<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 12, 1999
REGISTRATION NO. 333-77103
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 4
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
<TABLE>
<S> <C>
GROVE INVESTORS LLC GROVE INVESTORS CAPITAL, INC.
(Exact name of registrant as specified in its charter) (Exact name of registrant as specified in its charter)
DELAWARE DELAWARE
(State or other jurisdiction of incorporation or organization) (State or other jurisdiction of incorporation or organization)
6719 6799
(Primary Standard Industrial Classification Code Number) (Primary Standard Industrial Classification Code Number)
52-2089466 52-2097817
(I.R.S. Employer (I.R.S. Employer
Identification Number) Identification Number)
1565 BUCHANAN TRAIL EAST 1565 BUCHANAN TRAIL EAST
SHADY GROVE, PENNSYLVANIA 17256 SHADY GROVE, PENNSYLVANIA 17256
(717) 597-8121 (717) 597-8121
(Address, including zip code, and telephone number, (Address, including zip code, and telephone number,
including area code, of registrant's principal executive including area code, of registrant's principal executive
offices) offices)
</TABLE>
SALVATORE J. BONANNO
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
GROVE INVESTORS LLC
1565 BUCHANAN TRAIL EAST
SHADY GROVE, PENNSYLVANIA 17256
(717) 597-8121
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
WITH A COPY TO:
MARK S. BERGMAN, ESQ.
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
(212) 373-3000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the effective date of this Registration
Statement.
If the Securities registered on this Form are to be offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
14 1/2% Senior Debentures due 2010............... $56,652,000 100% $56,652,000 $15,750
14 1/2% Senior Debentures due 2010(2)............ $27,163,000(2) 100% $27,163,000 $7,552
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(f).
(2) This registration statement also relates to a bona fide estimate of
approximately $27,163,000 principal amount of additional debentures which
may be issued as interest payments on the registered debentures in lieu of
paying intrest in cash.
------------------------------
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED AUGUST , 1999
[LOGO]
PROSPECTUS
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. WE MAY
NOT SELL THESE SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER
TO SELL THESE SECURITIES AND IT IS NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>
$56,652,000
GROVE INVESTORS LLC
AND
GROVE INVESTORS CAPITAL, INC.
OFFER TO EXCHANGE $56,652,000 OF OUR 14 1/2% SENIOR DEBENTURES DUE 2010
- The debentures mature on May 1, 2010.
- The debentures (1) are general unsecured obligations of ours, (2) rank
equal in right of payment with all existing and future senior indebtedness
of ours and (3) rank senior in right of payment to all subordinated
indebtedness of ours. As of April 3, 1999, the debentures were not senior
to any of our indebtedness.
- The debentures rank junior to all existing and future liabilities of our
subsidiaries. As of April 3, 1999, the aggregate amount of liabilities of
our subsidiaries to which holders of debentures were subordinated was
approximately $727.8 million.
- The debentures bear interest at the rate of 14 1/2% per year, payable
quarterly on February 1, May 1, August 1 and November 1 of each year. We
have the option of paying interest on the debentures by issuing additional
debentures.
- The terms of the debentures we will issue in the exchange offer will be
substantially identical to the outstanding debentures, except that
transfer restrictions and registration rights relating to the outstanding
debentures will not apply to the registered debentures.
- The exchange offer expires 5:00 p.m., New York City time, ,
1999, unless we extend it.
- All debentures that are validly tendered in the exchange offer and not
withdrawn will be exchanged.
- Tenders of debentures may be withdrawn at any time prior to the expiration
of the exchange offer.
- There is no public market for the registered debentures.
BEFORE PARTICIPATING IN THIS EXCHANGE OFFER, PLEASE REFER TO THE SECTION IN THIS
PROSPECTUS ENTITLED "RISK FACTORS" BEGINNING ON PAGE 11.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE DEBENTURES OR DETERMINED IF THIS
PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
------------------------
THE DATE OF THIS PROSPECTUS IS , 1999.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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PAGE
-----
<S> <C>
PROSPECTUS SUMMARY......................................................................................... 1
SUMMARY HISTORICAL FINANCIAL DATA.......................................................................... 9
RISK FACTORS............................................................................................... 11
FORWARD-LOOKING STATEMENTS................................................................................. 18
THE TRANSACTIONS........................................................................................... 20
USE OF PROCEEDS............................................................................................ 23
CAPITALIZATION............................................................................................. 24
SELECTED HISTORICAL COMBINED AND CONSOLIDATED FINANCIAL DATA............................................... 25
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS...................... 27
THE EXCHANGE OFFER......................................................................................... 41
BUSINESS................................................................................................... 52
AVAILABLE INFORMATION...................................................................................... 65
MANAGEMENT................................................................................................. 66
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT............................................. 70
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................................................. 72
DESCRIPTION OF CREDIT FACILITY............................................................................. 75
DESCRIPTION OF DEBENTURES.................................................................................. 77
FEDERAL INCOME TAX CONSIDERATIONS.......................................................................... 119
ERISA CONSIDERATIONS....................................................................................... 123
PLAN OF DISTRIBUTION....................................................................................... 124
LEGAL MATTERS.............................................................................................. 125
EXPERTS.................................................................................................... 125
CHANGE IN ACCOUNTANTS...................................................................................... 125
INDEX TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS.................................................... F-1
</TABLE>
ii
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY CONTAINS BASIC INFORMATION FROM THIS PROSPECTUS. IT
LIKELY DOES NOT CONTAIN ALL THE INFORMATION THAT IS IMPORTANT TO YOU. FOR A MORE
COMPLETE UNDERSTANDING OF THIS OFFERING, WE ENCOURAGE YOU TO READ THE ENTIRE
PROSPECTUS CAREFULLY, INCLUDING THE SECTION ENTITLED "RISK FACTORS" BEGINNING ON
PAGE 11 AND THE FINANCIAL STATEMENTS, INCLUDING THE NOTES TO THOSE STATEMENTS,
INCLUDED ELSEWHERE IN THIS PROSPECTUS.
THE WORDS "WE," "OUR," "OURS" AND "US" REFER TO GROVE INVESTORS LLC AND,
UNLESS THE CONTEXT OTHERWISE REQUIRES, ITS SUBSIDIARIES.
UNLESS OTHERWISE NOTED, "GROVE WORLDWIDE" REFERS TO GROVE WORLDWIDE LLC AND
ITS SUBSIDIARIES AND INCLUDES THE MOBILE HYDRAULIC CRANE, AERIAL WORK PLATFORM
AND TRUCK-MOUNTED CRANE BUSINESSES OF HANSON FUNDING (G) PLC, WHICH WERE
ACQUIRED ON APRIL 29, 1998.
GROVE INVESTORS IS A LIMITED LIABILITY COMPANY. ACCORDINGLY, TERMINOLOGY
USED IN THE PROSPECTUS DIFFERS FROM THAT TYPICALLY USED FOR A CORPORATION. FOR
EXAMPLE, INSTEAD OF OWNING THE STOCK OF GROVE INVESTORS, AN INVESTOR OWNS
"MEMBERSHIP INTERESTS." "MEMBERSHIP INTERESTS" ARE OWNERSHIP INTERESTS IN GROVE
INVESTORS. INSTEAD OF A BOARD OF DIRECTORS, GROVE INVESTORS HAS A "MANAGEMENT
COMMITTEE." THE "MANAGEMENT COMMITTEE" IS THE GOVERNING BODY OF GROVE INVESTORS,
AND ITS MEMBERS ARE DESIGNATED BY THE HOLDERS OF GROVE INVESTORS' MEMBERSHIP
INTERESTS. INSTEAD OF BY-LAWS, GROVE INVESTORS HAS AN "OPERATING AGREEMENT." THE
"OPERATING AGREEMENT" IS THE AGREEMENT WHICH DEFINES THE RIGHTS AND OBLIGATIONS
OF THE HOLDERS OF THE MEMBERSHIP INTERESTS AND PROVIDES FOR THE RULES OF
GOVERNANCE.
OUR BUSINESS
Through Grove Worldwide, our wholly-owned subsidiary, we are a leading
international designer, manufacturer and marketer of a comprehensive line of
mobile hydraulic cranes, aerial work platforms and truck-mounted cranes.
Commercial and residential building contractors, as well as industrial,
municipal and military end-users, use our products in a wide variety of
applications.
Grove Worldwide markets its products through three operating
divisions--Grove Crane, Grove Manlift and National Crane.
- GROVE CRANE designs and manufactures over 40 models of mobile hydraulic
cranes.
- GROVE MANLIFT designs and manufactures over 35 models of aerial work
platforms.
- NATIONAL CRANE designs and manufactures 15 models of telescoping and 14
models of articulating truck-mounted cranes.
OUR COMPETITIVE STRENGTHS
We believe that we benefit from the following competitive strengths:
- MARKET POSITIONS. We believe that our three operating divisions have
established a leading position in most of their principal markets.
- STRONG BRAND NAME AND REPUTATION FOR QUALITY PRODUCTS. We have created
significant brand awareness as a result of our innovative designs, quality
products and product reliability.
- SUPERIOR CUSTOMER SERVICE. We are committed to providing superior
training, sales and service support to our distributors and end-users as a
standard part of our sales and marketing effort.
- ESTABLISHED NETWORK OF DISTRIBUTORS. We benefit from an established base
of approximately 240 independent distributors located in 50 countries
around the world.
- BROAD PRODUCT LINE. We believe we have one of the broadest product lines
in the industry, with 10 product categories and over 105 models offered by
our three operating divisions.
1
<PAGE>
OUR BUSINESS STRATEGY
The key elements of our business strategy involve:
- PROVIDING SUPERIOR PRODUCTS. We believe that we have the most extensive
engineering capability in the crane industry. Our engineering group
focuses on developing innovative, high performance and low maintenance
products that satisfy the demands of our customers.
- EXPANDING EXISTING INTERNATIONAL BUSINESS. We intend to continue to use
our significant brand awareness and strong distribution network to
selectively expand our existing international business.
- CAPITALIZING ON THE GROWTH OF THE WORLDWIDE AERIAL WORK PLATFORM MARKET.
We seek to capitalize on the increasing recognition that aerial work
platforms are an economical and safe alternative to scaffolding and
ladders.
OUR OPERATIONS IMPROVEMENT PROGRAM
We have developed a comprehensive program which we believe will enable us to
reduce costs. The key components of this program are:
- reducing operating costs through a product line rationalization program;
- reducing costs of goods sold by improving our manufacturing process;
- reducing selling, general and administrative expenses by eliminating
redundant manufacturing functions, using our new management information
system and streamlining existing business processes; and
- reducing working capital requirements by lowering inventory levels.
OUR STRUCTURE
Grove Investors was formed in the State of Delaware in December 1997. Grove
Investors Capital, Inc. was formed in the State of Delaware in March 1998. Grove
Investors owns all of the capital stock of Grove Investors Capital. Grove
Investors Capital has nominal assets, no operations and no subsidiaries. Grove
Investors Capital was formed solely to act as a co-issuer of the debentures.
Grove Investors also owns all of the membership interests of Grove Holdings LLC.
Grove Holdings, in turn, owns all of the membership interests of Grove
Worldwide. Grove Investors conducts all of its business through Grove Worldwide
and its subsidiaries. There is a chart on page 21 that describes our structure.
2
<PAGE>
SUMMARY OF THE EXCHANGE OFFER
<TABLE>
<S> <C>
The Exchange Offer.................. We are offering to exchange up to $56,652,000
aggregate principal amount of our 14 1/2% Senior
Debentures due 2010 for $56,652,000 of our
outstanding 14 1/2% Senior Debentures due 2010. We
issued and sold $47,375,000 in principal amount of
the outstanding debentures on April 29, 1998 in
reliance on an exemption from registration under the
Securities Act. We have issued $9,277,000 of
additional debentures as interest payments in lieu of
paying interest in cash.
We believe that the registered debentures may be
offered for resale, resold and otherwise transferred
by you without compliance with the registration and
prospectus delivery provisions of the Securities Act
if:
- you are acquiring the registered debentures in the
ordinary course of your business;
- you are not participating, do not intend to
participate, and have no arrangement or understanding
with any person to participate, in the distribution
of the registered debentures issued to you; and
- you are not an affiliate, under Rule 405 of the
Securities Act, of ours.
Expiration Date..................... The exchange offer will expire at 5:00 p.m., New York
City time, , 1999, unless we decide to
extend the expiration date.
Conditions to the Exchange Offer.... We may end or amend the exchange offer if:
- any legal proceeding, government action or other
adverse development materially impairs our ability to
complete the exchange offer;
- any SEC rule, regulation or interpretation
materially impairs the exchange offer; or
- we have not obtained all necessary governmental
approvals with respect to the exchange offer.
Please refer to the section in this prospectus
entitled "The Exchange Offer--Conditions to the
Exchange Offer." We may waive any or all of these
conditions. At this time, there are no adverse
proceedings, actions or developments pending or, to
our knowledge, threatened and no governmental
approvals are necessary to complete the exchange
offer.
Withdrawal Rights................... You may withdraw the tender of your outstanding
debentures at any time before 5:00 p.m., New York
City time, on , 1999.
</TABLE>
3
<PAGE>
<TABLE>
<S> <C>
Procedures for Tendering Outstanding
Debentures........................ To participate in the exchange offer you must:
- complete, sign and date the accompanying letter of
transmittal, or a facsimile copy of the letter of
transmittal; or
- tender outstanding debentures following the
procedures for book-entry transfer described on page
43.
You must mail or otherwise deliver the documentation
and your outstanding debentures to the United States
Trust Company of New York, as exchange agent, at one
of the addresses listed on the letter of transmittal.
Special Procedures for Beneficial
Owners............................ If you hold outstanding debentures registered in the
name of a broker, dealer, commercial bank, trust
company or other nominee you should contact such
person promptly if you wish to tender outstanding
debentures. Please refer to the section in this
prospectus entitled "The Exchange Offer--Procedures
for Tendering Outstanding Debentures."
Guaranteed Delivery Procedures...... If you wish to tender your outstanding debentures and
you cannot get required documents to the exchange
agent on time, or you cannot complete the procedure
for book-entry transfer on time, you may tender your
outstanding debentures according to the procedures
described in this prospectus under the heading "The
Exchange Offer-- Procedures for Tendering Outstanding
Debentures."
Federal Income Tax Consequences..... The exchange of debentures will not be a taxable
event to you for United States federal income tax
purposes. Please refer to the section in this
prospectus entitled "The Exchange Offer--Federal
Income Tax Considerations."
Exchange Agent...................... The United States Trust Company of New York is
serving as exchange agent in the exchange offer.
Please refer to the section in this prospectus
entitled "The Exchange Offer-- Exchange Agent."
</TABLE>
4
<PAGE>
SUMMARY OF THE REGISTERED DEBENTURES
We use the term "debentures" when describing provisions that apply to both
the outstanding debentures and the registered debentures. The registered
debentures will evidence the same debt as the outstanding debentures. The same
indenture will govern both the outstanding debentures and the registered
debentures. Please refer to the section in this prospectus entitled "Description
of Debentures."
<TABLE>
<S> <C>
Issuers............................. The registered debentures will be joint and several
obligations of Grove Investors and Grove Investors
Capital.
The Registered Debentures........... $56,652,000 aggregate principal amount of 14 1/2%
Senior Debentures due 2010. The form and terms of the
registered debentures are identical to the form and
terms of the outstanding debentures except that the
registered debentures will be registered under the
Securities Act. Therefore, the registered debentures
will not bear legends restricting their transfer. In
addition, the registered debentures will not be
entitled to registration under the Securities Act.
Maturity Date....................... May 1, 2010.
Interest............................ The registered debentures will bear interest at the
rate of 14 1/2% per year, payable quarterly on:
- February 1
- May 1
- August 1 and
- November 1.
We have the option of paying interest in cash or by
issuing additional debentures in an aggregate
principal amount equal to the amount of the interest
that would be payable at a rate per annum equal to
14 1/2%. Additional debentures have the same terms as
the debentures and all references to debentures in
the prospectus include the additional debentures.
Although we have been issuing additional debentures
in lieu of paying interest in cash since the
debentures were issued in April 1998 and intend to do
so for the forseeable future, we do not presently
foresee issuing additional debentures in lieu of
paying interest in cash every time we are required to
make an interest payment throughout the balance of
the term of the registered debentures, which mature
on May 1, 2010.
Sinking Fund........................ None.
Ranking............................. The registered debentures:
- will be general unsecured obligations of ours;
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
- will rank equal in right of payment with all
existing and future senior indebtedness of ours; and
- will rank senior in right of payment to all
subordinated indebtedness of ours.
As of April 3, 1999, we had no outstanding
indebtedness or debt securities which rank equal to
the debentures. We conduct all operations through our
subsidiaries. Our subsidiaries are not guarantors of
the debentures. The registered debentures will rank
junior to all liabilities of Grove Holdings LLC, our
direct wholly-owned subsidiary, and its subsidiaries.
As of April 3, 1999, the aggregate amount of
liabilities of our subsidiaries to which holders of
debentures were subordinated was approximately $727.8
million. The debentures are not junior to any other
liabilities. Subject to the general limitations on
the incurrence of indebtedness to which they are
subject, our subsidiaries may incur additional
indebtedness in the future that would rank senior to
the debentures.
Optional Redemption................. We may redeem the registered debentures at our
option, in whole or in part, at any time after May 1,
2003 in cash at the prices described in this
prospectus under the heading "Description of
Debentures--Optional Redemption," plus accrued and
unpaid interest and liquidated damages, if any,
thereon to the date of redemption.
In addition, at any time before May 1, 2003, we may
redeem all, but not less than all, of the aggregate
principal amount of debentures originally issued at a
redemption price equal to 114.5% of their principal
amount, plus accrued and unpaid interest and
liquidated damages, if any, on the debentures to the
date of redemption. Please refer to the section in
this prospectus entitled "Description of
Debentures--Optional Redemption."
Change of Control................... Upon change of control, you will have the right to
require us to repurchase all or any part of your
debentures at a price equal to 101% of the aggregate
principal amount of the registered debentures, plus
accrued and unpaid interest and liquidated damages,
if any, to the date of purchase. Please refer to the
section in this prospectus entitled "Description of
Debentures--Repurchase at the Option of
Holders--Change of Control."
We cannot assure you that, if a change of control
occurs, we will have sufficient funds to purchase all
registered debentures tendered. Please refer to the
section in this prospectus entitled "Risk
Factors--Upon a change of control, we may not have
sufficient funds available to repurchase the
debentures."
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
Certain Covenants................... The indenture contains covenants that limit our
ability to:
- pay dividends, redeem capital stock or make other
payments or investments;
- incur additional indebtedness or issue preferred
equity interests;
- merge, consolidate or sell all or substantially all
of our assets;
- create liens on assets; and
- enter into certain transactions with affiliates or
related persons.
Please refer to the section in this prospectus
entitled "Description of Debentures--Certain
Covenants."
Absence of Public Market............ There is no public market for the registered
debentures. The registered debentures will not be
listed on any securities exchange or quotation
system. Donaldson, Lufkin & Jenrette Securities
Corporation has advised us that following the
exchange offer, it intends to make a market in the
registered debentures. However, any market-making may
be discontinued at any time without notice. If an
active public market does not develop, the market
price and liquidity of the registered debentures may
be adversely affected. Please refer to the section in
this prospectus entitled "Risk Factors--You may find
it difficult to sell your registered debentures
because no public market for the registered
debentures exists."
The outstanding debentures currently trade in the
PORTAL Market. Following completion of the exchange
offer, the registered debentures will not be eligible
for PORTAL Market trading.
</TABLE>
7
<PAGE>
RISK FACTORS
You should carefully consider all of the information contained in this
prospectus and, in particular, you should evaluate the specific factors listed
under "Risk Factors" on page 11 for risks associated with the exchange offer and
an investment in the registered debentures.
You should also read the "Description of Debentures" beginning on page 76
and "Federal Income Tax Considerations" beginning on page 118 for additional
information regarding the registered debentures.
------------------------
Our principal executive offices are located at 1565 Buchanan Trail East,
Shady Grove, Pennsylvania 17256. Our telephone number is (717) 597-8121.
8
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA
(DOLLARS IN THOUSANDS)
Our fiscal year ends on the Saturday closest to the last day of September of
each year. References to: (1) fiscal 1996 are to the fiscal year ended September
28, 1996, (2) fiscal 1997 are to the fiscal year ended September 27, 1997 and
(3) fiscal 1998 are to the fiscal year ended October 3, 1998. References to the
seven months ended April 29, 1998 mean the period from September 27, 1997 to
April 29, 1998. References to the five months ended October 3, 1998 mean the
period from April 29, 1998 to October 3, 1998. References to the six months
ended March 28, 1998 mean the period from September 27, 1997 to March 28, 1998.
References to the six months ended April 3, 1999 mean the period from October 3,
1998 to April 3, 1999. References to historical financial information include
the historical combined and consolidated financial results of the mobile
hydraulic crane, aerial work platform and truck-mounted crane businesses which
we acquired from Hanson Funding on April 29, 1998. Because of the acquisition,
which was accounted for using the purchase method, results of operations for
periods prior to April 29, 1998 are not comparable with those for the periods
after April 29, 1998.
We have not included separate financial statements of Grove Investors
Capital in this prospectus because we believe that separate financial statements
would not be material to you.
You should read the following data with the more detailed information
contained in "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Selected Historical Combined and Consolidated Financial
Data" and our historical financial statements and the notes to those financial
statements included in this prospectus. You should also read the following
information with the data in the table below:
- Our gross profit for the five months ended October 3, 1998 was adversely
impacted by the write-off of $27.7 million of purchase accounting
adjustments with respect to the amount assigned to inventory in excess of
historical cost.
- Our net income (loss) includes losses by our Sunderland, United Kingdom
facility of $14,085 for the seven months ended April 28, 1998 and $5,999
for the five months ended October 3, 1998. In November 1998, we ceased
manufacturing operations at the Sunderland facility due to recurring
operating losses. Please refer to the section in this prospectus entitled
"Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources."
- Depreciation and amortization excludes depreciation on equipment held for
rent.
- Capital expenditures includes expenditures on our management information
system of approximately $4,300 in fiscal 1996, approximately $14,000 in
fiscal 1997, approximately $9,322 for the seven months ended April 28,
1998, approximately $5,377 for the five months ended October 3, 1998 and
approximately $4,080 for the six months ended April 3, 1999.
9
<PAGE>
SUMMARY HISTORICAL FINANCIAL DATA (CONTINUED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR GROVE
---------------------------------------------------------------------- INVESTORS
SEVEN -----------
MONTHS SIX MONTHS FIVE MONTHS
FISCAL YEAR ENDED ENDED ENDED
------------------------------------------ APRIL 28, MARCH 28, OCTOBER 3,
1994 1995 1996 1997 1998 1998 1998
--------- --------- --------- --------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................ $ 393,526 $ 503,815 $ 794,209 $ 856,812 $ 476,200 $ 405,903 $ 393,779
Gross profit..................... 87,991 126,589 185,079 203,273 98,863 84,566 58,015
Operating expenses............... 80,752 88,216 134,459 135,382 79,041 66,677 61,209
Operating profit (loss).......... 7,239 38,373 50,620 67,891 19,822 17,889 (3,194)
Net income (loss)................ (4,942) 16,769 25,448 42,220 (395) 3,248 (29,664)
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents........ $ 7,135 $ 18,685 $ 8,184 $ 5,024 $ 34,289
Total assets..................... 509,189 652,000 730,158 881,496 915,243
Total debt....................... -- -- 7,443 7,265 531,692
Total invested capital........... 399,762 467,306 502,554 628,492 47,835
OTHER DATA:
Depreciation and amortization.... $ 13,258 $ 13,765 $ 17,313 $ 17,985 $ 11,399 $ 9,384 $ 8,233
Capital expenditures............. 6,042 7,385 19,443 32,491 19,521 15,197 7,230
Sales backlog at end of period... 109,350 208,152 185,237 229,513 268,682 278,982 163,314
<CAPTION>
SIX MONTHS
ENDED
APRIL 3,
1999
-----------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Net sales........................ $ 350,369
Gross profit..................... 65,474
Operating expenses............... 63,998
Operating profit (loss).......... 1,476
Net income (loss)................ (26,509)
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents........ $ 20,722
Total assets..................... 883,568
Total debt....................... 535,489
Total invested capital........... 10,125
OTHER DATA:
Depreciation and amortization.... $ 9,600
Capital expenditures............. 4,080
Sales backlog at end of period... 208,753
</TABLE>
10
<PAGE>
RISK FACTORS
You should consider carefully the information below, as well as the other
information in this prospectus, before tendering your outstanding debentures in
the exchange offer.
RISK FACTORS RELATED TO THE ISSUERS:
WE HAVE SUBSTANTIAL DEBT WHICH MAY LIMIT OUR ABILITY TO BORROW AND RESTRICT THE
USE OF OUR CASH FLOWS, AND WE MAY NOT BE ABLE TO MEET OUR DEBT OBLIGATIONS.
We and our subsidiaries incurred substantial debt in connection with the
acquisition. We have, and will continue to have, substantial debt. Our
substantial debt has important consequences. For example:
- we must dedicate a substantial portion of our cash flow from operations to
the payment of interest on the debt of our subsidiaries, which reduces the
availability of cash to be used for working capital, capital expenditures
or other general corporate purposes;
- our substantial debt could cause us to be vulnerable to increases in
interest rates because indebtedness under Grove Worldwide's credit
facility is at variable rates of interest;
- our substantial debt could place us at a competitive disadvantage compared
to less leveraged competitors; and
- our substantial debt could increase our vulnerability to general adverse
economic and industry conditions.
Please refer to the sections in this prospectus entitled "The Transactions--The
Acquisition," "Description of Credit Facility" and "Description of
Debentures--Repurchase at the Option of Holders--Change of Control."
As of April 3, 1999, we had total indebtedness of approximately $535.5
million. Our cash interest expense for the five months ended October 3, 1998 was
approximately $20.5 million. Our cash interest expense for the six months ended
April 3, 1999 was approximately $19.1 million. We have the option of paying
interest on the debentures by issuing additional debentures. Grove Holdings does
not have to make any cash interest payments on its senior discount debentures
until November 1, 2003. All of our cash interest expense currently represents
the interest expense of Grove Worldwide and its subsidiaries, including interest
under Grove Worldwide's senior subordinated notes and term loan facility. Our
cash debt service obligations also include principal payments on our bank term
loan of $2 million per year plus 75% of excess cash flow as defined in the bank
credit facility. During the six months ended April 3, 1999, we made a $1.0
million mandatory payment. For the five months ended October 3, 1998, we had
cash flow of approximately $57.3 million after payment of approximately $20.5
million in cash interest expense. For the six months ended April 3, 1999, we had
cash flow of approximately $1.4 million after payment of approximately $18.1
million in cash interest expense and approximately $1.0 million in mandatory
term loan principal payments. We cannot assure you that our cash flow will
continue to be sufficient to meet our debt service obligations. Specifically,
poor operating results of our subsidiaries might result in insufficient cash
flow to service these debt obligations.
If our subsidiaries are unable to meet their debt service obligations, they
will be in default under their existing debt agreements or indentures. To avoid
a default, they may need waivers or consents from third parties, which might not
be granted. If the defaults are not waived, or the necessary consents are not
obtained, the defaults could result in acceleration of their indebtedness, in
which case the debt would become immediately due and payable. Please refer to
the sections in this prospectus entitled "Capitalization," "Description of
Debentures" and "Combined and Consolidated Financial Statements."
11
<PAGE>
WE ARE DEPENDENT UPON THE CASH FLOWS OF OUR SUBSIDIARIES AND WE MAY NOT RECEIVE
ENOUGH CASH TO MAKE PRINCIPAL OR INTEREST PAYMENTS ON THE DEBENTURES.
Our cash flow, and consequently our ability to service debt, including our
principal and interest obligations under the debentures, is dependent upon the
cash flows of our operating subsidiaries and the payment of funds by our
subsidiaries to us in the form of loans, dividends or otherwise. As noted on the
prior page, for the six months ended April 3, 1999, we had cash flow of
approximately $1.4 million after payment of approximately $18.1 million in cash
interest expense and approximately $1.0 million in mandatory term loan principal
payments. Our subsidiaries have no obligation to pay any amounts due under the
debentures or to make any funds available for that purpose. In addition, poor
operating results and failure to achieve anticipated cost savings in connection
with our operations improvement program could result in our subsidiaries not
having sufficient cash flow to allow us to make principal or interest payments
on the debentures. Accordingly, our subsidiaries may not be able to make
payments to us to enable us to make principal or interest payments on the
debentures.
Furthermore, the debt agreements and indentures of our subsidiaries impose
significant restrictions on the payment of dividends and the making of loans to
us. For example, the credit facility prohibits our subsidiaries from paying
dividends to us except as described in the next two sentences. First, our
subsidiaries may pay dividends to us so that we can pay dividends to the owners
of our membership interests to enable them to pay the portion of their income
taxes attributable to our taxable income. Second, our subsidiaries may dividend
up to $2,000,000 a year to Grove Holdings and us plus amounts necessary to
enable Grove Holdings and us to pay costs and expenses incurred in our
capacities as holding companies.
THE DEBENTURES ARE SUBORDINATED TO ALL THE LIABILITIES OF OUR SUBSIDIARIES AND
ARE NOT GUARANTEED BY ANY OF OUR SUBSIDIARIES.
We are a holding company. We do not have any material operations or assets
other than ownership of our subsidiaries, including Grove Worldwide. The
debentures are not guaranteed by any of our subsidiaries. As a result, the
debentures are effectively subordinated to all existing and future liabilities
of our subsidiaries. As of April 3, 1999, the aggregate amount of liabilities of
our subsidiaries to which holders of debentures were subordinated was
approximately $727.8 million.
WE MAY NEED TO REFINANCE OUR INDEBTEDNESS AND THAT REFINANCING MAY NOT BE
AVAILABLE TO US.
All or a portion of the principal payments at maturity on our indebtedness,
including the debentures, may require refinancing. Refinancing may not be
available on commercially reasonable terms or at all.
THE LENDERS UNDER GROVE WORLDWIDE'S CREDIT FACILITY MAY FORECLOSE ON GROVE
WORLDWIDE'S ASSETS AND ALL OF THE MEMBERSHIP INTERESTS OF GROVE WORLDWIDE, WHICH
WOULD LIMIT THE ASSETS AVAILABLE TO US TO MAKE PAYMENTS ON THE DEBENTURES.
Grove Worldwide granted the lenders under the credit facility a security
interest in substantially all of its assets. Grove Holdings granted the lenders
under the credit facility a lien on all of the membership interests of Grove
Worldwide owned by it as security for its guarantee of Grove Worldwide's
obligations under the credit facility. If a default under the credit facility or
the guarantee were to occur, the lenders could foreclose upon the assets pledged
to secure the credit facility, including the membership interests, and the
holders of the debentures would receive payments only when any payment default
is cured or waived, or the indebtedness under the credit facility is discharged
or paid in full. If the lenders foreclosed on Grove Worldwide's assets, we may
not have sufficient assets to make payments on the debentures.
12
<PAGE>
THE OPERATING AND FINANCIAL RESTRICTIONS IN OUR DEBT INSTRUMENTS MAY LIMIT OUR
ABILITY TO OPERATE OUR BUSINESS AND MAY INCREASE THE RISK OF DEFAULT UNDER OUR
DEBT OBLIGATIONS.
The credit facility, the indenture governing Grove Worldwide's senior
subordinated notes and the indenture governing Grove Holdings' senior discount
debentures impose significant operating and financial restrictions on our
subsidiaries. The indenture governing the debentures imposes significant
financial restrictions on us. The financial restrictions imposed on us by the
indenture governing the debentures are discussed beginning on page 80. Please
refer to the section in this prospectus entitled "Description of
Debentures--Certain Covenants."
The credit facility significantly limits or prohibits, among other things,
the ability of Grove Worldwide and its subsidiaries to:
- incur additional indebtedness;
- incur liens;
- pay dividends or make other restricted payments or investments;
- make certain asset sales;
- enter into certain transactions with affiliates;
- merge or consolidate with any other person; or
- sell, assign, transfer, lease, convey or otherwise dispose of all or
substantially all of the assets of Grove Worldwide.
The credit facility also requires Grove Worldwide to maintain balance sheet and
fixed charge coverage and leverage ratios.
These restrictions could limit the ability of Grove Worldwide to respond to
market conditions or meet extraordinary capital needs or otherwise restrict its
business and corporate activities. In addition, we cannot assure you that these
restrictions will not materially adversely affect the ability of Grove Worldwide
to finance its future operations or capital needs. Please refer to the sections
in this prospectus entitled "Description of Credit Facility" and "Description of
Debentures--Certain Covenants."
WE MAY NOT BE ABLE TO REALIZE COST SAVINGS FROM OUR OPERATIONS IMPROVEMENT
PROGRAM BECAUSE IT DEPENDS ON A NUMBER OF FACTORS, AND THE FAILURE TO REALIZE
THESE SAVINGS COULD ADVERSELY AFFECT OUR RESULTS OF OPERATIONS.
A majority of the cost savings to be realized from the implementation of our
operations improvement program will be realized gradually over the next three
years. In addition, we expect that cost savings during the three fiscal years
ending September 29, 2001 will be offset by non-recurring costs of up to
approximately $25.0 million associated with the implementation of our operations
improvement program, plus consulting fees payable to George Group Inc. Our
failure to achieve cost savings from this program could have a material adverse
effect on us. Our ability to achieve these cost savings depends on a number of
factors. These factors include:
- successfully implementing our new management information system,
- continued demand for our products and
- acceptance by our employees of new manufacturing and administrative
methods.
Please refer to the sections in this prospectus entitled "Forward Looking
Statements" and "Business-- Operations Improvement Program."
13
<PAGE>
OUR BUSINESS DEPENDS ON A LIMITED NUMBER OF KEY PERSONNEL THE LOSS OF WHOM COULD
ADVERSELY AFFECT OUR BUSINESS BECAUSE THEY ARE NOT EASILY REPLACEABLE.
Our success depends to a significant extent upon the continued services of
Salvatore J. Bonanno, our Chairman and Chief Executive Officer. Although we have
an employment agreement with Mr. Bonanno, the loss of his services could have a
material adverse effect on us. We also depend on the continued services of other
members of senior management. In order to retain members of senior management,
we have adopted a management option plan and short-term incentive plan. Each of
these plans is designed in part to provide incentives to members of senior
management to remain with us. Please refer to the sections in this prospectus
entitled "Management--Description of Management Option Plan," and
"Management--Short-Term Incentive Plan." However, we may not be able to retain
these senior managers. The loss of the services of our senior managers could
have an adverse effect on our financial condition and operations.
CHANGES IN EXCHANGE RATES BETWEEN THE UNITED STATES DOLLAR AND OTHER CURRENCIES
MAY HAVE AN ADVERSE EFFECT ON OUR REVENUES AND INCOME.
We sell our products in over 50 countries. In fiscal 1998, approximately
27.6% of our net sales were in foreign currencies, while the costs associated
with those net sales were only partly incurred in the same currencies. Because
our financial statements are denominated in United States dollars, changes in
exchange rates between the United States dollar and other currencies have had
and will have an impact on our reported results. In addition, changes in
currency rates could affect the competitiveness of our products and could result
in management reconsidering prices and strategies to maintain market share. Over
the last three years, changes in exchange rates in foreign currencies have not
had a material effect on the Company's cash flows from operations.
AN IMPAIRMENT OF INTANGIBLE ASSETS MAY HAVE AN ADVERSE EFFECT ON OUR FUTURE
EARNINGS.
We recorded the excess of the net purchase price paid over the fair value of
the assets we acquired in the acquisition as goodwill. At April 3, 1999, our
total liabilities exceeded tangible assets by $266.0 million. At April 3, 1999,
unamortized goodwill was $275.7, which represents approximately 30% of our
assets. Goodwill is amortized on a straight-line method over 40 years.
Management has selected a life of 40 years based on the following factors:
- Our subsidiaries have been in existence for over 50 years and over that
time have built a strong reputation and brand name.
- The technology in the crane industry historically has not been subject to
rapid change and is not expected to change significantly in the future.
- Our competitors have long operating histories and we believe there are
significant barriers to entry.
We will periodically assess the recovery of goodwill through projected
future cash flows. Our ultimate realization of the amount allocated to goodwill
will depend upon the continued acceptance of our existing products and our
successful development of new products. Significant adverse changes in
acceptance of our products by the market could result in acceleration of the
amortization period and write-down of this asset, which may have a material
adverse effect on our future earnings. Such acceleration of amortization or
write-down could also have a material adverse effect on the value of the
debentures.
14
<PAGE>
RISK FACTORS RELATED TO OUR INDUSTRY:
SALES OF OUR PRODUCTS ARE CYCLICAL, AND WHEN DEMAND FOR OUR PRODUCTS DECREASES
OUR FINANCIAL CONDITION IS ADVERSELY EFFECTED.
Historically, sales of our products have been cyclical. These cyclical
variations are caused by, among other things, cyclical changes in general
economic conditions and, in particular, in conditions in the construction
industry.
- During periods of expansion in construction activity, we have benefitted
from increased demand for our products. For example, from 1994 to 1998,
the most recent period of expansion in the construction industry, our net
sales increased significantly.
- During recessionary periods and periods of decreased construction
activity, we have been adversely affected by reduced demand for our
products. For example, during the first quarter of fiscal 1999, the most
recent downturn in the construction industry, we experienced a decrease in
net sales.
Downward cycles may result in reduction of our new unit sales and pricing,
which may materially and adversely impact our results of operations. Please
refer to the section in this prospectus entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations-- Cyclicality."
WE MAY HAVE TO RECALL OUR PRODUCTS, WHICH WOULD DECREASE OUR REVENUES AND
INCREASE OUR COSTS.
From time to time, we become aware of defects in the design of our products
and must repair these defects, and in certain instances recall these products,
at our expense. Recalling products and repairing defects have the following
adverse consequences:
- They could result in temporary disruptions in our business by requiring us
to devote additional resources to correct the defects.
- They adversely affect our reputation which could result in a decline in
sales of our products.
- They result in increased expenses.
Historically, most design defects have resulted in minor additional
expenses, ranging from several thousand dollars to twenty-five thousand dollars
per design issue. Examples of such minor instances are changes in decals affixed
to the product and modifications to minor components. On occasion in the past,
we have had to repair design defects at a cost to us of several hundred thousand
dollars per design issue.
RISK FACTORS RELATED TO THE DEBENTURES AND THE EXCHANGE OFFER:
PAYMENT OF PRINCIPAL AND INTEREST ON THE DEBENTURES IS SUBORDINATED TO ALL
LIABILITIES OF OUR SUBSIDIARIES, AND OUR SUBSIDIARIES' CREDITORS WOULD BE
ENTITLED TO REALIZE THEIR CLAIMS ON OUR ASSETS BEFORE YOU.
We are a holding company and conduct all of our business operations through
Grove Worldwide and its subsidiaries. As a result, the debentures are
effectively subordinated to all existing and future liabilities of our
subsidiaries, including indebtedness under:
- Grove Worldwide's credit facility;
- Grove Worldwide's senior subordinated notes; and
- Grove Holdings' senior discount debentures.
15
<PAGE>
As of April 3, 1999, the aggregate amount of liabilities of our subsidiaries to
which holders of the debentures were subordinated was approximately $727.8
million. Our subsidiaries may incur additional indebtedness in the future.
Our subsidiaries' creditors will have the right to participate in any
distribution of the assets of our subsidiaries in the event of the liquidation,
reorganization or insolvency of those subsidiaries before holders of the
debentures. Accordingly, in the event of a liquidation, reorganization or
insolvency, we may not have sufficient assets to pay amounts due under all or
any of the debentures. Please refer to the section in this prospectus entitled
"Description of Credit Facility."
UPON A CHANGE OF CONTROL, WE MAY NOT HAVE SUFFICIENT FUNDS AVAILABLE TO
REPURCHASE THE DEBENTURES.
The indenture governing the debentures provides that, upon a change of
control, we are required to make an offer to repurchase all the outstanding
debentures. However, we might not be able to repurchase the debentures because a
change of control under the indenture would require Grove Worldwide and Grove
Holdings to make offers to repurchase all their outstanding notes and debentures
under their indentures and would allow the lenders under the credit facility to
accelerate Grove Worldwide's obligations under the credit facility. Please refer
to the section in this prospectus entitled "Description of Credit Facility."
If a change of control were to occur and Grove Worldwide did not obtain
waivers under its credit facility, it is unlikely that Grove Worldwide would be
able to repay all of its obligations under the credit facility and repurchase
its senior subordinated notes. In these circumstances, it is unlikely that we
would have sufficient funds available to repurchase the debentures.
A COURT COULD DECLARE THE DEBENTURES VOID, JUNIOR IN RIGHT OF PAYMENT TO OUR
OTHER INDEBTEDNESS OR TAKE OTHER ACTIONS DETRIMENTAL TO YOU.
Under federal and state fraudulent transfer laws, an unpaid creditor or
representative of creditors, such as a trustee in bankruptcy or Grove Investors
as a debtor-in-possession in a bankruptcy proceeding, could file a lawsuit
claiming that the issuance of the debentures constituted a fraudulent
conveyance. If the court were to find that there has been a fraudulent
conveyance, it could:
- void our obligations under the debentures,
- declare the debentures junior in right of payment to our other
indebtedness, or
- take other actions detrimental to you as a holder of the debentures.
If a court were to take any of these actions, you might not be repaid.
IF YOU DO NOT EXCHANGE YOUR OUTSTANDING DEBENTURES FOR REGISTERED DEBENTURES,
YOUR DEBENTURES WILL CONTINUE TO HAVE RESTRICTIONS ON TRANSFER.
If you do not exchange your outstanding debentures for registered debentures
in the exchange offer, or if your outstanding debentures are tendered but not
accepted, your debentures will continue to have restrictions on transfer. In
general, you may offer or sell any outstanding debentures only if the debentures
are registered under the Securities Act and applicable state laws, or resold
under an exemption from these laws. We do not intend to register the outstanding
debentures under the Securities Act, other than in the limited circumstances
described in the registration rights agreement discussed in the section
"Description of Debentures--Registration Rights; Liquidated Damages."
16
<PAGE>
THE ISSUANCE OF THE REGISTERED DEBENTURES MAY ADVERSELY AFFECT THE MARKET FOR
OUTSTANDING DEBENTURES.
If outstanding debentures are tendered for exchange, the trading market for
untendered and tendered but unaccepted outstanding debentures could be adversely
affected. Please refer to the section in this prospectus entitled "The Exchange
Offer--Consequences of Failure to Exchange."
YOU MAY FIND IT DIFFICULT TO SELL YOUR REGISTERED DEBENTURES BECAUSE NO PUBLIC
TRADING MARKET FOR THE REGISTERED DEBENTURES EXISTS.
The registered debentures will be registered under the Securities Act, but
will constitute a new issue of securities with no established trading market. We
do not intend to list the registered debentures on any national securities
exchange or to seek the admission of the registered debentures for quotation
through the Nasdaq Stock Market, Inc. Although Donaldson, Lufkin & Jenrette
presently intends to make a market in the registered debentures, Donaldson,
Lufkin & Jenrette is not obligated to do so, and they may discontinue any
market-making activity with respect to the debentures at any time without
notice. In addition, the registered debentures will not be eligible for trading
on the Private Offerings, Resales and Trading through Automated Linkages Market.
Accordingly,
- a market for the registered debentures may not develop;
- you may not be able to sell your registered debentures; and
- you may not be able to sell your registered debentures at any particular
price.
17
<PAGE>
FORWARD-LOOKING STATEMENTS
Some of the statements contained in this prospectus, including the above
risk factors, and the statements contained in the sections entitled "Prospectus
Summary," "Selected Historical Combined and Consolidation Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business" constitute "forward-looking statements." Any
statements that express, or involve discussions as to, expectations, beliefs,
plans, objectives, assumptions or future events or performance are not
historical facts and may be forward-looking. Often, but not always, these type
of statements are expressed through the use of words or phrases like:
- "will likely result,"
- "are expected to,"
- "will continue,"
- "anticipates,"
- "expects,"
- "estimates,"
- "intends,"
- "plans,"
- "projects," and
- "outlook."
These forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause the actual results, levels of activity, cost
savings, performance or achievements of ours, or industry results, to be
materially different from any future results, levels of activity, cost savings,
performance or achievements expressed or implied by these forward-looking
statements, and accordingly, these statements should be read in conjunction with
and are qualified in their entirety by reference to, the risks, uncertainties
and other factors, which are discussed in this prospectus. These factors
include, among others, the following:
- substantial leverage and ability to service debt;
- changing market trends in the mobile hydraulic crane, aerial work platform
and truck-mounted crane industries;
- general economic and business conditions including a prolonged or
substantial recession;
- our ability to implement our business strategy and maintain and enhance
our competitive strengths;
- our ability to implement the operations improvement program and any
estimates of potential cost savings derived from the operations
improvement program;
- our ability to obtain financing for general corporate purposes;
- competition;
- availability of key personnel;
- industry overcapacity; and
- changes in, or the failure to comply with, government regulations. Please
refer to the section in this prospectus entitled "Risk Factors."
18
<PAGE>
As a result of these and other factors, we cannot give any assurance as to
future results, levels of activity and achievements. Any forward-looking
statements in this prospectus speak solely as of the date on which these
statements are made. We undertake no obligation to update any forward-looking
statements to reflect events or circumstances after the date on which these
statements were made or to reflect the occurrence of unanticipated events.
19
<PAGE>
THE TRANSACTIONS
THE ACQUISITION
In December 1997, Grove Worldwide was formed as a Delaware limited liability
company to acquire the mobile hydraulic crane, aerial work platform and
truck-mounted crane businesses of Hanson Funding. In March 1998, Grove Worldwide
entered into an agreement to acquire these businesses for aggregate cash
consideration of approximately $583.0 million plus assumed liabilities of
approximately $258.4 million. The purchase price was subject to a post-closing
net worth adjustment. The acquisition was completed on April 29, 1998. The cost
of the acquisition, including the payment of related fees and expenses, was
approximately $607.4 million. We financed the acquisition through:
- $210.1 million of borrowings under the credit facility among Grove
Worldwide and certain banks;
- the issuance by Grove Worldwide of $225.0 million in gross proceeds of its
senior subordinated notes;
- the issuance by Grove Holdings of $50.0 million in gross proceeds of its
senior discount debentures; and
- the issuance by Grove Holdings of $120.0 million of its limited liability
company interests to us, the purchase price for which was financed with
the net proceeds of the issuance of the debentures and the issuance of
$75.0 million of our limited liability company interests to members of the
investor group referred to on page 20.
On April 29, 1998, Grove Holdings contributed the net proceeds from its
equity issuance and the offering of its senior discount debentures to Grove
Worldwide. Please refer to the section in this prospectus entitled "Management's
Discussion and Analysis of Financial Condition and Results of Operations." Grove
Worldwide received approximately $16.8 million in July 1998 and $10.5 million in
November 1998 from Hanson Funding in payment of the post-closing net worth
adjustment.
20
<PAGE>
Our structure, excluding inactive and immaterial subsidiaries, is as
follows:
[LOGO]
- ------------------------------
(1) Grove Investors and Grove Investors Capital, a wholly-owned subsidiary of
Grove Investors, are the issuers of the debentures covered by this
prospectus.
(2) Grove Holdings and Grove Holdings Capital, Inc., a wholly-owned subsidiary
of Grove Holdings, are the issuers of the senior discount debentures.
(3) Grove Worldwide and Grove Capital, Inc., a wholly-owned subsidiary of Grove
Worldwide, are the issuers of the senior subordinated notes.
THE INVESTOR GROUP
Grove Holdings owns all of the limited liability company interests of Grove
Worldwide. We own all of the limited liability company interests of Grove
Holdings. All of our outstanding membership interests are owned by (1) FW Grove
Coinvestors, L.P., (2) Oak Hill Strategic Partners, L.P., formerly known as FW
Strategic Partners, L.P., (3) GGEP-Grove, L.P., (4) Michael L. George, (5)
institutional investors and (6) members of senior management (collectively, the
"investor group").
FW Grove Coinvestors, a limited partnership formed in order to acquire our
membership interests, owns approximately 43.38% of our outstanding membership
interests. Keystone, Inc., the principal investment entity of Robert M. Bass, is
a limited partner of FW Grove Coinvestors. In addition, certain principals of
Keystone and its related entities are limited partners in a partnership which is
a limited partner of FW Grove Coinvestors.
Oak Hill Strategic Partners is a limited partnership that invests primarily
in public and private debt and equity securities. Oak Hill Strategic Partners
was formed by certain principals and employees of Keystone and its related
entities. Oak Hill Strategic Partners owns approximately 43.38% of our
outstanding membership interests.
GGEP-Grove is an entity that was formed by certain principals and employees
of the George Group Inc., an acquisition and management consulting firm that
applies its strategic and operations
21
<PAGE>
management expertise to manufacturing businesses. GGEP-Grove owns approximately
2.66% of our outstanding membership interests. The George Group is the general
partner of GGEP-Grove. Michael L. George is the Chief Executive Officer of the
George Group and its majority shareholder. In addition to the membership
interests owned by GGEP-Grove, Mr. George owns approximately 1.89% of our
outstanding membership interests.
Certain institutional investors beneficially own less than 3% of our
outstanding membership interests. Members of senior management own approximately
6.9% of our outstanding membership interests.
Please refer to the section in this prospectus entitled "Security Ownership
of Certain Beneficial Owners and Management."
GROVE INVESTORS CAPITAL, INC.
We organized Grove Investors Capital as our direct wholly owned subsidiary
to act as a co-issuer of the debentures. We did this so that institutional
investors that might have been unable to purchase debt securities issued by a
limited liability company because of the legal investment laws of their states
of organization or their charter documents, would be able to invest in the
outstanding debentures. Grove Investors Capital has nominal assets, no
liabilities other than the debentures, no operations and will not have any
revenues and is prohibited from engaging in any business activities. Grove
Investors Capital has no subsidiaries. As a result, you should not expect Grove
Investors Capital to participate in servicing the interest and principal on the
debentures.
22
<PAGE>
USE OF PROCEEDS
We will not receive any cash proceeds or incur any additional indebtedness
from the issuance of the registered debentures. In exchange for issuing the
registered debentures, we will receive outstanding debentures in like original
principal amount. Outstanding debentures received in the exchange offer will be
canceled.
We used the net proceeds of $45.0 million from the sale of the debentures,
together with equity contributions by the investor group, to purchase the
limited liability company interests of Grove Holdings. Grove Holdings
contributed to Grove Worldwide those proceeds, together with the proceeds from
the sale of its senior discount debentures. Grove Worldwide used those
contributed funds, together with the:
- borrowings by Grove Worldwide totaling $210.1 million under the credit
facility; and
- gross proceeds of $225.0 million from the senior subordinated notes,
to pay the cash purchase price for the Grove acquisition and related fees and
expenses.
The sources and uses of funds in connection with the acquisition are listed
below (in millions):
<TABLE>
<CAPTION>
SOURCES AMOUNT
---------
Credit Facility:
<S> <C>
Revolving Credit Facility......................................... $ 10.1
Term Loan Facility................................................ 200.0
Senior Subordinated Notes........................................... 225.0
Senior Discount Debentures.......................................... 50.0
Senior Debentures................................................... 47.3
Issuance of Grove Investors' Equity................................. 75.0
---------
Total......................................................... $ 607.4
---------
---------
USES
Acquisition of the Acquired Businesses.............................. $ 583.0
Fees and Expenses................................................... 24.4
---------
Total......................................................... $ 607.4
---------
---------
</TABLE>
23
<PAGE>
CAPITALIZATION
(DOLLARS IN THOUSANDS)
The following table shows our capitalization at April 3, 1999. You should
read this table together with "Use of Proceeds," "Selected Historical Combined
and Consolidated Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and our historical combined and
consolidated financial statements and related notes appearing elsewhere in this
prospectus.
<TABLE>
<CAPTION>
AS OF
APRIL 3, 1999
--------------
<S> <C>
Cash and cash equivalents..................................................... $ 20,722
Total debt:
Credit Facility(1):
Revolving Credit Facility................................................... $ --
Term Loan Facility.......................................................... 179,000
Senior Subordinated Notes..................................................... 225,000
Senior Discount Debentures.................................................... 55,473
Senior Debentures............................................................. 52,758
Other Debt(2)................................................................. 23,214
--------------
Total Debt.................................................................. 535,445
Total Invested Capital........................................................ 10,125
--------------
Total capitalization........................................................ $ 566,292
--------------
--------------
</TABLE>
- ------------------------
(1) In connection with the acquisition, Grove Worldwide and Grove Capital
entered into the credit facility, which consists of a $125,000 revolving
credit facility and a $200,000 term loan facility. The revolving credit
facility enables Grove Worldwide to obtain revolving credit loans and the
issuance of letters of credit. As of April 3, 1999, $0.9 million of letters
of credit were outstanding under the revolving credit facility and $124.1
million of the revolving credit facility was available for future liquidity
and capital needs. Please refer to the sections in this prospectus entitled
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Description of Credit
Facility."
(2) Represents short-term borrowings by Deutsche Grove GmbH, which are secured
by an equal amount of trade receivables.
24
<PAGE>
SELECTED HISTORICAL COMBINED AND CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The following table presents our selected historical financial data as of
and for each of the fiscal years ended September 28, 1996 and September 27,
1997, as of and for the seven months ended April 28, 1998, as of and for the
five months ended October 3, 1998, as of and for the six months ended March 28,
1998 and as of and for the six months ended April 3, 1999. Because of the
acquisition, which was accounted for using the purchase method, results of
operations for periods prior to April 29, 1998 are not comparable with those for
the periods after April 29, 1998.
You should read the following data with the more detailed information
contained in "Management's Discussion and Analysis of Financial Condition and
Results of Operations," "Selected Historical Combined and Consolidated Financial
Data" and our historical financial statements and the notes to those financial
statements included in this prospectus. You should also read the following
information with the data in the table below:
- Our gross profit for the five months ended October 3, 1998 was adversely
impacted by the write-off of $27.7 million of purchase accounting
adjustments with respect to the amount assigned to inventory in excess of
historical cost.
- Our net income (loss) includes losses by our Sunderland, United Kingdom
facility of $14,085 for the seven months ended April 28, 1998 and $5,999
for the five months ended October 3, 1998. In November 1998, we ceased
manufacturing operations at the Sunderland facility due to recurring
operating losses. Please refer to the section in this prospectus entitled
"Management's Discussion and Analysis of Financial Condition and Results
of Operations--Liquidity and Capital Resources."
- Depreciation and amortization excludes depreciation on equipment held for
rent.
- Capital expenditures includes expenditures on our management information
system of approximately $4,300 in fiscal 1996, approximately $14,000 in
fiscal 1997, approximately $9,322 for the seven months ended April 28,
1998, approximately $5,377 for the five months ended October 3, 1998 and
approximately $4,080 for the six months ended April 3, 1999.
- Earnings used in computing the ratio or earnings to fixed charges consist
of earnings before provision for income taxes plus fixed charges. Fixed
charges are defined as interest expense, which includes the amortization
of deferred financing costs, and that portion of rental expense
representative of interest, deemed to be one-third or rental expense.
Earnings before fixed charges were insufficient to cover fixed charges by
$25,327 for the five months ended October 3, 1998 and $23,688 for the six
months ended April 3, 1999. Earnings for the five months ended October 3,
1998 included fixed charges of $23,871. Earnings for the six months ended
April 3, 1999 included fixed charges of $28,690.
25
<PAGE>
SELECTED HISTORICAL COMBINED AND CONSOLIDATED FINANCIAL DATA
(DOLLARS IN THOUSANDS)
(CONTINUED)
<TABLE>
<CAPTION>
PREDECESSOR GROVE INVESTORS
---------------------------------------------------------------------------- --------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SEVEN MONTHS
FISCAL YEAR ENDED SIX MONTHS FIVE MONTHS SIX MONTHS
------------------------------------------ APRIL 28, ENDED ENDED ENDED
1994 1995 1996 1997 1998 MARCH 28, 1998 OCTOBER 3, 1998 APRIL 3, 1999
--------- --------- --------- --------- ------------- ----------------- --------------- ---------------
STATEMENT OF
OPERATIONS DATA:
Net sales......... $ 393,526 $ 503,815 $ 794,209 $ 856,812 $ 476,200 $ 405,903 $ 393,779 $ 350,369
Gross profit...... 87,991 126,589 185,079 203,273 98,863 84,566 58,015 65,474
Operating
expenses........ 80,752 88,216 134,459 135,382 79,041 66,677 61,209 63,998
Operating profit
(loss).......... 7,239 38,373 50,620 67,891 19,822 17,889 (3,194) 1,476
Net income
(loss).......... (4,942) 16,769 25,448 42,220 (395) 3,248 (29,664) (26,509)
BALANCE SHEET DATA
(AT PERIOD END):
Cash and cash
equivalents..... $ 7,135 $ 18,685 $ 8,184 $ 5,024 $ 34,289 $ 20,722
Total assets...... 509,189 652,000 730,158 881,496 915,243 883,568
Total debt........ -- -- 7,443 7,265 531,692 535,489
Total invested
capital......... 399,762 467,306 502,554 628,492 47,835 10,125
OTHER DATA:
Depreciation and
amortization.... $ 13,258 $ 13,765 $ 17,313 $ 17,985 $ 11,399 $ 9,384 $ 8,233 $ 9,600
Capital
expenditures.... 6,042 7,385 19,443 32,491 19,521 15,197 7,230 4,080
Sales backlog at
end of period... 109,350 208,152 185,237 229,513 268,682 278,982 163,314 208,753
Ratio of Earnings
to fixed
charges......... 2.1x 12.4x 12.2x 22.4x 4.6x 6.5x -- --
</TABLE>
26
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion together with the more detailed
information and our historical combined and consolidated financial statements
included elsewhere in this prospectus.
OVERVIEW
Our assets consist solely of membership interests of Grove Holdings and
capital stock of Grove Investors Capital. Grove Holdings' assets consist solely
of membership interests of Grove Worldwide and capital stock of Grove Holdings
Capital, Inc. We conduct all of our business through Grove Worldwide.
On April 29, 1998, we acquired from Hanson Funding (G) PLC and certain of
its subsidiaries, substantially all of the assets of Hanson's U.S. mobile
hydraulic crane and aerial work platform operations, the capital stock of
Hanson's U.S. truck-mounted crane operation and the capital stock of Hanson's
British, French, German, and Australian crane and aerial work platform
subsidiaries for an aggregate purchase price of $583 million. The purchase price
was subject to a post closing adjustment based on our net assets as of the
closing date for which we received $16.8 million in fiscal 1998 and an
additional $10.5 million in November 1998. Please see "The Transactions--The
Acquisition" on page 20 for an explanation of how we financed the acquisition.
In addition, see Note 2 to our combined and consolidated financial statements.
In connection with the acquisition, we implemented our operations
improvement program. Our operations improvement program is intended to improve
our operating efficiency and our margins by rationalizing product lines,
reducing manufacturing costs and reducing selling, general and administrative
expenses. As part of the program, we closed our Sunderland, U.K. facility in
November 1998. Cost reductions associated with our operations improvement
program include reducing material, labor and overhead costs through
consolidation of facilities, redesigning manufacturing processes, improving
purchasing leverage and redesigning sales and administrative functions. Cost
savings associated with our operations improvement program are estimated to be
approximately $2.0 million for fiscal 1998. Management estimates that we will
achieve cost savings of approximately $15.0 million for fiscal 1999. Management
currently estimates that the expected cost savings for fiscal 1999 will be
achieved principally through cost savings in the following categories:
- reduction of procurement costs for savings in the range of $3.0 million;
- reduction of production, labor and benefit costs for savings in the range
of $1.5 million;
- consolidation of selling, engineering, general and administrative expenses
in the range of $4.0 million; and
- reduction of manufacturing costs through product rationalization and
manufacturing process improvements for savings in the range of $5.0
million.
Please refer to the sections in this prospectus entitled "Risk Factors--We may
not be able to realize cost savings from our operations improvement program
because it depends on a number of factors, and the failure to realize these
savings could adversely affect our results of operations" and "Forward-Looking
Statements" and "Business--The Operations Improvement Program."
For fiscal years 2000, 2001 and 2002, management currently estimates that
annual savings will be between approximately $15.0 and $25.0 million. Management
currently estimates that the expected cost savings for fiscal years 2000, 2001
and 2002 will be achieved principally through cost savings as a result of
rationalizing product lines and reducing manufacturing costs through product
rationalization and manufacturing process improvements. However, cost savings
associated with our operations improvement program will be partially offset by
costs of up to approximately $25.0 million associated
27
<PAGE>
with the implementation of our operations improvement program and consulting
fees payable to George Group. Estimates of potential cost savings are inherently
uncertain and this description of our operations improvement program should be
read together with "Risk Factors--We may not be able to realize cost savings
from our operations improvement program because it depends on a number of
factors, and the failure to realize these savings could adversely affect our
results of operations," "Forward-Looking Statements" and "Business--The
Operations Improvement Program."
Grove Worldwide generates most of its net sales from the manufacture and
sale of new mobile hydraulic cranes, aerial work platforms and truck-mounted
cranes. Grove Worldwide also generates a portion of its net sales from
after-market sales, which include parts, service and used equipment, of the
products it manufactures. Sales of used equipment are not material and are
generally limited to trade-ins on new equipment through company-owned
distributors in France, Germany and the United Kingdom.
The following is a summary of net sales for the periods indicated (dollars
in millions):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR --------------------------
------------------------------- MARCH 28, APRIL 3,
1996 1997 1998 1998 1999
--------- --------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C>
New equipment sold (1).................................... $ 632.4 $ 670.1 $ 679.5 $ 317.0 $ 269.1
After-Market.............................................. 120.6 125.8 123.2 60.0 61.0
Other (2)(3).............................................. 41.2 60.9 67.3 28.3 20.3
--------- --------- --------- ------ -----------
Net sales................................................. $ 794.2 $ 856.8 $ 870.0 $ 405.9 $ 350.4
--------- --------- --------- ------ -----------
--------- --------- --------- ------ -----------
</TABLE>
- ------------------------
(1) Excludes specialty cranes and equipment sold to the United States
government.
(2) Includes specialty cranes and equipment sold to the United States government
and revenues from unit sales accounted for as operating leases.
(3) Includes revenues resulting from a non-recurring refurbishment contract in
the first quarter of fiscal 1998 with the Ministry of Defense of the United
Kingdom.
Consistent with industry practice, particularly in Germany, some of Grove
Worldwide's mobile hydraulic crane sales, generally less than 5% of units sold
annually, are made with residual value guarantees under which the full sales
price is collected in cash on normal commercial terms following delivery of the
cranes. However, these sales are accounted for in a manner similar to operating
leases. Upon collection, the sales price is deferred and accounted for as
deferred revenue, current and non-current, while the related inventory is
reclassified as "property, plant and equipment/equipment held for rent." Over
the term of the residual value guarantee, deferred revenue is recognized as
sales and the depreciation of the related equipment held for rent is classified
as cost of goods sold, the effect of which is to recognize sales, costs of goods
sold and gross profit over the residual value guarantee period, typically five
years, as opposed to at the time of delivery of the crane. Losses with respect
to residual value guarantees have been insignificant. Please refer to Note 3 to
our combined and consolidated financial statements.
We are a limited liability company organized under the laws of Delaware, as
a result of which:
- we do not have to pay income taxes;
- the taxable income of the mobile hydraulic crane, aerial work platform and
truck-mounted crane businesses in the United States is allocated to our
equity holders; and
- our equity holders are responsible for income taxes on their taxable
income.
28
<PAGE>
We intend to make distributions in the form of dividends to our equity holders
to enable them to meet their tax obligations with respect to income allocated to
them by us.
RESULTS OF OPERATIONS
For financial reporting purposes, the acquisition creates a new basis of
accounting and, accordingly, we are required to report results before the
acquisition separate from results after the acquisition. For purposes of the
following discussion of our results of operations, we have compiled financial
information for the fiscal year ended October 3, 1998 by combining results of
operations for the seven months ended April 28, 1998, before the acquisition,
with those for the five months ended October 3, 1998, after the acquisition. In
connection with the acquisition, we were formed as a limited liability company
and our capital structure was changed significantly. Accordingly, comparisons of
interest, taxes, and net income for fiscal 1998 and for the six months ended
April 3, 1999 relative to fiscal 1997 would not be meaningful and are therefore
not presented.
Listed below is information regarding our results of operations for the
periods indicated (dollars in thousands).
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FISCAL YEAR ------------------------
---------------------------------- MARCH 28, APRIL 3,
1996 1997 1998 1998 1999
---------- ---------- ---------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Net sales......................................... $ 794,209 $ 856,812 $ 869,979 $ 405,903 $ 350,369
Cost of goods sold................................ 609,130 653,539 685,394 321,337 284,895
Write-off of amount assigned to inventory in
excess of historical costs resulting from
purchase accounting adjustments................. -- -- 27,707 -- --
---------- ---------- ---------- ------------ ----------
Gross profit...................................... 185,079 203,273 156,878 84,566 65,474
Selling, engineering, general and administrative
expenses........................................ 119,619 124,152 131,782 62,002 60,512
Management fees paid to Hanson Funding (G) PLC.... 5,655 2,176 162 162 --
Amortization of goodwill.......................... 9,185 9,054 8,306 4,513 3,486
---------- ---------- ---------- ------------ ----------
Operating profit.............................. $ 50,620 $ 67,891 $ 16,628 $ 17,889 $ 1,476
---------- ---------- ---------- ------------ ----------
---------- ---------- ---------- ------------ ----------
</TABLE>
SIX MONTHS ENDED APRIL 3, 1999 (THE "FISCAL 1999 SIX MONTHS") COMPARED TO THE
SIX MONTHS ENDED MARCH 28, 1998 (THE "FISCAL 1998 SIX MONTHS")
NET SALES. Net sales for the fiscal 1999 six months were $350.4 million as
compared to $405.9 million for the fiscal 1998 six months, a decrease of $55.5
million or 13.7%. This reduction primarily resulted from reduced sales volume
during the fiscal 1999 six months and the repositioning of certain aerial work
platform manufacturing operations from Sunderland to the United States. However,
our sales backlog increased at the end of the second quarter of 1999 as compared
to the first quarter of 1999 by approximately $41.0 million or 24%. This
increased backlog is partially associated with new customers resulting from our
participation in the CONEXPO Trade Show and new product introductions.
GROSS PROFIT. Gross profit as a percentage of sales decreased to 18.7% for
the fiscal 1999 six months from 20.8% in the fiscal 1998 six months. This
decrease was primarily due to production inefficiencies caused by the
implementation of new operational initiatives and the management information
system, which amounted to approximately 1.2% of net sales, and reduced sales
volume available to absorb fixed overhead, which amounted to approximately 0.9%
of net sales. The remaining dollar decrease was associated primarily with the
reduced net sales volume offset by an estimated net
29
<PAGE>
increase of approximately $2.0 million to $3.0 million associated with our
operations improvement program.
SELLING, ENGINEERING, GENERAL AND ADMINISTRATIVE EXPENSE. Selling,
engineering, general and administrative expenses for the fiscal 1999 six months
were $60.5 million compared to $62.0 million for the fiscal 1998 six months, a
decrease of $1.5 million or 2.4%. This decrease was primarily associated with
reductions from cost saving programs of approximately $5.5 to $6.5 million
associated with salary reductions and the elimination of the Sunderland, U.K.
facility costs, offset by increased consulting costs of approximately $3.8
million. Also, selling, engineering, general and administrative expenses
increased as a percentage of net sales to 18.3% in 1999 from 16.4% in 1998. This
increase was primarily associated with the reduced sales volume offset by our
recently initiated cost savings program.
INCOME FROM OPERATIONS. Income from operations decreased to $1.5 million
for the fiscal 1999 six months from $17.9 million in the fiscal 1998 six months,
a decrease of $16.4 million or 91.7%, primarily due to reduced sales volume and
the repositioning of certain aerial work platform manufacturing from Sunderland
to the United States.
INTEREST AND DEBT ISSUANCE EXPENSE. Interest and debt issuance expense
increased to $27.7 million for the fiscal 1999 six months from $1.9 million for
the fiscal 1998 six months, an increase of $25.8 million, primarily due to the
debt incurred to finance the acquisition and the change in our capital
structure. See notes 1 and 2 to the condensed consolidated financial statements.
OTHER INCOME (EXPENSE) NET. Other income (expense), net increased to income
of $2.5 million for fiscal 1999 six months from an expense of $1.6 million in
fiscal 1998 six months, an increase of $.94 million or 38.6% primarily due to a
loss in fiscal 1998 six months on the sale of land and buildings by our
predecessor's U.K. subsidiary to Hanson. Immediately after the sale, Hanson
leased the property back to us.
FISCAL 1998 COMPARED TO FISCAL 1997
NET SALES. Net sales increased $13.2 million, or 1.5%, from $856.8 million
for fiscal 1997 to $870.0 million for fiscal 1998.
Net sales of mobile hydraulic cranes declined from fiscal 1997 to fiscal
1998 on higher unit sales. The decline in net sales was caused by a shift in
product mix and higher price concessions, primarily on mobile hydraulic cranes
produced by our Sunderland, United Kingdom facility. While net sales to North
American and European customers remained stable, net sales to Asia declined. The
modest decline in net sales to the Asian market was a result of Asia's recent
economic crisis.
Net sales of aerial work platforms increased modestly from fiscal 1997 to
fiscal 1998. Unit sales of aerial work platforms were down; however, net sales
increased as a result of improved sales mix.
Net sales of truck-mounted cranes increased significantly from fiscal 1997
to fiscal 1998. Net sales increased as the result of increased production
capacity as well as significantly increased demand for higher priced models.
After-market sales, including parts and services, decreased slightly from
fiscal 1997 to fiscal 1998. This decrease was due primarily to a decrease in
used equipment sales partially offset by a slight increase in parts sales.
Other sales increased 10.5% as a result of higher revenue from unit sales
that were accounted for as operating leases, partially offset by lower revenues
following the completion of a non-recurring contract for crane refurbishment
with the Ministry of Defence of the United Kingdom.
GROSS PROFIT. Gross profit decreased $46.4 million, or 22.8%, from $203.3
million in fiscal 1997 to $156.9 million in fiscal 1998. Gross profit was
adversely impacted by a $27.7 million write-off of
30
<PAGE>
amounts assigned to inventory in excess of historical costs in accounting for
the acquisition. The decline in gross profit was also attributable to a $14.8
million decline in gross profit at our Sunderland, United Kingdom facility
caused by higher price concessions and lower sales volume available to absorb
fixed overhead. The higher price concessions were primarily required to induce
the sale of United Kingdom-manufactured products, including 17 all-terrain
cranes that were built to order for a customer that refused delivery in fiscal
1998. The sale of the 17 cranes, which were sold for approximately $8.2 million
during the second quarter of fiscal 1998, resulted in a loss of approximately
$1.5 million.
SELLING, ENGINEERING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling,
engineering, general and administrative expenses increased $7.6 million, or
6.1%, from $124.2 million in fiscal 1997 to $131.8 million in fiscal 1998. As a
percentage of net sales, selling, engineering, general and administrative
expenses were 14.5% in fiscal 1997 and 15.1% in fiscal 1998. The expense growth
occurred broadly across Grove Worldwide as the result of the impact of the
acquisition on operations. Included in selling, engineering, general and
administrative expenses for fiscal 1998 are approximately $2.7 million of George
Group Inc. expenses and $3.1 million of ownership transition costs related to
the acquisition and the hiring of new management. Included in selling,
engineering, general and administrative expenses for fiscal 1997 are
approximately $2.0 million in restructuring charges related to the United
Kingdom crane manufacturing operation.
FISCAL 1997 COMPARED TO FISCAL 1996
NET SALES. Net sales increased $62.6 million, or 7.9%, from $794.2 million
in fiscal 1996 to $856.8 million in fiscal 1997.
Net sales of mobile hydraulic cranes were virtually unchanged from fiscal
1996 to fiscal 1997. Unit shipments increased in fiscal 1997 versus fiscal 1996,
with substantially all of the increase representing units sold to Latin American
customers. Sales of mobile hydraulic cranes reflected strong demand in North
America.
Net sales of aerial work platforms increased significantly from fiscal 1996
to fiscal 1997. Unit sales increased as a result of continued industry growth
led by efficiency considerations as well as government-mandated safety standards
for people working in elevated environments.
Net sales of truck-mounted cranes increased significantly from fiscal 1996
to fiscal 1997. Unit sales increased principally due to increased international
marketing efforts. Net sales of truck-mounted cranes also benefited from an
improved product sales mix resulting primarily from increased demand for higher
priced models.
After-market sales, including parts and services, increased from fiscal 1996
to fiscal 1997. This increase was due primarily to an increase in parts sales
resulting from a larger installed base and relatively high rental fleet
utilization.
Other sales increased significantly as a result of a non-recurring crane
refurbishment contract for cranes with the Ministry of Defence of the United
Kingdom.
GROSS PROFIT. Gross profit increased $18.2 million, or 9.8%, from $185.1
million in fiscal 1996 to $203.3 million in fiscal 1997. The increase in gross
profit was due primarily to increased sales in the aerial work platform and
truck-mounted crane businesses. As a percentage of sales, gross profit improved
modestly from 23.3% in fiscal 1996 to 23.7% in fiscal 1997.
SELLING, ENGINEERING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling,
engineering, general and administrative expenses increased $4.6 million, or
3.8%, from $119.6 million in fiscal 1996 to $124.2 million in fiscal 1997.
However, as a percentage of net sales, selling, engineering, general and
administrative expenses declined from 15.1% in fiscal 1996 to 14.5% in fiscal
1997 as a result of higher
31
<PAGE>
sales that absorbed fixed costs. The dollar increase was principally related to
higher selling and advertising costs to support the sales growth of our product
lines as well as general cost increases.
Included in selling, engineering, general and administrative expenses are
research and development expenses, which increased 2.7% from $15.0 million in
fiscal 1996 to $15.4 million in fiscal 1997. In addition, general and
administrative expenses included $2.7 million in fiscal 1996 and $1.3 million in
fiscal 1997, due to process re-engineering and systems assessment costs
associated with the installation of our management information system. Please
refer to the section in this prospectus entitled "--Management Information
Systems and the Impact of Year 2000."
MANAGEMENT FEES. Results of operations included management fees paid to
Hanson Funding of $5.7 million in fiscal 1996 and $2.2 million in fiscal 1997.
We believe our results of operations in all material respects reflect all
operating costs on a stand alone basis. We estimate that costs to replace
services provided by Hanson Funding before the acquisition together with other
stand alone costs will be less than $1.0 million for the twelve months following
the acquisition. These costs, which are generally less than the management fees
charged by Hanson Funding on an annual basis, relate to additional treasury,
human resource and income tax requirements. We believe these additional costs
will be more than offset by planned costs savings in other general and
administrative areas.
NET INTEREST EXPENSE/INCOME. Net interest expense/income included (1)
interest income of $0.6 million in fiscal 1996 and $2.1 million in fiscal 1997,
which was generated primarily from notes receivable under Grove Worldwide's
special North American dealer financing program and (2) interest expense of $3.3
million in fiscal 1996 and $2.0 million in fiscal 1997, substantially all of
which was paid to Hanson Funding with respect to intercompany borrowings.
INCOME TAXES. Income tax expense, virtually all of which was U.S.-based,
increased 18.3% from $22.2 million in fiscal 1996 to $26.2 million in fiscal
1997. The overall effective tax rates were 46.6% for fiscal 1996 and 38.3% for
fiscal 1997. The decline in tax rate was caused principally by a reduction in
permanent goodwill additions which resulted from the transactions consummated to
effect a demerger of Hanson Funding's various businesses. We have established
valuation allowances for net operating losses generated by our foreign
subsidiaries.
NET INCOME. Net income increased $16.8 million, or 65.9%, from $25.4
million in fiscal 1996 to $42.2 million in fiscal 1997. The increase related
principally to increased sales and operating profits.
GEOGRAPHIC COMPARISONS DURING THE THREE YEARS ENDED OCTOBER 3, 1998
Net sales to unaffiliated customers by our domestic subsidiaries contributed
in excess of 70% of our sales in fiscal 1998 and virtually all of our income
from operations. Net sales to unaffiliated customers by our domestic
subsidiaries increased by $23.8 million or 3.9% in fiscal 1998 as compared to
fiscal 1997. The increase in net sales by our domestic subsidiaries was caused
by strong sales of aerial work platforms and truck-mounted cranes. Net sales of
mobile hydraulic cranes by our domestic subsidiaries were virtually unchanged in
fiscal 1998 as compared to fiscal 1997. Net sales to unaffiliated customers by
our foreign subsidiaries decreased by $10.6 million or 4.2% in fiscal 1998 as
compared to fiscal 1997. The decrease in net sales by our foreign subsidiaries
was primarily the result of Sunderland's completion of the Ministry of Defence
of the United Kingdom contract in February 1998. Recurring operating losses by
our manufacturing facility in Sunderland, United Kingdom of approximately $15.9
million in fiscal 1998 exceeded all of the operating earnings of our German and
French subsidiaries during the same period.
Net sales to unaffiliated customers by our domestic subsidiaries contributed
in excess of 70.0% of our sales in fiscal 1997 and virtually all of our net
income. Net sales to unaffiliated customers by our domestic subsidiaries
increased by $43.6 million or 7.8% in fiscal 1997 as compared to fiscal 1996,
which represented approximately 70.0% of our overall sales increase for fiscal
1997. The increase in net
32
<PAGE>
sales by our domestic subsidiaries was caused by strong sales of aerial work
platforms and truck-mounted cranes. Net sales of mobile hydraulic cranes by our
domestic subsidiaries were virtually unchanged in fiscal 1997 as compared to
fiscal 1996. Net sales to unaffiliated customers by our foreign subsidiaries
increased by $16.7 million or 7.2% in fiscal 1997 as compared to fiscal 1996.
The increase in net sales by our foreign subsidiaries was primarily the result
of continued growth of aerial work platform sales in Europe. Recurring operating
losses by our manufacturing facility in Sunderland, United Kingdom of
approximately $2.5 million in fiscal 1997 offset virtually all of the operating
earnings of our German and French subsidiaries during the same period.
Net sales to unaffiliated customers by our domestic subsidiaries contributed
in excess of 70.0% of our sales in fiscal 1996 and all of our net income. The
acquisition of the KMK division of Fried.Krupp AG Hoesch-Krupp contributed
significant sales growth to both domestic and European operations. Operating
losses by our manufacturing facility in Sunderland, United Kingdom of
approximately $3.8 million in fiscal 1997 offset all of the operating earnings
of our German and French subsidiaries during the same period. The acquisitions
of Delta Systems SA and the KMK division of Fried.Krupp improved the operating
results of our German and French subsidiaries.
33
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Our business is working capital-intensive, requiring significant investments
in receivables and inventory. In addition, we require working capital for
replacement and improvements of existing plant, equipment and processes and
service of subsidiary debt. We are a holding company whose operations are
conducted through our domestic and foreign subsidiaries.
During the six months ended April 3, 1999, our operating activities
generated approximately $2.4 million in operating cash flow. This amount
resulted primarily from a loss from operations before non-cash charges of $6.5
million, offset by favorable changes in operating assets and liabilities
(consisting of accounts receivable, inventories and accounts payable) of $8.9
million. We have entered into an agreement with a major international bank to
sell up to $65.0 million of notes receivable obtained under its special North
American Dealer Finance Program. The bank purchases the notes at face value on a
90.0% non-recourse basis. We retain 10%of the credit risk. The sale of the notes
qualifies as a sale under generally accepted accounting principles and,
accordingly, upon sale, the notes receivable are removed from our balance sheet.
Please refer to Note 4 to our combined and consolidated financial statements.
During the six months ended April 3, 1999, we used $12.0 million in
investing activities, consisting principally of $4.1 million of capital
expenditures and $19.2 million of investment in equipment held for rent, offset
by $10.5 million received from Hanson Funding as the final purchase price
adjustment.
During the twelve months ended October 3, 1998, our operating activities
generated approximately $150.4 million in operating cash flow ($93.1 million for
the seven months ended April 28, 1998 and $57.3 for the five months ended
October 3, 1998). This amount resulted primarily from income from operations
before non-cash charges of $80.3 million, declines in the investment in accounts
receivable and inventory of $34.4 million, proceeds from sales of notes
receivable to a major international bank of $24.8 million and increases in other
non-current liabilities of approximately $10.0 million.
During the seven months ended April 28, 1998, we used $33.8 million in
investing activities, consisting primarily of $19.5 million of capital
expenditures, of which $9.3 million was for the new management information
system, and $16.4 million of investment in equipment held for rent, due to the
operating lease treatment relating to sales which are accounted for as operating
leases, and $55.3 million in financing activities, principally consisting of
amounts paid to Hanson Funding.
During the five months ended October 3, 1998, we used approximately $589.4
million of cash flow for investing activities of which $562.7 million was
related to the acquisition, $7.2 million was for capital expenditures, of which
$5.4 million was for the new management information system, and $20.8 million
was for investment in equipment held for rent. The cash flows used in investing
activities were funded by cash flows from operating activities and through the
issuance of long-term debt of $547.6 million and an equity contribution from our
members of $75.0 million. Net cash flows from financing activities also included
there payment of $35.2 million of long-term debt and $19.5 million of deferred
financing costs.
In November 1998, we ceased manufacturing operations at our Sunderland,
United Kingdom facility due to recurring operating losses. Management believes
closing the facility will improve operating earnings as well as provide the
opportunity for additional cost reductions through product rationalization,
reduced selling, general and administrative expenses and reduced manufacturing
costs. Management has estimated total closure costs to be approximately $18.5
million, consisting of the following (dollars in thousands):
<TABLE>
<S> <C>
Employee costs consisting of severance payments and outplacement assistance........ $ 11,500
Equipment dismantlement and disposal costs......................................... $ 5,600
Plant cleanup and closure costs.................................................... $ 1,400
</TABLE>
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Through April 3, 1999, we expended approximately $7. million in severance
costs related to 633 employees. As of April 3, 1999, $4.1 million of severance
and related costs for 50 employees, $5.6 million of equipment disposal, and $1.4
million of plant cleanup costs remain to be expended. Such amounts are expected
to be expended by the end of the fiscal year.
We expect that cash flows from foreign operations will be required to meet
our domestic debt service requirements. Cash flows are expected to be generated
from intercompany interest expense on loans Grove Worldwide made to two of its
foreign subsidiaries to consummate the acquisition of Hanson Funding's crane and
aerial work platform subsidiaries in the United Kingdom, Germany and France and
for working capital requirements. The loans have been established with amounts
and interest rates to allow for repatriation without restriction or additional
tax burden. However, there is no assurance that the foreign subsidiaries will
generate the cash flow required to service the loans or that the laws in the
foreign jurisdictions will not change to limit repatriation or increase the tax
burden of repatriation.
In connection with the acquisition, Grove Worldwide entered into a
seven-year, $125 million revolving credit facility, permitting it, subject to
certain borrowing conditions, to obtain revolving credit loans and issue letters
of credit for working capital, acquisitions and general corporate purposes. A
portion of the revolving credit facility is available for borrowing in the euro
currency markets of British pounds sterling, German marks and French francs and
other currencies. As of April 3, 1999 Grove Worldwide had available borrowings
of $124.1 million under the revolving credit facility. For additional
information regarding the revolving credit facility, please refer to Note 10 to
our combined and consolidated financial statements. We believe that our income
from operations and available borrowings under the revolving credit facility
will be sufficient to meet our debt service obligations and capital expenditure
requirements and to make distributions in the form of dividends to our equity
holders to enable them to meet their tax obligations with respect to income
allocated to them for at least the next twelve months. In addition, we believe
that our results from operations plus available borrowings under the credit
facility should be sufficient to fund our capital expenditures and debt service
obligations for the next three years. Please refer to the section in this
prospectus entitled "Forward-Looking Statements." Through May 1, 2003, our cash
debt service obligations, except in certain circumstances, are limited to:
- principal payments on our bank term loan of $2 million per year plus 75%
of excess cash flow as defined in the bank credit facility;
- periodic interest payments on borrowings under the bank credit facility;
and
- semi-annual interest payments on the 9 1/4% senior subordinated notes.
The senior discount debentures do not require cash interest payments prior
to May 1, 2003 and the senior debentures require no cash interest payments prior
to maturity. Subject to certain exceptions, including the right of Grove
Worldwide and Grove Holdings to make distributions to us to enable us to make
distributions to our equity holders with respect to their tax obligations, Grove
Worldwide's credit facility, the indenture relating to Grove Worldwide's senior
subordinated notes and the indenture relating to Grove Holdings' senior discount
debentures impose significant restrictions on the ability of our subsidiaries to
pay cash dividends or make loans to us.
GROVE INVESTORS CAPITAL
We issued the debentures together with our wholly owned subsidiary, Grove
Investors Capital. We organized Grove Investors Capital as our direct wholly
owned subsidiary to act as a co-issuer of the debentures and a co-registrant of
the Registration Statement. We did this so that institutional investors that
might have been unable to purchase debt securities issued by a limited liability
company because
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of the legal investment laws of their states of organization or their charter
documents, would be able to invest in the outstanding debentures.
Grove Investors Capital has no subsidiaries. You should not expect Grove
Investors Capital to participate in servicing the interest and principal on the
debentures because Grove Investors Capital:
- has nominal assets and no operations;
- will not have any revenues; and
- is prohibited from engaging in any business activities.
We have not included separate financial statements of Grove Investors
Capital in this prospectus. We believe that providing separate financial
statements and other disclosures concerning Grove Investors Capital would not be
material to you. Once this registration statement is declared effective, Grove
Investors Capital will, absent relief from the SEC, become subject to the
reporting and informational requirements of Sections 13 and 15(d) of the
Exchange Act.
BACKLOG
Our backlog consists of firm orders for new equipment and replacement parts.
Total backlog as of July 10, 1999 was approximately $228.4 million compared to
total backlog as of July 11, 1998 of approximately $225.2 million. We expect all
of our backlog orders to be filled within one year, although there can be no
assurance that all backlog orders will be filled within that time period. Parts
orders are generally filled on an as-ordered basis.
CYCLICALITY
Historically, cyclical variations based, among other things, on general
economic conditions and, in particular, on conditions in the construction
industry have affected sales of our products. During periods of expansion in
construction activity, we generally have benefited from increased demand for
construction equipment. Conversely, during recessionary times, we have been
adversely affected by reduced demand for our products. Downward cycles result in
reductions in our new unit sales and prices, which adversely impact our results
of operations. We believe there are several factors that may lessen the effects
of future cyclical trends on our business. These factors include the continued
growth of our aerial work platform business, which has a lower correlation to
the results of the construction industry, the global diversification of our
sales network and the decrease in the fixed costs of our overall business.
After-market sales for parts and services accounted for 11.4% of our net sales
fiscal 1998. These sales typically have higher gross margins and are less
cyclical than new equipment sales. However, there can be no assurance that a
decline in the general condition of the economy will not have a material adverse
impact on us.
Net sales of new units to Asian customers represented 5.6% in fiscal 1996,
5.1% in fiscal 1997, 2.0% in fiscal 1998 and 1.6% in fiscal 1999 six months, of
our net sales. The Asian economic crisis has had a limited impact on our results
of operations. Although we are not dependent on sales to Asian customers, we
cannot reasonably predict what impact, if any, the crisis will have on our
competitors or on markets outside of Asia where we sell our products.
MANAGEMENT INFORMATION SYSTEMS AND THE IMPACT OF YEAR 2000
Many computer programs and microprocessors use two digits rather than four
to define the applicable year. Computer programs that have date-sensitive
software and microprocessors may recognize a date using "00" as the year 1900
rather than the year 2000. This phenomenon could cause a disruption of
operations, including, among other things, a temporary inability to use
manufacturing equipment, send invoices or engage in similar normal business
activities.
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<PAGE>
In fiscal 1995, we conducted a Year-2000 assessment of all management
information systems used at our crane and aerial work platform facilities in the
United States, United Kingdom and Germany. Upon completing this review in
October 1995, we launched the Year-2000 project, a campaign designed to replace
all existing software and hardware that was not Year-2000 compliant. In addition
to replacing all business application software and hardware, the Year-2000
project was designed to provide improved business processes and procedures.
We determined that we did not need to implement the Year-2000 project at our
National Crane facility in Waverly, Nebraska. Instead, National Crane upgraded
all of its existing hardware and software and converted all of its data.
Management believes the completion of this upgrade has rendered all of National
Crane's major computer systems Year-2000 compliant.
We have also polled the manufacturers of our computerized numerical control
manufacturing/ production equipment. These manufacturers have informed us that
there are no Year-2000 issues with respect to these computerized numerical
control equipment at our Shady Grove, Pennsylvania and Waverly, Nebraska
facilities. We are also conducting an internal review of our computerized
numerical control equipment to confirm the equipments' Year-2000 readiness.
Although we believe that the Year-2000 issue will not have a material adverse
impact on our computerized numerical control equipment, there can be no
assurance that it will not.
We have also evaluated all of our non-information technology systems for
their state of readiness for proper operation in the year 2000. We believe that
the majority of our non-information technology systems are Year-2000 compliant.
We expect that all non-information technology systems that are not yet Year-2000
compliant will be compliant by September 1999.
In addition, we have initiated communications with suppliers and customers
to determine the extent to which we may be vulnerable to their failure to
remediate their own Year-2000 issues. There can be no guarantee that the systems
of other companies on which our systems rely will be timely converted, or that a
failure to convert by another company, or a conversion that is incompatible with
our systems, would not have material adverse effect on us. However, based on our
current assessment, we believe that the Year-2000 issue will not have a material
adverse impact on our future results of operations or financial conditions,
although there can be no assurance that this will be the case.
We are in the process of developing a business contingency plan to address
Year-2000 risks. Although we expect to complete the plan by fall 1999, we will
continue to enhance and revise the plan, as appropriate, throughout the
remainder of 1999 and into the year 2000. The contingency plan will include
identification of critical processes, risk assessment and response techniques in
the event of a system failure. Our planned responses to "worst case scenario"
system failures include designating emergency response personnel to address and
correct any unforseen problems, identification of alternate sources of supply,
manual processing of transactions, manual control of production processes and
where practical, the stockpiling of raw materials and finished goods in those
instances where a high risk of a supply failure is suspected. In addition, we
are considering obtaining back-up power sources to keep core computer systems
functioning in the event local utility companies are no longer operational. In
certain cases, especially global infrastructure failures, there may be no
practical alternative course of action available to us that will permit
resumption of an interrupted business activity.
We expect to complete the Year-2000 project in September 1999. We expect the
project will have a total cost of approximately $38.0 million, of which
approximately $35.0 million had been spent as of April 3, 1999. If the Year-2000
project is delayed, we will have to shorten our planning horizons and replace
certain computerized functions, like inventory and work-in-process tracking,
billing and order processing, with manual systems. Any delay in completing the
project could result in part shortages and slow the delivery of products to our
customers. We believe that all of our major computer systems will be rendered
Year-2000 compliant. If we do not complete the modifications and conversions in
a timely
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manner, the Year-2000 issue could have a material impact on our operations.
Please refer to the section in this prospectus entitled "Business--Management
Information Systems."
IMPACT OF CONVERSION BY THE EUROPEAN UNION TO A COMMON CURRENCY
On January 1, 1999, eleven of the fifteen member countries of the European
Union established fixed conversion rates between their existing currencies and
the euro, a new European currency, and adopted the euro as their common legal
currency. Either the euro or a participating country's existing currency will be
accepted as legal tender until January 1, 2002, from which date forward only the
euro will be accepted. The euro will be implemented initially as an additional
currency both in domestic and foreign markets for European businesses domiciled
in the European monetary zone. In fiscal 1998, we derived approximately 18% of
our revenues from operations in member countries of the European monetary union.
We initiated an assessment of euro-related issues and their impact on
information systems, currency exchange rate risk, employment and benefits,
taxation, contracts, competition, selling prices and costs, communications,
finance and administration. Initially we intend to continue to do business in
the national currencies of the countries adopting the euro. We will accommodate
customers and vendors who wish to do business in the euro. During fiscal 1999
and 2000 we intend to upgrade our information systems in Germany and France to
facilitate our ability to transact all business using the euro by January 1,
2002. After this date all of our transactions in countries participating in the
euro conversion will be based solely on the euro. We do not currently expect the
cost of these modifications to have a material effect on our results of
operations or financial condition.
We have outstanding foreign exchange contracts involving the currencies of
countries participating in the euro conversion. We believe that conversion to
the euro may reduce our exposure to exchange rate risk, due to the netting
effect of having assets and liabilities denominated in a single currency as
opposed to the various legacy currencies. As a result, our foreign exchange
hedging costs could be reduced. Conversely, because there will be less diversity
in our exposure to foreign currencies, movements of the euro's value relative to
the United States dollar could have a more pronounced effect, whether positive
or negative.
The United Kingdom, which, in fiscal 1998, accounted for approximately 10%
of our consolidated net sales, did not participate in the euro conversion. We
are considering the potential impact which the United Kingdom's nonparticipation
might have on trading activities with countries participating in the euro
conversion as well as on internal United Kingdom operations.
We do not expect the euro conversion, including the costs of implementation,
to have a material adverse effect upon our results of operations, financial
condition or cash flow. However, we cannot guarantee that, with respect to the
euro conversion, all problems, including long-term competitive implications of
the conversion, will be foreseen and corrected, that no material disruption of
our business will occur, or that there will be no delays in the dates targeted
by us for the euro conversion process.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our principal market risk exposure is changing interest rates, primarily
changes in short-term interest rates. We do not enter into financial instruments
for trading or speculative purposes. Our policy is to manage interest rates
through use of a combination of fixed and floating rate debt. We may also use
derivative financial instruments to manage our exposure to interest rate risk. A
summary of
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the principal financial instruments which are subject to interest rate risk at
April 3, 1999 is as follows (dollars in thousands):
<TABLE>
<CAPTION>
AMOUNT OUTSTANDING AT INTEREST
DESCRIPTION APRIL 3, 1999 RATE FAIR VALUE
- ---------------------------------------------------------------- --------------------- ------------ ----------
<S> <C> <C> <C>
Grove Worldwide's Revolving Credit Facility..................... $ -- Floating $ --
Grove Worldwide's Term Loan Facility............................ $ 179,000 Floating $ 179,000
Grove Worldwide's Senior Subordinated Notes..................... $ 225,000 9.25% $ 168,750
Grove Holdings' Senior Discount Debentures...................... $ 88,000 11.625% $ 27,280
Grove Investors' Debentures..................................... $ 52,758 14.50% $ 26,379
</TABLE>
At Grove Worldwide's option, loans under the revolving credit facility and
term loan facility bear interest (a) in the case of loans in United States
dollars, at the highest of (x) 1/2 of 1.0% in excess of the federal funds
effective rate (y) 1.0% in excess of a certificate of deposit rate and (z) the
bank's prime rate, plus the applicable margin, or (b) in the case of all loans,
the relevant euro currency rate, plus the applicable margin. The applicable
margin will vary based upon Grove Worldwide's operating results and will range
between 1.25% and 2.25% for borrowings under the revolving credit facility and
between 2.0% and 2.5% for borrowings under the term loan facility. As of April
3, 1999, the margins for borrowings under the revolving credit facility were
2.25% and the margins for borrowings under the term loan facility were 2.5%. The
average interest rate on borrowings under the term loan facility was 7.5% for
the six months ended April 3, 1999.
The revolving credit facility expires in fiscal 2005. The term loan facility
matures in fiscal 2006 and must be repaid in semi-annual installments in April
and October of each year in an aggregate amount of (1) $2,000 for the first six
years, (2) $88,000 during fiscal 2005 and (3) the balance in fiscal 2006. The
senior subordinated notes mature in fiscal 2008. The senior discount debentures
mature in fiscal 2009. The senior discount debentures require no cash payments
prior to November 2003 except in limited circumstances. The debentures mature in
fiscal 2010. The debentures require no cash payments until maturity except in
limited circumstances.
We have an interest rate collar to manage exposure to fluctuations in
interest rates on $100.0 million of our floating rate long-term debt through
September 2001. Under the agreement we will receive, on a $100.0 million
notional amount, three month LIBOR and pay 6.5%, anytime LIBOR exceeds 6.5%, and
will receive three month LIBOR and pay 5.19% anytime LIBOR is below 5.19%. The
agreement effectively caps our exposure on $100.0 million of our floating rate
debt at 6.5% plus the applicable margin.
Movement in foreign currency exchange rates creates risk to our operations
to the extent of sales made and costs incurred in foreign currencies. The major
foreign currencies in which we do business are the British pound sterling,
German mark and French franc. In addition, changes in currency exchange rates
can affect the competitiveness of our products and could result in management
reconsidering pricing strategies to maintain market share. Specifically, we are
most sensitive to changes in the German mark. In the six months ended April 3,
1999, approximately 32.0% of our net sales were transacted in foreign currencies
and approximately 21% were transacted in the German mark. During the past three
fiscal years, the impact of currency fluctuations has not had significant impact
on our results of operations. Had the average exchange rate for our foreign
currencies been 10% higher in fiscal 1998 our reported earnings would have been
higher by $2.0 million for the seven months ended April 28, 1998 and $1.1
million for the five months October 3, 1998.
To manage currency risk, our practice is to contract for purchases and sales
of goods and services in the functional currency of our subsidiary executing the
transaction. To the extent the purchases or sales are in currencies other than
the functional currency of the subsidiary, we generally purchase forward
contracts to hedge firm purchase and sales commitments. As of April 3, 1999, we
were a party to ten forward contracts with an aggregate value of $15.1 million.
These forward contracts generally
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<PAGE>
have average maturities of less than three months. We have not taken any actions
at this time to hedge our net investment in foreign subsidiaries but may do so
in the future.
We do not have any commodity contracts.
ENVIRONMENTAL MATTERS
We generate hazardous and non-hazardous waste in the normal course of our
manufacturing operations. As a result, we are subject to a wide range of
Federal, state, local and foreign environmental laws, that:
- govern activities or operations that may have adverse environmental
effects, such as discharges to air and water, as well as handling and
disposal practices for hazardous and nonhazardous wastes; and
- impose liability for the costs of cleaning up, and damages resulting from,
sites of past spills, disposals or other releases of hazardous substances.
In order to comply with these laws , we have to make expenditures on a
continuing basis. We do not expect that these expenditures will have a material
adverse effect on our financial condition or results of operations.
In 1990, the Clean Air Act was amended to establish a list of 189 toxic air
pollutants that must be controlled using maximum achievable control technology
as prescribed by the Environmental Protection Agency. We believe that by 2003 we
will need to comply with the maximum achievable control technology regulations
with respect to our surface coating air omissions. At this time, we do not
expect the cost of compliance with these regulations to have a significant
impact on us.
CHANGE IN ACCOUNTING STANDARDS
Statement of Financial Accounting Standards No. 131 ("SFAS No. 131"),
"Disclosures about Segments of an Enterprise and Related Information," was
issued by the Financial Accounting Standards Board in June 1997. This statement
establishes standards for reporting information about operating segments in
annual financial statements and requires reporting of selected financial
information about operating segments in interim financial reports issued to
stockholders. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. We will adopt SFAS
No. 131 for the year ended 1999 reporting. We are evaluating the impact, if any,
the standard will have on its present segment reporting.
In February 1998 the Financial Accounting Standards Board issued SFAS No.
132, "Employers' Disclosures about Pension and Other Postretirement Benefits"
("SFAS No. 132"), which is effective for fiscal years beginning after December
15, 1997. SFAS No. 132 revised the required disclosures about pension and other
postretirement benefit plans. We will adopt SFAS No. 132 for year ended 1999
reporting.
In June 1998 the Financial Accounting Standards Board issued SFAS No. 133
("SFAS No. 133"), "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133 established new procedures for accounting for
derivatives and hedging activities and supersedes and amends a number of
existing standards. The statement is effective for fiscal years beginning after
June 15, 1999. In May 1999, the Financial Accounting Standards Board issued an
exposure draft that would defer the effective date of SFAS No. 133. In the event
that this exposure draft is adopted, we will postpone adoption of the statement
until fiscal years beginning after June 15, 2000.
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<PAGE>
THE EXCHANGE OFFER
GENERAL
We are offering to exchange up to $56,652,000 aggregate principal amount of
registered debentures for the same aggregate principal amount of outstanding
debentures properly tendered before the expiration date and not withdrawn. We
are making the exchange offer for all of the outstanding debentures. Your
participation in the exchange offer is voluntary and you should carefully
consider whether to accept this offer.
On the date of this prospectus, $56,652,000 aggregate principal amount of
the outstanding debentures is outstanding. We are sending this prospectus,
together with the letter of transmittal, on approximately , 1999, to
all holders of outstanding debentures that we are aware of. Our obligations to
accept outstanding debentures for exchange pursuant to the exchange offer are
limited by the conditions listed under "Conditions to the Exchange Offer" below.
We currently expect that each of the conditions will be satisfied and that no
waivers will be necessary.
PURPOSE OF THE EXCHANGE OFFER
We issued and sold $47,375,000 in principal amount of the outstanding
debentures on April 29, 1998 in a transaction exempt from the registration
requirements of the Securities Act. Because the transaction was exempt under the
Securities Act, you may re-offer, resell, or otherwise transfer the outstanding
debentures only if registered under the Securities Act or if an applicable
exemption from the registration and prospectus delivery requirements of the
Securities Act is available. We issued $9,277,000 of additional debentures as
interest payments in lieu of paying interest in cash.
In connection with the issuance and sale of the outstanding debentures, we
entered into the registration rights agreement, which requires us to:
- file with the SEC a registration statement relating to the exchange offer
not later than April 29, 1999 (365 days after the date of issuance of the
outstanding debentures);
- use our reasonable best efforts to cause the registration statement
relating to the exchange offer to become effective under the Securities
Act not later than August 27, 1999 (485 days after the date of issuance of
the outstanding debentures); and
- cause the exchange offer to be completed not later than 30 business days
after the date of the effectiveness of the Registration Statement.
In addition, there are circumstances where we are required to use our reasonable
best efforts to file a shelf registration statement with respect to resales of
the debentures not later than 60 days after the filing obligation arises and
cause the shelf registration statement to become effective not later than 120
days after the date that we become obligated to file the shelf registration
statement. We have filed a copy of the registration rights agreement as an
exhibit to the registration statement that this prospectus forms a part of and
that has been filed with the SEC.
We are making the exchange offer to satisfy our obligations under the
registration rights agreement. Otherwise, we are not required to file any
registration statement to register any outstanding debentures. Holders of
outstanding debentures that do not tender their outstanding debentures or whose
outstanding debentures are tendered but not accepted will have to rely on
exemptions to registration requirements under the securities laws, including the
Securities Act, if they wish to sell their outstanding debentures.
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<PAGE>
TERMS OF THE EXCHANGE
We are offering to exchange, upon the terms of this prospectus and the
letter of transmittal, $1,000 in principal amount at maturity of registered
debentures for each $1,000 in principal amount at maturity of the outstanding
debentures. The terms of the registered debentures are the same in all material
respects, including principal amount, interest rate, maturity and ranking, as
the terms of the outstanding debentures for which they may be exchanged pursuant
to the exchange offer, except that the registered debentures have been
registered under the Securities Act and, therefore, will not be subject to
restrictions on transfer applicable to the outstanding debentures and will be
entitled to registration rights only under limited circumstances. The registered
debentures will evidence the same indebtedness as the outstanding debentures and
will be entitled to the benefits of the indenture. Please refer to the section
in this prospectus entitled "Description of Debentures."
The exchange offer is not conditioned upon any minimum aggregate amount of
outstanding debentures being tendered for exchange.
We have not requested, and do not intend to request, an interpretation by
the staff of the SEC as to whether the registered debentures issued pursuant to
the exchange offer in exchange for the outstanding debentures may be offered for
sale, resold or otherwise transferred by any holder without compliance with the
registration and prospectus delivery provisions of the Securities Act. Instead,
based on an interpretation by the Staff in a series of no-action letters issued
to third parties, we believe that registered debentures issued pursuant to the
exchange offer in exchange for outstanding debentures may be offered for sale,
resold and otherwise transferred by any holder of registered debentures, other
than any holder which is:
- an affiliate of ours or
- a broker-dealer that purchases debentures from us to resell pursuant to
Rule 144A under the Securities Act or any other available exemption,
without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that the registered debentures
are acquired in the ordinary course of the holder's business and the
holder has no arrangement or understanding with any person to participate
in the distribution of the registered debentures and neither the holder
nor any other person is participating in or intends to participate in a
distribution of the registered debentures.
Since the SEC has not considered our exchange offer in the context of a
no-action letter, we cannot assure you that staff would make a similar
determination with respect to the exchange offer. Any holder that is an
affiliate of ours or that tenders in the exchange offer for the purpose of
participating in a distribution of the registered debentures may be deemed to
have received restricted securities and will not be allowed to rely on this
interpretation by the staff and must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with any resale
transaction.
If you participate in the exchange offer, you must acknowledge, among other
things, that you are not participating in, and do not intend to participate in,
a distribution of registered debentures. If you are a broker-dealer that
receives registered debentures for your own account in exchange for outstanding
debentures, where your outstanding debentures were acquired by you as a result
of your market-making activities or other trading activities, you must
acknowledge that you will deliver a prospectus in connection with any resale of
the registered debentures. Please refer to the section in this prospectus
entitled "Plan of Distribution."
You will not be required to pay brokerage commissions or fees or, if you
comply with the instructions in the letter of transmittal, transfer taxes with
respect to the exchange of the outstanding debentures pursuant to the exchange
offer.
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<PAGE>
EXPIRATION DATE; EXTENSION; TERMINATION; AMENDMENT
The exchange offer will expire at 5:00 p.m., New York City time, on
, 1999, unless we have extended the period of time that the exchange
offer is open. The expiration date will be at least 20 business days after the
beginning of the exchange offer as required by Rule 14e-1(a) under the Exchange
Act. We reserve the right to extend the period of time that the exchange offer
is open, and delay acceptance for exchange of any outstanding debentures, by
giving oral or written notice to the exchange agent and by timely public
announcement no later than 9:00 a.m. New York City time, on the next business
day after the previously scheduled expiration date. During any extension, all
outstanding debentures previously tendered will remain subject to the exchange
offer unless properly withdrawn.
We also reserve the right to:
- end or amend the exchange offer and not to accept for exchange any
outstanding debentures not previously accepted for exchange upon the
occurrence of any of the events specified below under "--Conditions to the
Exchange Offer" which have not been waived by us; and
- amend the terms of the exchange offer in any manner which, in our good
faith judgment, is advantageous to you, whether before or after any tender
of the outstanding debentures.
If any termination or amendment occurs, we will notify the exchange agent and
will either issue a press release or give oral or written notice to you as
promptly as practicable.
PROCEDURES FOR TENDERING OUTSTANDING DEBENTURES
Your tender to us of your outstanding debentures and our acceptance of the
debentures will constitute a binding agreement between you and us on the terms
contained in this prospectus and in the letter of transmittal.
You may tender outstanding debentures by:
- properly completing and signing the letter of transmittal or a facsimile
copy of the letter; and delivering the letter, together with the
certificate or certificates representing the outstanding debentures being
tendered and any required signature guarantees and any other documents
required by the letter of transmittal, to the exchange agent at its
address listed below on or before the expiration date; or
- complying with the procedure for book-entry transfer described below; or
- complying with the guaranteed delivery procedures described below.
If your outstanding debentures are registered in the name of a broker,
dealer, commercial bank, trust company or other nominee and you wish to tender
the debentures, you should contact the registered holder promptly and instruct
the registered holder to tender on your behalf. If you wish to tender on your
own behalf, you must, before completing and executing the letter of transmittal
and delivering the outstanding debentures, either make appropriate arrangements
to register ownership of the outstanding debentures in your name or obtain a
properly completed bond power from the registered holder. The transfer of
registered ownership may take considerable time.
THE METHOD OF DELIVERING THE OUTSTANDING DEBENTURES, LETTERS OF TRANSMITTAL
AND ALL OF THE REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. IF
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT YOU USE REGISTERED MAIL PROPERLY
INSURED, WITH RETURN RECEIPT REQUESTED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO INSURE TIMELY DELIVERY. NO DEBENTURES OR LETTERS OF TRANSMITTAL
SHOULD BE SENT TO US.
If tendered outstanding debentures are registered in the name of the person
who signs the letter of transmittal and the registered debentures to be issued
in exchange for the tendered debentures are to be issued in the name of the
registered holder, the signature of the signer need not be guaranteed.
43
<PAGE>
In addition, if any untendered outstanding debentures are to be reissued in the
name of the registered holder, the signature need not be guaranteed. Registered
holder shall include any participant in The Depository Trust Company whose name
appears on a security listing as an owner of outstanding debentures.
In any other case, the tendered outstanding debentures must be endorsed or
accompanied by written instruments of transfer, in form satisfactory to us and
duly executed by the registered holder. The signature on the endorsement or
instrument of transfer must be guaranteed by an eligible institution. The
following are considered eligible institutions:
- a firm which is a member of a registered national securities exchange or a
member of the National Association of Securities Dealers, Inc.,
- a clearing agency,
- an insured credit union,
- a savings association or a commercial bank, or
- trust company having an office or correspondent in the United States.
If the registered debentures and/or outstanding debentures not exchanged are to
be delivered to an address other than that of the registered holder appearing on
the debenture registrar for the outstanding debentures, the signature in the
letter of transmittal must be guaranteed by an eligible institution.
We understand that the exchange agent has confirmed with The Depository
Trust Company that any financial institution that is a participant in The
Depository Trust Company's system may use its Automated Tender Offer Program to
tender outstanding debentures. We further understand that the exchange agent
will request, within two business days after the date the exchange offer
commences, that The Depository Trust Company establish an account relating to
the outstanding debentures for the purpose of facilitating the exchange offer,
and any participant may make book-entry delivery of outstanding debentures by
causing The Depository Trust Company to transfer the outstanding debentures into
the exchange agent's account in accordance with the Automated Tender Offer
Program procedures for transfer. However, the exchange of the outstanding
debentures will only be made after timely confirmation of the book-entry
transfer and timely receipt by the exchange agent of an agent's message, an
appropriate letter of transmittal with any registered signature guarantee, and
any other documents required. The term agent's message means a message,
transmitted by The Depository Trust Company and received by the exchange agent
and forming part of a book-entry confirmation, stating that The Depository Trust
Company has received an express acknowledgment from a participant tendering
outstanding debentures which are the subject of the book-entry confirmation and
that the participant has received and agrees to be bound by the terms of the
letter of transmittal and that we may enforce such agreement against the
participant.
If you want to tender outstanding debentures in the exchange offer and time
will not permit a letter of transmittal or outstanding debentures to reach the
exchange agent before the expiration date or you cannot comply with the
procedure for book-entry transfer on a timely basis, a tender may be effected if
the exchange agent has received at its address listed below before the
expiration date, a letter, telegram or facsimile transmission from an eligible
institution listing your name and address, the names in which the outstanding
debentures are registered and, if possible, the certificate number of the
outstanding debentures to be tendered, and stating that the tender is being made
by the letter, telegram or facsimile transmission and guaranteeing that within
three business days after the expiration date, the outstanding debentures in
proper form for transfer, or a confirmation of book-entry transfer of the
outstanding debentures into the exchange agent's account at The Depository Trust
Company, will be delivered by the eligible institution together with a properly
completed and duly executed letter of
44
<PAGE>
transmittal, and any other required documents. Unless outstanding debentures
being tendered by the method described in the preceding sentence are deposited
with the exchange agent within the time period described in the preceding
sentence and accompanied or preceded by a properly completed letter of
transmittal and any other required documents, we may, at our option, reject the
tender. You may obtain copies of the notice of guaranteed delivery from the
exchange agent.
Your tender will be deemed to have been received when:
- the exchange agent receives your properly completed and duly signed letter
of transmittal accompanied by the outstanding debentures, or a
confirmation of book-entry transfer of such outstanding debentures into
the exchange agent's account at The Depository Trust Company; or
- a notice of guaranteed delivery or letter, telegram or facsimile
transmission to similar effect from an eligible institution is received by
the exchange agent.
We will issue registered debentures in exchange for outstanding debentures
tendered pursuant to a notice of guaranteed delivery or letter, telegram or
facsimile transmission to similar effect by an eligible institution only when
the exchange agent receives (1) the letter of transmittal and any other required
documents and (2) the tendered outstanding debentures.
We will determine all questions regarding the validity, form, eligibility,
time of receipt and acceptance of outstanding debentures tendered for exchange.
You should be aware that:
- We reserve the absolute right to reject any and all tenders of any
particular outstanding debentures not properly tendered or not to accept
any particular outstanding debentures which acceptance might, in our
judgment or that of our counsel, be unlawful.
- We reserve the absolute right to waive any defects or irregularities or
conditions of the exchange offer as to any particular outstanding
debentures either before or after the expiration date, including the right
to waive the ineligibility of any holder that seeks to tender outstanding
debentures in the exchange offer.
- Our interpretation of the terms and conditions of the exchange offer,
including the letter of transmittal and the instructions, shall be final
and binding on all parties.
- Unless waived, any defects or irregularities in connection with tenders of
outstanding debentures for exchange must be cured within a reasonable
period of time as we shall determine.
- Neither we, the exchange agent nor any other person shall have any duty to
give notification of any defect or irregularity with respect to any tender
of outstanding debentures for exchange.
If the letter of transmittal is signed by a person or persons other than the
registered holder or holders of outstanding debentures, the outstanding
debentures must be endorsed or accompanied by appropriate powers of attorney, in
either case signed exactly as the name or names of the registered holder or
holders appear on the outstanding debentures.
If the letter of transmittal or any outstanding debentures or powers of
attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, they should indicate they are acting in that capacity
when signing, and, unless waived by us, you should provide evidence of their
authority to act in that capacity.
If you tender, you will be representing to us that:
- the registered debentures you acquire pursuant to the exchange offer are
being acquired in the ordinary course of business of the person receiving
registered debentures, whether or not the person is the holder;
- you are not an affiliate of ours;
45
<PAGE>
- you are not participating in, and do not intend to participate in, and
have no arrangement or understanding with any person to participate in, a
distribution of the outstanding debentures or the registered debentures;
and
- if you are a broker or dealer registered under the Exchange Act, you will
receive the registered debentures for your own account in exchange for
outstanding debentures that were acquired as a result of market-making
activities or other trading activities. You must acknowledge that you will
deliver a prospectus in connection with any resale of the registered
debentures. Please refer to the section in this prospectus entitled "Plan
of Distribution."
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
By signing and returning the letter of transmittal you will be agreeing to
the following terms and conditions, which are part of the exchange offer.
- You are exchanging, assigning and transferring the outstanding debentures
to us and irrevocably constitute and appoint the exchange agent as your
agent and attorney-in-fact to cause the outstanding debentures to be
assigned, transferred and exchanged.
- You represent and warrant that you have full power and authority to
tender, exchange, assign and transfer the outstanding debentures and
acquire registered debentures issuable upon the exchange of tendered
outstanding debentures.
- When we accept outstanding debentures for exchange, we will acquire good
and unencumbered title to the tendered outstanding debentures, free and
clear of all liens, restrictions, charges and encumbrances and not subject
to any adverse claim.
- You will, upon request, execute and deliver any additional documents
deemed by the exchange agent or us to be necessary or desirable to
complete the exchange, assignment and transfer of tendered outstanding
debentures or transfer ownership of such outstanding debentures on the
account books maintained by The Depository Trust Company.
- Your acceptance of any tendered outstanding debentures and our issuance of
registered debentures in exchange for the outstanding debentures will
constitute performance in full by us of our obligations under the
registration rights agreement to complete the exchange offer.
All authority conferred by you will survive your death or incapacity and every
obligation of yours will be binding upon your heirs, legal representatives,
successors, assigns, executors and administrators. You will also make the
representations described above under "Procedures for Tendering Outstanding
Debentures."
WITHDRAWAL RIGHTS
You may withdraw your tender of outstanding debentures at any time before
5:00 p.m., New York City time, on the expiration date.
For a withdrawal to be effective, the exchange agent must receive a written
notice of withdrawal, sent by telegram, facsimile transmission, receipt
confirmed by telephone, or letter, before the expiration date. Any notice of
withdrawal must:
- specify the name of the person that tendered the outstanding debentures to
be withdrawn;
- identify the outstanding debentures to be withdrawn, including the
certificate number or numbers and principal amount of such outstanding
debentures;
- specify the principal amount of outstanding debentures to be withdrawn;
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<PAGE>
- include a statement that the holder is withdrawing its election to have
the outstanding debentures exchanged;
- be signed by the holder in the same manner as the original signature on
the letter of transmittal by which the outstanding debentures were
tendered or as otherwise described above, including any required signature
guarantees, or be accompanied by documents of transfer sufficient to have
the trustee under the indenture register the transfer of the outstanding
debentures into the name of the person withdrawing the tender; and
- specify the name in which any of the outstanding debentures are to be
registered, if different from that of the person that tendered the
outstanding debentures.
The exchange agent will return the properly withdrawn outstanding debentures
promptly following receipt of notice of withdrawal. If outstanding debentures
have been tendered pursuant to the procedure for book-entry transfer, any notice
of withdrawal must specify the name and number of the account at The Depository
Trust Company to be credited with the withdrawn outstanding debentures or
otherwise comply with The Depository Trust Company's procedures.
Any outstanding debentures withdrawn will not have been validly tendered for
exchange for purposes of the exchange offer. Any outstanding debentures which
have been tendered for exchange but which are not exchanged for any reason will
be returned to the holder without cost to the holder as soon as practicable
after withdrawal, rejection of tender or termination of the exchange offer. In
the case of outstanding debentures tendered by book-entry transfer into the
exchange agent's account at The Depository Trust Company pursuant to its
book-entry transfer procedures, the outstanding debentures will be credited to
an account with The Depository Trust Company specified by the holder, as soon as
practicable after withdrawal, rejection of tender or termination of the exchange
offer. Properly withdrawn outstanding debentures may be retendered by following
one of the procedures described under "--Procedures for Tendering Outstanding
Debentures" above at any time on or before the expiration date.
ACCEPTANCE OF OUTSTANDING DEBENTURES FOR EXCHANGE; DELIVERY OF REGISTERED
DEBENTURES
Upon satisfaction or waiver of all of the conditions to the exchange offer,
we will accept, promptly after the exchange date, all outstanding debentures
properly tendered and will issue the registered debentures promptly after the
acceptance. Please refer to the section in this prospectus entitled
"--Conditions to the Exchange Offer" below. For purposes of the exchange offer,
we will be deemed to have accepted properly tendered outstanding debentures for
exchange, when we give notice of acceptance to the exchange agent.
For each outstanding debenture accepted for exchange, the holder of the
outstanding debenture will receive a registered debenture having a principal
amount at maturity equal to that of the surrendered outstanding debenture.
In all cases, we will issue registered debentures for outstanding debentures
that are accepted for exchange pursuant to the exchange offer only after the
exchange agent timely receives certificates for the outstanding debentures or a
book-entry confirmation of the outstanding debentures into the exchange agent's
account at The Depository Trust Company, a properly completed and duly executed
letter of transmittal and all other required documents.
CONDITIONS TO THE EXCHANGE OFFER
We will not be required to accept for exchange, or to issue registered
debentures in exchange for, any outstanding debentures and may end or amend the
exchange offer, by notice to the exchange agent or by a timely press release, if
at any time before the acceptance of the outstanding debentures for
47
<PAGE>
exchange or the exchange of the registered debentures for the outstanding
debentures, any of the following conditions exist:
- any action or proceeding is instituted or threatened in any court or by or
before any governmental agency or regulatory authority or any injunction,
order or decree is issued with respect to the exchange offer which, in our
sole judgment, might materially impair our ability to proceed with the
exchange offer or have a material adverse effect on the contemplated
benefits of the exchange offer to us; or
- any change, or any development involving a prospective change, shall have
occurred or be threatened in our business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects that is or may be adverse to us, or we become aware of facts
that have or may have adverse significance with respect to the value of
the outstanding debentures or the registered debentures or that may
materially impair the contemplated benefits of the exchange offer to us;
or
- any law, rule or regulation or applicable interpretation of the staff of
the SEC is issued or promulgated which, in our good faith determination,
does not permit us to effect the exchange offer; or
- any governmental approval has not been obtained, which we think is
necessary for the completion of the exchange offer; or
- there shall have been proposed, adopted or enacted any law, statute, rule
or regulation, or an amendment to any existing law, statute, rule or
regulation, which might materially impair our ability to proceed with the
exchange offer or have a material adverse effect on the contemplated
benefits of the exchange offer to us; or
- there shall occur a change in the current interpretation by the staff of
the SEC which permits the registered debentures issued pursuant to the
exchange offer in exchange for outstanding debentures to be offered for
resale, resold and otherwise transferred by holders, other than any holder
that is a broker-dealer or an affiliate of ours within the meaning of Rule
405 under the Securities Act, without compliance with the registration and
prospectus delivery provisions of the Securities Act, provided that the
registered debentures are acquired in the ordinary course of the holders'
business and the holders have no arrangement with any person to
participate in the distribution of such registered debentures.
We reserve the right to end the exchange offer and reject for exchange any
outstanding debentures upon the occurrence of any of the preceding conditions.
In addition, we may amend the exchange offer at any time before the expiration
date if any of these conditions exist.
In addition, we will reject for exchange any outstanding debentures
tendered, and no registered debentures will be issued in exchange for any
outstanding debentures, if at the time any stop order is threatened or in effect
with respect to the registration statement of which this prospectus constitutes
a part or the qualification of the indenture under the Trust Indenture Act of
1939. If any stop order is in effect we will be required to use our best efforts
to obtain its withdrawal at the earliest possible time.
The exchange offer is not conditioned upon any minimum principal amount of
outstanding debentures being tendered for exchange.
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<PAGE>
EXCHANGE AGENT
We have appointed the United States Trust Company of New York as the
exchange agent for the exchange offer. You should direct all executed letters of
transmittal to the exchange agent at the addresses listed below:
<TABLE>
<S> <C>
BY HAND UP TO 4:30 PM: United States Trust Company of New York
111 Broadway
Lower Level
New York, New York 10006
Attention: Corporate Trust Services
Telephone: 1(800) 548-6565
Facsimile: (212) 780-0592
BY OVERNIGHT COURIER AND BY United States Trust Company of New York
HAND AFTER 4:30 PM ON THE 770 Broadway, 13th Floor
EXPIRATION DATE ONLY: New York, New York 10003
Attention: Corporate Trust Services
Telephone: 1(800) 548-6565
Facsimile: (212) 780-0592
BY REGISTERED OR CERTIFIED MAIL: United States Trust Company of New York
Post Office Box 844
New York, New York 10276-0844
Attention: Corporate Trust Services, Cooper
Station
Telephone: 1(800) 548-6565
Facsimile: (212) 780-0592
</TABLE>
You should direct questions and requests for assistance, requests for
additional copies of this prospectus or of the letter of transmittal and
requests for notices of guaranteed delivery to the exchange agent at the address
and telephone number listed above.
DELIVERY TO AN ADDRESS OTHER THAN AS LISTED ABOVE, OR TRANSMISSIONS OF
INSTRUCTIONS BY A FACSIMILE NUMBER OTHER THAN AS LISTED ABOVE, WILL NOT
CONSTITUTE A VALID DELIVERY.
SOLICITATION OF TENDERS; FEES AND EXPENSES
We have not retained any dealer-manager in connection with the exchange
offer and will not make any payments to brokers, dealers or others soliciting
acceptances of the exchange offer. However, we will pay the exchange agent
reasonable and customary fees for its services and will reimburse it for its
reasonable out-of-pocket expenses in connection with the exchange offer.
We will pay the estimated cash expenses to be incurred in connection with
the exchange offer. We estimate that those expenses will be, in the aggregate,
approximately $135,000, including fees and expenses of the exchange agent and
trustee, registration fees, accounting, legal and printing expenses and other
related fees and expenses.
Neither the delivery of this prospectus nor any exchange made under this
prospectus shall, under any circumstances, create any implication that there has
been no change in our affairs since the respective dates as of which information
is given in this prospectus. The exchange offer is not being made to, nor will
tenders be accepted from or on behalf of, holders of outstanding debentures in
any jurisdiction in which the making of the exchange offer or the acceptance of
the outstanding debentures would not be in compliance with the laws of the
jurisdiction. However, we may, at our discretion, take
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<PAGE>
any action as we may deem necessary to make the exchange offer in any
jurisdiction and extend the exchange offer to holders of outstanding debentures
in the jurisdiction concerned.
TRANSFER TAXES
We will pay all transfer taxes, if any, applicable to the exchange of
outstanding debentures under the exchange offer. If, however, certificates
representing registered debentures or outstanding debentures for principal
amounts not tendered or accepted for exchange are to be delivered to, or are to
be issued in the name of, any person other than the registered holder of the
outstanding debentures tendered, or if tendered outstanding debentures are
registered in the name of any person other than the person signing the letter of
transmittal, or if a transfer tax is imposed for any reason other than the
exchange of outstanding debentures pursuant to the exchange offer, then the
amount of the transfer taxes whether imposed on the registered holder or any
other person, will be payable by the tendering holder. If satisfactory evidence
of payment of the taxes or exemption therefrom is not submitted with the letter
of transmittal, the amount of the transfer taxes will be billed directly to the
tendering holder.
ACCOUNTING TREATMENT
The registered debentures will be recorded at the carrying value of the
outstanding debentures as reflected in our accounting records on the date the
exchange offer is completed. Accordingly, we will not recognize any gain or loss
for accounting purposes upon the exchange of registered debentures for
outstanding debentures. We will amortize the expenses incurred in connection
with the issuance of the registered debentures over the term of the registered
debentures.
CONSEQUENCES OF FAILURE TO EXCHANGE
If you do not exchange your outstanding debentures for registered debentures
pursuant to the exchange offer, you will continue to be subject to the
restrictions on transfer of the outstanding debentures as described in the
legend on the debentures. In general, the outstanding debentures may be offered
or sold only if registered under the Securities Act, except pursuant to an
exemption from, or in a transaction not subject to, the Securities Act and
applicable state securities laws. We do not currently anticipate that we will
register the outstanding debentures under the Securities Act. However, under
limited circumstances we may be required to file with the SEC a shelf
registration statement to cover resales of the outstanding debentures by the
holders of debentures who satisfy conditions relating to the provision of
information in connection with the shelf registration statement. Please refer to
the section in this prospectus entitled "Description of Debentures--Registration
Rights; Liquidated Damages."
Your participation in the exchange offer is voluntary, and you should
carefully consider whether to participate. We urge you to consult your financial
and tax advisors in making a decision whether or not to tender your outstanding
debentures. Please refer to the section in this prospectus entitled "Federal
Income Tax Consequences."
As a result of the making of, and upon acceptance for exchange of all
validly tendered outstanding debentures pursuant to the terms of, this exchange
offer, we will have fulfilled a covenant contained in the registration rights
agreement. If you do not tender your outstanding debentures in the exchange
offer you will be entitled to all the rights and limitations applicable to the
outstanding debentures under the indenture, except for any rights under the
registration rights agreement that by their terms end or cease to have further
effectiveness as a result of the making of this exchange offer. To the extent
that outstanding debentures are tendered and accepted in the exchange offer, the
trading market for untendered, or tendered but unaccepted, outstanding
debentures could be adversely affected. Please refer to the section in this
prospectus entitled "Risk Factors--If you do not exchange your outstanding
debentures for registered debentures, your debentures will continue to have
restrictions on transfer."
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<PAGE>
We may in the future seek to acquire, subject to the terms of the indenture,
untendered outstanding debentures in open market or privately negotiated
transactions, through subsequent exchange offers or otherwise. The terms of
these purchases or offers may differ form the terms of the exchange offer.
RESALE OF REGISTERED DEBENTURES
As noted above, we are making the exchange offer in reliance on the position
of the staff of the SEC in interpretive letters addressed to third parties in
other transactions. However, we have not sought an interpretive letter from the
staff and we cannot assure you that the staff would make a similar determination
with respect to the exchange offer as it has in past interpretive letters to
third parties. Any holder who is an affiliate of ours or who has an arrangement
or understanding with respect to the distribution of the registered debentures
to be acquired pursuant to the exchange offer, or any broker-dealer who
purchased outstanding debentures from us to resell pursuant to Rule 144A or any
other available exemption under the Securities Act:
- cannot rely on the applicable interpretations of the staff and
- must comply with the registration and prospectus delivery requirements of
the Securities Act.
A broker-dealer who holds outstanding debentures that were acquired for its own
account as a result of market-making or other trading activities may be deemed
to be an underwriter within the meaning of the Securities Act and must,
therefore, deliver a prospectus meeting the requirements of the Securities Act
in connection with any resale of registered debentures. Each broker-dealer that
receives registered debentures for its own account in exchange for outstanding
debentures, where the outstanding debentures were acquired by a broker-dealer as
a result of market-making activities or other trading activities must
acknowledge in the letter of transmittal that it will deliver a prospectus in
connection with any resale of the registered debentures. A secondary resale
transaction in the United States by a holder using the exchange offer to
participate in a distribution of outstanding debentures must be covered by an
effective registration statement containing the selling security holder
information required by Item 507 of Regulation S-K. Please refer to the section
in this prospectus entitled "Plan of Distribution."
In addition, to comply with the securities laws of some jurisdictions, the
registered debentures may be offered or sold only if they have been registered
or qualified for sale in the jurisdiction or an exemption from registration or
qualification is available and is complied with. We have agreed, pursuant to the
registration rights agreement and subject to specified limitations in the
registration rights agreement, to register or qualify the registered debentures
for offer or sale under the securities or blue sky laws of these jurisdictions
as any holder of the registered debentures reasonably requests. Registration or
qualification may require the imposition of restrictions or conditions,
including suitability requirements for offerees or purchasers, in connection
with the offer or sale of any registered debentures.
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<PAGE>
BUSINESS
Through Grove Worldwide, we are a leading international designer,
manufacturer and marketer of a comprehensive line of mobile hydraulic cranes,
aerial work platforms and truck-mounted cranes. In North America, Grove Crane,
our largest operating division, has a number one market position and a 41%
market share. Commercial and residential building contractors, as well as
industrial, municipal and military end-users use our products in a wide variety
of applications. We market our products to independent equipment rental
companies and directly to end-users under three widely recognized brand
names--Grove Crane, Grove Manlift and National Crane. We believe we have
achieved a leading position in each of our principal markets due to our:
- strong brand name and reputation for quality products;
- superior customer service;
- established network of distributors;
- broad product line; and
- commitment to superior engineering design and product innovation.
We sell our products in over 50 countries primarily through an established,
global network of approximately 240 independent distributors. Our major markets
are listed below.
<TABLE>
<CAPTION>
PERCENTAGE OF
OUR FISCAL 1998
GEOGRAPHICAL MARKET NEW EQUIPMENT SALES
- ------------------------------------------------------------------------ -------------------------
<S> <C>
North America........................................................... 70%
Europe.................................................................. 21%
Latin America........................................................... 4%
Africa and the Middle East.............................................. 3%
Asia.................................................................... 2%
</TABLE>
We market our products through three operating divisions:
- GROVE CRANE, which accounted for approximately 69% of our net sales in
1997 and 66% of our net sales in 1998, designs and manufactures over 40
models of mobile hydraulic cranes.
- GROVE MANLIFT, which accounted for approximately 23% of our net sales in
1997 and 24% of our in 1998 net sales, designs and manufactures over 35
models of aerial work platforms.
- NATIONAL CRANE, which accounted for approximately 8% of our net sales in
1997 and 10% of our net sales in 1998, designs and manufactures over 15
models of telescoping and 14 models of articulating truck-mounted cranes.
Telescoping and articulating cranes are mounted on a standard truck
chassis or on a pedestal at a fixed location.
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<PAGE>
COMPETITIVE STRENGTHS
We believe that we benefit from the following competitive strengths:
- MARKET POSITIONS. Our three operating divisions have established a
leading position in most of their principal markets.
<TABLE>
<CAPTION>
MARKET MARKET
DIVISION PRODUCTS PRINCIPAL MARKETS POSITION(1) SHARE(1)
- ---------------------------- ---------------------------- --------------------- ----------------- -----------
<S> <C> <C> <C> <C>
Grove Crane................. Mobile Hydraulic Cranes North America (2) 1 39.0%
Europe (2) 2 14.0%
Grove Manlift............... Aerial Work Platforms North America 3 8.5%
Europe 5 14.7%
National Crane.............. Truck-Mounted Cranes: 40.0%
Telescoping North America 1 12.4%
Articulating North America (3) 4
</TABLE>
- STRONG BRAND NAME AND REPUTATION FOR QUALITY PRODUCTS. We have created
significant brand awareness as a result of our innovative designs,
quality products and product reliability. With over 100,000 units sold
during the past 50 years, we believe that we currently have one of the
industry's largest installed bases of cranes and aerial work platforms.
The quality of our products and the value of our brand name are reflected
in the North American marketplace, where we believe that our cranes
generally command premium prices and have higher residual values than
comparable products manufactured by our competitors. For example, Grove
Crane's products typically have residual values in excess of 50% of their
original cost after five years, which management believes is
significantly greater than the average residual value of our competitors'
products.
- SUPERIOR CUSTOMER SERVICE. We are committed to providing superior
training, sales and service support to our distributors and end-users as
a standard part of our sales and marketing effort. Management believes
that no other major competitor matches the extent and quality of our
customer support services and that these services significantly
contribute to our ability to charge premium prices for our products. In
addition, we have focused on providing ready availability of service
parts. For example, in fiscal 1998, we shipped over 90% of our
replacement parts within 24 hours after receipt of an order. After-market
sales for parts and services accounted for 11.4% of our net sales and
34.0% of gross profits in fiscal 1998. These sales typically have higher
gross margins and are less cyclical than new equipment sales.
- ------------------------
(1) Market share data for Grove Manlift's share of the North American aerial
work platform market is based on fiscal 1998 revenues. Market share data
for Grove Crane is based on units shipped during calender 1998. All other
market share data is based on units shipped during fiscal 1998. With
respect to aerial work platforms, we believe that because Grove Manlift
primarily competes in the North American market for larger, high-end
aerial work platforms, comparisons based on revenues are more
appropriate. Market data is derived from industry statistics together
with our estimates and including, as applicable, our assumptions
regarding unit price.
(2) Excludes companies that do not report to any statistical groups.
(3) In the United States, we have a number three market position and a 17%
market share. National Crane has only a nominal presence in the Canadian
market for articulating cranes.
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- ESTABLISHED NETWORK OF DISTRIBUTORS. We benefit from an established base
of approximately 240 independent distributors located in 50 countries
around the world. Over two-thirds of Grove Crane's North American
distributors have sold our products for over 10 years. We believe that,
in many cases, our products represent an important portion of our
distributors' business. Many of these distributors also represent
Caterpillar Inc. or Komatsu Ltd. and, as such, are considered among the
best-capitalized in the industry. We believe that the strength of our
distributor network is an important competitive advantage. For example,
within twelve months after acquiring the mobile hydraulic crane business
of Fried.Krupp in August 1995, by using Grove's brand name and
distribution network we increased annual sales in the United States of
the cranes, formerly manufactured by Fried.Krupp, by 100% from
approximately 40 units in 1995 to approximately 80 units in 1996.
- BROAD PRODUCT LINE. We believe that we have one of the broadest product
lines in the industry. Our three operating divisions offer 10 product
categories and over 105 models. We believe the breadth of our product
line enables us to more effectively serve the equipment rental market,
which we estimate represents approximately 80% of our net sales. Our
broad product line allows us to satisfy the rental market's demand for
models addressing specific end-user needs, while also providing customers
the opportunity to save on support, maintenance and training costs by
purchasing from a single manufacturer.
BUSINESS STRATEGY
Our management team expects to capitalize on the experience and expertise of
senior management as we implement our operations improvement program. We are led
by Salvatore J. Bonanno who joined us in March 1998 from Foamex International
Inc., where he headed an organizational restructuring designed to reduce
manufacturing and overhead costs. We are implementing the operations improvement
program and the other key elements of our business strategy described below to
reach our objective of increased net sales and EBITDA.
- PROVIDING SUPERIOR PRODUCTS. We maintain a commitment to superior
engineering design and technological innovation. We believe that we have
the most extensive engineering capability in the crane industry. Our
engineering group focuses on developing innovative, high performance and
low maintenance products that satisfy the demands of our customers.
Together with our manufacturing and marketing staff, engineers seek to
use new technologies and effectively introduce new products. For example,
we have introduced lighter booms with greater lifting capacity,
electronic controls that facilitate operations and product features that
enhance safety and increase versatility. We believe that the greater
sophistication of our products contributes to our ability to sustain
higher residual values. We intend to intensify our efforts to design
products that meet evolving customer needs while reducing manufacturing
costs and the period from product conception to introduction.
- EXPANDING EXISTING INTERNATIONAL BUSINESS. We intend to use our
significant brand awareness and strong distribution network to expand our
existing international business selectively. As an industry leader, we
believe we are well-positioned to increase sales internationally as
infrastructure development in existing and emerging markets stimulates
demand for cranes and aerial work platforms. In 1995, we expanded our
product offerings and strengthened our manufacturing and distribution
presence in Europe by acquiring the mobile hydraulic crane business of
Fried.Krupp in Germany and the aerial work platform business of Delta
Systems in France. In addition, all of our manufacturing facilities have
received ISO 9001 certifications, which enhances our international
marketing efforts.
- CAPITALIZING ON THE GROWTH OF THE GROVE WORLDWIDE AERIAL WORK PLATFORM
MARKET. We seek to capitalize on the increasing recognition that aerial
work platforms are an economical and safe
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alternative to scaffolding and ladders. The North American aerial work
platform industry experienced a compound annual growth rate in total unit
shipments from 1992 to 1997 of 32%. In 1998, approximately 57,000 aerial
work platforms were shipped in North America while only 19,000 units were
shipped in markets outside of North America. We expect to generate
increased sales of aerial work platforms in international markets as
international end-users recognize the productivity and safety advantages
of aerial work platforms.
THE OPERATIONS IMPROVEMENT PROGRAM
We are implementing a comprehensive program that we believe will enable us
to reduce annual costs by fiscal 2001. Our operations improvement program is
intended to improve our operating efficiency and our margins by:
- rationalizing product lines;
- reducing manufacturing costs; and
- reducing selling, general and administrative expenses.
In addition, we believe our operations improvement program should enable us
to reduce our working capital requirements by decreasing inventory levels. It is
expected that these cost savings will be offset by non-recurring costs
associated with the implementation of the operations improvement program, plus
consulting fees payable to George Group. Estimates of potential cost savings and
implementation costs are inherently uncertain and the description of our
operations improvement program should be read in conjunction with "Risk
Factors--We may not be able to realize cost savings from our operations
improvement program because it depends on a number of factors, and the failure
to realize these savings could adversely affect our results of operations" and
"Forward-Looking Statements."
The key components of our operations improvement program are described
below.
RATIONALIZE PRODUCT LINES. In fiscal 1998 we began a product line
rationalization program to reduce both operating costs and working capital
requirements. The product line rationalization program identifies key product
requirements by different customer groups within each of the markets which we
serve. We will use this information to create a more focused product portfolio
which, when compared to our existing product lines, will help identify
opportunities to reduce components, standardize features and eliminate models.
We believe that these actions will:
- reduce inventory;
- increase labor productivity;
- improve purchasing leverage; and
- help reduce selling, general and administrative expenses without
negatively affecting revenue.
REDUCE MANUFACTURING COSTS. We intend to reduce the annual costs of goods
sold by fiscal 2001 by rationalizing our product line and undertaking the
following initiatives to improve our manufacturing process:
- Accelerating the use of established manufacturing techniques that are
designed to lower material and labor costs by redesigning products,
incorporating more standardized components and allowing a simplified
fabrication and assembly process. Our initial efforts during fiscal 1998
resulted in greater than 15% reduction in labor costs for a test model.
- Consolidating sourcing by using fewer suppliers to meet our global
requirements. As a result of our product rationalization program, we
expect to purchase a greater volume of fewer components, enabling us to
reduce the number of suppliers and the cost of supplies.
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- Implementing other procedures to reduce manufacturing costs, including:
(1) improving planning and scheduling by introducing continuous flow
manufacturing principles and integrating our new management information
system; (2) improving product flow and reducing cycle time to increase
manufacturing flexibility and capacity; and (3) shifting the production
of certain models and components to facilities where they can be more
efficiently produced.
REDUCE SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. We believe we can
reduce annual selling, general and administrative expenses by approximately $10
million to $20 million by fiscal 2001 by reducing redundant functions across
facilities, utilizing our new management information system and streamlining
existing business processes, including redesigning sales and administrative
functions. Please refer to the section in this prospectus entitled
"Business--Management Information Systems."
INDUSTRY OVERVIEW
The markets in which we compete include North America (the United States and
Canada), Latin America (Central and South America), Europe, Africa, the Middle
East and Asia. All statistical and numerical information contained below are
based on industry data, which we have not independently verified, together with
our estimates and assumptions regarding unit prices.
MOBILE HYDRAULIC CRANES (GROVE CRANE)
Approximately 8,160 mobile hydraulic cranes worth $2.7 billion were sold
worldwide in fiscal 1998. Demand in the crane industry primarily depends on
industrial and construction activity and replacement cycles for existing cranes.
Because of the different demands of each project, including boom lengths and
lifting capacities, contractors, particularly those in North America, tend to
rent specific machines as needed rather than own a fleet of machines with
varying capabilities. We estimate that 80% of all new sales in North America are
made to the equipment rental market. In periods of economic recovery, rising
end-user demand is initially reflected in rising rental fleet utilization. Then,
as rental fleet utilization reaches a maximum level, new orders for cranes
generally tend to increase.
In 1998, demand for mobile hydraulic cranes in North America was
approximately 2,600 machines, representing 32% of global demand. From 1993 to
1998, demand in North America grew at a compound annual growth rate of 19%.
Demand for mobile hydraulic cranes in Europe was approximately 2,100
machines in 1998, representing 26% of global demand. Since 1993, demand in
Europe has experienced little growth. European construction activity has
remained at recessionary levels for the last five years. We believe that this
initially was due to a cyclical downturn and more recently to fiscal tightening
as European countries met the budget deficit targets established by the
Maastricht Treaty. We believe that we are well positioned to participate in any
cyclical improvements in Europe due to our local manufacturing operations,
strong local distribution and our established market position in the region. We
believe that European growth could act as a buffer to a possible future economic
downturn in the United States.
In addition to North America and Europe, markets for mobile hydraulic cranes
include Africa, the Middle East, Asia, notably Japan, and Latin America. These
markets represented 42% of global demand in 1998 with approximately 3,450 units
shipped. The Japanese market represents approximately 31% of the world market on
a unit basis, with approximately 2,520 machines sold in 1998. We, like other
crane manufacturers in the United States and Europe, have chosen not to compete
in Japan due to barriers to entry.
AERIAL WORK PLATFORMS (GROVE MANLIFT)
The aerial work platform industry in North America has developed over the
past 20 years as end-users realize that aerial work platforms are an efficient
and safer alternative to scaffolding and
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ladders. Customers use these products for indoor or outdoor applications in a
variety of construction, industrial and commercial settings which require
workers to be lifted to high elevations. The industry has grown rapidly because
of efficiency considerations and regulations mandating safety standards for
people working in elevated areas. We believe that approximately 80% of all
aerial work platform sales in North America are to rental fleets. The rental
market represents such a large percentage of the overall market because:
- contractors need workers to be elevated only for limited periods during a
given job, and different jobs require different platform heights, making
ownership of a single specification unit uneconomical; and
- industrial customers increasingly outsource their equipment requirements
to rental providers.
Demand for aerial work platforms is greatest in the United States. Since
1993, demand in North America has grown at a compound annual growth rate of
30.3%. In 1998, demand for aerial work platforms in North America was
approximately 54,098 machines, representing 74% of global demand. The demand for
aerial work platforms in the worldwide market, excluding North America, in
comparison, was only 19,000 units in 1998. We expect increased sales of aerial
work platforms in international markets, where the number of aerial work
platforms remains significantly lower than in the United States.
We expect our aerial work platform division to be an important factor in our
long-term growth strategy. We expect that growth in the aerial work platform
market will be driven primarily by new product introductions and applications,
as well as continued compliance in the United States with government-mandated
safety regulations. Furthermore, as foreign governments adopt stricter safety
regulations and foreign end-users realize the efficiency benefits of using
aerial work platforms, we believe that we are well-positioned to capture a share
of international growth because of our existing international market presence
and distribution capabilities, particularly in Europe.
TRUCK-MOUNTED CRANES (NATIONAL CRANE)
The truck-mounted crane division manufactures both telescoping and
articulating cranes. These cranes are used primarily by contractors engaged in
the industrial, commercial, public works and residential construction, railroad
and oil field service industries and in maintenance applications to lift
materials or personnel at the same job site or to move material to another job
site or location. In 1998, demand for truck-mounted telescoping cranes in North
America was approximately 2,378 machines, representing 51% of total North
American demand. Since 1993, demand has grown at a compound annual growth rate
of 19%. Demand for truck-mounted articulating cranes in North America was
approximately 2,300 machines in 1998, representing 49% of total North American
demand. Since 1993, demand has grown at a compound annual growth rate of 14.4%.
Telescoping cranes are more popular in the United States while articulating
cranes are more popular in Europe.
PRODUCTS
MOBILE HYDRAULIC CRANES (GROVE CRANE)
We believe that, based on the superior reputation of our products as well as
our strong network of distributors, we are well positioned to capitalize on any
growth in the North American mobile hydraulic crane market. In addition, our
product line, which is one of the broadest in the industry, enables rental fleet
owners to provide a wide range of models for end-users while maintaining low
after-market maintenance and service costs by buying from a single manufacturer.
Please refer to the section in this prospectus entitled "--Competitive
Strengths."
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GROVE CRANE manufactures over 40 models of mobile hydraulic cranes, which
are used primarily in industrial, commercial and public works construction and
in maintenance applications to lift material at job sites. There are four main
types of mobile hydraulic cranes:
- Rough-Terrain;
- All-Terrain;
- Truck-Mounted; and
- Industrial.
In addition, Grove Crane produces three models of specialty cranes for the
United States Department of Defense.
ROUGH-TERRAIN CRANES are designed to lift materials and equipment on rough
or uneven terrain. These cranes cannot be driven on highways, and, accordingly,
must be transported by truck to a work -site. Grove Crane produces 14 models of
rough-terrain cranes capable of tip heights of up to 208 feet and maximum load
capacities of up to 100 tons. We believe our line of rough-terrain-cranes is one
of the broadest in the world.
ALL-TERRAIN CRANES are versatile cranes designed to lift materials and
equipment on rough or uneven terrain and yet are highly maneuverable and capable
of highway speeds. Grove Crane produces 11 models of all-terrain cranes capable
of tip heights of up to 374 feet and maximum load capacities of up to 300 tons.
TRUCK-MOUNTED CRANES are designed to provide simple set-up, long reach high
capacity booms and the capability of traveling from site to site at highway
speeds. These cranes are suitable for urban and suburban uses. Grove Crane
produces nine models of truck-mounted cranes capable of tip heights of up to 270
feet and maximum load capacities of up to 150 tons. We believe our line of
truck-mounted cranes is one of the broadest in the world.
INDUSTRIAL CRANES are designed primarily for plant maintenance, storage yard
and material handling jobs. Grove Crane produces eight models of industrial
cranes capable of tip heights of up to 74 feet and maximum load capacities of up
to 18 tons.
AERIAL WORK PLATFORMS (GROVE MANLIFT)
GROVE MANLIFT manufactures over 35 models of aerial work platforms which
elevate workers and their materials more safely, quickly and easily than
alternative methods including scaffolding and ladders. The work platform is
mounted to either a telescoping or articulating boom or to a vertical scissor or
mast lift mechanism. The boom lifting mechanism is mounted on a chassis powered
by electric motors or gas, diesel or propane engines. Grove Manlift manufactures
four types of aerial work platforms:
- Scissor Lift;
- Articulating Boom;
- Telescoping Boom; and
- Vertical Mast.
SCISSOR LIFTS have a work platform that is mounted on top of a scissor type
lifting mechanism. The lifts are designed to set up and move quickly from job to
job in construction, industrial and commercial settings. Grove Manlift produces
11 models of scissor lifts capable of working heights of up to 46 feet and
maximum load capacities of up to 1,750 pounds.
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ARTICULATING BOOM LIFTS have a work platform that is mounted on top of a
jointed boom. These lifts are used primarily in the industrial and construction
settings where articulation allows users to access elevated areas over machines
or structural obstacles. Grove Manlift produces 10 models of articulating boom
lifts capable of working heights of up to 131 feet with maximum load capacities
of up to 600 pounds.
TELESCOPING BOOM LIFTS have a work platform that is mounted on top of a
telescoping boom and designed for strength, rigidity and resistance to
deflection. These lifts are used primarily outdoors in residential, commercial
and industrial construction and maintenance projects. Grove Manlift produces 10
models of telescoping boom lifts capable of working heights of up to 116 feet
with maximum load capacities of up to 700 pounds.
VERTICAL MAST LIFTS have work platforms that are either mounted on top of
fork-lift type devices or on push-around type devices. These lifts are designed
for use by workers for general purpose indoor maintenance. Some models are for
vertical lifting applications only, while others also have out-reach
capabilities. Grove Manlift produces seven models of vertical mast lifts capable
of working heights of up to 46 feet with maximum load capacities of up to 500
pounds.
TRUCK-MOUNTED CRANES (NATIONAL CRANE)
National Crane manufactures 29 models of truck-mounted cranes used primarily
by contractors engaged in the industrial, commercial, public works and
residential construction, railroad and oil field service industries. They are
also used in maintenance applications to lift materials or personnel at the same
job site or to move material to another job site or location. National Crane
manufactures two types of truck-mounted cranes: telescoping and articulating,
and also produces four models of pedestal-mounted, fixed location cranes.
TELESCOPING CRANES are used primarily for lifting material and personnel on
a job site. National Crane produces 15 models of truck-mounted telescoping
cranes capable of working heights of up to 166 feet and maximum load capacities
of up to 36 tons.
ARTICULATING CRANES are used primarily to load and unload truck beds at a
job site. National Crane produces 14 models of truck-mounted articulating cranes
capable of working heights of up to 71 feet and maximum load capacities of up to
28 tons.
National Crane also produces four models of pedestal-mounted cranes designed
for docks, factories, yards, and other areas where fixed, stationary lifting is
required. These cranes are capable of working heights of up to 90 feet and
maximum load capacities of up to 23 tons.
MARKETING AND DISTRIBUTION
GENERAL
We benefit from an established base of approximately 240 independent
distributors located in 50 countries around the world. Over two thirds of Grove
Crane's North American distributors have been with us for over 10 years.
MOBILE HYDRAULIC CRANES
We distribute our mobile hydraulic cranes primarily through a global network
of independent distributors, except in Germany, France and the United Kingdom,
where we have our own distributors. In addition, we sell directly to some large
corporate customers and the United States Government.
In fiscal 1998, 73% of our unit sales of mobile hydraulic cranes were
derived from units shipped to North American and Latin American distributors and
customers. We have longstanding relationships with our 45 North American and 24
Latin American distributors. Shipments to Europe comprised
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approximately 19% of our shipments in fiscal 1998 through three Company stores,
located in the United Kingdom, Germany and France, and 42 third-party
distributors. In fiscal 1998, unit shipments to Asia comprised approximately 2%
of our total unit shipments. Africa comprised 2% and the Middle East comprised
3% of our total unit shipments in fiscal 1998.
AERIAL WORK PLATFORMS
In fiscal 1998, aerial work platforms sold to North American distributors
represented approximately 67% of our unit sales of aerial work platforms. We
have 65 authorized distributors in 187 locations across North America providing
coverage in most major markets. For fiscal 1998, sales to customers in Europe
represented approximately 28% of our units shipped. Our 13 European dealers
include independent and company-owned distributors. Three company locations in
the United Kingdom, Germany and France and a major independent distributor in
the Netherlands collectively accounted for more than 70% of our aerial work
platform net sales in Europe.
Asian customers purchased approximately 3% of our units shipped in fiscal
1998. Asia is supported by authorized distributors located in Hong Kong, India,
Indonesia, Korea, the Philippines, Singapore/ Malaysia, Taiwan, Thailand and
Vietnam and a company-owned distribution facility in Penrith, Australia. Latin
American customers purchased approximately 2% of our units shipped in fiscal
1998, while African and Middle Eastern customers purchased less than 1% of our
units during the same period.
TRUCK-MOUNTED CRANES (NATIONAL CRANE)
Our North American truck-mounted crane distribution network consists of 66
distributors that carry multiple product lines, the majority of which maintain
rental fleets. In addition, we have eight distributors that focus either on
limited product lines and/or market niches. Certain of our "niche" distributors
primarily sell to railroads and are a particular strength of our customer base.
END-USERS AND CUSTOMERS
Mobile hydraulic cranes are primarily used by contractors engaged in
industrial, commercial and public works construction, and for maintenance
applications and job site material handling. Aerial work platforms are primarily
used by contractors engaged in residential, commercial and industrial
construction and in maintenance projects. National Crane's truck-mounted cranes
are primarily used by contractors engaged in industrial, commercial, public
works and residential construction, railroad and oil field service industries,
and in maintenance applications to lift materials or personnel at the same job
site or to move material to another job site or location. In addition, United
States railroad companies and United States equipment rental companies use our
truck-mounted cranes. We also sell mobile hydraulic cranes and aerial work
platforms to the United States Department of Defense and other government
agencies.
For the years ended September 28, 1996 and September 27, 1997, revenues
generated from six major customers were approximately 20% and 19% of net sales,
respectively, with no one customer accounting for more than 5% of total revenue.
Approximately 31% of the outstanding trade and notes receivable balance as of
September 27, 1997 were due from these customers. For the seven months ended
April 28, 1998 and the five months ended October 3, 1998, revenues generated
from five major customers were approximately 23% and 24%, respectively, with no
one customer accounting for more than 10% of total revenue. Approximately, 11%
of the outstanding trade and notes receivable balance as of October 3, 1998 were
due from these customers.
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DEALER FINANCING PROGRAM
We offer some of our distributors up to 366-day inventory financing. Units
sold under this program generate secured notes receivable, which we sell, from
time to time, to a major international bank. The terms of the notes provide that
if the distributor sells the equipment before the maturity of the notes, the
notes must be repaid immediately along with any interest accrued thereon.
We have an agreement with a major international bank to sell up to $65.0
million of notes receivable generated from sales of mobile hydraulic cranes,
truck-mounted cranes and aerial work platforms on credit terms of up to 366 days
on a revolving basis. The bank purchases the notes receivable at face value on a
90% non-recourse basis. The agreement requires us to purchase credit insurance
on behalf of the third-party to insure the 90% risk assumed by the third-party
financial institution. We retain 10% of the credit risk.
ENGINEERING AND DESIGN
Our team of engineers focuses on developing innovative, high performance,
low maintenance products that create significant brand loyalty among customers.
Design engineers work closely with our manufacturing and marketing staff,
enabling us to quickly identify changing end-user requirements, implement new
technologies and effectively introduce product innovations. We spent
approximately $15.0 million in fiscal 1996, approximately $15.4 million in
fiscal 1997 and approximately $14.1 million in fiscal 1998 on company-sponsored
research and development activities.
MANUFACTURING AND FACILITIES
We maintain major manufacturing and engineering facilities in Shady Grove,
Pennsylvania and Wilhelmshaven, Germany, as well as plants in Tonneins, France
and Waverly, Nebraska. All of our manufacturing facilities are ISO 9001
certified. We also maintain administrative and service facilities in the United
Kingdom, France, Germany, and Australia, and offices in Singapore, the United
Arab Emirates, and China.
The following table shows the principal facilities that we own or lease:
<TABLE>
<CAPTION>
APPROXIMATE
FACILITY LOCATION TYPE OF FACILITY SQUARE FOOTAGE OWNED/ LEASED
- -------------------------------------------- ---------------------------------- -------------- ----------------
<S> <C> <C> <C>
Shady Grove, Pennsylvania................... Manufacturing/ Headquarters 1,165,600 owned
Quincy, Pennsylvania........................ Manufacturing 40,100 owned
Chambersburg, Pennsylvania.................. Office/Storage 81,000 owned
Waverly, Nebraska........................... Manufacturing/ Headquarters 303,800 owned
Sunderland, U.K.(1)......................... Warehouse/Office 102,200 leased
Wilhelmshaven, Germany(2)................... Manufacturing/ Storage/Office 410,400 owned/ leased
Langenfeld, Germany(3)...................... Storage/Office/ Field Testing 80,300 leased
Tonneins, France(4)......................... Manufacturing/ Storage/Office 101,900 owned/ leased
Osny, France................................ Storage/Repair/Office 43,000 owned
</TABLE>
- ------------------------
(1) The lease for the Sunderland facilities expires on December 31, 1999.
(2) We own the buildings and lease the underlying land from the Federal Republic
of Germany and Fried.Krupp. The lease with the Federal Republic of Germany
expires December 31, 2043 and the lease with Fried.Krupp expires December
31, 2042.
(3) The lease at Langenfeld, Germany runs through July 31, 2000.
(4) Includes two facilities, one of which is leased. The lease expires on
November 29, 2004.
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We expect to be able to renew leases of leased properties or lease
comparable facilities on terms commercially acceptable to us. We believe that
our facilities are suitable for our operations and provide sufficient capacity
to meet our requirements for the foreseeable future.
Grove Worldwide's obligations under its credit facility are secured by a
mortgage on some of its owned, domestic real properties.
COMPETITION
The markets in which we compete are highly competitive. To compete
successfully, we must remain competitive in areas of quality, value, product
line, ease of use, safety, comfort and customer service. We face competition in
each of our operating divisions from a number of manufacturers. Competition in
each of our markets generally is based on product design, overall product
quality, maintenance costs and price. The following table sets forth our primary
competitors in each of our major product groups:
<TABLE>
<CAPTION>
OPERATING DIVISIONS PRODUCTS PRIMARY COMPETITORS
- ------------------------------ ---------------------------- ---------------------------------------------------
<S> <C> <C>
Grove Crane................... Mobile Hydraulic Cranes Liebherr Werk Nenzing, Link-Belt Construction
Equipment Co., Mannesman DeMatic, Tadano Ltd. and
Terex Corporation.
Grove Manlift................. Aerial Work Platforms JLG Industries, Inc., Genie Industries, Sky Jack
Inc., The Snorkel Company, Terex Corporation and
UpRight, a division of W.R. Carpenter North
America, Inc.
National Crane................ Truck-Mounted Cranes Fassi Gru Idrauliche Spa, Hiab BV, Iowa Mold
Tooling Co. Inc. (IMT), Manitex, Inc., Palfinger
GmbH, Pioneer Truck Cranes, manufactured by Pioneer
Engineering Corporation, Terex Corporation and USTC
Inc.
</TABLE>
RAW MATERIALS
The principal materials that we use in our various manufacturing processes
include steel, castings, engines, tires, axles, transmissions, hydraulic
components and controls, hydraulic cylinders, electric controls, motors, and a
variety of other fabricated or manufactured items either purchased complete or
manufactured internally. Substantially all materials are normally available from
multiple suppliers but are designed and tested to meet specific requirements.
Current and potential suppliers are evaluated on a regular basis on their
ability to meet our requirements and standards regarding quality, delivery and
value.
CYCLICALITY
Historically, sales of our products have been subject to cyclical variations
caused by, among other things, cyclical changes in general economic conditions
and, in particular, in conditions in the construction industry. During periods
of expansion in construction activity, we generally have benefitted from
increased demand for our products. Conversely, during recessionary periods, we
have been adversely affected by reduced demand for our products. Downward cycles
may result in reduction of our new unit sales and pricing, which may materially
and adversely impact our results of operations. Please refer to the section in
this prospectus entitled "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Cyclicality."
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BACKLOG
Our backlog consists of firm orders for new equipment and replacement parts.
Total backlog as of July 10, 1999 was approximately $228.4 million compared to
total backlog as of July 11, 1998 of approximately $225.2 million. We expect to
fill substantially all of our backlog orders within one year, although there can
be no assurance that we will fill all backlog orders within that time period. We
generally fill parts orders on an as-ordered basis.
EMPLOYEES
As of June 30, 1999, we had a total of approximately 4,100 employees, of
which approximately 3,020 were employed in the United States. Approximately 20%
of our employees are represented by labor unions. In the United States, workers
at our Waverly, Nebraska facility are organized and are covered by a collective
bargaining agreement that will expire in June 2002. Employees at our Sunderland,
United Kingdom, Wilhelmshaven, Germany and Tonneins, France facilities are
organized under the host country's labor laws. The collective bargaining
agreements covering the employees at our Sunderland, United Kingdom facility
expired in October 1998. The collective bargaining agreements covering the
Wilhelmshaven, Germany employees will end only if proper notice is given by
either party under special provisions in the collective bargaining agreements,
but are subject to renegotiation at various times. At all facilities, we
consider our relations with our employees and union representatives to be good.
MANAGEMENT INFORMATION SYSTEMS
In fiscal 1995, we launched our year 2000 project. The year 2000 project,
which is expected to be completed at the end of fiscal 1999, will have a total
cost of approximately $38.0 million, of which approximately $35.0 million had
been expended as of April 3, 1999. We believe that this new system will enable
us to reduce costs, improve productivity and product development times, and
enhance inventory management.
We expect our new system to provide improved cost data, facilitate inventory
and work-in-process tracking and provide improved order processing. In addition,
we expect the system to improve organizational performance because it will
provide management information in a more timely and accurate fashion. The new
software will cover our product lifecycle, including the functionality needed
for new product development, order management and lifetime product service and
support, as well as accounting support activities. The system will also address
our global requirements such as a multi-lingual and multi-currency system to
cover all of our facilities.
The completion of the year 2000 project is expected to render all of our
major computer systems year-2000 compliant. Please refer to the section in this
prospectus entitled "Management's Discussion and Analysis of Financial Condition
and Results of Operations--Management Information Systems and the Impact of Year
2000."
ENVIRONMENTAL MATTERS
We generate hazardous and non-hazardous waste in the normal course of our
manufacturing operations. As a result, we are subject to a wide range of
Federal, state, local and foreign environmental laws, including the
Comprehensive Environmental Response, Compensation and Liability Act, that:
- govern activities or operations that may have adverse environmental
effects, such as discharges to air and water, as well as handling and
disposal practices for hazardous and nonhazardous wastes, and
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- impose liability for the costs of cleaning up, and damages resulting from,
sites of past spills, disposals or other releases of hazardous substances.
In order to comply with these laws we have to make expenditures on a continuing
basis. We do not expect that these expenditures will have a material adverse
effect on our financial condition or results of operations.
In 1990, the Clean Air Act was amended to establish a list of 189 toxic air
pollutants that must be controlled using maximum achievable control technology
as prescribed by the Environmental Protection Agency. We believe that by 2003 we
will need to comply with the maximum achievable control technology regulations
with respect to our surface coating air omissions. At this time, we do not
expect the cost of compliance with these regulations to have a significant
impact on our operations.
LEGAL PROCEEDINGS
We are involved in various legal proceedings which have arisen in the normal
course of our operations. The outcome of these legal proceedings, if determined
adversely to us, is unlikely to have a material effect on us. We are also
subject to product liability claims for which we believe we have adequate
insurance.
INTELLECTUAL PROPERTY
Our products are sold primarily under the logo "G-Registered Trademark-",
and the trademarks GROVE-Registered Trademark-, G Grove
Worldwide-Registered Trademark-, GROVE MANLIFT-Registered Trademark-,
MANLIFT-Registered Trademark-, G MANLIFT-Registered Trademark-, G MEGATRAK-TM-,
MAXX-Registered Trademark-, SUPER-MAXX-Registered Trademark-,
TOUCAN-Registered Trademark-, and YARDBOSS-TM-. We own patents and trademarks
relating to the products we manufacture that have been obtained over a number of
years. These patents and trademarks have been of value in the growth of our
business and may continue to be of value in the future.
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AVAILABLE INFORMATION
When this registration statement is declared effective by the SEC, we will
become subject to the periodic reporting and to the informational requirements
of the Exchange Act, and as required by the Exchange Act, we will file reports,
proxy statements and other information with the SEC. Reports, proxy and
information statements and other information filed by us may be inspected and
copied at the public reference facilities maintained by the Securities and
Exchange Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C.
20549, and at the SEC's Regional Offices located at Seven World Trade Center,
13th Floor, New York, New York 10048 and Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661. Copies of these materials may be
obtained upon written request from the Public Reference Section of the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. You may
obtain information on the operation of the Public Reference Room by calling the
SEC at 1-800-SEC-0330. In addition, the SEC maintains a site on the World Wide
Web at http://www.sec.gov that contains reports, proxy and information
statements and other information regarding registrants that file electronically
with the SEC.
No separate financial statements of Grove Investors Capital are included in
this prospectus. We believe that providing separate financial statements and
other disclosures concerning Grove Investors Capital would not be material to
you. Grove Investors Capital has no assets, liabilities, other than the
debentures, or operations.
The indenture dated as of April 29, 1998, between us and the United States
Trust Company of New York, under which the outstanding debentures were issued
and under which the registered debentures are to be issued, requires us to
furnish to holders of the debentures:
- all quarterly and annual financial information that would be required to
be contained in a filing with the SEC on Forms 10-Q and 10-K if we were
required to file these forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations" that describes
our financial condition and results of operations and, with respect to the
annual information only, a report by our certified independent
accountants; and
- all current reports that would be required to be filed with the SEC on
Form 8-K if we were required to file these reports, in each case within
the time periods specified in the SEC's rules and regulations.
In addition, following the completion of the exchange offer, whether or not
required by the rules and regulations of the SEC, the indenture requires us to
file a copy of all such information and reports with the SEC for public
availability within the time periods specified in the SEC's rules and
regulations, unless the SEC would not accept the filing. At all times the SEC
does not accept the filings provided for in the preceding sentence or the
filings provided for in the preceding sentence do not contain the information
required to be delivered upon request pursuant to Rule 144A(d)(4) under the
Securities Act, then, in each case, we have agreed that, for so long as any
debentures remain outstanding, we will furnish to the holders of the debentures
and to securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act. In addition, the indenture requires us to make such information
available to securities analysts and prospective investors upon request.
Notwithstanding the foregoing indenture provisions, the SEC does not permit the
filing of reports by entities that have no reporting obligation; accordingly, we
will not file reports if our reporting obligation ceases.
This prospectus constitutes a part of a registration statement on Form S-4
filed by us with the SEC under the Securities Act of 1933. This prospectus does
not contain all the information contained in the registration statement, parts
of which are omitted as required by the rules and regulations of the SEC, and
reference is hereby made to the registration statement and to the exhibits
relating thereto for further information with respect to us and the registered
debentures. Any statements contained in this prospectus concerning the
provisions of any document are not necessarily complete, and, in each instance,
reference is made to the copy of the document filed as an exhibit to the
registration statement or otherwise filed with the SEC. Each of these statements
is qualified in its entirety by these references.
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MANAGEMENT
MANAGEMENT COMMITTEE AND EXECUTIVE OFFICERS OF GROVE INVESTORS
Our executive officers serve at the discretion of our management committee.
The following table sets forth information concerning our executive officers and
the members of our management committee:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Salvatore J. Bonanno................................. 58 Chairman and Chief Executive Officer and Member of
Management Committee
Stephen L. Cripe..................................... 43 Vice President and Chief Financial Officer
Keith R. Simmons..................................... 48 Vice President and Secretary
J Taylor Crandall.................................... 45 Member of Management Committee
Michael L. George.................................... 59 Member of Management Committee
Gerald Grinstein..................................... 67 Member of Management Committee
Steven B. Gruber..................................... 40 Member of Management Committee
Robert B. Henske..................................... 38 Member of Management Committee
Gerard E. Holthaus................................... 49 Member of Management Committee
Anthony P. Scotto.................................... 51 Member of Management Committee
</TABLE>
Mr. Bonanno serves as our Chairman and Chief Executive Officer and serves as
a member of the management committee. From July 1995 to June 1997, he was
President of Foamex L.P. and from July 1997 to March 1998, he was President,
Chief Operating Officer and a Board Member of Foamex International Inc., a $1
billion polyurethane manufacturing company, where he was responsible for
directing all manufacturing operations, strategic planning and policy-making
activities for Foamex International's cushioning foams, automotive foams and
technical foams businesses. While at Foamex International, Mr. Bonanno led an
organizational restructuring which included streamlining three layers of
management, restructuring manufacturing operations and reducing costs. From July
1993 to July 1995, Mr. Bonanno served as General Manager of International
Manufacturing Operations for Chrysler Corporation where his responsibilities
included solely owned operations, joint ventures and licensing agreements
outside of North America. Mr. Bonanno joined Chrysler in 1965.
Mr. Cripe serves as our Vice President and Chief Financial Officer, a
position in which he has served since October 1998. He has served as Senior Vice
President and Chief Financial Officer of Grove Worldwide, a position in which he
has served since August 1998. Mr. Cripe is responsible for accounting and
control, treasury functions, budgeting and planning and information systems
oversight for us and our operating companies. From April 1996 to August 1998, he
was Vice President of the Tenneco Automotive Group, Lake Forest, Illinois. From
1993 to April 1996, he was Controller for the Industrial Fibers Group of Allied
Signal.
Mr. Simmons serves as our Vice President and Secretary, a position in which
he has served since April 1998. He has served as Senior Vice President, General
Counsel and Business Development of Grove Worldwide since May 1995, and is
responsible for managing the legal affairs of Grove Worldwide and its operating
companies and, in conjunction with the operating companies, for developing and
implementing external growth initiatives. From April 1992 to May 1995, he was
Senior Vice President and General Counsel of Grove Worldwide.
Mr. Crandall serves as a member of the management committee. Mr. Crandall
has been a Managing Partner of Oak Hill Capital Management, Inc. since November
1998, and the Chief Operating Officer of Keystone, Inc. since October 1998.
Between 1986 and October 1998, he served as Chief Financial Officer and Vice
President of Keystone, Inc. Since 1991, he has served as a President and a
director of Acadia MGP, Inc. Mr. Crandall is a director of Bell & Howell
Company, Quaker State Corporation, Specialty Foods, Inc., Washington Mutual,
Inc., Integrated Orthopedics, Inc.,
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Physician Reliance Network Inc. and Sunterra Corporation. Mr. Crandall also
serves on the Board of Advisors of Oak Hill Strategic Partners, L.P. and on the
Investment Committees of Insurance Partners, L.P. and Brazos Fund, L.P.
Mr. George serves as a member of the management committee. Since 1984, Mr.
George has served as Chief Executive Officer and Chairman of the Board of George
Group Inc., an acquisition and management consulting firm based in Dallas,
Texas. He is a director of Reliant Building Products, Inc.
Mr. Grinstein serves as a member of the management committee. Since August
1997, Mr. Grinstein has been the non-executive Chairman of Delta Air Lines, Inc.
He served as Chairman of Burlington Northern Santa Fe Corp., a railroad
transportation company, until his retirement in 1995. He was Chairman and Chief
Executive Officer of Burlington Northern Inc. from 1991 to 1995. Before joining
Burlington Northern in 1987, he was Chairman of Western Airlines from 1983 to
1987 and a partner in the law firm of Preston, Thorgrimson, Ellis and Holman
from 1969 to 1983. In addition to being a director of Delta Airlines, Mr.
Grinstein also serves as a director of Browning-Ferris Industries, Inc., PACCAR
Inc., Sundstrand Corp., Imperial Holly Corp and The Pittston Company and Vans,
Inc.
Mr. Gruber serves as a member of the management committee. Mr. Gruber has
been a Managing Partner of Oak Hill Capital Management, Inc. since November
1998, and has been a Managing Director of Oak Hill Partners, Inc. since March
1992. From May 1990 to March 1992, he was a Managing Director of Rosecliff, Inc.
Since February 1994, Mr. Gruber has also been an officer of Insurance Partners
Advisors, L.P., an investment adviser to Insurance Partners, L.P. Since October
1992, he has been a Vice President of Keystone, Inc. From 1981 to 1990, Mr.
Gruber was a Managing Director and co-head of High Yield Securities and held
various other positions at Lehman Brothers, Inc. Mr. Gruber serves as a director
of Superior National Insurance Group, Inc., MVE Holdings, Inc., Reliant Building
Products, Inc., Integrated Orthopedics, Inc. and several private companies
related to Keystone, Inc., Insurance Partners, L.P. and Oak Hill Partners, Inc.
Mr. Henske serves as a member of the management committee. Since November
1998, Mr. Henske has been a Partner of Oak Hill Capital Management, Inc. Since
January 1997, Mr. Henske has served as a principal at Arbor Investors, LLC. From
January 1996 to December 1996, he was Executive Vice President, Chief Financial
Officer and Board Member of American Savings Bank, F.A., a federally-chartered
thrift. From 1986 to January 1996, he was a partner or held various other
positions with Bain & Company, Inc., a management consulting firm. Mr. Henske is
a director of Reliant Building Products, Inc. and Williams Scotsman, Inc.
Mr. Holthaus serves as a member of the management committee. Since April
1997, Mr. Holthaus has been President and Chief Executive Officer of Williams
Scotsman, Inc. From September 1995 to April 1997, he was President and Chief
Operating Officer of Williams Scotsman, Inc. and was Executive Vice President
and Chief Financial Officer prior thereto. He has served as a director of
Williams Scotsman, Inc. since June 1994. Before joining Williams Scotsman, Inc.,
Mr. Holthaus served as Senior Vice President of MNC Financial, Inc. from April
1988 to June 1994. From 1971 to 1988, Mr. Holthaus was associated with the
accounting firm of Ernst & Young LLP (Baltimore), where he served as a partner
from 1982 to 1988. He is a director of the Baltimore Life Insurance Company and
Avitech Solutions.
Mr. Scotto serves as a member of the management committee. From 1992 until
May 1999, he served as a managing director of Oak Hill Partners, Inc. Since May
1999, Mr. Scotto has been a managing director of Oak Hill Advisors, Inc. Mr.
Scotto is a director of Holophane Corporation, Ivex Packaging Corporation and
Specialty Foods, Inc.
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MANAGEMENT COMMITTEE SUBCOMMITTEES AND FEES
The management committee does not have a compensation committee, audit
committee or nominating committee. The members of the management committee are
not compensated for their services as members.
EXECUTIVE COMPENSATION
Our executive officers are not compensated for their services as executive
officers. They are compensated for their services as executive officers of Grove
Worldwide.
DESCRIPTION OF MANAGEMENT OPTION PLAN
In April 1998, we adopted a management option plan. The purpose of the
option plan is to promote our and our members' interests by:
- attracting and retaining exceptional officers and other key employees of
ours and our affiliates, specifically Grove Worldwide; and
- enabling these individuals to acquire an equity interest in, and
participate in our long-term growth and financial success.
Subject to a participant's continued employment with Grove Worldwide or its
affiliates, options granted under the option plan will vest over a five year
period as follows. For each of the first five fiscal years beginning after the
date the options are granted, the options will vest and become cumulatively
exercisable with respect to 20% of our membership interests representing these
options on the last day of each fiscal year if Grove Worldwide and its
subsidiaries meet the EBITDA target established for that fiscal year. If the
EBITDA actually achieved for a year is less than the EBITDA target for that
year, then the vesting schedule for that year will be proportionately reduced.
In addition, options will not vest in any year if the actual EBITDA for that
year is less than a minimum percentage of the EBITDA target.
To the extent not previously canceled, any unvested portion of an option
will, as of the date of a change in control, be deemed vested and exercisable
immediately before a change in control. In addition, as a result of a
termination of employment by any participant, we have the assignable right but
not the obligation to purchase the participant's membership interests in us for
an amount to be calculated based on the participant's reason for termination of
employment.
EMPLOYMENT ARRANGEMENTS
Mr. Bonanno entered into an employment contract with Grove Worldwide in
March 1998. Mr. Bonanno's term of employment is two years, beginning on April
29, 1998, subject to two-year automatic renewal periods. Mr. Bonanno is entitled
to an annual salary of $500,000, short-term incentive plan awards and two
additional payments of $450,000 on March 31, 1999 and March 31, 2000. Please
refer to the section in this prospectus entitled "--Short-Term Incentive Plan."
In addition, Grove Worldwide arranged with a third party to purchase Mr.
Bonanno's former residence for approximately $219,000, the difference between
the residence's estimated market value and the outstanding mortgage balance, and
reimbursed the third party for the $219,000 payment. Upon sale of the residence,
any amount received by the third party in excess of the outstanding mortgage
balance will be paid to Grove Worldwide.
As part of his employment contract, Mr. Bonanno was granted an option under
the option plan to purchase 2.0% of our outstanding membership interests,
calculated as of April 29, 1998. Please refer to the section in this prospectus
entitled "--Description of Management Option Plan." The contract also provides
that Mr. Bonanno has the option to purchase additional membership interests of
ours.
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In March 1998, Mr. Bonanno entered into a separate employment agreement with
Grove Worldwide covering the period between March 16, 1998 and April 29, 1998,
under which he received a ratable payment based on the actual number of days
elapsed during this period based on a yearly salary of $500,000.
Joseph Shull, the former President of Grove Crane, entered into an executive
agreement with Grove Worldwide in June 1998, providing for his employment
through September 1998. During the term of his employment, Mr. Shull was
entitled to a ratable payment based on his current salary and short-term
incentive plan awards. Please refer to the section in this prospectus entitled
"--Short-Term Incentive Plan." In addition, in consideration of his agreeing not
to compete with Grove Worldwide through August 31, 2001, and to waive his change
of control agreement, Mr. Shull will receive additional annual payments through
August 31, 2001. Please refer to the section in this prospectus entitled
"--Termination and Change of Control Agreements." Mr. Shull also entered into a
consulting arrangement covering the period between October 1, 1998 and December
31, 2000.
TERMINATION AND CHANGE OF CONTROL AGREEMENTS
In 1997, a number of executives of Grove Worldwide, including Mr. Shull and
Mr. Simmons, entered into separate change of control agreements with Grove
Worldwide. Each executive's agreement provides that if, within two years after a
change in control of Grove Worldwide, (a) the executive is terminated by Grove
Worldwide without cause or due to death, disability or retirement, or (b) the
executive ends his employment for good reason, then, in addition to payment for
unreimbursed expenses, deferred compensation, health coverage premiums,
including reimbursement for any income tax liability resulting from these
payments, and other employment-related benefits, the executive will also be
entitled to a lump-sum payment equal to two times the sum of (x) his highest
annual base salary in effect within 180 days before the change of control and
(y) his highest annual bonus paid or payable for either of the last two
completed years by Grove Worldwide or its predecessors. Each executive is also
entitled to the above-described severance amount if his employment is terminated
within 180 days before a change in control (a) by Grove Worldwide without cause
or (b) by him for good reason, based on an event that occurred within the
180-day period, or (c) due to his death. Pursuant to Mr. Shull's 1998 executive
agreement, he has waived any rights under his change of control agreement.
Please refer to the section in this prospectus entitled "--Employment
Arrangements." Three former executive officers of Grove Worldwide were paid, in
total, approximately $4.3 million under their change of control agreements upon
their departures from Grove Worldwide.
SHORT-TERM INCENTIVE PLAN
Grove Worldwide's short-term incentive plan permits Grove Worldwide to pay
officers and other key employees, including prospective officers and employees,
of Grove Worldwide and its affiliates an annual bonus conditioned on the
attainment of pre-established financial performance criteria based on EBITDA
targets for Grove Worldwide and/or designated business sub-units. The short-term
incentive plan is administered by persons designated by the Compensation
Committee of Grove Worldwide.
MANAGEMENT OF GROVE INVESTORS CAPITAL
Messrs. Henske, Scotto and Bonanno are the directors of Grove Investors
Capital. They are not compensated in any way for acting as directors. The board
of directors of Grove Investors Capital lacks a compensation committee, audit
committee or nominating committee.
Mr. Bonanno is the Chief Executive Officer of Grove Investors Capital. Mr.
Simmons is the Vice President and Secretary of Grove Investors Capital. Mr.
Cripe is the Vice President and Chief Financial Officer of Grove Investors
Capital. None of the executive officers of Grove Investors Capital are
compensated for their services as officers of Grove Investors Capital. Please
refer to the section in this prospectus entitled "Directors and Executive
Officers of the Registrant" for biographical information on the directors and
executive officers of Grove Investors Capital.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership of
our membership interests by (1) each person or entity that owns five percent or
more of our membership interests, (2) each member of the management committee
individually who holds membership interests, (3) each executive officer of ours
who holds membership interests and (4) all executive officers and members of the
management committee as a group:
<TABLE>
<CAPTION>
PERCENTAGE OF
GROVE INVESTORS
NAME OF BENEFICIAL OWNER MEMBERSHIP INTERESTS (7)
- ------------------------------------------------------------------------------- -------------------------
<S> <C>
Oak Hill Strategic Partners, L.P.(1) (2)....................................... 43.38%
201 Main Street, Suite 3200
Fort Worth, Texas 7610
FW Grove Coinvestors, L.P.(2) (3).............................................. 43.38%
201 Main Street, Suite 3200
Fort Worth, Texas 76102
GGEP-Grove, L.P. (2) (4)....................................................... 2.66%
One Galleria Tower
13355 Noel Road, Suite 1100
Dallas, Texas 75240
D. Brown (3)................................................................... 43.38%
J Crandall (1)................................................................. 43.38%
M. George (2) (4).............................................................. 4.55%
S. Bonanno (5)................................................................. 2.67%
K. Simmons (5)................................................................. *
S. Cripe (5)................................................................... 1.16%
All executive officers and members of the management committee as a group (10
persons) (6)................................................................. 51.96%
</TABLE>
- ------------------------
* Indicates less than one percent.
(1) The general partner of Oak Hill Strategic Partners, L.P. is FW Strategic
Asset Management, L.P., whose general partner is Strategic Genpar, Inc. J
Taylor Crandall is the sole stockholder of Strategic Genpar, Inc.
Accordingly, Mr. Crandall may be deemed to be the beneficial owner of the
membership interests of Oak Hill Strategic Partners, L.P. Mr. Crandall
disclaims beneficial ownership of these membership interests. In addition,
Mr. Crandall is a member of the management committee.
(2) Represents Class B membership interests. The Class B membership interests
and the Class A membership interests are substantially identical except
that, under the terms of our operating agreement, the issuance of additional
Class B membership interests will not result in dilution to the holders of
the Class A membership interests.
(3) The general partner of FW Grove Coinvestors, L.P. is FW Group Genpar, Inc.
David G. Brown is the sole stockholder of FW Group Genpar, Inc. Accordingly,
Mr. Brown may be deemed to be the beneficial owner of the membership
interests of FW Grove Coinvestors, L.P. Mr. Brown disclaims beneficial
ownership of these membership interests.
(4) GGEP-Grove, L.P., is an entity formed by employees of George Group Inc. Mr.
George is the Chief Executive Officer and Chairman of the Board and majority
stockholder of George Group Inc. Accordingly, Mr. George may be deemed to be
the beneficial owner of the
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membership interests of GGEP-Grove, L.P. In addition, Mr. George is a member
of the management committee.
(5) Represents Class A membership interests.
(6) Includes membership interests which may be deemed to be beneficially owned
by Messrs. Crandall and George.
(7) Percentage of membership interests represents Class A and Class B membership
interests combined into one group.
Some members of senior management have purchased approximately 6.9% of our
membership interests. The purchase price of these interests was partially
financed through approximately $3.6 million in loans from Grove Worldwide. We
have also granted some members of senior management options to purchase our
membership interests under the option plan. Please refer to the section in this
prospectus entitled "Executive Compensation--Description of Management Option
Plan." Our membership interests held by senior management members are subject to
calls by us upon a termination of employment. Please refer to the section in
this prospectus entitled "Executive Compensation--Description of Management
Option Plan."
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
OPERATING AGREEMENTS
GROVE INVESTORS LLC OPERATING AGREEMENT
We are a limited liability company formed under the Delaware Limited
Liability Company Act and are governed by the Second Amended and Restated
Limited Liability Company Agreement, as amended from time to time. The members
of the investor group have delegated our management to a management committee.
The operating agreement establishes the composition of the management committee.
Please refer to the section in this prospectus entitled "Management--Management
Committee and Executive Officers of Grove Investors."
The management committee has the power to manage and control our business
and affairs, to make all decisions affecting our business and affairs and to
take all actions as it deems necessary or appropriate with respect to our
business and affairs. The management committee may delegate this power to
another person, committee or entity.
Under our operating agreement, we are authorized to issue two classes of
membership interests, Class A membership interests and Class B membership
interests. Members of the investor group beneficially own in the aggregate all
of our outstanding membership interests. Please refer to the section in this
prospectus entitled "Security Ownership of Certain Beneficial Owners and
Management." The Class A membership interests and Class B membership interests
are substantially identical except as discussed below. Please refer to the
section in this prospectus entitled "--Class A and Class B Membership
Interests."
Generally, income and loss will be allocated to the holders of membership
interests in proportion to their percentage of ownership. To the extent cash is
available to do so, we will make quarterly tax distributions to holders of
membership interests in proportion to allocations of taxable income. Upon
liquidation, distributions will be in proportion to the positive capital account
balances of the holders of membership interests.
GROVE HOLDINGS LLC OPERATING AGREEMENT
We own Grove Holdings. We are also the managing member of Grove Holdings. As
managing member, we have delegated the management of Grove Holdings to the Grove
Holdings' management committee, which is identical in composition to Grove
Worldwide's management committee. Subject to restrictions contained in the
indenture relating to Grove Holdings' senior discount debentures, all
distributions in respect of membership interests of Grove Holdings will be made
to us.
GROVE WORLDWIDE LLC OPERATING AGREEMENT
Grove Worldwide is wholly owned by Grove Holdings, which is also the
managing member. As managing member, Grove Holdings has delegated the management
of Grove Worldwide to Grove Worldwide's management committee. Subject to
restrictions contained in the credit facility and the indenture relating to
Grove Worldwide's senior subordinated notes, all distributions in respect of
membership interests of Grove Worldwide will be made to Grove Holdings.
CLASS A AND CLASS B MEMBERSHIP INTERESTS
Our operating agreement provides for the issuance of two separate classes of
membership interests. The Class A membership interests may be held only by
members of our senior management and are denominated in units. The Class B
membership interests are held by members other than senior management and are
not denominated in units. We are currently authorized to issue up to 10,000
Class A units. The allocation and distribution provisions of our operating
agreement provide
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that the issuance of the first 5,500 Class A membership interests will not
dilute the interests of other holders of Class A membership interests. However
the issuance of the first 5,500 Class A membership interests does dilute the
interests of the holders of Class B membership interests. To compensate the
holders of the Class B membership interests for the dilution of their interests,
our operating agreement provides that all of the money contributed by members of
senior management in exchange for the 5,500 Class A units will be distributed to
each holder of Class B membership interests in proportion to its percentage
interest.
In addition, if certain defined levels of performance are realized, members
of senior management will earn the right to purchase additional Class A units.
Also, if we achieve defined levels of performance in fiscal 1999, 2000, 2001 and
2002, the George Group will be entitled to receive additional Class B membership
interests for each year the defined levels of performance are achieved. Our
operating agreement provides that whenever additional Class B membership
interests are earned by the George Group, those interests will dilute only the
holders of Class B membership interests. Any issuance of membership interests,
other than as described above with respect to the George Group and the first
5,500 Class A units, will dilute the interests of all holders of Class A and
Class B membership interests.
AGREEMENTS WITH GEORGE GROUP INC. FOR MANAGEMENT CONSULTING SERVICES
George Group provides consulting services to facilitate the development and
achievement of our business plan, including services with respect to the
operations improvement program, strategic planning, operations and financial
matters. For these services, George Group is paid cash fees equivalent to its
costs and is reimbursed for its out-of-pocket expenses. George Group has advised
us that it estimates its engagement will be completed within 42 months and that
the total cash fees and expenses would approximate $14.0 million, including
approximately $2.7 million it received in fiscal 1998. In addition, if we
achieve defined levels of performance in fiscal 1999, 2000, 2001 and 2002,
George Group will be entitled to receive additional ownership interests in us
for each year the defined levels of performance are achieved. We have agreed to
indemnify George Group, its owners, employees, and agents from liabilities and
claims relating to or arising from the engagement of George Group, other than
those resulting from gross negligence or willful misconduct of George Group.
Michael L. George, a member of the management committee, is Chief Executive
Officer and Chairman of the Board and majority stockholder of George Group.
Please refer to the sections in this prospectus entitled "Business" and
"Management."
AGREEMENTS WITH CERTAIN EXECUTIVE OFFICERS
Grove Worldwide has entered into agreements with Messrs. Bonanno, Simmons
and Shull and other current and former executive officers of Grove Worldwide and
made payments to three former executive officers under their change of control
agreements. Please refer to the sections in this prospectus entitled "Executive
Compensation--Employment Arrangements" and "--Termination and Change of Control
Agreements." In addition, Grove Worldwide has entered into an executive
agreement with Mr. Shull. Please refer to the section in this prospectus
entitled "Executive Compensation--Employment Arrangements."
LOANS TO EXECUTIVE OFFICERS
Grove Worldwide has provided approximately $3.8 million in loans to certain
executive officers of Grove Worldwide to finance their investment in our
membership interests. These loans are evidenced by promissory notes which bear
interest at a rate per annum equal to the prime rate of Wells Fargo Bank and,
except for a $912,000 note made by Mr. Bonanno, are secured by a pledge of the
executive's membership interests in us. Except as described in the next
sentence, all of the notes are due ten years from their date of issuance. The
$912,000 note made by Mr. Bonanno is due in June 2005, a $250,000
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note made by Mr. Cripe is due in April 1999, and a $50,000 note made by Mr.
Donald Mallo is due in October 1999. As of April 3, 1999, Mr. Bonanno was
indebted to Grove Worldwide in the amount of approximately $1.9 million, Mr.
Bust was indebted in the amount of approximately $375,000, Mr. John Wheeler was
indebted in the amount of approximately $150,000, Mr. Mallo was indebted in the
amount of approximately $150,000, Mr. Cripe was indebted in the amount of
approximately $687,500 and Mr. Donald Manvel was indebted in the amount of
approximately $300,000.
CERTAIN TRANSACTIONS WITH HANSON FUNDING BEFORE THE CLOSING DATE
Before the completion of the acquisition, Grove Worldwide and its
subsidiaries were affiliates of Hanson Funding. Hanson Funding provided Grove
Worldwide and its subsidiaries with various services, including, without
limitation, cash management, tax reporting and risk management services and
charged a management fee for these services. Please refer to the section in this
prospectus entitled "Management's Discussion and Analysis of Financial Condition
Operations--Results of Operations." Before the completion of the acquisition,
Hanson Funding also purchased small quantities of Grove Worldwide's products on
an arm's-length basis.
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DESCRIPTION OF CREDIT FACILITY
In connection with the acquisition, Grove Worldwide entered into a senior
secured credit facility with a syndicate of banks, as lenders, and Chase Bank of
Texas, National Association, as administrative agent, Donaldson, Lufkin &
Jenrette, as documentation agent, and BankBoston N.A., as syndication agent. The
credit facility consists of a $200 million term loan facility and a $125 million
revolving credit facility.
The revolving credit facility enables Grove Worldwide to obtain revolving
credit loans and the issuance of letters of credit for the account of Grove
Worldwide from time to time for working capital, acquisitions and general
corporate purposes. A portion of the revolving credit facility is available for
borrowings by Grove Worldwide in the Eurocurrency markets of British pounds
sterling, German marks, French francs and certain other currencies. At Grove
Worldwide's option, loans under the credit facility bear interest:
(a) in the case of loans in United States dollars, at the highest of (x)
1/2 of 1% in excess of a federal funds effective rate, (y) 1.0% in excess
of a certificate of deposit rate and (z) the administrative agent's prime
rate, plus an applicable margin; or
(b) in the case of all loans, a relevant eurocurrency rate as determined by
the agent, plus the applicable margin.
Grove Worldwide also pays certain fees with respect to the credit facility.
The term loan facility has a term of eight years unless terminated sooner
because of an event of default. The term loan facility must be repaid in
semi-annual installments until April 2006 after the closing date of in an
aggregate amount for each year following the closing date of the credit
facility:
- $2 million for the first six years;
- $88 million during the seventh year; and
- $100 million during the eighth year.
The revolving credit facility has a term of seven years, unless terminated
sooner because of an event of default. Outstanding revolving credit loans are
payable in April 2005 unless the revolving credit loans are accelerated
following the occurrence of any event of default.
The obligations of Grove Worldwide under the credit facility are guaranteed
by Grove Holdings and each of Grove Worldwide's domestic subsidiaries. The
obligations of Grove Worldwide under the credit facility are secured by a first
priority lien, with permitted encumbrances for some property, on substantially
all of Grove Worldwide's and each guarantor's real, personal and intellectual
property and on the capital stock of Grove Worldwide and its domestic and
first-tier foreign subsidiaries. In addition, certain first tier foreign
subsidiaries have pledged their equity interests in their subsidiaries to secure
intercompany notes issued by them to Grove Worldwide.
The credit facility contains covenants that restrict Grove Worldwide from
taking specified actions and require Grove Worldwide to achieve and maintain
financial covenants relating to balance sheet, fixed charge coverage and
leverage ratios. The credit facility includes restrictions on:
- capital expenditures,
- liens,
- indebtedness,
- guarantees,
- mergers,
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- acquisitions,
- disposition of assets,
- dividends,
- changes in business activities and corporate activities.
In addition, the credit facility prohibits Grove Worldwide from guaranteeing the
debentures.
The credit facility also contains customary events of default:
- nonpayment of principal, interest or fees,
- violation of covenants,
- inaccuracy of representations or warranties in any material respect,
- cross default and cross acceleration to other indebtedness,
- bankruptcy,
- Employee Retirement Income Security Act,
- material judgments and
- certain changes in control of Grove Worldwide or Grove Holdings.
Oak Hill Securities Fund, L.P. participated as a lender in the term loan
facility and received customary fees in connection with the loan. Oak Hill
Securities Fund is a Delaware limited partnership that acquires and actively
manages a diverse portfolio of investments principally in leveraged companies.
Some principals of the general partner of Oak Hill Securities Fund and Oak Hill
Advisors, Inc., the adviser of Oak Hill Securities Fund, have business
relationships with Keystone, and Keystone has an equity investment in Oak Hill
Securities Fund. Keystone is a limited partner of FW Grove Coinvestors, a member
of the investor group. Please refer to the section in this prospectus entitled
"The Transactions."
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DESCRIPTION OF DEBENTURES
You can find the definitions of certain terms used in this description under
the subheading "Certain Definitions" on page 102. In this description, the word
"Grove Investors" refers only to Grove Investors LLC and not to any of its
subsidiaries. In addition, the words "we," "our," "ours" and "us" refer only to
Grove Investors LLC and Grove Investors Capital and not to any other
subsidiaries of Grove Investors.
The outstanding debentures were, and the registered debentures will be,
issued under an indenture among us and the United States Trust Company of New
York, as trustee, in a private transaction that was not subject to the
registration requirements of the Securities Act. The terms of the debentures
include those stated in the indenture and those made part of the indenture by
reference to the Trust Indenture Act of 1939. The debentures are subject to all
those terms, and you should refer to the indenture and the Trust Indenture Act
for a statement of those terms.
The following description is a summary of the material provisions of the
indenture. It does not restate that agreement in its entirety. We urge you to
read the indenture because it, and not this description, defines your rights as
a holder of the debentures. We have filed copies of the indenture and the
registration rights agreement as exhibits to the registration statement which
includes this prospectus.
GENERAL
The form and terms of the registered debentures are substantially identical
to the form and terms of the outstanding debentures except that the registered
debentures will be registered under the Securities Act. Therefore, the
registered debentures will not bear legends restricting their transfer and will
not be entitled to registration under the Securities Act. The registered
debentures will evidence the same debt as the outstanding debentures. The same
indenture will govern both the outstanding debentures and the registered
debentures.
The debentures are:
- general unsecured obligations of ours;
- rank equal in right of payment with all existing and future senior
indebtedness of ours; and
- rank senior in right of payment to all subordinated indebtedness of ours.
As indebtedness of ours, however, the debentures are effectively subordinated to
all indebtedness of Grove Holdings and its subsidiaries. As of April 3, 1999,
the debentures were subordinated to approximately $727.8 million of liabilities
of Grove Holdings and its subsidiaries. Please refer to the section in this
prospectus entitled "Risk Factors--Payment of principal and interest on the
debentures is subordinated to all liabilities of our subsidiaries and our
subsidiaries' creditors would be entitled to realize their claims on our assets
before you."
Our operations are conducted through our subsidiaries. We are dependent upon
the cash flow of our subsidiaries to meet our obligations, including our
obligations under the debentures. As of April 3, 1999, all of our subsidiaries
were Restricted Subsidiaries. However, under limited circumstances, we will be
able to designate current or future subsidiaries as Unrestricted Subsidiaries.
Unrestricted Subsidiaries will not be subject to many of the restrictive
covenants contained in the indenture.
Grove Investors Capital is a wholly owned subsidiary of ours. Grove
Investors Capital was incorporated in Delaware solely for the purpose of serving
as a co-issuer of the debentures to facilitate the offering of the outstanding
debentures. We believe that certain prospective purchasers of the outstanding
debentures may have been restricted in their ability to purchase debt securities
of limited liability companies, like us, unless the debt securities were jointly
issued by a corporation. Grove
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Investors has nominal assets and no operations or revenues. Grove Investors
Capital has no subsidiaries. Grove Investors Capital is also prohibited from
engaging in any business activities. As a result, you should not expect Grove
Investors Capital to participate in servicing the interest and principal
obligations on the debentures.
PRINCIPAL, MATURITY AND INTEREST
The debentures:
- are limited in aggregate principal amount to $300.0 million at maturity of
which $47,375,000 was issued in the offering;
- will mature on May 1, 2010; and
- accrue interest at a rate of 14 1/2% per annum.
Interest is payable quarterly in arrears on February 1, May 1, August 1 and
November 1 of each year to Holders of record on the immediately preceding
January 15, April 15, July 15 and October 15. We may pay interest on the
debentures at our option, in the form of cash or additional debentures for the
life of the debentures.
We may issue additional debentures from time to time after the offering,
subject to the provisions of the indenture described below under the caption
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Disqualified
Stock." The debentures and any additional debentures subsequently issued will be
treated as a single class for all purposes under the indenture, including
without limitation,
- waivers,
- amendments,
- redemptions and
- offers to purchase.
Interest on the debentures will accrue from the most recent date to which
interest has been paid. If no interest has been paid, interest on the debentures
will accrue from the date of issuance. Interest will be computed on the basis of
a 360-day year comprised of twelve 30-day months. We will pay principal, premium
and Liquidated Damages, if any, and interest on the debentures at our option:
- at the office or agency of ours maintained for that purpose within the
City and State of New York; or
- by check mailed to the Holders of the debentures at their respective
addresses listed in the register of Holders of debentures.
However, if a Holder of debentures gives us wire transfer instructions, we will
make all payments of principal, premium, interest and Liquidated Damages, if
any, by wire transfer of immediately available funds to the accounts specified
by the Holder. Until we designate another office, our office or agency in New
York will be the office of the United States Trust Company maintained for that
purpose. The debentures will be issued in denominations of $1,000 and integral
multiples of $1,000.
OPTIONAL REDEMPTION
At our option, we may redeem the debentures at any time. We may redeem the
debentures in whole or in part upon not less than 30 nor more than 60 days'
notice, in cash at the redemption prices described below plus accrued and unpaid
interest and Liquidated Damages, if any, on the debentures
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to the applicable redemption date, if redeemed during the twelve-month period
beginning on May 1 of the years indicated below. The redemption prices are
expressed as percentages of principal amount.
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- --------------------------------------------------------------------------------- -----------
<S> <C>
2003............................................................................. 107.250%
2004............................................................................. 104.833%
2005............................................................................. 102.417%
2006 and thereafter.............................................................. 100.000%
</TABLE>
However, at any time before May 1, 2003, we may redeem all but not less than
all of the aggregate principal amount of debentures originally issued. If we
redeem the debentures before May 1, 2003, the redemption price will be equal to
114.5% of the principal amount of the debentures, plus accrued and unpaid
interest and Liquidated Damages, if any, on the debentures to the redemption
date.
SELECTION AND NOTICE
If less than all of the debentures are redeemed or repurchased at any time,
the United States Trust Company will select the debentures for redemption or
repurchase in compliance with the requirements of the principal national
securities exchange, if any, on which the debentures are listed. If the
debentures are not listed on a national securities exchange, they will be
redeemed or repurchased on a pro rata basis, by lot or by another method that
the United States Trust Company deems fair and appropriate. No debentures of
$1,000 or less will be redeemed in part. We will mail notices of redemption by
first class mail at least 30 but not more than 60 days before the redemption
date to each Holder of debentures to be redeemed at its registered address.
Notices of redemption or repurchase may not be conditional. If any debenture is
to be redeemed or repurchased in part only, the notice of redemption or
repurchase that relates to that debenture will state the portion of the
principal amount of the debenture to be redeemed or repurchased. A new debenture
in principal amount equal to the unredeemed or unrepurchased portion of the
debenture will be issued in the name of the Holder of the debenture upon
cancellation of the original debenture. Debentures called for redemption or
repurchase become due on the date fixed for redemption or repurchase. On and
after the redemption or repurchase date, interest and Liquidated Damages cease
to accrue on debentures or portions of them called for redemption or repurchase.
MANDATORY REDEMPTION
We are not required to make mandatory redemption or sinking fund payments
with respect to the debentures.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a change of control, you will have the right to
require us to repurchase all or any part, equal to $1,000 or an integral
multiple of $1,000, of your debentures pursuant to the offer described below
(the "Change of Control Offer"). The offer price will be equal to 101% of the
aggregate principal amount of the debentures plus accrued and unpaid interest
and Liquidated Damages on the debentures, if any, to the date of purchase (the
"Change of Control Payment"). Within 30 days following any change of control, we
will mail a notice to you describing the transaction or transactions that
constitute the change of control and offering to repurchase your debentures on
the date specified in the notice. The date we repurchase the debentures will be
no earlier than 30 days and no later than 60 days from the date we mail the
notice (the "Change of Control Payment Date"), pursuant to the procedures
required by the indenture and described in the notice.
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We will comply with the requirements of Rule 14e-1 under the Exchange Act
and any other securities laws and regulations under the Exchange Act to the
extent these laws and regulations are applicable in connection with the
repurchase of the debentures as a result of a change of control. To the extent
that the provisions of any securities laws or regulations directly conflict with
the provisions of the indenture relating to such Change of Control Offer, we
will comply with the applicable securities laws and regulations and will not be
deemed to have breached our obligations described in the indenture by virtue our
compliance.
On the Change of Control Payment Date, we will, to the extent lawful:
- accept for payment all debentures or portions of debentures properly
tendered pursuant to the Change of Control Offer;
- deposit with the Paying Agent an amount equal to the Change of Control
Payment in respect of all debentures or portions of debentures so
tendered; and
- deliver or cause to be delivered to the United States Trust Company the
debentures accepted together with an Officers' Certificate stating the
aggregate principal amount of debentures or portions of debentures being
purchased by us.
The Paying Agent will promptly mail to each Holder of debentures so tendered the
Change of Control Payment for the debentures. The United States Trust Company
will then promptly authenticate and mail, or cause to be transferred by book
entry, to each Holder a registered debenture equal in principal amount to any
unpurchased portion of the debentures surrendered, if any. Each such registered
debenture will be in a principal amount of $1,000 or an integral multiple of
$1,000. We will publicly announce the results of the Change of Control Offer on
or as soon as practicable after the Change of Control Payment Date.
The change of control provisions described above will be applicable whether
or not any other provisions of the indenture are applicable. Except as described
above with respect to a change of control, the indenture does not contain
provisions that permit the Holders of the debentures to require us to repurchase
or redeem the debentures in the event of a takeover, recapitalization or similar
transaction. The definition of a change in control in the indenture includes a
transaction which is approved by our Management Committee. Due to change of
control repayment provisions in certain indebtedness of Grove Investors'
Subsidiaries, including the senior discount debentures and the senior
subordinated notes, and the existence of a change of control event of default in
the New Credit Facility, it is unlikely that we would be able to repurchase all
of the debentures upon the occurrence of a change of control. Please refer to
the section in this prospectus entitled "Risk Factors--Upon a change of control,
we may not have sufficient funds available to repurchase the debentures." In
addition, the debentures will rank equal in right of payment with other senior
Indebtedness of Grove Investors. The ability of Grove Investors to redeem all of
the debentures upon a change of control may also be limited by restrictions on
the ability of Grove Investors' Subsidiaries to pay dividends to Grove
Investors. Finally, the debentures will be effectively subordinated to
obligations of the Subsidiaries of Grove Investors, including with respect to
Change of Control Payments. Please refer to the section in this prospectus
entitled "--General."
We will not be required to make a Change of Control Offer upon a change of
control if:
- a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in the
indenture applicable to a Change of Control Offer made by us; and
- purchases all debentures validly tendered and not withdrawn under the
Change of Control Offer.
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"Change of Control" means the occurrence of any of the following:
- the sale, lease, transfer, conveyance or other disposition, other than by
way of merger or consolidation, in one or a series of related
transactions, of all or substantially all of the assets of Grove Investors
and its Subsidiaries, determined on a consolidated basis, to any "person,"
as such term is used in Section 13(d)(3) of the Exchange Act, other than
Grove Investors or a Wholly Owned Restricted Subsidiary or any Permitted
Holder or Permitted Holders;
- the adoption of a plan relating to the liquidation or dissolution of one
or both of us other than in a transaction which complies with the
provisions described under "--Merger, Consolidation or Sale of Assets";
- the completion of any transaction, including, without limitation, any
merger or consolidation, the result of which is that:
(1) any "person", as defined above, other than one or more Permitted
Holders, becomes the "beneficial owner" directly or indirectly, of
more than 50% of the Voting Stock of Grove Investors, measured by
voting power rather than number of shares, and
(2) the Permitted Holders do not beneficially own as much or more of the
Voting Stock of Grove Investors, measured by voting power rather than
by number of shares, than such person;
- the first day on which a majority of the members of the Management
Committee of Grove Investors are not Continuing Members; or
- the first day on which Grove Investors fails to own 100% of the issued and
outstanding Equity Interests of Grove Investors Capital, other than by
reason of the merger of Grove Investors Capital with and into a corporate
successor to Grove Investors.
The definition of change of control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of Grove Investors and its Subsidiaries, determined on a
consolidated basis. Although there is a developing body of case law interpreting
the phrase "substantially all," there is no precise established definition of
the phrase under applicable law. Accordingly, the ability of a Holder of
debentures to require us to repurchase the debentures as a result of a sale,
lease, transfer, conveyance or other disposition of less than all of the assets
of Grove Investors and its Subsidiaries taken as a whole to another Person or
group may be uncertain.
For purposes of these change of control provisions "beneficial owner" has
the same meaning as in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except
that a person shall be deemed to have "beneficial ownership" of all securities
that such person has the right to acquire, whether that right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition.
"Continuing Members" means, as of any date of determination, any member of
the Management Committee of Grove Investors who:
- was a member of the Management Committee on the date of the indenture; or
- was nominated for election or elected to the Management Committee with the
approval of a majority of the Continuing Members who were members of the
Management Committee at the time of such nomination or election.
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"Permitted Holders" means:
- any of:
-- Keystone, Inc.,
-- FW Grove Coinvestors, L.P.,
-- FW Strategic Partners, L.P.,
-- George Group Employee Partners--Grove, L.P.,
-- Michael George
-- and their respective affiliates on the date of the indenture;
- any of the Permitted Transferees of the Persons referred to above; and
- any person or group which holds, directly or indirectly, Equity Interests
in Grove Investors so long as a majority of the Equity Interests in Grove
Investors are beneficially owned by the Persons referred to under the
definition of Permitted Holders.
"Permitted Transferee" means, with respect to any Person:
- in the case of any Person who is a natural person, such individual's
spouse or children, any trust for such individual's benefit or the benefit
of such individual's spouse or children or any corporation, partnership,
limited liability company or similar entity in which the direct and
beneficial owner or owners of 80% or more of the Equity Interests is such
Person or such individual's spouse or children or any trust for the
benefit of such Persons; and
- in the case of any Person who is a natural person, the heirs, executors,
administrators or personal representatives upon death of that Person or
upon the incompetence or disability of that Person for purposes of the
protection and management of that individual's assets.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The indenture provides that Grove Investors will not, and will not permit
any of its Restricted Subsidiaries to, directly or indirectly, make any
Restricted Payment. However, Grove Investors and its Restricted Subsidiaries may
make a Restricted Payment if, at the time of and after giving effect to the
Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence of the Restricted Payment; and
(b) Grove Investors would, at the time of the Restricted Payment and
after giving pro forma effect to the Restricted Payment as if the
Restricted Payment had been made at the beginning of the applicable
four-quarter period, have been permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test
set forth in the first paragraph of the covenant described below under
the caption "--Incurrence of Indebtedness and Issuance of Disqualified
Stock"; and
(c) the Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by Grove Investors and its Restricted
Subsidiaries after the date of the indenture, excluding Restricted
Payments permitted by clauses (2), (3), (4), (6), (8), (10), (11) and
(13) of the next paragraph, is less than the sum, without duplication,
of:
(v) 50% of the Consolidated Net Income of Grove Investors for the
period, taken as one accounting period, from the beginning of the
first fiscal quarter commencing after the
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date of the indenture to the end of Grove Investors' most recently
ended fiscal quarter for which internal financial statements are
available at the time of the Restricted Payment, or, if such
Consolidated Net Income for the period is a deficit, less 100% of
such deficit, PLUS
(w) 100% of the aggregate net cash proceeds received by Grove
Investors since the date of the indenture as a contribution to its
equity capital or from the issue or sale of Equity Interests of Grove
Investors, other than Disqualified Stock, or from the issue or sale
of Disqualified Stock or debt securities of Grove Investors that have
been converted into such Equity Interests, other than Equity
Interests, or Disqualified Stock or convertible debt securities, sold
to a Subsidiary of Grove Investors, PLUS
(x) to the extent that any Restricted Investment that was made
after the date of the indenture is sold for cash or otherwise
liquidated or repaid for cash, the lesser of:
(A) the cash return of capital with respect to such
Restricted Investment, less the cost of disposition, if any, and
(B) the initial amount of such Restricted Investment, PLUS
(y) 50% of any dividends received by Grove Investors or a Wholly
Owned Restricted Subsidiary after the date of the indenture from an
Unrestricted Subsidiary of Grove Investors, to the extent that the
dividends were not otherwise included in Consolidated Net Income of
Grove Investors' for the period, PLUS
(z) to the extent that any Unrestricted Subsidiary is
redesignated as a Restricted Subsidiary after the date of the
indenture, the lesser of:
(A) the fair market value of Grove Investors' Investment in
the Subsidiary as of the date of the redesignation or
(B) the fair market value as of the date on which the
Subsidiary was originally designated as an Unrestricted
Subsidiary.
The provisions described above will not prohibit any of the following
payments or actions.
(1) The payment of any dividend within 60 days after the date of
declaration of the dividend, if at the date of declaration the payment would
have complied with the provisions of the indenture.
(2) The redemption, repurchase, retirement, defeasance or other
acquisition of any pari passu or subordinated Indebtedness or Equity
Interests of Grove Investors in exchange for, or out of the net cash
proceeds of the substantially concurrent sale, other than to a Subsidiary of
Grove Investors, of other Equity Interests of Grove Investors, other than
any Disqualified Stock; provided that the amount of any such net cash
proceeds that are used for any redemption, repurchase, retirement,
defeasance or other acquisition is excluded from clause (c)(w) of the
preceding paragraph.
(3) The defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness.
(4) The payment of any dividend or making of any distribution by a
Subsidiary of Grove Investors to the holders of its Equity Interests on a
pro rata basis.
(5) The repurchase, redemption or other acquisition or retirement for
value of any Equity Interests of Grove Investors or any Subsidiary of Grove
Investors held by
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- any former member of Grove Investors', or any of its Subsidiaries',
Management Committee, or
- any former officer, employee or director of Grove Investors or any of
its Subsidiaries pursuant to any equity subscription agreement, stock
option agreement, employment agreement or other similar agreement and
any dividends or distributions to Grove Investors to fund such
purchase, redemption or other acquisition or retirement.
The repurchases, redemptions or other acquisitions or retirements
permitted under clause (5) are limited by the following:
(A) the aggregate price paid for all repurchased, redeemed, acquired
or retired Equity Interests pursuant to clause (5) may not exceed (x)
$5.0 million in any calendar year, with unused amounts in any calendar
year being carried over to succeeding calendar years subject to a
maximum, without giving effect to clause (y), of $10.0 million plus (y)
the aggregate cash proceeds received by Grove Investors during such
calendar year from any reissuance of Equity Interests by Grove Investors
or Grove Worldwide to members of management of Grove Investors and its
Restricted Subsidiaries; and
(B) no Default or Event of Default shall have occurred and be
continuing immediately after such transaction; provided, further that the
aggregate cash proceeds referred to in (y) above shall be excluded from
clause (c)(w) of the preceding paragraph.
(6) So long as Grove Investors is a limited liability company either
treated as a partnership or disregarded as an entity separate from its owner
for federal income tax purposes, as evidenced by a certificate of an officer
of Grove Investors, prepared based on such officer's best knowledge, at
least annually, distributions to members of Grove Investors in an amount
with respect to any period after December 31, 1997 not to exceed the Tax
Amount of Grove Investors for such period. The distributions permitted under
clause (6) shall be allowed to be made quarterly based on an estimation and
after the end of a taxable year based on the partnership tax return of Grove
Investors, or, if Grove Investors is disregarded as an entity separate from
its owner, its nearest owner that is not so disregarded, for such taxable
year, or at such other times as reasonably appropriate including in
connection with an audit adjustment, taking into account
- any previous payments of Tax Amount for such taxable year or,
- if Grove Investors becomes included in a consolidated tax group for
federal income tax purposes, payments to the common parent of the
taxable group in an amount, with respect to any period after December
31, 1997, not to exceed the tax liability attributable to Grove
Investors on a stand-alone basis for that period.
(7) Any Investment to the extent that the consideration for the
Investment consists of the net cash proceeds of the concurrent issue and
sale, other than to a Restricted Subsidiary, of Equity Interests of Grove
Investors, other than any Disqualified Stock.
(8) The declaration and payment of dividends to holders of any class or
series of Disqualified Stock of Grove Investors, issued after the date of
the indenture in accordance with the covenant described below under the
caption "Incurrence of Indebtedness and Issuance of Disqualified Stock" so
long as
- no Default or Event of Default has occurred and is continuing and
- Grove Investors can incur at least $1.00 of additional indebtedness
pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of the covenant described below under caption
"--Incurrence of Indebtedness and Issuance of Disqualified Stock."
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(9) Investments made by Grove Investors or one of its Restricted
Subsidiaries within 30 days of the date of the indenture, the proceeds of
which are used to fund the Transactions or capitalize Restricted
Subsidiaries.
(10) The repurchase of Equity Interests deemed to occur upon exercise of
stock options if the Equity Interests represent a portion of the exercise
price of such options.
(11) Restricted Investments having an aggregate fair market value, taken
together with all other Restricted Investments made pursuant to this clause
(11) that are at that time outstanding, not to exceed $100.0 million, with
the fair market value of each Investment being measured at the time made and
without giving effect to subsequent changes in value.
(12) Distributions or payments of Receivables Fees.
(13) Restricted Payments not to exceed $50.0 million since the date of
the indenture.
"Restricted Payment" means, with respect to Grove Investors or any of
its Restricted Subsidiaries:
(1) to declare or pay any dividend or make any other payment or
distribution
(a) on account of Grove Investors' or any of its Restricted
Subsidiaries' Equity Interests, including, without limitation, any
payment in connection with any merger or consolidation involving Grove
Investors or any of its Restricted Subsidiaries, or
(b) to the direct or indirect holders of Grove Investors' or any of
its Restricted Subsidiaries' Equity Interests in their capacity as
holders of Equity Interests, other than dividends or distributions
payable in Equity Interests, other than Disqualified Stock, of Grove
Investors or dividends or distributions payable to Grove Investors or a
Restricted Subsidiary of Grove Investors;
(2) to purchase, redeem or otherwise acquire or retire for value,
including, without limitation, in connection with any merger or
consolidation involving us, any Equity Interests of Grove Investors, other
than Equity Interests owned by Grove Investors or any Restricted Subsidiary
of Grove Investors, or any direct or indirect parent of Grove Investors;
(3) to make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the debentures, other than any subordinated indebtedness
held by Grove Investors, except a payment of interest or principal at Stated
Maturity; or
(4) to make any Restricted Investment.
The Management Committee may designate any Restricted Subsidiary, other than
Grove Investors Capital, to be an Unrestricted Subsidiary if the designation
would not cause a Default. For purposes of making this determination, all
outstanding Investments by Grove Investors and its Restricted Subsidiaries,
except to the extent repaid in cash, in the Subsidiary so designated will be
deemed to be Restricted Payments at the time of the designation and will reduce
the amount available for Restricted Payments under the first paragraph of this
covenant. All outstanding Investments will be deemed to constitute Investments
in an amount equal to the fair market value of those Investments at the time of
the designation. The designation will only be permitted if the Restricted
Payment would be permitted at the time of the designation and if the Restricted
Subsidiary otherwise meets the definition of an Unrestricted Subsidiary.
For purposes of determining compliance with this covenant, if a Restricted
Payment meets the criteria of more than one of the exceptions described in (1)
through (13) above or is entitled to be made pursuant to the first paragraph of
this covenant, Grove Investors shall, in its sole discretion,
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classify the Restricted Payment in any manner that complies with the covenant.
The amount of all Restricted Payments, other than cash, will be the fair market
value on the date of the Restricted Payment of the asset(s) or securities
proposed to be transferred or issued by Grove Investors or the Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment will be determined by the
Management Committee whose resolution with respect to fair market value will be
delivered to the United States Trust Company. The Management Committee
determination will be based upon an opinion or appraisal issued by an
accounting, appraisal or investment banking firm of national standing if the
fair market value exceeds $5.0 million. Not later than the date of making any
Restricted Payment, we will deliver to the United States Trust Company an
Officers' Certificate stating that such Restricted Payment is permitted and
setting forth the basis upon which the calculations required by the covenant
"Restricted Payments" were computed, together with a copy of any fairness
opinion or appraisal required by the indenture.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF DISQUALIFIED STOCK
The indenture provides that Grove Investors will not, and will not permit
any of its Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness, including Acquired Debt. The indenture also provides that Grove
Investors will not issue any Disqualified Stock and will not permit any of its
Subsidiaries to issue any shares of Disqualified Stock. However, Grove Investors
may incur Indebtedness, including Acquired Debt, or issue shares of Disqualified
Stock and Grove Investors' Subsidiaries may incur Indebtedness or issue
preferred equity if the Fixed Charge Coverage Ratio for Grove Investors' most
recently ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date on which the additional
Indebtedness is incurred or the Disqualified Stock is issued would have been at
least 1.75 to 1, determined on a pro forma basis. The determination will include
a pro forma application of the net proceeds from the incurrence of indebtedness,
as if the additional Indebtedness had been incurred, or the Disqualified Stock
had been issued, as the case may be, at the beginning of the four-quarter
period.
The provisions of the first paragraph of this covenant do not apply to the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt").
(1) The incurrence by us and our Restricted Subsidiaries of Indebtedness
under the New Credit Facility, provided that the aggregate principal amount
of all term Indebtedness outstanding under the New Credit Facility after
giving effect to the incurrence does not exceed an amount equal to $200.0
million plus, in the case of any refinancing thereof, the aggregate amount
of fees, underwriting discounts, premiums and other costs and expenses
incurred in connection with the refinancing less the aggregate amount of all
scheduled or mandatory repayments of the principal of any term Indebtedness
under the New Credit Facility, other than repayments that are immediately
reborrowed, that have been made since the date of the indenture.
(2) The incurrence by us and our Restricted Subsidiaries of Indebtedness
and letters of credit under Credit Facilities; provided that the aggregate
principal amount of all revolving credit Indebtedness outstanding under all
Credit Facilities after giving effect to the incurrence does not exceed an
amount equal to the greater of
(A) the amount of the Borrowing Base and
(B) $125.0 million less, in the case of clause (B), the aggregate
amount of all Net Proceeds of Asset Sales applied to permanently reduce
revolving credit commitments under a Credit Facility pursuant to the
covenant described above under the caption "--Asset Sales". For purposes
of this covenant, letters of credit are deemed to have a principal amount
equal to the maximum face amount under the letter of credit.
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(3) The incurrence by Grove Investors and its Restricted Subsidiaries of
the Existing Indebtedness.
(4) The incurrence by
(A) us of Indebtedness represented by the debentures sold in the
offering,
(B) Grove Holdings and Grove Holdings Capital of Indebtedness
represented by the senior discount debentures and
(C) Grove Worldwide and Grove Capital of Indebtedness represented by
the senior subordinated notes and the incurrence by the Subsidiary
Guarantors, as defined in the senior subordinated note indenture, of
Indebtedness represented by the guarantees of the senior subordinated
notes.
(5) The incurrence by Grove Investors or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations or similar financings, in
each case incurred for the purpose of financing all or any part of the
purchase price or cost of construction or improvement of property, plant or
equipment used in the business of Grove Investors or the Restricted
Subsidiary, in an aggregate principal amount not to exceed $20.0 million at
any time outstanding.
(6) The incurrence by Grove Investors or any of its Restricted
Subsidiaries of Indebtedness in connection with the acquisition of assets or
a new Subsidiary; provided that the Indebtedness was incurred by the prior
owner of such assets or such Subsidiary before the acquisition by Grove
Investors or one of its Restricted Subsidiaries and was not incurred in
connection with, or in contemplation of, the acquisition by Grove Investors
or one of it Restricted Subsidiaries. The principal amount, or accreted
value, as applicable, of Indebtedness incurred pursuant to this clause (6),
together with any other outstanding Indebtedness incurred pursuant to this
clause (6) and any Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any Indebtedness incurred pursuant to this clause (6),
may not exceed $10.0 million.
(7) The incurrence by Grove Investors or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace Indebtedness,
other than intercompany Indebtedness, that was permitted by the indenture to
be incurred under the first paragraph under the caption "Incurrence of
Indebtedness and Issuance of Disqualified Stock" or clauses (3), (4), (5),
(6) or (10) of this paragraph.
(8) The incurrence by Grove Investors or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among Grove Investors
and any of its Wholly Owned Subsidiaries, including a pledge of assets in
connection with the incurrence; provided, however, that
(A) if one of us is the obligor on the Indebtedness, the Indebtedness
is expressly subordinated to the prior payment in full in cash of all
Obligations with respect to the debentures, and
(B)(1) any subsequent issuance or transfer of Equity Interests that
results in any intercompany Indebtedness being held by a Person other
than Grove Investors or a Restricted Subsidiary of Grove Investors and
(2) any sale or other transfer of any intercompany Indebtedness to a
Person that is not either Grove Investors or a Wholly Owned Restricted
Subsidiary of Grove Investors shall be deemed, in each case, to
constitute an incurrence of Indebtedness by Grove Investors or the
Restricted Subsidiary, as the case may be, that was not permitted by this
clause (8).
(9) The incurrence by Grove Investors or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging
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(A) interest rate risk with respect to any floating rate Indebtedness
that is permitted by the terms of the indenture to be outstanding,
(B) the value of foreign currencies purchased or received by Grove
Investors in the ordinary course of business as conducted by Grove
Investors or
(C) commodity risk relating to commodity agreements to the extent
entered into in the ordinary course of business to protect Grove
Investors and its Restricted Subsidiaries from fluctuations in the prices
of raw materials used in its business.
(10) The incurrence by Grove Investors or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal amount, or
accreted value, as applicable, at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (10), not to exceed $80.0
million.
(11) The incurrence by Grove Investors' Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any Indebtedness ceases to be
Non-Recourse Debt of an Unrestricted Subsidiary, that event will constitute
an incurrence of Indebtedness by a Restricted Subsidiary of Grove Investors
that was not permitted by this clause (11).
(12) The Guarantee by the Issuers or any of their Restricted
Subsidiaries of Indebtedness of Grove Investors or a Subsidiary of Grove
Investors, which Indebtedness was permitted to be incurred by another
provision of this covenant.
(13) The incurrence of Indebtedness, including letters of credit, in
respect of workers' compensation claims, self-insurance obligations,
performance, surety, bid or similar bonds and completion guarantees provided
by Grove Investors or a Restricted Subsidiary in the ordinary course of
business and consistent with past practices.
(14) The incurrence of Indebtedness, including Guarantees, by Grove
Investors or any of its Restricted Subsidiaries in connection with a Dealer
Financing Program.
(15) The incurrence of Equipment Financing Guarantees.
(16) The incurrence of Indebtedness arising from agreements of Grove
Investors or any Restricted Subsidiary providing for indemnification,
adjustment of purchase price or similar obligations, in each case, incurred
or assumed in connection with the disposition or acquisition of any
business, assets or Capital Stock of a Subsidiary. The maximum aggregate
liability of the Indebtedness permitted to be incurred pursuant to this
clause (16) shall at no time exceed the gross proceeds actually received by
Grove Investors and its Restricted Subsidiaries in connection with any
disposition or the gross proceeds actually paid by Grove Investors and its
Restricted Subsidiaries in connection with any acquisition.
For purposes of determining compliance with this covenant, if an item of
Indebtedness meets the criteria of more than one of the categories of Permitted
Debt described in clauses (1) through (16) above or is entitled to be incurred
pursuant to the first paragraph of this covenant, we shall, in our sole
discretion, classify the item of Indebtedness in any manner that complies with
this covenant. Accrual of interest, accretion or amortization of original issue
discount, the payment of interest on any Indebtedness in the form of additional
Indebtedness with the same terms, and the payment of dividends on Disqualified
Stock in the form of additional shares of the same class of Disqualified Stock
will not be deemed to be an incurrence of Indebtedness or an issuance of
Disqualified Stock for purposes of this covenant; provided, in each case, that
the amount thereof is included in Fixed Charges of Grove Investors as accrued.
LIENS
The indenture provides that we will not directly or indirectly, create,
incur, assume or suffer to exist any Lien securing Indebtedness or trade
payables on any asset now owned or acquired after the
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date of the indenture, or on any income or profits from any asset or assign or
convey any right to receive income from any asset, except Permitted Liens.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The indenture provides that neither Issuer may consolidate or merge with or
into, or sell, assign, transfer, convey or otherwise dispose of all or
substantially all of its properties or assets in one or more related
transactions, to another Person whether or not an Issuer is the surviving
corporation.
An Issuer may take any action described in the preceding paragraph if:
(1) the Issuer is the surviving corporation or the entity or the Person
formed by or surviving any consolidation or merger, if other than the
Issuer, or to which the sale, assignment, transfer, lease, conveyance or
other disposition shall have been made is a corporation or other entity
organized or existing under the laws of the United States, any state thereof
or the District of Columbia;
(2) the entity or Person formed by or surviving any such consolidation
or merger, if other than the Issuer, or the Person to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made assumes all the obligations of the Issuer under the registration rights
agreement, the debentures and the indenture pursuant to a supplemental
indenture in a form reasonably satisfactory to the United States Trust
Company;
(3) immediately after such transaction no Default or Event of Default
exists; and
(4) except in the case of a merger of one of us with or into a Wholly
Owned Subsidiary of Grove Investors, the Issuer or the entity or Person
formed by or surviving any such consolidation or merger, if other than the
Issuer, or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made will, at the time of such transaction
and after giving pro forma effect thereto as if such transaction had
occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described above under the caption "--Incurrence of Indebtedness and
Issuance of Disqualified Stock."
Notwithstanding the foregoing, Grove Investors is permitted to reorganize as a
corporation in accordance with the procedures established in the indenture, and
Grove Investors Capital may thereafter liquidate. Before reorganizing, Grove
Investors will deliver to the United States Trust Company an opinion of counsel
in the United States reasonably acceptable to the United States Trust Company
confirming that the reorganization, and, if applicable, liquidation of Grove
Investors Capital, is not adverse to holders of the debentures and certain other
conditions are satisfied. The reorganization will not be deemed adverse to the
holders of the debentures solely because:
(1) of the accrual of deferred tax liabilities resulting from such
reorganization or
(2) the successor or surviving corporation (A) is subject to income tax
as a corporate entity or (B) is considered to be an "includible corporation"
of an affiliated group of corporations within the meaning of the Internal
Revenue Code of 1986, as amended, or any similar state or local law.
LIMITATION ON LEASES
The indenture provides that Grove Investors will not, directly or
indirectly, lease all or substantially all of its properties or assets to any
Person.
TRANSACTIONS WITH AFFILIATES
The indenture provides that Grove Investors will not, and will not permit
any of its Restricted Subsidiaries to, make any payment to, or sell, lease,
transfer or otherwise dispose of any of its properties or assets to, or purchase
any property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of,
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any affiliate. Each of the foregoing payments and other actions are referred to
as an "Affiliate Transaction". However, Grove Investors and its Restricted
Subsidiaries may engage in an Affiliate Transaction if:
(1) the Affiliate Transaction is on terms that are no less favorable to
Grove Investors or the relevant Restricted Subsidiary than those that would
have been obtained in a comparable transaction by Grove Investors or the
Restricted Subsidiary with an unrelated Person and
(2) we deliver to the United States Trust Company:
(A) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$2.0 million, a resolution of the Management Committee set forth in an
Officers' Certificate certifying that the Affiliate Transaction complies
with clause (1) above and that the Affiliate Transaction has been
approved by a majority of the disinterested members of the Management
Committee and
(B) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of
$10.0 million, an opinion as to the fairness to the Holders of the
Affiliate Transaction from a financial point of view issued by an
accounting, appraisal or investment banking firm of national standing.
Notwithstanding the foregoing, the following items are not deemed to be
Affiliate Transactions.
(1) Any employment agreement, compensation or employee benefit
arrangements and incentive arrangements with any officer, director, member
or employee entered into by Grove Investors or any of its Restricted
Subsidiaries in the ordinary course of business of Grove Investors or such
Restricted Subsidiary, as well as customary change of control and severance
payments.
(2) Transactions between or among us and/or our Restricted Subsidiaries.
(3) Payment of reasonable managers and directors fees to Persons who are
not otherwise affiliates of ours.
(4) Restricted Payments, Permitted Investments and other payments and
distributions that are permitted by the provisions of the indenture
described above under the caption "--Restricted Payments."
(5) Any Permitted George Group Transaction.
(6) Loans and advances to officers, directors and employees of Grove
Worldwide or any Restricted Subsidiary for travel, entertainment, moving and
other relocation expenses, in each case made in the ordinary course of
business.
(7) Transactions permitted by the provisions of the covenant described
below under the caption "--Sales of Accounts Receivables".
(8) Transactions permitted by clauses (12) and (14) of the covenant
described above under the caption "--Incurrence of Indebtedness and Issuance
of Disqualified Stock."
(9) Transactions pursuant to any contract or agreement in effect on the
date of the indenture as the same may be amended, modified or replaced from
time to time so long as the amendment, modification or replacement is no
less favorable to Grove Investors and its Restricted Subsidiaries than the
contract or agreement as in effect on the date of the indenture.
SALE AND LEASEBACK TRANSACTIONS
The indenture provides that Grove Investors will not, and will not permit
any of its Restricted Subsidiaries to, enter into any sale and leaseback
transaction. Notwithstanding the foregoing, Grove Investors or any of its
Restricted Subsidiaries may enter into a sale and leaseback transaction if:
(1) Grove Investors or the Restricted Subsidiary could have (a) incurred
Indebtedness in an amount equal to the Attributable Debt relating to the
sale and leaseback transaction pursuant to
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the Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described above under the caption "--Incurrence of Additional
Indebtedness and Issuance of Disqualified Stock" and (b) incurred a Lien to
secure such Indebtedness pursuant to the covenant described above under the
caption "--Liens,"
(2) the gross cash proceeds of the sale and leaseback transaction are at
least equal to the fair market value, as determined in good faith by the
Management Committee and set forth in an Officers' Certificate delivered to
the United States Trust Company, of the property that is the subject of such
sale and leaseback transaction and
(3) the transfer of assets in such sale and leaseback transaction is
permitted by, and, if applicable, we apply the proceeds of such transaction
in compliance with, the covenant described above under the caption "--Asset
Sales."
In addition, Delta Manlift, S.A. and Grove France, S.A. and its successor, may
enter into any sale and leaseback transaction, provided that the sale and
leaseback transaction is in the ordinary course of business consistent with past
practices as in effect on the date of the indenture and the aggregate amount of
any Attributable Debt in connection with the transaction does not exceed $4.0
million in any calendar year.
RESTRICTIONS ON PREFERRED STOCK OF SUBSIDIARIES
The indenture provides that Grove Investors will not permit any of its
Restricted Subsidiaries to issue any preferred stock, or permit any Person to
own or hold an interest in any preferred stock of any such Subsidiary, except
for preferred stock issued to Grove Investors. Notwithstanding the foregoing,
Grove Holdings and Grove Worldwide, may issue preferred stock that is not
Disqualified Stock.
RESTRICTIONS ON ACTIVITIES OF GROVE INVESTORS CAPITAL
The indenture provides that Grove Investors Capital may not hold any assets,
become liable for any obligations or engage in any business activities. However,
Grove Investors Capital may be a co-obligor with respect to debentures issued
pursuant to the indenture and engage in any activities directly related or
necessary in connection with being a co-obligor.
PAYMENTS FOR CONSENT
The indenture provides that neither Grove Investors nor any of its
Restricted Subsidiaries will, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
of any debentures for or as an inducement to any consent, waiver or amendment of
any of the terms or provisions of the indenture or the debentures. Grove
Investors or its Restricted Subsidiaries may take any of the actions described
in the last sentence if consideration is offered to be paid or is paid to all
Holders of the debentures that consent, waive or agree to amend in the time
frame set forth in the solicitation documents relating to the consent, waiver or
agreement.
SALES OF ACCOUNTS RECEIVABLE
Grove Investors may, and any of its Restricted Subsidiaries may, sell at any
time and from time to time, accounts receivable and or notes receivable and
related assets to an Accounts Receivable Subsidiary if the following conditions
are met.
(1) The aggregate consideration received in each sale must be at least
equal to the aggregate fair market value of the receivables sold, as
determined by the Management Committee in good faith.
(2) No less than 80% of the consideration received in each sale must
consist of either cash or a promissory note (a "Promissory Note") which is
subordinated to no Indebtedness or obligation other than the financial
institution or other entity providing the financing to the Accounts
Receivable Subsidiary with respect to such accounts receivable (the
"Financier") or an Equity
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Interest in the Accounts Receivable Subsidiary. In addition the initial sale
of accounts receivable must include all accounts receivable of Grove
Investors and/or its Restricted Subsidiaries that are party to such
arrangements that constitute eligible receivables under such arrangements.
(3) Grove Investors and its Restricted Subsidiaries must sell all
accounts receivable that constitute eligible receivables under such
arrangements to the Accounts Receivable Subsidiary no less frequently than
on a weekly basis.
In addition, in connection with any sale of accounts receivable to an
Accounts Receivable Subsidiary permitted by this covenant Grove Investors
will comply with the following conditions:
- Grove Investors will not permit any Accounts Receivable Subsidiary to
sell any accounts receivable purchased from Grove Investors or any of
its Restricted Subsidiaries to any other person except on an
arms-length basis and solely for consideration in the form of cash or
Cash Equivalents.
- Grove Investors will not permit the Accounts Receivable Subsidiary to
engage in any business or transaction other than the purchase,
financing and sale of accounts receivable of Grove Investors and its
Restricted Subsidiaries and activities incidental the purchase,
financing or sale of accounts receivable.
- Grove Investors will not permit any Accounts Receivable Subsidiary to
incur Indebtedness in an amount in excess of the book value of the
Accounts Receivable Subsidiary's total assets, as determined in
accordance with GAAP.
- Grove Investors will, at least as frequently as monthly, cause the
Accounts Receivable Subsidiary to remit to Grove Investors or any of
its Restricted Subsidiaries as payment on the Promissory Notes or a
dividend, all available cash or Cash Equivalents not held in a
collection account pledged to a Financier, to the extent not applied to
pay or maintain reserves for reasonable operating expenses of the
Accounts Receivable Subsidiary or to satisfy reasonable minimum
operating capital requirements.
- Grove Investors will not, and will not permit any of its Subsidiaries
to, sell accounts receivable to any Accounts Receivable Subsidiary upon
(A) the occurrence of a Default with respect to Grove Investors and its
Restricted Subsidiaries and (B) the occurrence of certain events of
bankruptcy or insolvency with respect to such Accounts Receivable
Subsidiary.
REPORTS
The indenture provides that, whether or not required by the rules and
regulations of the Securities and Exchange Commission, so long as any debentures
are outstanding, Grove Investors will furnish to the Holders of debentures:
- all quarterly and annual financial information that would be required to
be contained in a filing with the Securities and Exchange Commission on
Forms 10-Q and 10-K if Grove Investors was required to file such Forms,
including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations" that describes the financial condition and
results of operations of Grove Investors and its consolidated Subsidiaries
and, with respect to the annual information only, a report on the
financial statements by Grove Investors' certified independent
accountants; and
- all current reports that would be required to be filed with the Securities
and Exchange Commission on Form 8-K if Grove Investors was required to
file such reports, in each case within the time periods specified in the
Securities and Exchange Commission's rules and regulations.
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In addition, following the completion of the exchange offer contemplated by the
registration rights agreement, whether or not required by the rules and
regulations of the Securities and Exchange Commission, the indenture requires
Grove Investors to file a copy of all such information and reports with the
Securities and Exchange Commission for public availability within the time
periods specified in the Securities and Exchange Commission's rules and
regulations, unless the Securities and Exchange Commission would not accept the
filing. Furthermore,
- at all times the Securities and Exchange Commission does not accept the
filings provided for in the preceding sentence or
- the filings provided for in the preceding sentence do not contain the
information required to be delivered upon request pursuant to Rule
144A(d)(4) under the Securities Act,
then, in each case, Grove Investors has agreed that, for so long as any
debentures remain outstanding, it will furnish to the Holders and to securities
analysts and prospective Grove Investors, upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.
In addition, the indenture requires Grove Investors to make information
available to securities analysts and prospective Grove Investors upon request.
Notwithstanding the foregoing indenture provisions, the SEC does not permit the
filing of reports by entities that have no reporting obligation; accordingly, we
will not file reports if our reporting obligation ceases.
EVENTS OF DEFAULT AND REMEDIES
The indenture provides that each of the events described below constitutes
an Event of Default.
(1) Default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the debentures.
(2) Default in payment when due of the principal of or premium, if any,
on the debentures.
(3) The failure by Grove Investors or any of its Restricted Subsidiaries
for 30 days after notice by the United States Trust Company or by the
Holders of at least 25% in principal amount of debentures then outstanding
to comply with the provisions described under the captions "--Change of
Control," "--Restricted Payments" or "--Incurrence of Indebtedness and
Issuance of Disqualified Stock".
(4) The failure by Grove Investors or any of its Restricted Subsidiaries
for 60 days after notice by the United States Trust Company or by the
Holders of at least 25% in principal amount of debentures then outstanding
to comply with any of its other agreements in the indenture or the
debentures.
(5) Default under any mortgage, indenture or instrument under which
there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by Grove Investors or any of its Restricted
Subsidiaries, or the payment of which is guaranteed by Grove Investors or
any of its Restricted Subsidiaries, whether the Indebtedness or guarantee
now exists, or is created after the date of the indenture, which default
(A) is caused by a failure to pay principal of or premium, if any, or
interest on the Indebtedness before the expiration of the grace period
provided in the Indebtedness on the date of the default (a "Payment
Default") or
(B) results in the acceleration of such Indebtedness before its
stated maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other
Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $10.0 million or more and
provided that in the case of any guarantees, a default shall not be
deemed to occur unless Grove Investors or the
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Restricted Subsidiary, as applicable, defaults in its payment obligations
under the guarantee after demand has been made in accordance with the
terms of the guarantee.
(6) The failure by Grove Investors or any of its Restricted Subsidiaries
to pay final judgments aggregating in excess of $10.0 million, net of any
amount with respect to which a reputable insurance company with assets over
$100.0 million has acknowledged liability in writing, which judgments are
not paid, discharged or stayed for a period of 60 days.
(7) The failure by Grove Worldwide or its Subsidiaries to apply the
proceeds from the offering as set forth under the caption "Use of Proceeds"
above before the 10th Business Day after the date of the indenture.
(8) Certain events of bankruptcy or insolvency with respect to Grove
Investors or any of its Subsidiaries.
If any Event of Default occurs and is continuing, the United States Trust
Company or the Holders of at least 25% in principal amount of the then
outstanding debentures may declare all the debentures to be due and payable
immediately. However, so long as any Indebtedness permitted to be incurred by
any of Grove Investors' Restricted Subsidiaries is outstanding, the acceleration
will not be effective until the earlier of;
(1) an acceleration of the Indebtedness of any of Grove Investors'
Restricted Subsidiaries; or
(2) ten business days after receipt by Grove Investors of written notice
of such acceleration.
Notwithstanding the foregoing, in the case of an Event of Default arising from
certain events of bankruptcy or insolvency, with respect to Grove Investors, any
Significant Subsidiary or any group of Subsidiaries that, taken together, would
constitute a Significant Subsidiary, all outstanding debentures will become due
and payable without further action or notice. Holders of the debentures may not
enforce the indenture or the debentures except as provided in the indenture.
Subject to certain limitations, Holders of a majority in principal amount of the
then outstanding debentures may direct the United States Trust Company in its
exercise of any trust or power. The United States Trust Company may withhold
from Holders of the debentures notice of any continuing Default or Event of
Default, except a Default or Event of Default relating to the payment of
principal or interest, if it determines that withholding notice is in their
interest.
In the case of any Event of Default occurring by reason of any willful
action, or inaction taken or ,or not taken, by us or on our behalf with the
intention of avoiding payment of the premium that we would have had to pay if we
then had elected to redeem the debentures pursuant to the optional redemption
provisions of the indenture, an equivalent premium shall also become and be
immediately due and payable to the extent permitted by law upon the acceleration
of the debentures.
The Holders of a majority in aggregate principal amount of the debentures
then outstanding by notice to the United States Trust Company may on behalf of
the Holders of all of the debentures waive any existing Default or Event of
Default and its consequences under the indenture except a continuing Default or
Event of Default in the payment of interest on, or the principal of, the
debentures.
We are required to deliver to the United States Trust Company annually a
statement regarding compliance with the indenture, and we are required upon
becoming aware of any Default or Event of Default, to deliver to the United
States Trust Company a statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES, MEMBERS AND
STOCKHOLDERS
No director, officer, employee, incorporator, member or stockholder of ours,
as such, shall have any liability for any of our obligations under the
debentures or the indenture or for any claim based on,
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in respect of, or by reason of, those obligations or their creation. Each Holder
of debentures by accepting a debenture waives and releases all such liability.
The waiver and release are part of the consideration for issuance of the
debentures. This waiver may not be effective to waive liabilities under the
federal securities laws and it is the view of the Securities and Exchange
Commission that such a waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
We may, at our option and at any time, elect to have all of our obligations
discharged with respect to the outstanding debentures ("Legal Defeasance")
except for:
(1) the rights of Holders of outstanding debentures to receive payments
in respect of the principal of, premium and Liquidated Damages, if any, and
interest on the debentures when the payments are due from the trust referred
to below,
(2) our obligations with respect to the debentures concerning issuing
temporary debentures, registration of debentures, mutilated, destroyed, lost
or stolen debentures and the maintenance of an office or agency for payment
and money for security payments held in trust,
(3) the rights, powers, trusts, duties and immunities of the United
States Trust Company, and our obligations in connection with those rights,
powers, duties and immunities and
(4) the Legal Defeasance provisions of the indenture.
In addition, we may, at our option and at any time, elect to have our
obligations released with respect to certain covenants that are described in the
indenture ("Covenant Defeasance") and thereafter any omission to comply with
such obligations shall not constitute a Default or Event of Default with respect
to the debentures. In the event Covenant Defeasance occurs, certain events, not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events, described under "Events of Default" will no longer constitute an Event
of Default with respect to the debentures.
To exercise either Legal Defeasance or Covenant Defeasance, we must take the
actions described below.
(1) We must irrevocably deposit with the United States Trust Company, in
trust, for the benefit of the Holders of the debentures, cash in United
States dollars, non-callable Government Securities, or a combination of cash
and Government Securities, in amounts that will be sufficient, in the
opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest and Liquidated
Damages on the outstanding debentures on the stated maturity or on the
applicable redemption date, as the case may be, and we must specify whether
the debentures are being defeased to maturity or to a particular redemption
date.
(2) In the case of Legal Defeasance, we must deliver to the United
States Trust Company an opinion of counsel in the United States reasonably
acceptable to the United States Trust Company confirming that (A) we have
received from, or there has been published by, the Internal Revenue Service
a ruling or (B) since the date of the indenture, there has been a change in
the applicable federal income tax law, in either case, to the effect that,
and based on the ruling or the change in laws, the opinion of counsel shall
confirm that, subject to customary assumptions and exceptions, the Holders
of the outstanding debentures will not recognize income, gain or loss for
federal income tax purposes as a result of the Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Legal Defeasance had not
occurred.
(3) In the case of Covenant Defeasance, we must deliver to the United
States Trust Company an opinion of counsel in the United States reasonably
acceptable to the United States Trust Company confirming that, subject to
customary assumptions and exceptions, the Holders of the
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outstanding debentures will not recognize income, gain or loss for federal
income tax purposes as a result of the Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at
the same times as would have been the case if such Covenant Defeasance had
not occurred.
(4) We must deliver to the United States Trust Company an opinion of
counsel to the effect that, subject to customary assumptions and exceptions,
after the 91st day following the deposit referred to in clause (1) above,
the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally.
(5) We must deliver to the United States Trust Company an Officers'
Certificate stating that we did not make the deposit with the intent of
preferring the Holders of debentures over the other creditors of ours with
the intent of defeating, hindering, delaying or defrauding creditors.
(6) We must deliver to the United States Trust Company an Officers'
Certificate and an opinion of counsel, each stating that all conditions
precedent provided for relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
In addition, no Default or Event of Default shall have occurred and be
continuing on the date of the deposit referred to in clause (1) above, other
than a Default or Event of Default resulting from the borrowing of funds to be
applied to such deposit, or insofar as Events of Default from bankruptcy or
insolvency events are concerned, at any time in the period ending on the 91st
day after the date of deposit.
Furthermore, the Legal Defeasance or Covenant Defeasance must not result in
a breach or violation of, or constitute a default under any material agreement
or instrument, other than the indenture, to which we or any of our Subsidiaries
is a party or by which we or any of our Subsidiaries is bound.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange registered debentures in accordance with
the indenture. The Registrar and the United States Trust Company may require a
Holder to furnish appropriate endorsements and transfer documents and we may
require a Holder to pay any taxes and fees required by law or permitted by the
indenture. We are not required to transfer or exchange any debenture selected
for redemption. Also, we are not required to transfer or exchange any debenture
for a period of 15 days before a selection of debentures to be redeemed.
The registered Holder of a debenture will be treated as the owner of it for
all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two paragraphs, the indenture or the
debentures may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount at maturity of the debentures then
outstanding, and any existing default or compliance with any provision of the
indenture or the debentures may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding debentures, including, in
each case, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, debentures.
Without the consent of each Holder affected, an amendment or waiver may not,
with respect to any debenture held by a non-consenting Holder:
(1) reduce the principal amount of debentures whose Holders must consent
to an amendment, supplement or waiver,
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(2) reduce the principal of or change the fixed maturity of any
debenture or alter the provisions with respect to the redemption of the
debentures, other than provisions relating to the covenants described above
under the caption "--Repurchase at the Option of Holders",
(3) reduce the rate of or change the time for payment of interest on any
debenture,
(4) waive a Default or Event of Default in the payment of principal of
or premium, if any, or interest on the debentures, except a rescission of
acceleration of the debentures by the Holders of at least a majority in
aggregate principal amount of the debentures and a waiver of the payment
default that resulted from such acceleration,
(5) make any debenture payable in money other than that stated in the
debentures,
(6) make any change in the provisions of the indenture relating to
waivers of past Defaults or the rights of Holders of debentures to receive
payments of principal of or premium, if any, or interest on the debentures,
(7) waive a redemption payment with respect to any debenture, other than
a payment required by one of the covenants described above under the caption
"--Repurchase at the Option of Holders," or
(8) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of
debentures, together with the United States Trust Company, we may amend or
supplement the indenture or the debentures to cure any ambiguity, defect or
inconsistency, to provide for uncertificated debentures in addition to or in
place of certificated debentures, to provide for the assumption of our
obligations to Holders of debentures in the case of a merger or consolidation or
sale of all or substantially all of our assets, to make any change that would
provide any additional rights or benefits to the Holders of debentures or that
does not adversely affect the legal rights under the indenture of any Holder, or
to comply with requirements of the Securities and Exchange Commission to effect
or maintain the qualification of the indenture under the Trust Indenture Act.
CONCERNING THE UNITED STATES TRUST COMPANY
The indenture contains limitations on the rights of the United States Trust
Company, should it become a creditor of ours, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any
claim as security or otherwise. The United States Trust Company will be
permitted to engage in other transactions. However, if it acquires any
conflicting interest it must eliminate the conflict within 90 days, apply to the
Securities and Exchange Commission for permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding
debentures will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the United
States Trust Company, subject to certain exceptions. The indenture provides that
in case an Event of Default shall occur, which shall not be cured, the United
States Trust Company will be required, in the exercise of its power, to use the
degree of care of a prudent man in the conduct of his own affairs. Subject to
these provisions, the United States Trust Company will be under no obligation to
exercise any of its rights or powers under the indenture at the request of any
Holder of debentures, unless the Holder shall have offered to the United States
Trust Company security and indemnity satisfactory to it against any loss,
liability or expense.
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ADDITIONAL INFORMATION
Anyone who receives this prospectus may obtain a copy of the indenture and
registration rights agreement without charge by writing to us at 1565 Buchanan
Trail East, Shady Grove, Pennsylvania 17256, Attention: Keith R. Simmons,
Secretary.
BOOK-ENTRY; DELIVERY AND FORM
The registered debentures will initially be issued in the form of one or
more registered debentures in global form without coupons. These registered
debentures are referred to in the prospectus as the "global debentures." The
global debentures will be deposited on the date of the closing of the exchange
of the registered debentures for outstanding debentures with, or on behalf of,
The Depository Trust Company and registered in the name of The Depository Trust
Company or its nominee, in each case, for credit to an account of a direct or
indirect participant as described below.
Except as set forth below, the global debentures may be transferred, in
whole and not in part, only to another nominee of The Depository Trust Company
or to a successor of The Depository Trust Company or its nominee. Beneficial
interests in the global debentures may not be exchange for debentures in
certificated form except in the limited circumstances described below. In
addition, transfers of beneficial interests in the global debentures will be
subject to the applicable rules and procedures of The Depository Trust Company
and its direct or indirect participants, which may change from time to time.
The debentures may be presented for registration of transfer and exchange at
the offices of the Registrar.
DEPOSITARY PROCEDURES
The Depository Trust Company has advised us that it is a limited-purpose
trust company created to hold securities for its participating organizations, or
"direct participants," and to facilitate the clearance and settlement of
transactions in those securities between direct participants through electronic
book-entry changes in accounts of participants. The direct participants include
securities brokers and dealers banks, trust companies, clearing corporations and
certain other organizations. Access to The Depository Trust Company's system is
also available to other entities that clear through or maintain a direct or
indirect custodial relationship with a direct participant. These entities are
referred to as "indirect participants." The Depository Trust Company may hold
securities beneficially owned by other persons only through the direct or
indirect participants and the other persons' ownership interest and transfer of
ownership interest will be recorded only on the records of the direct
participant and/or indirect participant, and not on the records maintained by
The Depository Trust Company.
The Depository Trust Company has also advised us that, pursuant to The
Depository Trust Company's procedures,
(1) upon deposit of the global debentures, The Depository Trust Company
will credit the accounts of the direct participants with an interest in the
global debentures, and
(2) The Depository Trust Company will maintain records of the ownership
interests of the direct participants in the global debentures and the
transfer of ownership interests by and between direct participants.
The Depository Trust Company will not maintain records of the ownership
interests of, or the transfer of ownership interests by and between, indirect
participants or other owners of beneficial interests in the global debentures.
Direct participants and indirect participants must maintain their own records of
the ownership interests of, and the transfer of ownership interests by and
between, indirect participants and other owners of beneficial interests in the
global debentures.
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Investors in the global debentures may hold their interests in the global
debentures directly through The Depository Trust Company if they are direct
participants in The Depository Trust Company or indirectly through organizations
that are direct participants in The Depository Trust Company. All ownership
interests in any global debentures may be subject to the procedures and
requirements of The Depository Trust Company.
The laws of some states require that certain persons take physical delivery
in definitive, certificated form of securities that they own. This may limit the
ability to transfer beneficial interests in a global debenture to these persons.
Because The Depository Trust Company can act only on behalf of direct
participants, which in turn act on behalf of indirect participants and others,
the ability of a person having a beneficial interest in a global debenture to
pledge the interest to persons or entities that are not direct participants in
The Depository Trust Company, or to otherwise take actions in respect of the
interests, may be affected by the lack of physical certificates evidencing the
interests.
Except as described in "Transfers of Interests in Global Debentures for
Certificated Debentures," owners of beneficial interests in the global
debentures will not have debentures registered in their names, will not receive
physical delivery of debentures in certificated form and will not be considered
the registered owners or holders of the debentures under the indenture for any
purpose.
Under the indenture, the United States Trust Company will treat the persons
in whose names the debentures are registered, including debentures represented
by global debentures, as the owners of the debentures for the purpose of
receiving payments and for any and all other purposes. Payments in respect of
the principal, premium, Liquidated Damages, if any, and interest on global
debentures registered in the name of The Depository Trust Company or its nominee
will be payable by the United States Trust Company to The Depository Trust
Company or its nominee as the registered holder under the indenture.
Consequently, neither we, the United States Trust Company nor any agent of ours
or the United States Trust Company will have any responsibility or liability
for:
(1) any aspect of The Depository Trust Company's records or any direct
participant's or indirect participant's records relating to or payments made
on account of beneficial ownership interests in the global debentures or for
maintaining, supervising or reviewing any of The Depository Trust Company's
records or any direct participant's or indirect participant's records
relating to the beneficial ownership interests in any global debenture; or
(2) any other matter relating to the actions and practices of The
Depository Trust Company or any of its direct participants or indirect
participants.
The Depository Trust Company has advised us that its current payment
practice, for payments of principal, interest and the like, with respect to
securities such as the debentures is to credit the accounts of the relevant
direct participants with the payment on the payment date in amounts
proportionate to the direct participants' respective ownership interests in the
global debentures as shown on The Depository Trust Company's records. Payments
by direct participants and indirect participants to the beneficial owners of the
debentures will be governed by standing instructions and customary practices
between them and will not be our responsibility or the responsibility of The
Depository Trust Company or the United States Trust Company. Neither we nor the
United States Trust Company will be liable for any delay by The Depository Trust
Company or its direct participants or indirect participants in identifying the
beneficial owners of the debentures, and both we and the United States Trust
Company may conclusively rely on and will be protected in relying on
instructions from The Depository Trust Company or its nominee as the registered
owner of the debentures for all purposes.
Interests in the global debentures are expected to be eligible to trade in
The Depository Trust Company's Same-Day Funds Settlement System. Therefore,
transfers between direct participants in The Depository Trust Company will be
effected in accordance with The Depository Trust Company's
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procedures, and will be settled in immediately available funds. Transfers
between indirect participants who hold an interest through a direct participant
will be effected in accordance with the procedures of the direct participant but
generally will settle in immediately available funds.
The Depository Trust Company has advised us that it will take any action
permitted to be taken by a holder of debentures only at the direction of one or
more direct participants to whose account interests in the global debentures are
credited and only in respect of such portion of the aggregate principal amount
of the debentures as to which the direct participant or direct participants has
or have given direction. However, if there is an Event of Default under the
debentures, The Depository Trust Company reserves the right to exchange global
debentures, without the direction of one or more of its direct participants, for
legended debentures in certificated form, and to distribute the certificated
forms of debentures to its direct participants. Please refer to the section in
this prospectus entitled "--Transfers of Interests in Global Debentures for
Certificated Debentures."
Although The Depository Trust Company has agreed to the foregoing procedures
to facilitate transfers of interests in the global debentures among direct
participants, it is under no obligation to perform or to continue to perform
these procedures, and the procedures may be discontinued at any time. Neither we
nor the United States Trust Company will have any responsibility for the
performance by The Depository Trust Company, or direct or indirect participants
of their respective obligations under the rules and procedures governing any of
their operations.
We have obtained the information in this section concerning The Depository
Trust Company and its book-entry system from sources that we believe to be
reliable, but we take no responsibility for the accuracy of these statements.
TRANSFERS OF INTERESTS IN GLOBAL DEBENTURES FOR CERTIFICATED DEBENTURES
An entire global debenture may be exchanged for definitive debentures in
registered, certificated form without interest coupons ("certificated
debentures") if any of the following events happens:
(1) The Depository Trust Company (x) notifies us that it is unwilling or
unable to continue as depositary for the global debentures and we fail to
appoint a successor depositary within 90 days or (y) has ceased to be a
clearing agency registered under the Exchange Act;
(2) we notify the United States Trust Company in writing that we elect
to cause the issuance of certificated debentures; or
(3) there shall have occurred and be continuing a Default or an Event of
Default with respect to the debentures.
If any of these events occurs, we will notify the United States Trust Company in
writing that, upon surrender by the direct and indirect participants of their
interest in the Global Debenture, Certificated Debentures will be issued to each
person that the direct and indirect participants and The Depository Trust
Company identify as being a beneficial owner of the related debentures.
Beneficial interests in global debentures held by any direct or indirect
participant may be exchanged for certificated debentures upon request to The
Depository Trust Company, by the direct participant, for itself or on behalf of
an indirect participant, but only upon at least 20 days' prior written notice
given to the United States Trust Company by or on behalf of The Depository Trust
Company in accordance with customary The Depository Trust Company procedures.
Certificated Debentures delivered in exchange for any beneficial interest in any
global debenture will be registered in the names, and issued in any approved
denominations, requested by The Depository Trust Company on behalf of these
direct or indirect participants, in accordance with The Depository Trust
Company's customary procedures.
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Neither we nor the United States Trust Company will be liable for any delay
by the holder of the global debentures or The Depository Trust Company in
identifying the beneficial owners of debentures, and both we and the United
States Trust Company may conclusively rely on, and will be protected in relying
on, instructions from the holder of the Global Debenture or The Depository Trust
Company for all purposes.
SAME DAY SETTLEMENT AND PAYMENT
The indenture requires that payments in respect of the debentures
represented by the global debentures, including principal, premium, if any,
interest and Liquidated Damages, if any, be made by wire transfer of immediately
available funds to the accounts specified by the holder of the Global Debenture.
With respect to Certificated Debentures, we will make all payments of principal,
premium, if any, interest and Liquidated Damages, if any, by wire transfer of
immediately available funds to the accounts specified by the holders of the
certificated debentures or, if no account is specified by a holder, by mailing a
check to that holder's registered address. We expect that secondary trading in
the certificated debentures will also be settled in immediately available funds.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
We entered into the registration rights agreement on April 29, 1998 with
Donaldson, Lufkin & Jenrette. Pursuant to the registration rights agreement, we
agreed to file with the Securities and Exchange Commission this registration
statement under the Securities Act with respect to the debentures. As required
by the registration rights agreement, upon the effectiveness of the registration
statement, we will offer to the Holders of Transfer Restricted Securities, as
defined, that are able to make certain representations the opportunity to
exchange their Transfer Restricted Securities for registered debentures. If we
are not required to file the registration statement or permitted to consummate
the exchange offer because the exchange offer is not permitted by applicable law
or Securities and Exchange Commission policy we will file with the Securities
and Exchange Commission a shelf registration statement to cover resales of the
Transfer Restricted Securities by the Holders of the Transfer Restricted
Securities who satisfy certain conditions relating to the provision of
information in connection with the shelf registration statement. In addition, if
any Holder of Transfer Restricted Securities notifies us before the 20th day
following completion of the exchange offer that:
- it is prohibited by law or Securities and Exchange Commission policy from
participating in the exchange offer, or
- it may not resell the registered debentures acquired by it in the exchange
offer to the public without delivering a prospectus and the prospectus
contained in the registration statement is not appropriate or available
for such resales, or
- it is a broker-dealer and owns debentures acquired directly from us or an
affiliate of ours
we will file a shelf registration statement to cover resales of the Transfer
Restricted Securities by those holders who satisfy the conditions relating to
the provision of information in connection with the shelf registration
statement.
We will use our best efforts to cause the applicable registration statement
to be declared effective as promptly as possible by the Securities and Exchange
Commission.
For purposes of the foregoing, "Transfer Restricted Securities" means each
outstanding debenture until the date on which that outstanding debenture:
(1) is exchanged in the exchange offer for a registered debenture which
is entitled to be resold to the public by the holder of the debenture
without complying with the prospectus delivery requirements of the
Securities Act,
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(2) has been disposed of in accordance with a shelf registration
statement, and the purchasers of that debenture have been issued registered
debentures, or
(3) is distributed to the public pursuant to Rule 144 under the
Securities Act or is saleable pursuant to Rule 144(k) under the Securities
Act and each registered debenture until the date on which such registered
debenture is disposed of by a broker-dealer pursuant to the "Plan of
Distribution" contemplated by this registration statement.
Pursuant to the registration rights agreement, we were obligated to file
this registration statement with the Securities and Exchange Commission on or
before April 29, 1999, 365 days after the Closing Date. In addition, the
registration rights agreement provides that:
(1) we will use our best efforts to have the registration statement
declared effective by the Securities and Exchange Commission on or before
August 27, 1999, 485 days after the Closing Date,
(2) unless the exchange offer would not be permitted by applicable law
or Securities and Exchange Commission policy, we will commence the exchange
offer and use our best efforts to issue on or before 30 business days after
the date on which the registration statement is declared effective by the
Securities and Exchange Commission, registered debentures in exchange for
all debentures tendered prior thereto in the exchange offer and
(3) if obligated to file a shelf registration statement, we will use our
best efforts to file the shelf registration statement with the Securities
and Exchange Commission on or before 60 days after the filing obligation
arises and to cause the shelf registration statement to be declared
effective by the Securities and Exchange Commission on or before 120 days
after such obligation arises.
If (a) we fail to file any of the registration statements required by the
registration rights agreement on or before the date specified for the filing,
(b) any of the registration statements is not declared effective by the
Securities and Exchange Commission on or before the date specified for such
effectiveness (the "Effectiveness Target Date"), (c) we fail to consummate the
exchange offer within 30 business days of the Effectiveness Target Date with
respect to the registration statement, or (d) this registration statement or a
shelf registration statement is declared effective but thereafter ceases to be
effective or usable in connection with resales of Transfer Restricted Securities
during the periods specified in the registration rights agreement (each such
event referred to in clauses (a) through (d) above a "Registration Default"),
then we will pay Liquidated Damages to each Holder of debentures, with respect
to the first 90-day period immediately following the occurrence of the first
Registration Default in an amount equal to $.05 per week per $1,000 principal
amount of debentures held by such Holder. The amount of the Liquidated Damages
will increase by an additional $.05 per week per $1,000 principal amount of
debentures with respect to each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum amount of Liquidated Damages for all
Registration Defaults of $.50 per week per $1,000 principal amount of
debentures. We will pay all accrued Liquidated Damages on each Damages Payment
Date to the Global Debenture Holder by wire transfer of immediately available
funds or by federal funds check and to Holders of Certificated Securities by
wire transfer to the accounts specified by them or by mailing checks to their
registered addresses if no such accounts have been specified. Following the cure
of all Registration Defaults, the accrual of Liquidated Damages will cease.
Holders of debentures are required to make certain representations to us, as
described in the registration rights agreement, to participate in the exchange
offer and are required to deliver certain information to be used in connection
with a shelf registration statement and to provide comments on the shelf
registration statement within the time periods set forth in the registration
rights agreement to have their debentures included in the shelf registration
statement and benefit from the provisions
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regarding Liquidated Damages set forth above. Please refer to the section in
this prospectus entitled "The Exchange Offer."
The foregoing description of the registration rights agreement is a summary
only and is not complete. This summary is qualified in its entirety by reference
to all provisions of the registration rights agreement which as been filed as an
exhibit to the registration statement of which this prospectus forms a part.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the indenture. Reference
is made to the indenture for a full disclosure of all such terms, as well as any
other capitalized terms used in this prospectus for which no definition is
provided.
"Accounts Receivable Subsidiary" means a Wholly Owned Subsidiary of Grove
Investors:
(1) which is formed solely for the purpose of, and which engages in no
activities other than activities in connection with, financing accounts
receivable and/or notes receivable and related assets of Grove Investors
and/or its Restricted Subsidiaries,
(2) which is designated by the Management Committee of Grove Investors
as an Accounts Receivables Subsidiary pursuant to a Management Committee
resolution set forth in an Officers' Certificate and delivered to the United
States Trust Company,
(3) that has total assets at the time of such designation with a book
value not exceeding $100,000 plus the reasonable fees and expenses required
to establish such Accounts Receivable Subsidiary and any accounts receivable
financing,
(4) no portion of Indebtedness or any other obligation, contingent or
otherwise, of which (a) is at any time recourse to or obligates Grove
Investors or any Restricted Subsidiary of Grove Investors in any way, other
than pursuant to (1) representations and covenants entered into in the
ordinary course of business in connection with the sale of accounts
receivable and/or notes receivable to such Accounts Receivable Subsidiary or
(2) any guarantee of any such accounts receivable financing by Grove
Investors that is permitted to be incurred pursuant to the covenant
described under the caption entitled "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Disqualified Stock," or (b) subjects any
property or asset of Grove Investors or any Restricted Subsidiary of Grove
Investors, directly or indirectly, contingently or otherwise, to the
satisfaction thereof, other than pursuant to (1) representations and
covenants entered into in the ordinary course of business in connection with
sales of accounts receivable and/or notes receivable or (2) any guarantee of
any such accounts receivable financing by Grove Investors that is permitted
to be incurred pursuant to the covenant described under the caption entitled
"--Certain Covenants--Incurrence of Indebtedness and Issuance of
Disqualified Stock,"
(5) with which neither Grove Investors nor any Restricted Subsidiary of
Grove Investors has any contract, agreement, arrangement or understanding
other than contracts, agreements, arrangements and understandings entered
into in the ordinary course of business in connection with sales of accounts
receivable and/or notes receivable in accordance with the covenant described
under the caption "--Certain Covenants--Sales of Accounts Receivable" and
fees payable in the ordinary course of business in connection with servicing
accounts receivable and/or notes receivable and
(6) with respect to which neither Grove Worldwide nor any Restricted
Subsidiary of Grove Worldwide has any obligation (a) to subscribe for
additional shares of Capital Stock or other Equity Interests therein or make
any additional capital contribution or similar payment or transfer thereto
other than in connection with the sale of accounts receivable and/or notes
receivable to
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such Accounts Receivable Subsidiary in accordance with the covenant
described under "--Certain Covenants--Sales of Accounts Receivable" or (b)
to maintain or preserve solvency or any balance sheet item, financial
condition, level of income or results of operations thereof.
"Acquired Debt" means, with respect to any specified Person,
(1) Indebtedness of any other Person existing at the time such other
Person is merged with or into or became a Subsidiary of the specified
Person, including, without limitation, Indebtedness incurred in connection
with, or in contemplation of, such other Person merging with or into or
becoming a Subsidiary of the specified Person, and
(2) Indebtedness secured by a Lien encumbering any asset acquired by the
specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the specified Person. For purposes of this definition, "control",
including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with", as used with respect to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise. Beneficial ownership
of 10% or more of the Voting Stock of a Person will be deemed to be control.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets or
rights, including, without limitation, by way of a sale and leaseback, other
than (A) in the ordinary course of business or (B) sales or other
dispositions of accounts receivable and/or notes receivable and related
assets to (x) the Accounts Receivable Subsidiary in accordance with the
covenant described under the caption "--Certain Covenants--Sale of Accounts
Receivable" and (y) one or more financial institutions in connection with a
Dealer Financing Program or factoring arrangements as in existence on the
date of the indenture, provided that, in each case, the sale, lease,
conveyance or other disposition of all or substantially all of the assets of
Grove Investors and its Subsidiaries, determined on a consolidated basis, is
governed by the provisions of the indenture described above under the
caption "--Change of Control" and/or the provisions described above under
the caption "--Limitation on Leases", and
(2) the issue or sale by Grove Investors or any of its Subsidiaries of
Equity Interests of any of the Grove Investors' Subsidiaries,
in the case of either clause (1) or (2), whether in a single transaction or a
series of related transactions (a) that have a fair market value in excess of
$2.5 million or (b) for net proceeds in excess of $2.5 million.
Notwithstanding the foregoing, the following items will not be deemed to be
Asset Sales:
(1) a transfer of assets by us to a Wholly Owned Restricted Subsidiary
or by a Wholly Owned Restricted Subsidiary to us or to another Wholly Owned
Restricted Subsidiary,
(2) an issuance of Equity Interests by a Wholly Owned Restricted
Subsidiary to us or to another Wholly Owned Restricted Subsidiary,
(3) a Restricted Payment that is permitted by the covenant described
above under the caption "--Restricted Payments,"
(4) the sale and leaseback of any assets within 90 days of the
acquisition of those assets; provided that such sale and leaseback complies
with the covenant described above under the caption "--Sale and Leaseback
Transactions",
(5) foreclosures of assets, and
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(6) the sale at fair market value of property or equipment that has
become worn out, obsolete or damaged or otherwise unsuitable for use in
connection with the business of Grove Investors or any Restricted
Subsidiary, as the case may be, in the ordinary course of business.
"Attributable Debt" in respect of a sale and leaseback transaction means, at
the time of determination, the present value, discounted at the rate of interest
implicit in such transaction, determined in accordance with GAAP, of the
obligation of the lessee for net rental payments during the remaining term of
the lease included in the sale and leaseback transaction, including any period
for which the lease has been extended or may, at the option of the lessor, be
extended.
"Borrowing Base" means, as of any date, an amount equal to the sum of 85% of
the face amount of all accounts receivable and notes receivable owned by Grove
Investors and its Restricted Subsidiaries as of such date that are not more than
90 days past due, as calculated on a consolidated basis and in accordance with
GAAP. To the extent that information is not available as to the amount of
accounts receivable and notes receivable as of a specific date, Grove Investors
may use the most recent available information for purposes of calculating the
Borrowing Base.
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at that time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means
(1) in the case of a corporation, corporate stock,
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents, however
designated, of corporate stock,
(3) in the case of a partnership or limited liability company,
partnership or membership interests, whether general or limited, and
(4) any other interest or participation that confers on a Person the
right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means
(1) United States dollars,
(2) securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality of the United
States, provided that the full faith and credit of the United States is
pledged in support thereof, having maturities of not more than one year from
the date of acquisition,
(3) certificates of deposit and Eurodollar time deposits with maturities
of one year or less from the date of acquisition, bankers' acceptances with
maturities not exceeding one-year and overnight bank deposits, in each case,
with any domestic commercial bank having capital and surplus in excess of
$500 million,
(4) repurchase obligations with a term of not more than thirty days for
underlying securities of the types described in clauses (2) and (3) above
entered into with any financial institution meeting the qualifications
specified in clause (3) above,
(5) obligations issued or fully guaranteed by any state of the United
States of America or any political subdivision of any state or any public
instrumentality of any state maturing within one year from the date of
acquisition thereof and, at the time of acquisition, having one of the two
highest ratings obtainable from either Standard & Poor's Corporation or
Moody's Investors Service, Inc.,
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(6) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Corporation and in each case
maturing within one year after the date of acquisition and
(7) money market funds at least 95% of the assets of which constitute
Cash Equivalents of the kinds described in clauses (1) through (7) of this
definition.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of that Person for that period PLUS
(1) an amount equal to any extraordinary or nonrecurring loss plus any
net loss realized in connection with an Asset Sale or the extinguishment of
any Indebtedness, to the extent the losses were deducted in computing such
Consolidated Net Income, PLUS
(2) provision for taxes based on income or profits or the Tax Amount of
that Person and its Subsidiaries for that period or, following the
reorganization of Grove Investors as a corporation, any tax sharing payment
made pursuant to a tax sharing agreement executed in connection therewith,
in each case, to the extent that the provision for taxes was included in
computing Consolidated Net Income, PLUS
(3) consolidated interest expense of that Person and its Subsidiaries
for that period, whether paid or accrued and whether or not capitalized,
including, without limitation, amortization of debt issuance costs and
original issue discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of all payments
associated with Capital Lease Obligations, imputed interest with respect to
Attributable Debt, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings,
and net payments, if any, pursuant to Hedging Obligations, to the extent
that any such expense was deducted in computing Consolidated Net Income,
PLUS
(4) depreciation, amortization, including amortization of goodwill and
other intangibles but excluding amortization of prepaid cash expenses that
were paid in a prior period, and other non-cash expenses, excluding any
non-cash expense to the extent that it represents an accrual of or reserve
for cash expenses in any future period or amortization of a prepaid cash
expense that was paid in a prior period, of that Person and its Subsidiaries
for that period to the extent that such depreciation, amortization and other
non-cash expenses were deducted in computing Consolidated Net Income, PLUS
(5) any interest expense on Indebtedness of another person that is
guaranteed by that Person or a Subsidiary of that Person or secured by a
Lien on the assets of that Person or one of its Subsidiaries, to the extent
that such interest expense was deducted in computing Consolidated Net Income
in that period, PLUS
(6) any charges of up to $30.0 million relating to a facility closing,
PLUS
(7) any charges of up to $16.0 million resulting from fees payable to
the George Group in connection with the consulting arrangements with Grove
Investors or its Restricted Subsidiaries, PLUS
(8) one-time expenses associated with inventory, research and
development and other write-ups resulting from purchase accounting
adjustments at the time of the Transactions or any other permitted
acquisition, to the extent such expenses were deducted in computing
Consolidated Net Income in such period, PLUS
(9) any expenses or charges related to any Equity offering, Permitted
Investment or Indebtedness permitted to be incurred by the indenture,
including expenses or charges related to the Transactions, and deducted in
such period in computing Consolidated Net Income, MINUS
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(10) non-cash items increasing such Consolidated Net Income for that
period, in each case, on a consolidated basis and determined in accordance
with GAAP.
Notwithstanding the foregoing, the provision for taxes based on the income or
profits of, and the depreciation and amortization and other non-cash charges of,
a Subsidiary of a Person shall be added to Consolidated Net Income to compute
Consolidated Cash Flow only to the extent, and in the same proportion, that the
Net Income of such Subsidiary was included in calculating the Consolidated Net
Income of that Person and only if a corresponding amount would be permitted at
the date of determination to be dividended to Grove Investors by such Subsidiary
without prior approval that has not been obtained, pursuant to the terms of its
charter and all judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any period,
the aggregate of the Net Income of that Person and its Subsidiaries for that
period, on a consolidated basis, determined in accordance with GAAP. The
foregoing is subject to the proviso that:
(1) the Net Income, but not loss, of any Person that is not a
Subsidiary, other than Grove Investors, or that is accounted for by the
equity method of accounting will be included only to the extent of the
amount of dividends or distributions paid in cash, or converted into cash,
to the referent Person or a Wholly Owned Restricted Subsidiary thereof;
(2) the Net Income of any Restricted Subsidiary will be excluded to the
extent that the declaration or payment of dividends or similar distributions
by that Subsidiary of that Net Income is not at the date of determination
permitted without any prior governmental approval, that has not been
obtained, or, directly or indirectly, by operation of the terms of its
charter or any judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its stockholders, unless the
restriction with respect to the payment of dividends or in similar
distributions has been legally waived, provided that Consolidated Net Income
of Grove Investors will be increased by the amount of dividends or other
distributions or other payments paid in cash, or to the extent converted
into cash, to the referent person or a Wholly Owned Restricted Subsidiary
thereof in respect of that period;
(3) the Net Income of any Person acquired in a pooling of interests
transaction for any period before the date of such acquisition will be
excluded;
(4) the cumulative effect of a change in accounting principles will be
excluded; and
(5) the Net Income, but not loss, of any Unrestricted Subsidiary will be
excluded, whether or not distributed to Grove Investors or one of its
Subsidiaries.
"Credit Facilities" means, with respect to us or our Restricted
Subsidiaries, one or more debt facilities, including, without limitation, the
New Credit Facility, or commercial paper facilities with banks or other
institutional lenders providing for revolving credit loans, term loans,
receivables financing, including through the sale or factoring of receivables to
such lenders or to special purpose entities formed to borrow from such lenders
against such receivables, or letters of credit, in each case, as amended,
restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time.
"Dealer Financing Program" means
(x) that certain financing program pursuant to which (1) distributors of
Grove Investors and its Restricted Subsidiaries can obtain up to 366-day
inventory financing for the purchase of the Grove Investors' Subsidiaries'
products, (2) units financed will generate secured notes receivable,
accounts receivable, chattel paper, instruments or other intangibles
(collectively, "Receivables"), which Grove Investors or its Restricted
Subsidiaries may sell, from time to time, to financial institutions at 100%
of face value and (3) Grove Investors or its Restricted Subsidiaries will
insure,
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with a nationally recognized insurance company with at least $100.0 million
in assets, at least 85% of the payment obligations relating to such
Receivables and
(y) factoring or discounting arrangements as in effect on the date of
the indenture or entered into in the ordinary course of business consistent
with past practice.
"Default" means any event that is or with the passage of time or the giving
of notice or both would be an Event of Default.
"Discount Debenture Indenture" means the indenture relating to the senior
discount debentures.
"Disqualified Stock" means any Capital Stock that, by its terms, or by the
terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof, or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or before the date that is 91 days after the date on which
the debentures mature. The foregoing is subject to the proviso that (1) any
Capital Stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require us to repurchase the Capital Stock
upon the occurrence of a change of control or an Asset Sale will not constitute
Disqualified Stock if the terms of the Capital Stock provide that we may not
repurchase or redeem any such Capital Stock pursuant to those provisions unless
the repurchase or redemption complies with the covenant described above under
the caption "--Certain Covenants--Restricted Payments"; and (2) Capital Stock
issued to any plan for the benefit of employees of Grove Investors or its
subsidiaries or by any plan to such employees will not constitute Disqualified
Stock solely because it may be required to be repurchased by Grove Investors to
satisfy applicable statutory or regulatory obligations.
"Equipment Financing Guarantees" means guarantees, including but not limited
to repurchase or remarketing obligations, residual value guarantees, conditional
loss guarantees or first loss guarantees, by Grove Investors or a Restricted
Subsidiary incurred in the ordinary course of business consistent with past
practice of Indebtedness incurred by a distributor, or other purchaser or
lessor, for the purchase of inventory manufactured or sold by Grove Investors or
a Restricted Subsidiary, the proceeds of which Indebtedness are used solely to
pay the purchase price of the inventory to the distributor or other purchaser or
lessor and any related reasonable fees and expenses, including financing fees;
provided, however, that
(1) to the extent commercially practicable, the Indebtedness so
guaranteed is secured by a Lien on such inventory in favor of the holder of
such Indebtedness, and
(2) if Grove Investors or a Restricted Subsidiary is required to make
payment with respect to the guarantee, Grove Investors or the Restricted
Subsidiary will have the right to receive either (q) title to such
inventory, (r) a valid assignment of a Lien in such inventory or (s) the net
proceeds of any resale of such inventory.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock, but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock.
"Existing Indebtedness" means up to $15.0 million in aggregate principal
amount of Indebtedness of Grove Investors and its Subsidiaries, other than
Indebtedness under the New Credit Agreement, in existence on the date of the
indenture, until such amounts are permanently repaid.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of that Person for that period
to the Fixed Charges of that Person for that period. If the referent Person or
any of its Restricted Subsidiaries incurs, assumes, Guarantees or redeems any
Indebtedness, other than revolving credit borrowings, or issues or redeems
preferred equity after the commencement of the period for which the Fixed Charge
Coverage Ratio is being calculated but before the date on which the event for
which the calculation of the Fixed Charge
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Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage
Ratio will be calculated giving pro forma effect to the incurrence, assumption,
Guarantee or redemption of Indebtedness, or the issuance or redemption of
preferred equity, as if the same had occurred at the beginning of the applicable
four-quarter reference period. In addition, for purposes of making the
computation referred to above,
(1) acquisitions that have been made by Grove Investors or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter
reference period or after the reference period and on or before the
Calculation Date will be deemed to have occurred on the first day of the
four-quarter reference period and Consolidated Cash Flow for the reference
period will be calculated without giving effect to clause (3) of the proviso
set forth in the definition of Consolidated Net Income and will reflect any
pro forma adjustments for expenses and cost reductions attributable to such
acquisitions, to the extent such adjustments are (x) realizable within
twelve months of the date of the acquisition and (y) based on pro forma
financial statements reviewed by Grove Investors' accountants,
(2) the Consolidated Cash Flow attributable to discontinued operations,
as determined in accordance with GAAP, and operations or businesses disposed
of before the Calculation Date, will be excluded,
(3) the Fixed Charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
before the Calculation Date, will be excluded, but only to the extent that
the obligations giving rise to the Fixed Charges will not be obligations of
the referent Person or any of its Restricted Subsidiaries following the
Calculation Date, and
(4) the amount of interest expense attributable to financings pursuant
to the Dealer Financing Program will be subtracted from the numerator and
excluded from the denominator in calculating the Fixed Charge Coverage Ratio
provided that the interest income from the financings exceeds interest
expense.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of
(1) the consolidated interest expense of that Person and its Restricted
Subsidiaries for that period, whether paid or accrued, including, without
limitation, amortization of debt issuance costs and original issue discount,
non-cash interest payments, the interest component of any deferred payment
obligations, the interest component of all payments associated with Capital
Lease Obligations, imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in respect of
letter of credit or bankers' acceptance financings, and net payments, if
any, pursuant to Hedging Obligations; provided, however, that in no event
will any amortization of deferred financing costs incurred in connection
with the Transactions be included in fixed charges, and
(2) the consolidated interest of that Person and its Restricted
Subsidiaries that was capitalized during such period, and
(3) any interest expense on Indebtedness of another Person that is
Guaranteed by that Person or one of its Restricted Subsidiaries or secured
by a Lien on assets of that Person or one of its Subsidiaries, whether or
not such Guarantee or Lien is called upon, excluding, however, guarantees
incurred in connection with (a) any Equipment Financing Guarantee or (b)
residual value guarantees, conditional loss guarantees and similar
financings allowed to be incurred pursuant to the covenant described above
under the caption "Incurrence of Indebtedness and Issuance of Preferred
Stock" and
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(4) if and for so long as that Person is taxed as a partnership for
federal income tax purposes, all cash dividend payments or other
distributions of property on any series of preferred stock of that Person
or, if that Person is taxed as a corporation for federal income tax
purposes, the product of (a) all cash dividend payments or other
distributions of property, and non-cash dividend payments in the case of a
Person that is a Subsidiary, on any series of preferred equity of that
Person times (b) a fraction, the numerator of which is one and the
denominator of which is one minus the then current combined federal, state
and local statutory tax rate of that Person expressed as a decimal, in each
case, on a consolidated basis and in accordance with GAAP.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in any other statements by any other
entity that have been approved by a significant segment of the accounting
profession, which are in effect on the date of the indenture.
"George Group" means The George Group, Inc. a Texas corporation, and its
successors.
"Guarantee" means a guarantee, direct or indirect, in any manner, including,
without limitation, by way of a pledge of assets or through letters of credit or
reimbursement agreements in respect thereof, of all or any part of any
Indebtedness but shall not include any endorsement of negotiable instruments for
collection in the ordinary course of business.
"Hedging Obligations" means, with respect to any Person, the obligations of
that Person under
(1) interest rate or currency swap agreements, interest rate cap
agreements and interest rate collar agreements,
(2) other agreements or arrangements designed to protect that Person
against fluctuations in interest or currency exchange rates and
(3) commodities purchase and sale agreements and other similar
agreements designed to protect that Person against fluctuations in the price
of raw materials used by Grove Investors or its Restricted Subsidiaries in
the ordinary course of business.
"Indebtedness" means, with respect to any Person, any indebtedness of that
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit, or
reimbursement agreements in respect thereof, or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any unpaid balance that constitutes an accrued expense or trade payable, if and
to the extent any of the foregoing, other than letters of credit and Hedging
Obligations, would appear as a liability upon a balance sheet of that Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of that Person, whether or not such Indebtedness is
assumed by that Person, and, to the extent not otherwise included, the Guarantee
by that Person of any indebtedness of any other Person. The amount of any
Indebtedness, other than Hedging Obligations and guarantees, outstanding as of
any date shall be
(1) the accreted value of the Indebtedness, in the case of any
Indebtedness issued with original issue discount, and
(2) the principal amount of the Indebtedness, together with any interest
thereon that is more than 30 days past due, in the case of any other
Indebtedness.
"Investment Grade Securities" means
(1) securities issued or directly and fully guaranteed or insured by the
United States government or any agency or instrumentality of the United
States, other than Cash Equivalents,
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(2) debt securities or debt instruments with a rating of BBB- or higher
by Standard and Poor's Corporation or Baa3 or higher by Moody's Investors
Services, Inc. or the equivalent of such rating by such rating organization,
or, if no rating of Standard and Poor's Corporation or Moody's Investors
Services, Inc. then exists, the equivalent of such rating by any other
nationally recognized securities rating agency, but excluding any debt
securities or instruments constituting loans or advances among Grove
Investors and its Subsidiaries, and
(3) investments in any fund that invests exclusively in investments of
the type described in clauses (1) and (2) which fund may also hold
immaterial amounts of cash pending investment and/or distribution.
"Investments" means, with respect to any Person, all investments by that
Person in other Persons, including affiliates, in the forms of direct or
indirect loans, including guarantees of Indebtedness or other obligations,
advances or capital contributions, purchases or other acquisitions for
consideration of Indebtedness, Equity Interests or other securities, together
with all items that are or would be classified as investments on a balance sheet
prepared in accordance with GAAP. "Investments" will not include commission,
travel and similar advances to officers and employees made in the ordinary
course of business. In addition, an acquisition of assets, Equity Interests or
other securities by us or any of our Restricted Subsidiaries for consideration
consisting solely of Equity Interests, other than Disqualified Stock, of Grove
Investors will not be deemed to be an Investment. If Grove Investors or any
Restricted Subsidiary of Grove Investors sells or otherwise disposes of any
Equity Interests of any direct or indirect Restricted Subsidiary of Grove
Investors such that, after giving effect to the sale or disposition, that Person
is no longer a Restricted Subsidiary of Grove Investors, Grove Investors will be
deemed to have made an Investment on the date of that sale or disposition equal
to the fair market value of the Equity Interests of such Restricted Subsidiary
not sold or disposed of in an amount determined as provided in the final
paragraph of the covenant described above under the caption "--Restricted
Payments."
"Lien" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of the asset, whether or
not filed, recorded or otherwise perfected under applicable law, including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code, or equivalent statutes, of any jurisdiction.
"Management Committee" means
(1) for so long as Grove Investors is a limited liability company, the
Management Committee of Grove Investors and
(2) otherwise the Board of Directors of Grove Investors.
"Net Income" means, with respect to any Person for any period,
(1) the net income (loss) of that Person, determined in accordance with
GAAP and before any reduction in respect of dividends on preferred
interests, excluding, however, (a) any gain, but not loss, together with any
related provision for taxes or Tax Distributions on such gain, but not loss,
realized in connection with (x) any Asset Sale, including, without
limitation, dispositions pursuant to sale and leaseback transactions, or (y)
the disposition of any securities by that Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of that Person or any
of its Restricted Subsidiaries and (b) any extraordinary or nonrecurring
gain, but not loss, together with any related provision for taxes or Tax
Distributions on such extraordinary or nonrecurring gain, but not loss, less
(2) in the case of any Person that is a partnership or limited liability
company, the Tax Amount of that person for that period.
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"New Credit Agreement" means that certain Credit Agreement, dated as of the
date of the indenture by and among Grove Worldwide LLC, Grove Capital, Inc. and
Chase Bank of Texas, National Association, as administrative agent, BankBoston
N.A., as syndication agent and Donaldson, Lufkin & Jenrette, as documentation
agent, and certain other lenders party thereto, providing for up to $125 million
of revolving credit borrowings and $200 million of term borrowings, including
any related notes, guarantees, collateral documents, instruments and agreements
executed in connection therewith, and in each case as amended, modified,
renewed, refunded, replaced or refinanced from time to time.
"New Credit Facility" means, with respect to Grove Investors and its
Restricted Subsidiaries, one or more debt facilities (including, without
limitation, the New Credit Agreement) or commercial paper facilities with banks
or other institutional lenders providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables to such lenders
or to special purpose entities formed to borrow from such lenders against such
receivables) or letters of credit, in each case, as amended, restated, modified,
renewed, refunded, replaced or refinanced in whole or in part from time to time.
"Non-Recourse Debt" means Indebtedness
(1) as to which neither Grove Investors nor any of its Restricted
Subsidiaries (a) provides credit support of any kind, including any
undertaking, agreement or instrument that would constitute Indebtedness, (b)
is directly or indirectly liable, as a guarantor or otherwise, or (c)
constitutes the lender; and
(2) no default with respect to which, including any rights that the
holders thereof may have to take enforcement action against an Unrestricted
Subsidiary, would permit, upon notice, lapse of time or both, any holder of
any other Indebtedness, other than the debentures being offered hereby, of
Grove Investors or any of its Restricted Subsidiaries to declare a default
on such other Indebtedness or cause the payment thereof to be accelerated or
payable before its stated maturity; and
(3) as to which the lenders have been notified in writing that they will
not have any recourse to the stock or assets of Grove Investors or any of
its Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities and obligations
payable under the documentation governing any Indebtedness.
"Permitted Business" means any of the businesses and any other businesses
related to the businesses engaged in by Grove Investors and its respective
Restricted Subsidiaries on the date of the indenture.
"Permitted George Group Transactions" means, for purposes of the covenant
described above under the caption "--Transactions with Affiliates," consulting
arrangements with the George Group and its affiliates and any payments for fees
and expenses made under the consulting arrangements, provided that the payments
may not exceed $8.0 million in any fiscal year, subject to reasonable
adjustments in connection with advisory and consulting services rendered in
connection with Permitted Investments.
"Permitted Investments" means
(1) any Investment in Grove Investors or in a Restricted Subsidiary of
Grove Investors that is engaged in a Permitted Business;
(2) any Investment in Cash Equivalents and Investment Grade Securities;
(3) any Investment by Grove Investors or any Restricted Subsidiary of
Grove Worldwide in a Person, if as a result of the Investment (a) that
Person becomes a Wholly Owned Restricted
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Subsidiary of Grove Worldwide and is engaged in a Permitted Business or (b)
that Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated
into, Grove Worldwide or a Wholly Owned Restricted Subsidiary of Grove
Worldwide that is engaged in Permitted Business;
(4) any Investment made as a result of the receipt of assets not
constituting Cash Equivalents from an Asset Sale that was made pursuant to
and in compliance with the covenant described above under the caption
"--Repurchase at the Option of Holders--Asset Sales";
(5) any acquisition of assets solely in exchange for the issuance of
Equity Interests of Grove Investor, other than Disqualified Stock
(6) other Investments in any Person having an aggregate fair market
value, measured on the date each such Investment was made and without giving
effect to subsequent changes in value, when taken together with all other
Investments made pursuant to this clause that are at the time outstanding,
not to exceed $10 million;
(7) Investments in securities of customers received in settlement of
obligations or pursuant to a plan of reorganization or similar arrangement
upon the bankruptcy or insolvency of such trade creditors or customers;
(8) Investments existing on the date of the indenture or made in
connection with the Transactions;
(9) Investments consisting of receivables owing to Grove Investors and
its Restricted Subsidiaries and advances or loans to or the receipt of notes
or drafts from, distributors and customers, in each case, in connection with
the sale or lease of inventory in the ordinary course of business and
consistent with past practices, including such Investments made in
connection with or pursuant to a Dealer Financing Program;
(10) loans and advances to officers, directors, members and employees
for business-related travel expenses, moving expenses and other similar
expenses, in each case, incurred in the ordinary course of business and
consistent with past practices not to exceed $1.0 million;
(11) any Hedging Obligation;
(12) Investments in an Accounts Receivable Subsidiary made in connection
with the formation of an Accounts Receivable Subsidiary or received in
consideration of sales of accounts receivable, in each case, in accordance
with the covenant described above under the caption entitled "--Certain
Covenants--Sales of Accounts Receivable,"
(13) Investments consisting of intercompany loans from Grove Investors
and its Restricted Subsidiaries to Restricted Subsidiaries;
(14) Investments consisting of capital contributions from Grove
Investors or any Restricted Subsidiaries to Restricted Subsidiaries in an
aggregate amount at any one time outstanding not to exceed $25.0 million;
(15) Equipment Financing Guarantees permitted by the terms of clause
(15) of the covenant described above under the caption "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock" and
(16) loans to and promissory notes or other instruments of managers and
officers of Grove Investors or its Restricted Subsidiaries issued in
connection with the purchase of Equity Interests of Grove Investors.
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"Permitted Liens" means
(1) Liens securing Senior Debt, as defined in the senior subordinated
note indenture, and Liens on assets of Restricted Subsidiaries securing
Senior Debt permitted by the terms of the senior subordinated note indenture
to be incurred;
(2) Liens in our favor or in favor of a Restricted Subsidiary;
(3) Liens on property of a Person existing at the time such Person
becomes a Restricted Subsidiary of Grove Investors or is merged into or
consolidated with Grove Investors or any Subsidiary of Grove Investors;
provided that the Liens were in existence before the contemplation of such
merger or consolidation and do not extend to any assets other than those of
the Person merged into or consolidated with Grove Investors or any
Subsidiary of Grove Investors;
(4) Liens on property existing at the time of acquisition of the
property by Grove Investors or any Subsidiary of Grove Investors, provided
that the Liens were in existence before the contemplation of such
acquisition;
(5) Liens to secure Indebtedness, including Capital Lease Obligations,
permitted by clause (5) of the second paragraph of the covenant entitled
"Incurrence of Indebtedness and Issuance of Disqualified Stock" covering
only the assets acquired, constructed or improved with the Indebtedness;
(6) Liens existing on the date of the indenture;
(7) Liens for taxes, assessments or governmental charges or claims that
are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded,
provided that any reserve or other appropriate provision as shall be
required in conformity with GAAP shall have been made therefor;
(8) Liens on assets of Unrestricted Subsidiaries that secure
Non-Recourse Debt of Unrestricted Subsidiaries;
(9) Liens incurred in the ordinary course of our business or any
Subsidiary's business with respect to obligations that do not exceed $5.0
million at any one time outstanding and that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances or
credit, other than trade credit in the ordinary course of business, and (b)
do not in the aggregate materially detract from the value of the property or
materially impair the use of the property in the operation of our business
or the business of such Subsidiary;
(10) liens on assets of the Subsidiary Guarantors, as defined in the
senior subordinated note indenture, to secure Senior Debt of the Subsidiary
Guarantors that was permitted to be incurred under the senior subordinated
note indenture;
(11) statutory Liens of landlords and Liens of carriers, warehousemen,
mechanics, suppliers, materialmen, repairmen and other Liens imposed by law
incurred in the ordinary course of business;
(12) Liens incurred or deposits made in the ordinary course of business
in connection with workers' compensation, unemployment insurance and other
types of social security or similar obligations, or to secure the
performance of tenders, statutory obligations, surety and appeal bonds,
bids, leases, government contracts, performance and return-of-money bonds
and other similar obligations, exclusive of obligations for the payment of
borrowed money;
(13) judgment or attachment Liens not giving rise to an Event of
Default;
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(14) easements, rights-of-way, zoning restrictions and other similar
charges or encumbrances in respect of real property not interfering in any
material respect with the ordinary course of the business of Grove Investors
or any of its Restricted Subsidiaries;
(15) any interest or title of a lessor under any lease, whether or not
characterized as capital or operating; provided that such Liens do not
extend to any property or assets which is not leased property subject to the
lease;
(16) Liens upon specific items of inventory or other goods and proceeds
of any Person securing that Person's obligations in respect of bankers'
acceptances issued or created for the account of that Person to facilitate
the purchase, shipment or storage of such inventory or other goods;
(17) Liens securing reimbursement obligations with respect to letters of
credit and products and proceeds thereof;
(18) Liens securing Hedging Obligations which Hedging Obligations relate
to Indebtedness that is otherwise permitted under the indenture;
(19) Liens arising out of consignment, conditional purchase or similar
arrangements for the sale of goods entered into by Grove Investors or any
Restricted Subsidiary in the ordinary course of business;
(20) Liens securing Permitted Refinancing Indebtedness which is incurred
to refinance any Indebtedness which has been secured by a Lien permitted
under the indenture and which has been incurred in accordance with the
provisions of the indenture;
(21) Liens with respect to Equipment Financing Guarantees and related
inventory and equipment;
(22) Liens incurred in connection with the Equipment Financing Program
and
(23) Liens incurred in the ordinary course of business on equipment and
inventory held for lease by Grove Worldwide or any of its Restricted
Subsidiaries.
"Permitted Refinancing Indebtedness" means any Indebtedness of ours or any
of our Restricted Subsidiaries issued in exchange for, or the net proceeds of
which are used within 60 days after the incurrence of the Indebtedness to
extend, refinance, renew, replace, defease or refund other Indebtedness of ours
or of any of our Restricted Subsidiaries, other than intercompany Indebtedness.
The foregoing is subject to the proviso that:
(1) the principal amount, or accreted value, if applicable, of the
permitted Refinancing Indebtedness does not exceed the principal amount of,
or accreted value, if applicable, plus accrued interest on, the Indebtedness
so extended, refinanced, renewed, replaced, defeased or refunded, plus the
amount of reasonable expenses, premiums, penalties, fees and interest
incurred in connection therewith;
(2) such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and has a Weighted Average Life to
Maturity equal to or greater than the Weighted Average Life to Maturity of,
the Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded;
(3) if the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded is subordinated in right of payment to the debentures,
such Permitted Refinancing Indebtedness has a final maturity date later than
the final maturity date of, and is subordinated in right of payment to, the
debentures on terms at least as favorable to the Holders of debentures as
those contained
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in the documentation governing the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; and
(4) such Indebtedness is incurred either by us or by the Restricted
Subsidiary that is the obligor on the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded.
"Receivables Fees" means distributions or payments made directly or by means
of discounts with respect to any participation interests issued or sold in
connection with, and other fees paid to a Person that is not a Restricted
Subsidiary in connection with, any receivables financing permitted pursuant to
the covenant entitled "Sales of Accounts Receivable."
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Senior Discount Debentures" means the 11 5/8% Senior Discount Debentures
due 2009 of Grove Holdings LLC and Grove Holdings Capital, Inc.
"Senior Subordinated Note Indenture" means the indenture relating to the
Senior Subordinated Notes.
"Senior Subordinated Notes" means the 9 1/4 Senior Subordinated Notes due
2008 of Grove Worldwide LLC and Grove Capital, Inc.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which the payment of
interest or principal was scheduled to be paid in the original documentation
governing the Indebtedness, and will not include any contingent obligations to
repay, redeem or repurchase any such interest or principal before the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person,
(1) any corporation, association or other business entity of which more
than 50% of the total voting power of shares of Capital Stock entitled,
without regard to the occurrence of any contingency, to vote in the election
of directors, managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by that Person or one or more of the
other Subsidiaries of that Person, or a combination thereof and
(2) any partnership (a) the sole general partner or the managing general
partner of which is such Person or a Subsidiary of such Person or (b) the
only general partners of which are that Person or of one or more
Subsidiaries of that Person, or any combination thereof.
"Tax Amount" means, with respect to Grove Investors for any period, the
product of
- the taxable income of that Person for such period and
- the maximum combined Federal, state and local income tax rates applicable
to an individual resident in New York City or California, whichever is
higher.
In determining the "Tax Amount," the effect on the tax amount of any net
operating loss carry forwards or other carry forwards or tax attributes, such as
alternative minimum tax carry forwards, shall be taken into account, and
adjusted to take into account any applicable credits, deductions or other
adjustments allowed under both New York and California law to a direct or
indirect owner of an interest in Grove Investors for state and local income tax
purposes. Notwithstanding anything to the
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contrary, Tax Amount shall not include taxes resulting from such Person's
reorganization as or change in the status to a corporation.
"Tax Distribution" means a distribution in respect of taxes to the members
of Grove Investors pursuant to clause (6) of the second paragraph of the
covenant described above under the caption "Certain Covenants--Restricted
Payments."
"Transactions" means each of
(1) the acquisition by Grove Investors through certain of its
subsidiaries of the mobile hydraulic crane, aerial work platform and
truck-mounted crane businesses of Hanson Funding (G) PLC and certain of its
subsidiaries, for aggregate cash consideration of approximately $583.0
million plus certain assumed liabilities (the "Acquisition");
(2) approximately $203.0 million of borrowings under the credit
facility;
(3) approximately $225.0 million of estimated gross proceeds from the
offering of the Senior Subordinated Notes; and
(4) an approximately $168.0 million equity contribution to Grove
Worldwide by Grove Investors (the "Equity Contribution"), a portion of which
is being financed with approximately $50.0 million in gross proceeds from
the offering of the senior discount debentures.
"Unrestricted Subsidiary" means any Subsidiary, other than Grove Investors
Capital, or any successor to any of them that is designated by the Management
Committee as an Unrestricted Subsidiary pursuant to a resolution of the
Management Committee; but only to the extent that the Subsidiary:
(1) has no Indebtedness other than Non-Recourse Debt;
(2) is not party to any agreement, contract, arrangement or
understanding with Grove Investors or any Restricted Subsidiary of Grove
Investors unless the terms of any such agreement, contract, arrangement or
understanding are no less favorable to Grove Investors or the Restricted
Subsidiary than those that might be obtained at the time from Persons who
are not affiliates of Grove Investors;
(3) is a Person with respect to which neither Grove Investors nor any of
its Restricted Subsidiaries has any direct or indirect obligation (x) to
subscribe for additional Equity Interests or (y) to maintain or preserve
such Person's financial condition or to cause such Person to achieve any
specified levels of operating results;
(4) has not guaranteed or otherwise directly or indirectly provided
credit support for any Indebtedness of Grove Investors or any of its
Restricted Subsidiaries; and
(5) has at least one director on its board of directors that is not a
director or executive officer of Grove Investors or any of its Restricted
Subsidiaries and has at least one executive officer that is not a director
or executive officer of Grove Investors or any of its Restricted
Subsidiaries.
Any such designation of an Unrestricted Subsidiary by the Management Committee
will be evidenced to the United States Trust Company by filing with the United
States Trust Company a certified copy of the Board Resolution giving effect to
the designation and an Officers' Certificate certifying that the designation
complied with the foregoing conditions and was permitted by the covenant
described above under the caption "Certain Covenants--Restricted Payments."
If, at any time, any Unrestricted Subsidiary would fail to meet the
foregoing requirements as an Unrestricted Subsidiary, it will thereafter cease
to be an Unrestricted Subsidiary for purposes of the indenture. Any Indebtedness
of such Subsidiary will be deemed to be incurred by a Restricted Subsidiary of
Grove Investors as of such date and, if such Indebtedness is not permitted to be
incurred
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as of such date under the covenant described under the caption "Incurrence of
Indebtedness and Issuance of Disqualified Stock," we will be in default of such
covenant. The Management Committee of Grove Investors may at any time designate
any Unrestricted Subsidiary to be a Restricted Subsidiary. Such designation will
be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of
Grove Investors of any outstanding Indebtedness of such Unrestricted Subsidiary
and such designation will only be permitted if
(1) such Indebtedness is permitted under the covenant described under
the caption "Certain Covenants--Incurrence of Indebtedness and Issuance of
Disqualified Stock," calculated on a pro forma basis as if the designation
had occurred at the beginning of the four-quarter reference period, and
(2) no Default or Event of Default would be in existence following the
designation.
"Voting Stock" of any Person as of any date means the Capital Stock of that
Person that is at the time entitled to vote in the election of the Management
Committee of that Person.
"Weighted Average Life to Maturity" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing
(1) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other
required payments of principal, including payment at final maturity, in
respect thereof, by (b) the number of years, calculated to the nearest
one-twelfth, that will elapse between such date and the making of such
payment, by
(2) the then outstanding principal amount of such Indebtedness.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of that Person all of the outstanding Capital Stock or other
ownership interests of which shall at the time be owned by that Person or by one
or more Wholly Owned Restricted Subsidiaries of that Person, other than Capital
Stock or other ownership interests which are (x) directors' qualifying shares
and (y) shares required to be held by a second shareholder pursuant to the laws
of France in an amount not to exceed one-tenth of one percent of the outstanding
shares.
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FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of our counsel, Paul, Weiss, Rifkind, Wharton & Garrison, the
following discussion is an accurate general description of the material
anticipated Federal income tax consequences of the purchase, ownership and
disposition of the debentures. This summary is based on laws, regulations,
rulings and decisions now in effect, all of which are subject to change,
possibly retroactively. This summary deals only with holders that will hold
debentures as capital assets and does not address tax considerations applicable
to investors that may be subject to special tax rules such as banks, insurance
companies, tax-exempt organizations, dealers in securities or currencies,
persons that will hold debentures as part of an integrated investment, including
a straddle, comprised of debentures and one or more other positions, persons
that have a functional currency other than the United States dollar or holders
of debentures that did not acquire the debentures in the initial distribution
thereof at their original issue price. In addition, this discussion does not
consider the effect of any state, local, estate, gift or other tax laws.
Investors considering the purchase of debentures should consult their own tax
advisors with respect to the application of the Federal income tax laws to their
particular situations as well as any tax consequences arising under the laws of
any state, local or foreign taxing jurisdiction.
UNITED STATES HOLDERS
As used in this prospectus, the term "United States Holder" means the
beneficial owner of debentures that is, for United States Federal income tax
purposes, (1) a citizen or resident of the United States, (2) a domestic
corporation or other entity taxable as a corporation, (3) an estate the income
of which is subject to United States Federal income taxation regardless of its
source, (4) a trust if (A) a United States court is able to exercise supervision
over the administration of the trust and (B) one or more United States
fiduciaries have authority to control all substantial decisions of the trust, or
(5) otherwise subject to United States Federal income taxation with respect to
its worldwide income on a net income basis.
TAXATION OF UNITED STATES HOLDERS ON EXCHANGE
In the opinion of our counsel, Paul, Weiss, Rifkind, Wharton & Garrison, the
exchange of an outstanding debenture for an registered debenture will not be a
taxable event to a United States Holder of an outstanding debenture, and a
United States Holder will not recognize any taxable gain or loss as a result of
such an exchange. Accordingly, a United States Holder will have the same
adjusted basis and holding period in an registered debenture as it had in a
outstanding debenture immediately before the exchange. Further, the tax
consequences of ownership and disposition of any registered debenture will be
the same as the tax consequences of ownership and disposition of a outstanding
debenture.
ORIGINAL ISSUE DISCOUNT
United States Holders of debentures generally will be subject to the special
tax accounting rules for original issue discount obligations provided by the
Internal Revenue Code of 1986, as amended (the "Code"). Accordingly, as
described in more detail below, United States Holders of the debentures will be
required to include original issue discount in gross income as ordinary income
as it accrues, in advance of the receipt of cash attributable to that income.
In general, a debt obligation that is issued for an amount less than its
"stated redemption price at maturity" (as defined below) will be considered to
have been issued with original issue discount for United States Federal income
tax purposes. Under the applicable regulations, the stated redemption price at
maturity will equal the sum of all payments to be made on a debenture, whether
denominated as interest or principal, other than certain interest payments based
on a fixed rate payable unconditionally at fixed periodic intervals of one year
or less during the entire term of the instrument.
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Because of our option to issue additional debentures in lieu of paying interest
in cash, none of the interest payable on the debentures is excluded from the
determination of the stated redemption price at maturity of the debentures.
Each United States Holder of a debenture, whether such holder uses the cash
or the accrual method of tax accounting, will be required to include in gross
income the sum of the "daily portions" of original issue discount on that
debenture for all days during the taxable year that the United States Holder
owns the debentures. The daily portions of original issue discount on a
debenture are determined by allocating to each day in any "accrual period" a
ratable portion of the original issue discount allocable to that accrual period.
At the election of each United States Holder, accrual periods may be of any
length and may vary in length over the term of the debentures, provided that
each accrual period is no longer than one year and each scheduled payment occurs
either on the final or first day of an accrual period. The amount of original
issue discount allocable to each accrual period is determined by multiplying the
"adjusted issue price" (as defined below) at the beginning of the accrual period
by the annual yield to maturity of the debentures. The "adjusted issue price" of
a debenture at the beginning of any accrual period will be the sum of its issue
price (generally, the first price at which a substantial amount of debentures
are sold, disregarding sales to bond houses, brokers, or similar persons or
organizations acting in the capacity of underwriters, placement agents or
wholesalers) and the amount of original issue discount allocable to all prior
accrual periods, reduced by the amount of all payments previously received on
the debenture.
EXERCISE OF ELECTION TO ISSUE ADDITIONAL DEBENTURES
In the event that we elect to issue additional debentures, such issuance of
additional debentures will not be treated, for United States Federal income tax
purposes, as a payment of interest, and the debentures will be deemed to be
"reissued" solely for purposes for computing the amount of original issue
discount includible in income during the then remaining term of the debentures.
Under these rules, the debentures will be deemed to be reissued at their then
adjusted issue price. The amount of original issue discount includible in
ordinary income over the remaining term of the debentures, determined on the
basis of a constant yield method as described above, will be equal to the excess
of (i) the sum of the principal amount due at maturity, the additional
debentures issued in lieu of cash payments, plus all remaining cash payments of
stated interest on the debentures and the additional debentures over (ii) the
adjusted issue price of the debentures.
MARKET DISCOUNT
The market discount rules generally provide that if a United States Holder
of a debenture purchased the debenture, subsequent to the original offering, for
an amount that is less than its "revised issue price" (the sum of the issue
price of the debenture and the aggregate amount of original interest discount
includible in the gross income of all holders for periods before the acquisition
of the debenture by such holder, which probably should be reduced by, although
it is not expressly stated in the Code, the amount of all payments previously
received on the debenture) of the debenture, the amount of the difference will
be treated as "market discount" for Federal income tax purposes, unless such
difference is less than a specified de minimis amount. Such a United States
Holder will be required to treat any principal payment on, or any gain on the
sale, exchange, retirement or other disposition of, a debenture as ordinary
income to the extent of the market discount which has not previously been
included in income and is treated as having accrued on such debenture at the
time of such payment or disposition. In addition, the United States Holder may
be required to defer, until the maturity of the debenture or its earlier
disposition in a taxable transaction, the deduction of all or a portion of the
interest expense on any indebtedness incurred or continued to purchase or carry
such debenture.
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Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the debenture, unless the
United States Holder elects to accrue on a constant interest method. A United
States Holder of a debenture may elect to include market discount in income
currently as it accrues (on either a ratable or constant interest method), in
which case the rule described above regarding deferral of interest deductions
will not apply. This election to include market discount in income currently,
once made, applies to all market discount obligations acquired on or after the
first taxable year to which the election applies and may not be revoked without
the consent of the Internal Revenue Service.
ACQUISITION PREMIUM
The acquisition premium rules generally provide that if a United States
Holder of a debenture purchased the debenture, subsequent to the original
offering, for an amount that is greater than the adjusted issue price of the
debenture, the amount of such excess will be treated as "acquisition premium"
for Federal income tax purposes, and the amount of original issue discount that
the United States Holder includes in gross income is reduced to reflect such
acquisition premium. Acquisition premium is allocated on a pro rata basis to
each accrual of original issue discount reducing original issue discount by a
constant fraction, the numerator of which is the excess of the adjusted basis of
the debenture over its adjusted issue price, and the denominator of which is the
excess of the sum of all amounts payable on the debenture after the purchase
date over its adjusted issue price.
SALE, EXCHANGE OR RETIREMENT OF DEBENTURES
Upon the sale, exchange or retirement of a debenture, a United States Holder
generally will recognize capital gain or loss equal to the difference between
the amount realized on the sale, exchange or retirement and such holder's
adjusted tax basis in the debentures. A United States Holder's adjusted tax
basis in a debenture will generally be equal to the amount paid for the
debentures by such holder, increased by any original issue discount included in
income by the holder, and reduced by the amount of all payments previously
received on the debenture. Such capital gain or loss will be long-term capital
gain or loss if the United States Holder's holding period in the debenture is
more than one year at the time of disposition. The distinction between capital
gain or loss and ordinary income or loss is important for purposes of the
limitations on a United States Holder's ability to offset capital losses against
ordinary income and because United States Holders that are individuals may be
entitled to a preferential rate on long-term capital gains.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
In general, information reporting requirements will apply to payments of
principal, premium, if any, and interest (including original issue discount) on
a debenture, and payment of the proceeds of the sale of a debenture to certain
non-corporate, not otherwise exempt, United States Holders, and a 31% backup
withholding tax may apply to such payments if the United States Holder (1) fails
to furnish or certify its correct taxpayer identification number to the payor in
the manner required, (2) is notified by the Internal Revenue Service that it has
failed to report payments of interest and dividends properly, or (3) under
certain circumstances, fails to certify that it has not been notified by the
Internal Revenue Service that it is subject to backup withholding for failure to
report interest and dividend payments. Any amounts withheld under the backup
withholding rules from a payment to a United States Holder will be allowed as a
credit against such holder's United States Federal income tax liability and may
entitle the United States Holder to a refund.
121
<PAGE>
REPORTING REQUIREMENTS
Grove Holdings will provide annual information statements to holders of the
debentures and to the Internal Revenue Service, setting forth the amount of
original issue discount determined to be attributable to the debentures for that
year.
NON-UNITED STATES HOLDERS
As used in this prospectus, the term "Non-United States Holder" means a
beneficial owner of debentures that, for United States Federal income tax
purposes, is not a United States Holder.
TAXATION OF NON-UNITED STATES HOLDERS ON EXCHANGE
The exchange of a outstanding debenture for an registered debenture will not
be a taxable event to a Non-United States Holder of a outstanding debenture, and
a Non-United States Holder will not recognize any taxable gain or loss as a
result of such an exchange. Accordingly, a Non-United States Holder will have
the same adjusted basis and holding period in an registered debenture as it had
in a outstanding debenture immediately before the exchange. Further, the tax
consequences of ownership and disposition of any registered debenture will be
the same as the tax consequences of ownership and disposition of a outstanding
debenture.
INTEREST
Subject to the discussion of information reporting and backup withholding
below, payments of interest (including original issue discount) on the
debentures to or on behalf of any Non-United States Holder will not be subject
to United States Federal income or withholding tax if such interest is not
effectively connected with the conduct of a trade or business within the United
States by such Non-United States Holder, provided that (1) such Non-United
States Holder is not a bank for United States Federal income tax purposes, (2)
such Non-United States Holder is not a "10-percent shareholder" within the
meaning of section 871(h)(3)(B) of the Internal Revenue Code of 1986, (3) such
Non-United States Holder is not a controlled foreign corporation for United
States Federal income tax purposes that is related to Grove Holdings through
stock ownership, and (4) certain certification requirements are met. A
Non-United States Holder that is not exempt from tax under these rules generally
will be subject to United States Federal income tax withholding at a rate of 30%
(or lower applicable treaty rate) on interest payments.
If the interest is effectively connected with the conduct of a trade or
business within the United States of such Non-United States Holder, such
interest will be subject to the United States Federal income tax on net income
that applies to United States persons generally (and with respect to corporate
holders under certain circumstances, the branch profits tax).
GAIN ON DISPOSITION
Any capital gain realized upon a sale, exchange or retirement of a debenture
by or on behalf of a Non-United States Holder generally will not be subject to
United States Federal withholding or income tax, unless (1) such gain is
effectively connected with a United States trade or business of such Non-United
States Holder, (2) the Non-United States Holder is an individual that is present
in the United States for 183 days or more during the taxable year of the sale,
exchange or retirement and certain other requirements are met, or (3) the
Non-United States Holder is subject to tax pursuant to provisions of the United
States Federal tax law applicable to certain United States expatriates.
122
<PAGE>
INFORMATION REPORTING AND BACKUP WITHHOLDING
Under temporary Treasury Regulations now in effect, information reporting
and backup withholding will not apply to payments by us or any middleman to a
Non-United States Holder, provided that the holder (and, in certain cases the
custodian, nominee or other agent of such holder) meets certain certification
requirements as to the status of the holder as a Non-United States Holder
(provided that the payor lacks actual knowledge that the holder is a United
States person or that the conditions of any other exemption are not in fact
satisfied).
Recently published final Treasury Regulations (the "Final Withholding
Regulations") make a number of important changes to the procedures for income
tax withholding and certification of eligibility for the portfolio interest
exemption or for a reduced rate of income tax withholding based on an applicable
income tax treaty. In general, the Final Withholding Regulations do not
significantly alter substantive withholding requirements but unify certification
procedures and clarify reliance standards. The Final Withholding Regulations are
scheduled to be effective for payments made on or after January 1, 2000, subject
to certain transition rules.
Initial Non-United States Holders will be required to submit certification
complying with the temporary Treasury Regulations upon purchase of the
debentures. Certification that complies with the procedures in the Final
Withholding Regulations, where required, must be provided not later than the
earlier of (1) the date after December 31, 1999 on which such Non-United States
Holders' certification is no longer accurate or has expired, and (2) December
31, 2000 by initial Non-United States Holders that remain holders on such date,
unless such Non-United States Holders receive payments on the debentures through
a qualified intermediary (as defined in the Final Withholding Regulations) that
has certified on such Non-United States Holders' behalf. Non-United States
Holders claiming under an income tax treaty (and not relying on the portfolio
interest exemption) should be aware that they may be required to obtain taxpayer
identification numbers and to certify their eligibility under the applicable
treaty's limitations on benefits article to comply with the Final Withholding
Regulations' certification requirements. The final withholding regulations are
quite complex. Non-United States holders are strongly urged to consult their own
tax advisors regarding potential application of the final withholding
regulations to payments on the debentures in light of their particular
circumstances.
Backup withholding is not an additional tax; any amounts so withheld may be
refunded or credited against a Non-United States Holder's United States Federal
income tax liability, provided the required information is furnished to the
Internal Revenue Service.
The foregoing summary does not discuss all aspects of Federal income
taxation that may be relevant to a particular holder of debentures in light of
his particular circumstances and income tax situation. Each holder of debentures
should consult his own advisor as to the specific tax consequences to such
holder of the ownership and disposition of the debentures, including the
application and effect of state, local, foreign and other tax laws, or
subsequent versions of such laws.
ERISA CONSIDERATIONS
Sections 406 and 407 of the Employee Retirement Income Security Act of 1974,
as amended, and Section 4975 of the Internal Revenue Code of 1986 prohibit
certain employee benefit plans, individual retirement accounts, individual
retirement annuities, and employee annuity plans ("Plans") from engaging in
certain transactions with persons who, with respect to such Plan, are "parties
in interest" under the Employee Retirement Income Security Act or "disqualified
persons" under the Internal Revenue Code of 1986. A violation of these
"prohibited transactions" rules may generate excise taxes under the Internal
Revenue Code of 1986 and other liabilities under the Employee Retirement Income
Security Act for such persons. Possible violations of the prohibited transaction
rules occur if the debentures are purchased with the assets of any Plan if we or
any of our affiliates is a party in interest
123
<PAGE>
or disqualified person with respect to such Plan, unless such acquisition is
subject to a statutory or administrative exemption.
The foregoing discussion is general in nature and is not intended to be
all-inclusive. Any fiduciary of a Plan considering the purchase of the
debentures should consult its legal advisors regarding the consequences of such
purchases under the Employee Retirement Income Security Act and the Internal
Revenue Code of 1986. If the Plan is not subject to the Employee Retirement
Income Security Act, the fiduciary should consult its legal advisors regarding
the consequences of any state law or Internal Revenue Code of 1986
considerations.
PLAN OF DISTRIBUTION
Based on interpretations by the Staff set forth in no-action letters issued
to third parties, we believe that a holder, other than a person that is an
affiliate of ours within the meaning of Rule 405 under the Securities Act or a
broker dealer registered under the Exchange Act that purchases debentures from
us to resell pursuant to Rule 144A under the Securities Act or any other
exemption, that exchanges outstanding debentures for registered debentures in
the ordinary course of business and that is not participating, does not intend
to participate, and has no arrangement or understanding with any person to
participate, in the distribution of the registered debentures will be allowed to
resell the registered debentures to the public without further registration
under the Securities Act and without delivering to the purchasers of the
registered debentures a prospectus that satisfies the requirements of Section 10
of the Securities Act. However, if any holder acquires registered debentures in
the exchange offer for the purpose of distributing or participating in a
distribution of the registered debentures, such holder cannot rely on the
position of the Staff enunciated in Exxon Capital Holdings Corporation or
similar no-action or interpretive letters and must comply with the registration
and prospectus delivery requirements of the Securities Act in connection with a
secondary resale transaction, and such secondary resale transaction must be
covered by an effective registration statement containing the selling security
holder information required by Item 507 or 508, as applicable, of Regulation S-K
if the resales are of registered debentures obtained by such holder in exchange
for outstanding debentures acquired by such holder directly from us or an
affiliate thereof, unless an exemption from registration is otherwise available.
As contemplated by the above no-action letters and the registration rights
agreement, each holder accepting the exchange offer is required to represent to
us in the letter of transmittal that they:
- are not an affiliate of ours;
- are not participating in, and do not intend to participate in, and has no
arrangement or understanding with any person to participate in, a
distribution of the outstanding debentures or the registered debentures;
- are acquiring the registered debentures in the ordinary course of
business; and
- if they are a broker dealer, they will receive the registered debentures
for their own account in exchange for the outstanding debentures that were
acquired as a result of market-making activities or other trading
activities. Each broker dealer must acknowledge that it will deliver a
prospectus in connection with any resale of such registered debentures.
Any broker dealer registered under the Exchange Act who holds outstanding
debentures that were acquired for its own account as a result of market-making
activities or other trading activities, other than outstanding debentures
acquired directly from us or any affiliate of ours, may exchange such
outstanding debentures for registered debentures pursuant to the exchange offer;
however, such broker dealer may be deemed an underwriter within the meaning of
the Securities Act and, therefore, must deliver a prospectus meeting the
requirements of the Securities Act in connection with any resales of the
registered debentures received by it in the exchange offer, which prospectus
delivery requirement
124
<PAGE>
may be satisfied by the delivery by such broker dealer of this prospectus, as it
may be amended or supplemented from time to time. We have agreed to use our
reasonable best efforts to cause the registration statement, of which this
prospectus is a part, to remain continuously effective for a period of one year
from the exchange date, and to make this prospectus, as amended or supplemented,
available to any such broker dealer for use in connection with resales. Any
broker dealer participating in the exchange offer will be required to
acknowledge that it will deliver a prospectus in connection with any resales of
registered debentures received by it in the exchange offer. The letter of
transmittal states that, by acknowledging that it will deliver and by delivering
a prospectus meeting the requirements of the Securities Act, a broker dealer
will not be deemed to admit that it is an underwriter within the meaning of the
Securities Act.
We will not receive any proceeds from any sale of registered debentures by a
broker dealer. Registered debentures received by broker dealers for their own
account pursuant to the exchange offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the registered debentures or a combination of
such methods of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker dealers and/or the purchasers of any such registered debentures. Any
broker dealer that resells registered debentures that were received by it for
its own account pursuant to the exchange offer and any broker dealer that
participates in a distribution of such registered debentures may be deemed to be
an underwriter within the meaning of the Securities Act and any profit on any
such resale of registered debentures and any commission or concessions received
by any such persons may be deemed to be underwriting compensation under the
Securities Act.
We have agreed to pay all expenses incident to the exchange offer, including
the reasonable expenses of one counsel for holders of the outstanding
debentures, other than commissions and concessions of broker dealers, and will
indemnify the holders of the outstanding debentures, including any broker
dealers, against certain liabilities, including liabilities under the Securities
Act.
LEGAL MATTERS
Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York, will pass upon
certain legal matters, including certain tax matters on our behalf, with respect
to the registered debentures.
EXPERTS
The consolidated financial statements of Grove Investors LLC as of October
3, 1998, and the combined financial statements of Grove Investors LLC for the
seven months ended April 28, 1998 and the consolidated financial statements for
the five months ended October 3, 1998, have been included herein and in the
registration statement in reliance upon the report of KPMG LLP, independent
certified public accountants, appearing elsewhere herein, and upon the authority
of said firm as experts in accounting and auditing.
The financial statements of the Grove Companies as of September 27, 1997,
and for each of the years in the two-year period ended September 27, 1997, have
been included herein and in the registration statement in reliance upon the
report of Ernst & Young LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
CHANGE IN ACCOUNTANTS
Until July 1998, Ernst & Young LLP was the independent accountant of Grove
Investors. In July 1998, Ernst & Young LLP was replaced by KPMG LLP as the
independent accountant of Grove
125
<PAGE>
Investors. Ernst & Young LLP did not resign nor was it dismissed under adverse
circumstances. Ernst & Young LLP's report on the financial statements for the
two years ended September 27, 1997 did not contain an adverse opinion or a
disclaimer of opinion, nor was it qualified or modified as to uncertainty, audit
scope, or accounting principles. The decision to change accountants was
recommended by the members of Grove Investors following the acquisition of the
Grove Companies. In addition, during the two most recent fiscal years, and the
subsequent interim periods, before Grove Investors' change in accountants, there
were no disagreements with Ernst & Young LLP on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of Ernst &
Young LLP, would have caused Ernst & Young LLP to make reference to the subject
matter of the disagreements in connection with its report.
During the two most recent fiscal years, and the subsequent interim periods,
before Grove Investors' change in accountants, there were no reportable events
communicated by Ernst & Young LLP on matters regarding the existence of internal
controls, the reliability of management representations, the scope of the audit,
or the fairness or reliabilty of the financials statements issued.
126
<PAGE>
INDEX TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
GROVE INVESTORS LLC AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
ANNUAL FINANCIAL STATEMENTS
Independent Auditors' Reports.............................................................................. F-2
Combined Balance Sheet as of September 27, 1997 and Consolidated Balance Sheet as of October 3, 1998....... F-4
Combined Statements of Operations for the years ended September 28, 1996 and September 27, 1997 and for the
seven months ended April 28, 1998 and Consolidated Statement of Operations for the five months ended
October 3, 1998.......................................................................................... F-5
Combined Statements of Predecessor Capital for the years ended September 28, 1996 and September 27, 1997
and for the seven months ended April 28, 1998 and Consolidated Statement of Members' Equity for the five
months ended October 3, 1998............................................................................. F-6
Combined Statements of Cash Flows for the years ended September 28, 1996 and September 27, 1997 and for the
seven months ended April 28, 1998 and Consolidated Statement of Cash Flows for the five months ended
October 3, 1998.......................................................................................... F-7
Notes to Combined and Consolidated Financial Statements.................................................... F-8
QUARTERLY FINANCIAL STATEMENTS
Unaudited Condensed Consolidated Balance Sheet as of April 3, 1999......................................... F-33
Unaudited Condensed Combined Statement of Operations and Comprehensive Income for the six months ended
March 28, 1998 and Condensed Consolidated Statement of Operations and Comprehensive Loss for the six
months ended April 3, 1999............................................................................... F-34
Unaudited Condensed Combined Statement of Cash Flow the six months ended March 28, 1998 and Condensed
Consolidated Statement of Cash Flow for the six months ended April 3, 1999............................... F-35
Notes to Unaudited Condensed Combined and Consolidated Financial Statements................................ F-36
</TABLE>
Grove Investors LLC and Grove Investors Capital, Inc. were formed in
December 1997 and March 1998, respectively, with nominal capital contributions
and had no operations prior to the acquisition. Accordingly, the Company (as
defined) has not provided herein any Financial Statements for such entities for
any period prior to the acquisition.
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Management Committee of
Grove Investors LLC:
We have audited the accompanying consolidated balance sheet of Grove
Investors LLC and subsidiaries as of October 3, 1998 and the related
consolidated statements of operations, members' equity and cash flows for the
five months ended October 3, 1998 (Successor Period) and the combined statements
of operations, predecessor capital and cash flows for the seven months ended
April 28, 1998 (Predecessor Period). These consolidated and combined financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated and combined
financial statements based on our audit.
We conducted our audit 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 audit provides 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 Grove
Investors LLC and subsidiaries as of October 3, 1998, and the results of their
operations and their cash flows for the Successor Period, in conformity with
generally accepted accounting principles. Furthermore, in our opinion, the
aforementioned combined financial statements present fairly, in all material
respects, the results of operations and cash flows of The Grove Companies for
the Predecessor Period, in conformity with generally accepted accounting
principles.
As discussed in note 2 to the combined and consolidated financial
statements, on April 28, 1998 Grove Investors LLC acquired The Grove Companies
in a business combination accounted for as a purchase. As a result of the
acquisition, the consolidated information as of October 3, 1998 and for the five
months then ended is presented on a different cost basis than that for the
periods before the acquisition and, therefore is not comparable.
KPMG LLP
December 1, 1998
Baltimore, Maryland
F-2
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholder of
The Grove Companies:
We have audited the accompanying combined balance sheet as of September 27,
1997 of the Grove Companies, and the related combined statements of operations,
predecessor capital, and cash flows for each of the two years in the period
ended September 27, 1997. Our audits also included the financial statement
schedules listed in the Index at Item 21(b). These financial statements and
schedules are the responsibility of the Companies' management. Our
responsibility is to express an opinion on the financial statements and
schedules 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 financial statements referred to above present fairly,
in all material respects, the combined financial position as of September 27,
1997, of the Grove Companies, and the combined results of their operations and
their cash flows for each of the two years in the period ended September 27,
1997, in conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedules, when considered in relation
to the basic financial statements taken as a whole, present fairly in all
material respects the information set forth therein.
ERNST & YOUNG LLP
December 15, 1997
Baltimore, Maryland
F-3
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
COMBINED BALANCE SHEET AS OF SEPTEMBER 27, 1997 AND
CONSOLIDATED BALANCE SHEET AS OF OCTOBER 3, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
1997 1998
----------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................ $ 5,024 $ 34,289
Trade receivables, net............................................... 149,164 129,833
Due from Hanson PLC.................................................. -- 10,500
Notes receivable..................................................... 68,450 5,887
Inventories (note 5)................................................. 215,332 207,248
Prepaid expenses and other current assets............................ 22,569 8,893
----------- ---------
Total current assets................................................... 460,539 396,650
Property, plant and equipment, net (note 6)............................ 147,588 207,175
Goodwill, net (note 7)................................................. 254,728 288,499
Other assets........................................................... 18,641 22,919
----------- ---------
$ 881,496 $ 915,243
----------- ---------
----------- ---------
LIABILITIES AND MEMBERS' EQUITY/PREDECESSOR CAPITAL
Current liabilities:
Current maturities of long-term debt (note 10)....................... $ -- $ 7,000
Short-term borrowings (note 8)....................................... 7,265 15,027
Accounts payable..................................................... 70,327 79,470
Accrued expenses and other current liabilities (note 9).............. 90,734 106,211
----------- ---------
Total current liabilities.............................................. 168,326 207,708
Deferred revenue (note 3).............................................. 46,509 67,306
Long-term debt (note 10)............................................... -- 509,665
Other liabilities (note 11)............................................ 38,169 82,729
----------- ---------
Total liabilities...................................................... 253,004 867,408
----------- ---------
Members' equity/predecessor capital:
Predecessor capital.................................................. 628,492 --
Invested capital..................................................... -- 75,000
Notes receivable from members........................................ -- (2,783)
Accumulated deficit.................................................. -- (29,664)
Minimum pension liability (note 12).................................. -- (2,059)
Cumulative translation adjustment.................................... -- 7,341
----------- ---------
Total members' equity/predecessor capital.............................. 628,492 47,835
----------- ---------
Commitments and contingencies (notes 16, 17, 18 and 19)
$ 881,496 $ 915,243
----------- ---------
----------- ---------
</TABLE>
See accompanying notes to combined and consolidated financial statements.
F-4
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
COMBINED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED SEPTEMBER 28, 1996
AND SEPTEMBER 27, 1997 AND THE SEVEN MONTHS ENDED APRIL 28, 1998 AND
CONSOLIDATED STATEMENT OF OPERATIONS FOR THE FIVE MONTHS ENDED OCTOBER 3, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
----------------------------------- ---------
SEPTEMBER SEPTEMBER OCTOBER
28, 27, APRIL 28, 3,
1996 1997 1998 1998
----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Net sales...................................... $ 794,209 $ 856,812 $ 476,200 $ 393,779
Cost of goods sold (note 5).................... 609,130 653,539 377,337 335,764
----------- ----------- --------- ---------
Gross profit................................... 185,079 203,273 98,863 58,015
Selling, engineering, general and
administrative expenses...................... 119,619 122,192 73,664 58,118
Amortization of goodwill....................... 9,185 9,054 5,215 3,091
Management fees paid to Hanson PLC (note 19)... 5,655 2,176 162 --
Restructuring charges (note 15)................ -- 1,960 -- --
----------- ----------- --------- ---------
Income (loss) from operations.................. 50,620 67,891 19,822 (3,194)
Interest income (expense), net (note 10)....... (2,791) 43 1,048 (21,579)
Other income (expense), net.................... (193) 535 (9,524) (554)
----------- ----------- --------- ---------
Income (loss) before income taxes.............. 47,636 68,469 11,346 (25,327)
Income taxes (note 14)......................... 22,188 26,249 11,741 4,337
----------- ----------- --------- ---------
Net income (loss).............................. $ 25,448 $ 42,220 $ (395) $ (29,664)
----------- ----------- --------- ---------
----------- ----------- --------- ---------
</TABLE>
See accompanying notes to combined and consolidated financial statements.
F-5
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
COMBINED STATEMENTS OF PREDECESSOR CAPITAL FOR THE YEARS ENDED SEPTEMBER 28,
1996
AND SEPTEMBER 27, 1997 AND FOR THE SEVEN MONTHS ENDED APRIL 28, 1998 AND
CONSOLIDATED STATEMENT OF MEMBERS' EQUITY FOR THE FIVE MONTHS ENDED OCTOBER 3,
1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMPANY
------------------------------------------------------------------
NOTES
RECEIVABLE MINIMUM CUMULATIVE
PREDECESSOR INVESTED FROM ACCUMULATED PENSION TRANSLATION
CAPITAL CAPITAL MEMBERS DEFICIT LIABILITY ADJUSTMENT
----------- ----------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, September 30, 1995 $ 467,306 $ -- $ -- $ -- $ -- $ --
Net income............................. 25,448 -- -- -- -- --
Dividends paid to parent............... (30,057) -- -- -- -- --
Net transactions with affiliates....... 42,394 -- -- -- -- --
Change in minimum pension liability.... (162) -- -- -- -- --
Change in foreign currency
translation.......................... (2,375) -- -- -- -- --
----------- ----------- ----------- ------------ ----------- ------
Balance, September 28, 1996 502,554 -- -- -- -- --
Net income............................. 42,220 -- -- -- -- --
Net transactions with affiliates....... 88,524 -- -- -- -- --
Change in minimum pension liability.... 601 -- -- -- -- --
Change in foreign currency
translation.......................... (5,407) -- -- -- -- --
----------- ----------- ----------- ------------ ----------- ------
Balance, September 27, 1997 628,492 -- -- -- --
Net loss............................... (395) -- -- -- -- --
Net transactions with affiliates....... (111,216) -- -- -- -- --
Change in minimum pension liability.... (1,371) -- -- -- -- --
Change in foreign currency
translation.......................... (5,764) -- -- -- -- --
----------- ----------- ----------- ------------ ----------- ------
Balance, April 28, 1998 509,746 -- -- -- --
Elimination of predecessor capital..... (509,746) -- -- -- -- --
Initial capitalization................. -- 75,000 -- -- -- --
Advances to members (note 19).......... -- -- (2,719) -- -- --
Net loss............................... -- -- -- (29,664) -- --
Accrued interest on member notes....... -- -- (64) -- -- --
Minimum pension liability.............. -- -- -- -- (2,059) --
Cumulative translation adjustment...... -- -- -- -- -- 7,341
----------- ----------- ----------- ------------ ----------- ------
Balance, October 3, 1998 $ -- $ 75,000 $ (2,783) $ (29,664) $ (2,059) $ 7,341
----------- ----------- ----------- ------------ ----------- ------
----------- ----------- ----------- ------------ ----------- ------
<CAPTION>
TOTAL
MEMBER'S
EQUITY
-----------
<S> <C>
Balance, September 30, 1995 $ --
Net income............................. --
Dividends paid to parent............... --
Net transactions with affiliates....... --
Change in minimum pension liability.... --
Change in foreign currency
translation.......................... --
-----------
Balance, September 28, 1996 --
Net income............................. --
Net transactions with affiliates....... --
Change in minimum pension liability.... --
Change in foreign currency
translation.......................... --
-----------
Balance, September 27, 1997 --
Net loss............................... --
Net transactions with affiliates....... --
Change in minimum pension liability.... --
Change in foreign currency
translation.......................... --
-----------
Balance, April 28, 1998
Elimination of predecessor capital..... --
Initial capitalization................. 75,000
Advances to members (note 19).......... (2,719)
Net loss............................... (29,664)
Accrued interest on member notes....... (64)
Minimum pension liability.............. (2,059)
Cumulative translation adjustment...... 7,341
-----------
Balance, October 3, 1998 $ 47,835
-----------
-----------
</TABLE>
See accompanying notes to combined and consolidated financial statements.
F-6
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
COMBINED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED SEPTEMBER 28, 1996
AND SEPTEMBER 27, 1997 AND FOR THE SEVEN MONTHS ENDED APRIL 28, 1998 AND
CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE FIVE MONTHS ENDED OCTOBER 3, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
----------------------------------- ---------
SEPTEMBER SEPTEMBER OCTOBER
28, 27, APRIL 28, 3,
1996 1997 1998 1998
----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)............................. $ 25,448 $ 42,220 $ (395) $ (29,664)
Adjustments to reconcile to net income (loss)
to net cash provided by operating
activities:
Depreciation and amortization............. 17,313 17,985 11,399 8,233
Depreciation of equipment held for rent... 3,805 8,352 5,501 7,400
Amortization of deferred financing
costs................................... -- -- -- 884
Accretion of interest on senior discount
notes................................... -- -- -- 2,550
Write-off of amount assigned to inventory
in purchase accounting.................. -- -- -- 27,707
Gain (loss) on sales of property, plant
and equipment........................... 5 (600) 6,256 --
Deferred income tax expense............... 126 1,969 2,358 1,249
Changes in operating assets and
liabilities:
Trade receivables, net.................. (48,405) (23,266) 32,096 (6,790)
Notes receivable........................ -- (68,450) 28,409 (3,607)
Inventories............................. (27,528) (162) (8,828) 17,936
Accounts payable and accrued expenses... 21,559 564 7,542 5,504
Other assets and liabilities, net....... 17,503 33,383 8,759 25,898
----------- ----------- --------- ---------
Net cash provided by operating activities....... 9,826 11,995 93,097 57,300
----------- ----------- --------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment.... (19,443) (32,491) (19,521) (7,230)
Investment in equipment held for rent......... (22,527) (37,904) (16,380) (20,751)
Acquisition of businesses from Hanson, PLC
including transaction costs of $5,783 net of
cash acquired of $9,242 and post-closing
adjustment received of $16,818.............. -- -- -- (562,723)
Other investing activities.................... (3,271) 1,603 2,071 1,302
----------- ----------- --------- ---------
Net cash used in investing activities........... (45,241) (68,792) (33,830) (589,402)
----------- ----------- --------- ---------
Cash flows from financing activities:
Net proceeds from short-term borrowings....... 7,443 204 6,821 941
Proceeds from issuance of long-term debt...... -- -- -- 547,560
Repayments of long-term debt.................. -- -- -- (35,200)
Equity investment............................. -- -- -- 75,000
Advances to members........................... -- -- -- (2,720)
Deferred financing costs...................... -- -- -- (19,533)
Other financing activities.................... 18,309 54,145 (62,087) --
----------- ----------- --------- ---------
Net cash provided by (used in) financing
activities.................................... 25,752 54,349 (55,266) 566,048
----------- ----------- --------- ---------
Effect of exchange rate changes on cash......... (838) (712) 217 343
----------- ----------- --------- ---------
Net increase (decrease) in cash and cash
equivalents................................... (10,501) (3,160) 4,218 34,289
Cash and cash equivalents, beginning of
period........................................ 18,685 8,184 5,024 --
----------- ----------- --------- ---------
Cash and cash equivalents, end of period........ $ 8,184 $ 5,024 $ 9,242 $ 34,289
----------- ----------- --------- ---------
----------- ----------- --------- ---------
</TABLE>
See accompanying notes to combined and consolidated financial statements.
F-7
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS)
(1) ORGANIZATION, DESCRIPTION OF BUSINESS, AND BASIS OF PRESENTATION
Grove Investors LLC ("Grove" or the "Company"), through its wholly owned
subsidiaries, is primarily engaged in the design, production, sale, and
after-sale support of mobile hydraulic cranes, aerial work platforms and
truck-mounted cranes. The Company's domestic manufacturing plants and related
facilities are located in Shady Grove and Chambersburg, Pennsylvania and
Waverly, Nebraska. The Company's foreign manufacturing plants and related
facilities are located in Sunderland, United Kingdom; Wilhelmshaven and
Langenfeld, Germany; and Tonneins and Cergy, France. The majority of the
Company's sales are to independent distributors, rental companies, and end users
which serve the heavy industrial and construction industries in the United
States and Europe.
The Company was formed as a limited liability company in December 1997
pursuant to the provisions of the Delaware Limited Liability Company Act. The
Company had no substantive operations prior to its initial capitalization and
the acquisition of The Grove Companies on April 29, 1998 (see note 2). The
Company issued 75,000 Class B membership interests for $75,000 to equity members
in connection with the initial capitalization of the Company. During the five
months ended October 3, 1998 the Company issued 3,912 Class A units to
management for cash of $1,192 and notes of $2,720 bearing interest at the prime
rate (8.5% at October 3, 1998). Such notes are recourse obligations generally
secured by the members' interest. In connection with the issuance of the Class A
units the Company redeemed 3,912 of the Class B membership interests for their
initial purchase price. Class A and Class B members have substantially identical
rights and obligations. As of October 3, 1998, 3,912 Class A units and 71,088
Class B membership interests are outstanding.
The Company is operated and controlled by a management committee (the
"Management Committee") constituted by a majority of the Company's equity
members. Equity members vote in relation to their percentage ownership. Net
income of the company is allocated to equity members first to the extent of any
deficit in their capital account; second, to the maximum extent possible, to
cause their capital account to equal their respective percentage interest in the
total members' equity of the Company; and third, in accordance with their
respective percentage interest in the Company. Net losses of the Company are
allocated to equity members first to the maximum extent possible, to cause their
capital account to equal their respective percentage interest in the total
member's equity of the Company; second, to the extent of any positive amount in
their capital account; and third, in accordance with their respective percentage
interest in the Company.
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation.
Combined financial statements for the periods prior to April 29, 1998
consist of the combined operations and substantially all of the assets and
liabilities of Kidde Industries, Inc. and the following legal entities: Grove
Europe Ltd., Crane Holdings, Inc., Delta Manlift SAS, Grove France SA, Deutsche
Grove GmbH, and Grove Manlift Pty. Ltd. (together "The Grove Companies" or
"Predecessor"). All of the Grove companies were either directly or indirectly
owned by Hanson PLC, a United Kingdom company.
(2) ACQUISITION
On April 29, 1998, the Company acquired (the "Acquisition") from Hanson
Funding (G) PLC ("Hanson") and certain of its subsidiaries, substantially all of
the assets of Hanson's U.S. mobile hydraulic crane and aerial work platform
operations, the capital stock of Hanson's U.S. truck-mounted
F-8
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS)
(CONTINUED)
(2) ACQUISITION (CONTINUED)
crane operation and the capital stock of Hanson's British, French, German, and
Australian crane and aerial work platform subsidiaries for an aggregate purchase
price of $583 million. The purchase price was subject to a post closing
adjustment based on the net assets of the Company as of the closing date for
which the Company received $16.8 million in fiscal 1998 and an additional $10.5
million in November 1998. Funds required by the Company to consummate the
Acquisition, including the payment of related fees and expenses, were as
follows:
<TABLE>
<S> <C>
Sources:
Issuance of the Senior Subordinated Notes....................................... $ 225,000
Borrowings under Revolving Credit Facility...................................... 10,106
Borrowings under Term Loan Facility............................................. 200,000
Issuance of the Senior Discount Debentures...................................... 49,958
Issuance of the Senior Debentures............................................... 47,375
Equity investment............................................................... 75,000
---------
$ 607,439
---------
---------
Uses:
Acquisition price............................................................... $ 583,000
Transaction costs............................................................... 5,783
---------
Aggregate purchase price........................................................ 588,783
Debt financing costs............................................................ 18,656
---------
$ 607,439
---------
---------
</TABLE>
The Acquisition was accounted for using the purchase method. The estimated
total purchase price of $583 million and related acquisition fees and expenses
of approximately $5.8 million have been allocated to the assets and liabilities
of the Company based upon an estimate of their respective fair values, with the
remainder being allocated to goodwill. The Company intends to amortize goodwill
over a 40 year period based on the strong brand name of the Company and the
longevity of the business
F-9
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS)
(CONTINUED)
(2) ACQUISITION (CONTINUED)
and the industry in which it operates. The estimated fair values of the assets
acquired and liabilities assumed in the Acquisition are summarized as follows:
<TABLE>
<S> <C>
Cash and cash equivalents........................................................ $ 9,241
Due from Hanson for post-closing adjustment...................................... 27,300
Trade receivables................................................................ 122,616
Notes receivable................................................................. 2,280
Inventories...................................................................... 248,381
Other current assets............................................................. 10,602
Property, plant and equipment.................................................... 189,703
Goodwill......................................................................... 294,877
Other non-current assets......................................................... 2,966
Short-term borrowings............................................................ (14,086)
Trade accounts payable........................................................... (79,493)
Sunderland, U.K. shut-down costs (Note 15)....................................... (18,500)
Accrued expenses and other current liabilities................................... (85,164)
Other non-current liabilities.................................................... (121,940)
---------
Aggregate purchase price......................................................... $ 588,783
---------
---------
</TABLE>
As a result of the Acquisition, the carrying value of assets and liabilities
of the Company are not comparable to the carrying value of such assets and
liabilities by the Predecessor. The allocation of the purchase price to certain
property, plant and equipment is based on fair market value appraisals which
have not been finalized.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
CASH AND CASH EQUIVALENTS
The Company defines cash equivalents as highly liquid investments with
initial maturities of three months or less.
TRADE RECEIVABLES AND NOTES RECEIVABLE
Trade receivables are net of allowance for doubtful accounts of $2,717 and
$3,075 as of September 27, 1997 and October 3, 1998, respectively.
Notes receivable relate to sales of new equipment to North American
distributors on terms of up to one year. Payment of interest and principal are
due at the maturity of the note unless the dealer sells the equipment prior to
maturity in which case the notes must be repaid immediately along with any
interest accrued thereon.
INVENTORIES
Inventories are valued at the lower of cost or market, as determined
primarily under the first-in, first-out method.
F-10
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS)
(CONTINUED)
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
Property, plant, and equipment are stated at cost. Maintenance and repairs
are charged to operations when incurred, while expenditures having the effect of
extending the useful life of an asset are capitalized. Depreciation is computed
primarily using the straight-line method. The useful lives by asset category are
as follows:
<TABLE>
<S> <C>
Land improvements............................................... 3-20 years
10-30
Buildings and improvements...................................... years
Machinery and equipment......................................... 3-12 years
Equipment held for rent......................................... Lease term
Furniture and fixtures.......................................... 3-10 years
</TABLE>
GOODWILL
The excess of the purchase price of the Company and its subsidiaries over
the fair value of the net assets acquired was recorded as goodwill. Amortization
expense is recorded on the straight-line method over 40 years. The Company
assesses the recovery of goodwill by determining whether amortization of the
goodwill over its remaining life can be recovered through undiscounted cash
flows of the acquired operations. Goodwill impairment, if any, is measured by
determining the amount by which the carrying value of the goodwill exceeds its
fair value based upon discounting of future cash flows.
IMPAIRMENT OF LONG-LIVED ASSETS
The Company records impairment losses on long-lived assets when events and
circumstances indicate that the assets might be impaired. No such losses have
been recorded in the accompanying financial statements.
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments are utilized by the Company to reduce
interest and foreign currency exchange risks and consist primarily of interest
rate collars and forward foreign exchange contracts. The Company does not hold
or issue derivative financial instruments for trading purposes. Gains and losses
on foreign currency transaction hedges are recognized in income and offset the
foreign exchange gains and losses of the underlying transactions. Gains and
losses on foreign currency firm commitment hedges are deferred and included in
the basis of the transactions underlying the commitments.
The Company has an interest rate collar contract to manage its exposure to
fluctuations in interest rates. The interest rate differential on the interest
rate contract is reflected as an adjustment to interest expense over the life of
the contract. Upon early termination of an interest rate contract, the gains or
losses on termination are deferred and amortized as an adjustment to the
interest expense on the related debt instrument over the remaining period
originally covered by the contract.
REVENUE RECOGNITION
Revenue is generally recognized as products are shipped to customers.
However, for certain transactions, the Company provides guarantees of the
residual value of the equipment to third party
F-11
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS)
(CONTINUED)
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
leasing companies. Such guarantees generally, given for periods of up to five
years, take the form of end-of-term residual value guarantees or reducing
residual value guarantees that decline with the passage of time. The Company
records these transactions in accordance with the lease principles established
by Statement of Financial Accounting Standards (SFAS) No. 13. If the transaction
qualifies as an operating lease, the Company records deferred revenue for the
amount of the net proceeds received upon the equipment's initial transfer to the
customer. The liability is then subsequently reduced on a pro rata basis over
the period to the first exercise date of the guarantee, to the amount of the
guaranteed residual value at that date, with corresponding credits to revenue in
the Company's statement of operations. Any further reduction in the guaranteed
residual value resulting from the purchaser's decision to continue to use the
equipment is recognized in a similar manner. Depreciation of equipment held for
rent is recognized in a similar manner over the term of the lease agreement. As
of September 27, 1997 and October 3, 1998, the amount of deferred revenue
relating to transactions involving residual value guarantees which is included
in other current or noncurrent liabilities was $53,150 and $80,658,
respectively.
PRODUCT WARRANTIES
Product warranty expenses are provided for estimated normal warranty costs
at the time of sale. Additional warranty expense is provided for specific
performance issues when identified. Specific performance issues relate to
situations in which the Company issues a part replacement notice for models that
are experiencing a particular problem.
FOREIGN CURRENCY TRANSLATION
The financial statements of subsidiaries located outside the United States
are measured using the local currency as the functional currency. Assets,
including goodwill, and liabilities are translated at the rates of exchange at
the balance sheet date. The resulting translation gains and losses are included
as a separate component of members' equity. Income and expense items are
translated at average monthly rates of exchange. Gains and losses from foreign
currency transactions of these subsidiaries are included in net income.
Aggregate gains (losses) on foreign currency transactions are not material.
RESEARCH AND DEVELOPMENT
Research and development expenditures are charged to operations as incurred.
Research and development costs were $14,976, $15,427, $8,242 and $5,878 for the
years ended September 28, 1996 and September 27, 1997, the seven months ended
April 28, 1998 and the five months ended October 3, 1998, respectively.
ADVERTISING
All costs associated with advertising and promoting products are expensed
when incurred. Advertising expense amounted to $3,887, $4,802, $2,324 and $1,568
for the years ended September 28, 1996 and September 27, 1997, the seven months
ended April 28, 1998 and the five months ended October 3, 1998, respectively.
F-12
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS)
(CONTINUED)
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STOCK-BASED COMPENSATION
The Company has elected to follow Accounting Principles Board Opinion No.
25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related interpretations in
accounting for its stock-based employee compensation arrangements.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument represents the amount at which the
instrument could be exchanged in a current transaction between willing parties,
other than a forced sale or liquidation. Significant differences can arise
between the fair value and carrying amount of financial instruments that are
recognized at historical cost amounts.
The following methods and assumptions were used by the Company in estimating
fair value disclosures for financial instruments:
Cash, trade receivables, notes receivable, trade accounts payable and
short-term borrowings: The amounts reported in the consolidated balance
sheets approximate fair value.
Foreign currency contracts: The fair value of forward exchange contracts is
estimated using prices established by financial institutions for comparable
instruments. (See note 17)
Long-term debt: For bank borrowings, the amount reported in the consolidated
balance sheet approximates fair value. The fair values of the Senior
Subordinated Notes, Senior Discount Debentures and Senior Debentures are
based on quoted market prices. (See note 10)
ADOPTION OF NEW ACCOUNTING STANDARDS
In 1997, the Financial Accounting Standards Board (FASB) issued Statement
No. 130, REPORTING OF COMPREHENSIVE INCOME. This Statement requires the
reporting of comprehensive income in interim and annual financial statements.
Net income together with periodic adjustments with respect to foreign currency
translation and minimum pension liabilities will result in comprehensive income.
The Company intends to adopt the pronouncement in the first quarter of fiscal
year 1999.
In 1997, the FASB issued Statement No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE AND RELATED INFORMATION. This Statement requires that public business
enterprises disclose information about their products and services, operating
segments, the geographic areas in which they operate, and their major customers.
The Company intends to adopt the pronouncement in fiscal year 1999.
In 1998, the FASB issued Statement No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. This statement establishes accounting and
reporting standards for derivative instruments and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities measured at fair value. Management has not yet evaluated this
statement's impact on the Company's financial condition or results of
operations. The Company intends to adopt the pronouncement in fiscal year 2000.
USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the
F-13
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS)
(CONTINUED)
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ significantly from those estimates.
RECLASSIFICATION
Certain amounts in the 1996 and 1997 combined financial statements have been
reclassified to conform to the presentation in the October 3, 1998 consolidated
financial statements.
(4) ACCOUNTS AND NOTES RECEIVABLE
Trade receivables subject the Company to a concentration of credit risk,
because they are concentrated in distributors and rental companies that serve
the heavy industrial and construction industries, which are subject to business
cycle variations. For the years ended September 28, 1996 and September 27, 1997,
revenues generated from six major customers were approximately 20% and 19% of
net sales, respectively, with no one customer accounting for more than 5% of
total revenue. Approximately 31% of the outstanding trade and notes receivable
balance as of September 27, 1997 were due from these customers. For the seven
months ended April 28, 1998 and the five months ended October 3, 1998, revenues
generated from five major customers were approximately 23% and 24%,
respectively, with no one customer accounting for more than 10% of total
revenue. Approximately, 11% of the outstanding trade and notes receivable
balance as of October 3, 1998 were due from these customers.
The Company generally offers terms of up to 30 days to its customers and
generally obtains a security interest in the underlying machinery sold. In
addition, the Company offered a special financing program primarily to its U.S.
distributors which provides credit terms of periods up to one year in exchange
for an interest-bearing note. The Company generally retains a security interest
in the machinery sold.
Prior to the Acquisition, Hanson entered into an agreement to sell certain
notes receivable to a third-party bank on a 90% non-recourse basis. In addition,
substantially all notes receivable outstanding at the date of the Acquisition
that had not been sold to the third party bank were retained by Hanson.
Following the Acquisition, the Company is responsible for administrative and
collection activities with respect to such receivables but Hanson is responsible
for all remaining credit risk. The cost of providing administrative support is
immaterial.
Following the Acquisition, the Company entered into an agreement with a
major international bank to sell up to $50 million of notes receivable generated
from sales of mobile hydraulic cranes and aerial work platforms on credit terms
of up to one year on a revolving basis. The bank purchases the notes receivable
at face value on a 90% non-recourse basis. The agreement provides that the
Company purchase credit insurance on behalf of the bank to insure the 90% risk
assumed by the bank. The Company retains 10% of the credit risk on a first loss
basis.
The Company is responsible for administrative and collection activities. The
cost of administrative and collection activities is immaterial. Cash collections
on the notes are deposited directly into an account for the benefit of the major
international bank. The bank has the power to sell or pledge the notes
receivable purchased at any time and the Company has no rights of repurchase of
the notes receivable.
F-14
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS)
(CONTINUED)
(4) ACCOUNTS AND NOTES RECEIVABLE (CONTINUED)
Notes receivable sold under this arrangement meet the criteria for sale
under FASB Statement No. 125 and, accordingly, are removed from the Company's
balance sheet upon sale. At October 3, 1998, the Company had credit risk of up
to $3.8 million with respect to notes receivable that had been sold under the
arrangement.
(5) INVENTORIES
Inventories consist of the following as of September 27, 1997 and October 3,
1998:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
1997 1998
----------- ---------
<S> <C> <C>
Raw materials and supplies......................................... $ 76,573 $ 61,910
Work in process.................................................... 78,993 72,299
Finished goods..................................................... 59,766 73,039
----------- ---------
$ 215,332 $ 207,248
----------- ---------
----------- ---------
</TABLE>
In connection with the Acquisition, the Company assigned $27.7 million of
the purchase price to work in process and finished goods inventories in excess
of their historical carrying value. Such amounts were charged to costs of goods
sold in the five month period ended October 3, 1998.
(6) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following as of September 27,
1997 and October 3, 1998:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
1997 1998
----------- ---------
<S> <C> <C>
Land and improvements.................................................. $ 12,765 $ 7,446
Buildings and improvements............................................. 63,052 62,709
Machinery and equipment................................................ 71,864 55,276
Equipment held for rent................................................ 58,455 79,997
Furniture and fixtures................................................. 17,016 5,264
Construction in progress............................................... 20,329 9,078
----------- ---------
243,481 219,770
Less accumulated depreciation and amortization......................... 95,893 12,595
----------- ---------
$ 147,588 $ 207,175
----------- ---------
----------- ---------
</TABLE>
Depreciation expense (including depreciation expense on equipment held for
rent) for the years ended September 28, 1996, September 27, 1997, the seven
months ended April 28, 1998 and the five months ended October 3, 1998 was
$11,933, $17,283, $11,685 and $12,522, respectively.
F-15
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS)
(CONTINUED)
(7) GOODWILL
Goodwill consists of the following as of September 27, 1997 and October 3,
1998:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
1997 1998
----------- ---------
<S> <C> <C>
Goodwill........................................................... $ 337,443 $ 291,590
Less accumulated amortization...................................... 82,715 3,091
----------- ---------
$ 254,728 $ 288,499
----------- ---------
----------- ---------
</TABLE>
(8) SHORT-TERM BORROWINGS
The Company's German operation maintains a DM33 million (approximately $20
million) credit facility available for discounting certain accounts receivable.
As of September 27, 1997 and October 3, 1998, $7,265 and $15,027 were drawn
against this facility. The interest rate charged on the outstanding borrowings
was 3.0% and 4.5% at September 27, 1997 and October 3, 1998, respectively. This
arrangement does not have a termination date and is reviewed periodically. No
material commitment fees are required to be paid on the undrawn portion of the
credit facility.
(9) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following as
of September 27, 1997 and October 3, 1998:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
1997 1998
----------- ---------
<S> <C> <C>
Salaries and wages..................................................... $ 21,036 $ 20,413
Employee benefits...................................................... 8,603 1,092
Accrued warranty....................................................... 18,044 16,522
Deferred revenue associated with equipment held for rent............... 6,641 13,352
Product, workers' compensation and general liability................... 12,757 4,125
Accrued interest....................................................... -- 11,167
Sunderland, U.K. shut-down costs (note 15)............................. -- 18,500
Other.................................................................. 23,653 21,040
----------- ---------
$ 90,734 $ 106,211
----------- ---------
----------- ---------
</TABLE>
F-16
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS)
(CONTINUED)
(10) LONG-TERM DEBT
Long-term debt consists of the following at October 3, 1998:
<TABLE>
<S> <C>
Term loan facility................................................................ $ 190,000
Senior subordinated notes......................................................... 225,000
Senior discount debentures........................................................ 52,535
Senior debentures................................................................. 49,130
---------
516,665
Less current maturities........................................................... 7,000
---------
Long-term debt.................................................................... $ 509,665
---------
---------
</TABLE>
BANK CREDIT FACILITY--The Company entered into a bank credit facility (the
"Bank Credit Facility") on April 29, 1998, which consists of a $200,000 term
loan facility ("Term Loan Facility") and a $125,000 revolving credit facility
("Revolving Credit Facility"). To consummate the Acquisition, the Company
borrowed $200,000 under the Term Loan Facility and approximately $10,106 under
the Revolving Credit Facility. The Revolving Credit Facility enables the Company
to obtain revolving credit loans and to issue letters of credit for working
capital, acquisitions and general corporate purposes. A portion of the Revolving
Credit Facility is available for borrowings by the Company in the Eurocurrency
markets of British pounds sterling, German marks, French francs and certain
other currencies.
At the Company's option, loans under the Bank Credit Facility bear interest
(a) in the case of loans in U.S. dollars, at the highest of (x) 1/2of 1% in
excess of the Federal Funds Effective Rate (as defined in the Bank Credit
Facility), (y) 1.0% in excess of a certificate of deposit rate and (z) the
bank's prime rate, plus the applicable margin (as defined in the Bank Credit
Facility), or (b) in the case of all loans, the relevant Eurocurrency Rate (as
defined in the Bank Credit Facility) as determined by the Lender, plus the
applicable margin. The applicable margin will vary based upon the Company's
operating results and will range between 1.25% and 2.25% for borrowings under
the Revolving Credit Facility and between 2.0% and 2.5% for borrowings under the
Term Loan Facility. The interest rate on borrowings under the Term Loan Facility
at October 3, 1998 is based on LIBOR plus an applicable margin of 2.5% (8.04% at
October 3, 1998). The Company will also pay a 0.375% fee on the unused portion
of the Bank Credit Facility. There were no borrowings outstanding at October 3,
1998 under the revolving credit facility.
The Term Loan Facility has a term of eight years and must be repaid in
semi-annual installments in April and October of each year in an aggregate
amount of (i) $2,000 for the first six years, (ii) $88,000 during the seventh
year and (iii) $100,000 during the eighth year. The Revolving Credit Facility
has a term of seven years. Commencing with the fiscal year ended September 30,
1999, the Company will be required to make annual payments, in excess of the
schedule principal payments, on the Term Loan Facility of up to 75% of the
Company's "excess cash flow" as defined in the Bank Credit Facility. In
addition, the Bank Credit Facility requires mandatory prepayments upon the
occurrence of certain events including a change of control of the Company. At
October 3, 1998, the Company had outstanding letters of credit of $938 and
available borrowings of $124,062 under the Revolving Credit Facility.
The obligations of the Company under the Bank Credit Facility are guaranteed
by each of the Company's domestic subsidiaries (the "Guarantors"). The
obligations of the Company under the Bank Credit Facility are secured by a first
priority lien (subject to permitted encumbrances) on substantially
F-17
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS)
(CONTINUED)
(10) LONG-TERM DEBT (CONTINUED)
all of the Company's and each Guarantor's real, personal, and intellectual
property and on the capital stock of the Company and all of the capital stock of
the Company's domestic and certain of its foreign subsidiaries.
In addition, the Bank Credit Facility contains various covenants that
restrict the Company's subsidiaries from taking various actions and that require
the Company to achieve and maintain certain financial ratios.
SENIOR SUBORDINATED NOTES--The Senior Subordinated Notes bear interest at a
rate of 9 1/4% per annum payable semi-annually on May 1 and November 1 of each
year commencing November 1, 1998. The Senior Subordinated Notes are general
unsecured obligations of the Company and its co-issuer, Grove Capital, Inc., and
are guaranteed by substantially all of the Company's domestic subsidiaries. The
Senior Subordinated Notes are redeemable at the option of the Company, in whole
or in part, at any time on or after, May 1, 2003, at a declining redemption
price and mature on May 1, 2008.
In addition, at any time prior to May 1, 2001, the Company may redeem up to
35% of the originally issued aggregate principal amount of the Senior
Subordinated Notes at 109.25% of the principal amount thereof, plus accrued and
unpaid interest and liquidated damages, if any, with net proceeds of one or more
public offerings of the Company's equity (or that of Investors), provided at
least 65% of the principal amount of the originally issued Senior Subordinated
Notes remain outstanding. Upon the occurrence of a change of control, as defined
in the Indenture governing the Senior Subordinated Notes (the "Indenture"), each
holder of the Senior Subordinated Notes will have the right to require the
Company to repurchase such holder's notes at an offer price in cash equal to
101% of the aggregate principal amount thereof plus accrued and unpaid interest
and liquidated damages, if any, thereon to the date of purchase.
The Indenture contains certain covenants that limit, among other things, the
ability of the Company's subsidiaries to (i) pay dividends, redeem capital stock
or make certain other restricted payments, (ii) incur additional indebtedness or
issue certain preferred equity interests, (iii) merge into or consolidate with
certain other entities or sell all or substantially all of its assets, (iv)
create liens on assets and (v) enter into certain transactions with affiliates
or related persons.
The Company expects that cash flows from foreign operations will be required
to meet its domestic debt service requirements. Such cash flows are expected to
be generated from intercompany interest expense on loans the Company has made to
certain of its foreign subsidiaries to consummate the acquisition of Hanson's
crane and aerial work platform subsidiaries in the U.K., Germany and France and
for working capital requirements. The loans have been established with amounts
and interest rates to allow for repatriation without restriction or additional
tax burden. However, there is no assurance that the foreign subsidiaries will
generate the cash flow required to service the loans or that the laws in the
foreign jurisdictions will not change to limit repatriation or increase the tax
burden of repatriation.
SENIOR DISCOUNT DEBENTURES--The Senior Discount Debentures were issued
pursuant to an Indenture dated April 29, 1998 (the "Holdings Indenture") at a
discount from their principal amount. The Senior Discount Debentures are general
unsecured obligations of the Company and its co-issuer, Grove Holdings Capital,
Inc. The Senior Discount Debentures accrete interest at a rate of 11 5/8% per
annum, compounded semi-annually, to an aggregate principal amount of $88 million
at May 1, 2003. Thereafter, the Senior Discount Debentures will accrue cash
interest at a rate of 11% per annum,
F-18
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS)
(CONTINUED)
(10) LONG-TERM DEBT (CONTINUED)
payable semi-annually on May 1 and November 1 of each year, commencing on
November 1, 2003. The Senior Discount Debentures are redeemable at the option of
Holdings, in whole or in part, at any time after May 1, 2003, at a declining
redemption price and mature on May 1, 2009.
In addition, at any time prior to May 1, 2001, the Company may redeem up to
35% of the originally issued aggregate principal amount of the Senior Discount
Debentures at 111.625% of the accreted value (as defined by the Holdings
Indenture) thereof plus liquidated damages (as defined by the Holdings
Indenture) thereon, if any, with the net proceeds of one or more public
offerings of the Company's or Investors' equity, provided that at least 65% of
the originally issued aggregate principal amount of the Senior Discount
Debentures remain outstanding thereafter.
Upon the occurrence of a change of control (as defined by the Holdings
Indenture), each holder of the Senior Discount Debentures will have the right to
require Holdings to repurchase such holders' notes at an offer price in cash
equal to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and liquidated damages, if any, thereon to the date of purchase.
The Holdings Indenture contains certain covenants that limit, among other
things, the ability of the Company and its subsidiaries to (i) pay dividends,
redeem capital stock or make certain other restricted payments, (ii) incur
additional indebtedness or issue certain preferred equity interests, (iii) merge
into or consolidate with certain other entities or sell all or substantially all
of its assets, (iv) create liens on assets and (v) enter into certain
transactions with affiliates or related persons.
SENIOR DEBENTURES--The Senior Debentures were issued pursuant to an
Indenture dated April 29, 1998 (the "Investors Indenture"). The Senior
Debentures are general unsecured obligations of the Company and its co-issuer,
Grove Investors Capital, Inc. The Senior Debentures accrue interest at a rate of
14 1/2% per annum, payable quarterly on February 1, May 1, August 1 and November
1 of each year, commencing on August 1, 1998. Interest is payable, at the option
of the Company, in cash or by issuance of additional Senior Debentures. The
Senior Debentures are redeemable at the option of the Company, in whole or in
part, at any time after May 1, 2003, at a declining redemption price and mature
on May 1, 2010.
In addition, at any time prior to May 1, 2001, the Company may redeem all,
but not less than all the aggregate principal amount of the Senior Debentures
issued at a redemption price of 114.5% of the principal amount thereof, plus
accrued and unpaid interest and liquidated damages (as defined by the Investors
Indenture) thereon, if any, in each case determined as of the date of such
repurchase.
The Investors Indenture contains certain covenants that limit, among other
things, the ability of the Company and its subsidiaries to (i) pay dividends,
redeem capital stock or make certain other restricted payments, (ii) incur
additional indebtedness or issue certain preferred equity interest, (iii) merge
into or consolidate with certain other entities or sell all or substantially all
of its assets, (iv) create liens on assets and (v) enter into certain
transactions with affiliates or related persons.
The estimated fair value of the Company's long-term debt at October 3, 1998
was $456,198.
Aggregate annual scheduled maturities of long-term debt at October 3, 1998
are $2,000 during each of the next five fiscal years. In November 1998, the
Company made an optional prepayment of $5 million on the Term Loan Facility.
The Company's ability to meet cash payment obligations under the Senior
Discount Notes and Senior Debentures will be based upon the receipts of
distributions from the Company's operating
F-19
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS)
(CONTINUED)
(10) LONG-TERM DEBT (CONTINUED)
subsidiaries. The Bank Credit Facility and the indentures place significant
restrictions on the amount of such distributions. The total amount of restricted
net assets for consolidated subsidiaries as of October 3, 1998 is $95,412. The
Senior Discount Notes and the Senior Debentures require no cash payments prior
to November 2003 except in certain limited circumstances.
INTEREST EXPENSE--Interest income (expense), net consists of the following
for the years ended September 26, 1996, September 27, 1997, the seven months
ended April 28, 1998 and the five months ended October 3, 1998.
<TABLE>
<CAPTION>
PRESDECESSOR COMPANY
------------------------------- -----------
APRIL 28, OCTOBER 3,
1996 1997 1998 1998
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
Interest expense........................................ $ (716) $ (638) $ (263) $ (20,454)
Interest expense paid to Hanson......................... (2,610) (1,404) (2,174) --
Amortization of deferred financing costs................ -- -- -- (790)
Accretion of interest on senior discount notes.......... -- -- -- (2,550)
Interest income......................................... 535 2,085 3,485 2,215
--------- --------- --------- -----------
$ (2,791) $ 43 $ 1,048 $ (21,579)
--------- --------- --------- -----------
--------- --------- --------- -----------
</TABLE>
The Company paid interest of $7,503 for the five months ended October 3,
1998.
In July 1998, the Company entered into an interest rate agreement with a
commercial bank to collar the interest rate on approximately $100 million of the
Company's floating rate borrowings for the three years ended September 2001. The
contract does not require collateral. If the contract were terminated at October
3, 1998, the Company would have had a loss of approximately $1.9 million.
(11) OTHER LIABILITIES
Other liabilities consist of the following as of September 27, 1997 and
October 3, 1998:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
1997 1998
----------- -----------
<S> <C> <C>
Accrued liability for defined benefit pension plans................. $ 11,068 $ 29,278
Accrued liability for postretirement benefit plan................... 18,859 28,293
Other............................................................... 8,242 25,158
----------- -----------
$ 38,169 $ 82,729
----------- -----------
----------- -----------
</TABLE>
F-20
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS)
(CONTINUED)
(12) EMPLOYEE BENEFIT PLANS
The Company has several defined benefit pension plans covering substantially
all of its employees. Plans covering salaried employees provide pension benefits
that are based on the participant's final average salary and credited service.
Plans covering hourly employees provide benefits based on the participant's
career earnings and service with the Company. The Company's funding policy for
all plans is to make the minimum annual contributions required by applicable
regulations, plus such additional amounts as the Company may determine to be
appropriate from time to time.
The components of the net periodic pension costs for all U.S. defined
benefit plans for the fiscal years ended September 28, 1996 and September 27,
1997, for the seven months ended April 28, 1998 and for the five months ended
October 3, 1998 are summarized below:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
--------------------------------- -----------
APRIL 28, OCTOBER 3,
1996 1997 1998 1998
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Service cost.............................................. $ 1,787 $ 2,172 $ 1,542 $ 1,322
Interest cost............................................. 2,482 3,128 2,163 1,621
Actual return on assets................................... (1,895) (2,748) (1,898) (1,528)
Net amortization and deferral............................. 341 539 465 --
--------- --------- ----------- -----------
Net periodic pension costs................................ $ 2,715 $ 3,091 $ 2,272 $ 1,415
--------- --------- ----------- -----------
--------- --------- ----------- -----------
</TABLE>
F-21
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS)
(CONTINUED)
(12) EMPLOYEE BENEFIT PLANS (CONTINUED)
The following tables set forth the U.S. plans' funded status at September
27, 1997 and October 3, 1998:
<TABLE>
<CAPTION>
PLANS WHOSE PLANS WHOSE
ASSETS ACCUMULATED
EXCEED BENEFITS
ACCUMULATED EXCEED
BENEFITS ASSETS
------------ --------------
<S> <C> <C>
As of September 27, 1997:
Actuarial present value of accumulated benefit obligation, including vested
benefits of $18,574 and $16,776, respectively................................... $ 18,859 $ 17,259
------------ --------------
------------ --------------
Projected benefit obligation for service rendered to date......................... $ (29,550) $ (17,259)
Plan assets at fair value, primarily marketable securities........................ 22,519 15,523
------------ --------------
Underfunded projected benefit obligation.......................................... (7,031) (1,736)
Unrecognized net loss............................................................. 933 2,520
Unrecognized prior service cost................................................... 3,128 4,312
Adjustment to recognize the required minimum pension liability.................... -- (6,832)
------------ --------------
Pension liability recognized in the balance sheets................................ $ (2,970) $ (1,736)
------------ --------------
------------ --------------
As of October 3, 1998:
Actuarial present value of accumulated benefit obligation, including vested
benefits of $46,812............................................................. $ -- $ 47,932
------------ --------------
------------ --------------
Projected benefit obligation for service rendered to date......................... $ -- $ (62,062)
Plan assets at fair value, primarily marketable securities........................ -- 44,641
------------ --------------
Underfunded projected benefit obligation.......................................... -- (17,421)
Unrecognized net loss............................................................. -- 4,159
Adjustment to recognize the required minimum pension liability.................... -- (2,051)
------------ --------------
Pension liability recognized in the balance sheets................................ $ -- $ (15,313)
------------ --------------
------------ --------------
</TABLE>
The components of the net periodic pension costs for all foreign defined
benefit plans for the years ended September 28, 1996 and September 27, 1997, for
the seven months ended April 28, 1998 and for the five months ended October 3,
1998 are summarized below:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
--------------------------------- -----------
APRIL 28, OCTOBER 3,
1996 1997 1998 1998
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Service cost.............................................. $ 1,804 $ 1,978 $ 1,169 $ 927
Interest cost............................................. 1,481 1,782 1,289 933
Actual return on assets................................... (2,176) (3,038) (904) (667)
Net amortization and deferral............................. 80 802 536 --
--------- --------- ----------- -----------
Net periodic pension costs................................ $ 1,189 $ 1,524 $ 2,090 $ 1,193
--------- --------- ----------- -----------
--------- --------- ----------- -----------
</TABLE>
F-22
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS)
(CONTINUED)
(12) EMPLOYEE BENEFIT PLANS (CONTINUED)
The following table sets forth the foreign plans' unfunded status at
September 27, 1997 and October 3, 1998:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
1997 1998
----------- ---------
<S> <C> <C>
Actuarial present value of accumulated benefit obligation, including
vested benefits of $22,792 and $38,637, respectively................. $ 23,449 $ 39,247
----------- ---------
----------- ---------
Projected benefit obligation for service rendered to date.............. $ (25,906) $ (38,128)
Plan assets at fair value, primarily marketable securities............. 19,911 23,886
----------- ---------
Underfunded projected benefit obligation............................... (5,995) (14,242)
Unrecognized net loss (gain)........................................... (367) 277
----------- ---------
Pension liability recognized in the balance sheets..................... $ (6,362) $ (13,965)
----------- ---------
----------- ---------
</TABLE>
Assumptions used in determining the actuarial present value of projected
pension obligations at September 27, 1997 and October 3, 1998 are as follows:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-------------- --------------
<S> <C> <C>
Domestic Pension Plans:
Return on plan assets.................................... 9.00% 9.00%
Weighted average discount rate........................... 7.50% 6.50%
Rate of increase in future compensation level............ 4.25% 4.25%
Foreign Pension Plans:
Return on plan assets.................................... 9.00% N/A
Weighted average discount rate........................... 6.50% to 8.00% 6.00% to 6.50%
Rate of increase in future compensation level............ 6.00% 2.25% to 4.5%
</TABLE>
Assets of domestic and foreign defined benefit plans consist principally of
investments in equity securities, debt securities, and cash equivalents.
The Company also has several defined contribution plans covering
substantially all of its U.S. employees. Eligible employees may contribute a
portion of their base compensation to the plan and their contributions are
matched by the Company at rates specified in the plan documents. Contributions
by the Company for the years ended September 28, 1996 and September 27, 1997,
for the seven months ended April 28, 1998 and for the five months ended October
3, 1998 were approximately $1,797, $1,902, $1,169 and $835, respectively.
In addition to providing pension benefits, the Company provides certain
health care and prescription drug benefits to certain retirees. Substantially
all of the Company's domestic eligible employees may qualify for benefits if
they reach normal retirement age while working for the Company. The Company
funds benefits on a pay-as-you-go basis, while retirees pay monthly premiums.
These benefits are subject to deductibles, co-payment provisions and other
limitations.
F-23
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS)
(CONTINUED)
(12) EMPLOYEE BENEFIT PLANS (CONTINUED)
Net periodic postretirement benefit expense included the following
components as of September 28, 1996 and September 27, 1997, and the seven months
ended April 28, 1998 and the five months ended October 3, 1998:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
--------------------------------- -----------
APRIL 28, OCTOBER 3,
1996 1997 1998 1998
--------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Service expense........................................... $ 797 $ 833 $ 622 $ 511
Interest expense.......................................... 1,423 1,464 1,096 725
Net amortization and deferral............................. 550 458 74 --
--------- --------- ----------- -----------
Net periodic postretirement benefit cost.................. $ 2,770 $ 2,755 $ 1,792 $ 1,236
--------- --------- ----------- -----------
--------- --------- ----------- -----------
</TABLE>
The reconciliation of the accumulated postretirement benefit obligation to
the liability recognized in the consolidated balance sheet at September 27, 1997
and October 3, 1998 is as follows:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
1997 1998
----------- -----------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.............................................................. $ 5,542 $ 5,178
Fully eligible active participants.................................... 5,214 5,474
Other active participants............................................. 14,503 17,715
----------- -----------
Total................................................................... 25,259 28,367
Unrecognized prior service benefit...................................... 3,407 --
Unrecognized net loss................................................... (9,807) (74)
----------- -----------
Net postretirement benefit liability recognized in the balance sheets... $ 18,859 $ 28,293
----------- -----------
----------- -----------
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.5% and 6.5% for 1997 and 1998, respectively. The assumed health
care cost trend rate used in measuring the accumulated postretirement benefit
obligation was 9.0% for 1997 and 1998, with subsequent annual decrements of 0.5%
to an ultimate trend rate of 5.5%. A one percentage point increase in the
assumed health care cost trend rate for each year would increase the accumulated
postretirement benefit obligation by approximately 13% as of October 3, 1998 and
the net postretirement benefit cost by approximately 15% for the five months
ended October 3, 1998.
(13) MANAGEMENT OPTION PLAN
In connection with the Acquisition, the Company established a management
option plan whereby the Investors' Management Committee can grant options to
purchase equity units of the Company to key employees of the Company at fair
market value. The options generally vest over a five-year period only upon the
achievement of certain earning targets. As of October 3, 1998, Grove had granted
options to employees to purchase 2,700 of its Class A units with an exercise
price of $1,000 per unit which will expire in 2008. No amounts were vested at
October 3, 1998. The estimated weighted average fair value of options granted
during the five months ended October 3, 1998 was $275 per unit assuming an
option life of six years, a risk free interest rate of 5.5% and no dividend or
volatility rates. Had the Company accounted for the options in accordance with
the provisions of FASB Statement No. 123 no
F-24
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS)
(CONTINUED)
(13) MANAGEMENT OPTION PLAN (CONTINUED)
compensation expense with respect to options granted in the five months ended
October 3, 1998 would have been recognized.
(14) INCOME TAXES
As a result of the Acquisition, a significant portion of the Company's
business is operated as a limited liability company organized under the laws of
Delaware. Accordingly, earnings of the Company's U.S. mobile hydraulic crane and
aerial work platform businesses, as well as earnings from its foreign
subsidiaries will not be directly subject to U.S. income taxes. Such taxable
income will be allocated to the Company's equity members and they will be
responsible for U.S. income taxes on such taxable income. The Company intends to
make distributions, in the form of dividends, to enable the equity members to
meet their tax obligations with respect to income allocated to them by the
Company. No distributions were made for taxes in the five months ended October
3, 1998 and no distributions are currently expected with respect to the fiscal
year ended October 2, 1999.
The provision for income taxes following the Acquisition, will be limited to
foreign taxes with respect to earnings of the Company's foreign subsidiaries and
U.S. state and local taxes with respect to the earnings of the Company's
truck-mounted crane business.
For periods prior to the Acquisition, each of the Grove Companies filed
their own income tax returns or were part of a consolidated group return with
other Hanson entities. Income tax expense for such periods was determined as if
the Grove Companies were a stand alone entity. In connection with the
Acquisition, Hanson has indemnified the Company with respect to certain tax
obligations arising from activities occurring prior to the Acquisition.
Domestic and foreign income (loss) before income taxes were as follows for
the fiscal years ended September 28, 1996 and September 27, 1997, for the seven
months ended April 28, 1998 and for the five months ended October 3, 1998:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------------------- -----------
APRIL 28, OCTOBER 3,
1996 1997 1998 1998
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
United States.......................................... $ 47,535 $ 66,721 $ 30,446 $ (13,054)
Other countries........................................ 101 1,748 (19,100) (12,273)
--------- --------- --------- -----------
$ 47,636 $ 68,469 $ 11,346 $ (25,327)
--------- --------- --------- -----------
--------- --------- --------- -----------
</TABLE>
F-25
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS)
(CONTINUED)
(14) INCOME TAXES (CONTINUED)
The provision for income taxes consisted of the following for the fiscal
years ended September 28, 1996 and September 27, 1997, for the seven months
ended April 28, 1998 and for the five months ended October 3, 1998:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------------------- -----------
APRIL 28, OCTOBER 3,
1996 1997 1998 1998
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
Current:
United States........................................ $ 21,623 $ 23,979 $ 8,780 $ 2,958
Other countries...................................... 439 301 -- 130
--------- --------- --------- -----------
22,062 24,280 8,780 3,088
--------- --------- --------- -----------
Deferred:
United States........................................ 126 1,969 2,961 (1,551)
Other countries...................................... -- -- -- 2,800
--------- --------- --------- -----------
126 1,969 2,961 1,249
--------- --------- --------- -----------
$ 22,188 $ 26,249 $ 11,741 $ 4,337
--------- --------- --------- -----------
--------- --------- --------- -----------
</TABLE>
The company paid income taxes of $272 for the five months ended October 3,
1998.
Significant components of the Company's deferred tax liabilities and assets
are as follows as of September 27, 1997 and October 3, 1998:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
1997 1998
----------- -----------
<S> <C> <C>
Allowance for doubtful accounts......................................... $ -- $ 106
Inventory obsolescence reserve.......................................... 1,881 100
Inventory capitalization................................................ -- 220
Tax deductible goodwill................................................. 5,074 --
Accrued general liability............................................... -- 1,847
Accrued product liability............................................... -- 1,105
Other accrued expenses.................................................. 12,221 1,290
Foreign net operating losses and AMT credits............................ 6,323 --
Other................................................................... 7,755 --
Intercompany basis differences.......................................... (7,557) --
Depreciation expense.................................................... 6,977 (2,240)
----------- -----------
Total deferred tax asset................................................ 32,674 2,428
Valuation allowance..................................................... 6,323 --
----------- -----------
Net deferred tax asset included in other assets......................... $ 26,351 $ 2,428
----------- -----------
----------- -----------
</TABLE>
Deferred taxes at October 3, 1998 relate to the Company's National Crane
Corporation subsidiary which is incorporated as a C-Corporation and the
Company's foreign subsidiaries.
At October 3, 1998 the Company's foreign subsidiaries have net operating
loss carryforwards of $7,300 which expire in various amounts through 2013. The
benefit from future utilization, if any, of such amounts will be credited to
goodwill as realized. In the five months ended October 3, 1998, the
F-26
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS)
(CONTINUED)
(14) INCOME TAXES (CONTINUED)
Company's German subsidiary utilized net operation losses of approximately
$4,600. The tax benefit of such utilization of $2,800 was credited to goodwill.
The reasons for the differences between applicable income taxes and the
amount computed by applying the statutory federal income tax rate of 35% to
income before taxes were as follows for the fiscal years ended September 28,
1996 and September 27, 1997:
<TABLE>
<CAPTION>
PREDECESOR
--------------------
<S> <C> <C>
1996 1997
--------- ---------
Applicable income taxes based on federal statutory tax rate................................. $ 16,673 $ 23,964
State taxes, net of federal tax benefit..................................................... 1,130 2,520
Goodwill amortization....................................................................... 2,955 333
Foreign operating loss benefits not previously recognized................................... (1,020) (1,409)
Foreign operating loss valuation allowances................................................. 2,182 1,405
Other....................................................................................... 268 (564)
--------- ---------
$ 22,188 $ 26,249
--------- ---------
--------- ---------
</TABLE>
The income tax rate reconciliation for the seven months ended April 28, 1998
was not presented since the information was deemed not meaningful. The income
tax provision for the seven months ended April 28, 1998 includes no benefit for
approximately $19,100 of losses incurred by the Company's foreign subsidiaries.
Income taxes for the five months ended October 3, 1998 relate principally to the
Company's subsidiary in Waverly, Nebraska, which is incorporated as a
C-corporation, and the Company's German subsidiary.
(15) RESTRUCTURING AND PLANT SHUTDOWN
In 1997 the Company recorded a restructuring charge of approximately $1,960
for severance and related costs related to the gradual phase-out of crane
production at its Sunderland, United Kingdom location. All amounts have been
expended as of September 27, 1997.
The Company plans to close its Sunderland, UK manufacturing facility as the
result of recurring operating losses. Management believes closing the facility
will improve operating earnings as well as provide the opportunity for
additional cost reductions through product rationalization, reduced selling,
general and administrative expenses and reduced manufacturing costs. Management
has estimated total closure costs to be approximately $18.5 million. Such amount
consists of $11.5 million in severance and related costs, $5.6 million for
dismantlement and disposal of plant equipment and $1.4 million for cleanup and
closure of the leased facility. Such costs were accrued in connection with the
Acquisition described in note 2. The carrying amount of the plant equipment at
October 3, 1998 was $1,400. None of the cost had been expended as of October 3,
1998. The shutdown activities are expected to commence during the first quarter
of fiscal 1999 and are expected to be concluded by the end of that fiscal year.
(16) LEASES
The Company and its subsidiaries lease office space, machinery and other
equipment under noncancelable operating leases with varying terms, some of which
contain renewal and/or purchase options.
F-27
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS)
(CONTINUED)
(16) LEASES (CONTINUED)
The following is a schedule of future minimum lease payments required under
operating leases that have initial or remaining noncancelable lease terms in
excess of one year:
<TABLE>
<S> <C>
1999............................................................... $ 5,466
2000............................................................... 4,034
2001............................................................... 764
2002............................................................... 173
2003............................................................... 58
Thereafter......................................................... 270
---------
$ 10,765
---------
---------
</TABLE>
Rental expense associated with operating leases was approximately $2,809,
$3,489, $2,496 and $1,795 for the years ended September 28, 1996 and September
27, 1997 and the seven months ended April 28, 1998 and the five months ended
October 3, 1998, respectively. It is expected that, in the normal course of
business, leases that expire will be renewed or replaced by leases on other
property and equipment.
(17) FOREIGN EXCHANGE RISK
Through its foreign currency hedging activities, the Company seeks to
minimize the risk that cash flows resulting from the sales of products
manufactured in a currency different from that of the selling company will be
affected by changes in exchange rates. Management responds to foreign exchange
movements through various means, such as pricing actions, changes in cost
structure, and changes in hedging strategies.
The Company may hedge its foreign currency transactions and firm sales
commitment exposures, based on management's judgment, through forward exchange
contracts. These forward exchange contracts are purchased from local banks. Some
of the contracts involve the exchange of two foreign currencies according to the
local needs of the companies.
The following table summarizes the contractual amounts of the Company's
forward exchange contracts as of September 27, 1997 and October 3, 1998,
including details by major currency as of October 3, 1998. Foreign currency
amounts were translated at the current rate as of the reporting date. The "sell"
amounts represent the U.S. dollar equivalent of commitments to sell foreign
currencies, and the "buy" amounts represent the U.S. dollar equivalent of
commitments to purchase foreign currencies.
<TABLE>
<CAPTION>
BUY SELL
--------- ----------
<S> <C> <C>
As of September 27, 1997............................................... $ 20,117 $ (20,393)
--------- ----------
--------- ----------
As of October 3, 1998:
United States Dollars................................................ $ 2,000 $ --
Australian Dollars................................................... -- (339)
Pounds Sterling...................................................... 244 (4,105)
--------- ----------
$ 2,244 $ (4,444)
--------- ----------
--------- ----------
</TABLE>
F-28
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS)
(CONTINUED)
(17) FOREIGN EXCHANGE RISK (CONTINUED)
The Company's credit exposure on its foreign currency derivatives was $259
and $192 as of September 27, 1997 and October 3, 1998, respectively. Gross
deferred realized gains and losses on firm commitments were not significant as
of September 27, 1997 and October 3, 1998. Substantially all of the amounts
deferred at October 3, 1998 are expected to be recognized in income during
fiscal year 1999, when the gains or losses on the underlying transactions will
also be recognized.
(18) OTHER COMMITMENTS AND CONTINGENCIES
The Company is involved in various lawsuits and administrative proceedings
arising in the ordinary course of business. These matters primarily involve
claims for damages arising out of the use of the Company's products as well as
employment matters and commercial disputes. Some of these lawsuits include
claims for punitive as well as compensatory damages. The Company is insured for
product liability and workers' compensation claims for amounts in excess of
established deductibles and accrues for the estimated liability up to the limits
of the deductibles. Claims in excess of deductibles are recorded as a gross
liability with a separate receivable for insurance recovery. As of October 3,
1998, no outstanding claims exceeded the Company's insurance deductible. The
Company accrues for all other claims and lawsuits on a case-by-case basis. The
Company's estimate of the undiscounted costs associated with legal and
environmental exposures is accrued if, in management's judgment, the likelihood
of a loss is probable. The Company's policy is to also accrue the probable legal
costs to be incurred in defending the Company against such claims. The Company
has followed this policy during each of the periods in the three-year period
ended October 3, 1998, with respect to all investigations, claims and
litigation. Insurance recoveries for environmental and certain general liability
claims are not recognized until realized.
In the opinion of management, while the ultimate results of lawsuits or
other proceedings against the Company cannot be predicted with certainty, the
amounts accrued for awards or assessments in connection with these matters are
adequate and, accordingly, management believes that the ultimate resolution of
these matters will not have a material effect on the Company. As of October 3,
1998, the Company had no known probable but inestimable exposures that could
have a material effect on the Company.
PRODUCT LIABILITY AND WORKERS' COMPENSATION--Hanson, on behalf of the
Company, purchased an insurance policy which effectively indemnifies the Company
against North American product liability and workers' compensation claims
arising prior to October 1, 1997 up to an aggregate loss limit of $85,000.
Losses in excess of that amount, if any, are the responsibility of the Company.
For product liability claims arising on or after October 1, 1997, the Company is
self-insured for losses up to $2,000 per occurrence, with a $15,000 annual
aggregate loss limit. For workers' compensation claims arising on or after such
date, the Company is self-insured for losses up to $250 per occurrence with a
$1,000 annual aggregate loss limit. Losses over the loss limits are covered by
umbrella insurance coverage up to $100,000. The Company accrues a reserve for
the estimated amount of claims which will be self-insured. The estimates are
provided by a third party actuary based upon historical trends. The reserve for
claims includes estimates of legal and administrative costs to be incurred.
ENVIRONMENTAL MATTERS--The Company is also involved in lawsuits and
administrative proceedings with respect to claims involving the discharge of
hazardous substances into the environment. Certain of these claims assert
damages and liability for remedial investigations and cleanup costs with respect
to sites at which the Company has been identified as a potentially responsible
party under federal and
F-29
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS)
(CONTINUED)
(18) OTHER COMMITMENTS AND CONTINGENCIES (CONTINUED)
state environmental laws and regulations (off-site). Other matters involve sites
that the Company currently owns and operates or has previously sold (on-site).
For off-site claims, the Company makes an assessment of the costs involved based
on environmental studies, prior experience at similar sites, and the experience
of other named parties. The Company also considers the ability of other parties
to share costs, the percentage of the Company's exposure relative to all other
parties, and the effects of inflation on these estimated costs. For on-site
matters associated with properties currently owned, the Company makes an
assessment as to whether an investigation and remediation effort is necessary
and estimates other potential costs associated with the site.
OTHER--The Company provides conditional loss guarantees to certain financing
companies on behalf of their customers. As of October 3, 1998, the Company had
outstanding guarantees of approximately $3,900. These guarantees mature at
various dates ranging from April, 1999 through August, 2002. The Company has not
and does not expect to incur losses as a result of these guarantees.
In addition, the Company provides guarantees of residual value to third
party financing companies in support of certain customers' financing
arrangements. These guarantees are only exercisable should the Company's
customer default on their financing agreements. The Company has not and does not
expect to incur losses under these guarantees. Exercises of these guarantees
have not been significant for the periods in the three years ended October 3,
1998. Aggregate residual value guarantees were approximately $81 million at
October 3, 1998.
(19) TRANSACTIONS WITH RELATED PARTIES
Prior to the Acquisition, the Company received certain services provided by
Hanson PLC and its affiliates, including cash management, tax reporting, and
risk management and was charged a management fee for such services. The
allocation of these management fees was based on percentage of total group sales
in 1996 and on total group operating profits in 1997. In the opinion of
management, these methods of allocation were reasonable.
The amount of predecessor capital included in the combined balance sheet
represents a net balance as the result of various transactions between the
Company and its parent, Hanson PLC. There were no terms of settlement associated
with the account balance and generally, there were no interest charges
associated with these balances. The balance is primarily the result of various
equity transactions, as well as the Company's participation in Hanson's central
cash management program, wherein all the Company's cash receipts were remitted
to Hanson and all cash disbursements are funded by Hanson. Other transactions
included in predecessor capital are management fees, taxes, insurance, employee
benefits, and miscellaneous other administrative expenses incurred by Hanson on
behalf of the Company.
Intercompany interest expense for the fiscal years ended September 28, 1996
and September 27, 1997 and for the seven months ended April 28, 1998 was $2,610,
$1,404, and $2,174, respectively. Substantially all of the interest expense
related to borrowings by one of the Company's subsidiaries from Hanson which are
classified as invested capital in the combined balance sheet. Such borrowings
averaged $24,540, $19,000, and $19,000 for the years ended September 28, 1996
and September 27, 1997 and for the seven months ended April 28, 1998.
F-30
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS)
(CONTINUED)
(19) TRANSACTIONS WITH RELATED PARTIES (CONTINUED)
In 1996, the Company had an arrangement with a Hanson PLC affiliated
company, whereby the affiliated company acted as a sales agent on behalf of the
Company. The Company recorded commission expense in the amount of $3,209 for the
fiscal year ended September 28, 1996.
The Company has engaged a consulting group, controlled by one of Investors'
minority owners, to help the Company during the next four years develop and
achieve its business plan. For such services the consulting group is expected to
be paid $14 million plus out-of-pocket expenses. As of October 3, 1998, the
consulting group had been paid $2.7 million for services rendered. In addition,
if the Company achieves certain defined levels of performance in fiscal 1999,
2000, 2001 and 2002, the consulting group will be entitled to receive additional
ownership interests in the Company for each year the defined levels of
performance are achieved. The Company will recognize as expense the fair value
of each equity award when earned.
(20) BUSINESS SEGMENT AND GEOGRAPHIC AREAS
The Company markets to heavy industrial and construction industries,
primarily in the United States and Europe through the production and support of
mobile hydraulic cranes, aerial work platforms and truck-mounted cranes. For
financial reporting purposes, the Company considers the heavy industrial and
construction industries as one segment. Transfers between geographic areas
primarily represent intercompany export sales and are accounted for based on
established sales prices between the related companies. In computing income from
operations, no allocations of general corporate expenses have been made.
Identifiable assets are those assets identified with the operation of legal
entities domiciled within the geographic area. General corporate assets were not
material at September 27, 1997 and October 3, 1998.
Information relating to operations by geographic area is as follows as of
and for the fiscal years ended September 28, 1996, September 27, 1997, and the
seven months ended April 28, 1998 and the five months ended October 3, 1998:
<TABLE>
<CAPTION>
CORPORATE
UNITED AND
STATES EUROPE ELIMINATIONS CONSOLIDATED
---------- ---------- ----------- ------------
<S> <C> <C> <C> <C>
1996
Sales to unaffiliated customers............................... $ 562,331 $ 231,878 $ -- $ 794,209
Transfers between geographic areas............................ 37,685 83,330 (121,015) --
---------- ---------- ----------- ------------
Net sales..................................................... $ 600,016 $ 315,208 $(121,015) $ 794,209
---------- ---------- ----------- ------------
---------- ---------- ----------- ------------
Operating profit.............................................. $ 58,653 $ 72 $ (8,105) $ 50,620
---------- ---------- ----------- ------------
---------- ---------- ----------- ------------
</TABLE>
<TABLE>
<CAPTION>
CORPORATE
UNITED OTHER AND
STATES EUROPE COUNTRIES ELIMINATIONS CONSOLIDATED
------------ ---------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
1997
Sales to unaffiliated customers................ $ 606,003 $ 248,532 $ 2,277 $ -- $ 856,812
Transfers between geographic areas............. 35,225 63,834 -- (99,059) --
------------ ---------- ----------- ------------- ------------
Net sales...................................... $ 641,228 $ 312,366 $ 2,277 $ (99,059) $ 856,812
------------ ---------- ----------- ------------- ------------
------------ ---------- ----------- ------------- ------------
Operating profit............................... $ 69,284 $ 670 $ (100) $ (1,963) $ 67,891
</TABLE>
F-31
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
NOTES TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS)
(CONTINUED)
(20) BUSINESS SEGMENT AND GEOGRAPHIC AREAS (CONTINUED)
<TABLE>
<CAPTION>
CORPORATE
UNITED OTHER AND
STATES EUROPE COUNTRIES ELIMINATIONS CONSOLIDATED
------------ ---------- ----------- ------------- ------------
<S> <C> <C> <C> <C> <C>
Identifiable assets............................ $ 648,578 $ 261,768 $ 3,548 $ (32,398) $ 881,496
------------ ---------- ----------- ------------- ------------
------------ ---------- ----------- ------------- ------------
APRIL 28, 1998
Sales to unaffiliated customers................ $ 339,151 $ 135,793 $ 1,256 $ -- $ 476,200
Transfers between geographic areas............. 15,722 29,731 -- (45,453) --
------------ ---------- ----------- ------------- ------------
Net sales...................................... $ 354,873 $ 165,524 $ 1,256 $ (45,453) $ 476,200
------------ ---------- ----------- ------------- ------------
------------ ---------- ----------- ------------- ------------
Operating profit............................... $ 31,671 $ (11,505) $ (344) $ -- $ 19,822
------------ ---------- ----------- ------------- ------------
------------ ---------- ----------- ------------- ------------
OCTOBER 3, 1998
Sales to unaffiliated customers................ $ 290,696 $ 101,801 $ 1,282 $ -- $ 393,779
Transfers between geographic areas............. 17,901 21,741 -- (39,642) --
------------ ---------- ----------- ------------- ------------
Net sales...................................... $ 308,597 $ 123,542 $ 1,282 $ (39,642) $ 393,779
------------ ---------- ----------- ------------- ------------
------------ ---------- ----------- ------------- ------------
Operating profit............................... $ 6,602 $ (9,532) $ (264) $ -- $ (3,194)
Identifiable assets............................ $ 1,798,704 $ 298,266 $ 4,840 $ (1,186,567) $ 915,243
------------ ---------- ----------- ------------- ------------
------------ ---------- ----------- ------------- ------------
</TABLE>
Information with respect to Europe includes Africa and the Middle East. Net
sales to customers in Africa and the Middle East were less than 5% of the
consolidated net sales of the Company during each of the years in the three year
period ended October 3, 1998.
Net sales by the Company's U.S. operations to foreign customers were less
than 10% of the consolidated net sales of the Company during each of the periods
presented in the three year period ended October 3, 1998.
(21) GROVE INVESTORS CAPITAL, INC.
The Company formed Grove Investors Capital, Inc. as a direct wholly-owned
subsidiary to act as a co-issuer of the Senior Debentures (See note 10). At
October 3, 1998, Grove Investors Capital, Inc. had one hundred dollars in cash
and total assets, and no current or long-term liabilities other than its
contingent co-obligation with respect to the Senior Debentures. For the five
months ended October 3, 1998 Grove Investors Capital, Inc. had no income or loss
and no revenues. Grove Investors Capital, Inc. has no subsidiaries and no
operations and is prohibited from engaging in any business activities.
F-32
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
AS OF APRIL 3, 1999
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<S> <C>
ASSETS
Current Assets:
Cash and cash equivalents........................................................................... $ 20,722
Trade receivables, net.............................................................................. 118,033
Due from Hanson PLC................................................................................. --
Notes receivable.................................................................................... 4,258
Inventories......................................................................................... 218,901
Other current assets................................................................................ 6,580
----------
Total current assets............................................................................ 368,494
Property, plant and equipment, net.................................................................... 217,581
Goodwill, net......................................................................................... 275,690
Other noncurrent assets............................................................................... 21,803
----------
$ 883,568
----------
----------
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities:
Short-term borrowings............................................................................... $ 23,214
Current maturities of long-term debt................................................................ 2,000
Trade accounts payable.............................................................................. 70,709
Other payable and accrued liabilities............................................................... 111,798
----------
Total current liabilities....................................................................... 207,721
Long-term debt, less current maturities............................................................... 510,275
Deferred revenue...................................................................................... 78,284
Other noncurrent liabilities.......................................................................... 77,163
----------
Total liabilities............................................................................... 873,443
----------
Members' equity:
Invested capital.................................................................................... 75,000
Notes receivable from members....................................................................... (4,055)
Accumulated deficit................................................................................. (56,242
Accumulated other comprehensive income.............................................................. (4,578)
----------
Total members' equity........................................................................... 10,125
----------
$ 883,568
----------
----------
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-33
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
CONDENSED COMBINED STATEMENT OF OPERATIONS AND
COMPREHENSIVE INCOME FOR THE SIX MONTHS
ENDED MARCH 28, 1998 AND CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS AND COMPREHENSIVE
LOSS FOR THE SIX MONTHS ENDED APRIL 3, 1999
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------
PREDECESSOR
-----------
MARCH 28, APRIL 3,
1998 1999
----------- ---------
<S> <C> <C>
Net sales.............................................................. $ 405,903 $ 350,369
Cost of goods sold..................................................... 321,337 284,895
----------- ---------
Gross profit........................................................... 84,566 65,474
Selling, engineering, general and administrative expenses.............. 66,677 63,998
----------- ---------
Income from operations................................................. 17,889 1,476
Interest and debt issuance expense..................................... 1,868 27,700
Other income (expense), net............................................ (1,599) 2,536
----------- ---------
Income (loss) before provision for income taxes........................ 14,422 (23,688)
Provision for income taxes............................................. 11,174 2,821
----------- ---------
Net income (loss)...................................................... $ 3,248 (26,509)
----------- ---------
Foreign currency translation........................................... 1,653 (9,860)
----------- ---------
Comprehensive income (loss)............................................ $ 4,901 $ (36,369)
----------- ---------
----------- ---------
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-34
<PAGE>
GROVE INVESTORS LLC AND SUBSIDIARIES
CONDENSED COMBINED STATEMENT OF CASH FLOW FOR
THE SIX MONTHS ENDED MARCH 28, 1998 AND
CONDENSED CONSOLIDATED STATEMENT OF CASH
FLOW FOR THE SIX MONTHS ENDED APRIL 3, 1999
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------------
PREDECESSOR
-----------
MARCH 28, APRIL 3,
1998 1999
----------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss).................................................... $ 3,248 ($ 26,509)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization...................................... 9,384 9,600
Depreciation of equipment held for rent............................ 5,501 8,681
Amortization of deferred financing costs........................... -- 1,688
Loss on sale of fixed assets....................................... 4,719 --
Other operating assets............................................. 2,602 --
Changes in operating assets and liabilities, net................... 60,564 8,914
----------- ---------
Net cash provided by operating activities........................ 86,018 2,374
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures................................................. (15,197) (4,080)
Investment in equipment held for rent................................ (16,380) (19,189)
Proceeds from sale of property, plant and equipment.................. 3,630 779
Cash received from Hanson PLC........................................ -- 10,500
----------- ---------
Net cash used in investing activities............................ (27,947) (11,990)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from short-term borrowings.............................. 2,639 8,187
Repayment of long-term debt.......................................... -- (11,000)
Advances to members.................................................. -- (1,138)
Other financing activities........................................... (61,649) --
----------- ---------
Net cash used for financing activities........................... (59,010) (3,951)
----------- ---------
Net decrease in cash and cash equivalents............................ (939) (13,567)
Cash and cash equivalents at beginning of period..................... 5,024 34,289
----------- ---------
Cash and cash equivalents at end of period........................... $ 4,085 $ 20,722
----------- ---------
----------- ---------
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
F-35
<PAGE>
GROVE INVESOTRS LLC AND SUBSIDIARIES
NOTES TO CONDENSED COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED AND IN THOUSANDS)
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Grove Investors LLC's ("Grove" or the "Company") condensed consolidated
balance sheet as of April 3, 1999, the condensed combined and consolidated
statements of operations for the six months ended April 3, 1999 and March 28,
1998 and the condensed combined and consolidated statements of cash flows for
the six months ended April 3, 1999 and March 28, 1998 have been prepared by
Grove Investors LLC and have not been audited by Grove Investors LLC's
independent accountants. Financial information for periods prior to April 29,
1998 (the "Predecessor") relates to the businesses acquired in connection with
the Acquisition (See note 2). Financial information subsequent to April 29, 1998
relates to the Company after the Acquisition. The Acquisition created a new
basis of accounting and a different capital structure, therefore, the operating
results and cash flows for 1999 and 1998 are not directly comparable. In the
opinion of management, all adjustments, consisting only of normal recurring
adjustments, considered necessary for a fair presentation of the financial
position, results of operations and cash flows have been included.
The Company primarily manufactures and sells new mobile hydraulic cranes,
aerial work platforms and truck-mounted cranes. In addition, the Company has net
sales from parts, service and used equipment of the products it manufactures.
Sales of used equipment are not material and are generally limited to trade-ins
on new equipment through distributors in France, Germany, and the United
Kingdom.
The separate financial statements of Grove Investors Capital, Inc. ("Grove
Investors Capital") are not included since the Company considers that such
financial statements would not be material.
Interim results for the six months ended April 3, 1999 are not necessarily
indicative of the results that may be expected for a full fiscal year. For
further information refer to the consolidated financial statements and notes for
the year ended October 3, 1998.
2. THE ACQUISITION
On April 29, 1998, the Company acquired from Hanson Funding (G) PLC and
certain of its subsidiaries ("Hanson") substantially all of the assets of
Hanson's United States mobile hydraulic crane and aerial work platform
operations, the capital stock of Hanson's United States truck-mounted crane
operation and the capital stock of Hanson's British, French, German, and
Australian crane and aerial work platform subsidiaries (the "Acquired Business")
for an aggregate purchase price of $583.0 million (the "Acquisition"). The
purchase price was subject to a post closing adjustment for which the Company
has received $27.3 million from Hanson.
The Acquisition was accounted for as a purchase and the operations of the
Acquisition are included in the consolidated statements of operations and cash
flows from the date of acquisition. The cost of the Acquisition has been
allocated on the basis of the fair value of the assets acquired and the
liabilities assumed. The excess of the purchase price over the estimated fair
value of the net assets acquired is being amortized using the straight-line
method over forty years. The allocation of the purchase price for the
Acquisition is based upon preliminary estimates and assumptions and is subject
to revision once appraisals, valuations and other studies of the fair value of
the acquired assets and liabilities have been completed.
F-36
<PAGE>
GROVE INVESOTRS LLC AND SUBSIDIARIES
NOTES TO CONDENSED COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED AND IN THOUSANDS)
4. INCOME TAXES
Following the Acquisition, a significant portion of the Company's business
was operated as a Delaware limited liability company and is not subject to
federal and certain state income taxes. The taxable income of the limited
liability company in the United States is allocated to the equity holders of the
Company who are responsible for the applicable federal and state income taxes.
The Company expects to make cash distributions to the equity holders for their
tax obligations associated with the Company's taxable income. Foreign and
certain domestic income taxes will continue to be the responsibility of the
Company.
The primary difference between the Company's effective income tax rate and
the United States statutory rate is due to the Company's structure as a limited
liability company. Therefore, income taxes included on the condensed combined
and consolidated statement of operations and comprehensive income (loss) relate
to foreign and certain domestic operations.
5. CLOSURE OF SUNDERLAND MANUFACTURING FACILITY
As the result of recurring operating losses, the Company closed its
Sunderland, U.K. manufacturing facility on November 27, 1998. Management
believes closing the facility will eventually improve operating earnings as well
as provide the opportunity for additional cost reductions through product
rationalization, reduced selling, general and administrative expenses and
reduced manufacturing costs. Management has estimated total closure costs to be
approximately $18.5 million. Such amount consists of $11.5 million in severance
and related costs for 683 plant employees, $5.6 million for dismantlement and
disposal of plant equipment and $1.4 million for cleanup and closure of the
leased facility. The carrying amount of the plant equipment at April 3, 1999 was
$1,400. None of these costs had been expended as of October 3, 1998. Through
April 3, 1999, the Company has expended $7.4 million of severance and related
costs for 633 employees. As of April 3, 1999, $4.1 million of severance and
related costs for 50 plant employees, $5.6 million of equipment disposal, and
$1.4 of plant cleanup costs remain to be expended. Such amounts are expected to
be expended by the end of the fiscal year.
6. GROVE INVESTORS CAPITAL, INC.
The Company formed Grove Investors Capital, Inc. as a direct wholly-owned
subsidiary to act as a co-issuer of the Senior Debentures (See note 10 of the
Company's audited financial statements). At April 3, 1999, Grove Investors
Capital, Inc. had one hundred dollars in cash and total assets, and no current
or long-term liabilities other than its contingent co-obligation with respect to
the Senior Debentures. For the three months ended April 3, 1999 Grove Investors
Capital, Inc. had no income or loss and no revenues. Grove Investors Capital,
Inc. has no subsidiaries and no operations and is prohibited from engaging in
any business activities.
F-37
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING COVERED BY THIS PROSPECTUS AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY GROVE INVESTORS OR GROVE INVESTORS CAPITAL. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS
OF GROVE INVESTORS OR GROVE INVESTORS CAPITAL SINCE THE DATE HEREOF. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY, THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION IN WHICH SUCH
OFFER OR SOLICITATION IS NOT AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER
OR SOLICITATION IS NOT QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION.
------------------------
UNTIL , 1999 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL DEALERS
EFFECTING TRANSACTIONS IN THE EXCHANGE DEBENTURES, WHETHER OR NOT PARTICIPATING
IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENT.
$56,652,000
GROVE INVESTORS LLC
GROVE INVESTORS CAPITAL, INC.
OFFER TO EXCHANGE $56,652,000 OF OUR 14 1/2% SENIOR DEBENTURES DUE 2010
---------------------
PROSPECTUS
---------------------
, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 18-108 of the Delaware Limited Liability Company Act, as amended
(the "Act"), grants a Delaware limited liability company the power, subject to
such standards and restrictions, if any, as are set forth in its limited
liability company agreement to indemnify and hold harmless any member or manager
or other person from and against any and all claims and demands whatsoever.
Section 8.1 of the Grove Investors LLC Second Amended and Restated Limited
Liability Company Agreement (the "Operating Agreement") provides that a member
shall not be personally liable for any debt, obligation or other liability of
Grove Investors, whether arising in contract, tort or otherwise, except that a
member shall remain personally liable for the payment of any capital
contributions required by Article III regarding distributions to the members,
and as otherwise provided in the Operating Agreement, the Act and any other
applicable law. Section 8.2 of the Operating Agreement provides that any
affiliate of a member, and any officer, director, shareholder, partner, member,
employee or agent of a member or any affiliate thereof, and any officer,
employee or expressly authorized agent of Grove Investors or its affiliates is a
"Covered Person." No Covered Person shall be liable to Grove Investors or any
other Covered Person for any loss, damage or claim incurred by reason of any act
or omission performed or omitted by such Covered Person in good faith on behalf
of Grove Investors and in a manner reasonably believed to be within the scope of
authority conferred on such Covered Person by the Operating Agreement, except
that a Covered Person shall be liable for any such loss, damage or claim
incurred by reason of such Covered Person's gross negligence or willful
misconduct. A Covered Person shall be fully protected in relying in good faith
upon the records of Grove Investors and upon such information, opinions, reports
or statements presented to Grove Investors by any person as to matters the
Covered Person reasonably believes are within such other person's professional
or expert competence and who has been selected with reasonable care by or on
behalf of Grove Investors, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses, or any other facts pertinent to the existence and amount of assets from
which distributions to s might properly be paid.
Section 145 of the Delaware General Corporation Law (the "DGCL") grants a
Delaware corporation the power to indemnify any director, officer, employee or
agent against reasonable expenses (including attorneys' fees) incurred by him in
connection with any proceeding brought by or on behalf of the corporation and
against judgments, fines, settlements and reasonable expenses (including
attorneys' fees) incurred by him in connection with any other proceeding, if (a)
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the corporation, and (b) in the case of any
criminal proceeding, he had no reasonable cause to believe his conduct was
unlawful. Except as ordered by a court, however, no indemnification is to be
made in connection with any proceeding brought by or in the right of the
corporation where the person involved is adjudged to be liable to the
corporation.
Section 8 of the Grove Investors Capital, Inc. certificate of incorporation
and Article 8 of Grove Investors Capital's by-laws provide that Grove Investors
Capital shall to the extent not prohibited by law, indemnify any person who is
or was made, or threatened to be made, a party to any threatened, pending or
completed action, suit or proceeding (a "Proceeding"), whether civil, criminal,
administrative or investigative, including, without limitation, an action by or
in the right of Grove Investors Capital to procure a judgment in its favor, by
reason of the fact that such person, or a person of whom such person is the
legal representative, is or was a director or officer of Grove Investors
Capital, or, at the request of Grove Investors Capital, is or was serving as a
director or officer of any other corporation or in a capacity with comparable
authority or responsibilities for any partnership, joint venture, trust,
employee benefit plan or other enterprise (an "Other Entity"), against
judgments,
II-1
<PAGE>
fines, penalties, excise taxes, amounts paid in settlement and costs, charges
and expenses (including attorneys' fees, disbursements and other charges).
Persons who are not directors or officers of Grove Investors Capital (or
otherwise entitled to indemnification pursuant to the preceding sentence) may be
similarly indemnified in respect of service to Grove Investors Capital or to an
Other Entity at the request of Grove Investors Capital to the extent the board
of directors of Grove Investors Capital at any time specifies that such persons
are entitled to the benefits of this Article 8.
Section 102(b)(7) of the DGCL permits the elimination or limitation of
directors' personal liability to the corporation or its stockholders for
monetary damages for breach of fiduciary duties as a director except for (1) any
breach of the director's duty of loyalty to the corporation or its stockholders,
(2) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of the law, (3) breaches under section 174 of the DGCL,
which relate to unlawful payments of dividends or unlawful stock repurchase or
redemptions, and (4) any transaction from which the director derived an improper
personal benefit.
Section 7 of Grove Investors Capital's certificate of incorporation limits
the personal liability of directors of Grove Worldwide to the fullest extent
permitted by paragraph (7) of subsection (b) of section 102 of the DGCL.
The Directors' and Officers' Liability and Reimbursement Insurance Policy
covering Grove Investors and Grove Investors Capital is designed to reimburse
Grove Investors and Grove Investors Capital for any payments made by them
pursuant to the foregoing indemnification. Such policy has aggregate coverage of
$10.0 million.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers or persons controlling Grove Investors
and Grove Investors Capital pursuant to the foregoing provisions, Grove
Investors and Grove Investors Capital have been informed that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Securities Act and is therefore unenforceable.
Pursuant to Section 8 of the registration rights agreement dated April 29,
1998 between the Grove Investors, Grove Investors Capital and Donaldson, Lufkin
& Jenrette, the holders of the debentures have agreed to indemnify Grove
Investors and Grove Investors Capital and their directors and controlling
persons against any losses, claims, damages, liabilities or expenses that may
arise out of an untrue statement or alleged untrue statement of or omission to
state a material fact, contained in the registration statement or prospectus,
but only with reference to information relating to such holder furnished in
writing to Grove Investors and Grove Investors Capital.
The Purchase Agreement dated as of April 29, 1998, by and among Grove
Investors, Grove Investors Capital and Donaldson, Lufkin & Jenrette, contains
provisions by which Donaldson, Lufkin & Jenrette agrees to indemnify Grove
Investors and Grove Investors Capital and their respective directors, officers
and controlling persons against any losses, claims, damages, liabilities or
expenses that may arise out of an untrue statement or alleged untrue statement
of or omission to state a material fact, contained in the registration statement
or prospectus, but only with reference to information relating to such holder
furnished in writing to Grove Investors and Grove Investors Capital.
Section 10.07 of the indenture dated as of April 29, 1998, by and among
Grove Investors, Grove Investors Capital and the United States Trust Company of
New York provides that the holders of the debentures have agreed to waive all
liability for any obligations incurred by Grove Investors and Grove Investors
Capital under the debentures or the indenture or for any claim based on, in
respect of, or by reason of such obligations or their creation, against any
incorporator, member, director, officer, employee or stockholder, as such, of
Grove Investors and Grove Investors Capital, and have agreed to the release of
such persons from any such liability.
II-2
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
1.1* The Purchase Agreement dated as of April 29, 1998, by and among Grove Investors and Grove Investors
Capital and Donaldson, Lufkin & Jenrette Securities Corporation.
3.1* Second Amended and Restated Limited Liability Company Agreement of Grove Investors.
3.2* Amendment No. 1, Dated as of October 27, 1998, to the Second Amended and Restated Limited Liability
Company Agreement of Grove Investors.
3.3* Amendment No. 2, Dated as of March 1, 1999, to the Second Amended and Restated Limited Liability
Company Agreement of Grove Investors.
3.4* Amendment No. 3, Dated as of April 7, 1999, to the Second Amended and Restated Limited Liability
Company Agreement of Grove Investors.
3.5* Articles of Incorporation of Grove Investors Capital.
3.6* By-laws of Grove Investors Capital.
4.1* The Indenture dated as of April 29, 1998, by and among Grove Investors and Grove Investors Capital
and the United States Trust Company of New York (the "Indenture").
4.2* Form of 14 1/2% outstanding debentures due 2010 (see Exhibit A of the Indenture).
4.3* Form of new 14 1/2% outstanding debentures due 2010.
4.4* The Registration Rights Agreement dated as of April 29, 1998, by and among Grove Investors and Grove
Investors Capital and Donaldson, Lufkin & Jenrette Securities Corporation.
4.5* The Credit Agreement dated April 29, 1998, by and among Grove Worldwide LLC, Grove Capital, Inc. and
Chase Bank of Texas, National Association, as administrative agent, Donaldson, Lufkin & Jenrette
Securities Corporation, as documentation agent, and BankBoston, N.A., as syndication agent.
5.1* Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to validity of the debentures.
8.1* Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to federal income tax matters.
10.1* Stock and Asset Purchase Agreement, dated March 10, 1998 (the "Acquisition Agreement"), by and among
Grove Worldwide LLC and Hanson Funding (G) Limited, Deutsche Grove Corporation, Hanson America Grove
Holdings (4) Ltd., Grove France SA, Kidde Industries, Inc. and Hanson Finance PLC (collectively, the
"Sellers").
10.2* Amendment to the Acquisition Agreement, dated April 29, 1998, by and among the Grove Worldwide LLC
and the Sellers.
10.3* George Group Consulting Agreement dated as of April 29, 1998 by and between Grove Worldwide LLC and
George Group Inc.
10.4* Employment Agreement dated as of March 5, 1998 by and between Grove Worldwide LLC and Salvatore J.
Bonanno.
10.5* Change of Control Agreement dated July 24, 1997 by and between Grove Worldwide LLC and James A.
Kolinski.
10.6* Change of Control Agreement dated July 24, 1997 by and between Grove Worldwide LLC and Joseph A.
Shull.
10.7* Change of Control Agreement dated July 24, 1997 by and between Grove Worldwide LLC and Robert Stift.
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
10.8* Change of Control Agreement dated July 24, 1997 by and between Grove Worldwide LLC and Keith R.
Simmons.
10.9* Change of Control Agreement dated July 24, 1997 by and between Grove Worldwide LLC and Theodore J.
Urbanek.
10.10* Change of Control Agreement dated July 24, 1997 by and between Grove Worldwide LLC and G. Fred
Heidinger.
10.11* Grove Investors LLC Management Option Plan.
10.12* Grove Worldwide LLC Short-Term Incentive Plan.
10.13* Guarantee and Collateral Agreement by Grove Holdings LLC, Grove Worldwide LLC, Grove Capital, Inc.
and certain of their subsidiaries in favor of Chase Bank of Texas, National Association, as
administrative agent.
10.14* Software License and Support Agreement, dated June 29, 1996, between Baan U.S.A. Inc. and Grove North
America, Division of Kidde Industries, Inc., and amended by Addendum No. One, dated June 29, 1996.
10.15* Professional Services Agreement, dated June 26, 1996, between Baan U.S.A. Inc. and Grove North
America, Division of Kidde Industries, Inc., and amended by Addendum No. One, dated June 29, 1996.
10.16* Consent Letter, dated April 27, 1998 from Grove to Baan U.S.A. Inc.
10.17* Form of Grove Investors LLC Option Agreement.
10.18* First Amendment, dated June 23, 1998, to Employment Agreement of Salvatore J. Bonanno.
10.19* Promissory Note dated June 27, 1998 by and between Grove Worldwide LLC and Salvatore J. Bonanno.
10.20* Promissory Note dated June 27, 1998 by and between Grove Worldwide LLC and Salvatore J. Bonanno.
10.21* Promissory Note dated June 27, 1998 by and between Grove Worldwide LLC and Jeffrey D. Bust.
10.22* Promissory Note dated June 27, 1998 by and between Grove Worldwide LLC and James A. Kolinski.
10.23* Promissory Note dated June 27, 1998 by and between Grove Worldwide LLC and John Wheeler.
10.24* Promissory Note dated October 27, 1998 by and between Grove Worldwide LLC and Stephen L. Cripe.
10.25* Promissory Note dated October 27, 1998 by and between Grove Worldwide LLC and Stephen L. Cripe.
10.26* Promissory Note dated October 27, 1998 by and between Grove Worldwide LLC and Donald Mallo.
10.27* Promissory Note dated October 27, 1998 by and between Grove Worldwide LLC and Donald Mallo.
10.28* Promissory Note dated March 1, 1999 by and between Grove Worldwide LLC and Donald Manvel.
12.1* Statement of Computation of Ratios of Earnings to Fixed Charges.
16.1* Letter from Ernst & Young LLP.
21.1* Subsidiaries of Grove Investors.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- -----------------------------------------------------------------------------------------------------
<C> <S>
23.1 Consent of Ernst & Young LLP.
23.2* Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in the opinion filed as Exhibit 5.1 of
this Registration Statement).
23.3 Consent of KPMG LLP.
24.1* Powers of Attorney (contained on signature pages).
25.1* Form T-1 Statement of Eligibility of the United States Trust Company of New York to act as trustee
under the Indenture.
27.1 Financial Data Schedule
99.1* Form of Letter of Transmittal.
99.2* Form of Notice of Guaranteed Delivery.
99.3* Guidelines for Certification of Taxpayer Identification Number of Substitute Form W-9
99.4* Form of Securities Dealers, Commercial Banks, Trust Companies and Other Nominees Letter
99.5* Form of Client Letter.
</TABLE>
- ------------------------
* Previously filed.
(B) FINANCIAL STATEMENT SCHEDULES
I Condensed Financial Information
II Valuation and Qualifying Accounts
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrants
have been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. If a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officers or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrants will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement;
(A) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(B) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Securities and
Exchange Commission pursuant to
II-5
<PAGE>
Rule 424(b) if, in the aggregate, the changes in volume and price represent
no more than a 20% change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective Registration
Statement;
(C) To include any material information with respect to the not
previously disclosed in the Registration Statement or any material change to
such information in the Registration Statement;
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof;
(3) To remove from registration by means of post-effective amendment any of
the securities being registered which remain unsold at the termination of the
offering;
(4). That before any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the Issuers undertake that such reoffering prospectus
will contain the information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in addition to
the information called for by the other Items of the applicable form;
(5) That every prospectus (1) that is filed pursuant to paragraph (4)
immediately preceding, or (2) that purports to meet the requirements of Section
10(a)(3) of the Securities Act of 1933 and is used in connection with an
offering of securities subject to Rule 415, will be filed as part of an
amendment to the registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof;
(6) To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Item 4, 10(b), 11 or 13 of Form S-4, within one
business day of receipt of such request, and to send the incorporated documents
by first class mail or other equally prompt means. This includes information
contained in documents filed after the effective date of this Registration
Statement through the date of responding to the request; and
(7) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the Registration Statement when it became
effective.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Grove Investors LLC has duly caused this Amendment No. 4 Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of New York, State of New York, on August 12, 1999.
<TABLE>
<S> <C> <C>
GROVE INVESTORS LLC
By: /s/ SALVATORE J. BONANNO
-----------------------------------------
Salvatore J. Bonanno
CHIEF EXECUTIVE OFFICER
</TABLE>
II-7
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 4 Registration Statement has been signed below by the following
persons on behalf of the registrant and in the capacities indicated, on August
12, 1999.
<TABLE>
<CAPTION>
SIGNATURES TITLE
- ------------------------------------------------------ ------------------------------------------------------
<C> <S>
/s/ SALVATORE J. BONANNO
------------------------------------------- Chairman and Chief Executive Officer and Member
Salvatore J. Bonanno (Principal Executive Officer)
/s/ STEPHEN L. CRIPE
------------------------------------------- Chief Financial Officer (Principal Financial and
Stephen L. Cripe Accounting Officer)
*
------------------------------------------- Member
J Taylor Crandall
*
------------------------------------------- Member
Michael L. George
*
------------------------------------------- Member
Gerald Grinstein
*
------------------------------------------- Member
Steven B. Gruber
*
------------------------------------------- Member
Robert B. Henske
*
------------------------------------------- Member
Gerard E. Holthaus
*
------------------------------------------- Member
Anthony P. Scotto
</TABLE>
<TABLE>
<S> <C> <C>
/s/ SALVATORE J. BONANNO
----------------------------------------
Salvatore J. Bonanno
*By: ATTORNEY-IN-FACT
</TABLE>
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
Grove Investors Capital, Inc. has duly caused this Amendment No. 4 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on August 12, 1999.
GROVE INVESTORS CAPITAL, INC.
By /s/ SALVATORE J. BONANNO
-----------------------------------------
Salvatore J. Bonanno
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 4 Registration Statement has been signed below by the following
persons on behalf of the registrant and in the capacities indicated, on August
12, 1999.
<TABLE>
<CAPTION>
SIGNATURES TITLE
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
/s/ SALVATORE J. BONANNO Chairman and Chief Executive Officer and Member
------------------------------------------- (Principal Executive Officer)
Salvatore J. Bonanno
/s/ STEPHEN L. CRIPE Chief Financial Officer (Principal Financial and
------------------------------------------- Accounting Officer)
Stephen L. Cripe
* Director
-------------------------------------------
Robert Henske
* Director
-------------------------------------------
Salvatore J. Bonanno
* Director
-------------------------------------------
Anthony P. Scotto
</TABLE>
<TABLE>
<S> <C> <C>
/s/ SALVATORE J. BONANNO
----------------------------------------
Salvatore J. Bonanno
*By: ATTORNEY-IN-FACT
</TABLE>
II-9
<PAGE>
SCHEDULE I--CONDENSED FINANCIAL INFORMATION OF THE REGISTRANT
GROVE INVESTORS LLC
CONDENSED BALANCE SHEET
OCTOBER 3, 1998
<TABLE>
<S> <C>
ASSETS
Investment in subsidiaries......................................................... $ 93,392
Other assets....................................................................... 3,725
---------
$ 97,117
---------
---------
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accrued expenses and other current liabilities................................... $ 1,260
---------
Long-term debt..................................................................... 49,130
Due to subsidiaries................................................................ 3,262
---------
Total liabilities.................................................................. 53,652
---------
Members' equity:
Invested capital................................................................. 75,000
Notes receivable from members.................................................... (1,871)
Accumulated deficit.............................................................. (29,664)
---------
Total members' equity.............................................................. 43,465
---------
$ 97,117
---------
---------
</TABLE>
S-1
<PAGE>
GROVE INVESTORS LLC
CONDENSED STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE FIVE MONTHS ENDED OCTOBER 3, 1998
<TABLE>
<S> <C>
Selling, engineering, general and administrative expenses........................ $ 20
Interest expense................................................................. (3,044)
Net loss of subsidiaries......................................................... (26,600)
---------
Net loss and comprehensive loss.................................................. $ (29,664)
---------
---------
</TABLE>
S-2
<PAGE>
GROVE INVESTORS LLC
CONDENSED STATEMENT OF CASH FLOWS
FOR THE FIVE MONTHS ENDED OCTOBER 3, 1998
<TABLE>
<S> <C>
Cash flow from operating activities:
Net loss....................................................................... $ (29,664)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization................................................ 19
Amortization of deferred financing costs..................................... 94
Accrued interest on Senior Debentures........................................ 1,755
Net loss of subsidiaries..................................................... 26,600
Changes in operating assets and liabilities:
Accounts payable and accrued expenses...................................... 3,624
---------
Net cash provided by operating activities........................................ 2,428
---------
Cash flows from investing activities:
Investment in subsidiaries..................................................... (120,000)
Net cash used in investing activities............................................ (120,000)
---------
Cash flows from financing activities:
Proceeds from issuance of long-term debt....................................... 47,375
Equity investment from members................................................. 75,000
Loans to stockholders.......................................................... (1,878)
Deferred financing costs....................................................... (2,925)
Net cash provided by financing activities........................................ 117,572
---------
Net change in cash and cash equivalents.......................................... --
Cash and cash equivalents at beginning of period................................. --
---------
Cash and cash equivalents at end of period....................................... $ --
---------
---------
</TABLE>
S-3
<PAGE>
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
ADDITIONS
------------------------------------
BALANCE AT CHARGED TO
BEGINNING COSTS AND CHARGED TO OTHER BALANCE AT
OF YEAR EXPENSES ACCOUNTS(S) DEDUCTIONS (B) END OF YEAR
----------- --------------- ------------------- ----------------- -----------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts:
(in thousands)
Year ended September 28, 1996............ $ 1,891 688 (14) 12 $ 2,553
Year ended September 27, 1997............ $ 2,553 538 (114) 260 $ 2,717
Seven months ended April 28, 1998........ $ 2,717 880 12 146 $ 3,463
Five months ended October 3, 1998........ $ 3,463 290 121 799 $ 3,075
</TABLE>
- ------------------------
(a) Impact of exchange rates
(b)Write-offs
S-4
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
use of our report dated December 15, 1997 in the Registration Statement (Form
S-4) and related Prospectus of Grove Investors LLC and Grove Investors
Capital, Inc. for the registration of $56,652,000 14 1/2% Senior Debentures
due 2010.
/s/ Ernst & Young LLP
Baltimore, Maryland
August 10, 1999
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Grove Investors LLC:
The audit referred to in our report dated December 1, 1998, included the
related financial statement schedules as of October 3, 1998, and for the
seven months ended April 28, 1998 and for the five months ended October 3,
1998, included in the registration statement. These financial statement
schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statement
schedules based on our audits. In our opinion, such financial statement
schedules, when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly in all material respects the
information set forth therein.
We consent to the use of our reports included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
/s/ KPMG LLP
Baltimore, Maryland
August 10, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CIK> 0001062485
<NAME> GROVE INVESTORS LLC/PA
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-02-1999
<PERIOD-START> OCT-04-1998
<PERIOD-END> APR-03-1999
<CASH> 20,722
<SECURITIES> 0
<RECEIVABLES> 118,033
<ALLOWANCES> 0
<INVENTORY> 218,901
<CURRENT-ASSETS> 368,494
<PP&E> 217,581
<DEPRECIATION> 0
<TOTAL-ASSETS> 883,568
<CURRENT-LIABILITIES> 207,721
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 10,125
<TOTAL-LIABILITY-AND-EQUITY> 883,568
<SALES> 350,369
<TOTAL-REVENUES> 350,369
<CGS> 284,895
<TOTAL-COSTS> 284,895
<OTHER-EXPENSES> 63,998
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,700
<INCOME-PRETAX> (23,688)
<INCOME-TAX> 2,821
<INCOME-CONTINUING> (26,509)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (26,509)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
