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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 28, 1998.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission file number 333-31187
W.R. CARPENTER NORTH AMERICA, INC.
(Exact name of registrant as specified in its charter)
Delaware 54-1049647
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1775 Park Street
Selma, California 93662
(Address of principal executive offices and zip code)
(209) 891-5344
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ] Not applicable.
State the aggregate market value of the voting and non-voting common equity held
by non-affiliates - Not applicable.
At September 28, 1998, there were 55,000 shares of Class A common stock, $1.00
par value, and 5,000 shares of Class B common stock, $1.00 par value, of the
registrant issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Not Applicable.
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PART I
<TABLE>
<S> <C>
Item 1. Business ...................................................... 1
Item 2. Properties..................................................... 7
Item 3. Legal Proceedings.............................................. 8
Item 4. Submission of Matters to a Vote of Security Holders............ 9
PART II
Item 5. Market for Company's Common Equity and Related
Stockholder Matters......................................... 10
Item 6. Selected Financial Data....................................... 11
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operation.......................... 13
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.... 19
Item 8. Financial Statements and Supplementary Data................... 20
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................... 40
PART III
Item 10. Directors and Executive Officers of the Company................ 41
Item 11. Executive Compensation......................................... 42
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................... 44
Item 13. Certain Relationships and Related Transactions................. 45
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on
Form 8-K..................................................... 46
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FORWARD-LOOKING STATEMENTS
This report contains forward-looking statements, usually containing the
words "estimate," "project," "expect," or similar expressions. Those statements
are subject to uncertainties, including those discussed in this report,
particularly in "Management's Discussion and Analysis of Financial Condition and
Results of Operations" on pages 13 through 18. These uncertainties could cause
actual results to differ materially. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
hereof. For additional information regarding such forward-looking statements,
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Forward-Looking Statements," on page 13.
PART I
ITEM 1. BUSINESS.
GENERAL
W.R. Carpenter North America, Inc. ("the Company") was incorporated in
1975 under the laws of Delaware and serves as the holding company for its two
operating subsidiaries, UpRight, Inc. ("UpRight") and Horizon High Reach, Inc.
("Horizon").
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, portable lifts, and aluminum scaffolding. UpRight has
been manufacturing powered scissor lifts since 1974 as an outgrowth of its
leadership in the development and sale of aluminum scaffolding. UpRight
currently manufactures its products in Selma, California. UpRight expects to
expand its production capacity with the addition of another facility in Madera,
California, located 40 miles north of Selma. Construction of the initial stage
of the Madera facility is scheduled for completion by December 1998. UpRight
expects to transfer the boom lift production lines from Selma to Madera in
January 1999.
UpRight sells its products through an extensive network of over 150 equipment
dealers and rental companies, including national, regional and local
distributors located throughout the United States and Canada and 79
distributors located in 53 countries internationally. For fiscal year 1998,
approximately 40% 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 64% of UpRight's revenue. UpRight's
customers sell and/or rent its aerial work platforms to end users in
construction, commercial, industrial 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.
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 ten product lines consisting of 167 scissor lift models. These
machines provide access to elevations up to 56 feet with various platform sizes
ranging from eight square feet to 110 square feet. These platforms range in
capacity from two persons/500 pounds to five persons/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. 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 range from approximately $7,750 to $50,000.
UpRight's two largest scissor lift lines, consisting of
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models which provide access to elevations ranging from 15 to 31 feet, accounted
for 41% of UpRight's revenue for fiscal year 1998.
UpRight's scissor lifts are powered by a battery-powered DC electric motor,
an internal combustion engine (propane, gasoline or diesel), or a combination of
diesel and electric power (bi-energy). UpRight's DC electric-powered scissor
lifts are capable of climbing grades ranging from 20% to 30%, which allows them
to climb most inclines and ramps and to tolerate certain uneven floor
conditions. UpRight's internal combustion engine machines are also available
with two- or four-wheel drive and can climb grades of up to 35%. An oscillating
axle is also available on UpRight's rough terrain units enabling these machines
to traverse difficult terrain.
Boom Lifts. In 1997 UpRight introduced its first lines of articulated boom
lifts and in February 1998 introduced its first telescopic boom lift. UpRight
offers four boom lift product lines consisting of 21 models. These machines have
rated lift capacities up to 500 pounds and provide access to elevations from 52
feet to 66 feet high and up to 53 feet away from the base. As a result of their
mobility, the applications for boom lifts are extensive, 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 to reach 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 range from
approximately $39,000 to $75,000.
UpRight's boom lifts are powered by a battery-powered DC electric motor, an
internal combustion engine (propane, gasoline or diesel), or a combination of
diesel and electric power (bi-energy). UpRight's boom lifts are capable of
climbing grades ranging from 30% to 40%. Rough terrain models offer an
oscillating axle, which enhances the ability of the boom lift to maintain
traction while traversing uneven terrain.
Portable Lifts. UpRight offers this product line consisting of more than 20
models of manually propelled portable lifts, which consist of a work platform
attached to an aluminum 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 $3,400 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. Revenue from scaffolding in fiscal year 1998 was $4.7
million, representing approximately 3.4% of UpRight's revenue.
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 workload) capacity and machine stability with minimum
machine dimensions, weight and cost. UpRight employs 17 degreed engineers
participating in product development. The design team utilizes the latest
computer-aided design (CAD) systems to facilitate improved design times, less
redesign work, and improved analytical capabilities for structural endurance. In
addition, new machine models and related modifications are often tested by
conducting accelerated service life cycle tests of prototype machines under
load, during which time critically stressed machine components are monitored
using state-of-the-art strain gauge equipment.
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 and test engineering, manufacturing,
purchasing, product support, finance, and quality assurance. 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 the 45-foot articulated models were the largest single segment within
the boom lift market, accounting for approximately 22% of estimated worldwide
total boom lift sales, according to management estimates and based on unit
shipment data reported by the Equipment Manufacturers Institute ("EMI"), an
industry trade organization. Following a similar business strategy, UpRight
introduced a line of 60-foot telescopic booms in February 1998. Based on EMI
data and management estimates, UpRight believes that these machines compete in
the second largest segment of the boom lift market.
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Research and development expenses of UpRight have been $2.9 million, $4.3
million and $6.0 million for fiscal years 1996, 1997 and 1998, respectively.
UpRight's new products and new models introduced since January 1, 1995 accounted
for approximately 68% of UpRight's revenue for fiscal year 1998.
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 154 companies, several of which have
large nationwide branch networks, operating in all 50 states and Canada.
UpRight's international distribution network consists of 79 dealers in 53
countries. 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 field sales support, product advertising, cooperative promotional programs,
major trade show participation and distributor personnel training in service,
safety and sales of all products UpRight manufactures and distributes.
During fiscal years 1996, 1997 and 1998, other than Horizon, UpRight's ten
largest customers together accounted for approximately 43%, 63% and 64% of
UpRight's revenue, respectively. No single customer of UpRight accounted for 10%
or more of the Company's revenue during fiscal year 1996; however, during fiscal
year 1997, two of UpRight's customers accounted for 14.9% and 10.6% of the
Company's revenue and in fiscal year 1998 two of UpRight's customers accounted
for 15.6% and 12.8% of the Company's revenue. UpRight (U.K.) Limited (formerly
Instant Zip-Up Limited) accounted for 19.3% of UpRight's revenue and 15.6% of
the Company's revenue for fiscal year 1998. An affiliate of the Company owns a
minority voting interest in UpRight (U.K.) Limited.
MANUFACTURING
UpRight maintains a mix of "permanent" and "temporary" personnel which
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. 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.
Since January 1, 1995 UpRight has added approximately 150,000 square feet
of manufacturing space at its Selma, California facility. In February 1998,
UpRight purchased a 39-acre site in Madera, California where UpRight plans to
add additional manufacturing facilities, including boom lift product
manufacturing and shipping buildings. Construction of the initial stage of the
Madera facility is scheduled for completion by December 1998. UpRight expects to
transfer its existing boom lift production lines from Selma to Madera in January
1999.
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 in many
applications its aerial work platforms are safer, more versatile and more
efficient, taking 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, Omniquip (formerly 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 currently offers four boom lift product lines consisting of
21 models. 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
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increasing their manufacturing capacity. 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.
EMPLOYEES
UpRight had 757 persons employed as of June 28, 1998. None of UpRight's
employees is subject to collective bargaining agreements.
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, forklifts and telescopic reach lifts and scaffolding, serving a
diverse range of more than 11,000 active customers from 15 domestic locations,
including four satellite facilities. 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 year 1998, approximately 49% 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 four 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 all of Horizon's designated market
areas. Horizon and UpRight operate independently, and all transactions between
them are conducted on an arm's-length basis.
PRODUCTS AND SERVICES
Equipment rental represents Horizon's principal line of business. In fiscal
year 1998, equipment rental revenue, together with rental-related revenue, such
as repair services, delivery charges and damage waiver income, accounted for
approximately 49% of Horizon's revenue. Horizon also acts as a distributor of
new equipment on behalf of UpRight and certain other nationally known equipment
manufacturers. In fiscal year 1998, approximately 44% of Horizon's revenue was
derived from the sale of new and used equipment, of which approximately 59% was
equipment manufactured by UpRight. Revenue from the sale of parts and
merchandise accounted for approximately 7% of Horizon's revenue in fiscal year
1998.
Rental Equipment. Horizon rents over 160 different models of aerial work
platforms and other industrial equipment as of June 28, 1998, consisting of
scissor lifts, boom lifts (including one truck-mounted boom lift model),
portable lifts and forklifts and telescopic reach lifts, with a total exceeding
3,000 pieces of equipment (excluding scaffolding). The original equipment cost
of Horizon's rental fleet was approximately $53.4 million as of such date. In
addition, Horizon maintains a comprehensive inventory of aluminum scaffolding
with an original equipment cost of approximately $942,000 as of such date. The
distribution of Horizon's total rental equipment fleet (based on original
equipment cost) as of June 28, 1998 was: (i) scissor lifts (48%); (ii) boom
lifts (30%); (iii) portable lifts (1%); (iv) forklifts (15%); (v) scaffolding
(2%); and (vi) other equipment (4%). The mix of rental equipment at each of
Horizon's 15 domestic locations is tailored to meet the demands of the local
customer base.
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 (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.
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Service. Horizon also generates revenue from maintenance and 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 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.
During fiscal year 1998, Horizon acquired the stock of a general rental
company in Katy, Texas and the stock of an aerial access sales, rental and
repair company in Suisun, California for $1.4 million and $4.2 million,
respectively.
Horizon utilizes an integrated AS400 information system that 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 its
locations effectively.
CUSTOMERS
Horizon serves a diverse range of more than 11,000 active customers. No
single customer of Horizon accounted for more than 1% of Horizon's revenue
during fiscal years 1996, 1997 and 1998. Horizon classifies its customers as
either construction or industrial end users. For fiscal years 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. In fiscal year
1998, approximately 54% of Horizon's revenue was derived from construction end
users, with the remaining 46% 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, boom 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 49%, 53% and 45% of Horizon's total capital
purchases of equipment for fiscal years 1996, 1997, and 1998, 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 52 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
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average of approximately three years. Sales personnel are compensated
on a salary-plus-commission basis and report directly to branch managers or
sales 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 60 trade shows on a company-wide basis.
EMPLOYEES
As of June 28, 1998, Horizon had a total of 244 full-time employees,
including 13 personnel in the Fresno headquarters who provide administrative and
accounting services. Each branch location averages 13 to 20 people, typically
structured as follows: one manager, three to four office persons, two to four
sales persons, five to seven mechanics and two to four truck drivers. The 11
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.
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ITEM 2. PROPERTIES.
UpRight maintains its headquarters and manufacturing operations at its
owned facilities at 1775 Park Street, Selma, California 93662, telephone (209)
891-5200. Since January 1, 1995 UpRight has added approximately 150,000 square
feet of manufacturing space at its Selma, California facility to increase the
complex size to approximately 335,000 square feet. To support its product line
expansion strategy, UpRight plans to add additional facilities in Madera,
California. The Company expects to relocate its corporate and administrative
offices to the Madera, California facility in mid-October 1998. To date the
Selma building program has been financed principally with UpRight's 7.0% to
11.0% 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. The Madera building program will be financed
initially by UpRight's revolving line of credit or with funds from the issuance
in June 1997 of the Company's senior subordinated notes due 2007 ("Notes").
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'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, Suisun, Sacramento and
Brea, California; Elmhurst, Illinois; Houston and Dallas, Texas; and Ridgefield
Park, New Jersey. In addition, Horizon currently has four satellite facilities
at the following locations: Raleigh, North Carolina (Charlotte); Oklahoma City,
Oklahoma (Dallas); Katy, Texas (Houston); and Lakewood, New Jersey (Ridgefield
Park). Horizon's corporate headquarters are leased for a term expiring in August
2000. Generally, Horizon's branch facilities are leased for terms ranging from
three to five years with options to extend or renew. Horizon's satellite
facilities are generally 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.
The Company's properties used in its operations are considered to be in
good operating condition, well maintained and suitable for their present
purposes.
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ITEM 3. LEGAL PROCEEDINGS.
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 the Company's comprehensive general liability insurance policies,
subject to certain deductible amounts and maximum coverage limits.
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 1996, 1997 and 1998, approximated 2.6%, 2.2% and
1.7% 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.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
Page 9
<PAGE> 12
PART II
ITEM 5. MARKET FOR COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
There is no public market for the common stock or equity securities of the
Company. See "Item 12" and "Item 7 - Liquidity and Capital Resources".
Page 10
<PAGE> 13
ITEM 6. SELECTED FINANCIAL DATA.
The following Selected Financial Data has been taken or derived from the
audited consolidated financial statements of the Company and should be read in
conjunction with and is qualified in its entirety by the full consolidated
financial statements, related notes and other information included elsewhere
herein.
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
JULY 3, JULY 2, JUNE 30, JUNE 29, JUNE 28,
1994(1) 1995 1996 1997 1998
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS)
OPERATING STATEMENT DATA:
Revenue (2) ........................ $ 70,387 $ 85,157 $117,903 $139,904 $170,797
Cost of revenue .................... 47,365 58,217 78,638 94,315 117,844
-------- -------- -------- -------- --------
Gross profit ....................... 23,022 26,940 39,265 45,589 52,953
Research and development expenses .. 1,732 1,817 2,865 4,281 5,952
Product liability costs ............ 1,827 2,094 3,015 3,115 2,807
Selling, general, and administrative
expenses ......................... 15,051 13,982 15,124 18,117 23,902
-------- -------- -------- -------- --------
Income from operations ............. 4,412 9,047 18,261 20,076 20,292
Interest expense, net .............. 3,214 2,566 2,907 3,983 9,421
Other Expense/Income, net (3) ...... 4,252 186 539 -- 6
-------- -------- -------- -------- --------
Income (loss) before provision for
income taxes ..................... (3,054) 6,295 14,815 16,093 10,865
Provision (benefit) for income taxes (1,221) 2,608 6,047 6,131 3,206
Cumulative effect on prior years of
accounting change ................ 6,663 -- -- -- --
-------- -------- -------- -------- --------
Net income ......................... $ 4,830 $ 3,687 $ 8,768 $ 9,962 $ 7,659
======== ======== ======== ======== ========
BALANCE SHEET DATA:
Cash and cash equivalents .......... 1,297 4,314 11,164 77,345 63,669
Working Capital (deficit) .......... (1,633) (4,271) 7,877 98,835 88,490
Total assets ....................... 56,027 55,082 75,985 167,825 196,659
Total debt ......................... 26,415 30,456 36,999 113,884 124,127
Stockholder's equity ............... 4,611 8,298 17,069 27,031 34,690
OTHER DATA:
EBITDA (4) ......................... $ 8,240 $ 12,626 $ 22,695 $ 25,880 $ 28,345
</TABLE>
Page 11
<PAGE> 14
(1) Results include operations and capital expenditures of Bacon-Universal
Company, Inc. ("Bacon"), a wholly-owned subsidiary of the Company sold in
fiscal year 1994. 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
JULY 3,
1994
----------------------
(DOLLARS IN THOUSANDS)
<S> <C>
Revenue........................................ $57,429
Gross profit................................... 19,293
Income from operations......................... 4,518
EBITDA......................................... 7,478
Capital expenditures........................... 7,031
Gross margin................................... 33.6%
EBITDA margin.................................. 13.0
</TABLE>
(2) The following details UpRight's and Horizon's revenue, and the elimination
of inter-company sales for fiscal years 1994, 1995, 1996, 1997 and 1998:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------------------------------------
JULY 3, JULY 2, JUNE 30, JUNE 29, JUNE 28,
1994 1995 1996 1997 1998
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
UpRight ........... $ 40,694 $ 65,593 $ 93,273 $ 110,471 $ 137,975
Horizon ........... 25,282 32,236 38,112 44,315 54,725
Inter-company sales (8,547) (12,672) (13,482) (14,882) (21,903)
--------- --------- --------- --------- ---------
$ 57,429 $ 85,157 $ 117,903 $ 139,904 $ 170,797
========= ========= ========= ========= =========
</TABLE>
Fiscal year 1994 excludes $13.0 million in revenue from Bacon. See footnote (1)
above.
(3) For fiscal year 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 its annual report 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.
Page 12
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
FORWARD-LOOKING STATEMENTS:
Certain statements in this Annual Report on Form 10-K include
forward-looking information within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended, and are subject to the "safe harbor" created by those sections.
These forward-looking statements involve certain risks and uncertainties that
could cause actual results to differ materially from those in the
forward-looking statement. Such risks and uncertainties include, but are not
limited to, the following factors: substantial leverage of the Company;
industrial cyclicality; dependence on the construction industry; consolidation
of the customer base; dependence upon major customers; risks relating to growth;
significance of new product development; the need for continual capital
expenditures; competition; product liability; insurance; availability of product
components; reliance on suppliers; foreign sales; government and environmental
regulation; labor matters; holding company structure; restrictions under debt
agreements; fraudulent conveyance; and control by the sole stockholder.
GENERAL
This discussion should be read in conjunction with the Company's
consolidated financial statements and the notes thereto appearing in Item 8 of
this Annual Report on Form 10-K.
The Company's strategy is to create shareholder value by providing capital,
strategic and financial direction and management to its wholly owned operating
subsidiaries, UpRight and Horizon. Prior to fiscal year 1994, Horizon was a
division of UpRight, operating as a captive equipment dealer and industrial
equipment rental company in certain markets. In fiscal year 1994, the Company
decided each business would be managed and operated separately. All
inter-company 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 that may be
produced by UpRight. The Company intends to maintain the distributor/supplier
relationship between the two subsidiaries. Sales to Horizon accounted for
approximately 14%, 13%, and 16% of UpRight's revenue for fiscal years 1996, 1997
and 1998, respectively. Purchases from UpRight accounted for 49%, 53% and 45% of
Horizon's total capital purchases of equipment for fiscal years 1996, 1997 and
1998, 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 inter-company 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.
Page 13
<PAGE> 16
The following table sets forth for the periods indicated certain
historical revenue and percentages from customer geographical segments:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
------------------------------------------------------------------------
JUNE 30, JUNE 29, JUNE 28,
1996 1997 1998
--------------------- --------------------- --------------------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
United States, Canada, Latin
America .................. $ 92.8 78.7% $ 96.8 69.2% $ 115.2 67.4%
Europe ..................... 19.6 16.6% 35.3 25.2% 48.3 28.3%
Pacific Rim ................ 5.5 4.7% 7.8 5.6% 7.3 4.3%
-------- ----- -------- ----- -------- -----
$ 117.9 100.0% $ 139.9 100.0% $ 170.8 100.0%
======== ===== ======== ===== ======== =====
</TABLE>
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
-----------------------------------------------------------------------------
JUNE 30, JUNE 29, JUNE 28,
1996 1997 1998
--------------------- --------------------- ---------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Revenue ............... $117,903 100.0% $139,904 100.0% $170,797 100.0%
Cost of revenue ....... 78,638 66.7% 94,315 67.4% 117,844 69.0%
-------- ------- -------- ------- -------- -------
Gross profit .......... 39,265 33.3% 45,589 32.6% 52,953 31.0%
Operating expenses .... 21,004 17.8% 25,513 18.2% 32,661 19.1%
-------- ------- -------- ------- -------- -------
Income from operations 18,261 15.5% 20,076 14.4% 20,292 11.9%
Interest expense, net . 2,907 2.5% 3,983 2.8% 9,421 5.5%
Other (income)
expense ............. 539 0.5% -- -- 6 --
Provision (benefit) for
income taxes .......... 6,047 5.1% 6,131 4.4% 3,206 2.4%
-------- ------- -------- ------- -------- -------
Net income ............ $ 8,768 7.4% $ 9,962 7.1% $ 7,659 4.5%
======== ======= ======== ======= ======== =======
EBITDA ................ $ 22,695 19.2% $ 25,880 18.5% $ 28,345 16.6%
Depreciation &
amortization ........ 4,434 5,804 8,053
</TABLE>
SEGMENT OPERATIONS
The Company believes its results of operations for its UpRight and
Horizon subsidiaries are most meaningful when analyzed from the perspective of
two arm's-length companies. The following table sets forth for the periods
indicated certain historical consolidating income statement data derived from
the Company's consolidated statements of operations expressed in dollars and as
a percentage of revenue.
When equipment purchased from UpRight by Horizon is included in Horizon's
rental fleet, or held as sales inventory at the end of a reporting period, the
gross profit earned by UpRight on the sale of this equipment is eliminated from
the Company's consolidated Gross Profit. As Horizon's purchases of equipment for
rental fleet purposes vary by reporting period, and the level of UpRight
equipment held in sales inventory by Horizon fluctuates by reporting period, the
resulting elimination of Gross Profit on consolidation can cause consolidated
Income from Operations to fluctuate between reporting periods.
Page 14
<PAGE> 17
CONSOLIDATING STATEMENT OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
12 MONTHS ENDED JUNE 28, 1998
<TABLE>
<CAPTION>
COMPANY HORIZON UPRIGHT ELIMINATION CONSOLIDATED
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues
Equipment Sales
New ..................... $ 21,926 $ 137,975 $ (21,903) $ 137,998
Used .................... 4,207 4,207
Rental and Services ......... 28,592 28,592
--------- --------- --------- --------- ---------
Total Revenues .......... -- 54,725 137,975 (21,903) 170,797
Gross Profit
Equipment Sales
New ..................... 4,900 39,022 (3,545) 40,377
Used .................... 1,807 1,807
Rental and Services ......... 10,769 10,769
--------- --------- --------- --------- ---------
Total Gross Profit ..... -- 17,476 39,022 (3,545) 52,953
% of Sales ........... 31.9% 28.3% 31.0%
Operating expenses
Selling, general and
administrative ............. $ 2,321 11,026 10,555 23,902
Product Liability ............ 2,807 2,807
Research and development ..... 5,952 5,952
--------- --------- --------- --------- ---------
Total Operating Expenses 2,321 11,026 19,314 -- 32,661
Income from Operations ............ $ (2,321) $ 6,450 $ 19,708 $ (3,545) $ 20,292
% of Sales ............. 11.8% 14.3% 11.9%
</TABLE>
Page 15
<PAGE> 18
CONSOLIDATING STATEMENT OF OPERATIONS
(IN THOUSANDS)
(UNAUDITED)
12 MONTHS ENDED JUNE 29, 1997
<TABLE>
<CAPTION>
COMPANY HORIZON UPRIGHT ELIMINATION CONSOLIDATED
---------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues
Equipment Sales
New ..................... $ 18,279 $ 110,470 $ (14,882) $ 113,867
Used .................... 2,589 2,589
Rental and Services ......... 23,448 23,448
--------- --------- --------- --------- ---------
Total Revenues .......... -- 44,316 110,470 (14,882) 139,904
Gross Profit
Equipment Sales
New ..................... 4,141 31,419 (405) 35,155
Used .................... 1,332 1,332
Rental and Services ......... 9,102 9,102
--------- --------- --------- --------- ---------
Total Gross Profit ..... -- 14,575 31,419 (405) 45,589
% of Sales ............ 32.9% 28.4% 32.6%
Operating expenses
Selling, general and
administrative ............ $ 1,070 8,866 8,181 18,117
Product Liability ............ 3,115 3,115
Research and development ..... 4,281 4,281
--------- --------- --------- --------- ---------
Total Operating Expenses 1,070 8,866 15,577 -- 25,513
Income from Operations ............ $ (1,070) $ 5,709 $ 15,842 $ (405) $ 20,076
% of Sales ............. 12.9% 14.3% 14.8%
</TABLE>
FISCAL YEAR ENDED JUNE 28, 1998 COMPARED TO FISCAL YEAR ENDED JUNE 29, 1997
Revenue increased by 22.1% to $170.8 million in fiscal year 1998 from
$139.9 million in fiscal year 1997. The increase of $30.9 million was
attributable to increased revenue from sales of new equipment of $24.1 million
(including sales of UpRight equipment by Horizon) and increased rental and
service revenue for Horizon of $5.1 million. UpRight's sales of larger scissor
lifts and boom lifts were the primary reasons for the increase in new equipment
sales. The increase in Horizon's rental and service revenue was primarily
attributable to rental fleet additions and the inclusion of results from
businesses acquired subsequent to the third quarter in fiscal year 1997.
Gross profit for fiscal year 1998 was $53.0 million, an increase of $7.4
million over gross profit of $45.6 million for fiscal year 1997. The increase in
gross profit is attributable to higher revenue; however, gross margins decreased
to 31.0% for fiscal year 1998 compared to 32.6% for the previous fiscal year,
due to new product introductions and higher elimination of gross profit
attributable to UpRight's products held in Horizon's rental fleet and sales
inventory as of June 28, 1998 compared to June 29, 1997.
Operating expenses, consisting of selling, general and administrative
expenses, product liability and research and development expenses were $32.7
million for fiscal year 1998 compared to $25.5 million for the same period last
year. SG & A expenses increased by $5.8 million to $23.9 million in fiscal year
1998 compared to fiscal year 1997, due to an increase in domestic and
international selling and marketing expense associated with higher unit volumes,
as well as expenses incurred in connection with the introduction of new products
and establishing a sales office in South America and in Asia. Product liability
expense was $2.8 million for fiscal year 1998 compared to $3.1 million in fiscal
year 1997. Research and development expense for fiscal year 1998 was $6.0
million compared to $4.3 million for fiscal year 1997. The increase in Research
and development expenses reflected the Company's increased emphasis on
developing new and re-designed aerial work platform products.
Page 16
<PAGE> 19
Interest expense, net of interest income, increased to $9.4 million for
fiscal year 1998 from $4.0 million for fiscal year 1997 due to the Company's
issuance of its Notes in June 1997.
Income taxes in fiscal year 1998 were $3.2 million compared to $6.1 million
in fiscal year 1997. The decrease in provision for income taxes is primarily due
to business tax credits realized in fiscal year 1998.
Net income for fiscal year 1998 was $7.7 million, representing a decrease
of $2.3 million from net income of $10.0 million for the previous fiscal year,
as a result of the factors described above.
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 year 1997 from
$117.9 million in fiscal year 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 71.7% to $43.1
million for fiscal year 1997 from $25.1 million for fiscal year 1996. The
increased sales to Europe primarily reflected improved economic conditions in
the United Kingdom, while the increased sales to Pacific Rim countries primarily
reflected 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 year 1997 from $69.5 million for fiscal year 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 year 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 year 1997 from $39.3 million for fiscal year 1996, while gross margin
decreased to 32.6% for fiscal year 1997 from 33.3% for fiscal year 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 year 1997 from $21.0 million for fiscal year 1996. As a
percentage of revenue, operating expenses increased to 18.2% for fiscal year
1997 from 17.8% for fiscal year 1996. Research and development expenses
increased by $1.4 million to $4.2 million in fiscal year 1997 due primarily to
the expansion of UpRight's boom lift development program. In addition, the
Company commenced payment of corporate services fees totaling $0.9 million for
fiscal year 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 year 1997 from $2.9 million for fiscal year 1996 as the result of
increase in outstanding debt.
As a result of the above, net income increased by 13.6% to $9.9 million for
fiscal year 1997 from $8.8 million for fiscal year 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flow requirements are for working capital, capital
expenditures and debt service.
Prior to June 1997 the Company met its liquidity needs through internally
generated funds and committed finance facilities available to its subsidiaries,
UpRight and Horizon.
Page 17
<PAGE> 20
In June 1997 the Company issued $105 million in principal amount of the
Notes. The net proceeds of the Notes, after (1) deducting fees and expenses of
the issue; (2) repayment of various term loans of Horizon; (3) repayment of
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 as of June 29,
1997 to $77.3 million. The Company's cash balances as of June 28, 1998 were
$63.7 million. This cash is to be used in part to finance the capital expansion
program at UpRight and Horizon and, in addition, will be used for general
corporate purposes, including acquisitions in complementary, ancillary or
related businesses. UpRight and Horizon have revolving lines of credit from
major financial institutions of $20.0 million and $5.0 million, respectively. As
of June 28, 1998, UpRight and Horizon had utilized $2.5 million and $1.4 million
of their respective revolving lines of credit. In April 1998, UpRight entered
into an equipment financing agreement with a financial institution which allows
it to borrow funds up to $20 million for the purchase of equipment. As of June
28, 1998, drawn funds under this equipment financing agreement totaled $2.8
million. Through the issuance of City of Selma industrial revenue bonds in 1994,
UpRight had available to it approximately $8.0 million to finance the purchase
of buildings and equipment and to develop and improve certain of the Company's
real property infrastructure, $6.4 million of which was outstanding at June 28,
1998.
The Company's working capital was $88.4 million and $98.8 million at June 28,
1998 and June 29, 1997, respectively. The decrease in working capital is mainly
due to the reduction of cash balances of $13.7 million in fiscal year 1998. The
cash was used to finance Horizon's capital expenditure program including
acquisitions made during fiscal year 1998. Inventories and accounts receivable
increased by $15.6 million during fiscal year 1998 due to the increased revenues
from new products and acquisitions made by Horizon.
The Company's outstanding debt was $124.1 million and $113.9 million at
June 28, 1998 and June 29, 1997, respectively. The increase in borrowings was
due to UpRight financing capital expenditures at its Selma and Madera facilities
of $9.9 million during fiscal year 1998. Cash and cash equivalents were $63.7
million and $77.3 million as of June 28, 1998 and June 29, 1997, respectively.
Net cash provided by operating activities was $5.0 million in fiscal year
1998 and $5.5 million for fiscal year 1997. The decrease in net cash provided by
operating activities of $0.5 million is primarily related to interest payments
on the Company's Notes and a higher level of inventory to support the
introduction of new products during fiscal year 1998 offset by increases in
accounts payable and other liabilities in fiscal years 1998 and 1997.
Cash used in fiscal year 1998 for the purchase of property, plant and
equipment totaled $27.4 million, including $9.4 million used in the three months
ended June 28, 1998. This capital expenditure was incurred to upgrade and expand
Horizon's rental fleet and UpRight's manufacturing facilities at Selma and
Madera, California.
Net cash provided by financing activities was $10.2 million and $72.8
million in fiscal year 1998 and fiscal year 1997, respectively. The decrease in
net cash provided by financing activities resulted primarily from the issuance
of the Company's Notes in June 1997. The Company paid no dividends in fiscal
years 1998 and 1997.
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.
Page 18
<PAGE> 21
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable
Page 19
<PAGE> 22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Independent Auditors' Report............................................. 21
Consolidated Balance Sheets-- June 29, 1997 and June 28, 1998............ 22
Consolidated Statements of Operations--Years Ended June 30, 1996, June
29, 1997 and June 28, 1998............................................... 23
Consolidated Statements of Stockholder's Equity-- Years Ended
June 30, 1996, June 29, 1997 and June 28, 1998......................... 24
Consolidated Statements of Cash Flows--Years Ended June 30, 1996,
June 29, 1997 and June 28, 1998........................................ 25
Notes to Consolidated Financial Statements............................... 26
Consolidated Financial Statements Schedule:
Schedule II-Valuation and Qualifying Accounts........................ 39
</TABLE>
Schedules other than those listed above are omitted because they are not
required or are not applicable, or the required information is shown in the
respective consolidated financial statements or notes thereto.
Page 20
<PAGE> 23
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 28, 1998 and June 29, 1997 and the related
consolidated statements of operations, stockholder's equity and cash flows for
each of the three years in the period ended June 28, 1998 and the related
financial statement schedule listed in the accompanying index at item 14. 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 28, 1998 and June 29, 1997 and the
results of their operations and their cash flows for each of the three years in
the period ended June 28, 1998 in conformity with generally accepted accounting
principles.
PANNELL KERR FORSTER
Certified Public Accountants
A Professional Corporation
Los Angeles, California
September 17, 1998
Page 21
<PAGE> 24
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS EXCEPT PAR VALUE)
<TABLE>
<CAPTION>
JUNE 29, JUNE 28,
1997 1998
-------- --------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents ................................................. $ 77,345 $ 63,669
Accounts receivable (net of allowance for doubtful accounts
of $364 and $410, respectively) ....................................... 23,591 28,625
Inventories ............................................................... 16,833 27,407
Prepaid expenses and other ................................................ 1,773 2,995
Deferred income taxes ..................................................... 1,091 1,791
-------- --------
Total current assets ................................................... 120,633 124,487
-------- --------
Property, plant and equipment, net .......................................... 42,143 62,765
Other assets .............................................................. 5,049 9,407
-------- --------
Total assets ...................................................... $167,825 $196,659
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Accounts payable .......................................................... $ 11,585 $ 18,028
Accrued wages and employee benefits ....................................... 2,224 3,911
Accrued interest .......................................................... 953 674
Other accrued expenses .................................................... 6,196 7,193
Current portion of long-term debt ......................................... 840 6,191
-------- --------
Total current liabilities .............................................. 21,798 35,997
Senior Subordinated Notes Payable ........................................... 104,523 104,571
Long-term debt, net of current portion ...................................... 8,521 13,365
Other long-term liabilities ................................................. 3,817 5,108
Deferred income taxes ....................................................... 2,135 2,928
-------- --------
Total liabilities ...................................................... 140,794 161,969
-------- --------
Commitments and contingencies
Stockholder's equity
Common stock, Class A - $1 par value; 70 shares authorized, 55
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) ................... 16,095 23,754
-------- --------
27,031 34,690
-------- --------
Total liabilities and stockholder's equity ........................ $167,825 $196,659
======== ========
</TABLE>
See notes to the consolidated financial statements.
Page 22
<PAGE> 25
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER-SHARE DATA)
<TABLE>
<CAPTION>
YEARS ENDED
-----------------------------------------
JUNE 30, JUNE 29, JUNE 28,
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Revenues
Equipment sales
New ............................... $ 94,592 $ 113,867 $ 137,998
Used .............................. 2,450 2,589 4,207
Rental and services .................. 20,861 23,448 28,592
--------- --------- ---------
Total revenues ............... 117,903 139,904 170,797
--------- --------- ---------
Cost of Revenues
Equipment sales
New ............................... 62,750 78,712 97,621
Used .............................. 1,170 1,257 2,400
Rental and services .................. 14,718 14,346 17,823
--------- --------- ---------
Total cost of revenues ............ 78,638 94,315 117,844
--------- --------- ---------
Gross profit
Equipment sales
New ............................... 31,842 35,155 40,377
Used .............................. 1,280 1,332 1,807
Rental and services .................. 6,143 9,102 10,769
--------- --------- ---------
Total gross profit ................ 39,265 45,589 52,953
--------- --------- ---------
Operating expenses
Selling, general and administrative .. 15,124 18,117 23,902
Product liability .................... 3,015 3,115 2,807
Research and development ............. 2,865 4,281 5,952
--------- --------- ---------
Total operating expenses .......... 21,004 25,513 32,661
--------- --------- ---------
Income from operations ................. 18,261 20,076 20,292
Other income (expense)
Interest expense, net ................ (2,907) (3,983) (9,421)
Other expense ........................ (539) -- (6)
--------- --------- ---------
Income before income taxes ............. 14,815 16,093 10,865
Provision for income taxes ............. 6,047 6,131 3,206
--------- --------- ---------
Net income ............................. $ 8,768 $ 9,962 $ 7,659
========= ========= =========
Earnings per common share .............. $ 146 $ 166 $ 128
========= ========= =========
Weighted average number of common shares 60,000 60,000 60,000
========= ========= =========
</TABLE>
See notes to the consolidated financial statements.
Page 23
<PAGE> 26
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY
YEARS ENDED JUNE 30, 1996, JUNE 29, 1997 AND JUNE 28, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK ADDITIONAL
----------------------- ----------------------- PAID-IN
SHARES AMOUNTS SHARES AMOUNTS CAPITAL CTA
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, July 2, 1995 60 $ 60 25 $ 25 $ 8,767 $ 2,081
CTA ................ -- -- -- -- -- 3
Net Income ......... -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Balance, June 30, 1996 60 60 25 25 8,767 2,084
Net income ......... -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Balance, June 29, 1997 60 60 25 25 8,767 2,084
Net Income ......... -- -- -- -- -- --
-------- -------- -------- -------- -------- --------
Balance, June 28, 1998 60 $ 60 25 $ 25 $ 8,767 $ 2,084
======== ======== ======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
RETAINED
EARNINGS TOTAL
(ACCUMULATED STOCKHOLDER'S
DEFICIT) EQUITY
-------- --------
<S> <C> <C>
Balance, July 2, 1995 $ (2,635) $ 8,298
CTA ................ -- 3
Net Income ......... 8,768 8,768
-------- --------
Balance, June 30, 1996 6,133 17,069
Net income ......... 9,962 9,962
-------- --------
Balance, June 29, 1997 16,095 27,031
Net Income ......... 7,659 7,659
-------- --------
Balance, June 28, 1998 $ 23,754 $ 34,690
======== ========
</TABLE>
See notes to the consolidated financial statements.
Page 24
<PAGE> 27
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEARS ENDED
--------------------------------------------
JUNE 30, JUNE 29, JUNE 28,
1996 1997 1998
--------- --------- ---------
<S> <C> <C> <C>
Cash flows from operating activities
Net income ............................................................... $ 8,768 $ 9,962 $ 7,659
--------- --------- ---------
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization ....................................... 4,434 5,804 8,053
Gain on disposition of property, plant and
equipment ........................................................... (1,426) (1,380) (1,997)
Changes in operating assets and liabilities
Accounts receivable ................................................. (3,167) (7,771) (5,034)
Inventories ......................................................... (5,331) (1,001) (10,574)
Prepaid expenses and other assets ................................... 13 (20) (1,222)
Deferred income taxes, net .......................................... 4,646 943 93
Accounts payable .................................................... 733 (339) 6,443
Accrued expenses .................................................... 2,605 1,880 2,405
Other, net .......................................................... 1,119 (2,626) (808)
--------- --------- ---------
Total adjustments ................................................ 3,626 (4,510) (2,641)
--------- --------- ---------
Net cash provided by operating
activities ..................................................... 12,394 5,452 5,018
--------- --------- ---------
Cash flows from investing activities
Additions to property, plant and equipment ............................ (11,549) (12,356) (27,424)
Proceeds from disposition of assets ................................... 2,678 2,453 4,072
Acquisitions, net of cash acquired .................................... -- (2,174) (5,537)
--------- --------- ---------
Net cash used by investing activities ............................ (8,871) (12,077) (28,889)
--------- --------- ---------
Cash flows from financing activities
Proceeds from long-term debt .......................................... 9,248 29,784 15,878
Repayment of long-term debt ........................................... (3,876) (48,034) (5,683)
Proceeds from senior subordinated notes ............................... -- 104,519 --
Repayment of note payable-- related party ............................. (2,045) (13,463) --
--------- --------- ---------
Net cash provided by financing activities ........................ 3,327 72,806 10,195
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents ....................... 6,850 66,181 (13,676)
Cash and cash equivalents at beginning of year ............................. 4,314 11,164 77,345
--------- --------- ---------
Cash and cash equivalents at end of year ................................... $ 11,164 $ 77,345 $ 63,669
========= ========= =========
Supplemental disclosure of cash flow information:
Cash used for interest payments .......................................... $ 2,089 $ 4,777 $ 12,118
========= ========= =========
Cash used for income tax payments ........................................ $ 4,537 $ 3,599 $ 2,226
========= ========= =========
</TABLE>
See notes to the consolidated financial statements.
Page 25
<PAGE> 28
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996, JUNE 29, 1997 AND JUNE 28, 1998
(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 15 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 all 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 multi-regional 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.
RISK FACTORS
Economic- The equipment rental industry is highly dependent upon the level
of business activity in the commercial and industrial segments of the
economy. As a result, the equipment rental industry is particularly
sensitive to national, regional and local slowdowns in the commercial
construction industry, which is highly cyclical and subject to downturns
during economic slowdowns.
Page 26
<PAGE> 29
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996, JUNE 29, 1997 AND JUNE 28, 1998
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
Competition -- The equipment rental, sales and service industry is highly
competitive. The Company's competitors include national, multiregional
companies and dealers that both sell and rent equipment directly to end
users. To the extent that existing or future competitors seek to gain or
retain market share by reducing rental rates or sales prices, the Company
may be required to lower its prices, thereby adversely affecting the
operating results of the Company.
Need for Continual Capital Expenditures -- A principal component of the
Company's strategy is to provide its rental customers with relatively new,
high-quality equipment. The annual replacement of equipment and plans to
expand the Company's business will require significant capital
expenditures. There can be no assurance that in the future the Company will
have capital sufficient to fund such planned or additional expenditures.
Insurance-- The Company maintains insurance coverage for its operations and
activities. There can be no assurance that existing or future claims will
not exceed the level of such insurance or that such insurance will continue
to be available at economically feasible terms.
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 inter-company balances and transactions are eliminated.
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.
Page 27
<PAGE> 30
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996, JUNE 29, 1997 AND JUNE 28, 1998
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
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 equipment 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:
Building and improvements........................... 5 - 39 years
Machinery and equipment............................. 3 - 10 years
Rental equipment.................................... 3 - 10 years
Expenditures for ordinary repairs and maintenance are charged to operations;
betterments are capitalized.
Other assets
Organization costs are amortized using the straight-line method over estimated
life of 6 years. Noncompete covenants are amortized using the straight-line
method over the terms of the respective agreements, three and five years.
Goodwill
Goodwill represents the excess purchase price paid over the fair market value of
the assets of companies 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 hedges tax effects, are reported in the
stockholder's 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, the related hedges 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.
Page 28
<PAGE> 31
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996, JUNE 29, 1997 AND JUNE 28, 1998
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
Earnings per share
Earnings per share is computed using the weighted average number of shares
outstanding of common stock. In February 1997, the Financial Accounting
Standards Board issued SFAS No. 128, "Earnings per Share." This statement, which
is effective for financial statements issued for periods ending after December
15, 1997, including interim periods, establishes simplified standards for
computing and presenting earnings per share (EPS). It requires dual presentation
of basic and diluted EPS on the face of the income statement for entities with
complex capital structures and disclosures of the calculation of each EPS
amount.
Fiscal year
The fiscal year of the Company ends on the Sunday nearest to June 30.
Reclassifications
Certain reclassifications have been made to the 1997 financial statements to
conform to the current year.
NOTE 3 -- INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
1997 1998
------- --------
<S> <C> <C>
Finished goods ..................... $ 4,269 $ 9,444
Work-in-progress ................... 979 1,312
Raw materials ...................... 11,585 16,651
------- -------
$16,833 $27,407
======= =======
</TABLE>
NOTE 4 -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Land ................................... $ 105 $ 391
Building and improvements .............. 7,503 7,248
Machinery and equipment ................ 24,252 35,463
Rental equipment ....................... 34,238 48,053
-------- --------
66,098 91,155
Less accumulated depreciation .......... (23,955) (28,390)
-------- --------
$ 42,143 $ 62,765
======== ========
</TABLE>
Page 29
<PAGE> 32
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996, JUNE 29, 1997 AND JUNE 28, 1998
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
NOTE 5 -- OTHER ASSETS
Other assets consist of the following:
<TABLE>
<CAPTION>
1997 1998
-------- --------
<S> <C> <C>
Debt issue costs, net ................................................ $ 4,422 $ 4,334
Goodwill ............................................................. 881 5,029
Organization costs ................................................... 457 457
Noncompete covenants ................................................. -- 80
Deposits ............................................................. 64 82
Long-term receivables ................................................ -- 98
Note receivable, due from officer .................................... -- 452
Other ................................................................ 25 --
-------- --------
. .................................................................... 5,849 10,532
Less accumulated amortization ........................................ (310) (592)
-------- --------
. .................................................................... 5,539 9,940
Less: Current portion (included in "Prepaid and other" current assets) (490) (533)
-------- --------
Other assets, net .................................................... $ 5,049 $ 9,407
======== ========
</TABLE>
Amortization expense related to goodwill and organization costs during 1998 and
1997 was $323 and $100, respectively.
NOTE 6 -- ACQUISITIONS
During fiscal year 1998, Horizon acquired the stock of a general rental company
in Texas and the stock of an aerial access sales, rental and repair company in
California for $1,384 and $4,192, respectively. 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 acquisition of these assets was financed as follows (in thousands):
<TABLE>
<CAPTION>
1997 1998
------ ------
<S> <C> <C>
Cash payments and/or expenses, net of cash acquired......... $2,174 $5,576
Amounts payable to seller .................................. 240 --
Other liabilities assumed .................................. 898 --
------ ------
Total value of asset acquired ............ $3,312 $5,576
====== ======
</TABLE>
All acquisitions have been accounted for under the purchase method. The excess
of cost over management's estimated fair value of the net assets acquired
related to these acquisitions totaled $3,899 and $1,130 in 1998 and 1997,
respectively, and has been allocated to goodwill.
Results of the Texas acquisition are included in the consolidated financial
statements beginning January 1, 1998. Results of the California acquisition in
fiscal year 1998 are included in the consolidated financial statements beginning
April 1, 1998.
Page 30
<PAGE> 33
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996, JUNE 29, 1997 AND JUNE 28, 1998
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
The following unaudited pro forma consolidated results of operations for the
year ended June 28, 1998, are presented as if the 1998 acquisitions had been
made at the beginning of fiscal 1998. The unaudited pro forma information is not
necessarily indicative of either the results of operations that would have
occurred had the purchase been made during the period presented or the future
results of the combined operations (in thousands).
<TABLE>
<CAPTION>
PRO FORMA
YEAR ENDED
JUNE 28, 1998
-------------
(UNAUDITED)
<S> <C>
Total revenues $62,905
Net income 2,703
</TABLE>
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 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>
1999 ............................................. $ 134 $1,559
2000 ............................................. 64 1,117
2001 ............................................. 60 732
2002 ............................................. -- 596
2003 ............................................. -- 445
Thereafter ....................................... -- 775
------ ------
Total future minimum lease payments .............. 258 $5,224
======
Less amount representing interest ................ 21
------
Present value of future minimum lease payments.... $ 237
======
</TABLE>
Rent expense under operating leases was $1,021, $1,324 and $3,064 in fiscal
years 1996, 1997 and 1998, respectively.
Page 31
<PAGE> 34
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996, JUNE 29, 1997 AND JUNE 28, 1998
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
NOTE 8 -- LONG-TERM DEBT AND CREDIT FACILITIES
Long-term debt and credit facilities consists of the following:
<TABLE>
<CAPTION>
1997 1998
------- -------
<S> <C> <C>
Notes payable obligation and credit facilities secured with machinery
and equipment, due in monthly installments of various amounts with
imputed interest at various rates per annum (ranging from 7.7% to 10.0%)
due at various dates through June 2003 ................................. $ 2,732 $13,167
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 ................................................. 6,604 6,389
Other .................................................................. 25 --
------- -------
9,361 19,556
Less current portion ................................................... 840 6,191
------- -------
$ 8,521 $13,365
======= =======
</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 29, 1997 and June 28, 1998, the Company received $2,393 and nil
in bond proceeds, respectively, and made principal payments of $186 and $215,
respectively, 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 29, 1997 and June 29, 1998, $750 was undisbursed and remained as bond
reserves with the Agency. As of June 29, 1997 and June 28, 1998, the bonds
payable had outstanding balances of $6,604 and $6,389, respectively, included on
the Long-term debt and credit facilities schedule above as Variable interest
bonds.
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>
<CAPTION>
Notes
Bonds Payable
----- -------
<S> <C> <C>
1999 $1,009 $ 5,816
2000 1,035 2,056
2001 1,026 2,112
2002 1,014 1,965
2003 1,000 981
Thereafter (2004 to 2014) 9,472 --
------ --------
14,556 12,930
Less amount representing bond interest 7,417 --
------ --------
Gross present value 7,139 12,930
Bond reserve remaining with Agency 750 --
------ --------
Net Present value $6,389 $ 12,930
====== ========
</TABLE>
Page 32
<PAGE> 35
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996, JUNE 29, 1997 AND JUNE 28, 1998
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
On October 27, 1994, UpRight also entered into an agreement with the City of
Selma (City) to develop and improve at the Company's expense, 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. Due to the structure of the agreement with the
City, the Company is issued bi-annual property tax bills as the bond payments
are due. The consequence of this treatment is that the Company's financial
statements do not reflect a bond payable balance at the year end.
On April 16, 1998, UpRight entered into a revolving loan agreement with a
financial institution which allows it to borrow in amounts in the aggregate not
to exceed $20 million. Interest accrues on amounts borrowed, at UpRight's
option, at the bank's reference rate minus one half of one percent, or Libor
plus 1.20 percent. At June 28, 1998, the actual interest rate was 8.0%, on an
outstanding loan balance of $2,458, all current, with available funds of
$17,542. Collateral includes a security agreement assuring a first priority
position covering accounts receivable and inventory, with UCC filings to perfect
such security interest, plus an executed agreement not to encumber or
hypothecate certain land intended for development.
On April 23, 1998, UpRight entered into an equipment financing agreement with a
financial institution which allows it to borrow funds for the purchase of
equipment, up to $20 million. Loan balances outstanding are payable in monthly
installments, at variable interest rates based on the Daily Treasury Index for
the day on which funds are drawn. As of June 28, 1998, drawn funds totaled
$2,797, and unused available funds totaled $17,203.
Horizon has a revolving line of credit with a bank allowing Horizon to borrow up
to $5,000 not to exceed 80 percent of eligible receivables plus 25 percent of
the Company's inventory. Interest accrues at Horizon's option at either the
bank's prime lending rate (8.5 percent at June 30, 1998), LIBOR plus 1.85
percent, or the bank's money market funds rate plus 1.6 percent. As of June 28,
1998, and June 29, 1997, the balance outstanding under the Revolving Credit Line
was $1,466 and $0, respectively. The Revolving Credit Line is secured by the
assets of Horizon. The Revolving Credit Agreement contains various restrictive
covenants, including minimum tangible net worth, minimum current ratio, maximum
debt to tangible net worth, and limits on annual capital expenditures and
operating lease expenses. Horizon has obtained waivers for the capital
expenditure and current ratio covenants.
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 accompanying balance sheets net
of unamortized discount of $429 and $477, at June 28, 1998 and June 29, 1997,
respectively. 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.
Page 33
<PAGE> 36
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996, JUNE 29, 1997 AND JUNE 28, 1998
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
The terms of the Notes contain covenants that, among other things, restrict the
ability of the Company and its subsidiaries 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 Company or any of the
guarantors; and (xi) transfer or 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
$426, $540 and $611 were made by UpRight during 1996, 1997 and 1998,
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
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
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 1996, 1997 and 1998, Horizon expensed and accrued $314, $350, and
$500, 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 June 30, 1996,
June 29, 1997, and June 28, 1998, 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 June 30, 1996, June 29, 1997,
and June 28, 1998. 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.
Page 34
<PAGE> 37
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996, JUNE 29, 1997 AND JUNE 28, 1998
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
NOTE 12 -- PROVISION FOR INCOME TAXES
The provision for income taxes consists of the following
<TABLE>
<CAPTION>
1996 1997 1998
------ ------ ------
<S> <C> <C> <C>
Current
Federal ............. $ 753 $3,841 $2,632
State ............... 176 1,347 481
------ ------ ------
929 5,188 3,113
Deferred .............. 5,118 943 93
------ ------ ------
$6,047 $6,131 $3,206
====== ====== ======
</TABLE>
The following is a summary of deferred tax assets and liabilities:
<TABLE>
<CAPTION>
1996 1997 1998
----------------------- --------------------- ------------------------
CURRENT NON-CURRENT CURRENT NON-CURRENT CURRENT NON-CURRENT
------- ----------- ------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Deferred tax liabilities resulting from
taxable temporary differences............... $ -- $ (2,390) $ (321) $ (4,128) $ (44) $(5,120)
Deferred tax assets resulting from deductible
temporary differences and tax credit carried
forward....................................... 1,003 1,286 1,412 1,993 1,835 2,192
------ -------- ------- -------- ------ -------
$1,003 $ (1,104) $ 1,091 $ (2,135) $1,791 $(2,928)
====== ======== ======= ======== ====== =======
</TABLE>
The provision for income taxes differs from the expense that would result from
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.
The Company concluded that a deferred tax asset valuation allowance as of June
30, 1996, June 29, 1997 and June 28, 1998, was not necessary.
Page 35
<PAGE> 38
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996, JUNE 29, 1997 AND JUNE 28, 1998
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
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>
1996 1997 1998
------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
U.S., Canada and Latin America $ 92,813 78% $ 96,774 69% $115,161 67%
Europe ....................... 19,550 17 35,295 25 48,339 28
Pacific Rim .................. 5,540 5 7,835 6 7,297 5
-------- --- -------- --- -------- ---
$117,903 100% $139,904 100% $170,797 100%
======== === ======== === ======== ===
</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.
Page 36
<PAGE> 39
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996, JUNE 29, 1997 AND JUNE 28, 1998
(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>
1997 1998
-------- --------
<S> <C> <C>
Balances due from related parties............................. $ 8,989 $ 15,362
Note receivable from officer.................................. -- 452
Interest and other payables due to related party.............. 1,468 --
Revenues from related parties................................. 28,695 34,166
Cost of revenues from related parties......................... 19,942 24,652
Purchases from related parties................................ 3,577 3,000
Marketing expense paid to related parties - net............... 1,066 1,212
Service agreement fees........................................ 800 1,598
Fees associated with debt issue............................... 700 --
Reimbursement of computer system costs........................ 80 --
Interest expense to related party............................. 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. During fiscal year 1998 the Company, UpRight
and Horizon paid an aggregate of $1,598 for services rendered by Griffin.
The note receivable due from officer is secured by deed of trust and assignment
of rents and real estate owned by the officer. The note receivable carries
interest of 7.0%. The principal sum of the note and all accrued and unpaid
interest thereon shall be paid in full on, or by May 27, 2001.
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 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.
Page 37
<PAGE> 40
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996, JUNE 29, 1997 AND JUNE 28, 1998
(IN THOUSANDS, EXCEPT PER-SHARE DATA)
NOTE 18 -- RECENT ACCOUNTING PRONOUNCEMENT
In 1997, the Financial Accounting Standards Board (FASB) issued SFAS No. 130,
"Reporting Comprehensive Income" and SFAS 131, "Disclosures about Segments of
an Enterprise and Related Information." In 1998, the FASB issued SFAS No. 132,
"Employers' Disclosures about Pension and Other Postretirement Benefits," and
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities."
The requirements of SFAS Nos. 130, 131 and 132 will become effective for the
Company during the year ending June 27, 1999. The requirements of SFAS No. 133
will become effective for the Company during the year ending June 25, 2000. The
impact of adopting these statements is not expected to have a material impact
on the Company's financial statements.
Page 38
<PAGE> 41
W.R. CARPENTER NORTH AMERICA, INC. AND SUBSIDIARIES
SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED JUNE 30, 1996, JUNE 29, 1997 AND JUNE 28, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
Balance at Charged to Charged to Balance at
Beginning Costs and Other End
of Period Expenses Accounts Deduction of Period
--------- -------- -------- --------- ---------
<S> <C> <C> <C> <C> <C>
Allowances are
deducted from the
asset to which
they apply
Year ended June 28, 1998:
Reserve for Product liability ....... $5,235 $2,807 $ -- $1,702 $6,340
Allowances for
Uncollectible accounts ............ 364 292 -- 246 410
Product obsolescence .............. 334 216 -- -- 550
------ ------ ------ -------- --------
$5,933 $3,315 $ -- $1,948 $7,300
------ ------ ------ -------- --------
Year ended June 29,
1997:
Reserve for
Product liability ............... $4,102 $3,115 $ -- $1,982 $5,235
Allowance for
Uncollectible
accounts ...................... 287 180 -- 103 364
Product obsolescence ............. 957 25 -- 648 334
------ ------ ------ -------- --------
$5,346 $3,320 $ -- $2,733 $5,933
------ ------ ------ -------- --------
Year ended June 30,
1996:
Reserve for
Product liability .............. $2,969 $3,015 $ -- $1,882 $4,102
Allowance for
Uncollectible accounts ........... 202 330 -- 245 287
Product obsolescence ............. 432 525 -- -- 957
------ ------ ------ -------- --------
$3,603 $3,870 $ -- $2,127 $5,346
====== ====== ====== ======== ========
</TABLE>
Page 39
<PAGE> 42
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
Page 40
<PAGE> 43
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.
The following table sets forth certain information concerning the directors
and executive officers of the Company, UpRight and Horizon:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Robert F. Stowe 54 Chairman of the Board of Directors of the Company
James T. Dillon 50 President and Chief Executive Officer of the Company,
UpRight and Horizon
Graham D. Croot 43 Chief Financial Officer of the Company
Noel Corcoran 52 Secretary of the Company
Peter B. Sawdy 66 Director of the Company
David K. Sargent 59 Director of the Company
Barris Evulich 50 Vice President and General Manager of UpRight
Shaun Flanagan 58 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.
James T. Dillon has served as Chief Executive Officer of the Company,
UpRight and Horizon since January 1, 1998 and as President of the Company,
UpRight and Horizon since June 29, 1998. He served as Vice President and General
Manager of UpRight from 1991 to 1998. 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.
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.
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.
David K. Sargent served as President and Chief Executive Officer of the
Company, UpRight and Horizon from 1989 to 1998 and he has served 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 UpRight (U.K.)
Limited (formerly Instant Zip-Up Limited).
Barris Evulich has served as Vice President and General Manager of UpRight
since January 1, 1998 and as Vice President-Engineering of UpRight from 1990 to
December 31, 1997. Mr. Evulich joined UpRight in 1971 as Project Engineer.
Shaun Flanagan has served as Vice President and General Manager of Horizon
since 1994. 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.
Page 41
<PAGE> 44
ITEM 11. 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 year 1998 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>
James T. Dillon (1) .................................. 1998 $337,500 $194,875
President and Chief Executive Officer 1997 250,000 178,352
of the Company, UpRight and Horizon 1996 220,320 159,750
David K. Sargent (1) ................................. 1998 $200,000 $ --
President and Chief Executive Officer 1997 200,000 42,918
of the Company, UpRight and Horizon 1996 175,000 50,000
Barris Evulich (2) ................................... 1998 $153,169 $ 78,000
Vice President and General Manager 1997 101,973 40,750
of UpRight 1996 92,703 46,270
Shaun Flanagan ....................................... 1998 $225,000 $ --
Vice President and General 1997 190,126 77,000
Manager of Horizon 1996 175,000 60,000
</TABLE>
(1) Mr. Dillon served as Chief Executive Officer of the Company, UpRight and
Horizon beginning January 1, 1998 and as President of the Company, UpRight
and Horizon beginning June 29, 1998. Mr. Sargent served as Chief Executive
Officer of the Company, UpRight and Horizon until December 31, 1997 and as
President of the Company, UpRight and Horizon until June 28, 1998.
(2) Mr. Evulich served as Vice President and General Manager of UpRight
beginning January 1, 1998.
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.
Page 42
<PAGE> 45
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 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 Company's Board of Directors determines
the amounts of incentive bonuses, and performance criteria for such bonuses.
DIRECTORS' AND OFFICERS' INSURANCE
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.
Directors and executive officers of the Company will pay no part of this
premium. The aggregate insurance coverage under the policy is limited to $15.0
million per policy period, and a $75,000 deductible for each claim, other than
claims arising from Securities and Exchange Commission for which 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.
Page 43
<PAGE> 46
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
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 2nd 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. Mr. Stowe, who is not a
beneficiary thereunder, appoints the trustees of the trusts.
Page 44
<PAGE> 47
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On May 12, 1997, the Company entered into a corporate services agreement
with Griffin Group International Management Limited ("Griffin"), an affiliate of
the Company (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 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. During fiscal year 1998, the Company paid $1.6 million
to Griffin for such services.
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 year 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 year 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. During fiscal year 1998, the Company's revenue from
UpRight Ireland, Instant Deutschland and Instant Australia were $4.3 million,
$3.1 million and $3.0 million, respectively. In addition, UpRight and Horizon
purchase and UpRight distributes in the United States certain products
manufactured by UpRight Ireland. During fiscal years 1996, 1997 and 1998, the
Company's purchases from UpRight Ireland totaled approximately $1.7 million,
$3.5 million and $3.0 million, respectively. During fiscal years 1996, 1997 and
1998, UpRight paid UpRight Ireland $740,000, $1,065,902 and $1,212,041,
respectively, for participation in UpRight Ireland's cooperative marketing
programs.
During fiscal years 1996, 1997 and 1998, the Company had revenue from
UpRight (U.K.) Limited (formerly Instant Zip-Up Limited) of approximately $8.3
million, $20.8 million and $26.7 million, respectively. An affiliate of the
Company owns a minority voting interest in UpRight (U.K.) Limited.
At the end of fiscal year 1996, the Company was indebted to UpRight
International Limited for an aggregate principal amount of approximately $13.5
million. In fiscal year 1997 the Company repaid this indebtedness in full, and
at the end of fiscal years 1997 and 1998, the Company was not indebted to
UpRight International Limited.
In May 1998, an executive officer of the Company executed two promissory
notes payable to the Company in the aggregate amount of $452,000. These notes
are secured by a deed of trust and assignment of rents and real estate owned by
the officer. The notes bear interest of 7.0% and the principal thereof and all
accrued and unpaid interest thereon is due in full on or before May 27, 2001.
Page 45
<PAGE> 48
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) FINANCIAL STATEMENTS, FINANCIAL STATEMENT SCHEDULES AND EXHIBITS
1. FINANCIAL STATEMENTS
See Index included on page 20
2. FINANCIAL STATEMENT SCHEDULES
See Index included on page 20
Financial Statement schedules other than those listed above are omitted
because they are not required or are not applicable, or the required information
is shown in the respective consolidated financial statements or notes thereto.
3. EXHIBITS
The following Exhibits are filed herewith and made a part hereof:
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
- ------- -----------------------
<S> <C>
*3.1(i) Certificate of Incorporation of the Registrant, as amended.
*3.1(ii) Bylaws of the Registrant, as amended.
*4.1 Indenture, dated as of June 10, 1997, by and among the Registrant,
the Guarantors named therein and U.S. Trust Company of California,
N.A.
*4.4 Form of Exchange Global Note.
*10.3 Industrial Lease, dated February 7 1997, between A.L.L., a general
partnership, and UpRight, Inc.
*10.4 Lease, entered into as of November 1995, by and between Townview
Partners, a Ohio partnership and UpRight, Inc.
*10.5 Recourse Agreement, dated February 11, 1997, by and between
Horizon High Reach, Inc., and American Equipment Leasing.
*10.6 Management Services Agreement, dated May 12, 1997, by and between
the Registrant and Griffin Group International Management Ltd.
*10.7 Lease, dated November 15, 1996, by and between Akzo Nobel
Coatings, Inc., and Horizon High Reach, Inc.
*10.8 Lease, dated January 1997, by and between Morris Ragona and Joan
Ragona, and Horizon High Reach, Inc.
*10.9 Agreement of Lease, dated January 26, 1995, by and between Richard
V. Gunner and George Andros, and Horizon High Reach, Inc.
*10.10(i) Lease Agreement, executed November 10, 1989, by and between
Trussel Electric, Inc., and Up-Right, Inc., including Lease
Extension Agreement dated February 28, 1994, Lease Modification
Agreement dated January 26, 1994, and Notice of Option to Renew
dated May 7, 1992.
10.10(ii) Lease Extension and Modification Agreement dated September 3,
1998.
*10.11 Lease Agreement (undated) by and between T.T. Templin and Horizon
High Reach & Equipment Company.
*10.12 Agreement of Lease, dated October 15, 1992, by and between Robert
I. Selsky and Up-Right Aerial Platforms Assignment of Lease, dated
June 1994, by and between Up-Right, Inc., and Horizon High Reach,
Inc., and Consent to Assignment dated July 15, 1994.
*10.13 Lease Agreement, dated April 27, 1990, by and between D.L.
Phillips Investment Builders, Inc., and Up-Right, Inc. together
with Supplemental Agreement to Lease, dated September 30, 1994,
Assignment of Lease, dated June 18, 1990, by and between D.L.
Phillips Investment Builders, Inc., and JMA, Ltd., Assignment of
Lease dated June 1994, by and between Up-Right, Inc., and Horizon
High Reach, Inc., and Consent to Assignment dated July 15, 1994.
*10.14 Lease Renewal Agreement, dated October 19, 1992, between Ronald W.
Werner and UpRight, Inc.
*10.15 Lease, dated March 7, 1995, by and between BMB Investment Group
and Horizon High Reach, Inc.
10.16 Lease Agreement dated December 31, 1997 by and between William L.
Morillon and Marie Anne Morillon and Horizon High Reach, Inc.
10.17 Revolving Loan Agreement, dated May 5, 1998 between UpRight, Inc.,
and Union Bank of California.
</TABLE>
Page 46
<PAGE> 49
<TABLE>
<S> <C>
10.18 Equipment Financing Agreement, dated April 23, 1998 between
UpRight, Inc. and KeyCorp Leasing Ltd.
*21.1 Subsidiaries of the Company
24.1 Power of Attorney (see Page 48)
</TABLE>
* Incorporated herein by reference to the Company's Registration Statement on
Form S-4 (Reg. No. 333-31187), filed with the Securities and Exchange
Commission on July 11, 1997.
(b) REPORTS ON FORM 8-K.
None
Page 47
<PAGE> 50
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
W.R. CARPENTER NORTH AMERICA, INC.
Date: September 28, 1998
By: /s/ James T. Dillon By: /s/ Graham Croot
----------------------------- -----------------------------------
James T. Dillon Graham Croot
President and Chief Financial Officer
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints Graham D. Croot and James T. Dillon, his
attorney-in-fact, with full power of substitution, for him in any and all
capacities, to sign any amendments to the Report, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his substitute or substitutes, may do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Company and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ James T. Dillon President, Chief Executive September 28, 1998
- ----------------------------------------- Officer (Principal Executive
James T. Dillon Officer)
/s/ Graham D. Croot Chief Financial Officer September 28, 1998
- ----------------------------------------- (Principal Financial Officer
Graham D. Croot and Principal Accounting Officer)
Director September 28, 1998
- -----------------------------------------
Peter B. Sawdy
/s/ Robert F. Stowe Chairman of the Board of Directors September 28, 1998
- -----------------------------------------
Robert F. Stowe
/s/ David K. Sargent Director September 28, 1998
- -----------------------------------------
David K. Sargent
</TABLE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT
No such annual report or proxy material has been sent to security holders.
Page 48
<PAGE> 51
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description of Document
- ------- -----------------------
<S> <C>
*3.1(i) Certificate of Incorporation of the Registrant, as amended.
*3.1(ii) Bylaws of the Registrant, as amended.
*4.1 Indenture, dated as of June 10, 1997, by and among the Registrant,
the Guarantors named therein and U.S. Trust Company of California,
N.A.
*4.4 Form of Exchange Global Note.
*10.3 Industrial Lease, dated February 7 1997, between A.L.L., a general
partnership, and UpRight, Inc.
*10.4 Lease, entered into as of November 1995, by and between Townview
Partners, a Ohio partnership and UpRight, Inc.
*10.5 Recourse Agreement, dated February 11, 1997, by and between
Horizon High Reach, Inc., and American Equipment Leasing.
*10.6 Management Services Agreement, dated May 12, 1997, by and between
the Registrant and Griffin Group International Management Ltd.
*10.7 Lease, dated November 15, 1996, by and between Akzo Nobel
Coatings, Inc., and Horizon High Reach, Inc.
*10.8 Lease, dated January 1997, by and between Morris Ragona and Joan
Ragona, and Horizon High Reach, Inc.
*10.9 Agreement of Lease, dated January 26, 1995, by and between Richard
V. Gunner and George Andros, and Horizon High Reach, Inc.
*10.10(i) Lease Agreement, executed November 10, 1989, by and between
Trussel Electric, Inc., and Up-Right, Inc., including Lease
Extension Agreement dated February 28, 1994, Lease Modification
Agreement dated January 26, 1994, and Notice of Option to Renew
dated May 7, 1992.
10.10(ii) Lease Extension and Modification Agreement dated September 3,
1998.
*10.11 Lease Agreement (undated) by and between T.T. Templin and Horizon
High Reach & Equipment Company.
*10.12 Agreement of Lease, dated October 15, 1992, by and between Robert
I. Selsky and Up-Right Aerial Platforms Assignment of Lease, dated
June 1994, by and between Up-Right, Inc., and Horizon High Reach,
Inc., and Consent to Assignment dated July 15, 1994.
*10.13 Lease Agreement, dated April 27, 1990, by and between D.L.
Phillips Investment Builders, Inc., and Up-Right, Inc. together
with Supplemental Agreement to Lease, dated September 30, 1994,
Assignment of Lease, dated June 18, 1990, by and between D.L.
Phillips Investment Builders, Inc., and JMA, Ltd., Assignment of
Lease dated June 1994, by and between Up-Right, Inc., and Horizon
High Reach, Inc., and Consent to Assignment dated July 15, 1994.
*10.14 Lease Renewal Agreement, dated October 19, 1992, between Ronald W.
Werner and UpRight, Inc.
*10.15 Lease, dated March 7, 1995, by and between BMB Investment Group
and Horizon High Reach, Inc.
10.16 Lease Agreement dated December 31, 1997 by and between William L.
Morillon and Marie Anne Morillon and Horizon High Reach, Inc.
10.17 Revolving Loan Agreement, dated May 5, 1998 between UpRight, Inc.,
and Union Bank of California.
10.18 Equipment Financing Agreement, dated April 23, 1998 between
UpRight, Inc. and KeyCorp Leasing Ltd.
*21.1 Subsidiaries of the Company
24.1 Power of Attorney (see Page 48)
</TABLE>
* Incorporated herein by reference to the Company's Registration Statement on
Form S-4 (Reg. No. 333-31187), filed with the Securities and Exchange
Commission on July 11, 1997.
Page 49
<PAGE> 1
EXHIBIT 10.10(ii)
LEASE EXTENSION AND MODIFICATION AGREEMENT
This LEASE EXTENSION AND MODIFICATION AGREEMENT is to be attached to and form a
part of the Net Commercial Lease Agreement dated November 10, 1989, which
together with any amendments, modifications and extensions thereof is
hereinafter called the "Lease."
Between TRUSSELL ELECTRIC, INC. "Landlord"
and
HORIZON HIGH REACH "Tenant"
(formerly Upright, Inc.)
Furthermore, Horizon High Reach ("Tenant") agrees that upon execution of the
Lease Extension and Modification Agreement, Tenant agrees to pay the Landlord a
monthly rate of Five Thousand Five Hundred Ninety Eight and 33/100 ($5,598.33),
which includes property taxes and insurance.
Witnesseth that the Lease is hereby renewed and extended for a further term of
six (6) months to commence on the 1st day of January, 1999 and to end the first
day of July, 1999, on condition that Landlord and Tenant comply with all the
provisions of the covenants and agreements contained in the Lease. All terms of
the Lease shall remain in full force and effect,
IN WITNESS WHEREOF, the parties hereto have signed this Lease Extension
Agreement this 3rd day of September, 1998.
LANDLORD: TRUSSELL ELECTRIC INC.
By: /s/
-------------------------------
Donald L. Trussell, President
TENANT: HORIZON HIGH REACH
(Formerly Up-Right, Inc)
By: /s/
-------------------------------
Name: Shaun Flanagan
-------------------------------
Title: VP
-------------------------------
LEASE EXTENSION AND MODIFICATION AGREEMENT -- Page 1 of 2
<PAGE> 2
STATE OF TEXAS (
COUNTY OF DALLAS (
BEFORE ME, the undersigned authority in and for said county and state,
on this day personally appeared Donald L. Trussell, known to me to be the person
whose name is subscribed to the foregoing instrument, and in his capacity as
President for Trussell Electric, Inc., acknowledged to me that the same was the
act and deed of said corporation, and that he executed the same for the purposes
and consideration therein expressed, and in the capacity therein stated.
GIVEN UNDER MY HAND AND SEAL this 3rd day of September, 1998.
/s/ Debra L. Schuelke
-------------------------------
Notary Public in and for the
State of Texas
My Commission expires:
5-20-2000 [seal]
- ----------------------
STATE OF CALIFORNIA (
COUNTY OF FRESNO (
BEFORE ME, the undersigned authority in and for said county and state,
on this day personally appeared Shaun Flanagan, known to me tot be the person
whose name is subscribed to the foregoing instrument, and in his capacity as
Vice President for Horizon High Reach, Inc. acknowledged to me that the same was
the act and deed of said corporation, and that he executed the same for the
purposes and consideration therein expressed, and in the capacity therein
stated.
GIVEN UNDER MY HAND AND SEAL this 3rd day of September, 1998.
/s/ Cheryl M. Menser
-------------------------------
Notary Public in and for the
State of California
My Commission expires:
May 23, 2000 [seal]
- ----------------------
LEASE EXTENSION AND MODIFICATION AGREEMENT -- Page 2 of 2
<PAGE> 1
EXHIBIT 10.16
LEASE AGREEMENT
THE STATE OF TEXAS )
KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF FORT BEND )
THIS LEASE AGREEMENT is made and entered into and effective the 1st day
of January, 1998, by and between WILLIAM L. MORILLON and MARIE ANNE MORILLON,
hereinafter referred to as "Lessor," and, HORIZON HIGH REACH, INC., A DELAWARE
CORPORATION, hereinafter referred to as "Lessee."
In consideration of the mutual covenants and agreements herein set forth
and other good and valuable consideration, Lessor does hereby demise and lease
unto Lessee, and Lessee does hereby lease from Lessor, the following property,
hereinafter referred to as the "demised premises"
That certain tract of land and all improvements thereon,
located at Interstate Highway 10, 22403 Katy Freeway,
Katy, Texas, consisting of 1.4 acres of land out of
Reserve G3, Block 39 in West Memorial Section 3, a
Subdivision in Harris County, Texas, including all
improvements, to wit: one 4,000 square foot building,
overhangs, and fences.
USE AND PURPOSE
Lessee shall operate the demised premises for the use and purpose for
which it is let, being the operation of an equipment rental and sales business.
TERM OF LEASE
The term of this lease shall commence on the 1st day of January, 1998,
and terminate twenty-four (24) months later on December 31, 1999. The term of
this lease shall be extended for two, one (1) year periods upon the expiration
of the primary term on the following conditions. At least thirty (30) days prior
to the expiration of the primary term or extended term, Lessee serves notice on
Lessor of intent to terminate the lease. If no notice is given, then this lease
shall automatically be extended for an additional one (1) year period. Without
written agreement to extend further this lease shall not extend beyond December
31, 2001.
<PAGE> 2
RENT
Rental for the Demised Premises shall be $72,000.00 annually, payable
$6,000.00 per month. Contemporaneously with the signing of this lease, Lessee
has paid to Lessor the sum of $6,000.00 as payment of rental for the first
month. Regular rental payments shall be due and payable on the first day of each
month beginning February 1, 1998.
Payments not received by the 10th of the month shall be accompanied by a
late payment of $50.00. Failure of any payment to be received because of late
delivery by the U.S. Postal Service shall not excuse a late payment, and Lessor
shall be under no obligation to accept such late payments and may declare the
Lessee in default and terminate the lease.
The rent payments herein described are in addition to other financial
obligations of Lessee contained elsewhere in this lease.
POSSESSION
Taking of possession of the premises by Lessee shall be conclusive
evidence against Lessee that Lessee received the demised premises in good
condition.
QUIET ENJOYMENT
In the event that Lessee pays the rent as provided for herein and
otherwise performs all of the covenants and conditions to be performed by the
Lessee and abides by all of the rules and regulations as set forth herein and
referred to, Lessee shall have peaceful and quiet enjoyment of all the demised
premises for the term of this lease.
LEASEHOLD IMPROVEMENTS
Lessee shall not create any openings in the roof or exterior walls of
the buildings, nor make any alternations, additions, or improvements to the
demised premises without prior written consent of Lessor. Consent for
non-structural alternations, additions or improvements shall not be unreasonably
withheld by Lessor. Lessee shall have the right at all times to erect or install
shelves, bins, machinery, or trade fixtures, provided that Lessee complies with
all applicable governmental laws, ordinances and regulations. At the termination
of this lease, Lessee shall at Lessee's sole cost, repair any damage caused by
Lessee. All leasehold improvements shall
-2-
<PAGE> 3
become the property of Lessor.
UTILITIES
Lessee shall pay all utility charges including electricity, water, trash
pick-up, sewage, and natural gas used in and about the demised premises, all
such charges to be paid by Lessee to the utility company or municipal district
furnishing the same, before same shall become delinquent.
MAINTENANCE
Lessee shall, through the term of this lease, and so long as Lessee
shall remain in possession of the Demised Premises, keep and maintain in good
repair all portions of the buildings, parking lot, driveways and other
improvements located upon the Demised Premises, including all lighting and
plumbing fixtures and equipment, appurtenances, machinery, fences, and all
glass, keep the plumbing, water closets, pipes and fixtures belonging thereto in
good repair and free from all obstructions. Lessee shall replace when necessary
all light bulbs and fluorescent lighting tubes at Lessee's expense. Lessee
shall, at Lessee's expense, keep and maintain the building and surrounding
grounds adjoining the building free and clear from debris and other unsightly
matter. Lessee shall at the termination of this lease deliver the premises in a
clean, sanitary condition, in good repair and condition, reasonable wear and
tear excepted.
Lessee shall conduct no activity on the property which results in any
hazardous waste or environmental regulation violation. In the event of such
violation Lessee shall cause the correction of such violation and removal of any
contaminated materials or soils and hold Lessor harmless from any costs for such
removal or violation of any regulation including the payment of any penalties or
fines.
SIGNS
One free standing sign is located on the demised premises. Lessee may
without additional cost use such sign. The cost of removal of such sign, use of
such sign and/or maintenance of such sign shall be at Lessee's sole cost and
expense.
-3-
<PAGE> 4
TAXES
Lessee shall pay and fully discharge all taxes, special assessments and
governmental charges of every character, including ad valorem, imposed on all
personal property and improvements owned by Lessee and on the Leased Other
including all buildings and improvements. Upon presentation to Lessee by Lessor
of any tax statements delivered to Lessor respecting the demised premises,
Lessee will immediately pay such assessment, or Lessor may require Lessee to
remit such amounts to Lessor who shall pay such amounts to the proper taxing
authority. All taxes must be paid by Lessee before they become delinquent.
INSURANCE
During the term of this lease, Lessee shall, at Lessee's own expense,
keep all of Lessee's personal property, fixtures and appliances located upon the
demised premises insured against loss or damage by fire, water, windstorm, hail,
and all other hazards. Lessee, at Lessee's own expense, shall also provide and
maintain in force during the term of this lease, liability insurance covering
Lessor as well as Lessee with one or more responsible insurance companies duly
authorized to transact business in Texas. Lessee shall maintain in full force
and effect fire and hazard insurance on the improvements located on the
premises. Such policy shall show Lessor as loss payee. Proceeds shall be paid in
the event of loss in accordance with the terms of this lease. Lessee shall hold
Lessor harmless from any claim or cause of action arising as a result of damage
to or by any of Lessee's agents, servants, employees, customers, invitees or any
person coming upon the demised premises, either directly or indirectly, at the
invitation of Lessee.
DAMAGE TO DEMISED PREMISES
If thirty (30%) percent of the buildings on the demised premises should
be destroyed by fire, tornado or other casualty, this lease shall at the option
of Lessor terminate, and rent shall be abated for the unexpired portion of this
lease, effective as of the date of said hazard. However, Lessor, at Lessor's
option, may choose to restore said building and maintain the lease in full force
and effect. Rent during any such restoration shall be proportionately abated.
Lessee agrees to release Lessor from any and all claims for loss, damage or
inconvenience arising from such
-4-
<PAGE> 5
fire or casualty.
INSPECTION BY LESSOR
Lessee shall permit Lessor and Lessor's agents to enter into and upon
the demised premises at all reasonable times for purposes of inspecting the same
or for the purpose of maintaining or making repairs or alterations to the
buildings.
ASSIGNMENT AND LEASE
Lessee shall not without the prior written consent of Lessor assign this
lease or any interest therein or sublet the demised premises. Discovery of any
subtenant upon the demised premises shall be deemed a default.
INTERRUPTION OF SERVICE
Interruption or failure of any service maintained in the demised
premises, if due to causes beyond Lessor's control, shall not entitle Lessee to
any claim against Lessor or to any reduction in rent and shall not constitute
constructive eviction unless Lessor shall fail to take such measures as may be
reasonable in the circumstances to restore the service without undue delay.
RELEASE OF LIABILITY
The Lessee assumes all risk of any damage to person or property that may
occur by reason of water or the bursting or leaking of any pipes or waste about
said premises or from negligence of any co-tenants or occupants of the building
or of any other person, or fire or hurricane or other act of God or from any
cause whatsoever, provided that Lessor shall make necessary repairs to prevent
further damage with reasonable diligence after notice given to it and the Lessee
agrees to give the Lessor prompt written notice of any accident to or defect in
the water pipes, electricity or of any plumbing, heating or cooling apparatus or
device.
SUBORDINATION
This lease shall always be subordinate to any mortgage now or hereafter
placed by Lessor against the property on which the premises is located, and the
Lessee agrees to execute such documents as are necessary to complete such
subordination, or in lieu thereof, Lessee appoints Lessor's agent irrevocably to
execute such documents as are necessary to complete such
-5-
<PAGE> 6
subordination.
LESSORS' RIGHT OF ENTRY
Lessor shall have the right to enter the demised premises at all times
which are necessary to make needed repairs, and this right shall exist whether
or not Lessee or other occupant shall be on the premises at such time. During
the last forty-five (45) days of the term of the lease, Lessor shall have the
right to enter the demised premises at reasonable hours to show the same to
prospective tenants.
DEFAULT CLAUSE
If the Lessee shall fail to pay the rent or any other charge required to
be paid by the Lessee, or if the Lessee shall breach any of the terms of this
lease or the rules attached hereto or enacted from time to time, then as to
every default or breach, except non-payment of rent, the Lessor may give the
Lessee thirty (30) days written notice thereof, and if such default has not been
cured within such a 30-day period, then the Lessor may give the Lessee three (3)
days notice of the termination of this lease, and this lease shall expire
accordingly and the Lessee shall surrender possession to the Lessor, but the
Lessee shall remain liable as hereinafter provided. In case of default by the
Lessee in the payment of rent, the notice shall be a three- day notice provided
by Statutes of the State of Texas, and the Lessor shall have such rights as are
provided by such Statutes. If the premises become vacant or abandoned or should
any other person than Lessee secure possession of the premises, or any part
hereof, by reason of any receivership, bankruptcy proceedings, or other
operation of law in any manner whatsoever, Lessor may at Lessor's option,
without notice to Lessee, terminate this lease, or in the alternative, Lessor
may reenter and take possession of said premises, or may take possession in the
manner provided by law. In case the Lessor shall recover possession of the
premises, the Lessor may, but shall not be required to remove the property of
the Lessee and store the same at the Lessee's expense, or Lessor may dispose of
said property, and the Lessee agrees that in no respect shall the Lessor be
responsible in damages for any action in entering said premises or removing and
disposing of Lessee's property, with or without process of law. Notwithstanding
anything stated herein,
-6-
<PAGE> 7
Lessee agrees that whether possession is taken or this lease is canceled by
Lessor, the entire unpaid balance of rent shall accelerate and immediately
become due and payable, and Lessee shall be responsible for all costs, including
attorney's fees incurred by Lessor in enforcing this and any other provision of
this lease.
In the event of a default by Lessee, Lessor shall have all recourse
against the Lessee provided by this lease and by law, and all remedies shall be
cumulative and non-exclusive. Lessee agrees to pay Lessor reasonable attorney's
fees and expenses incurred in and about enforcing any of the terms of this
lease, in collecting past due rent, and in and about recovering possession from
Lessee, should the services of any attorney be retained by Lessor in so doing.
ABANDONMENT
In the event any installment of rent shall not have been paid within
three (3) business days of its due date and Lessee shall not have been
physically present on the demised premises during such period of time, it shall
be conclusively deemed (and the lessee so agrees) that the premises has been
abandoned regardless of whether or not any of Lessee's possessions remain on the
premises, and in such event, Lessor may take possession without process of law,
without in any way being responsible to Lessee for damages, trespass, unlawful
entry, or any matter or thing whatever by reason thereof, and Lessor may, at
Lessor's option, in the event of such abandonment, declare this lease
terminated. This right on the part of the Lessor shall be in addition to and not
exclusive of all other rights and remedies provided by this lease and by law.
LESSEE'S PROPERTY
If, upon the termination of this lease or abandonment of the premises by
Lessee, Lessee abandons or leaves any property on the demised premises, Lessor
shall have the right, without notice to Lessee, to store or otherwise dispose of
the property at Lessee's cost and expense, without being liable in any respect
to the Lessee.
NOTICE
All notices provided to be given under this Lease Agreement shall be
given by certified mail to the parties at the following addresses:
-7-
<PAGE> 8
LESSOR:
LESSEE:
Notice shall be considered given upon posting with the U.S. Postal
Service and the date of such posting shall be shown upon receipt stamped by said
U.S. Postal Service at time of posting or by personal delivery to any agent or
employee of Lessee found on the demised premises.
IN TESTIMONY WHEREOF, the parties to this Lease have hereunto set their
hands in multiple copies, any of which may be deemed an original, this the 31st
day of December, 1997.
/s/
-------------------------------
WILLIAM L. MORILLON
/s/
-------------------------------
MARIE ANNE MORILLON
HORIZON HIGH REACH, INC.
By: /s/
-------------------------------
-8-
<PAGE> 1
EXHIBIT 10.17
UNION BANK OF CALIFORNIA FRESNO COMMERCIAL BUSINESS CENTER
Mr. James Dillon, C.E.O. April 16, 1998
W.R. Carpenter, North America
Upright, Inc.
1775 Park Street AMENDED AS OF MAY 5, 1998
Selma, CA. 93662
Dear Mr. Dillon:
Upon your acceptance hereof as provided below, this letter will serve as
confirmation of Union Bank of California's ("Bank") commitment to hold available
for Upright, Inc. ("Borrower") credit facilities in the aggregate total amount
of Twenty Million Dollars ($20,000,000). This commitment is subject to the
following terms and conditions:
Borrower: Upright, Inc.
FACILITY NUMBER ONE: Revolving Line of Credit
Amount: $20,000,000
Maturity: October 1, 1999
Purpose: a. To provide for required development funds related to
the Madera Expansion facilities.
b. General & Administrative expenses, pertaining to
operation of facilities in the Selma and Madera
locations.
c. Utilization for all general purposes related to
either of the locations, in Selma or Madera, CA.
Interest Rate: Union Bank of California Reference Rate minus one half
of one percent (1/2%), or Libor plus 120 basis points.
(Libor funding limited to a maximum of three month
contracts, with a minimum dollar amount of $100,000)
Repayment: Interest monthly; no clear or out of debt period
required, periodic principal reductions, all due and
payable at maturity. (Permanent reduction of principal
and commitment, will occur with advance designated for
Real Estate secured term financing on or about June
1999) See Facility Number two.
Collateral: Security Agreement assuring a first priority position
covering Accounts Receivable and Inventory. All
necessary UCC filings to prefect such security interest.
An executed agreement not to encumber or hypothecate the
land intended for development (aprox. 38.95 acres),
located in Madera, CA.
Fee: Waived
7108 NORTH FRESNO STREET, SUITE 200, FRESNO,
CALIFORNIA 93720
TEL: 209-436 2728 FAX 209-436 2713 800-972 6686
<PAGE> 2
James Dillon
April 16, 1998 (Amended as of May 5, 1998)
Page- 2
FACILITY NUMBER TWO: Commercial Real Estate Term Loan
Amount: Maximum Advance, not to exceed 80% of value determined
by Bank appraisal for completed improvements.
Maturity: Fifteen Years (Based on an amortization of twenty years)
Purpose: To fund a long term loan for the improvements completed
on or about June 1999, with regard to the Madera
facilities. (As outlined in proposed development and
construction schedule provided by Borrower). Initial
advance funding of this loan will be applied to the
revolving credit facility; thereby reducing its future
availability for a like amount.
Interest Rate: Options:
Variable Rate of Interest: Tied to the Bank's Reference
Rate minus one quarter (1/4%).
Fixed Rate of interest:
Option A: The Bank's Adjusted Treasury Index plus 125
basis points; this rate can be locked for a maximum of
30 days prior to funding.
Option B: Three Month LIBOR Rate plus 150 basis points;
this rate can be locked for a predetermined period of
time, utilizing a Forward Swap to hedge any interest
changes that might occur. (For example: had a swap
agreement been signed on April 15, 1998, the All-in-rate
for the full term of the loan would have been: 7.68%).
NOTE THIS RATE IS NOT A COMMITMENT MERELY AN EXAMPLE,
HAD A CONTRACT BEEN EXECUTED.
Repayment: Requirements vary depending on the option selected:
Variable Rate Option: Interest and principal monthly.
Fixed Rate Options:
Option A: Interest and principal monthly.
Option B: Interest and principal paid quarterly, based
on the three month Libor contract.
All repayment options require automatic debit to predetermined borrower deposit
account.
<PAGE> 3
James Dillon
April 16, 1998 (Amended as of May 5, 1998)
Page- 3
Collateral: First Trust deed, title insured.
Fee: One half of one percent (1/2%) on the full advance
amount for term debt.
FINANCIAL COVENANTS (Pertaining to the Revolving Credit Facility Only)
This facility would be governed by a loan agreement containing, among other
things, mutually acceptable financial covenants as indicated below:
Minimum Current Ratio: No less than 1.20:1 measured Quarterly
Maximum Debt to TNW: No greater than 3.0:1 measured at FYE
Minimum Debt Coverage: No less than 1.2:1 measured at FYE
FINANCIAL COVENANTS (Pertaining to the Commercial Real Estate Facility Only)
This facility would be governed by a loan agreement containing, among other
things, mutually acceptable financial covenants as indicated below:
Minimum Debt Coverage: No less than 1.2:1 measured at FYE
All debts now or hereafter due from the corporation to officers, stockholders or
inter company obligations are to be subordinate to the bank as long as debt
exists with the bank. The Bank agrees to allow scheduled payments of
inter-company debt as long as compliance is maintained with all remaining
covenants as identified.
REPORTING REQUIREMENTS
Reporting requirements would likely include, but not limited to, the following:
* Annual Audited Financial Statement, due within 120 days of fiscal year
end.
* Quarterly Interim Financial Statements, due within 45 days of each
period end.
* Quarterly aging of Accounts Receivable and Payable, due
within 45 days of period.
* Quarterly work in progress and backlog reporting, due within 45 days
of period.
* Annual Financial Statement of W.R. Carpenter North America, Inc.
<PAGE> 4
James Dillon
April 16, 1998 (Amended as of May 5, 1998)
Page- 4
CONDITIONS PRECEDENT
Borrower will have executed and delivered to Bank any and all promissory notes,
contracts, instruments and any documents, including, without limitation, Loan
and Security Agreements, and all other documentation required by Bank,
containing customer representation, warranties, covenants, and conditions for
this type of credit facility and otherwise acceptable to Bank. The terms of
these documents shall supplement the terms of this letter. In the event of any
conflict, said documents will prevail.
OTHER REQUIREMENTS; SUBJECT TO REVIEW AND ACCEPTANCE
The Bank is to be provided a true and current copy of a Phase I Environmental
survey pertaining to the acreage recently acquired from the City of Madera by
Upright, Inc. for the purpose of development. This property has been described
as aprox. 39 acres. The Bank's environmental department will review this survey
in order to determine whether any action may be necessary prior to the Bank
securing subject property as collateral for proposed loan. All costs for this
review will be the responsibility of the borrower.
Borrower agrees that all liens associated with the development of the Madera
facilities are to be satisfied prior to funding of the Bank Real Estate Term
Loan. If disputes exist between contractor, sub-contractor and Upright, Inc.,
borrower agrees to provide the necessary bond to satisfy the title company in
order that title insurance can be issued with clear title to the Bank. Borrower
to advise the Bank of ownership or control changes that exceed 10% of the
outstanding stock.
The borrower will execute an agreement not to encumber or hypothecate the +- 39
acres located in Madera, preserving it as collateral for Union Bank of
California, term loan financing.
Borrower is responsible for the following costs and expenses related to this
commitment:
a. Bank Appraisal required for Real Estate Term Loan
b. Title insurance and all endorsements necessary for documentation
of security with First Trust Deed. General liability, hazard,
flood (if required), and workers compensation coverage.
c. Environmental search and evaluations of property acquired,
including the review of the existing Phase I assessment that
will be supplied by Upright, Inc.
d. Recording and filing fees for Trust Deeds and UCC security
filings.
e. All other out of pocket expenses that may be necessary for
perfection of security position requested by Bank.
All legal matters will be satisfactory to the Bank's counsel, including, but not
limited to, all documentation and the perfection and priority of Bank's security
interest.
<PAGE> 5
James Dillon
April 16, 1998 (Amended as of May 5, 1998)
Page- 5
The Bank reserves the right to terminate this commitment if the Bank deems there
to be a material adverse change in the financial condition of Borrower, or any
material decline in the market value of any collateral required hereunder.
This commitment will be null and void if not accepted by your return of a signed
copy of this letter by May 20, 1998 and will terminate on June 15, 1998 unless
the required documents for the loan(s), are fully executed and delivered to the
Bank and all conditions hereof fulfilled to the satisfaction of the Bank.
Union Bank of California is pleased to offer you the credit facilities described
above, and we look forward to working with you in the future. Should you have
any questions regarding any of the above, please don't hesitate to give me a
call.
Respectfully,
UNION BANK OF CALIFORNIA,
/s/ Phil Lacey
- --------------------------
Phil Lacey
Vice President
Senior Commercial Officer
Acceptance Confirmed By:
Upright, Inc.
/s/ James T. Dillon
- ---------------------------
Name: James T. Dillon
Title: CEO
Date: 5/7/98
cc: Barris Evulich, Alan Harper
<PAGE> 1
EXHIBIT 10.18
KeyCorp Leasing Ltd.
Christopher E. Kerz
2010 Crow Canyon Place
Suite 110
San Ramon, CA 94583
(510) 277-3485
(510) 277-3486 (fax)
April 23, 1998
Alan Harper
Up-Right, Inc.
1775 Park Street
Selma, CA 93622
Dear Alan:
KeyCorp Leasing Ltd. is pleased to present the following equipment
financing proposal for your review and consideration. The following terms and
conditions are based upon information furnished to us by you.
SUMMARY OF TERMS AND CONDITIONS
LESSOR KeyCorp Leasing Ltd., or its Assignee
LESSEE Up-Right, Inc.
EQUIPMENT
DESCRIPTION Miscellaneous manufacturing and tooling equipment
EQUIPMENT LOCATION 1775 Park Street
Selma, CA 93622
EQUIPMENT COST $20,000,000.00
<PAGE> 2
April 23, 1998
Page 2 of 5
CLOSING DATE
This proposal is based upon both the assumption and the condition that the
closing for this transaction will take place on or before June 30, 1999. If the
closing does not take place on this date, the Rental Amounts (and other economic
factors) set forth herein may be adjusted to reflect the actual date of closing.
All fundings will be conditioned on the delivery and acceptance of the Equipment
by Borrower.
LEASE INFORMATION
LEASE TYPE/DOCUMENTATION
Promissory Note and Security Agreement, evidenced by documentation to be
provided by Lender and satisfactory to Lender and Borrower in all respects.
INITIAL LOAN TERM A. 84 months. B. 60 months.
RENTAL AMOUNT
A. The Rental Amount, payable monthly in arrears, expressed as a
percentage of Equipment Cost, is 1.1406%, for the first 24
months followed by 60 monthly payments at 1.7109% and is subject
to adjustment prior to lease closing as set forth below. The
rate based on the benchmarked Treasury is 7.35%.
B. The Rental Amount, payable monthly in arrears expressed as a
percentage of Equipment Cost, is 1.552% for 24 months followed
by 36 monthly payments at 2.328% and is subject to adjustment
prior to lease closing as set forth below. The rate based on the
benchmarked Treasury is 7.32%.
ADJUSTMENT OF RENTAL AMOUNT PRIOR To LOAN CLOSING
During the Initial Loan Term and a Renewal Term, if any, the Rental Amount in
place at loan closing will be fixed. The Rental Amount quoted in this Proposal
was calculated using a rate based on the Daily Treasury Index for April 3, 1998.
Such Rental Amount shall be adjusted to loan closing to reflect changes in the
Daily Treasury Index until the Rent Commencement Date under the Loan (and then
shall be fixed for the term of the initial Loan Term and any Renewal Term) as
follows:
IF
the Daily Treasury Index for the day on which the final equipment schedule
evidencing this transaction (as determined by Lender) is sent to Borrower by
Lender is greater than or less than A. 5.55% or B. 5.52%
THEN
for each one basis point (.01%) variance, the rate upon which the Rental Amount
is calculated shall be increased or decreased, as the case may be, by one basis
point (.01%).
Based upon such new rate, the Rental Amount shall be adjusted accordingly. As
used in this Section, the term "Daily Treasury Index" shall mean the average
yield on United States Treasury securities having a maturity date (excluding
securities with call options) which corresponds to the weighted average life of
49 months for the proposal, as announced in the "Treasury Bonds, Notes & Bills"
section of The Wall Street Journal
<PAGE> 3
April 23, 1998
Page 3 of 5
published on the day of determination, or if the Wall Street Journal is not
published on such day, in the most recently published edition of the Wall Street
Journal. If no such securities have a maturity date (excluding securities with
call options) which responds to the weighted average life of A.49 months or B.
34 months, adjustments will be based on the first succeeding month to have
maturities (e.g,, if no such securities mature in Aug 97, use Sep 97 maturities
[or first month following Sep 97 in which there are maturities]).
END OF LOAN OPTIONS
Upon payment in full by Borrower of all Rent (and all other sums) payable to
Lender hereunder, Lender shall release its interest in the equipment.
EARLY CANCELLATION RIGHTS
Borrower may prepay at any time after the first twelve months of the Note under
the following:
13-24 months-4% prepayment penalty, 25-36 months-3% prepayment penalty, 36-48
months -2% prepayment, 48-60 months-1% penalty, nothing thereafter.
NET LOAN
The Loan will be a noncancellable, net loan transaction whereby insurance,
maintenance, and all applicable taxes (including sales and/or use taxes, which
will be added to the cost of the Equipment or collected on the gross rentals, as
appropriate under the laws of the particular state) are the responsibility of
the Borrower. Lender will make no Warranties, expressed or implied, relating to
the Equipment.
INSURANCE
Borrower will provide adequate property and liability insurance with
endorsements and in amounts acceptable to Lessor prior to the delivery of the
Equipment. Lender will be named as first loss payee with respect to the
Equipment under such property insurance policies and as an additional insured
under such liability policies.
DOCUMENTATION FEE
At loan closing, Borrower shall pay to Lender a documentation fee equal to $0
per equipment schedule, plus all fees and disbursements (including attorney's
fees) actually incurred by Lessor in the negotiation of documentation.
APPLICATION DEPOSIT
Borrower shall forward to Lender an application deposit equal to $20,000 with
this signed proposal in consideration of Lender's transaction structuring and
review activities. In the event that Lender does not approve this transaction,
this application deposit (less the cost of any out-of-pocket expenses incurred
by Lender such as appraisal fees, lien searches, legal fees, etc., which shall
not exceed $1000 ) shall be returned to Borrower. In the event that this
transaction closes, this application deposit shall be applied on a pro rata
basis to reduce the first rental payment. In all other events, this application
deposit may be retained by Lender.
<PAGE> 4
April 23, 1998
Page 4 of 5
MISCELLANEOUS
SALES TAX EXEMPTION
Many companies are exempt from sales and/or use tax. For Lender to qualify for
Borrower's sales tax exemption, a valid tax exemption certificate, satisfactory
in all respects to Lender, for the state where the Equipment will be located
will be required at loan closing.
FINANCIAL STATEMENTS
Borrower shall furnish Lender with its financial statements, in a form
satisfactory to Lender, for the last three fiscal years and latest interim
financial statements. Borrower shall also provide the name of its major
financial institution, and the address, phone number and account officer name.
PROPOSAL ACCEPTANCE/EXPIRATION
This proposal is subject to approval by the Lessee on or before May 15, 1998.
Unless this date is extended in writing by Lender, if Lessor has not received a
copy of this proposal, signed by Borrower, on or before such date, this proposal
will expire.
DISCLAIMER
KeyCorp Leasing has offered this proposal based upon assumptions provided by the
Borrower. This proposal is not intended to give advice, representations or
warranties and we encourage you to discuss this proposal with your CPA and/or
tax advisor. KEYCORP LEASING HAS NOT MADE, AND DISCLAIMS ANY ADVICE,
REPRESENTATIONS, WARRANTIES AND COVENANTS, EITHER EXPRESSED OR IMPLIED, WITH
RESPECT TO LEGAL, ECONONIC, ACCOUNTING, TAX AND/OR OTHER EFFECTS OF THE LEASE
AND THE TRANSACTIONS CONTEMPLATED.
This proposal is subject to the formal approval of KeyCorp Leasing Ltd. (and/or
its assignee) and the execution of documentation acceptable to Lender and
Borrower. IT SHOULD NOT BE CONSTRUED AS A COMMITMENT BY KEYCORP LEASING TO
ENGAGE IN THIS FINANCING.
If the foregoing meets with your approval, please sign the enclosed copy and
return it, together with the Application Deposit, to KeyCorp Leasing on or
before the proposal Expiration Date set forth above. Our receipt of such signed
copy and the Application Deposit will constitute your application for
consideration by KeyCorp Leasing for the financing summarized in this proposal.
Thank you for allowing us the opportunity to present this proposal. If you have
any questions, please call me at 510-277-3485.
Very truly yours,
<PAGE> 5
April 23, 1998
Page 5 of 5
KeyCorp Leasing Ltd.
By: /s/ Christopher E. Kerz
- ---------------------------
Christopher E. Kerz
Leasing Manager
APPROVED THIS ___ DAY OF ______, 19__
UpRight, Inc.
By: /s/ Barris J. Evulich
---------------------
Name: Barris J. Evulich
Title: V.P. General Manager
Federal Tax ID: 94-1099653
Lessee State of Incorporation: California
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR YEAR
<FISCAL-YEAR-END> JUN-28-1998 JUN-29-1997
<PERIOD-START> JUN-30-1997 JUL-01-1996
<PERIOD-END> JUN-28-1998 JUN-29-1997
<CASH> 63,669 77,345
<SECURITIES> 0 0
<RECEIVABLES> 29,035 23,955
<ALLOWANCES> 410 364
<INVENTORY> 27,407 16,833
<CURRENT-ASSETS> 124,487 120,633
<PP&E> 91,155 66,098
<DEPRECIATION> 28,390 23,955
<TOTAL-ASSETS> 196,659 167,825
<CURRENT-LIABILITIES> 35,997 21,798
<BONDS> 117,936 113,884
0 0
25 25
<COMMON> 60 60
<OTHER-SE> 34,605 26,946
<TOTAL-LIABILITY-AND-EQUITY> 196,659 167,825
<SALES> 170,797 139,904
<TOTAL-REVENUES> 170,797 139,904
<CGS> 117,844 94,315
<TOTAL-COSTS> 32,661 25,513
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 9,421 3,983
<INCOME-PRETAX> 10,865 16,093
<INCOME-TAX> 3,206 6,131
<INCOME-CONTINUING> 7,659 9,962
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 7,659 9,962
<EPS-PRIMARY> 128 166
<EPS-DILUTED> 128 166
</TABLE>
