create dividend or other
payment restrictions affecting Restricted Subsidiaries, consolidate or merge
with any other person or transfer all or substantially all of the assets of the
Company. See "Description of the Notes -- Certain Covenants."
In addition, any credit facilities that the Company and its subsidiaries
may enter into may contain restrictive covenants that will limit the ability of
the Company and its subsidiaries to prepay their indebtedness (including the
Notes and obligations under the Guarantees). Such credit facilities may also
require the borrowers thereunder to maintain specified consolidated financial
ratios and satisfy certain consolidated financial tests. UpRight's and Horizon's
ability to meet applicable financial ratios and financial tests can be affected
by events beyond their control, and there can be no assurance that UpRight or
Horizon will meet those ratios and tests. A breach of any of the covenants under
any credit facilities or the Indenture could result in a default under such
credit facilities and/or the Indenture. If an event of default occurs under any
credit facilities, the respective lenders could elect to declare all amounts
outstanding thereunder, together with accrued interest, to be immediately due
and payable. If the Company, UpRight or Horizon is unable to repay those
amounts, the lenders could proceed against the collateral granted to them to
secure that indebtedness. A substantial portion of the Company's consolidated
assets will be pledged to secure such credit facilities. See "Description of the
Notes" and "Description of Certain Indebtedness."
FRAUDULENT CONVEYANCE RISKS
In certain circumstances, the incurrence by the Company of indebtedness
such as the Notes may be subject to review under relevant state and federal
fraudulent conveyance laws if a bankruptcy case or lawsuit is commenced by or on
behalf of unpaid creditors of the Company. Under these laws, if a court were to
find that, after giving effect to the sale of the Notes and the application of
the net proceeds therefrom, either (a) the Company incurred such indebtedness
with the intent of hindering, delaying or defrauding creditors or contemplated
insolvency with a design to prefer one or more creditors to the exclusion in
whole or in part of others or (b) the Company received less than reasonably
equivalent value or consideration for incurring such indebtedness and (i) was
insolvent or rendered insolvent by reason of such transaction, (ii) was engaged
in a business or transaction for which the assets remaining with the Company
constituted unreasonably small capital or (iii) intended to incur, or believed
that it would incur, debts beyond its ability to pay such debts as they matured,
such court may subordinate such indebtedness to presently existing and future
indebtedness of the Company, avoid the issuance of such indebtedness and direct
the repayment of any amounts paid thereunder to the Company's creditors or take
other action detrimental to the holders of such indebtedness.
The Company's obligations under the Notes will be guaranteed by the
Guarantors. In certain circumstances, the incurrence by a Guarantor of a
Guarantee may be subject to review under relevant state and federal fraudulent
conveyance laws if a bankruptcy case or lawsuit is commenced by or on behalf of
unpaid creditors of such Guarantor. Under these laws, if a court were to find
that either (a) a Guarantee was incurred
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by a Guarantor with the intent of hindering, delaying or defrauding creditors or
such Guarantor contemplated insolvency with a design to prefer one or more
creditors to the exclusion in whole or in part of others or (b) such Guarantor
received less than reasonably equivalent value or consideration for incurring
such Guarantee and (i) was insolvent or rendered insolvent by reason of such
transaction, (ii) was engaged in a business or transaction for which the assets
remaining with such Guarantor constituted unreasonably small capital or (iii)
intended to incur, or believed that it would incur, debts beyond its ability to
pay such debts as they matured, such court may subordinate such Guarantee to
presently existing and future indebtedness of such Guarantor, avoid the issuance
of such Guarantee and direct the repayment of any amounts paid thereunder to
such Guarantor's creditors or take other action detrimental to the holders of
such Guarantee. A legal challenge of a Guarantee on fraudulent conveyance
grounds, may, among other things, focus on the benefits, if any, realized by the
Guarantor as a result of the issuance of the Notes by the Company.
To the extent any Guarantee were voided as a fraudulent conveyance or held
unenforceable for any other reason, holders of the Notes would cease to have any
claim in respect of such Guarantor and would be creditors solely of the Company
and any Guarantor whose Guarantee was not voided or held unenforceable. In such
event, the claims of the holders of the applicable Notes against the issuer of
an invalid Guarantee would be subject to the prior payment of all liabilities
and preferred stock claims of such Guarantor. There can be no assurance that,
after providing for all prior claims and preferred stock interests, if any,
there would be sufficient assets to satisfy the claims of the holders of the
applicable Notes relating to any voided portions of any of the Guarantees.
The measure of insolvency for purposes of determining whether a transfer is
voidable as a fraudulent conveyance varies depending upon the law of the
jurisdiction which is being applied. Generally, however, a debtor would be
considered insolvent if the sum of all its liabilities, including contingent
liabilities, were greater than the value of all its property at a fair
valuation, or if the present fair salable value of the debtor's assets were less
than the amount required to repay its probable liabilities on debts, including
contingent liabilities, as they become absolute and matured.
Based upon financial and other information currently available to it,
management of the Company believes that the Notes and the Guarantees are being
incurred for proper purposes and in good faith and that, at the time the Notes
and the Guarantees are issued, the Company and each Guarantor, as the case may
be, will be (i) neither insolvent nor rendered insolvent thereby, (ii) in
possession of sufficient capital to run its business effectively and (iii)
incurring debts within its ability to pay as the same mature or become due. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources." In reaching these conclusions,
the Company has relied upon various valuations and estimates of future cash flow
that necessarily involve a number of assumptions and choices of methodology. No
assurance can be given, however, that the assumptions and methodologies chosen
by the Company would be adopted by a court or that a court would concur with the
Company's conclusions.
CONTROL BY SOLE STOCKHOLDER
All of the Company's common stock is owned by UpRight International
Limited, which has the ability to elect all of the directors and control the
business, policies and affairs of the Company and its subsidiaries. See
"Security Ownership of Certain Beneficial Owners."
CHANGE OF CONTROL
In the event of a Change of Control, the Company will be required to offer
to purchase all of the outstanding Notes at 101% of the principal amount
thereof, plus any accrued and unpaid interest thereon to the date of the
purchase. The exercise by the holders of the Notes of their right to require the
Company to purchase the Notes upon a Change of Control could also cause a
default under other indebtedness of the Company, even if the Change of Control
itself does not, because of the financial effect of such purchase on the
Company. The Company's ability to pay cash to the holders of the Notes upon a
purchase may be limited by the Company's then-existing financial resources.
There can be no assurance that, in the event of a Change of Control, the Company
will have, or will have access to, sufficient funds or will be contractually
permitted
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under the terms of outstanding indebtedness to pay the required purchase price
for all Notes tendered by holders upon a Change of Control. See "Description of
the Notes -- Change of Control Offer."
ABSENCE OF PUBLIC MARKET; RESTRICTIONS ON TRANSFER
There is no existing market for the Notes, and the Company does not intend
to apply for listing of the Notes on any securities exchange. There can be no
assurance as to the liquidity of any markets that may develop for the Notes, the
ability of holders of the Notes to sell their Notes, or the price at which
holders would be able to sell their Notes. Future trading prices of the Notes
will depend on many factors, including, among other things, prevailing interest
rates, the Company's operating results and the market for similar securities.
The Initial Purchasers have advised the Company that they currently intend to
make a market in the Notes. However, the Initial Purchasers are not obligated to
do so and any market making may be discontinued at any time without notice.
PROCEDURES FOR TENDER OF ORIGINAL NOTES
The Exchange Notes will be issued in exchange for Original Notes only after
timely receipt by the Exchange Agent of such Original Notes, a properly
completed and duly executed Letter of Transmittal and all other required
documents. Therefore, holders of Original Notes desiring to tender such Original
Notes in exchange for Exchange Notes should allow sufficient time to ensure
timely delivery. Failure by a holder in following such procedures may result in
delay in receiving an Exchange Note on a timely basis. Neither the Exchange
Agent nor the Company is under any duty to give notification of defects or
irregularities with respect to tenders of Original Notes for exchange. Any
holder of Original Notes who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes will be required to comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with any resale transaction. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Original Notes, where such
Original Notes were acquired by such broker-dealer as a result of market-making
activities or any other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes. See
"The Exchange Offer -- Procedures for Tendering" and "Plan of Distribution."
CONSEQUENCES OF FAILURE TO EXCHANGE ORIGINAL NOTES
The Original Notes have not been registered under the Securities Act and
are subject to substantial restrictions on transfer. Original Notes that are not
tendered in exchange for Exchange Notes or are tendered but not accepted will,
following consummation of the Exchange Offer, continue to be subject to the
existing restrictions upon transfer thereof. The Company does not currently
anticipate that it will register the Original Notes under the Securities Act. To
the extent that Original Notes are tendered and accepted in the Exchange Offer,
the trading market for untendered and tendered but unaccepted Original Notes
could be adversely affected. See "The Exchange Offer -- Consequences of Failure
to Exchange."
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THE EXCHANGE OFFER
PURPOSES AND EFFECTS OF THE EXCHANGE OFFER
The Original Notes were sold by the Company on June 10, 1997 (the "Issue
Date") to the Initial Purchasers pursuant to a Securities Purchase Agreement
dated as of June 4, 1997 (the "Purchase Agreement"). As a condition to the sale
of the Original Notes, the Company and the Initial Purchasers entered into the
Registration Rights Agreement on the Issue Date. Pursuant to the Registration
Rights Agreement, the Company agreed that, unless the Exchange Offer is not
permitted by applicable law or Commission policy, it would (i) file with the
Commission a Registration Statement under the Securities Act with respect to the
Exchange Notes within 45 days after the Issue Date, (ii) use its best efforts to
cause such Registration Statement to become effective under the Securities Act
within 135 days after the Issue Date and (iii) upon effectiveness of the
Registration Statement, commence the Exchange Offer, keep the Exchange Offer
open for at least 30 days (or a longer period if required by law) and deliver to
the Exchange Agent Exchange Notes in the same aggregate principal amount at
maturity as the Original Notes that were tendered by holders thereof pursuant to
the Exchange Offer. Under existing Commission interpretations, the Exchange
Notes would in general be freely transferable after the Exchange Offer without
further registration under the Securities Act; provided, that in the case of
broker-dealers, a prospectus meeting the requirements of the Securities Act will
be delivered as required. The Company has agreed to make available a prospectus
meeting the requirements of the Securities Act to any broker-dealer for use in
connection with any resale of any such Exchange Notes acquired as described
below for such period of 180 days after the Expiration Date. A broker-dealer
that delivers such a prospectus to purchasers in connection with such resales
will be subject to certain of the civil liability provisions under the
Securities Act, and will be bound by the Registration Rights Agreement
(including certain indemnification rights and obligations). A copy of the
Registration Rights Agreement has been filed as an exhibit to the Registration
Statement of which this Prospectus is a part. The Registration Statement of
which this Prospectus is a part is intended to satisfy certain of the Company's
obligations under the Registration Rights Agreement and the Purchase Agreement.
The Company is generally not required to file any registration statement to
register any outstanding Original Notes. Holders of Original Notes who do not
tender their Original Notes or whose Original Notes are tendered but not
accepted will have to rely on exemptions to registration requirements under the
securities laws, including the Securities Act, if they wish to sell their
Original Notes.
With respect to the Exchange Notes, based upon an interpretation by the
staff of the Commission set forth in certain no-action letters issued to third
parties, the Company believes that a holder (other than (i) a broker-dealer who
purchases such Exchange Notes directly from the Company to resell pursuant to
Rule 144A or any other available exemption under the Securities Act or (ii) any
such holder which is an "affiliate" of the Company (within the meaning of Rule
405 under the Securities Act)) who exchanges Original Notes for Exchange Notes
in the ordinary course of business and who is not participating, does not intend
to participate, and has no arrangement with any person to participate, in the
distribution of the Exchange Notes, will be allowed to resell the Exchange Notes
to the public without further registration under the Securities Act and without
delivering to the purchasers of the Exchange Notes a prospectus that satisfies
the requirements of Section 10 of the Securities Act. However, if any holder
acquires the Exchange Notes in the Exchange Offer for the purpose of
distributing or participating in the distribution of the Exchange Notes or is a
broker-dealer, such holder cannot rely on the position of the staff of the
Commission enumerated in certain no-action letters issued to third parties and
must comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction, unless an exemption
from registration is otherwise available. Each broker-dealer that receives
Exchange Notes for its own account in exchange for Original Notes, where such
Original Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for
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<PAGE> 28
Original Notes where such Original Notes were acquired by such broker-dealer as
a result of market-making or other trading activities. Pursuant to the
Registration Rights Agreement, the Company has agreed to make this Prospectus,
as it may be amended or supplemented from time to time, available to
broker-dealers for use in connection with any resale for a period of 180 days
after the Expiration Date. See "Plan of Distribution."
TERMS OF THE EXCHANGE OFFER
Upon the terms and subject to the conditions set forth in this Prospectus
and in the accompanying Letter of Transmittal, the Company will accept any and
all Original Notes validly tendered and not withdrawn prior to the Expiration
Date. The Company will issue $1,000 principal amount of Exchange Notes in
exchange for each $1,000 principal amount of outstanding Original Notes
surrendered pursuant to the Exchange Offer. Holders may tender some or all of
their Original Notes pursuant to the Exchange Offer; provided, however, that
Original Notes may be tendered only in integral multiples of $1,000. The
Exchange Offer is not conditioned upon any minimum aggregate principal amount of
Original Notes being tendered for exchange.
The form and terms of the Exchange Notes are the same as the form and terms
of the Original Notes except that (i) the Exchange Notes will be registered
under the Securities Act and, therefore, will not bear legends restricting their
transfer and (ii) holders of the Exchange Notes will not be entitled to certain
rights of holders of Original Notes under the Registration Rights Agreement,
which rights will terminate upon the consummation of the Exchange Offer. The
Exchange Notes will evidence the same debt as the Original Notes (which they
replace) and will be issued under, and be entitled to the benefits of, the
Indenture, which also authorized the issuance of the Original Notes, such that
all outstanding Notes will be treated as a single class of debt securities under
the Indenture.
Interest on the Exchange Notes will accrue from the most recent date to
which interest has been paid on the Original Notes or, if no interest has been
paid, from June 10, 1997. Accordingly, registered holders of Exchange Notes on
the relevant record date for the first interest payment date following the
consummation of the Exchange Offer will receive interest accruing from the most
recent date to which interest has been paid or, if no interest has been paid,
from June 10, 1997. Original Notes accepted for exchange will cease to accrue
interest from and after the date of the consummation of the Exchange Offer.
Holders whose Original Notes are accepted for exchange will not receive any
payment in respect of interest on such Original Notes otherwise payable on any
interest payment date, the record date for which occurs on or after consummation
of the Exchange Offer.
As of the date of this Prospectus, $105,000,000 aggregate principal amount
of the Original Notes are outstanding and registered in the name of Cede & Co.,
as nominee for The Depository Trust Company (the "Depository" or "DTC"). Only a
registered holder of the Original Notes (or such holder's legal representative
or attorney-in-fact) as reflected on the records of the Trustee under the
Indenture may participate in the Exchange Offer. There will be no fixed record
date for determining registered holders of the Original Notes entitled to
participate in the Exchange Offer.
Holders of the Original Notes do not have any appraisal or dissenters'
rights under the Indenture in connection with the Exchange Offer. The Company
intends to conduct the Exchange Offer in accordance with the provisions of the
Registration Rights Agreement and the applicable requirements of the Securities
Act, the Exchange Act and the rules and regulations of the Commission
thereunder.
The Company shall be deemed to have accepted validly tendered Original
Notes when, as and if the Company has given oral or written notice thereof to
the Exchange Agent. The Exchange Agent will act as agent for the tendering
holders of Original Notes for the purposes of receiving the Exchange Notes from
the Company.
If any tendered Original Notes are not accepted for exchange because of an
invalid tender, or due to the occurrence of certain other events set forth
herein or otherwise, certificates for any such unaccepted Original Notes will be
returned without expense to the tendering holders thereof (or in the case of
Original Notes tendered by book-entry transfer, such Original Notes will be
credited to the account of such holder maintained at the Depository), as
promptly as practicable after the expiration or termination of the Exchange
Offer.
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Holders who tender Original Notes in the Exchange Offer will not be
required to pay brokerage commissions or fees or, subject to the instructions in
the Letter of Transmittal, transfer taxes with respect to the exchange of Notes
pursuant to the Exchange Offer. The Company will pay all charges and expenses,
other than certain applicable taxes described below, in connection with the
Exchange Offer. See "-- Fees and Expenses."
EXPIRATION DATE; EXTENSIONS; TERMINATION
The term "Expiration Date" shall mean 5:00 p.m., New York City time, on
December 1, 1997, unless the Company, in its sole discretion, extends the
Exchange Offer, in which case the term "Expiration Date" shall mean the latest
date and time to which the Exchange Offer is extended.
In order to extend the Exchange Offer, the Company will notify the Exchange
Agent of any extension by oral (promptly confirmed in writing) or written notice
and will make a public announcement thereof, each prior to 9:00 a.m., New York
City time, on the next business day after the previously scheduled expiration
date of the Exchange Offer. Without limiting the manner in which the Company may
choose to make a public announcement of any delay, extension, amendment or
termination of the Exchange Offer, the Company shall have no obligation to
publish, advertise or otherwise communicate any such public announcement, other
than by making a timely release to an appropriate news agency.
The Company reserves the right, in its sole discretion, (i) to delay
accepting any Original Notes, (ii) to extend the Exchange Offer, (iii) if any
conditions set forth below under "-- Certain Conditions to the Exchange Offer"
shall not have been satisfied, to terminate the Exchange Offer by giving oral or
written notice of such delay, extension or termination to the Exchange Agent or
(iv) to amend the terms of the Exchange Offer in any manner. Any such delay in
acceptance, extension, termination or amendment will be followed as promptly as
practicable by oral or written notice thereof to the registered holders. If the
Exchange Offer is amended in a manner determined by the Company to constitute a
material change, the Company will promptly disclose such amendment by means of a
prospectus supplement that will be distributed to the registered holders of
Original Notes, and the Company will extend the Exchange Offer for a period of
five to ten business days, depending upon the significance of the amendment and
the manner of disclosure to such registered holders, if the Exchange Offer would
otherwise expire during such five to ten business day period. The rights
reserved by the Company in this paragraph are in addition to the Company's
rights set forth below under the caption "-- Certain Conditions to the Exchange
Offer."
If the Company extends the period of time during which the Exchange Offer
is open, or if it is delayed in accepting for exchange of, or in issuing and
exchanging the Exchange Notes for, any Original Notes, or is unable to accept
for exchange of, or issue Exchange Notes for, any Original Notes pursuant to the
Exchange Offer for any reason, then, without prejudice to the Company's rights
under the Exchange Offer, the Exchange Agent may, on behalf of the Company,
retain all Original Notes tendered, and such Original Notes may not be withdrawn
except as otherwise provided below in "-- Withdrawal of Tenders." The adoption
by the Company of the right to delay acceptance for exchange of, or the issuance
and the exchange of the Exchange Notes, for any Original Notes is subject to
applicable law, including Rule 14e-1(c) under the Exchange Act, which requires
that the Company pay the consideration offered or return the Original Notes
deposited by or on behalf of the holders thereof promptly after the termination
or withdrawal of the Exchange Offer.
PROCEDURES FOR TENDERING
Only a registered holder of Original Notes may tender such Original Notes
in the Exchange Offer. To tender in the Exchange Offer, a holder must complete,
sign and date the Letter of Transmittal, or facsimile thereof, have the
signature thereon guaranteed if required by the Letter of Transmittal and mail
or otherwise deliver such Letter of Transmittal or such facsimile to the
Exchange Agent at the address set forth below under "-- Exchange Agent" for
receipt prior to the Expiration Date. In addition, either (i) certificates for
such Notes must be received by the Exchange Agent along with the Letter of
Transmittal, or (ii) a timely confirmation of a book-entry transfer of such
Notes, if such procedure is available, into the Exchange Agent's account at DTC
pursuant to the procedure for book-entry transfer described below, must be
received by the
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Exchange Agent prior to the Expiration Date, or (iii) the holder must comply
with the guaranteed delivery procedures described below. See "-- Guaranteed
Delivery Procedures."
Any financial institution that is a participant in the Depository's
Book-Entry Transfer Facility system may make book-entry delivery of the Original
Notes by causing the Depository to transfer such Original Notes into the
Exchange Agent's account in accordance with the Depository's procedure for such
transfer. Although delivery of Original Notes may be effected through book-entry
transfer into the Exchange Agent's account at the Depository, the Letter of
Transmittal (or facsimile thereof), with any required signature guarantees and
any other required documents, must, in any case, be transmitted to and received
or confirmed by the Exchange Agent at its addresses set forth below under
"-- Exchange Agent" prior to 5:00 p.m., New York City time, on the Expiration
Date. DELIVERY OF DOCUMENTS TO THE DEPOSITORY IN ACCORDANCE WITH ITS PROCEDURES
DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT.
The tender by a holder which is not withdrawn prior to the Expiration Date
will constitute a binding agreement between such holder and the Company in
accordance with the terms and subject to the conditions set forth herein and in
the Letter of Transmittal.
THE METHOD OF DELIVERY OF NOTES AND THE LETTER OF TRANSMITTAL AND ALL OTHER
REQUIRED DOCUMENTS TO THE EXCHANGE AGENT IS AT THE ELECTION AND RISK OF THE
HOLDER. INSTEAD OF DELIVERY BY MAIL, IT IS RECOMMENDED THAT HOLDERS USE AN
OVERNIGHT OR HAND DELIVERY SERVICE, PROPERLY INSURED. IF DELIVERY IS BY MAIL,
REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED.
IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE DELIVERY TO THE
EXCHANGE AGENT BEFORE THE EXPIRATION DATE. NO LETTER OF TRANSMITTAL OR NOTES
SHOULD BE SENT TO THE COMPANY. HOLDERS MAY REQUEST THEIR RESPECTIVE BROKERS,
DEALERS, COMMERCIAL BANKS, TRUST COMPANIES OR NOMINEES TO EFFECT THE ABOVE
TRANSACTIONS FOR SUCH HOLDERS.
Any beneficial owner of the Original Notes whose Original Notes are
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee and who wishes to tender should contact the registered holder
promptly and instruct such registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to tender on such owner's own
behalf, such owner must, prior to completing and executing the Letter of
Transmittal and delivering such owner's Original Notes, either make appropriate
arrangements to register ownership of the Notes in such owner's name (to the
extent permitted by the Indenture) or obtain a properly completed assignment
from the registered holder. The transfer of registered ownership may take
considerable time.
If the Letter of Transmittal is signed by a person other than the
registered holder of any Original Notes (which term includes any participants in
DTC whose name appears on a security position listing as the owner of the
Original Notes) or if delivery of the Exchange Notes is to be made to a person
other than the registered holder, such Original Notes must be endorsed or
accompanied by a properly completed bond power, in either case signed by such
registered holder as such registered holder's name appears on such Original
Notes with the signature on the Original Notes or the bond power guaranteed by
an Eligible Institution (as defined below).
Signatures on a Letter of Transmittal or a notice of withdrawal described
below (see "-- Withdrawal of Tenders"), as the case may be, must be guaranteed
by an Eligible Institution unless the Original Notes tendered pursuant thereto
are tendered (i) by a registered holder who has not completed the box entitled
"Special Delivery Instructions" on the Letter of Transmittal or (ii) for the
account of an Eligible Institution. In the event that signatures on a Letter of
Transmittal or a notice of withdrawal, as the case may be, are required to be
guaranteed, such guarantee must be made by a member firm of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc., a commercial bank or trust company having an office or
correspondent in the United States, or another "Eligible Guarantor Institution"
within the meaning of Rule 17Ad-15 under the Exchange Act (any of the foregoing,
an "Eligible Institution").
If the Letter of Transmittal or any Original Notes or assignments are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and unless waived by the
Company,
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evidence satisfactory to the Company of their authority to so act must be
submitted with the Letter of Transmittal.
The Exchange Agent and the Depository have confirmed that any financial
institution that is a participant in the Depository's system may utilize the
Depository's Automated Tender Offer Program to tender Original Notes.
All questions as to the validity, form, eligibility (including time of
receipt), acceptance and withdrawal of tendered Original Notes will be
determined by the Company in its sole discretion, which determination will be
final and binding. The Company reserves the absolute right to reject any and all
Original Notes not properly tendered or any Original Notes, the Company's
acceptance of which would, in the opinion of counsel for the Company, be
unlawful. The Company also reserves the right to waive any defects,
irregularities or conditions of tender as to particular Notes. The Company's
interpretation of the terms and conditions of the Exchange Offer (including the
instructions in the Letter of Transmittal) will be final and binding on all
parties. Unless waived, any defects or irregularities in connection with tenders
of Original Notes must be cured within such time as the Company shall determine.
Although the Company intends to request the Exchange Agent to notify holders of
defects or irregularities with respect to tenders of Original Notes, neither the
Company, the Exchange Agent nor any other person shall incur any liability for
failure to give such notification. Tenders of Original Notes will not be deemed
to have been made until such defects or irregularities have been cured or
waived.
While the Company has no present plan to acquire any Original Notes which
are not tendered in the Exchange Offer or to file a registration statement to
permit resales of any Original Notes which are not tendered pursuant to the
Exchange Offer, the Company reserves the right in its sole discretion to
purchase or make offers for any Original Notes that remain outstanding
subsequent to the Expiration Date or, as set forth below under "-- Certain
Conditions to the Exchange Offer," to terminate the Exchange Offer and, to the
extent permitted by applicable law, purchase Original Notes in the open market,
in privately negotiated transactions or otherwise. The terms of any such
purchases or offers could differ from the terms of the Exchange Offer.
By tendering, each holder will represent to the Company that, among other
things, (i) the Exchange Notes to be acquired by the holder of the Original
Notes in connection with the Exchange Offer are being acquired by the holder in
the ordinary course of business of the holder, (ii) the holder has no
arrangement or understanding with any person to participate in the distribution
of Exchange Notes, (iii) the holder acknowledges and agrees that any person who
is a broker-dealer registered under the Exchange Act or is participating in the
Exchange Offer for the purpose of distributing the Exchange Notes must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale transaction of the Exchange Notes acquired
by such person and cannot rely on the position of the staff of the Commission
set forth in certain no-action letters, (iv) the holder understands that a
secondary resale transaction described in clause (iii) above and any resales of
Exchange Notes obtained by such holder in exchange for Original Notes acquired
by such holder directly from the Company should be covered by an effective
registration statement containing the selling securityholder information
required by Item 507 or Item 508, as applicable, of Regulation S-K of the
Commission, and (v) the holder is not an "affiliate," as defined in Rule 405 of
the Securities Act, of the Company. If the holder is a broker-dealer that will
receive Exchange Notes for its own account in exchange for Original Notes that
were acquired as a result of market-making activities or other trading
activities, the holder is required to acknowledge in the Letter of Transmittal
that it will deliver a prospectus in connection with any resale of such Exchange
Notes; however, by so acknowledging and by delivering a prospectus, the holder
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
RETURN OF NOTES
If any tendered Original Notes are not accepted for any reason set forth in
the terms and conditions of the Exchange Offer or if Original Notes are
withdrawn or are submitted for a greater principal amount than the holders
desire to exchange, such unaccepted, withdrawn or non-exchanged Original Notes
will be returned
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without expense to the tendering holder thereof (or, in the case of Original
Notes tendered by book-entry transfer into the Exchange Agent's account at the
Depository pursuant to the book-entry transfer procedures described below, such
Original Notes will be credited to an account maintained with the Depository) as
promptly as practicable.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Original Notes at the Depository for purposes of the Exchange Offer
within two business days after the date of this Prospectus, and any financial
institution that is a participant in the Depository's system may make book-entry
delivery of Original Notes by causing the Depository to transfer such Original
Notes into the Exchange Agent's account at the Depository in accordance with the
Depository's procedures for transfer. However, although delivery of Original
Notes may be effected through book-entry transfer at the Depository, the Letter
of Transmittal or facsimile thereof, with any required signature guarantees and
any other required documents, must, in any case, be transmitted to and received
by the Exchange Agent at the address set forth below under "-- Exchange Agent"
on or prior to the Expiration Date or pursuant to the guaranteed delivery
procedures described below. See "-- Guaranteed Delivery Procedures."
GUARANTEED DELIVERY PROCEDURES
Holders who wish to tender their Original Notes and (i) whose Original
Notes are not immediately available or (ii) who cannot deliver their Original
Notes (or complete the procedures for book-entry transfer), the Letter of
Transmittal or any other required documents to the Exchange Agent prior to the
Expiration Date, may effect a tender if:
(a) the tender is made through an Eligible Institution;
(b) prior to the Expiration Date, the Exchange Agent receives from
such Eligible Institution a properly completed and duly executed Notice of
Guaranteed Delivery substantially in the form provided by the Company (by
facsimile transmission, mail or hand delivery) setting forth the name and
address of the holder, the certificate number(s) of such Original Notes (if
available) and the principal amount of Original Notes tendered, stating
that the tender is being made thereby and guaranteeing that, within five
New York Stock Exchange trading days after the Expiration Date, the Letter
of Transmittal (or a facsimile thereof) together with the certificate(s)
representing the Original Notes in proper form for transfer (or a
confirmation of a book-entry transfer into the Exchange Agent's account at
the Depository of Original Notes delivered electronically), and any other
documents required by the Letter of Transmittal will be deposited by the
Eligible Institution with the Exchange Agent; and
(c) such properly executed Letter of Transmittal (or facsimile
thereof), as well as the certificate(s) representing all tendered Original
Notes in proper form for transfer (or a confirmation of a book-entry
transfer into the Exchange Agent's account at the Depository of Original
Notes delivered electronically), and all other documents required by the
Letter of Transmittal are received by the Exchange Agent within five New
York Stock Exchange trading days after the Expiration Date.
Upon request to the Exchange Agent, a Notice of Guaranteed Delivery will be
sent to holders who wish to tender their Original Notes according to the
guaranteed delivery procedures set forth above.
WITHDRAWAL OF TENDERS
Except as otherwise provided herein, tenders of Original Notes may be
withdrawn at any time prior to the Expiration Date.
To withdraw a tender of Original Notes in the Exchange Offer, a written or
facsimile transmission notice of withdrawal must be received by the Exchange
Agent at its address set forth herein prior to the Expiration Date. Any such
notice of withdrawal must (i) specify the name of the person having deposited
the Original Notes to be withdrawn (the "Depositor"), (ii) identify the Original
Notes to be withdrawn (including the certificate number or numbers (if
applicable) and principal amount of such Original Notes), and (iii) be
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signed by the holder in the same manner as the original signature on the Letter
of Transmittal by which such Original Notes were tendered (including any
required signature guarantees). All questions as to the validity, form and
eligibility (including time of receipt) of such notices will be determined by
the Company in its sole discretion, whose determination shall be final and
binding on all parties. Any Original Notes so withdrawn will be deemed not to
have been validly tendered for purposes of the Exchange Offer and no Exchange
Notes will be issued with respect thereto unless the Original Notes so withdrawn
are validly retendered. Properly withdrawn Notes may be retendered by following
one of the procedures described above under "-- Procedures for Tendering" at any
time prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company shall not
be required to accept for exchange, or exchange the Exchange Notes for, any
Original Notes not theretofore accepted for exchange, and may terminate or amend
the Exchange Offer as provided herein before the acceptance of such Original
Notes, if any of the following conditions exist:
(a) any action or proceeding is instituted or threatened in any court
or by or before any governmental agency with respect to the Exchange Offer
which, in the reasonable judgment of the Company, might impair the ability
of the Company to proceed with the Exchange Offer or have a material
adverse effect on the contemplated benefits of the Exchange Offer to the
Company or there shall have occurred any material adverse development in
any existing action or proceeding with respect to the Company or any of its
subsidiaries; or
(b) there shall have been any material change, or development
involving a prospective change, in the business or financial affairs of the
Company or any of its subsidiaries which, in the reasonable judgment of the
Company, could reasonably be expected to materially impair the ability of
the Company to proceed with the Exchange Offer or materially impair the
contemplated benefits of the Exchange Offer to the Company; or
(c) there shall have been proposed, adopted or enacted any law,
statute, rule or regulation which, in the judgment of the Company, could
reasonably be expected to materially impair the ability of the Company to
proceed with the Exchange Offer or materially impair the contemplated
benefits of the Exchange Offer to the Company; or
(d) any governmental approval which the Company shall, in its
reasonable discretion, deem necessary for the consummation of the Exchange
Offer as contemplated hereby shall have not been obtained.
If the Company determines in its reasonable discretion that any of these
conditions is not satisfied, the Company may (i) refuse to accept any Original
Notes and return all tendered Original Notes to the tendering holders, (ii)
extend the Exchange Offer and retain all Original Notes tendered prior to the
expiration of the Exchange Offer, subject, however, to the rights of holders to
withdraw such Original Notes (see "-- Withdrawal of Tenders") or (iii) waive
such unsatisfied conditions with respect to the Exchange Offer and accept all
properly tendered Original Notes which have not been withdrawn. If such waiver
constitutes a material change to the Exchange Offer, the Company will promptly
disclose such waiver by means of a prospectus supplement that will be
distributed to the registered holders of the Original Notes, and the Company
will extend the Exchange Offer for a period of five to ten business days,
depending upon the significance of the waiver and the manner of disclosure to
the registered holders, if the Exchange Offer would otherwise expire during such
five to ten business day period.
Holders may have certain rights and remedies against the Company under the
Registration Rights Agreement should the Company fail to consummate the Exchange
Offer, notwithstanding a failure of the conditions stated above. Such conditions
are not intended to modify those rights or remedies in any respect.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to such
condition or may be waived by the Company in whole or in part at any time and
from time to time in the Company's reasonable discretion. The failure by the
Company at
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any time to exercise the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
TERMINATION OF CERTAIN RIGHTS
All rights under the Registration Rights Agreement (including registration
rights) of holders of the Original Notes eligible to participate in this
Exchange Offer will terminate upon consummation of the Exchange Offer except
with respect to the Company's continuing obligations (i) to indemnify the
holders (including any broker-dealers) and certain parties related to the
holders against certain liabilities (including liabilities under the Securities
Act), (ii) to provide, upon the request of any holder of a transfer-restricted
Original Note, the information required by Rule 144A(d)(4) under the Securities
Act in order to permit resales of such Original Notes pursuant to Rule 144A,
(iii) to use its best efforts to keep the Registration Statement effective to
the extent necessary to ensure that it is available for resales of
transfer-restricted Original Notes by broker-dealers for a period of 180 days
from the date on which the Registration Statement is declared effective and (iv)
to provide copies of the latest version of the Prospectus to broker-dealers upon
their request for a period of 180 days from the date on which the Registration
Statement is declared effective. Insofar as indemnification for liabilities
arising under the Securities Act may be permitted pursuant to the foregoing
provisions, the Company has been informed that, in the opinion of the
Commission, such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.
EXCHANGE AGENT
U.S. Trust Company of California, N.A. has been appointed as Exchange Agent
for the Exchange Offer. All questions and requests for assistance as well as all
correspondence in connection with the Exchange Offer and the Letter of
Transmittal should be addressed to the Exchange Agent, as follows:
By Facsimile:
(212) 420-6155
(For Eligible Institutions Only)
Confirm by Telephone:
(800) 225-2398
By Overnight Courier:
U.S. Trust Company of California, N.A.
c/o United States Trust Company of New York
770 Broadway, 13th Floor
New York, New York 10003
Attention: Corporate Trust and Agency Services
By Hand:
U.S. Trust Company of California, N.A.
c/o United States Trust Company of New York
111 Broadway, Lower Level
New York, New York 10006
Attention: Corporate Trust and Agency Services
By Mail:
(insured or registered recommended)
U.S. Trust Company of California, N.A.
c/o United States Trust Company of New York
P.O. Box 841, Peter Cooper Station
New York, New York 10276-0841
Attention: Corporate Trust and Agency Services
Requests for additional copies of this Prospectus, the Letter of
Transmittal or the Notice of Guaranteed Delivery should be directed to the
Exchange Agent.
FEES AND EXPENSES
The expenses of soliciting tenders will be borne by the Company. The
principal solicitation is being made by mail; however, additional solicitation
may be made by telegraph, telephone or in person by officers and regular
employees of the Company and its affiliates.
The Company has not retained any dealer-manager or other soliciting agent
in connection with the Exchange Offer and will not make any payments to brokers,
dealers or others soliciting acceptance of the Exchange Offer. The Company,
however, will pay the Exchange Agent reasonable and customary fees for its
services and will reimburse it for its reasonable out-of-pocket expenses in
connection therewith.
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The cash expenses to be incurred in connection with the Exchange Offer will
be paid by the Company and are estimated in the aggregate to be approximately
$200,000. Such expenses include fees and expenses of the Exchange Agent and
Trustee, accounting and legal fees and printing costs, among others.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Original Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes, or Original Notes for principal amounts not
tendered or acceptable for exchange, are to be delivered to, or are to be issued
in the name of, any person other than the registered holders of the Original
Notes tendered, or if tendered Original Notes are registered in the name of any
person other than the person signing the Letter of Transmittal, or if a transfer
tax is imposed for any reason other than the exchange of Original Notes pursuant
to the Exchange Offer, then the amount of any such transfer taxes (whether
imposed on the registered holder or any other persons) will be payable by the
tendering holder. If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder of Original
Notes.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the same carrying value as the
Original Notes as reflected in the Company's accounting records on the date of
the exchange. Accordingly, no gain or loss for accounting purposes will be
recognized. The expenses of the Exchange Offer will be amortized over the term
of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Participation in the Exchange Offer is voluntary. Holders of the Original
Notes are urged to consult their financial and tax advisors in making their own
decisions on what action to take.
The Original Notes which are not exchanged for the Exchange Notes pursuant
to the Exchange Offer will remain restricted securities. Accordingly, such
Original Notes may be resold only (i) to a person whom the seller reasonably
believes is a qualified institutional buyer (as defined in Rule 144A under the
Securities Act) in a transaction meeting the requirements of Rule 144A, (ii) in
a transaction meeting the requirements of Rule 144 under the Securities Act,
(iii) outside the United States to a foreign person in a transaction meeting the
requirements of Rule 904 under the Securities Act, (iv) in accordance with
another exemption from the registration requirements of the Securities Act (and
based upon an opinion of counsel if the Company so requests), (v) to the Company
or (vi) pursuant to an effective registration statement and, in each case, in
accordance with any applicable securities laws of any state of the United States
or any other applicable jurisdiction.
35
<PAGE> 36
USE OF PROCEEDS
The Company will not receive any cash proceeds from the issuance of the
Exchange Notes offered hereby. In consideration for issuing the Exchange Notes
as contemplated in this Prospectus, the Company will receive in exchange
Original Notes in like principal amount, the terms of which are substantially
identical to the Exchange Notes. The Original Notes surrendered in exchange for
Exchange Notes will be retired and cancelled and cannot be reissued.
Accordingly, issuance of the Exchange Notes will not result in any increase in
the indebtedness of the Company.
The net proceeds to the Company from the sale of the Original Notes were
used to: (i) repay $1.2 million of outstanding revolving credit indebtedness of
Horizon with a maturity of November 1997 and with an interest rate of 8.5% as of
March 30, 1997; (ii) repay $18.0 million in the aggregate of various term loans
of Horizon with maturities ranging from July 2000 to July 2001 and with interest
rates ranging from 8.5% to 9.0%; (iii) repay $9.6 million of demand indebtedness
and accrued interest thereon through March 30, 1997 of the Company from its
parent company, UpRight International Limited, with an interest rate of 8.25%;
(iv) repay $4.4 million of various capital lease obligations and other debt of
UpRight and Horizon with maturities ranging from June 1997 to February 2002 and
with interest rates ranging from 8.0% to 14.4%; (v) finance its capital
expansion program at UpRight, which management currently estimates will cost
approximately $20 million over the next two fiscal years (see "Capital Expansion
Program -- UpRight"); (vi) finance its capital expansion program at Horizon,
which management currently estimates will cost approximately $13.5 million over
the next two fiscal years (see "Capital Expansion Program -- Horizon"); and
(vii) capitalize with up to $5.0 million a floor plan financing program (see
"Capital Expansion Program -- UpRight"). The balance of the net proceeds of the
offering of the Original Notes was or will be used for general corporate
purposes, including acquisitions in complementary, ancillary or related
businesses, in accordance with the terms of the Indenture. The Company may also
use all or a portion of the amounts allocated to fund the capital expansion
programs at UpRight and Horizon to fund any such acquisitions. However, no
agreement with respect to any acquisition has been entered into at the date of
this Prospectus. To the extent an acquisition is consummated utilizing funds
originally allocated to the capital expansion programs or which provides
manufacturing capacity, product lines or locations which were otherwise intended
to be developed or started by the Company, the Company's capital expansion
programs may be delayed, modified or reduced accordingly, and the Company may
require additional financing to complete its planned capital expansion.
36
<PAGE> 37
CAPITAL EXPANSION PROGRAM
UPRIGHT
Since the beginning of fiscal 1995, UpRight has invested approximately
$17.7 million in its capital expenditure program to develop a boom lift product
line, extend its line of scissor lift products by developing new models, modify
existing scissor lifts to enhance product quality, safety and reliability and to
automate and upgrade its manufacturing facilities. In the aggregate, UpRight
spent $5.3 million on fixtures and equipment, including a horizontal machining
center, powder coat paint equipment, overhead cranes, welding fixtures and
turning centers, to manufacture new products; $4.1 million for buildings and
improvements, including 80,000 square feet for boom lift assembly and
production, 38,000 square feet for large scissor lift production and 33,000
square feet for a new powder coat paint facility; $3.5 million for machine shop
equipment; $4.6 million on other manufacturing equipment; and $0.2 million on
engineering work stations and equipment.
UpRight intends to develop a full line of articulated and telescopic boom
lifts over the next five years. In addition, UpRight intends to continue to
modernize and upgrade its manufacturing facilities. UpRight's capital
expenditure program anticipates spending approximately $20.0 million over the
next two fiscal years, including the following: $12.6 million on fixtures and
equipment to manufacture new products, including boom lifts and new scissor lift
models; $3.6 million for additional land, buildings and improvements related to
production expansion; $2.0 million for machine shop equipment; and $1.8 million
on quality control, other manufacturing and engineering.
UpRight currently operates at near full manufacturing capacity and
utilization in its production of current product lines and models of scissor and
boom lifts. Management of UpRight estimates that its capital expenditure program
will enable UpRight to generate revenue of approximately $140 million for the
fiscal year ending June 27, 1999, reflecting an estimated 27% increase over
UpRight's fiscal 1997 revenue. The foregoing sentence constitutes a
forward-looking statement that involves certain risks and uncertainties that
could cause actual results to differ materially from those estimated.
The following table details the capital expenditures incurred by UpRight
for fiscal years 1995, 1996 and 1997, and UpRight's anticipated capital
expenditures for fiscal years 1998 and 1999.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL YEAR ENDING
--------------------------------- ---------------------
JULY 2, JUNE 30, JUNE 29, JUNE 28, JUNE 27,
1995 1996 1997 1998 1999
------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Land........................................ $ -- $ -- $ -- $ 600 $ --
Building and Improvements................... 358 1,980 2,238 1,500 1,500
Machinery and Equipment..................... 3,080 4,488 5,531 7,900 8,500
------ ------ ------ ------ ------
$ 3,438 $6,468 $7,769 $ 10,000 $ 10,000
====== ====== ====== ====== ======
</TABLE>
UpRight's management believes that one of the reasons supporting the growth
in North American sales of aerial work platform equipment has been the
availability of financing for both distributors and end users of the
manufactured equipment. In North America, there are multiple sources available
to finance the purchase of industrial equipment. UpRight's management believes
that the range of financing options available internationally is limited because
leasing companies in the countries to which UpRight exports are generally
unwilling to finance transactions of the relatively small size and unit price of
equipment typically purchased from UpRight in such transactions. UpRight
currently exports to a large number of countries, and a key element of UpRight's
growth strategy is to continue to increase export sales. As a result, UpRight
intends to introduce a floor plan financing program to allow its foreign
distributors to finance their inventory of UpRight aerial work platforms on
extended terms. UpRight intends to invest up to $5.0 million initially to
capitalize this floor plan financing program. UpRight's management believes this
will be of increasing importance with the introduction of its boom lift line of
products, which have higher unit prices.
HORIZON
Since the beginning of fiscal 1995, Horizon has invested approximately
$24.6 million in its capital expenditure program, including the following:
approximately $1.4 million (at dealer cost) to fund the startup of its Raleigh,
North Carolina and Charleston, South Carolina satellite locations; approximately
$9.6 million
37
<PAGE> 38
(at dealer cost) to purchase approximately 703 units to upgrade and replace
equipment in its rental fleet; approximately $14.0 million (at dealer cost) to
purchase new equipment to expand its rental fleet from approximately 1,900 units
to more than 2,400 units; approximately $0.4 million for equipment related to
its acquisition of a forklift rental and sales operation in Brea, California
which totaled $1.2 million; and approximately $1.8 million to purchase a branch
location in Lakewood, New Jersey, of which $1.4 million was used to purchase
equipment.
Horizon's capital expansion program anticipates spending approximately
$17.0 million (at dealer cost) over the next two years, including the following:
approximately $2.3 million for the continued expansion of the number of its
locations through the development of satellite rental offices linked to an
existing branch and the strategic acquisition of small regional equipment rental
and sales companies; approximately $4.2 million (at dealer cost) to add
additional equipment, particularly scissor lifts, to increase the size of its
rental fleet; and approximately $10.6 million (at dealer cost) to replace
existing equipment.
The following table details the capital expenditures (at dealer cost)
incurred by Horizon for fiscal years 1995, 1996 and 1997, and Horizon's
anticipated capital expenditures (at dealer cost) for fiscal years 1998 and
1999. "Dealer cost" means the price paid by Horizon to purchase equipment from
equipment manufacturers, including from UpRight on arm's-length terms.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED FISCAL YEAR ENDING
--------------------------------------------- -----------------------------
JULY 2, 1995 JUNE 30, 1996 JUNE 29, 1997 JUNE 28, 1998 JUNE 27, 1999
------------- ------------- ------------- ------------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Replacement Equipment(1).......... $ 2,833 $ 2,299 $ 3,495 $ 4,750 $ 5,800
Additional Equipment(2)........... 4,238 6,079 3,686 2,750 1,450
Investment in New Satellite
Locations....................... -- 735 641 1,000 750
Acquisitions...................... -- -- 1,673 -- 500
------ ------ ------ ------ ------
$ 7,071 $ 9,113 $ 9,495 $ 8,500 $ 8,500
====== ====== ====== ====== ======
</TABLE>
- ---------------
(1) Horizon anticipates purchasing approximately $7.4 million of replacement
equipment in fiscal years 1998 and 1999 from UpRight at dealer cost. On a
consolidated basis, the Company expects to record these capital purchases at
approximately $5.2 million, which reflects UpRight's cost to manufacture the
equipment.
(2) Horizon anticipates purchasing approximately $4.0 million of additional
equipment in fiscal years 1998 and 1999 from UpRight at dealer cost. On a
consolidated basis, the Company expects to record these capital purchases at
approximately $2.8 million, which reflects UpRight's cost to manufacture the
equipment.
38
<PAGE> 39
CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
29, 1997. This table should be read in conjunction with the Consolidated
Financial Statements of the Company and the Notes thereto included elsewhere in
this Prospectus.
<TABLE>
<S> <C>
Debt outstanding:
Revolving credit facilities(1)................................ $ --
Industrial revenue bonds...................................... 6,604
Term indebtedness............................................. --
Capital leases and other...................................... 2,757
Note payable -- related party................................. --
Notes offered hereby, net of unamortized discount............. 104,523
-------
Total debt outstanding................................ 113,884
Stockholder's equity............................................ 27,031
-------
Total capitalization.................................. $140,915
=======
</TABLE>
- ---------------
(1) Upon consummation of the offering of the Original Notes and the application
of the net proceeds thereof, UpRight and Horizon had $4.0 million and $3.0
million available under their respective revolving credit facilities. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources."
39
<PAGE> 40
SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL DATA
The following table sets forth selected historical consolidated financial
data with respect to the Company for the periods ended on and as of the dates
indicated. The selected historical consolidated financial data for fiscal years
1995, 1996 and 1997 are derived from and should be read in conjunction with the
consolidated financial statements of the Company audited by Pannell Kerr
Forster, Certified Public Accountants, A Professional Corporation, Los Angeles,
California, including the Company's consolidated balance sheets at June 30, 1996
and June 29, 1997 and the related consolidated statements of operations and cash
flows for each of the three fiscal years in the period ended June 29, 1997 and
the notes thereto appearing elsewhere in this Prospectus. The selected
historical consolidated financial information for the fiscal year ended July 3,
1994 has been derived from the Company's consolidated financial statements
audited by Pannell Kerr Forster. The selected historical consolidated financial
data for the fiscal year ended June 27, 1993 have been derived from unaudited
financial information prepared by the Company. The unaudited selected pro forma
statement of operations data and other data for the fiscal year ended June 29,
1997 give effect to the offering of the Original Notes as if it had been
completed on July 1, 1996. The pro forma data should be read in conjunction with
the Company's consolidated financial statements and the notes thereto appearing
elsewhere in this Prospectus and "Management's Discussion and Analysis of
Financial Condition and Results of Operations." The pro forma financial data are
not necessarily indicative of the results that would have occurred had the
offering of the Original Notes been completed on the dates indicated or of the
Company's actual or future operating results or financial condition. Other than
those pro forma adjustments reflecting the offering of the Original Notes, the
offering of the Exchange Notes will have no effect on the Company's financial
condition and results of operations.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------------
JULY 27, JULY 3, JULY 2, JUNE 30, JUNE 29,
1993(1) 1994(1) 1995 1996 1997
-------- ------- ------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA:
Revenue(2)..................................... $ 67,005 $70,387 $85,157 $117,903 $139,904
Cost of revenue................................ 44,539 47,365 58,217 78,638 94,315
------- ------- ------- ------- -------
Gross profit................................... 22,466 23,022 26,940 39,265 45,589
Research and development expenses.............. 1,457 1,732 1,817 2,865 4,281
Product liability costs........................ 1,994 1,827 2,094 3,015 3,115
Selling, general and administrative expenses... 15,884 15,051 13,982 15,124 18,117
------- ------- ------- ------- -------
Income from operations......................... 3,131 4,412 9,047 18,261 20,076
Interest expense, net.......................... 4,341 3,214 2,566 2,907 3,983
Other expense, net(3).......................... 1,130 4,252 186 539 --
------- ------- ------- ------- -------
Income (loss) before provision for income
taxes........................................ (2,340) (3,054) 6,295 14,815 16,093
Provision (benefit) for income taxes........... 15 (1,221) 2,608 6,047 6,131
Cumulative effect on prior years of accounting
change....................................... -- 6,663 -- -- --
------- ------- ------- ------- -------
Net income (loss).............................. $ (2,355) $ 4,830 $ 3,687 $ 8,768 $ 9,962
======= ======= ======= ======= =======
OTHER DATA:
EBITDA(4)...................................... $ 6,812 $ 8,240 $12,626 $ 22,695 $ 25,880
Depreciation and amortization.................. 3,681 3,828 3,579 4,434 5,804
Capital expenditures........................... 4,014 8,159 7,949 14,720 18,104
Gross margin................................... 33.5% 32.7% 31.6% 33.3% 32.6%
EBITDA margin.................................. 10.2 11.7 14.8 19.3 18.5
Ratio of EBITDA to interest expense, net....... 1.57x 2.56x 4.92x 7.81x 6.50x
Ratio of earnings to fixed charges(8).......... --(5) --(5) 3.24 5.56 4.60
</TABLE>
40
<PAGE> 41
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 29, 1997
---------------------------------------
PRO FORMA PRO
ACTUAL ADJUSTMENTS FORMA
-------- ----------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CONDENSED OPERATING STATEMENT DATA(6):
Revenue................................................. $139,904 $139,904
Cost of revenue......................................... 94,315 94,315
-------- --------
Gross profit............................................ 45,589 45,589
Research and development expenses....................... 4,281 4,281
Product liability costs................................. 3,115 3,115
Selling, general and administrative expenses............ 18,117 18,117
-------- --------
Income from operations.................................. 20,076 20,076
Interest expense, net(7)................................ 3,983 7,747(6a) 11,730
-------- ------ --------
Income before provision for income taxes................ 16,093 8,346
Provision for income taxes.............................. 6,131 (2,951)(6b) 3,180
-------- ------ --------
Net income.............................................. $ 9,962 $ 5,166
======== ========
OTHER DATA:
EBITDA(4)............................................... $ 25,880 $ 25,880
Depreciation and amortization........................... 5,804 5,804
Capital expenditures.................................... 18,104 18,104
Gross margin............................................ 32.6% 32.6%
EBITDA margin........................................... 18.5% 18.5%
Ratio of EBITDA to interest expense, net................ 6.50x 2.21x
</TABLE>
<TABLE>
<CAPTION>
JUNE
JUNE 27, JULY 3, JULY 2, 30, JUNE 29,
1993 1994 1995 1996 1997
-------- ------- ------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONDENSED BALANCE SHEET DATA:
Cash and cash equivalents.................. $ 3,341 $ 1,297 $ 4,314 $11,164 $ 77,345
Accounts receivable, net................... 8,494 10,772 12,426 15,593 23,591
Inventories................................ 12,138 12,899 9,969 15,301 16,833
Prepaid expenses and other................. 2,958 3,796 2,768 2,756 2,864
-------- ------- ------- ------- --------
Total current assets............. 26,931 28,764 29,477 44,814 120,633
Property, plant and equipment, net......... 19,254 20,924 21,673 30,816 42,143
Other assets............................... 371 6,337 3,932 355 5,049
-------- ------- ------- ------- --------
Total assets..................... $ 46,556 $56,025 $55,082 $75,985 $167,825
======== ======= ======= ======= ========
Accounts payable........................... $ 9,553 $10,945 $10,054 $10,786 $ 11,585
Accrued expenses........................... 5,883 11,322 4,887 7,493 9,373
Current debt............................... 13,777 7,000 18,807 18,658 840
-------- ------- ------- ------- --------
Total current liabilities........ 29,213 29,267 33,748 36,937 21,798
Long term debt, net of current portion..... 40,327 19,416 11,649 18,341 113,044
Other long-term liabilities................ 2,365 2,731 1,387 3,638 5,952
-------- ------- ------- ------- --------
Total liabilities................ 71,905 51,414 46,784 58,916 140,794
Stockholder's equity (deficit)............. (25,349) 4,611 8,298 17,069 27,031
-------- ------- ------- ------- --------
Total liabilities and
stockholder's equity
(deficit)...................... $ 46,556 $56,025 $55,082 $75,985 $167,825
======== ======= ======= ======= ========
</TABLE>
41
<PAGE> 42
- ---------------
(1) Results include operations and capital expenditures of Bacon. Results of
operations and capital expenditures of the Company excluding the operating
results and capital expenditures of Bacon are as follows:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------
JUNE
27, JULY 3,
1993 1994
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Revenue.................................................. $52,293 $57,429
Gross profit............................................. 18,400 19,293
Income from operations................................... 4,419 4,518
EBITDA................................................... 7,101 7,478
Capital expenditures..................................... 2,822 7,031
Gross margin............................................. 35.2% 33.6%
EBITDA margin............................................ 13.6 13.0
</TABLE>
(2) The following details UpRight's and Horizon's revenue, and the elimination
of intercompany sales for fiscal years 1994, 1995, 1996 and 1997:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
----------------------------------------------
JULY 3, JULY 2, JUNE 30, JUNE 29,
1994 1995 1996 1997
------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
UpRight.......................... $40,694 $ 65,593 $ 93,273 $110,471
Horizon.......................... 25,282 32,236 38,112 44,315
Intercompany sales............... (8,547) (12,672) (13,482) (14,882)
------- -------- -------- --------
$57,429 $ 85,157 $117,903 $139,904
======= ======== ======== ========
</TABLE>
Fiscal 1994 excludes $13.0 million in revenue from Bacon. See footnote (1)
above. For fiscal year 1993, Horizon was a division of UpRight and did not
report financial results separately.
(3) For fiscal 1994, includes $4.0 million loss on sale of Bacon.
(4) EBITDA represents income before extraordinary item, net interest expense,
financing costs, income taxes, depreciation and amortization and other
expenses and income. The Company has included information concerning EBITDA
in this Prospectus because it is used by certain investors as a measure of a
company's ability to service its debt obligations. EBITDA should not be used
as an alternative to, or be considered more meaningful than, operating
income, net income or cash flow as an indicator of the Company's operating
performance.
(5) Earnings were insufficient to cover fixed charges by $2,340 in fiscal 1993
and $3,054 in fiscal 1994.
(6) Pro forma information is presented as though the Notes had been issued at
the beginning of fiscal 1997.
a -- Interest pro forma adjustment assumes the Senior subordinated notes
payable were outstanding for all of fiscal 1997, and debt paid-off
with loan proceeds were not accruing interest charges for all of
fiscal 1997. See "Use of Proceeds."
b -- The provision for income taxes pro forma adjustment reduces the
provision for income taxes at June 29, 1997 by the Company's effective
income tax rate.
(7) Pro forma amount reflects an interest rate of 10.625% on the Notes and
includes amortization of discount. Interest expense, net excludes the
amortization of deferred financing costs, including the amounts estimated to
be incurred in connection with the issuance of the Notes, and includes
actual interest income.
(8) For purposes of this computation, earnings are defined as income (loss)
before provision for income taxes and fixed charges. Fixed charges are the
sum of (i) interest costs, (ii) amortization of deferred financing costs and
(iii) the portion of operating lease rental expense that is representative
of the interest factor (deemed to be one-third).
42
<PAGE> 43
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of the financial condition and the
results of operations should be read in conjunction with the historical
consolidated financial statements of the Company and notes thereto included
elsewhere in this Prospectus.
GENERAL
The Company's strategy is to create shareholder value by providing capital,
strategic and financial direction and management support to its wholly-owned
operating subsidiaries, UpRight and Horizon. Prior to fiscal 1994, Horizon was a
division of UpRight, operating as a captive equipment dealer and industrial
equipment rental company in certain markets. In fiscal 1994, the Company decided
each business would be managed and operated separately. All intercompany
transactions between UpRight and Horizon are currently, and are intended to
continue to be, conducted on an arm's-length basis. UpRight sells equipment to
Horizon for the same price it would otherwise charge a comparable distributor.
Horizon purchases equipment from UpRight, as well as from other major
manufacturers, including certain models and product lines which may be produced
by UpRight. The Company intends to maintain the distributor/supplier
relationship between the two subsidiaries. Sales to Horizon accounted for
approximately 19%, 14% and 13% of UpRight's revenue for fiscal years 1995, 1996
and 1997, respectively. Purchases from UpRight accounted for 72%, 49%, and 53%
of Horizon's total capital purchases of equipment for fiscal years 1995, 1996
and 1997, respectively. UpRight and Horizon maintain stand-alone financial
statements. Sales from UpRight to Horizon are reflected in UpRight's stand-alone
financial statements at the actual arm's-length price charged. Purchases by
Horizon from UpRight are reflected in Horizon's stand-alone financial statements
at dealer cost. "Dealer cost" means the price paid by Horizon to purchase
equipment from equipment manufacturers, including from UpRight on arm's-length
terms. All significant intercompany balances and transactions are eliminated in
consolidation.
Revenue growth in the aerial work platform and industrial equipment rental
industries has been historically related to the cyclical levels of construction
and industrial activity in North America. UpRight has adopted just-in-time
inventory procedures and build-to-order production scheduling and has instituted
flexible labor and staffing practices to manage volume cycles, all of which
management believes will enable UpRight to respond in a timely manner to
possible downturns in the North American construction market. The foregoing
strategies also allow UpRight to respond quickly to periods of strong growth in
demand, which have characterized the industry. Horizon responds to downturns in
the United States construction market by delaying expansion capital expenditures
and adjusting the timing of replacement capital expenditures. The Company
expects the aerial work platform industry will continue to be dependent upon
North American construction and industrial activity, although international
sales are comprising a greater proportion of total industry revenues. The
Company believes UpRight has among the highest percentages of revenue from
international sales of any aerial work platform manufacturer. All sales outside
of the United States are denominated and paid in U.S. dollars.
The following table sets forth for the periods indicated certain historical
revenue and percentages from customer geographical segments:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------------------
JULY 2, JUNE 30, JUNE 29,
1995 1996 1997
--------------- ---------------- ----------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
United States, Canada, Latin America.......... $67.5 79.3% $ 92.8 78.7% $ 96.8 69.2%
Europe........................................ 12.9 15.1 19.6 16.6 35.3 25.2
Pacific Rim................................... 4.8 5.6 5.5 4.7 7.8 5.6
----- ------ ------ ------ ------ ------
$85.2 100.0% $117.9 100.0% $139.9 100.0%
====== ======= ======= ======= ======= =======
</TABLE>
43
<PAGE> 44
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain historical
income statement data derived from the Company's consolidated statements of
operations expressed in dollars and as a percentage of net revenue.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------------------
JULY 2, JUNE 30, JUNE 29,
1995 1996 1997
---------------- ----------------- -----------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenue............................... $85,157 100.0% $117,903 100.0% $139,904 100.0%
Cost of revenue....................... 58,217 68.4 78,638 66.7 94,315 67.4
------- ----- -------- ----- -------- -----
Gross profit.......................... 26,940 31.6 39,265 33.3 45,589 32.6
Operating expenses.................... 17,893 21.0 21,004 17.8 25,513 18.2
------- ----- -------- ----- -------- -----
Operating income...................... 9,047 10.6 18,261 15.5 20,076 14.4
Interest expense, net................. 2,566 3.0 2,907 2.5 3,983 2.8
Other expense......................... 186 0.2 539 0.5 -- --
Income taxes.......................... 2,608 3.1 6,047 5.1 6,131 4.4
------- ----- -------- ----- -------- -----
Net income............................ $ 3,687 4.3% $ 8,768 7.4% $ 9,962 7.1%
======= ===== ======== ===== ======== =====
EBITDA................................ $12,626 14.8% $ 22,695 19.2% $ 25,880 18.5%
Depreciation & amortization........... 3,579 4,434 5,804
</TABLE>
As total revenue has increased, the Company has experienced a corresponding
improvement in EBITDA and EBITDA margins. From fiscal 1995 through fiscal 1997,
the Company's EBITDA and EBITDA margins have improved from $12.6 million and
14.8%, respectively, to $25.9 million and 18.5%, respectively. Margin
improvement has been due primarily to manufacturing efficiencies related to
greater production volume and from a lower rate of growth in selling, general
and administrative expenses as compared to the rate of growth in revenue.
FISCAL YEAR ENDED JUNE 29, 1997 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1996
Revenue increased by 18.7% to $139.9 million in fiscal 1997 from $117.9
million in fiscal 1996. The increase of $22.0 million was attributable to
increased revenue from sales of new equipment of $19.3 million (including sales
of Upright equipment by Horizon) and increased rental and service revenue for
Horizon of $2.6 million. The increase in revenue from new equipment sales was
primarily attributable to an increase in export sales by UpRight to dealers in
European and Pacific Rim countries of 71.9% to $43.1 million for fiscal 1997
from $25.1 million for fiscal 1996. The increased sales to Europe primarily
reflect improved economic conditions in the United Kingdom, while the increased
sales to Pacific Rim countries primarily reflect growing economic activity in
Asia generally. Sales of new equipment to the United States, Canada and Latin
America, increased 1.8% to $70.8 million for fiscal 1997 from $69.5 million for
fiscal 1996. This small increase in North American sales of new equipment was
primarily due to a significant decrease in sales to a single customer at
UpRight, which was offset by increased sales to other UpRight customers. For
fiscal 1997, approximately 62% of the Company's revenue was attributable to new
products and new models introduced since January 1, 1994.
Gross profit increased by $6.3 million, or 16.1%, to $45.6 million for
fiscal 1997 from $39.3 million for fiscal 1996, while gross margin decreased to
32.6% for fiscal 1997 from 33.3% for fiscal 1996. The increase in gross profit
is attributable to higher revenue; however, margins contracted due to: (i) costs
associated with the introduction of UpRight's boom lift product line; (ii) the
buildup of Horizon's rental fleet and related costs; and (iii) lower dollar
utilization on Horizon's rental fleet as competitive factors and inclement
weather negatively impacted rental rates and equipment utilization.
Operating expenses, consisting of selling, general and administrative
expenses, product liability and research and development expenses, increased to
$25.5 million for fiscal 1997 from $21.0 million for fiscal 1996. As a
percentage of revenue, operating expenses increased to 18.2% for fiscal 1997
from 17.8% for fiscal 1996. Research and development expenses increased by $1.4
million to $4.2 million in fiscal 1997 due primarily to the expansion of
UpRight's boom lift development program. In addition, the Company
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commenced payment of corporate services fees totaling $0.9 million for fiscal
1997 pursuant to the terms of the Corporate Services Agreements. Other selling,
general and administrative expenses increased by $2.1 million, but were
generally flat as a percentage of revenue.
Interest expense, net of interest income, increased to $4.0 million for
fiscal 1997 from $2.9 million for fiscal 1996 as the result of an increase in
outstanding debt.
As a result of the above, net income increased by 13.6% to $9.9 million for
fiscal 1997 from $8.8 million for fiscal 1996.
FISCAL YEAR ENDED JUNE 30, 1996 COMPARED TO FISCAL YEAR ENDED JULY 2, 1995
Revenue increased by 38.4% to $117.9 million in fiscal 1996 from $85.2
million in fiscal 1995. The increase of $32.7 million was attributable to
increased revenue from North American and European sales of new equipment of
$29.7 million and increased rental and service revenue for Horizon of $3.0
million. Sales of new equipment increased due to (i) a general increase in sales
by UpRight to North American customers, including sales to a single new customer
of approximately $8.0 million, (ii) sales of new products introduced by UpRight
in its large scissor lift product line totaling $7.4 million, (iii) an increase
in export sales primarily to European customers of $6.7 million, and (iv) an
increase in sales of new equipment by Horizon from manufacturers other than
UpRight of approximately $2.0 million. Sales by UpRight of new products and new
models introduced since January 1, 1994 accounted for 60.0% of the Company's
revenue in fiscal 1996.
Gross profit increased by $12.3 million, or 45.6%, to $39.3 million for
fiscal 1996 from $27.0 million for fiscal 1995, while gross margin increased to
33.3% for fiscal 1996 from 31.6% for fiscal 1995. The increase in gross profit
was attributable to increased revenue and higher margins. Margin improvement was
due to elimination of manufacturing inefficiencies related to the production of
the MX and X series and TM-12 scissor lifts in fiscal 1995 by UpRight and higher
dollar utilization of rental equipment by Horizon.
Operating expenses increased to $21.0 million for fiscal 1996 from $17.9
million for fiscal 1995. However, as a percentage of revenue, operating expenses
decreased to 17.8% from 21.0%. For fiscal 1996, research and development
expenses increased by $1.1 million, or 57.7%, which was primarily attributable
to the development by UpRight of its large scissor lift product line. Product
liability expenses increased by $0.9 million, or 44.0%, but were virtually flat
as a percentage of revenue.
Interest expense, net of interest income, increased to $2.9 million for
fiscal 1996 from $2.6 million for fiscal 1995 as the result of an increase in
outstanding debt. Income tax expense increased to $6.0 million for fiscal 1996
from $2.6 million for fiscal 1995 as a result of increased pre-tax income.
As a result of the above, net income increased to $8.8 million for fiscal
1996 from $3.7 million for fiscal 1995, representing an increase of 137.8%.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flow requirements are for working capital, capital
expenditures and debt service.
The Company has met its liquidity needs to date through internally
generated funds and committed finance facilities available to its subsidiaries,
UpRight and Horizon. UpRight and Horizon have revolving lines of credit from
major financial institutions of $4.0 million and $3.0 million, respectively.
UpRight had various capital lease arrangements with finance companies to finance
new and re-engineered equipment, which were repaid out of the net proceeds of
the offering of the Original Notes. The net proceeds of the offering of the
Original Notes, after (1) deducting fees and expenses of the issue; (2)
repayment of various term loans of Horizon; (3) repayment of on demand
indebtedness and accrued interest of the Company from its parent company,
UpRight International Limited; and (4) repayment of various capital lease
obligations of UpRight, increased the Company's cash balances at June 29, 1997
to $77.3 million. This cash is to be used to finance the capital expansion
program at UpRight and Horizon in fiscal 1998 and 1999 and in addition will be
used for general corporate purposes, including acquisitions in complementary,
ancillary or related businesses. Through the issuance of City of Selma
industrial revenue bonds in 1994, UpRight had available to it approximately
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$8.0 million to finance the purchase of buildings and equipment and to develop
and improve certain of the Company's real property infrastructure, $6.6 million
of which was outstanding at June 29, 1997. See "Description of Certain
Indebtedness."
The Company's working capital was $98.8 million and $7.9 million at June
29, 1997 and June 30, 1996, respectively. The increase in working capital is the
result of growth in revenue, generating higher levels of receivables and
inventory. Receivables also increased due to increased export sales (which
typically have longer payment terms) at UpRight. In addition, cash increased by
$66.2 million and current debt liabilities decreased by $17.8 million following
the offering of the Original Notes.
The Company's debt increased by $76.9 million in fiscal 1997 from June 30,
1996. In June 1997 the Company received $104.5 million, being proceeds from the
offering of the Original Notes, net of discount. During fiscal 1997 the Company
repaid a net $18.2 million of senior debt and repaid $13.5 million to its parent
company. Cash increased by $66.2 million in fiscal 1997. Net proceeds of the net
increase in debt in fiscal 1997 were used to fund capital expenditures related
to the expansion of manufacturing capacity for UpRight's new boom lift product
line, extension of UpRight's scissor lift product line and expansion of
Horizon's rental fleet (see "Capital Expansion Program").
Net cash provided by operating activities was $5.5 million and $12.4
million for the fiscal years 1997 and 1996, respectively, primarily due to
funding increased receivables (which typically have longer payment terms)
associated with increased export revenue at UpRight and payment of costs
associated with the offering of the Original Notes.
Net cash used in investing activities was $12.1 million and $8.9 million in
the fiscal years 1997 and 1996, respectively, primarily to fund the Company's
capital expenditure program associated with the expansion of UpRight's
manufacturing facilities at Selma, California, and the upgrading and expansion
of Horizon's rental fleet. Over the next two fiscal years, the Company
anticipates spending approximately $33.5 million on capital expenditures and up
to $5.0 million to capitalize a floor plan financing operation (see "Capital
Expansion Program -- UpRight") which will be funded primarily from the proceeds
of the Original Notes (see "Use of Proceeds").
Net cash provided by financing activities was $72.8 million and $3.3
million in fiscal 1997 and 1996, respectively, after repayments of debt to its
parent company of $13.5 million and $2.0 million, respectively. The Company has
paid no dividends since July 3, 1994.
In addition to its cash on hand, the Company believes that internally
generated funds and amounts available to UpRight and Horizon under revolving
credit facilities are and will continue to be sufficient to satisfy its
operating cash requirements and planned capital expenditures. The Company may,
however, require additional capital through borrowings if the Company undertakes
acquisitions.
SEASONALITY
The Company's revenue and operating results historically have fluctuated
from quarter to quarter, and the Company expects that they will continue to do
so in the future. These fluctuations have been caused by a number of factors,
including seasonal purchasing patterns of UpRight's customers and seasonal
rental patterns of Horizon's customers (principally due to the effect of weather
on construction activity). The operating results of any historical period are
not necessarily indicative of results for any future period.
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BUSINESS
The Company was incorporated in 1975 under the laws of Delaware and serves
as the holding company for its two operating subsidiaries, UpRight and Horizon.
The Company's headquarters are located at 1775 Park Street, Selma, California
93662, telephone (209) 891-5344. UpRight's headquarters are located at 1775 Park
Street, Selma, California 93662, telephone (209) 896-5150. Horizon's
headquarters are located at 1540 East Shaw Avenue, Suite 123, Fresno, California
93710, telephone (209) 248-8180.
UpRight's stock was publicly traded from 1980 until 1988, when it was
acquired by an affiliate of the Company. In 1988, through a corporate
reorganization, UpRight became a wholly-owned subsidiary of the Company. Prior
to 1989, Horizon was an independent company in the business of renting and
selling aerial work platform equipment in Southern California. In 1989, UpRight
acquired the assets of Horizon which were merged into the retail division of
UpRight's North American Operations. In 1994, Horizon became a wholly-owned
subsidiary of the Company. Although Horizon distributes UpRight products, the
two companies have separate management teams and operate on an independent
basis.
UPRIGHT
UpRight is a leading manufacturer of aerial work platforms, including
scissor lifts, boom lifts and portable lifts, and aluminum scaffolding, which
are distributed through a network of domestic and international dealers and
industrial equipment rental companies to end users in North America and
increasingly in Europe, Asia and Latin America.
UpRight has been manufacturing scissor lifts since 1974 as an outgrowth of
its leadership in the development and sale of aluminum scaffolding. The industry
developed in and is predominantly based in North America. Based on unit shipment
data reported by EMI, an industry trade organization, UpRight's management
estimates that of the world's eight largest aerial work platform manufacturers,
seven are headquartered in North America, generating approximately 90% of the
$1.4 billion in worldwide aerial work platform sales in 1996. According to
historical data reported by EMI, the aerial work platform industry has
experienced compound annual growth rates in total unit shipments of scissor
lifts and boom lifts from 1986 to 1996 of 20% and from 1991 to 1996 of 33%.
UpRight's management believes that the principal factors driving the growth
of the industry are (i) aerial work platforms provide significant cost and
safety advantages over alternative equipment (primarily scaffolding and
ladders), and (ii) the increasing awareness of the benefits of aerial work
platforms and the growth of the industrial equipment rental industry is
expanding the availability of aerial work platforms to more numerous smaller
businesses and from larger industrial metropolitan centers to more
geographically diverse and smaller industrial and non-industrial areas. In
addition, management believes that the industry's pattern of growth in North
America will be repeated in other industrialized regions of the world as
labor-efficient equipment becomes more readily available.
UpRight sells its products through an extensive network of over 140
equipment dealers and rental companies, including national, regional and local
distributors located throughout the United States and 76 distributors located in
51 countries internationally. For fiscal 1997, approximately 39% of UpRight's
revenue was generated by sales to customers in Europe and the Pacific Rim, which
UpRight's management believes is among the highest percentages of revenue from
international sales of any aerial work platform manufacturer. Other than
Horizon, UpRight's ten largest customers for such period accounted for
approximately 63% of UpRight's revenue. UpRight's customers sell and/or rent its
aerial work platforms to end users in construction, industrial, commercial and
institutional markets who use the equipment for a wide variety of applications,
including for the construction, repair and maintenance of industrial plants,
shopping malls, office buildings, schools, hotels, hospitals, elevated roadways,
bridges and other industrial, commercial and institutional structures. UpRight
believes its customer service, including technical support for dealers and
rental companies, repair and maintenance services, spare parts availability,
product upgrades and operational and safety training, enhances its reputation
and improves its competitive position versus other manufacturers.
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Since the beginning of fiscal 1994, UpRight has executed an aggressive
research and product development program, investing in excess of $10.7 million
to: (i) extend existing product lines, particularly in scissor lifts, where
UpRight's management believes that the introduction of numerous new scissor lift
models of various platform sizes, weight capacities and heights has made
UpRight's product line as extensive as that of any other manufacturer in the
industry and has positioned UpRight among the top three scissor lift
manufacturers worldwide; (ii) add new features and enhancements to continually
improve the reliability and operational capability of UpRight's existing
products; and (iii) broaden UpRight's product mix, principally by introducing a
line of boom lifts. UpRight's new products and new models introduced since
January 1, 1994 accounted for approximately 79% of UpRight's revenue for fiscal
1997. UpRight has demonstrated product development leadership with regard to
product enhancements, many of which are now commonly used by other
manufacturers, including speed leveling, tight turning and easy platform
loading, and intends to continue to develop improvements to existing aerial work
platform products. UpRight also recently introduced its first boom lift product
line and is currently developing additional boom lift models, replicating the
line extension strategy it successfully utilized in scissor lifts and leveraging
its domestic and international distribution capabilities to accelerate market
acceptance. Based on historical unit shipment data reported by EMI, UpRight's
management estimates that boom lifts accounted for approximately $847 million of
the $1.4 billion in worldwide aerial work platform shipments in 1996.
Since the beginning of fiscal 1994, in addition to the $10.7 million
invested in research and product development, UpRight has invested approximately
$20.2 million in the construction of modern, highly efficient production
facilities incorporating state-of-the-art equipment, has adopted "just-in-time"
inventory procedures and modified cellular production techniques and has
instituted flexible labor and staffing practices to manage peak volume cycles.
UpRight continually redesigns its products to create cost efficiencies and
improve product reliability by standardizing production components and by
reducing the number of parts in its products. These design improvements reduce
UpRight's total cost of purchased components, minimize assembly time and
simplify repairs and maintenance. UpRight believes that its product designs and
operational efficiencies give it a cost advantage over its competitors and that
its revenue per employee is among the highest in the industry.
THE AERIAL WORK PLATFORM INDUSTRY
The aerial work platform industry began in the United States in the late
1960s with the introduction of scissor lifts, boom lifts and portable lifts.
Since that time, aerial work platforms have gained increasing acceptance as an
economical and safe alternative to scaffolding and ladders. According to
historical data reported by EMI, the aerial work platform industry has
experienced compound annual growth rates in total unit shipments of scissor
lifts and boom lifts from 1986 to 1996 of 20% and from 1991 to 1996 of 33%. In
addition, exports of scissor lifts and boom lifts accounted for 17% and 20%,
respectively, of total unit shipments in 1996 compared to 10% and 1%,
respectively, of total unit shipments in 1986. Based on unit shipment data
reported by EMI, UpRight's management estimates that worldwide sales of aerial
work platforms totaled $1.4 billion in 1996. Despite the growth in export
shipments, the working population of aerial work platform equipment remains
significantly lower internationally than in North America. The Company's
management expects that in the next several years as the cost of labor increases
and labor-efficient equipment becomes more readily available, sales of aerial
work platforms will experience substantial growth internationally, similar to
that experienced in the United States over the past several years.
Scissor lifts and boom lifts are the two principal aerial work platform
industry products, accounting for approximately 97% of total aerial work
platform sales in 1996, according to data reported by EMI and management
estimates. A scissor lift consists of a work platform mounted on top of a
hydraulically actuated scissor-type lifting mechanism. A boom lift consists of a
generally smaller work platform supported from the tip of a telescopic or
articulated boom. The lifting mechanisms of both types of machines are mounted
on a self-propelled, steerable, mobile, four-wheeled chassis. Scissor lifts and
boom lifts can be driven by the operator from the platform while in an elevated
position, thus enabling the operator to move from one location to another
without having to return to the ground. This feature, coupled with the
elimination of the time-
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consuming and more labor-intensive task of erecting, disassembling and moving
scaffolding, generates substantial labor savings and reduces hazards to workers.
Scissor lifts generally are capable of supporting 500 to 2,000 pounds of
payload and can elevate to heights ranging from 12 to 50 feet. Boom lifts
generally are capable of supporting 500 to 750 pounds of payload and can elevate
to heights ranging from 30 to 150 feet.
Aerial work platforms are used in a variety of applications that require
workers to access elevated work areas. The ability to elevate the worker,
equipment and material on a platform which the worker can position while
elevated improves worker safety and productivity. Self-propelled aerial work
platforms are now commonly used by end users in construction, industrial,
commercial and institutional markets who use the equipment for a wide variety of
applications, including for the construction, repair and maintenance of
industrial plants, shopping malls, office buildings, schools, hotels, hospitals,
elevated roadways, bridges and other industrial, commercial and institutional
structures. During the construction of certain large commercial and industrial
projects, contractors can often require in excess of one hundred aerial work
platforms at one time. The wide acceptance of aerial work platforms as a
cost-effective, safe alternative to scaffolding and ladders in the United
States, Canada and parts of Europe has influenced both the design of certain
buildings and construction methods. For example, the construction, maintenance
and usefulness of high-ceilinged warehouses have been made more practical
through the wide acceptance of aerial work platforms.
The aerial work platform industry is cyclical and historically has been
dependent on the United States construction industry. However, several other
factors have affected the growth in total unit shipments, including the
following:
- - New product introductions, new usage applications and the continued expansion
into international markets have increased demand. The aerial work platform
industry has historically been concentrated in North America and has primarily
served the non-residential construction market. As a result, industry growth
was adversely affected by the severe downturn in commercial construction
between 1990 and 1992. However, according to data reported by EMI, scissor
lift unit shipments exported from North America have increased by a compound
annual growth rate of approximately 25% since 1986. Several new products have
been introduced that are specifically designed for nonconstruction
applications, such as narrow aisle boom lifts which accounted for
approximately 8% of total boom lift unit shipments in 1996.
- - Significant changes in the industrial equipment rental industry. UpRight's
management believes that increasing demand for rentals is helping to fuel the
growth in demand for aerial work platform products. In addition, companies in
the equipment rental industry are reducing the average age of their rental
fleets by accelerating the turnover of their equipment, thereby increasing
sales of aerial work platforms. At the same time, the consolidation of the
historically fragmented equipment rental industry in the United States has led
to the emergence of several national and regional equipment rental companies
(other than Horizon) which have greater access to capital. In addition, these
large industrial equipment rental companies are expanding the availability of
aerial work platforms from larger industrial metropolitan centers to more
geographically diverse and smaller industrial and non-industrial areas.
- - Safety regulations are increasing. Product liability concerns in the United
States and an increase in the number and scope of government-mandated safety
regulations, especially in developing countries, have spurred an increase in
the development of safety features and improved the cost effectiveness of
aerial work platforms compared to scaffolding, cranes, forklifts and ladders.
BUSINESS STRATEGY
The Company believes that UpRight is well positioned to realize continued
growth in net sales and EBITDA. UpRight expects to continue its growth and
enhance its industry leadership by implementing a continuation of this strategy
based on the following elements:
Continually Introduce New Products and Extend Product Line. UpRight
management believes that it is among the leaders in new product development in
the industry. In addition to its extensive scissor lift product line, UpRight
intends to systematically expand its product offerings with a line of
articulated and telescopic
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boom lifts, the first of which was introduced in February 1997. UpRight expects
to leverage its existing domestic and international distribution capabilities to
accelerate market acceptance and market share of its boom lifts. The line
extension strategy will be targeted to the most frequently utilized models with
broad end user applications and to less frequently utilized models servicing
underserved niches with specific end user applications. UpRight has recently
completed the construction of approximately 80,000 square feet of additional
assembly and production capacity and intends to add over time an additional
300,000 square feet of manufacturing facilities to accommodate the anticipated
growth in its boom lift sales.
Enhance Product Reliability. UpRight believes its products are well
regarded in the industry for their quality, features and reliability and have
among the highest resale values in the used equipment aftermarket. In addition,
management believes that repair and maintenance costs for its equipment compare
favorably to those of its competitors within the industry. UpRight has increased
and expects to continue to increase its research, development and engineering
efforts to integrate new components and materials technology into its products
in order to further enhance product quality and reliability.
Provide High Level of Customer Service. UpRight believes that its level of
customer service is among the highest in the industry and that its reputation
for service is excellent. UpRight's customer service includes technical support
for dealers and rental companies, repair and maintenance services, spare parts
availability, product upgrades and operational and safety training. UpRight
intends to continue to provide operational training, safety instruction and
other services to enhance customer loyalty.
Expand Distribution Network. UpRight intends to expand its distribution
network of domestic and international dealers and industrial equipment rental
companies primarily by (i) adding dealers in existing markets to increase
penetration and market presence, (ii) adding dealers in new markets,
particularly outside the United States, (iii) following existing dealers'
expansion into a greater number of locations, and (iv) expanding its boom lift
line which will make UpRight's product line comprehensive and should enhance its
attractiveness to certain large industrial equipment rental companies.
Improve Production Efficiency. UpRight intends to continue to automate and
upgrade production equipment, redesign and reengineer products to standardize
and simplify parts and components, work closely with its suppliers to reduce
parts and components costs, including inventory costs, and enhance quality
control to reduce production and delivery cycles. In addition, UpRight believes
that its new product development and product line extensions will help it
realize economies of scale.
Expand Through Selective Acquisitions. UpRight intends to make selective
acquisitions of complementary companies to accelerate the expansion of its
product line or distribution network or to vertically integrate the manufacture
of certain parts and components used in its products to improve cost efficiency
and enhance product reliability. Management believes many of the parts and
components used in UpRight's products are manufactured by a number of small
companies which, if acquired, could be integrated into UpRight's research,
design and production capabilities while retaining the existing customer base of
such acquired companies.
PRODUCTS
UpRight's product line consists of four major categories of equipment:
scissor lifts, boom lifts, portable lifts and aluminum scaffolding.
Scissor Lifts. UpRight is a leader in the manufacture and sale of scissor
lifts, offering nine product lines consisting of more than 127 scissor lift
models, with elevation capabilities of up to 50 feet and various platform sizes
up to 6 feet by 14 feet, including some models with an available option that
extends the deck horizontally up to six feet, and rated lift capacities ranging
from 500 to 2,000 pounds. Scissor lifts are intended to safely lift and support
workers, their tools and materials. These models are available for indoor and
outdoor applications, including a rough-terrain series of scissor lifts with a
patented leveling apparatus which provides for fast platform leveling on uneven
ground and slopes. The uses and applications for scissor lifts are varied and
include non-residential construction, warehousing, renovations and retooling and
maintenance of large manufacturing plants and institutional facilities.
Currently, dealer net prices for UpRight's standard models
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range from approximately $7,750 to $45,000. UpRight's two largest scissor lift
lines, consisting of models ranging from 15 to 31 feet, accounted for 43% of
UpRight's revenue for fiscal 1997.
Each of UpRight's self-propelled units is powered by either a
battery-powered DC electric motor or an internal combustion engine (propane,
gasoline or diesel). UpRight's DC electric-powered scissor lifts are capable of
climbing grades of up to 25%, which allows them to climb most inclines and ramps
and to tolerate certain uneven floor conditions. UpRight's engine-driven
machines are also available with two- and four-wheel drive and can climb grades
of up to 35%, which makes these machines capable of traversing difficult
terrain.
Boom Lifts. In February 1997, UpRight introduced its first line of
articulating boom lifts and intends to introduce certain other boom lift lines
in the future. UpRight offers nine boom lift models, and distributes an
additional two boom lift models which are manufactured by an affiliate, with
rated lift capacities up to 500 pounds. The applications for boom lifts are
extensive, due to their mobility, and include non-residential construction,
manufacturing, renovations and retooling of large manufacturing plants and
facilities maintenance. Boom lifts are designed to reach over machinery and
equipment that is mounted on floors and for reaching other elevated positions
not easily accessed by a vertical lifting device. The boom may be rotated up to
360 degrees in either direction, raised or lowered from vertical to below
horizontal and extended, while the work platform remains horizontal and stable.
Boom lifts may be maneuvered forward or backward and steered in any direction by
the operator from the elevated work platform. Currently, dealer net prices for
UpRight's standard models, including the two models manufactured by its
affiliate, range from approximately $28,000 to $43,000.
Each of UpRight's boom lifts is powered by either battery-powered DC
electric motors or an internal combustion engine (propane, gasoline or diesel).
UpRight's boom lifts are capable of climbing grades of up to 36%, which allows
them to climb most inclines and ramps, as well as allowing for the ability to
negotiate certain uneven floor conditions.
Portable Lifts. UpRight offers two product lines consisting of more than
36 models of manually-propelled portable lifts, which consist of a work platform
attached to an aluminum or steel mast that extends vertically. These machines,
while in their retracted position, can be rolled through standard door openings.
They have maximum elevation capabilities of up to 48 feet and rated lift
capacities range from 250 to 350 pounds. The applications for portable lifts are
more limited than for self-propelled machines and include many indoor uses such
as maintenance of commercial buildings, municipal and governmental institutions,
industrial plants and theaters. Currently, dealer net prices for UpRight's
standard models range from approximately $3,000 to $9,500.
Scaffolding. UpRight first introduced aluminum scaffolding in 1947 and
today is considered to be the North American leader in this product segment.
Scaffolding height can be adjusted by mounting individual sections on top of one
another up to a maximum height of approximately 100 feet. Today, scaffolding is
still a major rental and sales item for use on certain construction and
maintenance projects, although it represents a declining portion of UpRight's
business. Revenue from scaffolding in fiscal years 1996 and 1997 was $4.0
million and $3.7 million, representing approximately 4% and 3% of UpRight's
revenue, respectively.
PRODUCT DEVELOPMENT STRATEGY
UpRight's products compete in a price-conscious, utilitarian-oriented
market on the basis of product quality, cost, reliability and customer service.
The primary design challenge with aerial work platforms is to achieve the
maximum lift (height and work load) capacity and machine stability with minimum
machine dimensions, weight and cost. UpRight employs 12 engineers who use
computer assisted design ("CAD") to facilitate faster design, redesign and
improvement of machines. In addition, new machine models and related
modifications are often tested by conducting accelerated service life cycle
tests of actual machines under load, during which time critically stressed
machine components are monitored using state-of-the-art strain measuring
technology. These capabilities, among others, enable UpRight to quickly and
safely improve the designs of its existing and future aerial work platform
models.
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UpRight's product development process is customer driven, beginning with
market research of customer needs and requirements. UpRight's development
process utilizes concurrent engineering and cross-functional teams, which
combine personnel from marketing, design, engineering, manufacturing, purchasing
and quality assurance. As a result of this approach, UpRight's product
development cycle for scissor lift models is approximately 11 months. To develop
the boom lift line, UpRight utilized its existing technology and engineering
capabilities from its scissor lifts and supplemented its product development
staff with engineers experienced in the design, development and manufacture of
boom lifts. In February 1997, UpRight introduced its first boom lift product,
with a line of 45-foot articulated booms. UpRight chose this model as its first
product line in booms because 45-foot articulated models are the largest single
segment within the boom lift market, accounting for 22% of estimated total boom
lift sales, according to EMI data and management estimates. UpRight intends to
introduce additional boom lift models following a similar business strategy of
initially targeting the most frequently utilized product sizes or serving an
underserved market niche in the boom lift market.
Since the early days of the aerial work platform industry, UpRight
engineers have been actively involved in creating and writing various industry
safety standards. In addition to meeting these requirements, UpRight has often
exceeded them, adopting features, such as interlocking outriggers on portable
lifts and pothole protection and tilt interlocks on scissor lifts, before they
were incorporated into industry safety standards.
Research and development expenses of UpRight have been $1.8 million, $2.9
million and $4.3 million for fiscal years 1995, 1996 and 1997, respectively.
UpRight's new products and new models introduced since January 1, 1994 accounted
for approximately 79% of UpRight's revenue for the fiscal year ended June 29,
1997.
SALES AND MARKETING
UpRight's products are distributed through a network of domestic and
international dealers and industrial equipment rental companies to end users in
North America and increasingly in Europe, the Pacific Rim and Latin America. The
North American network consists of over 140 companies, several of whom have
large nationwide branch networks, operating in all 50 states and Canada. In
Europe, Africa and the Middle East, UpRight's distribution network consists of
49 dealers in 32 countries. UpRight also has 21 distributors in 13 countries in
the Pacific Rim and has six distributors in six countries of Latin America.
UpRight's distributors sell and/or rent its products and provide service
support.
UpRight supports the sales, service and rental programs of its distributors
with product specific advertising, cooperative promotional programs, national
and regional trade show participation and distributor personnel training in
sales, service, safety and product attributes. In order to better serve
differing channels of distribution and end use applications, UpRight has
structured its North American sales organization along product lines, with one
team serving boom and scissor lift distributors and rental companies, including
large national rental companies, and the other group supporting the distribution
of portable lifts. Internationally, UpRight's sales force is regionally
structured with separate organizations serving European, Pacific Rim and Latin
American distributors. UpRight's sales and service support to its customers in
Europe is supplemented through UpRight's affiliate in Ireland.
During fiscal years 1995, 1996 and 1997, other than Horizon, UpRight's ten
largest customers together accounted for approximately 43%, 43% and 63% of
UpRight's revenue, respectively. No single customer of UpRight accounted for 10%
or more of the Company's revenue during fiscal years 1995 and 1996; however,
during fiscal year 1997, two of UpRight's customers accounted for 14.9% and
10.6% of the Company's revenue. Instant Zip-Up Limited accounted for 18.9% of
UpRight's revenue and 14.9% of the Company's revenue for the fiscal year ended
June 29, 1997. An affiliate of the Company owns a minority voting interest in
Instant Zip-Up Limited. While the actual level of revenues from Instant Zip-Up
Limited is, in large part, dependent upon the strength of the European market
and Instant Zip-Up Limited's ability to compete in that
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market, UpRight expects that the relationship with Instant Zip-Up Limited will
continue at its current levels. See "Certain Relationships and Related
Transactions."
MANUFACTURING
UpRight's headquarters and manufacturing facility is located in a 335,000
square foot complex in Selma, California, of which approximately 150,000 square
feet of manufacturing space was added since January 1, 1995. UpRight has spent
more than $15.1 million since the beginning of fiscal 1994 to upgrade and expand
its manufacturing facilities, to install several new machine tools, including
computer numerically controlled ("CNC") turning and machining centers, plasma
cutting and welding robots, flexible manufacturing system ("FMS"), including CNC
punching and laser cutting centers, as well as a state-of-the-art powder coat
paint finishing system, which management believes is among the largest on the
West Coast. These capital expenditures have more than doubled UpRight's
manufacturing throughput since the beginning of fiscal 1994 and increased labor
productivity.
The manufacturing process involves welding and fabrication of raw steel and
aluminum into various components, machining, assembly and painting. To the
extent practical, a cellular approach is used to manufacture major components on
a just-in-time basis. Products are assembled, including purchased finished
components, on a build-to-order basis utilizing continuous flow processes. These
approaches give UpRight the flexibility to quickly respond to changing customer
demand while effectively managing its inventory levels. In-process inspection is
utilized to control and ensure quality.
UpRight employed 626 employees in the manufacturing process as of June 29,
1997, of which 222 were "temporary" or contract personnel. This mix of
"permanent" and "temporary" personnel gives UpRight the flexibility to quickly
and efficiently adjust production levels during periods of changing market
demand. This flexible staffing policy also gives management the opportunity to
selectively add quality permanent employees from the temporary ranks. UpRight
believes this pre-employment trial has contributed to a very low employee
turnover rate. At present, during an average week, UpRight operates one 40-hour
assembly shift and multiple shifts of a smaller number of employees performing
certain machining, painting and fabrication functions.
To support its product line expansion strategy, UpRight plans to add
additional facilities at its existing Selma, California complex, including boom
lift manufacturing and shipping buildings. However, full implementation of the
boom lift product line extension strategy over the next five years will require
the purchase of approximately 20 additional acres in the Selma area, at an
estimated cost of approximately $600,000.
SUPPLIERS
UpRight's scissor lifts and boom lifts are fabricated primarily from steel.
Portable lifts and scaffolds are fabricated primarily from aluminum. These raw
materials are obtained from large company mills or service centers. Most
purchased finished components, including electric motors, batteries and
hydraulic motors, cylinders and valves, are obtained directly from small- to
mid-sized United States manufacturing companies. Engines are supplied through
independent distributors. UpRight relies on arrangements with preferred vendors
as a sole source for just-in-time delivery of many manufactured components.
Depending on the particular product, purchased finished components account for
approximately 60% to 65% of the total average unit cost. UpRight has instituted
a comprehensive supplier certification program, in which a team of UpRight
personnel work closely with supplier partners to ensure quality and reduce
costs. To the extent feasible, just-in-time deliveries are used to minimize
inventories and support UpRight's continuous flow production processes.
COMPETITION
In selling its aerial work platform products, UpRight experiences two
principal types of competition: from alternative equipment and from other
manufacturers of aerial work platforms. UpRight competes with more traditional
means of accomplishing the tasks performed by aerial work platforms, including
truck- and trailer-mounted booms and, to a more limited extent, ladders,
scaffolding and other devices. UpRight's management believes that its aerial
work platforms in many applications are safer, more versatile and more
efficient, taking
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into account labor costs, than those traditional methods and that its aerial
work platforms enjoy competitive advantages when the job requires frequent
movement from one location to another at the same site or when there is a need
to return to the ground frequently for tools and materials.
UpRight competes in the aerial work platform industry primarily with
several other manufacturers, including JLG Industries, Grove Worldwide, Skyjack
and Genie Industries, which each manufacture scissor lifts, boom lifts and
portable lifts, Snorkel and Terex, which each manufacture scissor lifts and boom
lifts, and Mayville Engineering Company, which manufactures scissor lifts and
portable lifts. UpRight's scissor lift product line is as extensive as that of
any other manufacturer in the industry and management believes UpRight is among
the top three scissor lift manufacturers worldwide. UpRight has recently
introduced its first boom lift product line and is currently developing
additional boom lift product lines. Several of UpRight's competitors currently
offer a more comprehensive boom lift product line. Certain of UpRight's
competitors are part of, or are affiliated with, companies that are larger and
have greater financial resources than UpRight. Several of UpRight's competitors
have significantly increased or are in the process of significantly increasing
their manufacturing capacity. See "Risk Factors -- Competition." However,
UpRight believes that its product quality, customer service, distribution
network and reputation for leadership in product improvement and development
enhance UpRight's competitive position.
PROPERTIES
UpRight maintains its headquarters and manufacturing operations at its
owned facilities at 1775 Park Street, Selma, California 93662, telephone (209)
896-5150. Since January 1, 1995, UpRight has added approximately 150,000 square
feet of manufacturing space to increase the complex size to approximately
335,000 square feet. To support its product line expansion strategy, UpRight
plans to add additional facilities to its existing Selma, California complex,
including boom lift manufacturing and shipping buildings. To date the building
program has been financed principally with UpRight's 7.0% to 11% bond issues
with the Community Redevelopment Agency of the City of Selma, California, due
through December, 2014. The borrowings are secured by a Deed of Trust on the
Selma property. UpRight leases a sales office and training facility in
Cincinnati, Ohio with a five-year term and a storage facility in Selma,
California with a six-month term with optional six-month renewals.
HORIZON
Horizon is a leading industrial equipment rental, sales and service company
specializing in aerial work platforms, including scissor lifts, boom lifts and
portable lifts, and forklifts and scaffolding, serving a diverse range of more
than 11,000 active customers from 14 domestic locations. Horizon offers a full
service, integrated approach to serving its customers' needs by providing
rentals of equipment, sales of new and used equipment, sales of spare parts and
repair and maintenance services. For fiscal 1997, approximately 51% of Horizon's
revenue was generated by equipment rentals, approximately 44% of Horizon's
revenue was generated by sales of new and used equipment, and the remainder was
generated by training services, sales of spare parts and certain related
customer services. Management believes that, among major industrial equipment
rental companies, Horizon has one of the highest ratios of sales to rentals in
the industry. Within the last three fiscal years, Horizon has strategically
expanded its product offerings to include, in addition to UpRight products,
certain additional product lines from other leading manufacturers. Horizon acts
as a distributor for UpRight products in most of Horizon's designated market
areas. Horizon and UpRight operate independently, and all transactions between
them are conducted on an arm's-length basis.
Horizon's strategy is to focus on small- to mid-sized companies and
contractors, particularly in the construction market, including users in
specialized trades, such as electricians, painters, HVAC and mechanical
contractors, and in the industrial market, including users engaged in the
maintenance of warehouses, manufacturing plants and commercial and institutional
facilities. Management believes that its customers within its target markets are
less price sensitive, more dependent upon service and equipment availability,
less sensitive to economic cycles and more diversified in number than are the
larger end users typically targeted by Horizon's primary competitors. In
addition, small- to mid-sized contractors tend to rent
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equipment on shorter notice for shorter periods of time. As a result of the
higher turnover of equipment and Horizon's pricing structure, management
believes Horizon generates higher margins and higher dollar utilization than if
Horizon targeted larger end users. Horizon's rental strategy is complemented by
Horizon's sales efforts, which primarily target small- to mid-sized companies
that often purchase the most frequently utilized equipment models and rent
additional equipment or specialized equipment for particular projects.
The equipment rental industry serves a wide variety of commercial and
residential construction, industrial and homeowner customers. According to a
survey conducted by AED, an industry trade organization, the United States
equipment rental industry has grown from approximately $610 million in revenue
in 1982 to an estimated $13 billion in revenue in 1995, a compound annual growth
rate of approximately 27%. Horizon's management estimates that the aerial work
platform segment constitutes approximately 10% to 15% of such industry revenue.
Management believes that the growth in the industry reflects, in part, (i) an
increase in outsourcing by commercial and industrial customers seeking to reduce
their capital invested in equipment and to reduce the costs associated with
maintaining and servicing such equipment by renting rather than purchasing
equipment, (ii) an increase in the number of equipment rental locations and the
corresponding increase in availability of equipment, and (iii) a general decline
in inflation-adjusted rental rates.
According to the Rental Equipment Register, an industry publication,
Horizon is the 34th largest rental equipment company in the United States based
on 1996 rental revenue; however, within the aerial work platform segment,
Horizon is the eighth largest rental equipment company. Horizon's rental fleet
as of June 29, 1997 exceeded 2,400 self-propelled and portable aerial work
platforms and forklifts with an original equipment cost of approximately $38.0
million, and included aluminum scaffolding with an original equipment cost of
approximately $939,000.
Horizon provides a complete range of customer services through its network
of offices and field support personnel, including safety and operational
training, technical and maintenance support, 24-hour emergency repair service,
spare parts supplies and related services. Management believes Horizon is
recognized as a leader in customer service, a significant factor for many of
Horizon's customers, which are generally more dependent on each piece of
equipment and which cannot afford downtime associated with unscheduled
maintenance. Horizon was among the first aerial work platform rental companies
to offer service and maintenance contracts and training programs, and was one of
the first in the industry to comply with all of the safety and operational
standards of ANSI.
BUSINESS STRATEGY
Focus on Small- to Mid-Sized Customers. Horizon intends to continue
focusing on small- to mid-sized companies in the construction market, including
users in specialized trades, such as electrical, painting, HVAC and mechanical
contractors, and in the industrial market, including users engaged in the
maintenance of warehouses, manufacturing plants and commercial and institutional
facilities. Management believes that its comprehensive service and technical
support, which includes safety and operational training, 24-hour emergency
repair service, spare part supplies and related services, provides a competitive
advantage with these customers and, further, that focusing on these customers
allows Horizon to achieve higher dollar utilization, more stable day utilization
and higher margins than if Horizon targeted larger end users.
Expand the Number of Locations. Horizon currently operates in 14 locations
dispersed among industrial areas on the East Coast and West Coast and in the
Midwest and Southwest. In late 1995, Horizon began to implement a hub-and-spoke
expansion strategy whereby one branch supports multiple satellite rental offices
to maximize the availability and utilization of its rental fleet within a given
geographic area while cost-efficiently increasing market penetration. Because
many of its customers are small- to mid-sized companies, maintaining a local
presence and relationship is important in retaining customer loyalty. Horizon
has identified several additional markets in which to open branches, as well as
selectively add satellite offices, within the next several years. Satellite
offices are intended to be opened to service existing customers' needs as they
expand or relocate, and to attract new customers. As part of this strategy and
to accelerate its expansion efforts, Horizon may make strategic acquisitions of
regional or local equipment rental and sales companies.
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Expand and Upgrade Rental Fleet. Horizon has systematically expanded its
rental fleet primarily to meet the demands of specific markets. Within the next
two fiscal years, Horizon plans to add approximately $11 million (at dealer
cost) of additional equipment to upgrade its existing fleet and approximately $6
million (at dealer cost) of additional equipment to offer greater availability
and more comprehensive product mix to its customers. See "Capital Expansion
Program." Horizon does not intend to significantly change the composition of its
rental fleet towards boom lifts, because its existing customer base has
historically utilized scissor lifts and boom lift usage declines substantially
during the winter and poor weather months, which decreases equipment
utilization.
Manage the Revenue Mix of Rentals and Sales. Horizon targets a 50%/40%/10%
mix of revenue generated from (i) rentals, including delivery charges and damage
waivers, (ii) sales of new and used equipment and (iii) miscellaneous sources,
including service revenue on customer-owned equipment, sales of spare parts and
safety training certification fees, respectively. Horizon management believes
this strategy diversifies Horizon's customer base beyond the construction
industry and mitigates the impact of seasonal and economic cycles. Equipment
sales to industrial companies during the fiscal year ended June 29, 1997
accounted for approximately 70% of total Horizon sales of new and used
equipment. Although Horizon expects that its new branches and satellite offices
will generate higher percentages of rental revenue, until those branches and
satellite offices are more established in their respective markets, Horizon
intends to continue to target a similar revenue mix through an increase in sales
of new and used equipment and spare parts at its existing locations.
PRODUCTS AND SERVICES
Equipment rental represents Horizon's principal line of business. In fiscal
1997, equipment rental revenue, together with rental-related revenue, such as
repair services, delivery charges and damage waiver income, accounted for
approximately 51% of Horizon's revenue. Horizon also acts as a distributor of
new equipment on behalf of UpRight and certain other nationally known equipment
manufacturers. Approximately 44% of Horizon's fiscal 1997 revenue was derived
from the sale of new and used equipment, of which approximately 69% was
equipment manufactured by UpRight. Revenue from the sale of parts and
merchandise accounted for approximately 5% of Horizon's revenue in fiscal 1997.
Rental Equipment. Horizon rents over 105 different models of aerial work
platforms and other industrial equipment as of June 29, 1997, consisting of
scissor lifts, boom lifts (including one truck-mounted boom lift model),
portable lifts and forklifts, with a total exceeding 2,400 pieces of equipment
(excluding scaffolding). The original equipment cost of Horizon's rental fleet
was approximately $38.0 million as of such date. In addition, Horizon maintains
a comprehensive inventory of aluminum scaffolding with an original equipment
cost of approximately $939,000 as of such date. The distribution of Horizon's
total rental equipment fleet (based on original equipment cost) as of June 29,
1997 was: (i) scissor lifts (56%); (ii) boom lifts (33%); (iii) portable lifts
(1%); (iv) forklifts (5%); (v) scaffolding (2%); and (vi) other equipment (3%).
The mix of rental equipment at each of Horizon's 14 domestic locations is
tailored to meet the demands of the local customer base.
Horizon seeks to maintain a modern, high-quality rental fleet through
regular sales of used rental equipment and ongoing capital investment in new
equipment. As of June 29, 1997, the average age of Horizon's rental equipment
fleet was approximately 44 months. Horizon currently expects to replace
approximately 15% of its rental fleet annually, subject to market, economic and
other conditions. In addition, Horizon has an advanced preventive maintenance
program, which complies with ANSI requirements and requires that scheduled
maintenance be performed in compliance with manufacturers' guidelines. This
program extends the useful life of Horizon's rental equipment, which management
believes results in higher resale prices in the industrial equipment
aftermarket.
Sales of New Equipment. In addition to equipment rental, Horizon is a
distributor for various equipment manufacturers in certain of its designated
market areas, including UpRight (scissor lifts, boom lifts, portable lifts and
aluminum scaffolding), Terex (boom lifts), Denka Lift (specialized manually-
propelled boom lifts), Mitsubishi (forklifts), Sky-Trak (reach forklifts),
Carelift (reach forklifts) and Elliott
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(truck-mounted boom lifts). Horizon also sells equipment manufactured by Genie
Industries (boom lifts). Horizon believes that, by offering new equipment for
sale, it strengthens its relationships with its existing rental customers who
may want to purchase certain pieces of often-utilized equipment, and it enables
Horizon to develop new rental customer relationships as it sells new equipment
to customers who rent equipment to supplement their owned machines.
Sales of Used Equipment. Horizon routinely sells used equipment to adjust
the size and composition of its rental fleet to changing market conditions and
as part of its ongoing commitment to maintain a modern, high-quality rental
fleet. Horizon believes it achieves favorable sales prices for its used
equipment as a result of its preventive maintenance program and its practice of
selling used equipment before it becomes irreparable or obsolete. Horizon's
management attempts to optimize the timing of sales of used equipment by taking
into account maintenance costs, rental demand patterns and resale prices.
Horizon sells used equipment to its existing rental customers as well as to
other used equipment buyers.
Sales of Parts and Merchandise. Horizon also sells a wide range of repair
and replacement parts, supplies and safety equipment, including harnesses, belts
and lanyards, as a complement to its equipment rental and sales businesses.
Management believes that the sales of parts, supplies and safety equipment
enhance the ability of Horizon to attract and retain customers.
Service. Horizon also generates revenue from maintenance service by
providing various options to its customers, including service on a contract or
time-and-materials basis for customers who own their equipment and over the life
of a lease for customers who lease their equipment. Horizon's trained personnel
perform both the maintenance and service work on Horizon's rental fleet and to
customers who own equipment. Horizon's safety department also provides safety
training and operator training courses, including operator certification and
"train-the-trainer" programs.
OPERATIONS
Horizon's sales and rental functions are managed at each of its locations.
Each year, location managers budget expected new equipment sales and rental
equipment expenditures and parts and service needs for their respective markets.
Horizon recently centralized equipment purchasing at a single location in an
effort to achieve greater volume discounts and better manage its inventory.
Horizon distributes equipment from its Dallas location to all other Horizon
locations or customers upon order, except for West Coast shipments, which are
distributed from its Sacramento, California location.
Horizon seeks to manage its rental fleet to optimize the return on its
investment in rental equipment. Senior management regularly interacts with
branch managers to monitor equipment utilization rates and indicated demand at
each location in order to determine and react to trends and imbalances between
supply and demand for equipment. In late 1995, Horizon began implementing a
"hub-and-spoke" network among certain of its branch and satellite locations
whereby, through its information systems, employees at locations within a
certain hub-and-spoke network are able to locate a specific item within that
network's geographic region and determine whether that item is currently rented
to a customer, undergoing maintenance or available for delivery. Once the item
is identified, the employee is able to reserve such equipment for a customer and
schedule delivery to the job site.
Horizon utilizes an integrated AS400 information system which allows both
the corporate headquarters and the branch and satellite locations to have
instantaneous access to all inventory and rental information. The system also
provides immediate access to customer records and needs and management believes
enables Horizon to move its assets among locations to optimize equipment
utilization and maximize customer service. Management believes that its
information systems are an integral component in its ability to manage new
locations effectively.
CUSTOMERS
Horizon serves a diverse range of more than 11,000 active customers. Other
than one customer who accounted for approximately 3% of Horizon's revenue, no
single customer of Horizon accounted for more than
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1% of Horizon's revenue during fiscal 1997. No single customer of Horizon
accounted for 1% or more of the Company's revenue during fiscal years 1995, 1996
and 1997. Horizon classifies its customers as either construction or industrial
end users. For fiscal 1996 and 1997, approximately 53% of Horizon's revenue was
derived from construction end users, with the remaining 47% being derived from
industrial end users. Construction customers include users in specialized
trades, such as electricians, painters, HVAC and mechanical contractors.
Industrial customers include users engaged in the maintenance of warehouses,
manufacturing plants and commercial and institutional facilities.
SUPPLIERS
Each Horizon branch carries a comprehensive line of UpRight equipment in
its rental fleet, including scissor lifts, portable lifts and aluminum
scaffolding, and each location also carries a variety of equipment from other
manufacturers, including boom lifts and forklifts. Other than Genie Industries
boom lifts, which are purchased from distributors, Horizon purchases all of its
equipment directly from the original equipment manufacturer. UpRight accounted
for approximately 72%, 49%, and 53% of Horizon's total capital purchases of
equipment for fiscal years 1995, 1996 and 1997, respectively. Horizon believes
it could readily replace any of its suppliers for rental equipment if it were
necessary.
SALES AND MARKETING
In the sales and rental of aerial work platforms, Horizon's strategy is to
focus on small- to mid-sized end users. Horizon concentrates on providing a wide
selection of equipment choices to a large, diversified customer base while
providing comprehensive customer service and technical support.
There are currently 36 employees in Horizon's sales force, including
specialists who focus on the construction industry, with a primary focus on
equipment rentals, specialists who focus on the industrial market, with a
primary focus on equipment sales, and special account managers who focus on
specialized industries and end users. Horizon's sales force has been with
Horizon an average of approximately six years. Sales personnel are compensated
on a salary-plus-commission basis and report directly to branch managers.
Horizon promotes its services through a combination of direct sales
contacts, telemarketing, listings in telephone directories, subscriptions to
industry data base lists and pursuing leads obtained from manufacturers. In
addition, each Horizon field office annually participates in approximately five
informational trade shows in their market area and, combined with the
manufacturers' national shows, Horizon sales representatives annually attend
approximately 50 trade shows on a company-wide basis.
PROPERTIES
Horizon's corporate headquarters are located at 1540 East Shaw Avenue,
Suite 123, Fresno, California 93710, telephone (209) 248-8180. Horizon currently
has 11 branch facilities at the following locations: Atlanta, Georgia;
Charlotte, North Carolina; Beltsville, Maryland; Oakland, Sacramento and Brea,
California; Elmhurst, Illinois; Morgantown, West Virginia; Houston and Dallas,
Texas; and Ridgefield Park, New Jersey. In addition, Horizon currently has three
satellite facilities at the following locations: Raleigh, North Carolina
(Charlotte); Charleston, South Carolina (Charlotte); and Lakewood, New Jersey
(Ridgefield Park). Horizon owns no properties. Horizon's corporate headquarters
are leased for a term expiring in August 2000. Generally, Horizon's branches are
leased for terms ranging from three to five years with options to extend or
renew. Horizon's satellite facilities are leased for terms of less than one
year. Horizon's management believes it would be able to relocate its branches or
satellites to alternate locations on comparable lease terms.
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LEGAL PROCEEDINGS, ENVIRONMENTAL AND REGULATORY
MATTERS AND EMPLOYEES
LEGAL PROCEEDINGS; PRODUCT LIABILITY; INSURANCE
Use of products manufactured by UpRight and sold or rented by Horizon
involves exposure to personal injury as well as property damage, particularly if
operated carelessly or without proper maintenance, and liability exposure for
the Company, UpRight and Horizon.
There are various claims and litigation pending against UpRight and Horizon
for personal injury and property damage arising out of incidents involving the
use of UpRight products and, in the case of Horizon, products of UpRight and
other manufacturers. The Company believes that litigation of this type is common
in the businesses of UpRight and Horizon and for other manufacturers and
distributors in the aerial work platform industry. Although the outcome of such
litigation cannot be predicted with certainty, it is the opinion of management,
based on the advice of legal counsel and other considerations, that all claims,
legal actions, complaints and proceedings which have been filed or are pending
against UpRight and Horizon, as well as possible future claims, are adequately
covered by reserves and insurance.
UpRight's insurance against exposure to such litigation is currently
comprised of a self-insurance retention of $100,000 per occurrence and
catastrophic coverage of $101 million per occurrence and in an annual aggregate
in excess of the retention.
Horizon's insurance currently provides for an annual aggregate of $10.0
million in respect of general liability with a deductible of $10,000 per
occurrence for the first $1.0 million of coverage. The Company has accrued what
management believes are adequate reserves with respect to pending and potential
claims. Management believes that UpRight's and Horizon's potential exposure to
product liability/general claims may be affected by the substantial growth in
usage of aerial work platforms over the past several years, which has
dramatically increased machine population and the number of users. There can be
no assurance that existing or future claims will not exceed the level of
UpRight's and Horizon's insurance, or that such insurance will continue to be
available on economically reasonable terms, or at all. In addition, certain
types of claims, such as claims for punitive damages or for damages arising from
intentional misconduct, generally are not covered by insurance. Since the
acquisitions of UpRight and Horizon by the Company, neither subsidiary has been
required to pay any claim for punitive damages. Product liability costs incurred
by the Company, including premiums, self-insurance retention payments,
unreimbursed judgments and settlements not covered by insurance, for fiscal
years 1995, 1996 and 1997, approximated 2.5%, 2.6% and 2.2% of revenue,
respectively. Various legal actions (in areas other than product liability) may
arise in the ordinary course of business from time to time against the Company,
UpRight or Horizon. Other than with respect to product liability, there is no
litigation currently pending against the Company, UpRight or Horizon. None of
the litigation pending against UpRight or Horizon, individually or collectively,
is expected to have a material adverse effect on the Company's financial
condition, results of operations or liquidity.
ENVIRONMENTAL AND REGULATORY MATTERS
UpRight and Horizon are subject to environmental regulation by federal,
state and local governmental authorities. Although the Company does not believe
that the operations of UpRight and Horizon involve activities likely to create
significant environmental risks, their operations do involve the use of diesel
and gasoline fuel, hydraulic fluid, coolants, paint and other chemicals and
solvents that must be stored, handled, used and disposed of in accordance with
environmental laws and regulations. The Company believes that its operations
have been and are in compliance in all material respects with applicable
environmental laws and regulations. To date, environmental requirements have not
had a material adverse effect on the Company's operations or financial
condition. Expenditures by the Company for environmental matters were $0.3
million and $0.1 million in fiscal 1996 and 1997, respectively, and are
estimated to be $0.3 million in fiscal 1998.
Since the late 1980s, UpRight has been engaged in ongoing clean up and
monitoring of soil and groundwater contamination at its Selma, California
facility. UpRight is currently in the process of preparing a remediation
proposal to the Regional Water Quality Control Board. Management of UpRight does
not believe that its proposal or other alternative remedial actions are likely
to have a material adverse effect on UpRight's
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financial condition or results of operations. UpRight and Horizon are also
subject to worker and product safety regulations by the Occupational Safety and
Health Administration ("OSHA") and by the safety regulations of various states.
OSHA has adopted many of the safety standards developed by ANSI and enforces
these standards for the industry. UpRight employees have been on ANSI committees
since 1979 and have assisted in the drafting and development of those standards.
Management of the Company believes that it is currently in compliance with all
applicable worker and product safety requirements and that such laws and
regulations have not, to date, had a material adverse effect on the Company's
operations or financial condition.
EMPLOYEES
UpRight had 404 full-time and 222 temporary persons employed at June 29,
1997. None of UpRight's employees is subject to collective bargaining
agreements. UpRight believes its employee relations are good, and it has
experienced no work stoppages as a result of labor problems.
As of June 29, 1997, Horizon had a total of 180 full-time employees,
including nine personnel in the Fresno headquarters who provide administrative
and accounting services. Each branch location averages 12 to 18 people,
typically structured as follows: one manager, three to four office persons, two
to four sales persons, five to seven mechanics and two truck drivers. The 10
mechanics and drivers at the Ridgefield Park, New Jersey facility are members of
the International Brotherhood of Operating Engineers and are the only union
employees at Horizon. Horizon believes its employee relations are good, and it
has experienced no work stoppages as a result of labor problems.
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MANAGEMENT
DIRECTORS OF THE COMPANY AND EXECUTIVE OFFICERS OF THE COMPANY, UPRIGHT AND
HORIZON
The following table sets forth certain information concerning the directors
of the Company and executive officers of the Company, UpRight and Horizon:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- --------------------------------------
<S> <C> <C>
Robert F. Stowe............... 53 Chairman of the Board of Directors of
the Company
David K. Sargent.............. 58 President and Chief Executive Officer
of the Company, UpRight and Horizon
and Director of the Company
Graham D. Croot............... 42 Chief Financial Officer of the Company
Kenneth M. A. Murphy.......... 32 Controller of the Company
Noel Corcoran................. 51 Secretary of the Company
Peter B. Sawdy................ 65 Director of the Company
James T. Dillon............... 49 Vice President and General Manager of
UpRight
Shaun Flanagan................ 57 Vice President and General Manager of
Horizon
</TABLE>
Robert F. Stowe has served as Chairman of the Board of Directors of the
Company since 1985. He is the founder of various trusts, the beneficiaries of
which are the family, relations and other descendants of Mr. Stowe (the "Stowe
Family Trusts"). Since 1974, Mr. Stowe has served as Chairman of various
companies which are owned by the Stowe Family Trusts and which are affiliates of
the Company. Mr. Stowe is a Fellow of the Institute of Chartered Accountants in
Australia.
David K. Sargent has served as President and Chief Executive Officer of the
Company, UpRight and Horizon since 1989 and as a Director of the Company since
1994. Prior to joining the Company, Mr. Sargent was President of Instant Zip-Up
Limited, a distributor of UpRight products in the United Kingdom. Mr. Sargent is
currently a director of Instant Zip-Up Limited.
Graham D. Croot has served as Chief Financial Officer of the Company since
1990. He served as the Company's Treasurer from 1981 to 1989. In addition to his
responsibilities with the Company, Mr. Croot serves as chief financial officer
of various companies owned by the Stowe Family Trusts. Mr. Croot is a member of
The Australian Society of Certified Practicing Accountants.
Kenneth M. A. Murphy has served as Controller of the Company since 1996. In
addition to his responsibilities with the Company, since 1996, Mr. Murphy has
served as controller of various companies owned by the Stowe Family Trusts.
Prior to joining the Company, from 1992 to 1996, Mr. Murphy was an accountant
with Arthur Andersen LLP, serving as a Manager in the Contract Audit Services
Division from 1995 to 1996. Mr. Murphy is a member of the Institute of Chartered
Accountants in Ireland.
Noel Corcoran has served as Secretary of the Company since April 1997. In
addition to his responsibilities with the Company, since 1994, Mr. Corcoran has
served as secretary and in other capacities of various companies owned by the
Stowe Family Trusts. From 1990 to 1994, Mr. Corcoran served as the Financial
Controller of European Operations of UpRight. Mr. Corcoran is a Fellow of the
Association of Chartered Certified Accountants.
Peter B. Sawdy has served as a Director of the Company since April 1997.
Mr. Sawdy is currently the Chairman of Peter Sawdy Associates, a business
consultancy. From 1990 to 1993, Mr. Sawdy was Chairman of Costain Group. Mr.
Sawdy has served in various director and advisory capacities with the Stowe
Family Trusts since 1985.
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James T. Dillon has served as Vice President and General Manager of UpRight
since 1991. Mr. Dillon joined UpRight in 1987 as Chief Financial Officer. Prior
to joining UpRight, he served as Vice President and Controller of Equatorial
Communications, Inc.
Shaun Flanagan has served as Vice President and General Manager of Horizon
since 1989. Mr. Flanagan was the founder and President of Horizon from 1982
until 1989 when Horizon was acquired by UpRight. Mr. Flanagan served as the Vice
President and General Manager of the Horizon Division of UpRight from 1989 until
1994 when Horizon became a wholly-owned subsidiary of the Company.
EXECUTIVE COMPENSATION
The following table sets forth for the last three fiscal years certain
compensation information about the Company's chief executive officer and the
other persons who served as executive officers of the Company, UpRight or
Horizon during fiscal 1997 and earned in excess of $100,000 during such year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL
COMPENSATION
---------------------
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS
----------------------------------------------- ---- -------- --------
<S> <C> <C> <C>
David K. Sargent............................... 1997 $200,000 $ 42,918
President and Chief Executive Officer 1996 175,000 50,000
of the Company, UpRight and Horizon 1995 141,667 50,000
James T. Dillon................................ 1997 $250,000 $178,352
Vice President and General 1996 220,320 159,750
Manager of UpRight 1995 200,000 129,520
Shaun Flanagan................................. 1997 $190,126 $ 77,000
Vice President and General 1996 175,000 60,000
Manager of Horizon 1995 100,640 50,000
</TABLE>
DIRECTORS
Directors of the Company are elected annually and hold office until the
next annual meeting of stockholders or until their successors are duly elected
and qualified.
Directors of the Company do not receive any fees for services on the Board
of Directors. Directors are reimbursed for their expenses for each meeting
attended.
EMPLOYEE BENEFIT PLANS
Employees of UpRight participate in a Taxsaver's Investment Plan (the
"UpRight 401(k) Plan"). The UpRight 401(k) Plan was originally adopted effective
as of January 1, 1984 as an addition to the Company's Employee Stock Ownership
Plan, originally adopted in January 1, 1975. The Company's Employee Stock
Ownership Plan was terminated in 1987. UpRight makes fixed contributions to the
UpRight 401(k) Plan for each year in an amount equal to 4% of the compensation
of all eligible participants, plus up to an additional 2% matching of
participants' contributions. The UpRight 401(k) Plan also contains features that
allow employees to save money before paying Federal income tax on the amount
saved. The UpRight 401(k) Plan covers all employees who have at least one year
of service, and is administrated by a Plan Committee, whose members are
appointed by UpRight's Board of Directors. The UpRight 401(k) Plan is intended
to conform to the provisions of the Employee Retirement Income Security Act of
1974. Contributions to the UpRight 401(k) Plan are fully vested as of December
31 in the year in which such contributions were made.
Employees of Horizon participate in the Horizon High Reach 401(k) Plan (the
"Horizon 401(k) Plan"). Participation in this defined contribution plan is
available to all full-time employees who have completed at least one year of
service and attained the age of 21. Horizon makes fixed contributions to the
Horizon 401(k) Plan for each year in an amount up to 4% of the compensation of
all eligible participants. In addition to the fixed annual contribution, Horizon
is required to make a matching contribution equal to the participant's elective
contribution up to 2% of the participant's compensation for the calendar year.
Employee
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contributions to the Horizon 401(k) Plan are fully vested. Employer
contributions are vested in 20% annual increments beginning after the second
year of participation in the Horizon 401(k) Plan, with full vesting occurring
after the sixth year of participation. Employees are fully vested upon their
65th birthday. Employees of Horizon who had been employed by UpRight or Horizon
for one year as of December 31, 1993 are fully vested in the Horizon 401(k)
Plan.
INCENTIVE COMPENSATION
The Company has in effect various arrangements pursuant to which certain
officers may receive incentive cash bonuses based upon the achievement of
financial performance objectives. The amounts of incentive bonuses, and
performance criteria for such bonuses, are determined by the Company's Board of
Directors.
DIRECTORS' AND OFFICERS' INSURANCE
UpRight International Limited, the parent of the Company, has purchased
liability insurance for the directors and officers of its subsidiaries,
including the Company, UpRight and Horizon, effective January 1, 1996, for an
aggregate 21 months' premium of $112,500. No part of this premium will be paid
by directors and executive officers of the Company. The aggregate insurance
coverage under the policy is limited to $5.0 million per policy year, and a
$100,000 deductible for each claim is payable under the policy by UpRight
International Limited in respect of any claim made against a director or officer
for which UpRight International Limited has indemnified such director or
officer. UpRight International Limited intends to increase the aggregate
insurance coverage under the policy.
Group International Securities Limited, the parent of UpRight International
Limited, has purchased liability insurance for the directors and officers of its
subsidiaries, including the Company, UpRight and Horizon, effective October 1,
1997 for an aggregate 24 months' premium of $200,000. No part of this premium
will be paid by directors and executive officers of the Company. The aggregate
insurance coverage under the policy is limited to $15.0 million, and a $75,000
deductible for each claim, other than claims arising from Securities and
Exchange Commission where the deductible is $150,000, is payable under the
policy by Group International Securities Limited in respect of any claim made
against a director or officer for which Group International Securities Limited
has indemnified such director or officer.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of the date hereof, information with
respect to the beneficial ownership of shares of the Company's Common Stock by
each stockholder known by the Company to be the beneficial owner of more than 5%
of such shares. No executive officers or directors of the Company own any shares
of the Company's Common Stock.
<TABLE>
<CAPTION>
PERCENTAGE
NAME AND ADDRESS OF STOCKHOLDER(1) CLASS SHARES OF CLASS
- ------------------------------------------------ --------------------- ------- ----------
<S> <C> <C> <C>
UpRight International Limited(2)................ Class A Common Stock 55,000 100%
Class B Common Stock 5,000 100
Preferred Stock 25,000 100
</TABLE>
- ---------------
(1) The principal business address of UpRight International Limited is Le Forum
2 degrees Etage, 28 Boulevard Princesse Charlotte, MC-98000, Monaco.
(2) All of the capital stock of UpRight International Limited is owned
beneficially by the Stowe Family Trusts. The trustees of the trusts are
appointed by Mr. Stowe, who is not a beneficiary thereunder.
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<PAGE> 64
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During fiscal 1997, each of UpRight and Horizon entered into a separate
corporate services agreement (the "Corporate Services Agreements") with Griffin
Group International Management Ltd. ("Griffin"), an affiliate of the Company.
Pursuant to the Corporate Services Agreements, Griffin provides consulting
services to UpRight and Horizon in various areas including operations, finance
and accounting, asset management, strategic planning and policy, management
organization, marketing, technology and communications and public relations.
During fiscal 1997, UpRight and Horizon paid Griffin $604,000 and $276,000,
respectively, for services rendered by Griffin, including the services of
Messrs. Croot, Murphy and Corcoran and others, pursuant to the Corporate
Services Agreements and for reimbursements for computer system costs. The
Corporate Services Agreements terminated on June 29, 1997. On May 12, 1997, the
Company entered into a corporate services agreement with Griffin (the "Company
Corporate Services Agreement") pursuant to which Griffin, for a term of one
fiscal year commencing June 30, 1997, provides consulting services to the
Company, UpRight and Horizon in various areas including operations, finance and
accounting, asset management, strategic planning and policy, management
organization, marketing, technology, communications, public relations and SEC
compliance and reporting, including the services of Messrs. Croot, Murphy and
Corcoran and others. The term of the Company Corporate Services Agreement is
automatically extended for additional one year periods, unless either party
gives notice of termination 180 days prior to the end of such fiscal year. The
Indenture provides that amounts payable under the Company Corporate Services
Agreement shall be for actual services rendered and shall not exceed the amounts
that would be payable to unaffiliated third parties for such services. Any
amounts payable under the Company Corporate Services Agreement in excess of 8.5%
of the Company's EBITDA on a consolidated basis are subject to the limitation on
restricted payments covenant. See "Description of the Notes -- Certain
Covenants -- Limitation on Restricted Payments."
Upon consummation of the offering of the Original Notes, the Company paid
Griffin $700,000 for reimbursement of expenses incurred in connection with the
offering of the Original Notes.
UpRight International Manufacturing Ltd. ("UpRight Ireland"), an affiliate
of the Company located in Ireland, Vectur GmbH ("Instant Deutschland"), an
affiliate of the Company located in Germany, and Instant Access Australia Pty.
Ltd. ("Instant Australia"), an affiliate of the Company located in Australia,
each purchase and distribute products for UpRight in their respective market
areas. UpRight Ireland purchases products from UpRight on extended terms to
maintain a strategic sales inventory in Europe and provides sales, marketing and
warranty support to UpRight in Europe. UpRight management believes that each of
the foregoing arrangements are conducted on an arm's-length basis and on terms
at least as favorable to UpRight as those generally available from unaffiliated
third parties. During fiscal 1995, the Company's revenue from UpRight Ireland,
Instant Deutschland and Instant Australia were $4.2 million, $0.8 million and
$1.0 million, respectively. During fiscal 1996, the Company's revenue from
UpRight Ireland, Instant Deutschland and Instant Australia were $3.6 million,
$1.5 million and $1.1 million, respectively. During fiscal 1997, the Company's
revenue from UpRight Ireland, Instant Deutschland and Instant Australia were
$6.2 million, $1.7 million and $1.3 million, respectively. In addition, UpRight
and Horizon purchase and UpRight distributes in the United States certain
products manufactured by UpRight Ireland. During fiscal years 1995, 1996 and
1997, the Company's purchases from UpRight Ireland totaled approximately $0.9
million, $1.7 million and $3.6 million, respectively. During fiscal years 1995,
1996 and 1997, UpRight paid UpRight Ireland $600,000, $740,000 and $1,065,902,
respectively, for participation in UpRight Ireland's cooperative marketing
programs.
During fiscal years 1995, 1996 and 1997, the Company had revenue from
Instant Zip-Up Limited of approximately $5.9 million, $8.3 million and $20.8
million, respectively. An affiliate of the Company owns a minority voting
interest in Instant Zip-Up Limited.
At the end of fiscal years 1995 and 1996, the Company was indebted to
UpRight International Limited for an aggregate principal amount of approximately
$15.5 million and $13.5 million, respectively. In fiscal 1997, the Company
repaid such indebtedness and accrued interest thereon which totaled $15.7
million. See "Use of Proceeds."
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<PAGE> 65
DESCRIPTION OF CERTAIN INDEBTEDNESS
TERM INDEBTEDNESS
On July 15, 1996, Horizon entered into a term note with a financial
institution in the amount of approximately $6.0 million, plus interest thereon
computed either at a fluctuating rate per annum equal to the prime rate or at a
fixed rate per annum determined by the lender to be 2.10% above its money market
funds rate. Interest on the note is payable monthly, together with principal of
$99,996, and the outstanding principal balance on the note is due and payable in
full on July 15, 2001. As of June 29, 1997, the note was repaid. See "Use of
Proceeds."
On July 1, 1996, Horizon entered into a term commitment note with a
financial institution in the amount of $7.75 million, plus interest thereon
computed either at a variable rate per annum equal to the prime rate or at a
fixed rate per annum determined by the lender to be 2.10% above its money market
funds rate. Interest on the note is payable monthly, and the outstanding
principal balance on the note is due and payable in full on July 15, 2002. As of
June 29, 1997, the note was repaid. See "Use of Proceeds."
On July 14, 1995, Horizon entered into a term note with a financial
institution in the amount of $5.6 million, plus interest thereon computed at
either a fluctuating rate per annum 0.5% above the prime rate or at a fixed rate
per annum determined by the lender to be 2.1% above its money market funds rate.
Interest on the note is payable monthly, together with principal of $93,333, and
the outstanding principal balance on the note is due and payable in full on July
15, 2000. As of June 29, 1997, the note was repaid. See "Use of Proceeds."
On June 15, 1994, Horizon entered into a term note with a financial
institution in the amount of $6.0 million, plus interest thereon computed at
either a fluctuating rate per annum 0.5% above the prime rate or at a fixed rate
per annum determined by the lender to be 2.1% above its money market funds rate.
Interest on the note is payable monthly, together with principal of $83,333, and
the outstanding principal balance on the note is due and payable in full on
August 5, 2000. As of June 29, 1997, the note was repaid. See "Use of Proceeds."
BONDS
On October 27, 1994, UpRight finalized a bonds payable agreement for two
bond issues with the Community Redevelopment Agency of the City of Selma,
California, pursuant to which a total of $7.1 million is available to UpRight
for purchases of buildings, equipment and tooling. The bonds bear interest
ranging from 7.0% to 11.0% per annum. As of June 29, 1997, the Company has
received the aggregate of the $7.1 million in bond proceeds, and made principal
payments in the aggregate of $0.5 million on the bonds. The Company is scheduled
to repay one series of the bond financing in bi-annual payments of principal and
interest through December 2014 and is scheduled to repay the other series of
bond financing in monthly payments of principal and interest through December
2014.
On October 27, 1994, UpRight also entered into an agreement with the City
of Selma to develop and improve certain of the City's real property
infrastructure. The improvements project was financed by the issuance of Limited
Obligation Improvement Bonds for Assessment District No. 1994-1. The total
project cost including aggregate bond fees of $504,000 was not to exceed $1.4
million. As of June 29, 1997, the Company has received in the form of bond
financing a total of $1.4 million. The improvements, upon completion, were
acquired from UpRight by the City. UpRight is obligated for future property tax
assessments to the District in amounts sufficient to repay the bonds. The bonds
call for bi-annual payments of varying amounts at an interest rate of 7.5
percent through December 2014.
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<PAGE> 66
REVOLVING INDEBTEDNESS
On October 16, 1996, UpRight entered into a revolving loan agreement with a
financial institution which allows it to borrow in amounts in the aggregate not
to exceed $4.0 million. Interest accrues on amounts borrowed at a fixed or
variable rate, at UpRight's option, of 2.25% per annum in excess of the lender's
adjusted London Interbank Offered Rate ("LIBOR") for the interest period or at
the lender's reference rate, respectively. The loan is payable in monthly
installments and matures on December 30, 1998. As of June 29, 1997, total
borrowings were zero and available funds were $4.0 million.
In November 1996, Horizon entered into a revolving line of credit note with
a financial institution in the amount of $3.0 million, not to exceed 80% of
eligible receivables plus 25% of its inventory. Interest accrues on such
revolving line of credit at the lender's prime lending rate (8.5% at June 29,
1997). As of June 29, 1997, total borrowings were zero and available funds were
$3.0 million. See "Use of Proceeds."
RELATED PARTY INDEBTEDNESS
During fiscal 1994, the Company issued an unsecured note payable to UpRight
International Limited for approximately $19.2 million. The note is due on demand
and bears interest at either 0.5% above the prime rate or 2% above the LIBOR
(adjusted annually) at the election of the Company. Accrued interest is payable
quarterly. As of June 29, 1997, the note was repaid. See "Use of Proceeds."
OTHER INDEBTEDNESS
The Company's subsidiaries have capital lease and other debt obligations
for rental equipment, computers and other equipment. The capital lease
obligations are due in monthly installments of various amounts, with maturities
ranging from July 1998 to February 2002 and with interest rates per annum
ranging from 8.0% to 14.4%. Such capital lease and other debt obligations
totaled approximately $2.8 million as of June 29, 1997. See "Use of Proceeds."
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<PAGE> 67
DESCRIPTION OF THE NOTES
The Original Notes were, and the Exchange Notes will be, issued under an
Indenture, dated as of June 10, 1997 (the "Indenture") among the Company and
U.S. Trust Company of California, N.A., as trustee (the "Trustee"). The terms of
the Notes include those stated in the Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939, as amended (the
"Trust Indenture Act") as in effect on the date of the Indenture. The Notes are
subject to all such terms, and holders of the Notes are referred to the
Indenture and the Trust Indenture Act for a statement of them. The following is
a summary of the material terms and provisions of the Notes. This summary does
not purport to be a complete description of the Notes and is subject to the
detailed provisions of, and qualified in its entirety by reference to, the Notes
and the Indenture (including the definitions contained therein). Definitions
relating to certain capitalized terms are set forth under "-- Certain
Definitions" and throughout this description. Capitalized terms that are used
but not otherwise defined herein have the meanings assigned to them in the
Indenture, and such definitions are incorporated herein by reference. The
Indenture has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part. The form of the Exchange Notes and the Original Notes
are identical in all material respects except that the Exchange Notes will have
been registered under the Securities Act and, therefore, will not bear legends
restricting their transfer. The Exchange Notes will not represent new
indebtedness of the Company, will be entitled to the benefits of the same
Indenture which governs the Original Notes and will rank pari passu with the
Original Notes. Any provisions of the Indenture which require actions by or
approval of a specified percentage of Original Notes shall require the approval
of the holders of such percentage of principal amount of Original Notes and
Exchange Notes, in the aggregate.
The Indenture provides for the issuance of the $105 million principal
amount of Original Notes and additional series of notes in aggregate principal
amounts of not less than $20 million per series, subject to compliance with the
covenant described below under "-- Certain Covenants -- Limitation on Additional
Indebtedness" and provided that no Default or Event of Default exists under the
Indenture at the time of issuance or would result therefrom and that the
aggregate principal amount of notes issued under the Indenture does not exceed
$150 million. All notes will be substantially identical in all material respects
other than issuance dates.
GENERAL
The Notes are general unsecured obligations of the Company, subordinated in
right of payment to Senior Indebtedness of the Company and senior in right of
payment to any future subordinated indebtedness of the Company.
The Notes are unconditionally guaranteed, on a senior subordinated
unsecured basis, as to payment of principal, premium, if any, and interest,
jointly and severally, by the Guarantors (together with each other Restricted
Subsidiary which guarantees payment of the Notes pursuant to the covenant
described under "-- Certain Covenants -- Limitation on Creation of
Subsidiaries."
MATURITY, INTEREST AND PRINCIPAL
The Notes will mature on June 15, 2007. The Notes are limited in aggregate
principal amount to $150 million. Any Notes issued after the Issue Date can only
be issued in compliance with the covenant described under "-- Certain
Covenants -- Limitation on Additional Indebtedness." The Notes will bear
interest at a rate of 10 5/8% per annum from the date of original issuance until
maturity. Interest is payable semi-annually in arrears on June 15 and December
15 commencing December 15, 1997, to holders of record of the Notes at the close
of business on the immediately preceding June 1 and December 1, respectively.
Interest on the Exchange Notes will accrue from the last interest payment date
on which interest was paid on the Notes surrendered in exchange therefor or, if
no interest has been paid on the Notes, from June 10, 1997.
The interest rate on the Notes is subject to increase, and such Additional
Interest will be payable on the payment dates set forth above, in certain
circumstances, if the Notes (or other securities substantially similar to the
Notes) are not registered with the Commission within the prescribed time
periods. Upon consummation of the Exchange Offer, such registration requirements
will have been met and no Additional Interest will be
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<PAGE> 68
payable with respect the Notes, except as set forth below. In the event that the
Company does not exchange Exchange Notes for all Original Notes validly tendered
in accordance with the terms of the Exchange Offer on or prior to 60 days after
the date of this Prospectus or the Registration Statement of which this
Prospectus forms a part ceases to be effective at any time prior to the
consummation of the Exchange Offer (either such event, a "Registration
Default"), the sole remedy available to holders of the Notes will be the
immediate assessment of additional interest ("Additional Interest") as follows:
the per annum interest rate on the Notes will increase by .50% during the first
90-day period following the occurrence of a Registration Default and until it is
waived or cured; and the per annum interest rate will increase by an additional
.25% for each subsequent 90-day period during which the Registration Default
remains uncured, up to a maximum additional interest rate of 2.0% per annum in
excess of the interest rate on the cover of this Prospectus. All Additional
Interest will be payable to holders of the Notes in cash on the same original
issue payment dates as the Notes, commencing with the first such date occurring
after any such Additional Interest commences to accrue, until such Registration
Default is cured. After the date on which such Registration Default is cured,
the interest rate on the Notes will revert to the interest rate originally borne
by the Notes (as shown on the cover of this Prospectus).
The summary herein of certain provisions of the Registration Rights
Agreement does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all the provisions of the Registration Rights
Agreement, which has been filed as an exhibit to the Registration Statement of
which this Prospectus forms a part, a copy of which will be available to holders
of the Notes upon request to the Company.
OPTIONAL REDEMPTION
The Notes are redeemable at the option of the Company, in whole or in part,
at any time on or after June 15, 2002 at the following redemption prices
(expressed as a percentage of principal amount), together, in each case, with
accrued and unpaid interest to the redemption date, if redeemed during the
twelve-month period beginning on June 15, of each year listed below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
-------------------------------------------------- ----------
<S> <C>
2002.............................................. 105.313%
2003.............................................. 103.542%
2004.............................................. 101.771%
2005 and thereafter............................... 100.000%
</TABLE>
Notwithstanding the foregoing, the Company may redeem in the aggregate up
to 35% of the original principal amount of Notes at any time and from time to
time prior to June 15, 2000 at a redemption price equal to 110.625% of the
aggregate principal amount so redeemed, plus accrued interest to the redemption
date out of the Net Proceeds of one or more Public Equity Offerings; provided,
that at least $75 million of the principal amount of Notes originally issued
remain outstanding immediately after the occurrence of any such redemption and
that any such redemption occurs within 90 days following the closing of any such
Public Equity Offering.
In the event of redemption of fewer than all of the Notes, the Trustee
shall select by lot or in such other manner as it shall deem fair and equitable
the Notes to be redeemed. The Notes are redeemable in whole or in part upon not
less than 30 nor more than 60 days' prior written notice, mailed by first class
mail to a holder's last address as it shall appear on the register maintained by
the Registrar of the Notes. On and after any redemption date, interest will
cease to accrue on the Notes or portions thereof called for redemption unless
the Company shall fail to redeem any such Note.
SUBORDINATION
The indebtedness represented by the Notes is, to the extent and in the
manner provided in the Indenture, subordinated in right of payment to the prior
indefeasible payment and satisfaction in full in cash of all existing and future
Senior Indebtedness of the Company. As of June 29, 1997, after giving effect to
the application of
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<PAGE> 69
the net proceeds of the offering of the Original Notes, the Company had $0.0 of
Senior Indebtedness outstanding and the Guarantors had approximately $6.6
million of Senior Indebtedness outstanding.
In the event of any insolvency or bankruptcy case or proceeding, or any
receivership, liquidation, arrangement, reorganization or other similar case or
proceeding in connection therewith, relative to the Company or to its creditors,
as such, or to its assets, whether voluntary or involuntary, or any liquidation,
dissolution or other winding-up of the Company, whether voluntary or involuntary
and whether or not involving insolvency or bankruptcy, or any general assignment
for the benefit of creditors or other marshalling of assets or liabilities of
the Company (except in connection with the merger or consolidation of the
Company or its liquidation or dissolution following the transfer of
substantially all of its assets, upon the terms and conditions permitted under
the circumstances described under "-- Merger, Consolidation or Sale of Assets")
(all of the foregoing referred to herein individually as a "Bankruptcy
Proceeding" and collectively as "Bankruptcy Proceedings"), the holders of Senior
Indebtedness of the Company will be entitled to receive payment and satisfaction
in full in cash of all amounts due on or in respect of all Senior Indebtedness
of the Company before the holders of the Notes are entitled to receive or retain
any payment or distribution of any kind (other than a payment or distribution in
the form of Permitted Junior Securities) on account of the Notes. In the event
that, notwithstanding the foregoing, the Trustee or any holder of Notes receives
any payment or distribution of assets of the Company of any kind, whether in
cash, property or securities, including, without limitation, by way of set-off
or otherwise, in respect of the Notes before all Senior Indebtedness of the
Company is paid and satisfied in full in cash, then such payment or distribution
(other than a payment or distribution in the form of Permitted Junior
Securities) will be held by the recipient in trust for the benefit of holders of
Senior Indebtedness and will be immediately paid over or delivered to the
holders of Senior Indebtedness or their representative or representatives to the
extent necessary to make payment in full of all Senior Indebtedness remaining
unpaid, after giving effect to any concurrent payment or distribution, or
provision therefor, to or for the holders of Senior Indebtedness. By reason of
such subordination, in the event of liquidation or insolvency, creditors of the
Company who are holders of Senior Indebtedness may recover more, ratably, than
other creditors of the Company, and creditors of the Company who are not holders
of Senior Indebtedness or of the Notes may recover more, ratably, than the
holders of the Notes.
No payment or distribution (other than a payment or distribution in the
form of Permitted Junior Securities) of any assets or securities of the Company
or any Restricted Subsidiary of any kind or character (including, without
limitation, cash, property and any payment or distribution which may be payable
or deliverable by reason of the payment of any other Indebtedness of the Company
being subordinated to the payment of the Notes by the Company) may be made by or
on behalf of the Company or any Restricted Subsidiary, including, without
limitation, by way of set-off or otherwise, for or on account of the Notes, or
for or on account of the purchase, redemption or other acquisition of the Notes,
and neither the Trustee nor any holder or owner of any Notes shall take or
receive from the Company or any Restricted Subsidiary, directly or indirectly in
any manner, payment in respect of all or any portion of Notes following the
delivery by the representative of the holders of Designated Senior Indebtedness
(the "Representative") to the Trustee of written notice of the occurrence of a
Payment Default, and in any such event, such prohibition shall continue until
such Payment Default is cured, waived in writing or ceases to exist. At such
time as the prohibition set forth in the preceding sentence shall no longer be
in effect, subject to the provisions of the following paragraph, the Company
shall resume making any and all required payments in respect of the Notes,
including any missed payments.
Upon the occurrence of a Non-Payment Event of Default on Designated Senior
Indebtedness, no payment or distribution (other than a payment or distribution
in the form of Permitted Junior Securities) of any assets of the Company of any
kind may be made by the Company, including, without limitation, by way of
set-off or otherwise, on account of the Notes, or on account of the purchase or
redemption or other acquisition of Notes, for a period (a "Payment Blockage
Period") commencing on the date of receipt by the Trustee of written notice from
the Representative of such Non-Payment Event of Default unless and until
(subject to any blockage of payments that may then be in effect under the
preceding paragraph) the earliest of (x) more than 179 days shall have elapsed
since receipt of such written notice by the Trustee, (y) such Non-Payment Event
of Default shall have been cured or waived in writing or shall have ceased to
exist or such Designated
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Senior Indebtedness shall have been paid in full or (z) such Payment Blockage
Period shall have been terminated by written notice to the Company or the
Trustee from such Representative, after which, in the case of clause (x), (y) or
(z), the Company shall resume making any and all required payments in respect of
the Notes, including any missed payments. Notwithstanding any other provision of
the Indenture, in no event shall a Payment Blockage Period commenced in
accordance with the provisions of the Indenture described in this paragraph
extend beyond 179 days from the date of the receipt by the Trustee of the notice
referred to above (the "Initial Blockage Period"). Any number of additional
Payment Blockage Periods may be commenced during the Initial Blockage Period;
provided, however, that no such additional Payment Blockage Period shall extend
beyond the Initial Blockage Period. After the expiration of the Initial Blockage
Period, no Payment Blockage Period may be commenced until at least 180
consecutive days have elapsed from the last day of the Initial Blockage Period.
Notwithstanding any other provision of the Indenture, no event of default with
respect to Designated Senior Indebtedness (other than a Payment Default) which
existed or was continuing on the date of the commencement of any Payment
Blockage Period initiated by the Representative shall be, or be made, the basis
for the commencement of a second Payment Blockage Period initiated by the
Representative, whether or not within the Initial Blockage Period, unless such
event of default shall have been cured or waived for a period of not less than
90 consecutive days.
Each Guarantee is, to the extent set forth in the Indenture, subordinated
in right of payment to the prior payment in full of all Senior Indebtedness of
the respective Guarantor, including obligations of such Guarantor with respect
to the Credit Facilities, and is subject to the rights of holders of Designated
Senior Indebtedness of such Guarantor to initiate blockage periods, upon terms
substantially comparable to the subordination of the Notes to all Senior
Indebtedness of the Company.
If the Company or any Guarantor fails to make any payment on the Notes or
any Guarantee, as the case may be, when due or within any applicable grace
period, whether or not on account of payment blockage provisions, such failure
would constitute an Event of Default under the Indenture and would enable the
holders of the Notes to accelerate the maturity thereof. See "-- Events of
Default."
A holder of Notes by his acceptance of Notes agrees to be bound by such
provisions and authorizes and expressly directs the Trustee, on his behalf, to
take such action as may be necessary or appropriate to effectuate the
subordination provided for in the Indenture and appoints the Trustee his
attorney-in-fact for such purpose.
CERTAIN COVENANTS
The Indenture contains, among others, the following covenants. Except as
otherwise specified, all of the covenants described below appear in the
Indenture.
Limitation on Additional Indebtedness
The Company will not, and will not permit any Restricted Subsidiary of the
Company to, directly or indirectly, incur (as defined) any Indebtedness
(including Acquired Indebtedness) unless (a) after giving effect to the
incurrence of such Indebtedness and the receipt and application of the proceeds
thereof, the Company's Fixed Charge Coverage Ratio (determined on a pro forma
basis for the last four fiscal quarters of the Company for which financial
statements are available at the date of determination) is greater than 2.0 to 1
if the Indebtedness is incurred prior to June 15, 1999 and 2.25 to 1 if the
Indebtedness is incurred thereafter; provided, however, that if the Indebtedness
which is the subject of a determination under this provision is Acquired
Indebtedness, or Indebtedness incurred in connection with the simultaneous
acquisition of any Person, business, property or assets or Indebtedness of an
Unrestricted Subsidiary being designated as a Restricted Subsidiary, then such
ratio shall be determined by giving effect to (on a pro forma basis, as if the
transaction had occurred at the beginning of the four-quarter period) both the
incurrence or assumption of such Acquired Indebtedness or such other
Indebtedness by the Company or such Restricted Subsidiary and the inclusion in
the Company's EBITDA of the EBITDA of the acquired Person, business, property or
assets or redesignated Subsidiary, and (b) no Default or Event of Default shall
have occurred and be continuing at the time or as a consequence of the
incurrence of such Indebtedness.
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Notwithstanding the foregoing, the Company and its Restricted Subsidiaries
may incur Permitted Indebtedness; provided that the Company will not incur any
Permitted Indebtedness that ranks pari passu or junior in right of payment to
the Notes and that has a maturity or mandatory sinking fund payment prior to the
maturity of the Notes unless it meets the Fixed Charge Coverage Ratio test
specified in the previous paragraph.
Limitation on Restricted Payments
The Company will not make, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, make, any Restricted Payment, unless:
(a) no Default or Event of Default shall have occurred and be
continuing at the time of or immediately after giving effect to such
Restricted Payment;
(b) immediately after giving pro forma effect to such Restricted
Payment, the Company could incur $1.00 of additional Indebtedness (other
than Permitted Indebtedness) under the covenant set forth under "--
Limitation on Additional Indebtedness"; and
(c) immediately after giving effect to such Restricted Payment, the
aggregate of all Restricted Payments declared or made after the Issue Date
does not exceed the sum of (1) 50% of the cumulative consolidated Net
Income of the Company subsequent to the Issue Date (or minus 100% of any
cumulative deficit in Consolidated Net Income during such period), (2) 100%
of the aggregate Net Proceeds and the fair market value of securities or
other property received by the Company from the issue or sale, after the
Issue Date, of Capital Stock (other than Disqualified Capital Stock or
Capital Stock of the Company issued to any Subsidiary of the Company) of
the Company or any Indebtedness or other securities of the Company
convertible into or exercisable or exchangeable for Capital Stock (other
than Disqualified Capital Stock) of the Company which has been so converted
or exercised or exchanged, as the case may be and (3) $2,000,000. For
purposes of determining under this clause (c) the amount expended for
Restricted Payments, cash distributed shall be valued at the face amount
thereof and property other than cash shall be valued at its fair market
value (as determined in good faith by the Company's board of directors, and
evidenced by a board resolution).
The provisions of this covenant shall not prohibit (i) the payment of any
distribution within 60 days after the date of declaration thereof, if at such
date of declaration such payment would comply with the provisions of the
Indenture, (ii) the retirement of any shares of Capital Stock of the Company or
subordinated Indebtedness by conversion into, or by or in exchange for, shares
of Capital Stock (other than Disqualified Capital Stock), or out of, the Net
Proceeds of the substantially concurrent sale (other than to a Subsidiary of the
Company) of other shares of Capital Stock of the Company (other than
Disqualified Capital Stock), (iii) the redemption or retirement of Indebtedness
of the Company subordinated to the Notes in exchange for, by conversion into, or
out of the Net Proceeds of, a substantially concurrent sale or incurrence of
Indebtedness (other than any Indebtedness owed to a Subsidiary) of the Company
that is contractually subordinated in right of payment to the Notes to at least
the same extent as the subordinated Indebtedness being redeemed or retired, (iv)
the retirement of any shares of Disqualified Capital Stock by conversion into,
or by exchange for, shares of Disqualified Capital Stock, or out of the Net
Proceeds of the substantially concurrent sale (other than to a Subsidiary of the
Company) of other shares of Disqualified Capital Stock or (v) the payment of
Corporate Services Fees not to exceed $880,000 in fiscal 1997 and 8.5% of the
Company's EBITDA on a consolidated basis for any fiscal year thereafter.
Not later than the date of making any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate stating that such Restricted
Payment is permitted and setting forth the basis upon which the calculations
required by the covenant "Limitation on Restricted Payments" were computed,
which calculations may be based upon the Company's latest available financial
statements, and that no Default or Event of Default exists and is continuing and
no Default or Event of Default will occur immediately after giving effect to any
Restricted Payments.
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Limitations on Investments
The Company will not, and will not permit any of its Restricted
Subsidiaries to, make any Investment other than (i) a Permitted Investment or
(ii) an Investment that is made as a Restricted Payment in compliance with the
"Limitation on Restricted Payments" covenant, after the Issue Date.
Limitations on Liens
The Company will not, and will not permit any of its Restricted
Subsidiaries to, create, incur or otherwise cause or suffer to exist or become
effective any Liens of any kind (other than Permitted Liens) upon any property
or asset of the Company or any Restricted Subsidiary or any shares of stock or
debt of any Restricted Subsidiary which owns property or assets, now owned or
hereafter acquired, unless (i) if such Lien secures Indebtedness which is pari
passu with the Notes or the Guarantees, then the Notes or the Guarantees, as the
case may be, are secured on an equal and ratable basis with the obligations so
secured until such time as such obligation is no longer secured by a Lien or
(ii) if such Lien secures Indebtedness which is subordinated to the Notes or the
Guarantees, any such Lien shall be subordinated to the Lien granted to the
Holders of the Notes to the same extent as such subordinated Indebtedness is
subordinated to the Notes or the Guarantees, as the case may be.
Limitation on Transactions with Affiliates
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, enter into or suffer to exist any
transaction or series of related transactions (including, without limitation,
the sale, purchase, exchange or lease of assets, property or services) with any
Affiliate (including entities in which the Company or any of its Restricted
Subsidiaries own a minority interest) or holder of 10% or more of the Company's
Common Stock (an "Affiliate Transaction") or extend, renew, waive or otherwise
modify the terms of any Affiliate Transaction entered into prior to the Issue
Date unless (i) such Affiliate Transaction is between or among the Company and
its Wholly-Owned Subsidiaries or between or among Wholly-Owned Subsidiaries of
the Company; or (ii) the terms of such Affiliate Transaction are fair and
reasonable to the Company or such Restricted Subsidiary, as the case may be, and
the terms of such Affiliate Transaction are commercially reasonable and at least
as favorable as the terms which could be obtained by the Company or such
Restricted Subsidiary, as the case may be, in a comparable transaction made on
an arm's-length basis between unaffiliated parties. In any Affiliate Transaction
involving an amount or having a value in excess of $1 million which is not
permitted under clause (i) above, the Company must obtain a resolution of the
Board of Directors certifying that such Affiliate Transaction complies with
clause (ii) above. In transactions with a value in excess of $3 million which
are not permitted under clause (i) above, the Company must obtain a written
opinion as to the fairness of such a transaction from an independent investment
banking firm, provided, that, in the case of loans from the Company to an
Affiliate or loans from an Affiliate to the Company, no such fairness opinion
shall be required if the Company has obtained a resolution of the Board of
Directors certifying that such Affiliate Transaction complies with clause (ii)
above.
The foregoing provisions will not apply to (i) any Restricted Payment that
is not prohibited by the provisions described under "Limitations on Restricted
Payments" contained herein, (ii) any transaction, approved by the Board of
Directors of the Company, with an officer or director of the Company or of any
Subsidiary in his or her capacity as officer or director entered into in the
ordinary course of business or (iii) any transaction entered into in the
ordinary course of business, consistent with past practice, with any of UpRight
Ireland, Instant Deutschland or Instant Australia.
Limitation on Creation of Subsidiaries
The Company shall not create or acquire, nor permit any of its Restricted
Subsidiaries to create or acquire, any Subsidiary other than (i) a Restricted
Subsidiary existing as of the date of the Indenture, (ii) a Restricted
Subsidiary that is acquired or created after the date of the Indenture, or (iii)
an Unrestricted Subsidiary; provided, however, that each Restricted Subsidiary
acquired or created pursuant to clause (ii) shall have executed a guarantee,
satisfactory in form and substance to the Trustee (and with such
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documentation relating thereto as the Trustee shall require, including, without
limitation a supplement or amendment to the Indenture and opinions of counsel as
to the enforceability of such guarantee), pursuant to which such Restricted
Subsidiary shall become a Guarantor. As of the Issue Date, the Company will have
no Subsidiaries, other than the Guarantors.
Limitation on Certain Asset Sales
The Company will not, and will not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company or its
Restricted Subsidiaries, as the case may be, receives consideration at the time
of such sale or other disposition at least equal to the fair market value
thereof (as determined in good faith by the Company's board of directors, and
evidenced by a board resolution); (ii) not less than 85% of the consideration
received by the Company or its Subsidiaries, as the case may be, is in the form
of cash or Temporary Cash Investments; and (iii) the Asset Sale Proceeds
received by the Company or such Restricted Subsidiary are applied (a) first, to
the extent the Company elects, or is required, to prepay, repay or purchase debt
of the Company or any Restricted Subsidiary under a Credit Facility within 180
days following the receipt of the Asset Sale Proceeds from any Asset Sale,
provided that any such repayment shall result in a permanent reduction of the
commitments thereunder in an amount equal to the principal amount so repaid; (b)
second, to the extent of the balance of Asset Sale Proceeds after application as
described above, to the extent the Company elects, to an investment in assets
(including Capital Stock or other securities purchased in connection with the
acquisition of Capital Stock or property of another person) used or useful in
businesses similar or ancillary to the business of the Company or Restricted
Subsidiary as conducted at the time of such Asset Sale, provided that such
investment occurs or the Company or a Restricted Subsidiary enters into
contractual commitments to make such investment, subject only to customary
conditions (other than the obtaining of financing), on or prior to the 181st day
following receipt of such Asset Sale Proceeds (the "Reinvestment Date") and
Asset Sale Proceeds contractually committed are so applied within 270 days
following the receipt of such Asset Sale Proceeds; and (c) third, if on the
Reinvestment Date with respect to any Asset Sale, the Available Asset Sale
Proceeds exceed $5 million, the Company shall apply an amount equal to such
Available Asset Sale Proceeds to an offer to repurchase the Notes, at a purchase
price in cash equal to 100% of the principal amount thereof plus accrued and
unpaid interest, if any, to the date of repurchase (an "Excess Proceeds Offer").
If an Excess Proceeds Offer is not fully subscribed, the Company may retain the
portion of the Available Asset Sale Proceeds not required to repurchase Notes.
If the Company is required to make an Excess Proceeds Offer, the Company
shall mail, within 30 days following the Reinvestment Date, a notice to the
Holders stating, among other things: (1) that such Holders have the right to
require the Company to apply the Available Asset Sale Proceeds to repurchase
such Notes at a purchase price in cash equal to 100% of the principal amount
thereof plus accrued and unpaid interest, if any, to the date of purchase; (2)
the purchase date, which shall be no earlier than 30 days and not later than 60
days from the date such notice is mailed; (3) the instructions, determined by
the Company, that each Holder must follow in order to have such Notes
repurchased; and (4) the calculations used in determining the amount of
Available Asset Sale Proceeds to be applied to the repurchase of such Notes.
Limitation on Preferred Stock of Restricted Subsidiaries
The Company will not permit any Restricted Subsidiary to issue any
Preferred Stock (except Preferred Stock to the Company or a Restricted
Subsidiary) or permit any Person (other than the Company or a Restricted
Subsidiary) to hold any such Preferred Stock unless the Company or such
Restricted Subsidiary would be entitled to incur or assume Indebtedness under
the covenant described under "-- Limitation on Additional Indebtedness" in the
aggregate principal amount equal to the aggregate liquidation value of the
Preferred Stock to be issued.
Limitation on Capital Stock of Restricted Subsidiaries
The Company will not (i) sell, pledge, hypothecate or otherwise convey or
dispose of any Capital Stock of a Restricted Subsidiary or (ii) permit any of
its Restricted Subsidiaries to issue any Capital Stock, other than to the
Company or a Wholly-Owned Subsidiary of the Company. The foregoing restrictions
shall not
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apply to an Asset Sale made in compliance with "Limitation on Certain Asset
Sales" or the issuance of Preferred Stock in compliance with the covenant
described under "-- Limitation on Preferred Stock of Restricted Subsidiaries."
Limitation on Sale and Lease-Back Transactions
The Company will not, and will not permit any Restricted Subsidiary to,
enter into any Sale and Lease-Back Transaction unless (i) the consideration
received in such Sale and Lease-Back Transaction is at least equal to the fair
market value of the property sold, as determined in good faith by the Company's
board of directors and evidenced by a board resolution and (ii) the Company
could incur the Attributable Indebtedness in respect of such Sale and Lease-Back
Transaction in compliance with the covenant described under "-- Limitation on
Additional Indebtedness."
Limitation on Dividend and Other Payment Restrictions Affecting Subsidiaries
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (a)(i) pay dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries (A) on its Capital stock or
(B) with respect to any other interest or participation in, or measured by, its
profits, or (ii) pay any Indebtedness owed to the Company or any of its
Restricted Subsidiaries, (b) make loans or advances or capital contributions to
the Company or any of its Restricted Subsidiaries or (c) transfer any of its
properties or assets to the Company or any of its Restricted Subsidiaries,
except for such encumbrances or restrictions existing under or by reason of (i)
encumbrances or restrictions existing on the Issue Date, (ii) the Indenture, the
Notes and the Guarantees, (iii) applicable law, (iv) any instrument governing
Indebtedness or Capital Stock of a Person acquired by the Company or any of its
Restricted Subsidiaries or of any Person that becomes a Restricted Subsidiary as
in effect at the time of such acquisition or such Person becoming a Restricted
Subsidiary (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition of such Person becoming a
Restricted Subsidiary), which encumbrance or restriction is not applicable to
any Person, or the properties or assets of any Person, other than the Person, or
the property of assets of the Person (including any Subsidiary of the Person),
so acquired, provided that the EBITDA of such Person is not taken into account
(to the extent of such restriction) in determining whether any financing or
Restricted Payment in connection with such acquisition was permitted by the
terms of the Indenture, (v) customary non-assignment provisions in leases or
other agreements entered into in the ordinary course of business and consistent
with past practices, (vi) encumbrances or restrictions under a Credit Facility,
provided that such encumbrances or restrictions are no more restrictive than
those typically contained in senior credit facilities, (vii) Refinancing
Indebtedness provided that such encumbrances or restrictions are in the
aggregate no more restrictive than those contained in the agreements governing
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded, or (viii) customary restrictions in security agreements or mortgages
securing Indebtedness of the Company or a Restricted Subsidiary to the extent
such restrictions restrict the transfer of the property subject to such security
agreements and mortgages.
Payments for Consent
Neither the Company nor any of its Subsidiaries shall, directly or
indirectly, pay or cause to be paid any consideration, whether by way of
interest, fee or otherwise, to any holder of any Notes for or as an inducement
to any consent, waiver or amendment of any of the terms or provisions of the
Indenture or the Notes unless such consideration is offered to be paid or agreed
to be paid to all holders of the Notes which so consent, waive or agree to amend
in the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
Limitation on Other Senior Subordinated Indebtedness
The Company will not, and will not permit any of its Restricted
Subsidiaries to, directly or indirectly, incur, contingently or otherwise, any
Indebtedness that is both (i) subordinate in right of payment to any
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Senior Indebtedness of the Company or its Restricted Subsidiaries, as the case
may be, and (ii) senior in right of payment to the Notes and the Guarantees, as
the case may be. For purposes of this covenant, Indebtedness is deemed to be
senior in right of payment to the Notes and the Guarantees, as the case may be,
if it is not explicitly subordinate in right of payment to Senior Indebtedness
at least to the same extent as the Notes and the Guarantees, as the case may be,
are subordinate to Senior Indebtedness.
Limitation on Lines of Business
The Company will not, and will not permit any of its Restricted
Subsidiaries to, engage in or conduct any business other than (i) participation
in the equipment rental industry, including the sale and rental of industrial
equipment, (ii) participation in the aerial work platform industry or the
materials handling industry, including the manufacture and distribution of
industrial equipment the purpose of which is the movement of people and
material, (iii) the manufacture and distribution of scaffolds and scaffolding
and (iv) businesses complementary, ancillary or related to, any of the
foregoing, or that can be vertically integrated with, any of the foregoing.
CHANGE OF CONTROL OFFER
Within 30 days of the occurrence of a Change of Control, the Company shall
notify the Trustee in writing of such occurrence and shall make an offer to
purchase (the "Change of Control Offer") the outstanding Notes at a purchase
price equal to 101% of the principal amount thereof plus any accrued and unpaid
interest thereon to the Change of Control Payment Date (as hereinafter defined)
(such applicable purchase price being hereinafter referred to as the "Change of
Control Purchase Price") in accordance with the procedures set forth in this
covenant.
Within 30 days of the occurrence of a Change of Control, the Company also
shall (i) cause a notice of the Change of Control Offer to be sent at least once
to the Dow Jones News Service or similar business news service in the United
States and (ii) send by first-class mail, postage prepaid, to the Trustee and to
each holder of the Notes, at the address appearing in the register maintained by
the Registrar of the Notes, a notice stating:
that a Change of Control Offer is being made pursuant to this covenant
and that all Notes tendered will be accepted for payment, and otherwise
subject to the terms and conditions set forth herein;
the Change of Control Purchase Price and the purchase date (which
shall be a Business Day no earlier than 20 business days from the date such
notice is mailed (the "Change of Control Payment Date"));
that any Note not tendered will continue to accrue interest;
that, unless the Company defaults in the payment of the Change of
Control Purchase Price, any Notes accepted for payment pursuant to the
Change of Control Offer shall cease to accrue interest after the Change of
Control Payment Date;
that holders accepting the offer to have their Notes purchased
pursuant to a Change of Control Offer will be required to surrender the
Notes to the Paying Agent at the address specified in the notice prior to
the close of business on the Business Day preceding the Change of Control
Payment Date;
that holders will be entitled to withdraw their acceptance if the
Paying Agent receives, not later than the close of business on the third
Business Day preceding the Change of Control Payment Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
holder, the principal amount of the Notes delivered for purchase, and a
statement that such holder is withdrawing his election to have such Notes
purchased;
that holders whose Notes are being purchased only in part will be
issued new Notes equal in principal amount to the unpurchased portion of
the Notes surrendered, provided that each Note purchased and each such new
Note issued shall be in an original principal amount in denominations of
$1,000 and integral multiples thereof;
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any other procedures that a holder must follow to accept a Change of
Control Offer or effect withdrawal of such acceptance; and
the name and address of the Paying Agent.
On the Change of Control Payment Date, the Company shall, to the extent
lawful, (i) accept for payment Notes or portions thereof tendered pursuant to
the Change of Control Offer, (ii) deposit with the Paying Agent money sufficient
to pay the purchase price of all Notes or portions thereof so tendered and (iii)
deliver or cause to be delivered to the Trustee Notes so accepted together with
an Officers' Certificate stating the Notes or portions thereof tendered to the
Company. The Paying Agent shall promptly mail to each holder of Notes so
accepted payment in an amount equal to the purchase price for such Notes, and
the Company shall execute and issue, and the Trustee shall promptly authenticate
and mail to such holder, a new Note equal in principal amount to any unpurchased
portion of the Notes surrendered; provided that each such new Note shall be
issued in an original principal amount in denominations of $1,000 and integral
multiples thereof.
The Indenture requires that if a Credit Facility is in effect, or any
amounts are owing thereunder or in respect thereof, at the time of the
occurrence of a Change of Control, prior to the mailing of the notice to holders
described in the preceding paragraph, but in any event within 30 days following
any Change of Control, the Company covenants to (i) repay in full all
obligations under or in respect of such Credit Facility or offer to repay in
full all obligations under or in respect of such Credit Facility and repay the
obligations under or in respect of such Credit Facility of each lender who has
accepted such offer or (ii) obtain the requisite consent under such Credit
Facility to permit the repurchase of the Notes as described above. The Company
must first comply with the covenant described in the preceding sentence before
it shall be required to purchase Notes in the event of a Change of Control;
provided that the Company's failure to comply with the covenant described in the
preceding sentence constitutes an Event of Default described in clause (iii)
under "-- Events of Default" below if not cured within 60 days after the notice
required by such clause. As a result of the foregoing, a holder of the Notes may
not be able to compel the Company to purchase the Notes unless the Company is
able at the time to refinance all of the obligations under or in respect of its
Credit Facility or the Credit Facility of its Restricted Subsidiaries or obtain
requisite consents thereunder. Failure by the Company to make a Change of
Control Offer when required by the Indenture constitutes a default under the
Indenture and, if not cured within 60 days after notice, constitutes an Event of
Default.
The Indenture provides that, (A) if the Company or any Subsidiary thereof
has issued any outstanding (i) Indebtedness that is subordinated in right of
payment to the Notes or the Guarantees or (ii) Preferred Stock, and the Company
or such Subsidiary is required to make a Change of Control Offer or to make a
distribution with respect to such subordinated Indebtedness or Preferred Stock
in the event of a change of control, the Company or such Subsidiary shall not
consummate any such offer or distribution with respect to such subordinated
Indebtedness or Preferred Stock until such time as the Company shall have paid
the Change of Control Purchase Price in full to the holders of Notes that have
accepted the Company's Change of Control Offer and shall otherwise have
consummated the Change of Control Offer made to holders of the Notes and (B) the
Company will not issue Indebtedness that is subordinated in right of payment to
the Notes or the Guarantees or Preferred Stock with change of control provisions
requiring the payment of such Indebtedness or Preferred Stock prior to the
payment of the Notes in the event of a Change in Control under the Indenture.
In the event that a Change of Control occurs and the holders of Notes
exercise their right to require the Company to purchase Notes, if such purchase
constitutes a "tender offer" for purposes of Rule 14e-1 under the Exchange Act
at that time, the Company will comply with the requirements of Rule 14e-1 as
then in effect with respect to such repurchase.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Company will not and will not permit any Guarantor to consolidate with,
merge with or into, or transfer all or substantially all of its assets (as an
entirety or substantially as an entirety in one transaction or a series of
related transactions), to any Person unless: (i) the Company or the Guarantor,
as the case may be,
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shall be the continuing Person, or the Person (if other than the Company or the
Guarantor) formed by such consolidation or into which the Company or the
Guarantor, as the case may be, is merged or to which the properties and assets
of the Company or the Guarantor, as the case may be, are transferred shall be a
corporation organized and existing under the laws of the United States or any
State thereof or the District of Columbia and shall expressly assume, by a
supplemental indenture, executed and delivered to the Trustee, in form
satisfactory to the Trustee, all of the obligations of the Company or the
Guarantor, as the case may be, under the Notes and the Indenture, and the
obligations under the Indenture shall remain in full force and effect; (ii)
immediately before and immediately after giving effect to such transaction, no
Default or Event of Default shall have occurred and be continuing; and (iii)
immediately after giving effect to such transaction on a pro forma basis the
Company or such Person could incur at least $1.00 of additional Indebtedness
(other than Permitted Indebtedness) under the covenant set forth under
"-- Certain Covenants -- Limitation on Additional Indebtedness," provided that a
Person that is a Guarantor on the Issue Date may merge into the Company or
another Person that is a Guarantor on the Issue Date without complying with this
clause (iii).
In connection with any consolidation, merger or transfer of assets
contemplated by this provision, the Company shall deliver, or cause to be
delivered, to the Trustee, in form and substance reasonably satisfactory to the
Trustee, an Officers' Certificate and an opinion of counsel, each stating that
such consolidation, merger or transfer and the supplemental indenture in respect
thereto comply with this provision and that all conditions precedent herein
provided for relating to such transaction or transactions have been complied
with.
GUARANTEES
The Notes are guaranteed on a senior subordinated unsecured basis by the
Guarantors. All payments pursuant to the Guarantees by the Guarantors are
subordinated in right of payment to the prior payment in full of all Senior
Indebtedness of the Guarantor, to the same extent and in the same manner that
all payments pursuant to the Notes are subordinated in right of payment to the
prior payment in full of all Senior Indebtedness of the Company.
The obligations of each Guarantor are limited to the maximum amount as
will, after giving effect to all other contingent and fixed liabilities of such
Guarantor and after giving effect to any collections from or payments made by or
on behalf of any other Guarantor in respect of the obligations of such other
Guarantor under its Guarantee or pursuant to its contribution obligations under
the Indenture, result in the obligations of such Guarantor under the Guarantee
not constituting a fraudulent conveyance or fraudulent transfer under federal or
state law. Each Guarantor that makes a payment or distribution under a Guarantee
shall be entitled to a contribution from each other Guarantor in a pro rata
amount based on the Adjusted Net Assets of each Guarantor.
A Guarantor shall be released from all of its obligations under its
Guarantee if all or substantially all of its assets are sold or all of its
Capital Stock is sold, in each case in a transaction in compliance with the
covenant described under "-- Certain Covenants -- Limitation on Certain Asset
Sales," or the Guarantor merges with or into or consolidates with, or transfers
all or substantially all of its assets to, the Company or another Guarantor in a
transaction in compliance with "Merger, Consolidation or Sale of Assets," and
such Guarantor has delivered to the Trustee an Officers' Certificate and an
opinion of counsel, each stating that all conditions precedent herein provided
for relating to such transaction have been complied with.
EVENTS OF DEFAULT
The following events are defined in the Indenture as "Events of Default":
(i) default in payment of any principal of, or premium, if any, on the
Notes;
(ii) default for 30 days in payment of any interest on the Notes after
such interest becomes due and payable;
(iii) default by the Company or any Guarantor in the observance or
performance of any other covenant in the Notes or the Indenture for 60 days
after written notice from the Trustee or the holders of not less than 25%
in aggregate principal amount of the Notes then outstanding;
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(iv) failure to pay when due (within any applicable grace period)
principal, interest or premium in an aggregate amount of $5 million or more
with respect to any Indebtedness of the Company or any Restricted
Subsidiary thereof, or the acceleration of any such Indebtedness
aggregating $5 million or more which default shall not be cured, waived or
postponed pursuant to an agreement with the holders of such Indebtedness
within 60 days after written notice as provided in the Indenture, or such
acceleration shall not be rescinded or annulled within 20 days after
written notice as provided in the Indenture;
(v) any final judgment or judgments which can no longer be appealed
for the payment of money in excess of $5 million shall be rendered against
the Company or any Restricted Subsidiary thereof, and shall not be
discharged for any period of 60 consecutive days during which a stay of
enforcement shall not be in effect;
(vi) certain events involving bankruptcy, insolvency or reorganization
of the Company or any Restricted Subsidiary thereof.
The Indenture provides that the Trustee may withhold notice to the holders
of the Notes of any default (except in payment of principal or premium, if any,
or interest on the Notes) if the Trustee considers it to be in the best interest
of the holders of the Notes to do so.
The Indenture will provide that if an Event of Default (other than an Event
of Default resulting from certain events of bankruptcy, insolvency or
reorganization) shall have occurred and be continuing, then the Trustee or the
holders of not less than 25% in aggregate principal amount of the Notes then
outstanding may declare to be immediately due and payable the entire principal
amount of all the Notes then outstanding plus accrued interest to the date of
acceleration and such amounts shall become immediately due and payable;
provided, however, that after such acceleration but before a judgment or decree
based on acceleration is obtained by the Trustee, the holders of a majority in
aggregate principal amount of outstanding Notes may, under certain
circumstances, rescind and annul such acceleration if all Events of Default,
other than nonpayment of accelerated principal, premium or interest, have been
cured or waived as provided in the Indenture. In case an Event of Default
resulting from certain events of bankruptcy, insolvency or reorganization shall
occur, the principal, premium and interest amount with respect to all of the
Notes shall be due and payable immediately without any declaration or other act
on the part of the Trustee or the holders of the Notes.
The holders of a majority in principal amount of the Notes then outstanding
shall have the right to waive any existing default or compliance with any
provision of the Indenture or the Notes and to direct the time, method and place
of conducting any proceeding for any remedy available to the Trustee, subject to
certain limitations specified in the Indenture.
No holder of any Note will have any right to institute any proceeding with
respect to the Indenture or for any remedy thereunder, unless such holder shall
have previously given to the Trustee written notice of a continuing Event of
Default and unless also the holders of at least 25% in aggregate principal
amount of the outstanding Notes shall have made written request and offered
reasonable indemnity to the Trustee to institute such proceeding as a trustee,
and unless the Trustee shall not have received from the holders of a majority in
aggregate principal amount of the outstanding Notes a direction inconsistent
with such request and shall have failed to institute such proceeding within 60
days. However, such limitations do not apply to a suit instituted on such Note
on or after the respective due dates expressed in such Note.
DEFEASANCE AND COVENANT DEFEASANCE
The Indenture provides the Company may elect either (a) to defease and be
discharged from any and all obligations with respect to the Notes (except for
the obligations to register the transfer or exchange of such Notes, to replace
temporary or mutilated, destroyed, lost or stolen Notes, to maintain an office
or agency in respect of the Notes and to hold monies for payment in trust)
("defeasance") or (b) to be released from their obligations with respect to the
Notes under certain covenants contained in the Indenture and described above
under "-- Certain Covenants" ("covenant defeasance"), upon the deposit with the
Trustee (or other qualifying trustee), in trust for such purpose, of money
and/or U.S. Government Obligations which through
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the payment of principal and interest in accordance with their terms will
provide money, in an amount sufficient to pay the principal of, premium, if any,
and interest on the Notes, on the scheduled due dates therefor or on a selected
date of redemption in accordance with the terms of the Indenture. Such a trust
may only be established if, among other things, the Company has delivered to the
Trustee an Opinion of Counsel (as specified in the Indenture) (i) to the effect
that neither the trust nor the Trustee will be required to register as an
investment company under the Investment Company Act of 1940, as amended, and
(ii) describing either a private ruling concerning the Notes or a published
ruling of the Internal Revenue Service, to the effect that holders of the Notes
or persons in their positions will not recognize income, gain or loss for
federal income tax purposes as a result of such deposit, defeasance and
discharge and will be subject to federal income tax on the same amount and in
the same manner and at the same times, as would have been the case if such
deposit, defeasance and discharge had not occurred.
MODIFICATION OF INDENTURE
From time to time, the Company, the Guarantors and the Trustee may, without
the consent of holders of the Notes, amend the Indenture or the Notes or
supplement the Indenture for certain specified purposes, including providing for
uncertificated Notes in addition to certificated Notes, and curing any
ambiguity, defect or inconsistency, or making any other change that does not
materially and adversely affect the rights of any holder. The Indenture contains
provisions permitting the Company, the Guarantors and the Trustee, with the
consent of holders of at least a majority in principal amount of the outstanding
Notes, to modify or supplement the Indenture or the Notes, except that no such
modification shall, without the consent of each holder affected thereby, (i)
reduce the amount of Notes whose holders must consent to an amendment,
supplement, or waiver to the Indenture or the Notes, (ii) reduce the rate of or
change the time for payment of interest on any Note, (iii) reduce the principal
of or premium on or change the stated maturity of any Note, (iv) make any Note
payable in money other than that stated in the Note or change the place of
payment from New York, New York, (v) change the amount or time of any payment
required by the Notes or reduce the premium payable upon any redemption of
Notes, or change the time before which no such redemption may be made, (vi)
waive a default on the payment of the principal of, interest on, or redemption
payment with respect to any Note, (vii) take any other action otherwise
prohibited by the Indenture to be taken without the consent of each holder
affected thereby, or (viii) affect the ranking of the Notes or the Guarantees in
a manner adverse to the holders.
REPORTS TO HOLDERS
So long as the Company is subject to the periodic reporting requirements of
the Exchange Act, it will continue to furnish the information required thereby
to the Commission and to the holders of the Notes. The Indenture provides that
even if the Company is entitled under the Exchange Act not to furnish such
information to the Commission or to the holders of the Notes, they will
nonetheless continue to furnish such information to the Commission and to the
holders of the Notes.
COMPLIANCE CERTIFICATE
The Company will deliver to the Trustee on or before 100 days after the end
of the Company's fiscal year and on or before 50 days after the end of each the
first, second and third fiscal quarters in each year an Officers' Certificate
stating whether or not the signers know of any Default or Event of Default that
has occurred. If they do, the certificate will describe the Default or Event of
Default and its status.
THE TRUSTEE
The Trustee under the Indenture is the Registrar and Paying Agent with
regard to the Notes. The Indenture provides that, except during the continuance
of an Event of Default, the Trustee will perform only such duties as are
specifically set forth in the Indenture. During the existence of an Event of
Default, the Trustee will exercise such rights and powers vested in it under the
Indenture and use the same degree of care and skill in its exercise as a prudent
person would exercise under the circumstances in the conduct of such person's
own affairs.
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TRANSFER AND EXCHANGE
Holders of the Notes may transfer or exchange Notes in accordance with the
Indenture. The Registrar under such Indenture may require a holder, among other
things, to furnish appropriate endorsements and transfer documents, and to pay
any taxes and fees required by law or permitted by the Indenture. The Registrar
is not required to transfer or exchange any Note selected for redemption. Also,
the Registrar is not required to transfer or exchange any Note for a period of
15 days before selection of the Notes to be redeemed.
The Original Notes were issued in a transaction exempt from registration
under the Securities Act and are subject to restrictions on transfer.
The registered holder of a Note may be treated as the owner of it for all
purposes.
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
covenants contained in the Indenture. Reference is made to the Indenture, a copy
of which has been filed as an exhibit to the Registration Statement of which
this Prospectus is a part, for the full definition of all such terms as well as
any other capitalized terms used herein for which no definition is provided.
"Acquired Indebtedness" means Indebtedness of a Person (including an
Unrestricted Subsidiary) existing at the time such Person becomes a Restricted
Subsidiary or assumed in connection with the acquisition of assets from such
Person.
"Adjusted Net Assets" of a Guarantor at any date shall mean the lesser of
the amount by which (x) the fair value of the property of such Guarantor exceeds
the total amount of liabilities, including, without limitation, contingent
liabilities (after giving effect to all other fixed and contingent liabilities),
but excluding liabilities under the Guarantee, of such Guarantor at such date
and (y) the present fair salable value of the assets of such Guarantor at such
date exceeds the amount that will be required to pay the probable liability of
such Guarantor on its debts (after giving effect to all other fixed and
contingent liabilities and after giving effect to any collection from any
subsidiary of such Guarantor in respect of the obligations of such Subsidiary
under the Guarantee), excluding Indebtedness in respect of the Guarantee, as
they become absolute and matured.
"Affiliate" of any specified Person means any other Person which directly
or indirectly through one or more intermediaries controls, or is controlled by,
or is under common control with, such specified Person. For the purposes of this
definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by," and "under common control with"), as used with
respect to any Person, means the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise.
"Asset Sale" means the sale, transfer or other disposition (other than to
the Company or any of its Restricted Subsidiaries) in any single transaction or
series of related transactions of (a) any Capital Stock of or other equity
interest in any Restricted Subsidiary of the Company, (b) all or substantially
all of the assets of the Company or of any Restricted Subsidiary thereof, (c)
real property or (d) all or substantially all of the assets of any property, or
part thereof, owned by the Company or any Restricted Subsidiary thereof, or a
division, line of business or comparable business segment of the Company or any
Restricted Subsidiary thereof; provided that Asset Sales shall not include
sales, leases, conveyances, transfers or other dispositions to the Company or to
a Restricted Subsidiary or to any other Person if after giving effect to such
sale, lease, conveyance, transfer or other disposition such other Person becomes
a Restricted Subsidiary.
"Asset Sale Proceeds" means, with respect to any Asset Sale, (i) cash
received by the Company or any Restricted Subsidiary from such Asset Sale
(including cash received as consideration for the assumption of liabilities
incurred in connection with or in anticipation of such Asset Sale), after (a)
provision for all income or other taxes measured by or resulting from such Asset
Sale, (b) payment of all brokerage commissions, underwriting and other fees and
expenses related to such Asset Sale, (c) provision for minority interest holders
in any Restricted Subsidiary as a result of such Asset Sale and (d) deduction of
appropriate amounts
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to be provided by the Company or a Restricted Subsidiary as a reserve, in
accordance with GAAP, against any liabilities associated with the assets sold or
disposed of in such Asset Sale and retained by the Company or a Restricted
Subsidiary after such Asset Sale, including, without limitation, pension and
other post employment benefit liabilities and liabilities related to
environmental matters or against any indemnification obligations associated with
the assets sold or disposed of in such Asset Sale, and (ii) promissory notes and
other noncash consideration received by the Company or any Restricted Subsidiary
from such Asset Sale or other disposition upon the liquidation or conversion of
such notes or noncash consideration into cash.
"Attributable Indebtedness" under the Indenture in respect of a Sale and
Lease-Back Transaction means, as at the time of determination, the greater of
(i) the fair market value of the property subject to such arrangement (as
determined in good faith by the board of directors of the Company) and (ii) the
present value (discounted at a rate of 10%, compounded annually) of the total
obligations of the lessee for rental payments during the remaining term of the
lease included in such Sale and Lease-Back Transaction (including any period for
which such lease has been extended).
"Available Asset Sale Proceeds" means, with respect to any Asset Sale, the
aggregate Asset Sale Proceeds from such Asset Sales that have not been applied
in accordance with clauses (iii)(a) or (iii)(b), and which has not yet been the
basis for an Excess Proceeds Offer in accordance with clause (iii)(c) of the
first paragraph of "-- Certain Covenants -- Limitation on Certain Asset Sales."
"Capital Stock" means, with respect to any Person, any and all shares or
other equivalents (however designated) of capital stock, partnership interests
or any other participation, right or other interest in the nature of an equity
interest in such Person or any option, warrant or other security convertible
into any of the foregoing.
"Capitalized Lease Obligations" means Indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such Indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
A "Change of Control" of the Company will be deemed to have occurred at
such time as (i) any Person (including a Person's Affiliates and associates),
other than a Permitted Holder, becomes the beneficial owner (as defined under
Rule 13d-3 or any successor rule or regulation promulgated under the Exchange
Act) of 50% or more of the total voting or economic power of the Company's
Common Stock, (ii) any Person (including a Person's Affiliates and associates),
other than a Permitted Holder, becomes the beneficial owner of more than 35% of
the total voting power of the Company's Common Stock, and the Permitted Holders
beneficially own, in the aggregate, a lesser percentage of the total voting
power of the Common Stock of the Company than such other Person and do not have
the right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the Board of Directors of the Company,
(iii) there shall be consummated any consolidation or merger of the Company in
which the Company is not the continuing or surviving corporation or pursuant to
which the Common Stock of the Company would be converted into cash, securities
or other property, other than a merger or consolidation of the Company in which
the holders of the Common Stock of the Company outstanding immediately prior to
the consolidation or merger hold, directly or indirectly, at least a majority of
the Common Stock of the surviving corporation immediately after such
consolidation or merger, or (iv) during any period of two consecutive years,
individuals who at the beginning of such period constituted the Board of
Directors of the Company (together with any new directors whose election by such
Board of Directors or whose nomination for election by the shareholders of the
Company has been approved by 66 2/3% of the directors then still in office who
either were directors at the beginning of such period or whose election or
recommendation for election was previously so approved) cease to constitute a
majority of the board of directors of the Company.
"Common Stock" of any Person means all Capital Stock of such Person that is
generally entitled to (i) vote in the election of directors of such Person or
(ii) if such Person is not a corporation, vote or otherwise participate in the
selection of the governing body, partners, managers or others that will control
the management and policies of such Person.
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"Company Corporate Services Agreement" means the corporate services
agreement dated May 12, 1997 between the Company and Griffin Group International
Management Limited ("Griffin"), as in effect on the Issue Date.
"Consolidated Fixed Charges" means, with respect to any Person and with
respect to any determination date, the sum of a Person's (i) Consolidated
Interest Expense, plus (ii) the product of (x) the aggregate amount of all
dividends paid on Disqualified Capital Stock of the Company or on each series of
preferred stock of each Subsidiary of such Person (other than dividends paid or
payable in additional shares of preferred stock or to the Company or any of its
Wholly-Owned Subsidiaries) times (y) a fraction, the numerator of which is one
and the denominator of which is one minus the then current effective combined
federal, state and local tax rate of such Person (expressed as a decimal), in
each case, for the prior four full fiscal quarter period for which financial
results are available.
"Consolidated Interest Expense" means, with respect to any Person, for any
period, the aggregate amount of interest which, in conformity with GAAP, would
be set forth opposite the caption "interest expense" or any like caption on an
income statement for such Person and its Subsidiaries on a consolidated basis
(including, but not limited to, Redeemable Dividends, whether paid or accrued,
on Subsidiary Preferred Stock (as defined below in these "-- Certain
Definitions"), imputed interest included in Capitalized Lease Obligations, all
commissions, discounts and other fees and charges owed with respect to letters
of credit and bankers' acceptance financing, the net costs associated with
hedging obligations, amortization of other financing fees and expenses, the
interest portion of any deferred payment obligation, amortization of discount or
premium, if any, and all other non-cash interest expense (other than interest
amortized to cost of sales)) plus, without duplication, all net capitalized
interest for such period and all interest incurred or paid under any guarantee
of Indebtedness (including a guarantee of principal, interest or any combination
thereof) of any Person, plus the amount of all dividends or distributions paid
on Disqualified Stock (other than dividends paid or payable in shares of Capital
Stock of the Company). If any Indebtedness outstanding or to be incurred (x)
bears a floating rate of interest, the interest expense on such Indebtedness
shall be calculated as if the rate in effect on the date of determination had
been the applicable rate for the entire four quarter period (taking into account
on a pro forma basis any Interest Rate Agreement that has a remaining term as to
the date of determination in excess of 12 months), (y) bears, at the option of
the Company or a Restricted Subsidiary, a fixed or floating rate of interest,
the interest expense on such Indebtedness shall be computed by applying, at the
option of the Company or such Restricted Subsidiary, either a fixed or floating
rate and (z) was incurred under a revolving credit facility, the interest
expense on such Indebtedness shall be computed based upon the average daily
balance of such Indebtedness during the applicable period.
"Consolidated Net Income" means, with respect to any Person, for any
period, the aggregate of the Net Income of such Person and its Subsidiaries for
such period, on a consolidated basis, determined in accordance with GAAP;
provided, however, that (a) the Net Income of any Person (the "other Person") in
which the Person in question or any of its Subsidiaries has less than a 100%
interest (which interest does not cause the net income of such other Person to
be consolidated into the net income of the Person in question in accordance with
GAAP) shall be included only to the extent of the amount of dividends or
distributions paid to the Person in question or the Subsidiary, (b) the Net
Income of any Subsidiary of the Person in question that is subject to any
restriction or limitation on the payment of dividends or the making of other
distributions (other than pursuant to the Notes or the Indenture) shall be
excluded to the extent of such restriction or limitation, (c)(i) the Net Income
of any Person acquired in a pooling of interests transaction for any period
prior to the date of such acquisition and (ii) any net gain (but not loss)
resulting from an Asset Sale by the Person in question or any of its
Subsidiaries other than in the ordinary course of business shall be excluded,
(d) extraordinary gains and losses shall be excluded.
"Corporate Services Fees" means fees paid pursuant to the Subsidiary
Corporate Services Agreements and the Company Corporate Services Agreement for
actual services rendered in an amount not to exceed the amount that would be
payable to unaffiliated third parties for such services.
"Credit Facility" means any credit facility entered into by the Company or
a Restricted Subsidiary of the Company to provide financing for general
corporate purposes, including acquisitions, capital expenditures and
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working capital financing for the Company or such Restricted Subsidiary. All
such Credit Facilities are collectively referred to as the "Credit Facilities."
"Designated Senior Indebtedness," as to the Company or any Guarantor, as
the case may be, means any Senior Indebtedness (a) under the Credit Facilities
and (b) which at the time of determination exceeds $10 million in aggregate
principal amount (or accreted value in the case of Indebtedness issued at a
discount) outstanding or available under a committed facility.
"Disqualified Capital Stock" means any Capital Stock of the Company or a
Restricted Subsidiary thereof which, by its terms (or by the terms of any
security into which it is convertible or for which it is exchangeable at the
option of the holder), or upon the happening of any event, matures or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the option of the holder thereof, in whole or in part, on or
prior to the maturity date of the Notes, for cash or securities constituting
Debt. Without limitation of the foregoing, Disqualified Capital Stock shall be
deemed to include (i) any Preferred Stock of a Restricted Subsidiary of the
Company and (ii) any Preferred Stock of the Company, with respect to either of
which, under the terms of such Preferred Stock, by agreement or otherwise, such
Restricted Subsidiary or the Company is obligated to pay current dividends or
distributions in cash during the period prior to the maturity date of the Notes;
provided, however, that Preferred Stock of the Company or any Restricted
Subsidiary thereof that is issued with the benefit of provisions requiring a
change of control offer to be made for such Preferred Stock in the event of a
change of control of the Company or Restricted Subsidiary, which provisions have
substantially the same effect as the provisions of the Indenture described under
"-- Change of Control Offer," shall not be deemed to be Disqualified Capital
Stock solely by virtue of such provisions.
"EBITDA" means, for any Person, for any period, an amount equal to (a) the
sum of (i) Consolidated Net Income for such period, plus (ii) the provision for
taxes for such period based on income or profits to the extent such income or
profits were included in computing Consolidated Net Income and any provision for
taxes utilized in computing net loss under clause (i) hereof, plus (iii)
Consolidated Interest Expense for such period (but only including Redeemable
Dividends in the calculation of such Consolidated Interest Expense to the extent
that such Redeemable Dividends have not been excluded in the calculation of
Consolidated Net Income), plus (iv) depreciation for such period on a
consolidated basis, plus (v) amortization of intangibles for such period on a
consolidated basis, plus (vi) any other non-cash items reducing Consolidated Net
Income for such period, minus (b) all non-cash items increasing Consolidated Net
Income for such period, all for such Person and its Subsidiaries determined in
accordance with GAAP, except that with respect to the Company each of the
foregoing items shall be determined on a consolidated basis with respect to the
Company and its Restricted Subsidiaries only; and provided, however, that, for
purposes of calculating EBITDA during any fiscal quarter, (A) cash income from a
particular Investment of such Person shall be included only (x) if cash income
has been received by such Person with respect to such Investment during each of
the previous four fiscal quarters, or (y) if the cash income derived from such
Investment is attributable to Temporary Cash Investments and (B) EBITDA shall be
reduced by any amounts paid by the Company pursuant to the Corporate Services
Agreements but only to the extent not already reducing Consolidated Net Income.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Fixed Charge Coverage Ratio" of any Person means, with respect to any
determination date, the ratio of (i) EBITDA for such Person's prior four
full-fiscal quarters for which financial results have been reported prior to the
determination date to (ii) Consolidated Fixed Charges of such Person for such
period.
"GAAP" means generally accepted accounting principles consistently applied
as in effect in the United States from time to time.
"incur" means, with respect to any Indebtedness or other obligation of any
Person, to create, issue, incur (by conversion, exchange or otherwise), assume,
guarantee or otherwise become liable in respect of such Indebtedness or other
obligation or the recording, as required pursuant to GAAP or otherwise, of any
such Indebtedness or other obligation on the balance sheet of such person (and
"incurrence," "incurred," "incurable," and "incurring" shall have meanings
correlative to the foregoing); provided, that a change in
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GAAP that results in an obligation of such Person that exists at such time
becoming Indebtedness shall not be deemed an incurrence of such Indebtedness.
"Indebtedness" means (without duplication), with respect to any Person, any
indebtedness at any time outstanding, secured or unsecured, contingent or
otherwise, which is for borrowed money (whether or not the recourse of the
lender is to the whole of the assets of such Person or only to a portion
thereof), or evidenced by bonds, notes, debentures or similar instruments or
representing the balance deferred and unpaid of the purchase price of any
property (excluding, without limitation, any balances that constitute accounts
payable or trade payables, and other accrued liabilities arising in the ordinary
course of business) if and to the extent any of the foregoing indebtedness would
appear as a liability upon a balance sheet of such Person prepared in accordance
with GAAP, and shall also include, to the extent not otherwise included (i) any
Capitalized Lease Obligations, (ii) obligations secured by a lien to which the
property or assets owned or held by such Person is subject, whether or not the
obligation or obligations secured thereby shall have been assumed (provided,
however, that if such obligation or obligations shall not have been assumed, the
amount of such indebtedness shall be deemed to be the lesser of the principal
amount of the obligation or the fair market value of the pledged property or
assets), (iii) guarantees of items of other Persons which would be included
within this definition for such other Persons (whether or not such items would
appear upon the balance sheet of the guarantor), (iv) all obligations for the
reimbursement of any obligor on any letter of credit, banker's acceptance or
similar credit transaction (provideds that in the case of any such letters of
credit, the items for which such letters of credit provide credit support are
those of other Persons which would be included within this definition for such
other Persons), (v) in the case of the Company, Disqualified Capital Stock of
the Company or any Restricted Subsidiary thereof, and (vi) obligations of any
such Person under any Interest Rate Agreement applicable to any of the foregoing
(if and to the extent such Interest Rate Agreement obligations would appear as a
liability upon a balance sheet of such Person prepared in accordance with GAAP).
The amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and,
with respect to contingent obligations, the maximum liability upon the
occurrence of the contingency giving rise to the obligation, provided (i) that
the amount outstanding at any time of any Indebtedness issued with original
issue discount is the principal amount of such Indebtedness less the remaining
unamortized portion of the original issue discount of such Indebtedness at such
time as determined in conformity with GAAP and (ii) that Indebtedness shall not
include any liability for federal, state, local or other taxes. Notwithstanding
any other provision of the foregoing definition, any trade payable arising from
the purchase of goods or materials or for services obtained in the ordinary
course of business shall not be deemed to be "Indebtedness" of the Company or
any Restricted Subsidiaries for purposes of this definition. Furthermore,
guarantees of (or obligations with respect to letters of credit supporting)
Indebtedness otherwise included in the determination of such amount shall not
also be included.
"Interest Rate Agreement" means, for any Person, any interest rate swap
agreement, interest rate cap agreement, interest rate collar agreement or other
similar agreement designed to protect the party indicated therein against
fluctuations in interest rates.
"Investments" means, directly or indirectly, any advance, account
receivable (other than an account receivable arising in the ordinary course of
business or acquired as part of the assets acquired by the Company in connection
with an acquisition of assets which is otherwise permitted by the terms of the
Indenture), loan or capital contribution to (by means of transfers of property
to others, payments for property or services for the account or use of others or
otherwise), the purchase of any stock, bonds, notes, debentures, partnership or
joint venture interests or other securities of, the acquisition, by purchase or
otherwise, of all or substantially all of the business or assets or stock or
other evidence of beneficial ownership of, any Person or the making of any
investment in, any Person or transfers of property or assets to any Affiliate
other than sales of assets or payment for services rendered in the ordinary
course of business consistent with past practice. Investments shall exclude
extensions of trade credit on commercially reasonable terms in accordance with
normal trade practices.
"Issue Date" means the date the Notes are first issued by the Company and
authenticated by the Trustee under the Indenture.
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"Lien" means with respect to any property or assets of any Person, any
mortgage or deed of trust, pledge, hypothecation, assignment, deposit
arrangement, security interest, lien, charge, easement, encumbrance, preference,
priority, or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including
without limitation, any Capitalized Lease Obligation, conditional sales, or
other title retention agreement having substantially the same economic effect as
any of the foregoing).
"Net Income" means, with respect to any Person for any period, the net
income (loss) of such Person determined in accordance with GAAP.
"Net Proceeds" means (a) in the case of any sale of Capital Stock by the
Company, the aggregate net proceeds received by the Company, after payment of
expenses, commissions and the like incurred in connection therewith, whether
such proceeds are in cash or in property (valued at the fair market value
thereof, as determined in good faith by the board of directors, at the time of
receipt) and (b) in the case of any exchange, exercise, conversion or surrender
of outstanding securities of any kind for or into shares of Capital Stock of the
Company which is not Disqualified Stock, the net book value of such outstanding
securities on the date of such exchange, exercise, conversion or surrender (plus
any additional amount required to be paid by the holder to the Company upon such
exchange, exercise, conversion or surrender, less any and all payments made to
the holders, e.g., on account of fractional shares and less all expenses
incurred by the Company in connection therewith).
"Non-Payment Event of Default" means any event (other than a Payment
Default) the occurrence of which entitles one or more Persons to accelerate the
maturity of any Designated Senior Indebtedness.
"Officers' Certificate" means, with respect to any Person, a certificate
signed by the Chief Executive Officer, the President or any Vice President and
the Chief Financial Officer or any Treasurer of such Person that shall comply
with applicable provisions of the Indenture.
"Payment Default" means any default, whether or not any requirement for the
giving of notice, the lapse of time or both, or any other condition to such
default becoming an event of default has occurred, in the payment of principal
of (or premium, if any) or interest on or any other amount payable in connection
with Designated Senior Indebtedness.
"Permitted Holders" means (i) any Affiliate of the Company, and (ii) Robert
F. Stowe, his children or other lineal descendants (whether adoptive or
biological), probate estate of any such individual, and any trust, so long as
one or more of the foregoing individuals is the beneficiary thereunder, and any
other corporation, partnership or other entity all of the shareholders,
partners, members or owners of which are any of the foregoing.
"Permitted Indebtedness" means:
(i) Indebtedness of the Company or any Restricted Subsidiary arising
under or in connection with a Credit Facility in an amount not to exceed in
the aggregate with Indebtedness under any other Credit Facility of the
Company or any Restricted Subsidiary the greater of (a) $25 million less
any mandatory prepayments actually made thereunder (to the extent, in the
case of payments of revolving credit indebtedness, that the corresponding
commitments have been permanently reduced) or scheduled payments actually
made thereunder or (b) the sum of (x) 85% of consolidated accounts
receivable of the Company and its Subsidiaries and (y) 50% of consolidated
inventory of the Company and its Subsidiaries;
(ii) Indebtedness under the Notes and the Guarantees offered pursuant
to this Prospectus;
(iii) Indebtedness not covered by any other clause of this definition
which is outstanding on the date of the Indenture;
(iv) Indebtedness of the Company to any Restricted Subsidiary and
Indebtedness of any Restricted Subsidiary to the Company or another
Restricted Subsidiary;
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(v) Purchase Money Indebtedness and Capitalized Lease Obligations
incurred to acquire property in the ordinary course of business which
Indebtedness and Capitalized Lease Obligations do not in the aggregate
exceed $5 million;
(vi) Interest Rate Agreements;
(vii) additional Indebtedness of the Company not to exceed $20 million
in principal amount outstanding at any time; and
(viii) Refinancing Indebtedness.
"Permitted Investments" means, for any Person, Investments made on or after
the date of the Indenture consisting of
(i) Investments by the Company, or by a Restricted Subsidiary thereof,
in the Company or a Restricted Subsidiary;
(ii) Temporary Cash Investments;
(iii) Investments by the Company, or by a Restricted Subsidiary
thereof, in a Person, if as a result of such Investment (a) such Person
becomes a Restricted Subsidiary of the Company or (b) such Person is
merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or a
Restricted Subsidiary thereof; and
(iv) reasonable and customary loans made to employees not to exceed $1
million in the aggregate at any one time outstanding; and
(v) an Investment that is made by the Company or a Restricted
Subsidiary thereof in the form of any stock, bonds, notes, debentures,
partnership or joint venture interests or other securities that are issued
by a third party to the Company or Restricted Subsidiary solely as partial
consideration for the consummation of an Asset Sale that is otherwise
permitted under the covenant described under "-- Certain
Covenants -- Limitation on Certain Asset Sales"; and any Investment
existing on the Issue Date.
"Permitted Junior Securities" means debt or equity securities of the
Company or any Guarantor or any successor corporation provided for by a plan of
reorganization or readjustment that are subordinated to the Notes and the
Guarantees at least to the same extent that the Notes and the Guarantees are
subordinated to the payment of all Senior Indebtedness then outstanding.
"Permitted Liens" means (i) Liens on Property or assets of, or any shares
of stock of or secured debt of, any corporation existing at the time such
corporation becomes a Restricted Subsidiary of the Company or at the time such
corporation is merged into the Company or any of its Restricted Subsidiaries,
provided that such Liens are not incurred in connection with, or in
contemplation of, such corporation becoming a Restricted Subsidiary of the
Company or merging into the Company or any of its Restricted Subsidiaries, (ii)
Liens securing Refinancing Indebtedness, provided that any such Lien does not
extend to or cover any Property, shares or debt other than the Property, shares
or debt securing the Indebtedness so refunded, refinanced or extended, (iii)
Liens in favor of the Company or any of its Restricted Subsidiaries, (iv) Liens
securing industrial revenue bonds, (v) Liens to secure Purchase Money
Indebtedness that is otherwise permitted under the Indenture, provided that (a)
any such Lien is created solely for the purpose of securing Indebtedness
representing, or incurred to finance, refinance or refund, the cost (including
sales and excise taxes, installation and delivery charges and other direct costs
of, and other direct expenses paid or charged in connection with, such purchase
or construction) of such Property, (b) the principal amount of the Indebtedness
secured by such Lien does not exceed 100% of such costs, and (c) such Lien does
not extend to or cover any Property other than such item of Property and any
improvements on such item, (vi) statutory liens or landlords', carriers',
warehouseman's, mechanics', suppliers', materialmen's, repairmen's or other like
Liens arising in the ordinary course of business which do not secure any
Indebtedness and with respect to amounts not yet delinquent or being contested
in good faith by appropriate proceedings, if a reserve or other appropriate
provision, if any, as shall be required in conformity with GAAP shall have been
made therefor, (vii) other
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Liens securing obligations incurred in the ordinary course of business which
obligations do not exceed $1,000,000 in the aggregate at any one time
outstanding, (viii) any extensions, substitutions, replacements or renewals of
the foregoing, (ix) Liens for taxes, assessments or governmental charges that
are being contested in good faith by appropriate proceedings, (x) easements or
minor defects or irregularities in title and other similar charges or
encumbrances on Property not interfering in any material respect with the use of
such property by the Company or any Restricted Subsidiary (xi) customary deposit
arrangements entered into in connection with acquisitions (xii) Liens securing
Capital Lease Obligations permitted to be incurred under clause (v) of the
definition of "Permitted Indebtedness," provided that such Lien does not extend
to any property other than that subject to the underlying lease and (xiii) Liens
securing Indebtedness of the Company or any Restricted Subsidiary under a Credit
Facility.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization or
government (including any agency or political subdivision thereof).
"Preferred Stock" means any Capital Stock of a Person, however designated,
which entitles the holder thereof to a preference with respect to dividends,
distributions or liquidation proceeds of such Person over the holders of other
Capital Stock issued by such Person.
"Property" of any Person means all types of real, personal, tangible,
intangible or mixed property owned by such Person whether or not included in the
most recent consolidated balance sheet of such Person and its Subsidiaries under
GAAP.
"Public Equity Offering" means a public offering by the Company of shares
of its common stock (however designated and whether voting or non-voting) and
any and all rights, warrants or options to acquire such common stock.
"Purchase Money Indebtedness" means any Indebtedness incurred in the
ordinary course of business by a Person to finance the cost (including the cost
of construction) of an item of property, the principal amount of which
Indebtedness does not exceed the sum of (i) 100% of such cost and (ii)
reasonable fees and expenses of such Person incurred in connection therewith.
"Redeemable Dividend" means, for any dividend or distribution with regard
to Disqualified Capital Stock, the quotient of the dividend or distribution
divided by the difference between one and the maximum statutory federal income
tax rate (expressed as a decimal number between 1 and 0) then applicable to the
issuer of such Disqualified Capital Stock.
"Refinancing Indebtedness" means Indebtedness that refunds, refinances or
extends any Indebtedness of the Company or its Restricted Subsidiaries
outstanding on the Issue Date or other Indebtedness permitted to be incurred by
the Company or its Restricted Subsidiaries pursuant to the terms of the
Indenture, but only to the extent that (i) the Refinancing Indebtedness is
subordinated to the Notes or the Guarantees, as the case may be, to at least the
same extent as the Indebtedness being refunded, refinanced or extended, if at
all, (ii) the Refinancing Indebtedness is scheduled to mature either (a) no
earlier than the Indebtedness being refunded, refinanced or extended, or (b)
after the maturity date of the Notes, (iii) the portion, if any, of the
Refinancing Indebtedness that is scheduled to mature on or prior to the maturity
date of the Notes has a weighted average life to maturity at the time such
Refinancing Indebtedness is incurred that is equal to or greater than the
weighted average life to maturity of the portion of the Indebtedness being
refunded, refinanced or extended that is scheduled to mature on or prior to the
maturity date of the Notes, (iv) such Refinancing Indebtedness is in an
aggregate principal amount that is equal to or less than the sum of (a) the
aggregate principal amount then outstanding under the Indebtedness being
refunded, refinanced or extended, (b) the amount of accrued and unpaid interest,
if any, and premiums owed, if any, not in excess of preexisting prepayment
provisions on such Indebtedness being refunded, refinanced or extended and (c)
the amount of customary fees, expenses and costs related to the incurrence of
such Refinancing Indebtedness, and (v) such Refinancing Indebtedness is incurred
by the same Person that initially incurred the Indebtedness being refunded,
refinanced or extended, except that the Company may incur Refinancing
Indebtedness to refund, refinance or extend Indebtedness of any Wholly-Owned
Subsidiary of the Company; provided, however, that
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subclauses (ii) and (iii) of this definition will not apply to any refunding or
refinancing of any Indebtedness under a Credit Facility.
"Restricted Payment" means any of the following: (i) the declaration or
payment of any dividend or any other distribution or payment on Capital Stock of
the Company or any Restricted Subsidiary of the Company or any payment made to
the direct or indirect holders (in their capacities as such) of Capital Stock of
the Company or any Restricted Subsidiary of the Company (other than (x)
dividends or distributions payable solely in Capital Stock (other than
Disqualified Capital Stock) or in options, warrants or other rights to purchase
Capital Stock (other than Disqualified Capital Stock), and (y) in the case of
Restricted Subsidiaries of the Company, dividends or distributions payable to
the Company or to a Wholly-Owned Subsidiary of the Company), (ii) the purchase,
redemption or other acquisition or retirement for value of any Capital Stock of
the Company or any of its Restricted Subsidiaries (other than Capital Stock
owned by the Company or a Wholly-Owned Subsidiary of the Company, excluding
Disqualified Capital Stock), (iii) the making of any principal payment on, or
the purchase, defeasance, repurchase, redemption or other acquisition or
retirement for value, prior to any scheduled maturity, scheduled repayment or
scheduled sinking fund payment, of any Indebtedness which is subordinated in
right of payment to the Notes other than subordinated Indebtedness acquired in
anticipation of satisfying a scheduled sinking fund obligation, principal
installment or final maturity, in each case due within one year of the date of
acquisition), (iv) the making of any Investment or guarantee of any Investment
in any Person other than a Permitted Investment, (v) any designation of a
Restricted Subsidiary as an Unrestricted Subsidiary on the basis of the
Investment by the Company therein, (vi) forgiveness of any Indebtedness of an
Affiliate of the Company to the Company or a Restricted Subsidiary and (vii) the
payment of Corporate Services Fees. For purposes of determining the amount
expended for Restricted Payments, cash distributed or invested shall be valued
at the face amount thereof and property other than cash shall be valued at its
fair market value (as determined in good faith by the board of directors of the
Company, as evidenced by a board resolution).
"Restricted Subsidiary" means a Subsidiary of the Company other than an
Unrestricted Subsidiary and includes all of the Subsidiaries of the Company
existing as of the Issue Date. The Board of Directors of the Company may
designate any Unrestricted Subsidiary or any Person that is to become a
Subsidiary as a Restricted Subsidiary if immediately after giving effect to such
action (and treating any Acquired Indebtedness as having been incurred at the
time of such action), the Company could have incurred at least $1.00 of
additional Indebtedness (other than Permitted Indebtedness) pursuant to the
"Limitation on Additional Indebtedness" covenant.
"Sale and Lease-Back Transaction" means any arrangement with any Person
providing for the leasing by the Company or any Restricted Subsidiary of the
Company of any real or tangible personal property, which property has been or is
to be sold or transferred by the Company or such Restricted Subsidiary to such
Person in contemplation of such leasing.
"Senior Indebtedness" means the principal of and premium, if any, and
interest on, and any and all other fees, expense reimbursement obligations and
other amounts due pursuant to the terms of all agreements, documents and
instruments providing for, creating, securing or evidencing or otherwise entered
into in connection with (a) all Indebtedness of the Company or any Restricted
Subsidiary owed to lenders under the Credit Facilities, (b) all obligations of
the Company or any Restricted Subsidiary with respect to any Interest Rate
Agreement, (c) all obligations of the Company or any Restricted Subsidiary to
reimburse any bank or other person in respect of amounts paid under letters of
credit, acceptances or other similar instruments, (d) all other Indebtedness of
the Company or any Restricted Subsidiary which does not provide that it is to
rank pari passu with or subordinate to the Notes and the Guarantees, and (e) all
deferrals, renewals, extensions and refundings of, and amendments, modifications
and supplements to, any of the Senior Indebtedness described above.
Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness
will not include (i) Indebtedness of the Company to any of its Subsidiaries,
(ii) Indebtedness represented by the Notes and the Guarantees, (iii) any
Indebtedness which by the express terms of the agreement or instrument creating,
evidencing or governing the same is junior or subordinate in right of payment to
any item of Senior Indebtedness, (iv) any trade payable arising from the
purchase of goods or materials or for services obtained in the ordinary course
of business, or (v) Indebtedness incurred in violation of the Indenture.
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"Subsidiary" of any specified Person means any corporation, partnership,
joint venture, association or other business entity, whether now existing or
hereafter organized or acquired, (i) in the case of a corporation, of which more
than 50% of the total voting power of the Capital Stock entitled (without regard
to the occurrence of any contingency) to vote in the election of directors,
officers or trustees thereof is held by such first-named Person or any of its
Subsidiaries, or (ii) in the case of a partnership, joint venture, association
or other business entity, with respect to which such first-named Person or any
of its Subsidiaries has the power to direct or cause the direction of the
management and policies of such entity by contract or otherwise or if in
accordance with generally accepted accounting principles such entity is
consolidated with the first-named Person for financial statement purposes.
"Subsidiary Corporate Services Agreements" means (i) the corporate services
agreement effective as of July 1, 1996 between UpRight and Griffin and (ii) the
corporate services agreement effective as of July 1, 1996 between Horizon and
Griffin, each as in effect on the Issue Date and each of which expired on June
29, 1997.
"Temporary Cash Investments" means (i) Investments in marketable, direct
obligations issued or guaranteed by the United States of America, or of any
governmental agency or political subdivision thereof, maturing within 365 days
of the date of purchase, (ii) Investments in certificates of deposit issued by a
bank organized under the laws of the United States of America or any state
thereof or the District of Columbia, in each case having capital, surplus and
undivided profits totaling more than $500,000,000 and rated at least A by
Standard & Poor's Corporation and A-2 by Moody's Investors Service, Inc.,
maturing within 365 days of purchase, or (iii) Investments not exceeding 365
days in duration in money market funds that invest substantially all of such
funds' assets in the Investments described in the preceding clauses (i) and
(ii).
"Unrestricted Subsidiary" means (a) any Subsidiary of an Unrestricted
Subsidiary and (b) any Subsidiary of the Company which is classified after the
Issue Date as an Unrestricted Subsidiary by a resolution adopted by the Board of
Directors of the Company; provided that a Subsidiary organized or acquired after
the Issue Date may be so classified as an Unrestricted Subsidiary only if such
classification is in compliance with the covenant set forth under "-- Certain
Covenants -- Limitation on Restricted Payments." The Trustee shall be given
prompt notice by the Company of each resolution adopted by the Board of
Directors of the Company under this provision, together with a copy of each such
resolution adopted.
"Wholly-Owned Subsidiary" means any Restricted Subsidiary, all of the
outstanding voting securities (other than directors' qualifying shares) of which
are owned, directly or indirectly, by the Company.
BOOK-ENTRY; DELIVERY AND FORM
The Original Notes were issued in the form of one Note certificate (the
"Original Global Note"). Except for Exchange Notes issued to Non-Global
Purchasers (as defined below), the Exchange Notes will be issued in the form of
one or more Global Notes (collectively, the "Exchange Global Note" and,
collectively with the Original Global Note, the "Global Notes"). The Original
Global Note was deposited on the date of the closing of the sale of the Original
Notes, and the Exchange Global Note will be deposited on the date of the closing
of the Exchange Offer, with the Trustee as custodian for The Depository Trust
Company ("DTC"), in New York, New York, and registered in the name of DTC or its
nominee.
Depository Procedures
DTC has advised the Company that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "Participants") and to facilitate the clearance and settlement of
transactions in those securities between the Participants through electronic
book-entry changes in accounts of the Participants. The Participants include
securities brokers and dealers (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities such as banks, brokers, dealers
and trust companies that clear through or maintain a custodial relationship with
a Participant, either directly or indirectly (collectively, the "Indirect
Participants"). Persons who are not Participants may beneficially own securities
held by or on behalf of DTC only through the Participants or the Indirect
Participants. The ownership interest and transfer of ownership
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interest of each actual purchaser of each security held by or on behalf of DTC
are recorded on the records of the Participants and the Indirect Participants.
DTC has also advised the Company that pursuant to procedures established by
it, (i) upon deposit of the Global Notes, DTC will credit the accounts of
Participants designated by the Initial Purchasers with portions of the principal
amount of the Global Notes and (ii) ownership of such interests in the Global
Notes will be shown on, and the transfer of ownership thereof will be effected
only through, records maintained by DTC (with respect to the Participants) or by
the Participants and the Indirect Participants (with respect to other owners of
beneficial interest in the Global Notes).
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Note to such persons may be limited to
that extent. Because DTC can act only on behalf of the Participants, which in
turn act on behalf of the Indirect Participants and certain banks, the ability
of a person having beneficial interests in a Global Note to pledge such
interests to persons or entities that do not participate in the DTC system, or
otherwise take actions in respect of such interests, may be affected by the lack
of a physical certificate evidencing such interests. For certain other
restrictions on the transferability of the Notes, see "-- Exchange of Book-Entry
Notes for Certificated Notes."
Except as described below, owners of interests in the Global Notes will not
have Notes registered in their names, will not receive physical delivery of
Notes in certificated form and will not be considered the registered owners or
holders thereof under the Indenture for any purpose.
Payments in respect of the principal of (and premium, if any) and interest
on a Global Note registered in the name of DTC or its nominee will be payable to
DTC or its nominee in its capacity as the registered holder under the Indenture.
Under the terms of the Indenture, the Company and the Trustee will treat the
persons in whose names the Notes, including the Global Notes, are registered as
the owners thereof for the purpose of receiving such payments and for any and
all other purposes whatsoever. Consequently, neither the Company, the Initial
Purchasers, the Trustee or any agent of the Company, the Initial Purchasers or
the Trustee has or will have any responsibility or liability for (i) any aspect
or accuracy of DTC's records or any Participant's or Indirect Participant's
records relating to or payments made on account of beneficial ownership
interests in the Global Notes, or for maintaining, supervising or reviewing any
of DTC's records or any Participant's or Indirect Participant's records relating
to the beneficial ownership interests in the Global Notes, or (ii) any other
matter relating to the actions and practices of DTC or any of the Participants
or the Indirect Participants.
DTC has advised the Company that its current practice, upon receipt of any
payment in respect of securities such as the Notes (including principal and
interest), is to credit the accounts of the relevant Participants with the
payment on the payment date, in amounts proportionate to their respective
holdings in principal amount of beneficial interests in the relevant security as
shown on the records of DTC. Payments by the Participants and the Indirect
Participants to the beneficial owners of Notes will be governed by standing
instructions and customary practices and will not be the responsibility of DTC,
the Trustee or the Company. Neither the Company nor the Trustee will be liable
for any delay by DTC or any of the Participants in identifying the beneficial
owners of the Notes, and the Company and the Trustee may conclusively rely on
and will be protected in relying on instructions from DTC or its nominee as the
registered owner of the Global Notes for all purposes.
Interests in the Global Notes will trade in DTC's Same-Day Funds Settlement
System and secondary market trading activity in such interests will therefore
settle in immediately available funds, subject in all cases to the rules and
procedures of DTC and the Participants.
Transfers between Participants in DTC will be effected in accordance with
DTC's procedures and will be settled in same-day funds. Transfers between
accountholders in Euroclear and CEDEL will be effected in the ordinary way in
accordance with their respective rules and operating procedures.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Notes only at the direction of one or more Participants to
whose account with DTC interests in the Global Notes are
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credited and only in respect of such portion of the aggregate principal amount
of the Notes as to which such Participant or Participants has or have given such
direction. However, if any of the events described under "-- Exchange of Book
Entry Notes for Certificated Notes" occurs, DTC reserves the right to exchange
the Global Notes (in the case of the Exchange Global Note) for legended Notes in
certificate form and to distribute such Notes to its Participants.
The information in this section concerning DTC and its book-entry systems
has been obtained from sources that the Company believes to be reliable, but the
Company takes no responsibility for the accuracy thereof.
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Notes among accountholders in DTC, they are under no
obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. Neither the Company nor the Trustee
nor any agent of the Company or the Trustee will have any responsibility for the
performance by DTC or its respective participants, indirect participants or
accountholders, of their respective obligations under the rules and procedures
governing their operations.
Exchange of Book-Entry Notes for Certificated Notes
A Global Note is exchangeable for definitive Notes in registered
certificated form if (i) DTC (x) notifies the Company that it is unwilling or
unable to continue as depository for the Global Note and the Company thereupon
fails to appoint a successor depository or (y) has ceased to be a clearing
agency registered under the Exchange Act, (ii) the Company, at its option,
notifies the Trustee in writing that it elects to cause the issuance of the
Notes in certificated form or (iii) there shall have occurred and be continuing
a Default or an Event of Default with respect to the Notes. In all cases,
certificated Notes delivered in exchange for any Global Note or beneficial
interests therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the depository (in accordance with
its customary procedures).
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain federal income tax
considerations for holders who elect to exchange their Original Notes for
Exchange Notes in the Exchange Offer. This summary is for general information
purposes only and does not address any state, local or foreign tax consequences
of the Exchange Offer nor specific federal income tax aspects of the Exchange
Offer which may be relevant to certain holders such as foreign persons,
financial institutions, broker-dealers, tax-exempt organizations or insurance
companies. THEREFORE, EACH HOLDER OF A NOTE SHOULD CONSULT HIS OR HER OWN TAX
ADVISOR CONCERNING THE PARTICULAR FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES OF EXCHANGING HIS OR HER ORIGINAL NOTES FOR EXCHANGE NOTES IN THE
EXCHANGE OFFER.
Under current provisions of the Internal Revenue Code of 1986, as amended,
the Treasury Regulations promulgated thereunder and current judicial authority
and administrative rulings and practice, an exchange of the debt instrument of
an issuer for a new debt instrument of the issuer will be treated as an
"exchange" for federal income tax purposes if the new debt instrument differs
materially either in kind or in extent from the old debt instrument. Because the
Exchange Notes are substantially identical to the Original Notes and because the
Exchange Offer was contemplated by the Indenture pursuant to which the Original
Notes were sold, the Exchange Notes and Original Notes should not be considered
to differ materially either in kind or in extent and, accordingly, the
consummation of the Exchange Offer should not constitute an "exchange" for
federal income tax purposes. Therefore, for federal income tax purposes, no gain
or loss should be recognized by the holder on the exchange of an Original Note
for an Exchange Note, the holder's adjusted tax basis in the Exchange Note
should be the same as his or her basis in the Original Note and the holding
period for the Exchange Note should be the same as the holding period for the
Original Note.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with the resale of Exchange Notes received in
exchange for Original Notes where such Original Notes were acquired as a result
of market-making activities or other trading activities. The Company has agreed
that for a period of 180 days after the Expiration Date, it will use reasonable
efforts to make this Prospectus, as amended or supplemented, available to any
broker-dealer for use in connection with any such resale; provided that such
broker-dealer indicates in the Letter of Transmittal that it is a broker-dealer.
In addition, until January 20, 1997, all broker-dealers effecting transactions
in the Exchange Notes may be required to deliver a Prospectus. See "The Exchange
Offer -- Purpose and Effects of the Exchange Offer."
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers or any other persons. Exchange Notes received by
broker-dealers for their own account pursuant to the Exchange Offer may be sold
from time to time in one or more transactions in the over-the-counter market, in
negotiated transactions, through the writing of options on the Exchange Notes or
a combination of such methods of resale, at market prices prevailing at the time
of resale, at prices related to such prevailing market prices or at negotiated
prices. Any such resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions or
concessions from any such broker-dealer and/or the purchasers of any such
Exchange Notes. Any broker-dealer that resells Exchange Notes that were received
by it for its own account pursuant to the Exchange Offer and any broker or
dealer that participates in a distribution of such Exchange Notes may be deemed
to be an "underwriter" within the meaning of the Securities Act, and any profit
on any such resale of Exchange Notes and any commissions or concessions received
by any such persons may be deemed to be underwriting compensation under the
Securities Act. The Letter of Transmittal states that by acknowledging that it
will deliver and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
For a period of 180 days after the Expiration Date, the Company will
promptly send additional copies of this Prospectus and any amendment or
supplement to this Prospectus to any broker-dealer that requests such documents
in the Letter of Transmittal.
92
<PAGE> 93
By acceptance of this Exchange Offer, each broker-dealer that receives
Exchange Notes pursuant to the Exchange Offer agrees that, upon receipt of
notice from the Company of the happening of any event which makes any statement
in the Prospectus untrue in any material respect or which requires the making of
any changes in the Prospectus in order to make the statements therein not
misleading (which notice the Company agrees to deliver promptly to such
broker-dealer), such broker-dealer will suspend use of the Prospectus until the
Company has amended or supplemented the Prospectus to correct such misstatement
or omission and has furnished copies of the amended or supplemented Prospectus
to such broker-dealer. If the Company gives any such notice to suspend the use
of the Prospectus, it shall extend the 180-day period referred to above by the
number of days during the period from and including the date of the giving of
such notice up to and including when broker-dealers have received copies of the
supplemented or amended Prospectus necessary to permit resales of Exchange
Notes.
The Company has agreed to pay all expenses incident to the Company's
performance of, or compliance with, the Registration Rights Agreement and will
indemnify the holders (including any broker-dealers) and certain parties related
to the holders against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
Certain legal matters with respect to the Notes offered hereby will be
passed upon for the Company by Pillsbury Madison & Sutro LLP, San Francisco,
California.
EXPERTS
The consolidated financial statements of the Company for each of the three
fiscal years in the period ended June 29, 1997 included in this Prospectus have
been audited by Pannell Kerr Forster, Certified Public Accountants, A
Professional Corporation, Los Angeles, California, independent auditors, as
stated in their report included herein, and have been so included in reliance
upon the report of such firm given upon its authority as experts in accounting
and auditing.
93
<PAGE> 94
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Independent Auditors' Report........................................................ F-2
Consolidated Balance Sheets -- June 30, 1996 and June 29, 1997...................... F-3
Consolidated Statements of Operations -- Years Ended July 2, 1995, June 30, 1996 and
June 29, 1997..................................................................... F-4
Consolidated Statements of Stockholder's Equity -- Years Ended July 2, 1995, June
30, 1996 and June 29, 1997........................................................ F-5
Consolidated Statements of Cash Flows -- Years Ended July 2, 1995, June 30, 1996 and
June 29, 1997..................................................................... F-6
Notes to Consolidated Financial Statements.......................................... F-7
</TABLE>
F-1
<PAGE> 95
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholder of
W.R. Carpenter North America, Inc.
Selma, California
We have audited the consolidated balance sheets of W.R. Carpenter North
America, Inc. and subsidiaries as of June 29, 1997 and June 30, 1996 and the
related consolidated statements of operations, stockholder's equity and cash
flows for each of the three years in the period ended June 29, 1997. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of W.R.
Carpenter North America, Inc. and subsidiaries as of June 29, 1997 and June 30,
1996 and the results of their operations and their cash flows for each of the
three years in the period ended June 29, 1997 in conformity with generally
accepted accounting principles.
PANNELL KERR FORSTER
Certified Public Accountants
A Professional Corporation
Los Angeles, California
August 29, 1997
F-2
<PAGE> 96
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PAR VALUE)
<TABLE>
<CAPTION>
JUNE 30, JUNE 29,
1996 1997
-------- --------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents............................................. $ 11,164 $ 77,345
Accounts receivable (net of allowance for doubtful accounts of $287
and $364, respectively)............................................ 15,593 23,591
Inventories........................................................... 15,301 16,833
Prepaid expenses and other............................................ 1,753 1,773
Deferred income taxes................................................. 1,003 1,091
------- --------
Total current assets............................................... 44,814 120,633
Property, plant and equipment, net...................................... 30,816 42,143
Other assets............................................................ 355 5,049
------- --------
Total assets.................................................. $ 75,985 $167,825
======= ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable...................................................... $ 10,786 $ 11,585
Accrued wages and employee benefits................................... 2,145 2,224
Accrued interest...................................................... 1,684 953
Other accrued expenses................................................ 3,664 6,196
Current portion of long-term debt..................................... 4,351 840
Revolving line of credit.............................................. 844 --
Note payable -- related party......................................... 13,463 --
------- --------
Total current liabilities..................................... 36,937 21,798
Senior Subordinated Notes Payable....................................... -- 104,523
Long-term debt, net of current portion.................................. 18,341 8,521
Other long-term liabilities............................................. 2,534 3,817
Deferred income taxes................................................... 1,104 2,135
------- --------
Total liabilities.................................................. 58,916 140,794
------- --------
Commitments and contingencies
Stockholder's equity
Common stock, Class A, $1 par value; 70 shares authorized, 55 shares
issued and outstanding............................................. 55 55
Common stock, Class B, $1 par value; 35 shares authorized, 5 shares
issued and outstanding............................................. 5 5
Preferred stock, $1 par value; 25 shares authorized, issued and
outstanding........................................................ 25 25
Additional paid-in capital............................................ 8,767 8,767
Cumulative currency translation adjustment (CTA)...................... 2,084 2,084
Retained earnings (on July 3, 1994 a deficit of $31,395 was eliminated
due to a subsidiary's quasi-reorganization)........................ 6,133 16,095
------- --------
17,069 27,031
------- --------
Total liabilities and stockholder's equity.................... $ 75,985 $167,825
======= ========
</TABLE>
See notes to the consolidated financial statements.
F-3
<PAGE> 97
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER-SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED
---------------------------------
JULY 2, JUNE 30, JUNE 29,
1995 1996 1997
------- -------- --------
<S> <C> <C> <C>
Revenues
Equipment sales
New.................................................... $64,891 $ 94,592 $113,867
Used................................................... 2,445 2,450 2,589
Rental and services....................................... 17,821 20,861 23,448
------- -------- --------
Total revenues.................................... 85,157 117,903 139,904
------- -------- --------
Cost of Revenues
Equipment sales
New.................................................... 44,514 62,750 78,712
Used................................................... 1,119 1,170 1,257
Rental and services....................................... 12,584 14,718 14,346
------- -------- --------
Total cost of revenues............................ 58,217 78,638 94,315
------- -------- --------
Gross profit
Equipment sales
New.................................................... 20,377 31,842 35,155
Used................................................... 1,326 1,280 1,332
Rental and services....................................... 5,237 6,143 9,102
------- -------- --------
Total gross profit................................ 26,940 39,265 45,589
------- -------- --------
Operating expenses
Selling, general and administrative....................... 13,982 15,124 18,117
Product liability......................................... 2,094 3,015 3,115
Research and development.................................. 1,817 2,865 4,281
------- -------- --------
Total operating expenses.......................... 17,893 21,004 25,513
------- -------- --------
Income from operations...................................... 9,047 18,261 20,076
Other income (expense)
Interest expense, net..................................... (2,566) (2,907) (3,983)
Other expense............................................. (186) (539) --
------- -------- --------
Income before income taxes.................................. 6,295 14,815 16,093
Provision for income taxes.................................. 2,608 6,047 6,131
------- -------- --------
Net income.................................................. $ 3,687 $ 8,768 $ 9,962
======= ======== ========
Net income per common share................................. $ 61 $ 146 $ 166
======= ======== ========
Weighted average number of common shares.................... 60,000 60,000 60,000
======= ======== ========
</TABLE>
See notes to the consolidated financial statements.
F-4
<PAGE> 98
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED JULY 2, 1995, JUNE 30, 1996 AND JUNE 29, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
RETAINED
COMMON STOCK PREFERRED STOCK ADDITIONAL EARNINGS TOTAL
---------------- ---------------- PAID-IN (ACCUMULATED STOCKHOLDER'S
SHARES AMOUNTS SHARES AMOUNTS CAPITAL CTA DEFICIT) EQUITY
------ ------- ------ ------- ---------- ------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, July 3, 1994........... 60 $60 25 $25 $8,767 $2,081 $ (6,322) $ 4,611
Net income.................... -- -- -- -- -- -- 3,687 3,687
-- --
--- --- ------ ------ ------- -------
Balance, July 2, 1995........... 60 60 25 25 8,767 2,081 (2,635) 8,298
CTA........................... -- -- -- -- -- 3 -- 3
Net income.................... -- -- -- -- -- -- 8,768 8,768
-- --
--- --- ------ ------ ------- -------
Balance, June 30, 1996.......... 60 60 25 25 8,767 2,084 6,133 17,069
Net Income.................... -- -- -- -- -- -- 9,962 9,962
-- --
--- --- ------ ------ ------- -------
Balance, June 29, 1997.......... 60 $60 25 $25 $8,767 $2,084 $ 16,095 $27,031
== === == === ====== ====== ======= =======
</TABLE>
See notes to the consolidated financial statements.
F-5
<PAGE> 99
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
-----------------------------
JULY 2, JUNE 30, JUNE 29,
1995 1996 1997
------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities
Net income.............................................................. $ 3,687 $ 8,768 $ 9,962
------ ------- -------
Adjustments to reconcile net income to net cash provided (used) by
operating activities
Depreciation and amortization........................................ 3,579 4,434 5,804
Gain on disposition of property, plant and equipment................. (1,341) (1,426) (1,380)
Changes in operating assets and liabilities
Accounts receivable................................................ (1,654) (3,167) (7,771)
Current portion of net investment in lease......................... 30 -- --
Inventories........................................................ 2,930 (5,331) (1,001)
Prepaid expenses and other assets.................................. (381) 13 (20)
Deferred income taxes, net......................................... 2,337 4,646 943
Accounts payable................................................... 492 733 (339)
Accrued expenses................................................... (4,091) 2,605 1,880
Other, net......................................................... (56) 1,119 (2,626)
------ ------- -------
Total adjustments............................................... 1,845 3,626 (4,510)
------ ------- -------
Net cash provided by operating activities....................... 5,532 12,394 5,452
------ ------- -------
Cash flows from investing activities
Additions to property, plant and equipment.............................. (7,155) (11,549) (12,356)
Proceeds from disposition of assets..................................... 2,486 2,678 2,453
Increase in notes and contracts receivable.............................. (177) -- --
Acquisitions, net of cash acquired...................................... -- -- (2,174)
------ ------- -------
Net cash used by investing activities........................... (4,846) (8,871) (12,077)
------ ------- -------
Cash flows from financing activities
Proceeds from long-term debt............................................ 14,514 9,248 29,784
Repayment of long-term debt............................................. (5,006) (3,876) (48,034)
Proceeds from senior subordinated notes................................. -- -- 104,519
Repayment of note payable -- related party.............................. (7,177) (2,045) (13,463)
------ ------- -------
Net cash provided by financing activities....................... 2,331 3,327 72,806
------ ------- -------
Net increase in cash and cash equivalents................................. 3,017 6,850 66,181
Cash and cash equivalents at beginning of year............................ 1,297 4,314 11,164
------ ------- -------
Cash and cash equivalents at end of year.................................. $ 4,314 $ 11,164 $ 77,345
====== ======= =======
Supplemental disclosure of cash flow information:
Cash used for interest payments......................................... $ 3,541 $ 2,089 $ 4,777
====== ======= =======
Cash used for income tax payments....................................... $ 2,273 $ 4,537 $ 3,599
====== ======= =======
</TABLE>
See note 18 for additional supplemental information to consolidated statements
of cash flows.
See notes to the consolidated financial statements.
F-6
<PAGE> 100
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 2, 1995, JUNE 30, 1996 AND JUNE 29, 1997
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
NOTE 1 -- THE COMPANY
W.R. Carpenter North America, Inc. (the Company), incorporated in 1975
under the laws of Delaware, serves as the holding company for its operating
subsidiaries UpRight, Inc. (UpRight) and Horizon High Reach, Inc. (Horizon).
UpRight was incorporated in California in 1947, and its stock was publicly
traded from 1980 until 1988 when it was acquired by an affiliate of the Company.
In 1988, through a corporate reorganization, UpRight became a wholly-owned
subsidiary of the Company. Prior to 1989, Horizon was an independent company in
the business of renting and selling aerial work equipment in Southern
California. In 1989, UpRight acquired the assets of Horizon which were merged
into the retail division of UpRight's North American Operations. In 1994,
Horizon became a separate, wholly-owned subsidiary of the Company. Although
Horizon is a distributor for UpRight products, the two companies have separate
management and operate on an independent basis.
UpRight is a leading manufacturer of aerial work platforms. Sales are made
principally to independent distributors who rent and sell UpRight's products to
a broad customer base, which includes end users in the industrial, commercial,
institutional and construction markets.
The aerial work platform industry is highly competitive. In selling its
aerial work platform products, UpRight experiences two principal types of
competition: from other manufacturers and from alternative equipment. UpRight
competes in the aerial work platform industry primarily with several other
manufacturers. Certain of UpRight's competitors are part of, or are affiliated
with, companies that are larger and have greater financial resources than
UpRight.
The principal customers for UpRight's new equipment are independent
equipment distributors that primarily rent UpRight's products and provide
service support to equipment users. In recent years, there has been substantial
consolidation in ownership among rental companies, including certain UpRight
customers, resulting in a more limited number of major customers comprising a
substantial portion of total revenue.
Horizon is a leading industrial equipment rental, sales and service
equipment company serving a diverse range of customers from 14 domestic
locations. Horizon's rental fleet consists primarily of aerial work platforms,
portable lift products, self-propelled scissor lift and boom products, and
forklifts. Horizon rents equipment on a daily, weekly and monthly basis and,
occasionally, for longer periods. Horizon is also a distributor of new equipment
for several leading manufacturers and sells used equipment from its rental
fleet, in addition to complementary parts, supplies and accessories.
Horizon is a distributor for UpRight products in most of Horizon's
designated market areas. The equipment in Horizon's existing rental fleet
consists of scaffold, UpRight lifts, scissors, boom lifts, and other lift
products. Horizon also represents various product lines for other manufacturers.
Horizon's corporate headquarters are located in Fresno, California.
Horizon's competitors include national and multiregional companies,
regional competitors that operate in a small number of states, small independent
businesses with one or a few rental locations, and equipment vendors and dealers
which both sell and rent equipment directly to end users.
NOTE 2 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiaries, UpRight and Horizon. In consolidation, all
significant intercompany balances and transactions are eliminated.
F-7
<PAGE> 101
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JULY 2, 1995, JUNE 30, 1996 AND JUNE 29, 1997
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
Cash Flows
For purposes of the statement of cash flows, the Company considers all cash
investments and related deposits purchased with a maturity of three months or
less to be cash equivalents.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reporting amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the dates of the financial
statements, and the reported amounts of revenue and expenses during the
reporting periods. Actual future results could differ from those estimates.
Revenue recognition
The Company's subsidiaries recognize revenue from equipment sales upon
shipment. Revenue from rentals is recognized ratably over the term of the rental
contract.
Inventories
Inventories are valued at the lower of cost, using the first-in, first-out
(FIFO) method, or market.
Property, plant and equipment
Property, plant and equipment are stated at cost. When units of property
are disposed of, the cost and accumulated depreciation are removed from the
accounts, and any resulting gain or loss is recognized in operations for the
period. Sales of rental equipment are reflected as used equipment sales in the
accompanying consolidated financial statements. Cost of used sales consists of
the net book value of the equipment sold plus costs directly associated with the
sale. (See Note 6 regarding assets acquired through acquisition.)
Depreciation is computed using the straight-line method over the following
estimated useful lives of the assets, as follows:
<TABLE>
<S> <C>
Building and improvements.............................. 5 - 30 years
Machinery and equipment................................ 3 - 10 years
Rental equipment....................................... 3 - 10 years
</TABLE>
Expenditures for ordinary repairs and maintenance are charged to
operations; betterments are capitalized.
Goodwill
Goodwill represents the excess purchase price paid over the fair market
value of the assets of a company acquired by Horizon. Goodwill is being
amortized over 10 years on a straight-line basis.
Debt issue costs
Debt issue costs are amortized on a straight-line basis over the term of
the related debt.
Foreign currency translation
Assets and liabilities denominated in foreign currencies are translated to
U.S. dollars using prevailing rates of exchange. Gains and losses on foreign
currency translation from operations for which the functional currency is other
than the U.S. dollar, together with related tax effects, are reported in the
stockholder's
F-8
<PAGE> 102
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JULY 2, 1995, JUNE 30, 1996 AND JUNE 29, 1997
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
equity. For foreign operations for which the U.S. dollar is the functional
currency, gains and losses resulting from converting foreign currency assets and
liabilities to U.S. dollars are included in trading revenue.
Income taxes
The Company files a consolidated tax return with its subsidiaries. Current
and deferred taxes are recorded for differences in the timing of the recognition
of revenues and expenses for financial reporting and income tax purposes.
Deferred taxes result primarily from the use of accelerated depreciation methods
for income tax purposes, timing in the deduction of state income taxes,
capitalization of certain costs in inventories for tax purposes, and differences
in the recognition of certain accruals for tax and financial statement purposes.
Net income per share
Net income per share is computed using the weighted average number of
shares outstanding of common stock.
Fiscal year
The fiscal year of the Company ends on the Sunday nearest to June 30.
Reclassifications
Certain reclassifications have been made to the 1996 financial statements
to conform to the current year presentation.
NOTE 3 -- INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Finished goods........................................... $ 6,374 $ 4,269
Work-in-progress......................................... 862 979
Raw materials............................................ 8,065 11,585
------- -------
$15,301 $16,833
======= =======
</TABLE>
NOTE 4 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Land................................................... $ 105 $ 105
Building and improvements.............................. 4,784 7,503
Machinery and equipment................................ 19,010 24,252
Rental equipment....................................... 28,247 34,238
-------- --------
52,146 66,098
Less accumulated depreciation.......................... (21,330) (23,955)
-------- --------
$ 30,816 $ 42,143
======== ========
</TABLE>
F-9
<PAGE> 103
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JULY 2, 1995, JUNE 30, 1996 AND JUNE 29, 1997
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
NOTE 5 -- OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
1996 1997
----- ------
<S> <C> <C>
Debt issue costs........................................... $ -- $4,422
Goodwill................................................... -- 881
Organization costs......................................... 457 457
Deposits................................................... 42 64
Other...................................................... 25 25
----- ------
524 5,849
Less accumulated amortization.............................. (169) (310)
----- ------
355 5,539
Less: Current portion (included in "Prepaid and other"
current assets).......................................... -- (490)
----- ------
Other assets, net.......................................... $ 355 $5,049
===== ======
</TABLE>
NOTE 6 -- ACQUISITIONS
During fiscal 1997, Horizon acquired certain assets and liabilities of a
forklift sales, rental and repair company in California and certain assets of an
aerial lift rental and sales company in New Jersey amounting to $577 and $1,854
respectively. The excess of cost over management's estimated fair value of the
net assets acquired (such assets consisted primarily of inventory of $531,
accounts receivable of $227, and rental equipment of $1,673) totaling $881
related to these acquisitions has been allocated to goodwill and classified
under other assets in the balance sheet.
The acquisition of these assets was financed as follows (in thousands):
<TABLE>
<S> <C>
Cash payments and/or expenses, net of cash acquired................. $2,174
Amounts payable to sellers.......................................... 240
Other liabilities assumed........................................... 898
------
Total value of assets acquired............................ $3,312
======
</TABLE>
F-10
<PAGE> 104
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JULY 2, 1995, JUNE 30, 1996 AND JUNE 29, 1997
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
NOTE 7 -- LEASE OBLIGATIONS
The Company's subsidiaries lease certain office and operating facilities
and certain machinery and equipment under operating leases. The Company's
subsidiaries also have capital lease obligations for manufacturing equipment,
computers and other equipment. The following table sets forth future minimum
principal payments under capital lease arrangements and minimum payments under
operating lease arrangements:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
------- ---------
<S> <C> <C>
1998..................................................... $ 846 $ 1,332
1999..................................................... 757 999
2000..................................................... 758 784
2001..................................................... 658 493
2002..................................................... 322 402
Thereafter............................................... -- 756
------ ------
Total future minimum lease payments...................... 3,341 $ 4,766
======
Less amount representing interest........................ 609
------
Present value of future minimum lease payments........... $ 2,732
======
</TABLE>
Rent expense under operating leases was $744, $1,021 and $1,324 in fiscal
years 1995, 1996 and 1997, respectively.
Assets held under capital leases are included in property, plant and
equipment in the amounts of $5,148 and $2,985, and related accumulated
depreciation of $636 and $548 for 1996 and 1997, respectively.
F-11
<PAGE> 105
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JULY 2, 1995, JUNE 30, 1996 AND JUNE 29, 1997
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
NOTE 8 -- LONG-TERM DEBT AND CREDIT FACILITIES
Long-term debt consists of the following:
<TABLE>
<CAPTION>
1996 1997
------- ------
<S> <C> <C>
Capital lease obligations due in monthly installments of various
amounts, with imputed interest at various rates per annum due at
various dates through March 2002.................................. $ 3,727 $2,732
Variable interest bonds (ranging from 7% to 11%), secured by deed of
trust and equipment due in monthly installments of varying amounts
through September 2014............................................ 4,419 6,604
$6,000 equipment term note, interest at the bank's prime lending
rate plus .5 percent (8.75 percent at June 30, 1996), payable in
monthly principal installments of $83 plus interest through August
2000.............................................................. 4,167 --
A $5,600 term commitment, interest at the bank's prime lending rate
plus .5 percent, payable in monthly principal installments of $93
plus interest through July 2000................................... 4,317 --
A $750 term note, interest at the bank's prime lending rate plus .5
percent, payable in monthly principal installments of $31 plus
interest through August 1996...................................... 62 --
A $6,000 equipment line of credit, interest at the bank's prime
lending rate, payable in monthly interest-only payments, with the
entire principal due on July 15, 1996............................. 6,000 --
Other............................................................... -- 25
------- ------
22,692 9,361
Less current portion................................................ 4,351 840
------- ------
$18,341 $8,521
======= ======
</TABLE>
On October 27, 1994, the Company's UpRight subsidiary finalized a bonds
payable agreement with the Community Redevelopment Agency (Agency) of the City
of Selma, California, for purchases of buildings, equipment and tooling. For the
fiscal years ended June 30, 1996 and June 29, 1997, respectively, the Company
received $2,404 and $2,393 in bond proceeds, and made principal payments of $173
and $186 on the bonds. The total value of bond funds was $7,870, of which $750
is to remain undisbursed as bond reserves remaining with the Agency and
unavailable for UpRight's use through the entire term of the bond agreement. As
of June 30, 1996, $3,143 remained undisbursed, and as of June 29, 1997, $750 was
undisbursed and remained as bond reserves with the Agency. As of June 30, 1996
and June 29, 1997, the bonds payable had outstanding balances of $4,419 and
$6,604, respectively, included on the Long-term debt and credit facilities
schedule above as Variable interest bonds.
F-12
<PAGE> 106
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JULY 2, 1995, JUNE 30, 1996 AND JUNE 29, 1997
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
The following is a five year maturity schedule for long-term debt
(excluding capital leases -- see note 7 and senior subordinated notes -- see
note 9).
<TABLE>
<S> <C>
1998....................................................... $ 1,001
1999....................................................... 1,020
2000....................................................... 1,035
2001....................................................... 1,026
2002....................................................... 1,014
Thereafter (2003 to 2014).................................. 10,472
-------
15,568
Less amount representing bond interest..................... 8,189
-------
Gross present value........................................ 7,379
Bond reserve remaining with Agency......................... 750
-------
Net present value.......................................... $ 6,629
=======
</TABLE>
On October 27, 1994, UpRight also entered into an agreement with the City
of Selma (City) to develop and improve certain of the City's real property
infrastructure. The improvements project was financed by the issuance of Limited
Obligation Improvement Bonds for Assessment District No. 1994-1 (District). The
total project cost, including aggregate bond fees of $504, was not to exceed
$1,400. As of June 30, 1996, the Company has received in the form of bond
financing a total of $1,400. The improvements, upon completion, were acquired
from UpRight by the City. UpRight is obligated for future property tax
assessments to the District in amounts sufficient to repay the bonds. The bonds
call for bi-annual payments of varying amounts at an interest rate of 7.5
percent through December 2014.
On November 9, 1994, Upright entered into a line of credit agreement with a
certain bank. The revolving line of credit is not to exceed the principal amount
of $2,000, with a variable interest rate tied to the bank's prime rate. A
nonrevolving line of credit totaling $750 with interest at prime plus one
quarter was due in sixty monthly payments through December 31, 2001. Both lines
of credit expired December 31, 1996 and had outstanding balances at June 30,
1996 and June 29, 1997 of zero. This line of credit represents a credit facility
in addition to the Company's long-term debt included on the schedules noted
above.
On October 16, 1996, Upright entered into a revolving loan agreement with a
financial institution which allows it to borrow in amounts in the aggregate not
to exceed $4,000. Interest accrues on amounts borrowed at a fixed or variable
rate, at Upright's option, of 2.25% per annum in excess of the lender's adjusted
London Interbank Offered Rate ("LIBOR") rate for the interest period at the
lender's reference rate, respectively. The loan is payable in monthly
installments and matures on December 30, 1998. As of June 29, 1997 total
borrowings were zero and available funds were $4,000. This loan agreement
represents a credit facility in addition to the Company's long-term debt
included on the schedules noted above.
On August 28, 1995, UpRight entered into loan agreements with finance
companies for the purchase of new equipment and tooling. Total funds of $5,000
are available through June 30, 1997 with five year payment terms, due in sixty
(60) monthly installments, each payable in arrears and with a range of 2.0977%
to 2.1046% of the loan amounts. As of June 30, 1996, and June 29, 1997 total
borrowings were $1,191 and zero and available funds were $3,809 and $5,000,
respectively. The loan agreement was not renewed in fiscal year 1998. As of June
29, 1997, this loan agreement represents a credit facility in addition to the
Company's long-term debt included on the schedules noted above; however, as of
June 30, 1996, borrowings of $1,191 are included on the above Long-term debt and
credit facility schedule as part of the capital lease obligations total of
$3,727.
Horizon has a revolving line of credit with a bank allowing it to borrow up
to $3,000, not to exceed 80% of eligible receivables plus 25% of its inventory.
Interest accrues at the bank's prime lending rate (8.25% and
F-13
<PAGE> 107
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JULY 2, 1995, JUNE 30, 1996 AND JUNE 29, 1997
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
8.5% at June 30, 1996 and June 29, 1997, respectively). As of June 30, 1996 and
June 29, 1997 the revolving line of credit had outstanding balances of $844 and
zero, respectively. This revolving line of credit is reflected on the face of
the Consolidated Balance Sheets with balances of $844 and zero as of June 30,
1996 and June 29, 1997, respectively.
The notes and revolving line of credit of Horizon totaling $15,390 at June
30, 1996 were secured by the assets of Horizon and were subject to financial
covenants pursuant to the terms of the debt agreements. These covenants included
tangible net worth, debt service ratio and current ratio as defined, among
others. During fiscal year 1996, Horizon was out of compliance with the debt to
tangible net worth covenant. However, at June 30, 1996 Horizon was in compliance
with bank covenants, and there were no instances of noncompliance during fiscal
year 1997. The bank waived instances of noncompliance and as of June 29, 1997,
the notes and line have been repaid. The Company and Upright were not subject to
compliance with Horizon's bank debt covenant agreement.
NOTE 9 -- SENIOR SUBORDINATED NOTES
On June 4, 1997, the Company filed a private placement offering of
$105,000, 10.625 percent senior subordinated notes due in 2007 (the Notes). The
Notes are guaranteed by the subsidiaries and are subordinated to all senior
indebtedness of the subsidiaries. The notes are reflected in the accompanying
balance sheet net of unamortized discount of $477. The effective interest rate
is approximately 10.68%.
The Company applied the net proceeds to repay the outstanding indebtedness
and various term loans of the subsidiaries, finance capital expansion programs,
and fund acquisitions in complementary businesses.
The terms of the Notes contain covenants that, among other things, restrict
the ability of the Parent and its subsidiaries (including the Company) to (i)
incur additional indebtedness; (ii) pay dividends and make distributions; (iii)
issue stock of subsidiaries; (iv) make certain investments; (v) repurchase
stock; (vi) create liens; (vii) enter into transactions with affiliates; (viii)
enter into sale and leaseback transactions; (ix) create dividend or other
payment restrictions affecting subsidiaries; (x) merge or consolidate the Parent
or any of the guarantors; and (xi) transfer to sell assets. These covenants are
subject to a number of exceptions as defined in the agreement.
NOTE 10 -- EMPLOYEE BENEFIT PLANS
Employees of UpRight participate in a Taxsaver's Investment Plan (UpRight
401(k) Plan). The UpRight 401(k) Plan was originally adopted effective as of
January 1, 1984 as an addition to the Company's Employee Stock Ownership Plan,
originally adopted in January 1, 1975. The Company's Employee Stock Ownership
Plan was terminated in 1987. UpRight makes fixed contributions to the UpRight
401(k) Plan for each year in an amount equal to 4% of the compensation of all
eligible participants, plus up to an additional 2% matching of participants'
contributions. The UpRight 401(k) Plan also contains features that allow
employees to save money before paying Federal income tax on the amount saved.
The UpRight 401(k) Plan covers all employees who have at least one year of
service, and is administrated by a Plan Committee, whose members are appointed
by UpRight's Board of Directors. The UpRight 401(k) Plan is intended to conform
to the provisions of the Employee Retirement Income Security Act of 1974.
Contributions to the UpRight 401(k) Plan are fully vested as of December 31 in
the year in which such contributions were made. Contributions of approximately
$474, $426 and $540 were made by UpRight during 1995, 1996 and 1997,
respectively. Employees of Horizon participate in the Horizon High Reach 401(k)
Plan (Horizon 401(k) Plan). Participation in this defined contribution plan is
available to all full-time employees who have completed at least one year of
service and have attained the age of 21. Horizon makes fixed contributions to
the Horizon 401(k) Plan for each year in an amount up to 4% of the compensation
of all eligible participants. In addition
F-14
<PAGE> 108
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JULY 2, 1995, JUNE 30, 1996 AND JUNE 29, 1997
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
to the fixed annual contribution, Horizon is required to make a matching
contribution equal to the participant's elective contribution up to 2% of the
participant's compensation for the calendar year. Employee contributions to the
Horizon 401(k) Plan are fully vested. Employer contributions are vested in 20%
annual increments beginning after the second year of participation in the
Horizon 401(k) Plan, with full vesting occurring after the sixth year of
participation. Employees are fully vested upon their 65th birthday. Employees of
Horizon who had been employed by UpRight or Horizon for one year as of December
31, 1993 are fully vested in the Horizon 401(k) Plan. During 1995, 1996 and
1997, Horizon expensed and accrued $293, $314 and $350, respectively, under the
Horizon 401(k) Plan.
NOTE 11 -- CAPITAL STOCK
The Company is authorized to issue 70 shares of its $1 par value Class A
common stock and 35 shares of its $1 par value Class B common stock. At July 2,
1995, June 30, 1996 and June 29, 1997, 55 shares of Class A common stock and 5
shares of Class B common stock were issued and outstanding. The Class A and
Class B shares have equal voting rights and, subject to the rights of the
Company's preferred shares, equal rights as to dividends and other
distributions.
The Company is also authorized to issue 25 shares of its $1 par value
preferred stock, all of which was issued and outstanding at July 2, 1995, June
30, 1996 and June 29, 1997. The preferred shares have no voting rights and have
preference over both classes of common stock as to dividends and other
distributions. The preferred shares are entitled to a $10 per share preferential
distribution before any distribution to common share holders in the event the
Company is dissolved or liquidated.
NOTE 12 -- PROVISION FOR INCOME TAXES
The provision for income taxes consists of the following:
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Current
Federal........................................ $ 41 $ 753 $3,841
State.......................................... 30 176 1,347
------ ------ ------
71 929 5,188
Deferred......................................... 2,537 5,118 943
------ ------ ------
$2,608 $6,047 $6,131
====== ====== ======
</TABLE>
The following is a summary of deferred tax assets and liabilities:
<TABLE>
<CAPTION>
1995 1996 1997
-------------------- -------------------- --------------------
CURRENT NONCURRENT CURRENT NONCURRENT CURRENT NONCURRENT
------- ---------- ------- ---------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Deferred tax liabilities resulting from
taxable temporary differences......... $ -- $ (1,833) $ -- $ (2,390) $ (321) $ (4,128)
Deferred tax assets resulting from
deductible temporary differences and
tax credit forwards................... 1,002 5,376 1,003 1,286 1,412 1,993
------ ------- ------ ------- ------ -------
$ 1,002 $ 3,543 $ 1,003 $ (1,104) $ 1,091 $ (2,135)
====== ======= ====== ======= ====== =======
</TABLE>
The provision for income taxes differs from the expense that would result
form applying Federal statutory rates to income before taxes because of the
inclusion of a provision for state income taxes. In addition, the provision
includes deferred income taxes resulting from adjustments in the amount of
temporary differences.
F-15
<PAGE> 109
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JULY 2, 1995, JUNE 30, 1996 AND JUNE 29, 1997
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
The Company concluded that a deferred tax asset valuation allowance as of July
2, 1995, June 30, 1996 and June 29 1997, was not necessary.
NOTE 13 -- REORGANIZATION OF UPRIGHT, INC.
Effective July 3, 1994, UpRight's Board of Directors approved the
elimination of UpRight's accumulated deficit through an accounting
reorganization of its equity accounts (a quasi-reorganization). The quasi-
reorganization, as reflected in the accompanying consolidated financial
statements, did not result in the revaluation of any assets or liabilities of
UpRight, because the fair values were estimated to approximate book values.
The purpose of the quasi-reorganization was to provide users of UpRight's
financial statements with a "fresh start" presentation of UpRight's operations
subsequent to the spin off of its former retail operating division into Horizon,
a separate wholly-owned subsidiary of the Company (see note 1).
The reorganization of Horizon into a separate subsidiary and UpRight's
quasi-reorganization were all significant aspects of the Company's efforts to
strategically refocus its capital resources and operational structure.
NOTE 14 -- CUSTOMER SEGMENTS
Revenue from customer geographical segments were as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
U.S., Canada and Latin America....... $67,486 79% $ 92,813 78% $ 96,774 69%
Europe............................... 12,920 15 19,550 17 35,295 25
Pacific Rim.......................... 4,751 6 5,540 5 7,835 6
------- --- -------- --- -------- ---
$85,157 100% $117,903 100% $139,904 100%
======= === ======== === ======== ===
</TABLE>
NOTE 15 -- CONTINGENCIES
The Company and its subsidiaries have various product liability claims and
suits pending. The Company's policy is to defend each suit vigorously,
regardless of the amount sought in damages. Although the outcome of such
litigation cannot be predicted with certainty, it is the opinion of management,
based on the advice of legal counsel and other considerations, that all claims,
legal actions, complaints and proceedings which have been filed or are pending
against the Company and its subsidiaries, as well as possible future claims are
adequately covered by reserves or insurance, and are not expected to have a
material adverse effect on the Company's consolidated financial position.
F-16
<PAGE> 110
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JULY 2, 1995, JUNE 30, 1996 AND JUNE 29, 1997
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
NOTE 16 -- RELATED PARTY TRANSACTIONS
Included in the financial statements are the following related party
balances and transactions.
<TABLE>
<CAPTION>
1996 1997
------- -------
<S> <C> <C>
Balances due from related parties........................ $ 1,800 $ 8,989
Note payable due to related party........................ 13,463 --
Interest and other payables due to related party......... 2,190 1,468
Revenues from related parties............................ 19,549 28,695
Cost of revenues from related parties.................... 13,596 19,942
Purchases from related parties........................... 1,727 3,577
Marketing expense paid to related parties -- net......... 740 1,066
Service agreement fees................................... -- 800
Fees associated with debt issue.......................... -- 700
Reimbursement of computer system costs................... -- 80
Interest expense to related party........................ 1,065 699
</TABLE>
During fiscal 1997, both UpRight and Horizon entered into corporate
services agreements (the "Corporate Services Agreements") with Griffin Group
International Management LTD ("Griffin") an affiliate of the Company. Pursuant
to the Corporate Services Agreements, Griffin provides consulting services to
UpRight and Horizon in various areas including operations, finance and
accounting, asset management, strategic planning and policy, management
organization, marketing, technology and communications and public relations.
During fiscal 1997, UpRight and Horizon paid Griffin $800 for services rendered
by Griffin pursuant to the Corporate Services Agreements. The Corporate Services
Agreements terminated on June 29, 1997. On May 12, 1997 the Company entered into
a corporate services agreement with Griffin pursuant to which Griffin will, for
a term of one fiscal year commencing June 30, 1997, provide consulting services
to the Company, UpRight and Horizon in various areas including operations,
finance and accounting, asset management, strategic planning and policy,
management organization, marketing, technology, communications, public relations
and SEC compliance and reporting.
NOTE 17 -- CONCENTRATIONS OF CREDIT RISK
Financial instruments that subject the Company to concentration of credit
risk are cash equivalents and trade receivables. Cash equivalents consist
principally of short-term money market funds. These instruments are short-term
in nature and bear minimal risk. To date, the Company has not experienced
significant losses on these instruments.
The Company maintains cash balances at financial institutions located in
various domestic banks. Accounts are insured by the Federal Deposit Insurance
Corporation up to $100. At June 29, 1997, the Company's uninsured cash balance
totaled $80,163.
The Company performs on-going credit evaluations of its customer's
financial conditions. Security is required on all accounts with credit limits in
excess of $50. UCC financing statements are filed, when necessary, for U.S.
customers and sixty days (from invoice date) letter of credit are required for
export shipments.
F-17
<PAGE> 111
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JULY 2, 1995, JUNE 30, 1996 AND JUNE 29, 1997
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
NOTE 18 -- SUPPLEMENTAL INFORMATION TO STATEMENT OF CASH FLOWS
Noncash investing and financing activities:
During fiscal years 1995, 1996 and 1997 the Company entered into
capital lease financing arrangements whereby it acquired equipment for
notes payable in the amount of $794, $3,171 and $4,075, respectively.
NOTE 19 -- RECENT ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standard (SFAS) No. 128, "Earnings per Share." The
statement is effective for financial statements for periods ending after
December 15, 1997 and changes the method in which earnings per share will be
determined. Adoption of this statement by the Company will not have a material
impact on earnings per share.
In March 1995, the FASB issued SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets To be Disposed Of " ("Statement
121"). Statement 121 addresses the accounting for the impairment of long-lived
assets, certain identifiable intangible and goodwill related to those assets to
be held and used. It also addresses the accounting for long-lived assets and
certain identifiable intangibles to be disposed of. Statement 121 establishes
guidance for recognizing and measuring impairment losses and requires that the
carrying amount of impaired assets be reduced to fair value. Statement 121 was
effective for fiscal years beginning after December 15, 1995. The impact of the
adoption of Statement 121 did not have a material adverse effect on the
Company's consolidated financial condition or results of operations.
F-18
<PAGE> 112
============================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THE OFFER
CONTAINED HEREIN OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ANY OTHER PERSON. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY TO ANY PERSON
IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN
WHICH THE PERSON MAKING SUCH AN OFFER OR SOLICITATION IS NOT QUALIFIED TO DO SO
OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Available Information...................... 2
Certain Definitions........................ 3
Prospectus Summary......................... 4
Risk Factors............................... 19
The Exchange Offer......................... 27
Use of Proceeds............................ 36
Capital Expansion Program.................. 37
Capitalization............................. 39
Selected Historical and Pro Forma
Consolidated Financial Data.............. 40
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 43
Business................................... 47
Management................................. 61
Security Ownership of Certain Beneficial
Owners................................... 63
Certain Relationships and Related
Transactions............................. 64
Description of Certain Indebtedness........ 65
Description of the Notes................... 67
Certain Federal Income Tax
Considerations........................... 92
Plan of Distribution....................... 92
Legal Matters.............................. 93
Experts.................................... 93
Index to Consolidated Financial
Statements............................... F-1
</TABLE>
UNTIL JANUARY 20, 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE NOTES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
SELLING EXCHANGE NOTES RECEIVED IN EXCHANGE FOR ORIGINAL NOTES HELD FOR THEIR
OWN ACCOUNT. SEE "PLAN OF DISTRIBUTION."
============================================================
============================================================
W.R. CARPENTER
NORTH AMERICA, INC.
OFFER TO EXCHANGE ITS
10 5/8% SENIOR SUBORDINATED
NOTES DUE 2007,
WHICH HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT, FOR ANY AND ALL OF ITS
OUTSTANDING 10 5/8% SENIOR SUBORDINATED
NOTES DUE 2007
------------------------------
PROSPECTUS
------------------------------
OCTOBER 22, 1997
============================================================
