<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 10, 1998
REGISTRATION NO. 333-57611
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 2
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
<TABLE>
<S> <C>
GROVE WORLDWIDE LLC GROVE CAPITAL, INC.
(Exact name of registrant as (Exact name of registrant as
specified in its charter) specified in its charter)
DELAWARE DELAWARE
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or organization)
6719 6799
(Primary Standard Industrial (Primary Standard Industrial
Classification Code Number) Classification Code Number)
23-2955766 25-1806448
(I.R.S. Employer Identification (I.R.S. Employer Identification
Number) 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, (Address, including zip code,
and telephone number, including and telephone number, including
area code, of registrant's area code, of registrant's
principal executive offices) principal executive offices)
</TABLE>
SALVATORE J. BONANNO
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
GROVE WORLDWIDE 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. / / ______
------------------------
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>
TABLE OF ADDITIONAL REGISTRANTS
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION PRIMARY STANDARD IRS EMPLOYER
OF INDUSTRIAL CLASSIFICATION IDENTIFICATION
NAME INCORPORATION CODE NUMBER NUMBER
- ---------------------------------------- -------------- ------------------------- --------------
<S> <C> <C> <C>
Grove U.S. LLC (a)...................... Delaware 3531 23-2955767
Grove Finance LLC (a)................... Delaware 6799 25-1806573
Crane Acquisition Corp. (a)............. Delaware 6719 52-2089451
Crane Holding Inc. (a).................. Delaware 6719 51-0305209
National Crane Corporation (a).......... Delaware 3531 22-2196756
<CAPTION>
ADDRESS, INCLUDING ZIP CODE, AND
TELEPHONE NUMBER, INCLUDING AREA
CODE, OF REGISTRANTS' PRINCIPAL
NAME EXECUTIVE OFFICES
- ---------------------------------------- --------------------------------------
<S> <C>
Grove U.S. LLC (a)...................... 1565 Buchanan Trail East
Shady Grove, Pennsylvania 17256
(717) 597-8121
Grove Finance LLC (a)................... 1565 Buchanan Trail East
Shady Grove, Pennsylvania 17256
(717) 597-8121
Crane Acquisition Corp. (a)............. 11200 Number 148
Waverly, Nebraska 68462
(402) 786-6300
Crane Holding Inc. (a).................. 11200 Number 148
Waverly, Nebraska 68462
(402) 786-6300
National Crane Corporation (a).......... 11200 Number 148
Waverly, Nebraska 68462
(402) 786-6300
</TABLE>
- --------------------------
(a) The Notes (as defined on page 1) are guaranteed fully and unconditionally,
on a joint and several basis, by each of the direct and indirect
wholly-owned domestic subsidiaries of Grove Worldwide LLC (other than Grove
Capital, Inc.) (the "Subsidiary Guarantors").
<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 10, 1998
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PRELIMINARY PROSPECTUS
$225,000,000
GROVE WORLDWIDE LLC
GROVE CAPITAL, INC.
OFFER TO EXCHANGE THEIR
9 1/4% SENIOR SUBORDINATED NOTES DUE 2008, WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT,
FOR ANY AND ALL OF THEIR OUTSTANDING 9 1/4% SENIOR SUBORDINATED NOTES DUE 2008
THE EXCHANGE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1998, UNLESS EXTENDED
Grove Worldwide LLC, a Delaware limited liability company (the "Company" or
"Grove"), and Grove Capital, Inc., a Delaware corporation and a wholly owned
subsidiary of the Company ("Grove Capital" and, together with the Company, the
"Issuers"), hereby offer, upon the terms and subject to the conditions set forth
in this Prospectus and the accompanying letter of transmittal (the "Letter of
Transmittal," and together with this Prospectus, the "Exchange Offer") up to
$225,000,000 in aggregate principal amount of their 9 1/4% Senior Subordinated
Notes Due 2008 (the "Exchange Notes") for a like principal amount of their
outstanding 9 1/4% Senior Subordinated Notes Due 2008 that were issued and sold
in reliance upon an exemption from registration under the Securities Act of
1933, as amended (the "Securities Act") (the "Senior Subordinated Notes" and,
together with the Exchange Notes, the "Notes").
The terms of the Exchange Notes will be the same in all material respects
(including principal amount, interest rate, maturity and ranking) as the terms
of the Senior Subordinated Notes for which they may be exchanged pursuant to the
Exchange Offer, except that the Exchange Notes have been registered under the
Securities Act, and therefore will not be subject to certain restrictions on
transfer applicable to the Senior Subordinated Notes and will not be entitled to
registration rights except under certain limited circumstances. The Exchange
Notes will be issued under the Indenture (as defined on page 3) governing the
Senior Subordinated Notes. The Senior Subordinated Notes are, and the Exchange
Notes will be, general unsecured obligations of the Issuers, will rank
subordinate in right of payment to all Senior Debt and rank equal in right of
payment to any future senior subordinated indebtedness of the Issuers and senior
in right of payment to any subordinated indebtedness of the Issuers. The
Issuers' obligations under the Notes will be jointly and severally guaranteed
(the "Subsidiary Guarantees") by all of the existing domestic subsidiaries of
the Company except Grove Capital (the "Subsidiary Guarantors"). The Subsidiary
Guarantees will rank subordinate in right of payment to all Senior Debt of each
Subsidiary Guarantor, including each Subsidiary Guarantor's guarantee of
indebtedness under the New Credit Facility (as defined on page 10). The Notes
and the Subsidiary Guarantees will be effectively subordinated to all
indebtedness, including trade payables, of the Company's subsidiaries that are
not Subsidiary Guarantors. As of June 27, 1998, the Notes were subordinated to
$238.8 million of Senior Debt and effectively subordinated to $118.6 million of
liabilities of the Company's subsidiaries that are not Subsidiary Guarantors. As
of June 27, 1998, the Company had no senior subordinated indebtedness
outstanding other than the Notes and had no subordinated indebtedness
outstanding.
(CONTINUED ON NEXT PAGE)
------------------------
SEE "RISK FACTORS" BEGINNING ON PAGE 22 FOR A DISCUSSION OF CERTAIN RISKS
ASSOCIATED WITH AN INVESTMENT IN THE EXCHANGE NOTES.
---------------------
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS , 1998.
<PAGE>
(CONTINUED FROM COVER)
The Senior Subordinated Notes were originally issued and sold on April 29,
1998 in a transaction not registered under the Securities Act, in reliance upon
the exemption provided in Section 4(2) of the Securities Act and Rule 144A of
the Securities Act (the "Initial Offering"). Accordingly, the Senior
Subordinated Notes may not be reoffered, resold or otherwise pledged,
hypothecated or transferred in the United States unless so registered or unless
an applicable exemption from the registration requirements of the Securities Act
is available. Based upon interpretations provided to third parties by the Staff
(the "Staff") of the Securities and Exchange Commission (the "Commission"), the
Issuers believe that the Exchange Notes issued pursuant to the Exchange Offer in
exchange for the Senior Subordinated Notes may be offered for resale, resold and
otherwise transferred by holders thereof (other than any holder which is (i) an
"affiliate" of the Company within the meaning of the Securities Act (an
"Affiliate") or (ii) a broker-dealer that purchases Notes from the Issuers to
resell pursuant to Rule 144A or any other available exemption) without
compliance with the registration and prospectus delivery provisions of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such holder's business and such holder has no arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes and neither such holder nor any other such person is engaging in
or intends to engage in a distribution of such Exchange Notes. Each Affiliate
that receives the Exchange Notes must comply with the registration and
prospectus delivery requirements of the Securities Act to the extent applicable.
In addition, each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer may be deemed to be an "underwriter" within the
meaning of the Securities Act, and must acknowledge that it will deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of such Exchange Notes. The Letter of Transmittal states that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Senior Subordinated Notes where such Senior Subordinated Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities. The Issuers and the Subsidiary Guarantors have agreed that,
for a period of one year after the Expiration Date (as defined below), they will
make this Prospectus available to any broker-dealer for use in connection with
any such resale. See "Plan of Distribution."
The Exchange Notes constitute new issues of securities with no established
public trading market. The Issuers do not intend to apply for listing of the
Exchange Notes on any national securities exchange or for their quotation
through the Nasdaq Stock Market, Inc. Therefore, there can be no assurance as to
the development or liquidity of any trading market for the Exchange Notes. Any
Senior Subordinated Notes not tendered and accepted in the Exchange Offer will
remain outstanding. To the extent that Senior Subordinated Notes are tendered
and accepted in the Exchange Offer, a holder's ability to sell untendered Senior
Subordinated Notes could be adversely affected. Following consummation of the
Exchange Offer, the holders of Senior Subordinated Notes will continue to be
subject to the existing restrictions on transfer thereof and the Issuers will
have no further obligation to register such Senior Subordinated Notes under the
Securities Act except under certain limited circumstances. See "Description of
Notes--Registration Rights; Liquidated Damages."
The Senior Subordinated Notes currently trade in the Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") market. Following
commencement of the Exchange Offer but prior to its consummation, the Senior
Subordinated Notes may continue to be traded in the PORTAL market. Following
consummation of the Exchange Offer, the Exchange Notes will not be eligible for
PORTAL trading.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Senior Subordinated Notes being tendered or accepted for exchange. The
Exchange Offer will expire at 5:00 p.m., New York City time, on , 1998,
unless extended (the "Expiration Date"). The date of acceptance for exchange of
the Senior Subordinated Notes (the "Exchange Date") will be the Expiration Date,
upon surrender of the Senior Subordinated Notes tendered. Senior Subordinated
Notes tendered pursuant to the Exchange Offer may be withdrawn at any time prior
to the Expiration Date.
The Issuers will not receive any proceeds from this Exchange Offer and no
underwriter is being utilized in connection with this Exchange Offer.
2
<PAGE>
AVAILABLE INFORMATION
Upon the effectiveness of this Registration Statement, the Issuers and the
Subsidiary Guarantors will become subject to the periodic reporting and to the
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), and in accordance therewith, the Company will file
reports, proxy statements and other information with the Commission. Reports,
proxy and information statements and other information filed by the Company may
be inspected and copied at the public reference facilities maintained by the
Commission in Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at
the Commission'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 such materials may be obtained
upon written request from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549, at prescribed rates. In addition,
the Commission 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 Commission.
No separate financial statements of the Subsidiary Guarantors and Grove
Capital are included herein. The Company considers that such financial
statements would not be material to holders of the Notes because: (i) this
Registration Statement does include, (a) in the notes to the audited combined
financial statements of the Company, supplemental financial information, setting
forth on a combined basis, balance sheets, statements of operations and cash
flows information for the Subsidiary Guarantors, the subsidiaries of the Company
that are not guarantors (the "Non-Guarantor Subsidiaries") and the Company and
(b) in the notes to the unaudited condensed financial statements of the Company,
supplemental financial information, setting forth on a combined basis, balance
sheets, statements of operations and cash flows information for the Subsidiary
Guarantors and Grove Capital, the Non-Guarantor Subsidiaries and the Company;
and (ii) the above-mentioned notes provide sufficient detail to allow investors
to determine the nature of the assets held by, and the operations and cash flows
of the Subsidiary Guarantors and Grove Capital.
The Company is required by the terms of the Indenture dated as of April 29,
1998, by and among the Issuers, the Subsidiary Guarantors and the United States
Trust Company of New York (the "Trustee"), under which the Senior Subordinated
Notes were issued and under which the Exchange Notes are to be issued (the
"Indenture"), to furnish to holders of the Notes (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were 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 the Company and its consolidated subsidiaries and, with respect to
the annual information only, a report thereon by the Company's certified
independent accountants and (ii) all current reports that would be required to
be filed with the Commission on Form 8-K if the Company were required to file
such reports, in each case within the time periods specified in the Commission's
rules and regulations. In addition, following the consummation of the Exchange
Offer, whether or not required by the rules and regulations of the Commission,
the Company will file a copy of all such information and reports with the
Commission for public availability within the time periods specified in the
Commission's rules and regulations (unless the Commission will not accept such a
filing) and make such information available to securities analysts and
prospective investors upon request. In addition, (i) at all times the Commission
does not accept the filings provided for in the preceding sentence or (ii) such
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, the Company has agreed that, for so long as
any Notes remain outstanding, it will furnish to the holders of the Notes 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.
3
<PAGE>
This Prospectus constitutes a part of a registration statement on Form S-4
(the "Registration Statement") filed by the Issuers and the Subsidiary
Guarantors with the Commission under the Securities Act. This Prospectus does
not contain all the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission, and reference is hereby made to the Registration Statement and to
the exhibits relating thereto for further information with respect to the
Company, Grove Capital, the Subsidiary Guarantors and the Exchange Notes. Any
statements contained herein concerning the provisions of any document are not
necessarily complete, and, in each instance, reference is made to the copy of
such document filed as an exhibit to the Registration Statement or otherwise
filed with the Commission. Each such statement is qualified in its entirety by
such reference.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements under "Prospectus Summary," "Risk Factors," "Selected
Historical Financial Data," "Management's Discussion and Analysis of Financial
Condition and Results of Operations," "Business" and elsewhere in this
Prospectus constitute "forward-looking statements." Any statements that express,
or involve discussions as to, expectations, beliefs, plans, objectives,
assumptions or future events or performance (often, but not always, through the
use of words or phrases such as "will likely result," "are expected to," "will
continue," "anticipates," "expects," "estimates," "intends," "plans,"
"projects," and "outlook") are not historical facts and may be forward-looking.
Such 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 the Company, or industry results, to be
materially different from any future results, levels of activity, cost savings,
performance or achievements expressed or implied by such forward-looking
statements, and accordingly, such statements should be read in conjunction with
and are qualified in their entirety by reference to, such risks, uncertainties
and other factors, which are discussed throughout this Prospectus. Such factors
include, among others, the following: (i) substantial leverage and ability to
service debt; (ii) changing market trends in the mobile hydraulic crane, aerial
work platform and truck-mounted crane industries; (iii) general economic and
business conditions including a prolonged or substantial recession; (iv) the
ability of the Company to implement its business strategy and maintain and
enhance its competitive strengths; (v) the ability of the Company to implement
the Operations Improvement Program (as defined); (vi) the ability of the Company
to obtain financing for general corporate purposes; (vii) competition; (viii)
availability of key personnel; (ix) industry overcapacity; and (x) changes in,
or the failure to comply with, government regulations. See "Risk Factors." As a
result of the foregoing and other factors, no assurance can be given as to
future results, levels of activity and achievements, and neither the Company nor
any other person assumes responsibility for the accuracy and completeness of
these forward-looking statements. Any forward-looking statements contained
herein speak solely as of the date on which such statements are made, and the
Company undertakes no obligation to update any forward-looking statements to
reflect events or circumstances after the date on which such statements were
made or to reflect the occurrence of unanticipated events.
4
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND COMBINED FINANCIAL
STATEMENTS OF THE GROVE COMPANIES, THE PREDECESSOR TO THE COMPANY AND THE
CONDENSED FINANCIAL STATEMENTS OF GROVE WORLDWIDE LLC INCLUDING THE NOTES
THERETO (THE "FINANCIAL STATEMENTS"), INCLUDED ELSEWHERE IN THIS PROSPECTUS.
UNLESS OTHERWISE NOTED, THE "COMPANY" OR "GROVE" REFERS TO GROVE WORLDWIDE LLC
AND ITS SUBSIDIARIES AND INCLUDES THE ACQUIRED BUSINESS (AS DEFINED). THE
COMPANY'S FISCAL YEAR ENDS ON THE SATURDAY CLOSEST TO THE LAST DAY OF SEPTEMBER.
REFERENCES TO FISCAL 1993, FISCAL 1994, FISCAL 1995, FISCAL 1996 AND FISCAL 1997
REFER TO THE FISCAL YEARS ENDED OCTOBER 2, 1993, OCTOBER 1, 1994, SEPTEMBER 30,
1995, SEPTEMBER 28, 1996 AND SEPTEMBER 27, 1997, RESPECTIVELY. REFERENCES TO
HISTORICAL FINANCIAL INFORMATION ARE TO THE HISTORICAL COMBINED FINANCIAL
RESULTS OF THE ACQUIRED BUSINESS. SEE "THE TRANSACTIONS--THE ACQUISITION." THIS
PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INHERENTLY INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE
ANTICIPATED IN THESE FORWARD-LOOKING STATEMENTS AS A RESULT OF VARIOUS FACTORS,
INCLUDING THOSE SET FORTH UNDER "THE COMPANY-- BUSINESS STRATEGY" AND "RISK
FACTORS." CERTAIN MARKET DATA USED IN THIS PROSPECTUS REFLECT MANAGEMENT
ESTIMATES. PROSPECTIVE INVESTORS ARE URGED TO READ THIS PROSPECTUS IN ITS
ENTIRETY.
THE COMPANY
Grove Worldwide is 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, the Company's
largest operating division, has a number one market position and a 45% market
share. The Company's products are used in a wide variety of applications by
commercial and residential building contractors, as well as by industrial,
municipal and military end-users. The Company's products are marketed to
independent equipment rental companies and directly to end-users under three
widely recognized brand names--GROVE CRANE, GROVE MANLIFT and NATIONAL CRANE.
The Company believes it has achieved a leading position in each of its principal
markets due to its: (i) strong brand name and reputation for quality products;
(ii) superior customer service; (iii) established network of distributors; (iv)
broad product line; and (v) commitment to superior engineering design and
product innovation.
The Company's products are sold in over 50 countries primarily through an
established, global network of approximately 240 independent distributors. The
Company's major markets are North America (67% of fiscal 1997 new equipment
sales), Europe (19% of fiscal 1997 new equipment sales), Africa and the Middle
East (4% of fiscal 1997 new equipment sales), Asia (7% of fiscal 1997 new
equipment sales) and Latin America (3% of fiscal 1997 new equipment sales). The
Company markets its products through three operating divisions:
- - GROVE CRANE (approximately 69% of fiscal 1997 net sales) designs and
manufactures over 40 models of mobile hydraulic cranes. The Company's mobile
hydraulic cranes, which are used primarily in industrial, commercial and
public works construction, are capable of reaching maximum heights of 372 feet
and lifting up to 300 tons. From fiscal 1993 to fiscal 1997, Grove Crane's net
sales (including acquisitions) increased from $290 million to $587 million,
representing a compound annual growth rate ("CAGR") of 19.4%.
- - GROVE MANLIFT (approximately 23% of fiscal 1997 net sales) designs and
manufactures over 60 models of aerial work platforms. The Company's aerial
work platforms, which are used primarily in industrial, commercial and
construction applications, are capable of lifting people to maximum working
heights ranging from 19 to 131 feet. Aerial work platforms elevate workers and
their materials more safely, quickly and easily than alternative methods such
as scaffolding and ladders. From fiscal 1993 to fiscal 1997, Grove Manlift's
net sales (including acquisitions) increased from $57 million to $199 million,
representing a CAGR of 36.8%.
- - NATIONAL CRANE (approximately 8% of fiscal 1997 net sales) designs and
manufactures over 14 models of telescoping and 14 models of articulating
truck-mounted cranes. The Company's telescoping and
5
<PAGE>
articulating cranes, which are used primarily in industrial, commercial,
public works and construction applications, are capable of reaching maximum
heights of 166 feet and lifting up to 36 tons. Telescoping and articulating
cranes are mounted on a standard truck chassis or on a pedestal at a fixed
location. From fiscal 1993 to fiscal 1997, National Crane's net sales
increased from $40 million to $71 million, representing a CAGR of 15.4%.
COMPETITIVE STRENGTHS
The Company believes that it benefits from the following competitive
strengths:
- - LEADING MARKET POSITIONS. The Company believes that its three operating
divisions have established a leading position in each of their principal
markets.
<TABLE>
<CAPTION>
MARKET
DIVISION PRODUCTS PRINCIPAL MARKETS POSITION(1) MARKET SHARE(1)
- ----------------- -------------------------- ------------------------------ ----------------- ---------------------
<S> <C> <C> <C> <C>
Grove Crane Mobile Hydraulic Cranes North America 1 43%(2)
Europe (excluding Russia) 2 14%
Grove Manlift Aerial Work Platforms North America 3 10%
Europe (excluding Russia) 3 16%
National Crane Truck-Mounted Cranes:
Telescoping North America 1 43%
Articulating North America 4 13%(3)
</TABLE>
- - STRONG BRAND NAME AND REPUTATION FOR QUALITY PRODUCTS. The Company has created
significant brand equity as a result of its innovative designs, quality
products and product reliability. With over 100,000 units sold during the past
50 years, the Company believes that it currently has one of the industry's
largest installed bases of cranes and aerial work platforms. The quality of
the Company's products and the value of its brand name are reflected in the
North American marketplace, where the Company believes that its cranes
generally command premium prices and have higher residual values than
comparable products manufactured by its 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 its competitors' products.
- - SUPERIOR CUSTOMER SERVICE. The Company is committed to providing superior
training, sales and service support to its distributors and end-users as a
standard part of its sales and marketing effort. Management believes that no
other major competitor matches the extent and quality of its customer support
services and that such services significantly contribute to the Company's
ability to charge premium prices for its products. In addition, the Company
has focused on providing ready availability of service parts. For example, in
fiscal 1997, the Company shipped over 80% of its replacement parts worldwide
within 24 hours after receipt of an order. After-market sales for parts and
services accounted for 12% of the Company's net sales and 26% of gross profits
in fiscal 1997. Such sales typically have higher gross margins and are less
cyclical than new equipment sales.
- - ESTABLISHED NETWORK OF DISTRIBUTORS. The Company benefits 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 the Company's products for over 10 years.
- ------------------------------
(1) All market share data are based on units shipped during fiscal 1997, except
for data on Grove Manlift's share of the North American and European aerial
work platform markets, which are based on fiscal 1997 revenues. With respect
to aerial work platforms, management believes that because the Company
primarily competes in the North American and European markets for larger,
high-end aerial work platforms, comparisons based on revenues are more
appropriate. Market data were derived from management estimates including,
as applicable, management assumptions regarding unit price.
(2) Does not include industrial cranes.
(3) In the United States, the Company has a number three market position and a
17% market share. National Crane has a nominal presence in the Canadian
market for articulating cranes.
6
<PAGE>
- - BROAD PRODUCT LINE. The Company believes it has the broadest product line in
the industry, with 10 product categories and over 120 models offered by its
three operating divisions. Management believes the breadth of the Company's
product offerings enables it to more effectively serve the equipment rental
market, which management estimates represents approximately 80% of the
Company's net sales. The Company's broad product line allows it 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
As a result of the Acquisition (as defined), the Company is operated on a
stand-alone basis rather than as part of a larger diversified enterprise. The
Company's management team expects to capitalize on the experience and expertise
of new senior management as it implements the Operations Improvement Program in
cooperation with the George Group Inc. ("George Group"), an acquisition and
management consulting firm that applies strategic and operations management
expertise to manufacturing businesses. Management is led by Salvatore J. Bonanno
who joined the Company in March 1998 from Foamex International Inc., where he
led an organizational restructuring designed to reduce manufacturing and
overhead costs. The Company will implement the Operations Improvement Program
and the other key elements of the Company's business strategy described below in
order to reach its objective of increased net sales and EBITDA.
- - OPERATIONS IMPROVEMENT PROGRAM. The Company, in cooperation with the George
Group, has developed a comprehensive program (the "Operations Improvement
Program") which it believes will enable the Company to reduce its annual costs
by approximately $35 million to $50 million and achieve significant working
capital efficiencies by fiscal 2001. The Operations Improvement Program is
intended to improve the Company's operating efficiency and margins by: (i)
rationalizing product lines; (ii) reducing manufacturing costs; and (iii)
reducing selling, general and administrative expenses. In addition, the
Company believes the Operations Improvement Program should enable it to reduce
its working capital requirements by decreasing inventory levels by
approximately $40 million to $50 million.
- - CONTINUE TO PROVIDE SUPERIOR PRODUCTS. The Company has maintained a commitment
to superior engineering design and technological innovation. The Company
believes that it has the most extensive engineering capability in the crane
industry, with a dedicated engineering group focusing on developing
innovative, high performance, low maintenance products that satisfy the
demands of its customers. Together with the Company's manufacturing and
marketing staff, these engineers seek to utilize new technologies and
effectively introduce new products. For example, the Company has introduced
lighter booms with greater lifting capacity, electronic controls that
facilitate operations and product features that enhance safety and increase
versatility. The Company believes that the greater sophistication of its
products contributes to its ability to sustain higher residual values. The
Company intends to intensify its efforts to design products that meet evolving
customer needs while reducing manufacturing costs and the period from product
conception to introduction.
- - EXPAND EXISTING INTERNATIONAL BUSINESS. The Company intends to leverage its
significant brand equity and strong distribution network to opportunistically
expand its existing international business. As an industry leader, the Company
believes it is well-positioned to increase sales internationally as
infrastructure development in existing and emerging markets stimulates demand
for cranes and aerial work platforms. In 1995, the Company expanded its
product offerings and strengthened its manufacturing and distribution presence
in Europe by acquiring the mobile hydraulic crane business of Krupp in Germany
and the aerial work platform business of Delta Systemes SA ("Delta") in
France. In addition, all of the Company's manufacturing facilities have
received ISO 9001 certifications, which enhances the Company's international
marketing efforts.
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- - CAPITALIZE ON THE GROWTH OF THE WORLDWIDE AERIAL WORK PLATFORM MARKET. The
Company seeks to capitalize on the increasing recognition by end-users
worldwide that aerial work platforms are economical and safe alternatives to
scaffolding and ladders. The North American aerial work platform industry
experienced a CAGR in total unit shipments from 1992 to 1997 of 32%. In 1997,
approximately 41,000 aerial work platforms were shipped in North America while
only 13,000 units were shipped in markets outside of North America. The
Company expects 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
The Company, in cooperation with George Group, has developed a comprehensive
program which it believes will enable it to reduce its annual costs by
approximately $35 million to $50 million and achieve significant working capital
efficiencies by fiscal 2001. The Operations Improvement Program is intended to
improve the Company's operating efficiency and its margins by: (i) rationalizing
product lines; (ii) reducing manufacturing costs; and (iii) reducing selling,
general and administrative expenses. In addition, the Company believes the
Operations Improvement Program should enable it to reduce its working capital
requirements by decreasing inventory levels by approximately $40 million to $50
million. It is expected that these cost savings will be offset by non-recurring
costs of up to approximately $25 million 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 the Operations Improvement Program
should be read in conjunction with "Special Note Regarding Forward Looking
Statements" and "Risk Factors--Realization of Benefits of Operations Improvement
Program." The key components of the Operations Improvement Program are as
follows:
RATIONALIZE PRODUCT LINES. The Company expects to implement a product line
rationalization program which will position it to reduce both operating costs
and working capital requirements without diminishing the advantages derived from
its broad product line. The Company will monitor product line data to enable it
to simplify its engineering processes by reducing the number of models and
manufacturing components, standardizing options and using platform design
concepts. The Company believes this program will enable it to eliminate certain
models that have low demand, low margins or features and capabilities that are
redundant with other models. The product line rationalization program will
identify key product requirements by different customer groups within each of
the market segments which the Company serves. Such information will be used to
define a more focused product portfolio which, when compared to the existing
product lines, will help the Company identify opportunities to reduce
components, standardize features and eliminate models. Management believes that
these actions will (i) reduce inventory, (ii) increase labor productivity, (iii)
improve purchasing leverage and (iv) help reduce selling, general and
administrative expenses without negatively impacting revenue.
REDUCE MANUFACTURING COSTS. Management intends to reduce the annual costs
of goods sold by approximately $25 million to $30 million by fiscal 2001 by
rationalizing its product line and undertaking the following initiatives to
improve the Company's manufacturing process:
- - Accelerate the recently initiated Design for Manufacturing and Assembly
("DFMA") program and continue to implement value analysis programs. These
established techniques are designed to lower material and labor costs by
redesigning products, incorporating more standardized components and allowing
a simplified fabrication and assembly process. Initial efforts during fiscal
1997 resulted in a 28% reduction in labor costs for a test model.
- - Consolidate sourcing by using fewer suppliers to fulfill the Company's global
requirements. As a result of its product rationalization and DFMA programs,
the Company expects to purchase a greater volume of fewer components, enabling
it to significantly reduce its vendor base and benefit from increased sourcing
leverage.
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- - Implement other procedures to reduce manufacturing costs, including: (i)
improving planning and scheduling by introducing continuous flow manufacturing
principles and integrating the Company's new management information system;
(ii) improving product flow and reducing cycle time in order to increase
manufacturing flexibility and capacity; and (iii) shifting the production of
certain models and components to facilities where they can be more efficiently
produced.
REDUCE SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Management believes it
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 the Company's new management information system and
streamlining existing business processes, including redesigning sales and
administrative functions. See "Business--Management Information System."
REDUCE WORKING CAPITAL REQUIREMENTS. Management believes the Operations
Improvement Program will enable the Company to reduce its working capital
requirements by reducing inventory levels by approximately $40 million to $50
million. The Company expects to reduce its inventory levels primarily as a
result of: (i) improved manufacturing processes; (ii) the shifting of production
of certain models and components to facilities where they can be more
efficiently produced; and (iii) product rationalization.
9
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THE TRANSACTIONS
THE ACQUISITION
On March 10, 1998, the Company, entered into an agreement (together with the
related agreements, the "Acquisition Agreement") to acquire, through certain of
its subsidiaries, the mobile hydraulic crane, aerial work platform and
truck-mounted crane businesses of Hanson Funding (G) PLC ("Hanson") and certain
of its subsidiaries (the "Acquired Business"), for aggregate cash consideration
of approximately $583.0 million plus certain assumed liabilities, subject to a
post-closing net worth adjustment (the "Acquisition").
On April 29, 1998 (the "Closing Date"), pursuant to the Acquisition
Agreement, the Company acquired the Acquired Business. Cash funding requirements
to consummate the Acquisition, including the payment of related fees and
expenses, were approximately $604.5 million, which were provided by: (i) $209.5
million of borrowings under a new $325.0 million credit facility (the "New
Credit Facility"); (ii) $225.0 million of estimated gross proceeds to the
Company from the offering of the Senior Subordinated Notes; (iii) the issuance
by Grove Holdings LLC, a Delaware limited liability company ("Holdings"), of
$50.0 million in gross proceeds of its 11 5/8% Senior Discount Debentures due
2009 (the "Debentures"); and (iv) the issuance of $120.0 million of limited
liability company membership interests of Holdings (the "Holdings Equity
Issuance") (collectively, the "Financings"). At the Closing, Holdings
contributed (the "Equity Contribution") the net proceeds from the Holdings
Equity Issuance and the Debenture offering to the Company. The Acquisition, the
Financings and the application of the proceeds of the Financings are hereinafter
referred to as the "Transactions." See "The Transactions."
Under the Acquisition Agreement, the purchase price is subject to a post
closing net worth adjustment based upon the net worth of the Grove Companies (as
defined in the Acquisition Agreement) as of April 28, 1998. In July 1998, the
Company received $16.7 million from Hanson in payment of the post closing net
worth adjustment. The Company has until October 1998 to review the combined
balance sheet of the Grove Companies (the "Closing Balance Sheet") and, if it
does not agree with the post closing net worth adjustment, to object to such
determination.
THE INVESTOR GROUP
Keystone, Inc. and its related parties ("Keystone"), FW Strategic Partners,
L.P. ("Strategic Partners"), certain minority investors and certain principals
of, and an entity formed by certain employees of, the George Group and certain
other investors, including certain members of senior management (together with
Keystone, Strategic Partners, the minority investors and the George Group, the
"Investor Group") beneficially own in the aggregate, through Grove Investors LLC
("Grove Investors"), all of the outstanding membership interests of Holdings.
Keystone is the principal investment entity of Robert M. Bass. Since 1985,
Keystone and associated entities have directly and indirectly sponsored over 30
leveraged acquisitions valued in the aggregate at more than $6.0 billion. These
acquisitions have included, among others, American Savings Bank, F.A., Bell &
Howell Company, CapStar Hotel Company, Ivex Packaging Corporation, National
Reinsurance Corporation, Reliant Building Products, Inc., Specialty Foods
Corporation, Stage Stores, Inc., and Williams Scotsman, Inc. Strategic Partners
is a Delaware limited partnership formed to invest primarily in public and
private debt and equity securities. George Group is an acquisition and
management consulting firm that applies its strategic and operations management
expertise to manufacturing businesses. George Group has established an exclusive
relationship with Keystone to pursue leveraged acquisitions of companies in
which George Group's operational expertise may significantly reduce costs and
increase revenue, cash flow and return on invested capital. As part of their
on-going relationship, in May 1997, Keystone, Strategic Partners, certain other
parties and George Group completed the acquisition of Reliant Building Products,
Inc.
10
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GROVE CAPITAL, INC.
Grove Capital was organized as a direct wholly owned subsidiary of Grove for
the purpose of acting as a co-issuer of the Notes and is also a co-registrant of
the Registration Statement. This was done so that certain institutional
investors to whom the Senior Subordinated Notes were marketed and that might
otherwise have been restricted in their ability to purchase debt securities
issued by a limited liability company, such as Grove, by reason of the legal
investment laws of their states of organization or their charter documents,
would be able to invest in the Senior Subordinated Notes. Grove Capital has no
assets, no liabilities (other than the Notes and as a borrower under the New
Credit Facility), no operations and will not have any revenues and is prohibited
from engaging in any business activities. As a result, holders of the Notes
should not expect Grove Capital to participate in servicing the interest and
principal obligations on the Notes.
11
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THE EXCHANGE OFFER
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ISSUERS..................................... The Exchange Notes will be joint and several
obligations of the Company and Grove Capital.
Grove Capital is a Delaware corporation and
wholly owned subsidiary of the Company formed
in connection with the Offering. Grove Capital
has no assets, no liabilities (other than the
Notes and as a borrower under the New Credit
Facility) and no operations and is prohibited
from engaging in any business activities.
THE EXCHANGE OFFER.......................... The Issuers are offering to exchange up to
$225,000,000 aggregate principal amount of
their 9 1/4% Senior Subordinated Notes due
2008 for a like principal amount of their
outstanding 9 1/4% Senior Subordinated Notes
due 2008 that were issued and sold on April
29, 1998 in reliance upon an exemption from
registration under the Securities Act. The
terms of the Exchange Notes will be identical
in all material respects (including principal
amount, interest rate, maturity and ranking)
to the terms of the Senior Subordinated Notes
for which they may be exchanged pursuant to
the Exchange Offer, except that the Exchange
Notes will be registered under the Securities
Act and therefore will not be subject to
certain restrictions on transfer and will not
be entitled to registration rights except
under certain limited circumstances. See "The
Exchange Offer-- Terms of the Exchange."
EXPIRATION DATE............................. The Exchange Offer will expire at 5:00 p.m.,
New York City time, on , 1998
unless extended (the "Expiration Date").
EXCHANGE DATE............................... The first date the Senior Subordinated Notes
will be accepted for exchange will be the
Exchange Date.
CONDITIONS TO THE EXCHANGE OFFER............ The obligation of the Issuers to consummate
the Exchange Offer is subject to certain
customary conditions which may be waived by
the Issuers. See "The Exchange Offer--Certain
Conditions to the Exchange Offer." The
Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Senior
Subordinated Notes being tendered for
exchange. The Issuers reserve the right to
terminate or amend the Exchange Offer at any
time prior to the Expiration Date upon the
occurrence of any such condition.
WITHDRAWAL RIGHTS........................... Tenders may be withdrawn at any time prior to
the Expiration Date. Any Senior Subordinated
Notes not accepted for any reason will be
returned without expense to the tendering
holders thereof as promptly
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12
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as practicable after the expiration or
termination of the Exchange Offer.
PROCEDURES FOR TENDERING SENIOR SUBORDINATED
NOTES..................................... Unless a tender of Senior Subordinated Notes
is effected pursuant to the procedures for
book-entry transfer as provided herein, each
holder of Senior Subordinated Notes wishing to
accept the Exchange Offer must complete, sign
and date a Letter of Transmittal, or a
facsimile thereof, in accordance with the
instructions contained herein and therein, and
mail or otherwise deliver such Letter of
Transmittal, or such facsimile, together with
such Senior Subordinated Notes or in
compliance with the specified procedures for
guaranteed delivery of Senior Subordinated
Notes, and any other required documentation,
to the Exchange Agent at the address set forth
herein. Holders of Senior Subordinated Notes
registered in the name of a broker, dealer,
commercial bank, trust company or other
nominee are urged to contact such person
promptly if they wish to tender Senior
Subordinated Notes pursuant to the Exchange
Offer. See "Risk Factors--Adverse Consequences
of Failure To Exchange" and "The Exchange
Offer--Procedures for Tendering Senior
Subordinated Notes."
Letters of Transmittal and certificates
representing Senior Subordinated Notes should
not be sent to the Issuers. Such documents
should only be sent to the Exchange Agent.
Questions regarding how to tender and requests
for information should be directed to the
Exchange Agent. See "Risk Factors--Adverse
Consequences of Failure To Exchange" and "The
Exchange Offer--Exchange Agent."
FEDERAL INCOME TAX CONSEQUENCES............. In the opinion of Paul, Weiss, Rifkind,
Wharton & Garrison, counsel to the Issuers,
the exchange of Senior Subordinated Notes for
Exchange Notes by holders will not constitute
an exchange for federal income tax purposes,
and U.S. holders will not realize any gain or
loss upon receipt of Exchange Notes. See
"Certain Federal Income Tax Considerations."
EFFECT ON HOLDERS OF THE SENIOR SUBORDINATED
NOTES..................................... As a result of the making of the Exchange
Offer, and upon acceptance for exchange of all
validly tendered Senior Subordinated Notes
pursuant to the terms of this Exchange Offer,
the Issuers will have fulfilled covenants
contained in the terms of the Senior
Subordinated Notes and the Registration Rights
Agreement (the "Registration Rights
Agreement")
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13
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dated April 29, 1998 between the Company,
Grove Capital, the Subsidiary Guarantors and
Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ"), Chase Securities Inc.
("Chase Securities") and BancBoston Securities
Inc. ("BancBoston Securities" and, together
with DLJ and Chase Securities, the "Initial
Purchasers") and, accordingly, the holders of
the Senior Subordinated Notes will have no
further registration or other rights under the
Registration Rights Agreement, except under
certain limited circumstances. See
"Description of Notes-- Registration Rights;
Liquidated Damages." Holders of the Senior
Subordinated Notes who do not tender their
Senior Subordinated Notes in the Exchange
Offer will continue to hold such Senior
Subordinated Notes and will be entitled to all
the rights and limitations applicable thereto
under the Indenture. All untendered, and
tendered but unaccepted, Senior Subordinated
Notes will continue to be subject to the
restrictions on transfer provided for in the
Senior Subordinated Notes and the Indenture.
To the extent that Senior Subordinated Notes
are tendered and accepted in the Exchange
Offer, the trading market, if any, for the
Senior Subordinated Notes could be adversely
affected. See "Risk Factors--Adverse
Consequences of Failure to Exchange."
EXCHANGE AGENT.............................. The United States Trust Company of New York is
serving as exchange agent (the "Exchange
Agent") in connection with the Exchange Offer.
See "The Exchange Offer--Exchange Agent."
RESALE OF EXCHANGE NOTES.................... Based upon interpretations by the Staff issued
to third parties, the Issuers believe that
Exchange Notes issued pursuant to the Exchange
Offer in exchange for the Senior Subordinated
Notes may be offered for resale, resold and
otherwise transferred by holders thereof
(other than any holder which is (i) an
Affiliate of the Company or (ii) a
broker-dealer that purchases Notes from the
Issuers to resell pursuant to Rule 144A or any
other available exemption) without compliance
with the registration and prospectus delivery
provisions of the Securities Act, provided
that such Exchange Notes are acquired in the
ordinary course of such holder's business and
such holder has no arrangement or
understanding with any person to participate
in the distribution of such Exchange Notes and
neither such holder nor any other such person
is engaging in or intends to engage in a
distribution of such Exchange Notes. Each
Affiliate that receives the Exchange Notes
must comply with the registration and
prospectus delivery
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requirements of the Securities Act to the
extent applicable. In addition, each
broker-dealer that receives Exchange Notes for
its own account pursuant to the Exchange Offer
may be deemed to be an "underwriter" within
the meaning of the Securities Act, and must
acknowledge that it will deliver a prospectus
meeting the requirements of the Securities Act
in connection with any resale of such Exchange
Notes. This Prospectus, as it may be amended
or supplemented from time to time, may be used
by a broker-dealer in connection with resales
of Exchange Notes received in exchange for
Senior Subordinated Notes where such Senior
Subordinated Notes were acquired by such
broker-dealer as a result of market-making or
other trading activities. See "The Exchange
Offer--Resale of Exchange Notes."
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TERMS OF THE EXCHANGE NOTES
The Exchange Offer applies to $225,000,000 aggregate principal amount of the
Senior Subordinated Notes. The form and terms of the Exchange Notes are the same
in all material respects as the form and terms of the Senior Subordinated Notes
except that the Exchange Notes have been registered under the Securities Act
and, therefore, will not bear legends restricting the transfer thereof. The
Exchange Notes will evidence the same debt as the Senior Subordinated Notes and
will be entitled to the benefit of the Indenture. See "Description of Notes."
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THE EXCHANGE NOTES.......................... $225,000,000 aggregate principal amount of
9 1/4% Senior Subordinated Notes due 2008.
MATURITY DATE............................... May 1, 2008.
INTEREST PAYMENT DATES...................... May 1 and November 1 of each year, commencing
on November 1, 1998.
SINKING FUND................................ None.
OPTIONAL REDEMPTION......................... The Exchange Notes will be redeemable at the
option of the Issuers, in whole or in part, at
any time on or after May 1, 2003 in cash at
the redemption prices set forth herein, plus
accrued and unpaid interest and Liquidated
Damages (as defined), if any, thereon to the
date of redemption. In addition, at any time
prior to May 1, 2001, the Issuers may on any
one or more occasions redeem up to 35% of the
aggregate principal amount of Exchange Notes
originally issued at a redemption price equal
to 109.250% of the principal amount thereof,
plus accrued and unpaid interest and
Liquidated Damages, if any, thereon to the
redemption date, with the net cash proceeds of
one or more Public Equity Offerings (as
defined); PROVIDED that at least 65% of the
aggregate principal amount of Exchange Notes
originally issued remains outstanding
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immediately after the occurrence of any such
redemption. See "Description of
Notes--Optional Redemption."
CHANGE OF CONTROL........................... Upon the occurrence of a Change of Control,
each holder of Exchange Notes will have the
right to require the Issuers to repurchase all
or any part of such holder's Exchange 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. See "Description of Notes--
Repurchase at the Option of Holders--Change of
Control." There can be no assurance that, in
the event of a Change of Control, the Issuers
would have sufficient funds to purchase all
Exchange Notes tendered. See "Risk
Factors--Limitations on Ability to Make Change
of Control Payment."
SUBSIDIARY GUARANTORS....................... The Exchange Notes will be fully,
unconditionally, jointly and severally
guaranteed on a senior subordinated basis by
the Subsidiary Guarantors. The Subsidiary
Guarantors are Grove U.S. LLC, a Delaware
limited liability company, Grove Finance LLC,
a Delaware limited liability company, Crane
Acquisition Corp., a Delaware corporation,
Crane Holding Inc., a Delaware corporation,
and National Crane Corporation, a Delaware
corporation. Grove U.S. LLC and National Crane
Corporation are the Company's domestic
operating subsidiaries and together hold
substantially all of the Company's domestic
assets. The Company's foreign subsidiaries
have not issued, and are not expected to
issue, Subsidiary Guarantees. For more
information regarding the assets, liabilities,
revenues and cash flows of the Subsidiary
Guarantors and the Company's non-guarantor
subsidiaries, see Note 19 to the Notes to the
Combined Financial Statements of the Company
and Note 9 to the Notes to the Unaudited
Condensed Financial Statements of the Company.
SUBORDINATION............................... The Exchange Notes will be general unsecured
obligations of the Issuers, will rank
subordinate in right of payment to all Senior
Debt and will rank equal in right of payment
with any future senior subordinated
indebtedness of the Issuers and senior in
right of payment to all subordinated
Indebtedness. The Subsidiary Guarantees will
rank subordinate in right of payment to all
Senior Debt of each Subsidiary Guarantor,
including each Subsidiary Guarantor's
guarantee of indebtedness under the New Credit
Facility. The Exchange Notes and the
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16
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Subsidiary Guarantees will be effectively
subordinated to all indebtedness, including
trade payables, of the Company's subsidiaries
that are not Subsidiary Guarantors. As of June
27, 1998, the Notes were subordinated to
$238.8 million of Senior Debt and effectively
subordinated to $118.6 million of liabilities
of the Company's subsidiaries that are not
Subsidiary Guarantors. As of June 27, 1998,
the Company had no senior subordinated
indebtedness outstanding other than the Notes
and had no subordinated indebtedness
outstanding.
CERTAIN COVENANTS........................... The Indenture contains certain covenants that
will limit, among other things, the ability of
the Issuers to: (i) pay dividends, redeem
capital stock or make certain other restricted
payments or investments, (ii) incur additional
indebtedness or issue certain preferred equity
interests, (iii) merge, consolidate 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. See "Description of
Notes--Certain Covenants." The restrictions
placed on Holdings and its subsidiaries in the
indenture governing the Debentures (the
"Debenture Indenture") will be substantially
the same as those applicable to the Company
and its subsidiaries under the Indenture;
however, additional indebtedness of Holdings
(including that represented by the Debentures)
will have the effect of making the covenants
contained in the Debenture Indenture that are
applicable to the Company and its subsidiaries
more restrictive than the corresponding
covenants contained in the Indenture. However,
all these limitations and prohibitions are
subject to a number of qualifications and
exceptions. See "Description of Notes--Certain
Covenants."
ABSENCE OF PUBLIC MARKET.................... There is no public market for the Exchange
Notes, and the Exchange Notes will not be
listed on any securities exchange or quotation
system. The Company has been advised by the
Initial Purchasers that, following
consummation of the Exchange Offer, the
Initial Purchasers intend to make a market in
the Exchange Notes; 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
Exchange Notes may be adversely affected. See
"Risk Factors--Absence of Public Market for
Exchange Notes."
The Senior Subordinated Notes currently trade
in the PORTAL market. Following commencement
of the Exchange Offer but prior to its
consummation,
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the Senior Subordinated Notes may continue to
be traded in the PORTAL market. Following
consummation of the Exchange Offer, the
Exchange Notes will not be eligible for PORTAL
trading.
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For definitions of certain capitalized terms used herein, see "Description
of Notes."
HOLDERS OF SENIOR SUBORDINATED NOTES AND PROSPECTIVE PURCHASERS OF EXCHANGE
NOTES SHOULD CAREFULLY CONSIDER ALL OF THE INFORMATION SET FORTH IN THIS
PROSPECTUS AND, IN PARTICULAR, SHOULD EVALUATE THE SPECIFIC FACTORS SET FORTH
UNDER "RISK FACTORS" FOR RISKS ASSOCIATED WITH THE EXCHANGE OFFER AND AN
INVESTMENT IN THE EXCHANGE NOTES. SEE "RISK FACTORS."
------------------------
The principal executive offices of the Issuers, Grove US LLC and Grove
Finance are located at 1565 Buchanan Trail East, Shady Grove, Pennsylvania
17256. The telephone number of the Issuers, Grove US LLC and Grove Finance's
executive offices is (717) 597-8121. The principal executive offices of Crane
Acquisition Corp., Crane Holding Inc. and National Crane Corporation are located
at 11200 Number 148, Waverly, Nebraska 68462. The telephone number of the Crane
Acquisition Corp., Crane Holding Inc. and National Crane Corporation's executive
office is (402) 786-6300.
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SUMMARY HISTORICAL AND PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The following table presents summary: (i) historical financial data of the
Company for fiscal 1995, fiscal 1996, fiscal 1997, the nine months ended June
28, 1997, the seven months ended April 28, 1998 and the two months ended June
27, 1998; (ii) pro forma data of the Company for fiscal 1997 and the nine months
ended June 27, 1998; and (iii) historical consolidated balance sheet data of the
Company as of June 27, 1998. The Company's fiscal year ends on the Saturday
closest to the last day of September. The summary historical financial data for
the nine months ended June 28, 1997, the seven months ended April 28, 1998 and
the two months ended June 27, 1998 were derived from unaudited historical
financial statements. The pro forma financial data for fiscal 1997 and the nine
months ended June 27, 1998 give effect to the Transactions as if they had
occurred at the beginning of fiscal 1997. The pro forma financial data are
unaudited and do not purport to represent what the Company's results of
operations or financial position would have been if the Transactions had been
completed as of the date or for the periods presented, nor does such data
purport to represent the results of operations for any future period. The
summary financial data set forth below should be read in conjunction with "The
Transactions," "Selected Historical Financial Data," "Management's Discussion
and Analysis of Financial Condition and Results of Operations," and the
historical financial statements and pro forma financial data of the Company and
the related notes thereto included elsewhere in this Prospectus.
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PREDECESSOR
-------------------------------------------------------
NINE COMPANY
MONTHS SEVEN -----------
FISCAL YEAR ENDED ENDED MONTHS TWO MONTHS
------------------------------- JUNE 28, ENDED APRIL ENDED JUNE
1995 1996 1997 1997 28, 1998 27, 1998
--------- --------- --------- --------- ----------- -----------
STATEMENT OF OPERATIONS DATA(1):
<S> <C> <C> <C> <C> <C> <C>
Net sales................................................... $ 503,815 $ 794,209 $ 856,812 $ 633,845 $ 476,199 $ 154,780
Gross profit................................................ 126,589 185,079 203,273 146,086 100,467 23,636
Operating expenses.......................................... 88,216 134,459 135,382 100,575 78,412 24,326
Operating profit (loss) 38,373 50,620 67,891 45,511 22,055 (690)
Net income (loss)(2)........................................ 16,769 25,448 42,220 27,320 4,436 (9,421)
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents................................... $ 11,424
Total assets................................................ 949,679
Total debt.................................................. 463,800
Total holder's equity....................................... 156,745
OTHER DATA:
Adjusted EBITDA(3).......................................... $ 55,594 $ 78,704 $ 93,850 $ 64,954 $ 34,094 $ 12,868
Depreciation and amortization(4)............................ 13,765 17,313 17,985 13,560 10,934 2,749
Capital expenditures(5)..................................... 7,385 19,443 32,491 26,282 20,254 3,047
Sales backlog at end of period(6)........................... 208,152 185,237 229,513 242,529 218,669
Net cash provided by (used in) operating activities......... 6,953 9,826 11,995 (22,003) 96,464 (20,515)
Net cash used in investing activities....................... (46,574) (45,241) (68,782) (38,839) (33,004) (574,925)
Net cash provided by (used in) financing activities......... 50,601 25,752 54,349 59,214 (59,459) 606,952
<CAPTION>
NINE MONTHS
ENDED
JUNE 27,
1998
-----------
<S> <C> <C> <C> <C> <C> <C>
PRO FORMA DATA:
Pro forma Adjusted EBITDA(7)................................ $ 95,254 $ 48,446
Cash interest expense(8).................................... 38,339 28,822
Ratio of pro forma Adjusted EBITDA to cash interest
expense................................................... 2.5x
Ratio of total debt to pro forma Adjusted EBITDA(9)......... 4.9x
</TABLE>
19
<PAGE>
- ------------------------------
(1) The financial results of Krupp and Delta have been included since their
respective dates of acquisition on August 30, 1995 and November 30, 1995,
respectively.
(2) Includes losses by the Company's Sunderland U.K. facility of $14,085 and
$2,912 for the seven months ended April 28, 1998 and the two months ended
June 27, 1998, respectively. In August 1998, the Company announced plans to
close the Sunderland facility. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
(3) Adjusted EBITDA represents operating profit plus (i) depreciation and
amortization (exclusive of depreciation on equipment held for rent), (ii)
write-off of amount assigned to inventory in purchase accounting, (iii)
management fees paid to Hanson, (iv) restructuring charges, principally
related to redundancy costs of facility reorganizations, (v) business
process reengineering and training costs associated with installation of the
Company's new management information system ("MIS") and (vi) an adjustment
to eliminate the effect of units sold with residual value guarantees which
have been accounted for as operating leases and recognize the gross profit
on such units in the period in which such units were shipped. Adjusted
EBITDA is included herein to provide additional information with respect to
the ability of the Company to meet its future debt service, capital
expenditure and working capital requirements. In addition, the Company
believes that certain investors find EBITDA to be a useful tool for
measuring the ability of the Company to service its debt. Adjusted EBITDA is
not necessarily a measure of the Company's ability to fund its cash needs
nor is it intended to represent and should not be considered an alternative
to, or more meaningful than, net income and income from operations as an
indicator of the operating performance of the Company. Adjusted EBITDA
should not be considered by investors as an indicator of cash flows from
operating activities, investing activities and financing activities as
determined in accordance with generally accepted accounting principles.
Items excluded in determining Adjusted EBITDA, such as depreciation and
amortization, are significant components in understanding and assessing the
Company's financial performance. Adjusted EBITDA measures presented may not
be comparable to similarly titled measures presented by other issuers. For
purposes of the following presentation, the Company has compiled certain
unaudited financial information for the seven months ended April 28, 1998
(prior to the Acquisition) and has combined such information with the
unaudited financial information for the two months ended June 27, 1998
(period subsequent to the Acquisition) to provide unaudited financial
information with respect to the nine month period ended June 27, 1998. The
components of Adjusted EBITDA are set forth below for the periods indicated:
<TABLE>
<CAPTION>
PREDECESSOR
--------------------------------------------------------- COMPANY
SEVEN -----------
FISCAL YEAR ENDED NINE MONTHS MONTHS TWO MONTHS
------------------------------- ENDED JUNE ENDED APRIL ENDED JUNE
1995 1996 1997 28, 1997 28, 1998 27, 1998
--------- --------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Operating profit................................ $ 38,373 $ 50,620 $ 67,891 $ 45,511 $ 22,055 $ (690)
Depreciation and amortization................... 13,765 17,313 17,985 13,560 10,934 2,749
Write-off of amount assigned to inventory in
purchase accounting........................... -- -- -- -- -- 10,000
Management fees paid to Hanson.................. 3,390 5,655 2,176 1,632 162 --
Restructuring charges from facility
reorganizations............................... -- -- 1,960 1,960 -- --
Expenses associated with new MIS installation... -- 2,723 1,283 910 142 12
Impact of units sold accounted for as operating
leases........................................ 66 2,393 2,555 1,381 801 797
--------- --------- --------- ----------- ----------- -----------
Adjusted EBITDA................................. $ 55,594 $ 78,704 $ 93,850 $ 64,954 $ 34,094 $ 12,868
--------- --------- --------- ----------- ----------- -----------
--------- --------- --------- ----------- ----------- -----------
<CAPTION>
COMBINED
-----------
NINE MONTHS
ENDED JUNE
27, 1998
-----------
<S> <C>
Operating profit................................ $ 21,365
Depreciation and amortization................... 13,683
Write-off of amount assigned to inventory in
purchase accounting........................... 10,000
Management fees paid to Hanson.................. 162
Restructuring charges from facility
reorganizations............................... --
Expenses associated with new MIS installation... 154
Impact of units sold accounted for as operating
leases........................................ 1,598
-----------
Adjusted EBITDA................................. $ 46,962
-----------
-----------
</TABLE>
(4) Depreciation and amortization excludes depreciation on equipment held for
rent.
(5) Includes expenditures on the Company's new MIS of approximately $4,300 in
fiscal 1996, approximately $14,000 in fiscal 1997, approximately $9,084 for
the nine months ended June 28, 1997, approximately $9,322 for the seven
months ended April 28, 1998 and approximately $2,222 for the two months
ended June 27, 1998.
(6) Sales backlog includes firm orders for new equipment and replacement parts.
Data with respect to backlog is unaudited for all periods presented.
(7) As a result of the Acquisition, the Company has had to replace certain
administrative functions previously provided by Hanson. Management estimates
that the cost of replacing these functions will be less than $1,000 in the
first twelve months following the Acquisition ("Stand-alone Costs"). Since
the Acquisition, no further management fees have been paid to Hanson. Pro
forma Adjusted EBITDA represents Adjusted EBITDA further adjusted to take
account of (i) Stand-alone Costs and (ii) reductions in corporate overhead.
Management expects that reductions in corporate overhead will result from,
among other things, (i) the elimination of the senior management long-term
incentive plan and certain other perquisites, (ii) lower pension and
postretirement benefit expense due to purchase accounting adjustments and
(iii) the elimination of professional fees and other expenses associated
with the sale of the Company. The Company replaced the long-term incentive
plan with an option plan providing for the granting of options to purchase
membership interests to certain members of senior management at fair market
value. See "Unaudited Pro Forma Combined Financial Data."
20
<PAGE>
The adjustments to Adjusted EBITDA resulting in pro forma Adjusted EBITDA are
set forth below for the periods indicated:
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
SEPTEMBER 27, 1997 JUNE 27, 1998
------------------- -------------------
<S> <C> <C>
Adjusted EBITDA................................................... $ 93,850 $ 46,962
Reduction in corporate overhead, net.............................. 2,404 2,067
Stand-alone costs................................................. (1,000) (583)
------- -------
Pro forma Adjusted EBITDA......................................... $ 95,254 $ 48,446
------- -------
------- -------
</TABLE>
In addition to the cost savings reflected in the pro forma financial
statements, the Company believes it can achieve $35,000 to $50,000 of annual
cost savings by fiscal 2001. These additional cost savings, which depend
upon the Company's ability to implement certain improvements, relate to
manufacturing productivity improvements, better supplies procurement and
SG&A reductions. It is expected that cost savings during the four fiscal
years ending September 29, 2001 will be offset by non-recurring costs of up
to approximately $25,000 associated with the implementation of the
Operations Improvements Program. See "Special Note Regarding Forward Looking
Statements," "Risk Factors--Realization of Benefits of Operations
Improvement Program" and "Business--The Operations Improvement Program."
(8) Cash interest expense represents total interest expense less amortization of
deferred financing costs. Interest rates with respect to borrowings under
the New Credit Facility are variable. A 25-basis point increase in interest
rates on borrowings under the New Credit Facility would increase pro forma
interest expense by $500 annually.
(9) The ratio of total debt to pro forma Adjusted EBITDA was calculated based on
total debt as of June 27, 1998 of $463.8 million. See "Capitalization."
21
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS
TOGETHER WITH THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS, BEFORE MAKING
A DECISION TO EXCHANGE THE SENIOR SUBORDINATED NOTES. CERTAIN STATEMENTS IN THIS
PROSPECTUS (INCLUDING CERTAIN OF THE FOLLOWING FACTORS) CONSTITUTE
FORWARD-LOOKING STATEMENTS. SEE "SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS."
SUBSTANTIAL LEVERAGE; ABILITY TO SERVICE DEBT
The Issuers incurred substantial indebtedness in connection with the
Transactions and are highly leveraged. As of June 27, 1998, the Issuers had
total indebtedness of $463.8 million. On a pro forma basis after giving effect
to the Transactions, cash interest expense for fiscal 1997 would have been $37.9
million. Pro forma earnings before fixed charges were insufficient to cover
fixed charges by approximately $3.6 million for the nine months ended June 27,
1998. Pro forma earnings for the nine months ended June 27, 1998 included
non-cash charges of approximately $15.2 million. The Company may incur
additional indebtedness in the future, subject to limitations imposed by the
Indenture, the Indenture relating to the Debentures (the "Debenture Indenture"),
the New Credit Facility and certain other agreements. See "The Transactions--The
Acquisition," "Capitalization," "Description of Notes" and "Unaudited Pro Forma
Combined Financial Statements."
The Company's ability to make scheduled payments of principal of, or pay
interest on, or to refinance its indebtedness depends on its future performance,
which, to a certain extent, is subject to general economic, financial,
competitive, legislative, regulatory, and other factors beyond its control.
Furthermore, all or a portion of the principal payments at maturity on the Notes
may require refinancing. There can be no assurance that the Company's business
will generate sufficient cash flow from operations or that future borrowings
will be available in an amount sufficient to enable the Company to service its
indebtedness, including the Exchange Notes, or to make necessary capital
expenditures, or that any refinancing would be available on commercially
reasonable terms or at all. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital Resources."
The degree to which the Issuers are leveraged could have significant
consequences to the Issuers and the holders of the Notes, including the
following: (i) the Company's ability to obtain additional financing for working
capital, capital expenditures, acquisitions or general corporate purposes may be
impaired; (ii) a substantial portion of the Company's cash flow from operations
will be dedicated to the payment of interest on the Notes and its other existing
indebtedness (including indebtedness under the New Credit Facility), thereby
reducing the funds available to the Company for other purposes; (iii) certain
indebtedness under the New Credit Facility are at variable rates of interest,
which would cause the Company to be vulnerable to increases in interest rates;
(iv) the Company is substantially more leveraged than certain of its
competitors, which might place the Company at a competitive disadvantage; and
(v) the Company's substantial degree of leverage could make it more vulnerable
in the event of a downturn in general economic conditions or in its business.
See "Description of Certain Indebtedness--New Credit Facility" and "Description
of Notes--Repurchase at the Option of Holders--Change of Control."
SUBORDINATION
The Notes are subordinated in right of payment to all current and future
Senior Debt of the Issuers and the Subsidiary Guarantors. As of June 27, 1998
the Notes were subordinated to approximately $238.8 million of Senior Debt and
effectively subordinated to approximately $118.6 million of liabilities of the
Company's subsidiaries that are not Subsidiary Guarantors. See Note 19 to the
Notes to the Combined Financial Statements and Note 9 to the Notes to the
Unaudited Condensed Financial Statements. As of June 27, 1998, approximately
$99.8 million was available for additional borrowing under the New Credit
Facility. Upon any distribution to creditors of the Issuers in a liquidation or
dissolution of the Issuers or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Issuers or their
22
<PAGE>
property, the holders of Senior Debt will be entitled to be paid in full in cash
before any payment may be made with respect to the Notes, except holders of
Notes may receive Permitted Junior Securities (as defined). In addition, the
subordination provisions of the Indenture provide that payments with respect to
the Notes will be blocked in the event of a payment default on Senior Debt and
may be blocked for up to 179 days each year in the event of certain non-payment
defaults on Senior Debt. In the event of a bankruptcy, liquidation or
reorganization of the Issuers, holders of the Notes will participate ratably
with all holders of subordinated indebtedness of the Issuers that is deemed to
be of the same class as the Notes, and potentially with all other general
creditors of the Issuers, based upon the respective amounts owed to each holder
or creditor, in the remaining assets of the Issuers. Holders of indebtedness of,
and trade creditors of, subsidiaries of the Company that are not Subsidiary
Guarantors, would generally be entitled to payment of their claims from the
assets of the affected subsidiaries before such assets were made available for
distribution to creditors of the Company. The New Credit Facility and the
Indenture permit the incurrence of additional indebtedness by the Company and
its subsidiaries and the Indenture does not require those subsidiaries that do
not guarantee the New Credit Facility to guarantee the Notes. In the event of a
bankruptcy, liquidation or reorganization of a subsidiary that is not a
Subsidiary Guarantor, holders of any such subsidiary's indebtedness will have a
claim to the assets of the subsidiary that is prior to the Company's interest in
those assets. In any of the foregoing events, there can be no assurance that
there would be sufficient assets to pay amounts due on the Notes. As a result,
holders of Notes may receive less, ratably, than the holders of Senior Debt. See
"Description of Notes--Subordination."
The Company may be required to refinance all or a portion of the New Credit
Facility at or prior to its maturity, which is prior to the maturity of the
Notes. Potential measures to raise cash may include the sale of assets or
equity. However, the Company's ability to raise funds by selling assets is
restricted by the New Credit Facility, and its ability to effect equity
financings is dependent on results of operations and market conditions. In the
event that the Company is unable to refinance the New Credit Facility or raise
funds through asset sales, sales of equity or otherwise, the Issuers' ability to
pay principal of and interest on the Notes would be adversely affected.
If the Issuers were unable to repay borrowings under the New Credit
Facility, the lenders thereunder could proceed against their collateral. If the
indebtedness under the New Credit Facility were to be accelerated, there can be
no assurance that the assets of the Company and its subsidiaries would be
sufficient to repay in full such indebtedness and the other indebtedness of the
Issuers, including the Notes. See "Description of Certain Indebtedness--New
Credit Facility" and "Description of Notes-- Subordination."
REALIZATION OF BENEFITS OF OPERATIONS IMPROVEMENT PROGRAM
The Company estimates that significant cost savings can be achieved through
implementation of the Operations Improvement Program. However, the estimates of
potential cost savings are inherently uncertain, and the actual cost savings, if
any, could differ materially from those projected. In addition, a majority of
those cost savings are to be realized gradually over the next four years. There
can be no assurance that any or all of these cost savings will be achieved, or
specifically, that they can be achieved within four years. Further, it is
expected that cost savings during the four 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 the Operations Improvement Program, plus
consulting fees payable to George Group. See "Special Note Regarding Forward
Looking Statements" and "Business--Operations Improvement Program."
INDUSTRY CYCLICALITY
Historically, sales of products manufactured and sold by the Company 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,
23
<PAGE>
the Company generally has benefitted from increased demand for its products.
Conversely, during recessionary periods, the Company has been adversely affected
by reduced demand for such products. Downward cycles may result in reduction of
the Company's new unit sales and pricing, which may materially and adversely
impact the Company's results of operations. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Cyclicality."
COMPETITION
The markets in which the Company competes are highly competitive. To compete
successfully, the Company must remain competitive in areas of quality, value,
product line, ease of use, safety, comfort and customer service. See
"Business--Competition."
INTERNATIONAL RISKS
The Company's products are sold in over 50 countries around the world. In
fiscal 1997, the Company generated approximately 29% of its net sales in foreign
currencies, while the costs associated with those net sales were only partly
incurred in the same currencies. The major foreign currencies, among others, in
which the Company does business are the British pound sterling, German mark and
French franc. Because the Company's financial statements are denominated in U.S.
dollars, changes in exchange rates between the U.S. dollar and other currencies
have had and will have an impact on the reported results of the Company. To
date, this impact has not been material. In addition, changes in currency rates
can affect the competitiveness of the Company's products and could result in
management reconsidering prices and strategies to maintain market share.
Historically, the Company's currency risk had been coordinated with Hanson. The
Company is now responsible for its own cash management activities and expects to
use forward exchange contracts and options to manage its foreign currency risk.
Although revenues and costs of the Company may be partially hedged, currency
fluctuations will likely impact the Company's financial performance in the
future.
In addition, the Company's business strategy includes expanding its existing
business in selected international markets. International operations and
business expansion plans are subject to numerous additional risks, including the
impact of foreign government regulations, currency and interest rate
fluctuations, exchange controls, trade barriers, the effects of income and
withholding tax, governmental expropriation, political uncertainties and
differences in business practices. There can be no assurance that foreign
governments will not adopt regulations or take other actions that would have a
direct or indirect adverse impact on the business or market opportunities of the
Company. Furthermore, there can be no assurance that the political, cultural and
economic climate outside the United States will be favorable to the Company's
operations and business strategy.
ENVIRONMENTAL AND RELATED MATTERS
The Company generates hazardous and nonhazardous wastes in the normal course
of its manufacturing operations. As a result, the Company is subject to a wide
range of federal, state, local and foreign environmental laws and regulations,
including the Comprehensive Environmental Response, Compensation and Liability
Act ("CERCLA"), that (i) 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 (ii) impose
liability for the costs of cleaning up, and certain damages resulting from,
sites of past spills, disposals or other releases of hazardous substances.
Compliance with such laws and regulations has required, and will require,
expenditures by the Company on a continuing basis. The Company does not expect
that these expenditures will have a material adverse effect on its financial
condition or results of operations.
24
<PAGE>
CONCENTRATION OF OWNERSHIP
The members of the Investor Group beneficially own, through their holdings
of the membership interests of Grove Investors, all of the outstanding
membership interests of Holdings; Holdings in turn owns 100% of the outstanding
membership interests of the Company. As a result, the Investor Group has the
ability to control the Company's management, policies and financing decisions,
to elect a majority of the members of the Company's Management Committee and to
control the vote on all matters coming before the equity holders of the Company.
See "Security Ownership of Certain Beneficial Owners and Management."
RESTRICTIVE DEBT COVENANTS
The New Credit Facility, the Indenture, the Debenture Indenture and certain
other agreements impose significant operating and financial restrictions on the
Issuers. The New Credit Facility significantly limits or prohibits, among other
things, the ability of the Issuers and their restricted subsidiaries to incur
additional indebtedness, incur liens, pay dividends or make certain other
restricted payments or investments, consummate certain asset sales, enter into
certain transactions with affiliates, impose restrictions on the ability of a
subsidiary to pay dividends or make certain payments to the Issuers, 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 the Issuers. The
Indenture, the Debenture Indenture and certain other agreements contain similar
restrictions on the Issuers and their restricted subsidiaries. While the
restrictions placed on Holdings and its subsidiaries in the Debenture Indenture
are substantially the same as those applicable to the Company and its
subsidiaries under the Indenture, additional indebtedness of Holdings (including
that represented by the Debentures) will have the effect of making the covenants
contained in the Debenture Indenture that are applicable to the Company and its
subsidiaries more restrictive than the corresponding covenants contained in the
Indenture. See "Description of Notes--General." The New Credit Facility also
requires the Company to maintain balance sheet and fixed charge coverage and
leverage ratios. The ability of the Company to comply with these and other
provisions of the New Credit Facility and the Indenture may be affected by
events beyond the Company's control. These restrictions could limit the ability
of the Company to respond to market conditions or meet extraordinary capital
needs or otherwise restrict corporate activities. There can be no assurances
that such restrictions will not materially adversely affect the ability of the
Company to finance its future operations or capital needs. See "Description of
Certain Indebtedness--New Credit Facility" and "Description of Notes--Certain
Covenants."
LIMITATIONS ON ABILITY TO MAKE CHANGE OF CONTROL PAYMENT
The Indenture provides that, upon the occurrence of any Change of Control
(as defined therein), the Issuers will be required to make an offer (a "Change
of Control Offer") to repurchase all the Notes issued and then outstanding under
the Indenture at a price equal to 101% of the principal amount thereof plus
accrued and unpaid interest and Liquidated Damages, if any, to the date of
repurchase. Any Change of Control under the Indenture would constitute a default
under the New Credit Facility. Therefore, upon the occurrence of a Change of
Control, the lenders under the New Credit Facility would have the right to
accelerate the Company's obligations under the New Credit Facility. Upon such
event, such lenders would be entitled to receive payment of all outstanding
obligations under the New Credit Facility. See "Description of Certain
Indebtedness--New Credit Facility." If a Change of Control were to occur and
waivers under the New Credit Facility were not obtained, it is unlikely that the
Issuers would be able to repay all of their obligations under the New Credit
Facility and the Notes. Consequently, it is unlikely that the Issuers would have
sufficient funds available to repurchase the Notes pursuant to the Change of
Control Offer in the absence of a waiver under the New Credit Facility.
25
<PAGE>
RISK OF FRAUDULENT TRANSFER LIABILITY
If a court of competent jurisdiction in a suit by an unpaid creditor or a
representative of creditors (such as a trustee in bankruptcy or a
debtor-in-possession) were to find that either the Issuers did not receive fair
consideration or reasonably equivalent value for issuing the Senior Subordinated
Notes and, at the time of the incurrence of indebtedness represented by the
Senior Subordinated Notes, the Issuers were insolvent, were rendered insolvent
by reason of such incurrence, were engaged in a business or transaction for
which their remaining assets constituted unreasonably small capital, intended to
incur, or believed that they would incur, debts beyond their ability to pay as
such debts matured, or intended to hinder, delay or defraud their creditors,
such court could avoid such indebtedness, subordinate such indebtedness to other
existing and future indebtedness of the Issuers or take other action detrimental
to the holders of the Senior Subordinated Notes. The measure of insolvency for
purposes of the foregoing will vary depending upon the law of the relevant
jurisdiction. Generally, however, a company would be considered insolvent for
purposes of the foregoing if the sum of such company's debts is greater than all
the company's property at a fair valuation, or if the present fair saleable
value of the company's assets is less than the amount that will be required to
pay its probable liability on its existing debts as they become absolute and
matured.
In addition, the Subsidiary Guarantees may be subject to review under
relevant federal and state fraudulent conveyance and similar statutes in a
bankruptcy or reorganization case or a lawsuit by or on behalf of creditors of
the Subsidiary Guarantor, as the case may be. In such a case, the analysis set
forth above would generally apply, except that the Subsidiary Guarantees could
also be subject to the claim that, since the Subsidiary Guarantees were incurred
for the benefit of the Issuers (and only indirectly for the benefit of the
Subsidiary Guarantors), the obligations of the Subsidiary Guarantors thereunder
were incurred for less than reasonably equivalent value or fair consideration. A
court could avoid a Subsidiary Guarantor's obligation under its Subsidiary
Guarantee, subordinate a Subsidiary Guarantee to other indebtedness of a
Subsidiary Guarantor or take other action detrimental to the holders of the
Senior Subordinated Notes.
RELIANCE ON KEY MANAGEMENT
The success of the Company's business is dependent upon the management and
leadership skills of Salvatore J. Bonanno, the Company's Chairman and Chief
Executive Officer. Although the Company does have an employment agreement with
Mr. Bonanno, the loss of his services or those of other members of senior
management could have a material adverse effect on the Company.
PRODUCT RECALL
From time to time, the Company becomes aware of defects in product design
for existing products which require it to take steps to correct or retrofit, at
the Company's expense, previously sold products. There can be no assurance that
any such product recall will not adversely affect the Company's reputation or
result in a decline in sales of the Company's products, that action required to
be taken to correct these defects will not result in additional temporary
disruptions in the Company's business or that the costs of correcting any such
defects will not adversely affect the Company's results of operations.
ADVERSE CONSEQUENCES OF FAILURE TO EXCHANGE
Issuance of the Exchange Notes in exchange for Senior Subordinated Notes
pursuant to the Exchange Offer will be made only after a timely receipt by the
Exchange Agent of such Senior Subordinated Notes, a properly completed and duly
executed Letter of Transmittal and all other required documents. Therefore,
holders of Senior Subordinated Notes desiring to tender such Senior Subordinated
Notes in exchange for Exchange Notes should allow sufficient time to ensure
timely delivery. A tender will not be deemed to have been timely received if the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Senior Subordinated Notes is mailed prior to the Expiration
Date but is received by
26
<PAGE>
the Exchange Agent after the Expiration Date. All questions as to the validity,
form, eligibility (including time of receipt) and acceptance of Senior
Subordinated Notes tendered for exchange will be determined by the Issuers in
their sole discretion, which determination will be final and binding on all
parties. Neither the Issuers nor the Exchange Agent are under any duty to give
notification of defects or irregularities with respect to the tenders of Senior
Subordinated Notes for exchange. See "The Exchange Offer--Procedures for
Tendering Senior Subordinated Notes."
Holders of Senior Subordinated Notes who do not exchange their Senior
Subordinated Notes for Exchange Notes pursuant to the Exchange Offer, or whose
Senior Subordinated Notes are tendered but not accepted, will continue to be
subject to the restrictions on transfer of such Senior Subordinated Notes as set
forth in the legend thereon as a consequence of the issuance of the Senior
Subordinated Notes pursuant to exemptions from, or in transactions not subject
to, the registration requirements of the Securities Act and applicable state
securities laws. In general, the Senior Subordinated Notes may not be offered or
sold unless registered under the Securities Act and applicable state laws, or
pursuant to an exemption therefrom. The Issuers do not intend to register the
Senior Subordinated Notes under the Securities Act, other than in the limited
circumstances contemplated by the Registration Rights Agreement. In addition, to
the extent that Senior Subordinated Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
Senior Subordinated Notes could be adversely affected. See "The Exchange
Offer--Consequences of Failure to Exchange."
RECEIPT OF RESTRICTED SECURITIES UNDER CERTAIN CIRCUMSTANCES
Any holder of Senior Subordinated Notes who tenders in the Exchange Offer
for the purpose of participating in a distribution of the Exchange Notes may be
deemed to have received restricted securities and, if so, will be required to
comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. Failure of any holder
to comply with such registration and prospectus delivery requirements may
subject such holder to civil and criminal liability under the Securities Act.
See "The Exchange Offer--Resale of Exchange Notes."
ABSENCE OF A PUBLIC MARKET FOR EXCHANGE NOTES
The Exchange Notes will constitute a new issue of securities for which there
is no established trading market. The Issuers do not intend to list the Exchange
Notes on any national securities exchange or to seek the admission of the
Exchange Notes for quotation through the Nasdaq Stock Market, Inc. Although the
Initial Purchasers have advised the Company that they currently intend to make a
market in the Exchange Notes, they are not obligated to do so, and may
discontinue such market-making at any time without notice. In addition, such
market-making activity will be subject to the limits imposed by the Securities
Act and the Exchange Act. The Senior Subordinated Notes currently trade in the
PORTAL market. Following commencement of the Exchange Offer but prior to its
consummation, the Senior Subordinated Notes may continue to be traded in the
PORTAL market, but the Exchange Notes will not be eligible for PORTAL trading.
Accordingly, there can be no assurance as to the development or liquidity of any
market for the Exchange Notes (or any Senior Subordinated Notes not tendered),
the ability of the holders of the Exchange Notes to sell their Exchange Notes or
the price at which the holders would be able to sell their Exchange Notes.
Future trading prices of the Exchange Notes (or any Senior Subordinated Notes
not tendered) will depend on many factors, including, among other things,
prevailing interest rates, the Company's operating results and the market for
similar securities.
27
<PAGE>
THE TRANSACTIONS
THE ACQUISITION
On March 10, 1998, the Company entered into the Acquisition Agreement to
acquire, through certain of its subsidiaries, the mobile hydraulic crane, aerial
work platform and truck-mounted crane businesses of Hanson and certain of its
subsidiaries (the "Sellers"), for aggregate cash consideration of approximately
$583.0 million plus certain assumed liabilities, subject to a post-closing net
worth adjustment. In July 1998, the Company received $16.7 million from Hanson
in payment of the post closing net worth adjustment. The Company has until
October 1998 to object to the Closing Balance Sheet and the post closing net
worth adjustment determined thereby.
To effect the Acquisition, the Company purchased from Hanson and certain of
its subsidiaries substantially all of the assets of Kidde Industries, Inc., a
Delaware corporation ("Kidde"), and the capital stock of each of Crane Holding,
Inc, a Delaware corporation, Grove Europe Ltd., a limited company organized
under the laws of England and Wales, Deutsche Grove GmbH, a German limited
liability company, Grove France S.A., a SOCIETE ANONYME organized under the laws
of France, Delta Manlift S.A.S., a SOCIETE PAR ACTION SIMPLIFIEE organized under
the laws of France, and Grove Manlift Pty. Ltd., a limited liability company
incorporated under the laws of New South Wales, Australia. The Acquisition
closed on April 29, 1998. As a result of the Acquisition, the Company became the
parent company of the entities operating the Acquired Business. The Company is a
wholly owned subsidiary of Holdings, whose limited liability company interests
are owned indirectly by members of the Investor Group. Cash funding requirements
to consummate the Acquisition, including the payment of related fees and
expenses, were $604.5 million. Financing for the Acquisition was provided by:
(i) $209.5 million of borrowings under the New Credit Facility; (ii) $225.0
million of estimated gross proceeds from the offering of the Senior Subordinated
Notes; and (iii) the proceeds from the Equity Contribution. Holdings, the
Company and Grove Capital were formed in December 1997, December 1997 and March
1998, respectively, with nominal capital contributions and had no operations
prior to the Acquisition.
The structure of Grove Investors, Holdings, the Company and its subsidiaries
(excluding inactive and immaterial foreign subsidiaries) is set forth below:
[ART]
- ------------------------
* Indicates subsidiaries that provide guarantees of the Issuers' obligations
under the Notes. Grove U.S. LLC and National Crane Corporation are the
Company's domestic operating subsidiaries and together hold substantially
all of the Company's domestic assets. The Company's foreign subsidiaries
have not issued, and are not expected to issue, Subsidiary Guarantees.
(1) The Debentures were offered by Holdings and Grove Holdings Capital, Inc., a
wholly-owned subsidiary of Holdings.
(2) The Senior Subordinated Notes were offered by the Company and Grove Capital,
a wholly-owned subsidiary of the Company.
28
<PAGE>
NEW CREDIT FACILITY
On the Closing Date, the Issuers entered into the New Credit Facility with a
syndicate of banks, as lenders, and Chase Bank of Texas, National Association,
as administrative agent ("Chase"), Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ"), as documentation agent, and BankBoston, N.A.
("BankBoston"), as syndication agent. The New Credit Facility consists of a
$200.0 million term loan facility (the "Term Loan Facility") and a $125.0
million revolving credit facility (the "Revolving Credit Facility"). At Closing,
the Company borrowed $200.0 million under the Term Loan Facility and $9.5
million under the Revolving Credit Facility. The undrawn portion of the
Revolving Credit Facility will be available for working capital, acquisitions
and general corporate purposes. See "Description of Certain Indebtedness--New
Credit Facility."
HOLDINGS EQUITY ISSUANCE
The Equity Contribution by Holdings to the Company was partially funded by
the purchase of membership interests of Holdings by Grove Investors. See
"Security Ownership of Certain Beneficial Owners and Management."
HOLDINGS DISCOUNT DEBENTURES OFFERING
The issuance by Holdings of the Debentures resulted in gross proceeds to
Holdings of approximately $50.0 million. The Equity Contribution was funded with
the net proceeds from the offering of the Debentures together with the proceeds
of the Holdings Equity Issuance.
THE INVESTOR GROUP
Members of the Investor Group beneficially own, through their holdings of
membership interests of Grove Investors, all of the outstanding membership
interests of Holdings. See "Security Ownership of Certain Beneficial Owners and
Management." Keystone, formerly Robert M. Bass Group, Inc., is the principal
investment entity of Robert M. Bass. Since 1987, Keystone and associated
entities have directly and indirectly sponsored over 30 leveraged acquisitions
valued in the aggregate at more than $6.0 billion. These acquisitions have
included, among others, American Savings Bank, F.A., Bell & Howell Company,
CapStar Hotel Company, Ivex Packaging Corporation, National Reinsurance
Corporation, Reliant Building Products, Inc., Specialty Foods Corporation, Stage
Stores, Inc., and Williams Scotsman, Inc. Strategic Partners is a Delaware
limited partnership formed to invest primarily in public and private debt and
equity securities. George Group is an acquisition and management consulting firm
that applies its strategic and operations management expertise to manufacturing
businesses. George Group has established an exclusive relationship with Keystone
to pursue leveraged acquisitions of companies in which George Group's
operational expertise may significantly reduce costs and increase revenue, cash
flow and return on invested capital. As part of their on-going relationship, in
May 1997, Keystone, Strategic Partners, certain other parties and George Group
completed the acquisition of Reliant Building Products, Inc.
29
<PAGE>
USE OF PROCEEDS
The Issuers will not receive any cash proceeds or incur any additional
indebtedness as a result of the issuance of the Exchange Notes pursuant to the
Exchange Offer.
The gross proceeds of $225.0 million from the sale of the Senior
Subordinated Notes, together with borrowings totaling $209.5 million under the
New Credit Facility, proceeds of $120.0 million from the Holdings Equity
Issuance and gross proceeds of $50.0 million from the Debentures, were used by
the Company: (i) to fund the cash purchase price payable in connection with the
Acquisition and (ii) to pay fees and expenses in connection with the
Transactions. See "The Transactions."
The estimated sources and uses of funds used by the Company to effect the
Transactions are set forth below:
<TABLE>
<CAPTION>
AMOUNT
(IN MILLIONS)
-------------
<S> <C>
SOURCES
New Credit Facility:
Revolving Credit Facility.......................................................................... $ 9.5
Term Loan Facility................................................................................. 200.0
Senior Subordinated Notes............................................................................ 225.0
Holdings 11 5/8% Senior Discount Debentures due 2009................................................. 50.0
Holdings Equity Issuance............................................................................. 120.0
------
Total............................................................................................ $ 604.5
------
------
USES
Acquisition of the Acquired Business................................................................. $ 583.0
Fees and expenses.................................................................................... 21.5
------
Total............................................................................................ $ 604.5
------
------
</TABLE>
30
<PAGE>
CAPITALIZATION
(DOLLARS IN THOUSANDS)
The following table sets forth the cash and cash equivalents and
capitalization of the Company at June 27, 1998. This table should be read in
conjunction with "Use of Proceeds," "Selected Historical Financial Data,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the historical and pro forma combined financial statements and
the related notes thereto appearing elsewhere in this Prospectus.
<TABLE>
<CAPTION>
AS OF JUNE
27, 1998
-------------
<S> <C>
Cash and cash equivalents.......................................................................... $ 11,424
-------------
-------------
Total debt:
New Credit Facility(1):
Revolving Credit Facility........................................................................ $ 25,200
Term Loan Facility............................................................................... 200,000
Senior Subordinated Notes.......................................................................... 225,000
Other debt(2)...................................................................................... 13,600
-------------
Total debt..................................................................................... 463,800
Total holder's equity.............................................................................. 156,745
-------------
Total capitalization........................................................................... $ 620,545
-------------
-------------
</TABLE>
- ------------------------------
(1) As part of the Transactions, the Issuers entered into the New Credit
Facility, which consists of a $125,000 Revolving Credit Facility and a
$200,000 Term Loan Facility. The Revolving Credit Facility enables the
Issuers to obtain revolving credit loans and the issuance of letters of
credit. As of June 27, 1998, $22 of letters of credit were outstanding under
the Revolving Credit Facility and $99.8 million of the Revolving Credit
Facility was available for future liquidity and capital needs. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Description of Certain
Indebtedness--New Credit Facility."
(2) Represents short-term borrowings by Deutsche Grove GmbH, which are secured
by an equal amount of trade receivables.
31
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
(DOLLARS IN THOUSANDS)
The following table presents selected historical financial data of the
Company (i) as of and for each of the fiscal years ended October 2, 1993,
October 1, 1994, September 30, 1995, September 28, 1996 and September 27, 1997
and (ii) as of June 27, 1998 and for the nine months ended June 28, 1997, the
seven months ended April 28, 1998 and the two months ended June 27, 1998. The
selected historical financial data for fiscal 1993 and fiscal 1994 and as of
September 25, 1993, September 24, 1994 and September 30, 1995, respectively, the
nine months ended June 28, 1997, the seven months ended April 28, 1998 and the
two months ended June 27, 1998 were derived from unaudited historical financial
statements. The selected historical financial data for fiscal 1995 were derived
from historical financial statements as of and for such periods audited by
PricewaterhouseCoopers LLP and included elsewhere in this Prospectus. The
selected historical financial data for fiscal 1996 and 1997 were derived from
historical financial statements for such periods audited by Ernst & Young LLP
and included elsewhere in this Prospectus. Information for interim periods
includes all adjustments (consisting of normal recurring adjustments) considered
necessary in the opinion of management for a fair presentation of financial
position and results of operations of the Company. Results for interim periods
are not indicative of results for a full fiscal year. The selected historical
financial data set forth below should be read in conjunction with "The
Transactions," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the historical financial statements and the related
notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PREDECESSOR
-----------------------------------------------------------------------------
NINE
MONTHS SEVEN
FISCAL YEAR(1) ENDED MONTHS
----------------------------------------------------- JUNE 28, ENDED APRIL
1993 1994 1995 1996 1997 1997 28, 1998
--------- --------- --------- --------- --------- --------- -----------
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales.................................. $ 387,373 $ 393,526 $ 503,815 $ 794,209 $ 856,812 $ 633,845 $ 476,199
Gross profit............................... 95,225 87,991 126,589 185,079 203,273 146,086 100,467
Operating expenses......................... 86,077 80,752 88,216 134,459 135,382 100,575 78,412
Operating profit (loss).................... 9,148 7,239 38,373 50,620 67,891 45,511 22,055
Net income (loss)(2)....................... (5,358) (4,942) 16,769 25,448 42,220 27,320 4,436
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents.................. $ 5,458 $ 7,135 $ 18,685 $ 8,184 $ 5,024
Total assets............................... 497,646 509,189 652,000 730,158 881,496
Total debt................................. -- -- -- 7,443 7,265
Total invested capital..................... 416,368 399,762 467,306 502,554 628,492
OTHER DATA:
Depreciation and amortization(3)........... $ 13,093 $ 13,258 $ 13,765 $ 17,313 $ 17,985 $ 13,560 $ 10,934
Capital expenditures(4).................... 4,672 6,042 7,385 19,443 32,491 26,282 20,254
Sales backlog at end of period............. 63,084 109,350 208,152 185,237 229,513 242,529
Ratio of earnings to fixed charges(5)...... 2.7x 2.0x 12.4x 12.2x 22.4x 16.5x 10.1x
<CAPTION>
COMPANY
-----------
TWO MONTHS
ENDED JUNE
27, 1998
-----------
STATEMENT OF OPERATIONS DATA:
<S> <C>
Net sales.................................. $ 154,780
Gross profit............................... 23,636
Operating expenses......................... 24,326
Operating profit (loss).................... (690)
Net income (loss)(2)....................... (9,421)
BALANCE SHEET DATA (AT PERIOD END):
Cash and cash equivalents.................. $ 11,424
Total assets............................... 949,679
Total debt................................. 463,800
Total invested capital..................... 156,745
OTHER DATA:
Depreciation and amortization(3)........... $ 2,749
Capital expenditures(4).................... 3,047
Sales backlog at end of period............. 218,669
Ratio of earnings to fixed charges(5)...... --
</TABLE>
- ------------------------------
(1) The results of Krupp and Delta have been included since their dates of
acquisition on August 30, 1995 and November 30, 1995, respectively.
(2) Includes losses by the Company's Sunderland U.K. facility of $14,085 and
$2,912 for the seven months ended April 28, 1998 and the two months ended
June 27, 1998, respectively. In August 1998, the Company announced plans to
close the Sunderland facility. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
(3) Depreciation and amortization excludes depreciation on equipment held for
rent.
(4) Includes expenditures on the Company's new MIS of approximately $4,300 in
fiscal 1996, approximately $14,000 in fiscal 1997, approximately $9,084 for
the nine months ended June 28, 1997, approximately $9,322 for the seven
months ended April 28, 1998 and approximately $2,222 for the two months
ended June 27, 1998.
(5) Earnings used in computing the ratio of earnings to fixed charges consists
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 of rental expense). Earnings before
fixed charges were insufficient to cover fixed charges by $7,670 for the two
months ended June 27, 1998. Earnings for the two months ended June 27, 1998
included non-cash charges of $13,050.
32
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the more
detailed information and the historical combined financial statements and pro
forma combined financial data included elsewhere in this Prospectus.
OVERVIEW
The Company generates most of its net sales from the manufacture and sale of
new mobile hydraulic cranes, aerial work platforms and truck-mounted cranes. The
Company also generates a portion of its net sales from after-market sales
(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.
Over the three fiscal years ended September 27, 1997, the Company
experienced significant growth and profitability as a result of a strong North
American economy and growing market demand for aerial work platforms. The
Company also benefited from the acquisition of the mobile hydraulic crane
business of Krupp in August 1995 and the aerial work platform business of Delta
in November 1995. The Company's net sales for the nine months ended June 27,
1998 were $631.0 million, a decrease of 0.4% from the same period in fiscal
1997. The following is a summary of net sales for the periods indicated (dollars
in millions):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
FISCAL YEAR -----------
------------------------------- JUNE 28,
1995 1996 1997 1997
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
New equipment sold(1)..................................................... $ 378.8 $ 632.4 $ 670.1 $ 499.5
After-Market.............................................................. 81.5 120.6 125.8 90.0
Other(2).................................................................. 43.5 41.2 60.9(3) 44.3
--------- --------- --------- -----------
Net sales................................................................. $ 503.8 $ 794.2 $ 856.8 $ 633.8
--------- --------- --------- -----------
--------- --------- --------- -----------
<CAPTION>
JUNE 27,
1998
-----------
<S> <C>
New equipment sold(1)..................................................... $ 492.8
After-Market.............................................................. 89.5
Other(2).................................................................. 48.7
-----------
Net sales................................................................. $ 631.0
-----------
-----------
</TABLE>
- ------------------------
(1) Excludes specialty cranes and equipment sold to the U.S. government.
(2) Includes specialty cranes and equipment sold to the U.S. government and
revenues from unit sales accounted for as operating leases.
(3) Includes revenues resulting from a non-recurring contract for crane
refurbishment with the Ministry of Defence of the United Kingdom.
Consistent with industry practice, particularly in Germany, certain of the
Company'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. See Note 1 of Notes to
Combined Financial Statements.
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, as a result of which (i) Holdings is not itself subject to income tax,
(ii) the taxable income of the mobile hydraulic crane, aerial work platform and
truck-mounted crane businesses in the United States will be allocated to the
equity holders of Holdings, and (iii) such equity holders will be responsible
for income taxes on such taxable income. The Company
33
<PAGE>
intends to make distributions in the form of dividends to equity holders of
Holdings to enable them to meet their tax obligations with respect to income
allocated to them by the Company. See "Description of Notes--Certain
Covenants--Restricted Payments."
RESULTS OF OPERATIONS
For financial reporting purposes, the Acquisition creates a new basis of
accounting and, accordingly, the Company is required to report results prior to
the Acquisition separate from results subsequent to the Acquisition. For
purposes of the following discussion of the Company's results of operations, the
Company has compiled certain unaudited financial information for the nine months
ended June 27, 1998 by combining results of operations for the seven months
ended April 28, 1998 (prior to the Acquisition) with those for the two months
ended June 27, 1998 (subsequent to the Acquisition). As described above, the
Company's capital structure changed and, for income tax reporting purposes, the
Company is a limited liability company. Consequently, information with respect
to interest, income taxes, and net income for the nine month periods ended June
27, 1998 is not considered meaningful and, accordingly, comparison of such items
with results for the nine month periods ended June 28, 1997 are not made herein.
Set forth below is certain information regarding the Company's results of
operations for fiscal 1995, fiscal 1996 and fiscal 1997 and the nine month
periods ended June 28, 1997 and June 27, 1998 (dollars in thousands).
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
---------------------------------- ----------------------------
1995 1996 1997 JUNE 28, 1997 JUNE 27, 1998
---------- ---------- ---------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Net Sales.................................................... $ 503,815 $ 794,209 $ 856,812 $ 633,845 $ 630,979
Cost of goods sold........................................... 377,226 609,130 653,539 487,759 496,876
Write-off of amount assigned to inventory in excess of
historical costs resulting from purchase accounting
adjustments................................................ -- -- -- -- 10,000
---------- ---------- ---------- ------------- -------------
Gross profit............................................. 126,589 185,079 203,273 146,086 124,103
Selling, engineering, general and administrative expenses.... 84,826 128,804 124,152 92,142 96,197
Management fees paid to Hanson............................... 3,390 5,655 2,176 1,632 162
Amortization of goodwill..................................... -- -- 9,054 6,801 6,379
---------- ---------- ---------- ------------- -------------
Operating profit......................................... $ 38,373 $ 50,620 $ 67,891 $ 45,511 $ 21,365
---------- ---------- ---------- ------------- -------------
---------- ---------- ---------- ------------- -------------
</TABLE>
NINE MONTHS ENDED JUNE 27, 1998 (THE "FISCAL 1998 NINE MONTHS") COMPARED TO THE
NINE MONTHS ENDED JUNE 28, 1997 (THE "FISCAL 1997 NINE MONTHS").
NET SALES. Net sales for the Company decreased $2.8 million, or 0.4%, from
$633.8 million for the fiscal 1997 nine months to $631.0 million for the fiscal
1998 nine months.
Net sales of mobile hydraulic cranes declined from the fiscal 1997 nine
months to the fiscal 1998 nine months 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 the Company's Sunderland, U.K.
facility. While net sales to North American customers remained strong, net sales
in Europe and Asia declined. Net sales in Europe were also lower as a result of
an increase in the percentage of units sold with residual value guarantees
accounted for as operating leases.
Net sales of aerial work platforms increased modestly from the fiscal 1997
nine months to the fiscal 1998 nine months. 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 the fiscal
1997 nine months to the fiscal 1998 nine months. Net sales increased as the
result of increased production capacity as well as significantly increased
demand for higher priced models.
34
<PAGE>
After-market sales, including parts and services, decreased slightly from
the fiscal 1997 nine months to the fiscal 1998 nine months. This decrease was
due primarily to a modest decrease in parts sales partially offset by an
increase in used equipment sales.
Other sales increased 9.9% 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 $22.0 million, or 15.0%, from $146.1
million in the fiscal 1997 nine months to $124.1 million in the fiscal 1998 nine
months. The decline in gross profit was primarily attributable to a $10.2
million decline in gross profit at the Company's Sunderland, U.K. 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 U.K. 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.
In addition, gross profit was adversely impacted by the $10.0 million write-off
of amounts assigned to inventory in excess of historical costs.
SELLING, ENGINEERING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling,
engineering, general and administrative expenses increased $4.1 million, or
4.4%, from $92.1 million in the fiscal 1997 nine months to $96.2 million in the
fiscal 1998 nine months. As a percentage of net sales, selling, engineering,
general and administrative expenses were 14.5% in the fiscal 1997 nine months
and 15.2% in the fiscal 1998 nine months. The expense growth occurred broadly
across the Company as the result of the distraction to operations created by the
Acquisition. Included in selling, engineering, general and administrative
expenses for the 1998 nine months are approximately $0.9 million of George Group
expenses and $1.4 million of transition costs related to the sale of the
Company. Included in selling, engineering, general and administrative expenses
for the 1997 nine months is approximately $2.0 million in restructuring charges
related to the U.K. 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 the Company's 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.
35
<PAGE>
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 $4.4 million, or
3.4%, from $128.8 million in fiscal 1996 to $133.2 million in fiscal 1997.
However, as a percentage of net sales, selling, engineering, general and
administrative expenses declined from 16.2% in fiscal 1996 to 15.5% in fiscal
1997 as a result of higher sales that absorbed fixed costs. The dollar increase
was principally related to higher selling and advertising costs to support the
sales growth of the Company's 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, in fiscal 1996 and
fiscal 1997, general and administrative expenses included $2.7 million and $1.3
million, respectively, due to process reengineering and systems assessment costs
associated with the installation of the Company's management information system.
See "--Information Systems and the Impact of Year 2000."
MANAGEMENT FEES. Results of operations for fiscal 1996 and fiscal 1997
included management fees paid to Hanson of $5.7 million and $2.2 million,
respectively. Management believes the Company's results of operations in all
material respects reflect all operating costs on a stand alone basis. Management
estimates that costs to replace services provided by Hanson prior to the
Acquisition together with other stand alone costs will be less than $1.0 million
for the twelve months following the Acquisition. Such costs, which are generally
less than the management fees charged by Hanson on an annual basis, relate to
additional treasury, human resource and income tax requirements. Management
believes such 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 (i)
interest income of $0.6 million in fiscal 1996 and $2.1 million in fiscal 1997,
which was generated primarily from notes receivable under the Company's special
North American dealer financing program and (ii) interest expense of $3.3
million in fiscal 1996 and $2.0 million in fiscal 1997, substantially all of
which was paid to Hanson 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% and 38.3% for fiscal 1996 and
fiscal 1997, respectively. 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 certain of Hanson PLC's various businesses.
The Company has established valuation allowances for net operating losses
generated by its 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.
FISCAL 1996 COMPARED TO FISCAL 1995
NET SALES. Net sales increased $290.4 million, or 57.6%, from $503.8
million in fiscal 1995 to $794.2 million in fiscal 1996.
Net sales of mobile hydraulic cranes increased significantly from fiscal
1995 to fiscal 1996, primarily as a result of higher unit sales and an improved
product mix. Approximately 60% of the net sales increase resulted from sales to
North American customers, with the majority of the balance resulting from sales
to European customers. Unit sales increased as a result of strong demand created
by improved economic conditions for the construction industry in North America
as well as from the acquisition and integration of the Krupp mobile hydraulic
crane business (acquired in August 1995).
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Net sales of aerial work platforms increased significantly from fiscal 1995
to fiscal 1996. Unit sales increased as a result of continued growth of the
industry, resulting from efficiency considerations and government-mandated
safety standards for people working in elevated environments, as well as from
the acquisition of Delta in November 1995. Net sales to North American customers
grew by 33.5% in fiscal 1996 compared to fiscal 1995. Net sales to European
customers, excluding the impact of the Delta acquisition, grew significantly in
fiscal 1996.
Net sales of truck-mounted cranes increased from fiscal 1995 to fiscal 1996.
Unit sales increased as a result of growth in the Company's telescoping product
line. Product sales prices and mix improved slightly.
After-market sales, including parts and services, increased significantly
from fiscal 1995 to fiscal 1996. This increase was related primarily to the
acquisition of Krupp and higher volume from an increase of service part sales
resulting from the higher installed base and relatively high rental fleet
utilization.
GROSS PROFIT. Gross profit increased $58.5 million, or 46.2%, from $126.6
million in fiscal 1995 to $185.1 million in fiscal 1996. The increase in gross
profit was primarily due to increased sales in aerial work platforms and
truck-mounted cranes, as well as due to the acquisition of Krupp. As a
percentage of sales, gross margins declined from 25.1% in fiscal 1995 to 23.3%
in fiscal 1996. The decrease was attributable principally to lower profit
margins for the acquired Krupp all-terrain line of mobile hydraulic cranes
relative to the Company's other product lines and lower gross margins from
after-market sales related to Krupp's all-terrain products.
SELLING, ENGINEERING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling,
engineering, general and administrative expenses increased $44.0 million, or
51.9%, from $84.8 million in fiscal 1995 to $128.8 million in fiscal 1996.
However, as a percentage of net sales, selling, engineering, general and
administrative expenses declined from 16.8% in fiscal 1995 to 16.2% in fiscal
1996 as the result of higher sales that absorbed fixed costs. The dollar
increase was primarily related to the acquisitions of Krupp and Delta and higher
selling, general and administrative expenses to support the higher volume of
business. Included in selling, engineering, general and administrative expenses
are research and development expenses, which increased $5.7 million, or 61.3%,
from $9.3 million in fiscal 1995 to $15.0 million in fiscal 1996 as the result
of costs associated with accelerated development of new products and the Krupp
acquisition. In addition, fiscal 1996 general and administrative expenses
included $2.7 million of process reengineering and systems assessment costs
associated with the installation of the Company's new management information
system.
MANAGEMENT FEES. Results of operations for fiscal 1995 and fiscal 1996
included management fees and other charges paid to Hanson of $3.4 million and
$5.7 million, respectively.
NET INTEREST EXPENSE/INCOME. Interest expenses in fiscal 1995 and fiscal
1996 were $2.6 million and $3.3 million, respectively, substantially all of
which was paid to Hanson with respect to intercompany receivables.
INCOME TAXES. Income tax expense, virtually all of which was U.S.-based,
increased from $19.0 million, or 16.7%, in fiscal 1995 to $22.2 million in
fiscal 1996. The overall effective tax rates were 53.1% and 46.6% for fiscal
1995 and fiscal 1996, respectively. The decline in tax rate was caused
principally by the utilization of Deutsche Grove loss carryforwards. The Company
has established valuation allowances for net operating losses generated by its
foreign subsidiaries.
NET INCOME. Net income increased $8.6 million, or 51.8%, from $16.8 million
in fiscal 1995 to $25.4 million in fiscal 1996. The increase related primarily
to increased sales and operating profits created by increased demand for mobile
hydraulic cranes and aerial work platforms as well as the acquisitions of Krupp
and Delta.
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GEOGRAPHIC COMPARISONS DURING THE THREE YEARS ENDED SEPTEMBER 27, 1997.
Net sales to unaffiliated customers by the Company's domestic subsidaries
contributed in excess of 70.0% of the Company's sales in fiscal 1997 and
virtually all of its net income. Net sales to unaffiliated customers by the
Company's domestic subsidaries increased by $43.6 million or 7.8% in fiscal 1997
as compared to fiscal 1996, which represented approximately 70.0% of the
Company's overall sales increase for fiscal 1997. The increase in net sales by
the Company's domestic subsidiaries was caused by strong sales of aerial work
platforms and truck-mounted cranes. Net sales of mobile hydralic cranes by the
Company's domestic subsidiaries were virtually unchanged in fiscal 1997 as
compared to fiscal 1996. Net sales to unaffiliated customers by the Company's
foreign subsidiaries increased by $16.7 million or 7.2% in fiscal 1997 as
compared to fiscal 1996. The increase in net sales by the Company's foreign
subsidiaries was primarily the result of continued growth of aerial work
platform sales in Europe. Recurring operating losses by the Company's
manufacturing facility in Sunderland, U.K. of approximately $2.5 million in
fiscal 1997 offset virtually all of the operating earnings of the Company's
German and French subsidaries during the same period.
Net sales to unaffiliated customers by the Company's domestic subsidiaries
contributed in excess of 70.0% of the Company's sales in fiscal 1996 and all of
its net income. Net sales to unaffiliated customers by the Company's domestic
subsidaries increased by $165.2 million or 41.6% in fiscal 1996 as compared to
fiscal 1995, which represented approximately 56.0% of the Company's overall
sales increase for 1997. The increase in net sales by the Company's domestic
subsidiaries was primarily the result of continued growth of aerial work
platform sales. Net sales to unaffiliated customers by the Company's foreign
subsidiaries increased by approximately $125.2 million or 117.3% in fiscal 1996
as compared to fiscal 1995. The acquistion of Krupp contributed significant
sales growth to both domestic and European operations. Operating losses by the
Company's manufacturing facility in Sunderland, U.K. of approximately $3.8
million offset all of the operating earnings of the Company's German and French
subsidiaries. The acquisitions of Delta and Krupp improved the operating results
of the Company's German and French subsidiaries.
Net sales to unaffiliated customers by the Company's domestic subsidiaries
contributed in excess of 75.0% of the Company's sales in fiscal 1995 and all of
its net income. The domestic net income was offset to some extent by losses from
the foreign subsidiaries including operating losses by the Company's
manufacturing facility in Sunderland, U.K. of approximately $2.4 million.
LIQUIDITY AND CAPITAL RESOURCES
The Company's business is working capital-intensive, requiring significant
investments in receivables and inventory. In addition, the Company requires
capital for replacement and improvements of existing plant, equipment and
processes.
During the two months ended June 27, 1998, the Company's operating
activities used approximately $20.5 million in operating cash flow. This amount
resulted primarily from $21.5 million of new notes receivable from customers
under the Company's special North American dealer financing program. In July
1998, the Company entered into an agreement with a third party financial
institution to sell up to $50.0 million of notes generated from sales under such
program. The third party financial institution purchases the notes at face value
on a 90.0% non-recourse basis. In July 1998, the Company sold approximately
$21.0 million of notes receivable to the third party. The sale of the notes
qualifies as a sale under generally accepted accounting principles and,
accordingly, upon sale, the notes receivable will be removed from the Company's
balance sheet. See Note 4 of Notes to Unaudited Condensed Financial Statements.
During the two months ended June 27, 1998 the Company used approximately
$574.9 million of cash flow for investing activities of which $563.5 million was
related to the Acquisition, $3.0 million was for capital expenditures and $8.3
million was for investment in equipment held for rent. The cash flows used in
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operating and investing activities were funded by the issuance of long-term debt
of $450.2 and an equity contribution from Holdings of $168.2 million. See "The
Transactions" and "Use of Proceeds."
During the seven months ended April 28, 1998 (the "fiscal 1998 seven
months"), the Company's operating activities provided $96.4 million in operating
cash flow. Cash flow from operating activities increased due to a sale to a
third party financing company of $52.7 million of notes receivable from
customers under the Company's special North American dealer financing program.
Until the first quarter of fiscal 1998, Hanson financed all of the notes
receivable arising under the special North American dealer financing program.
During the fiscal 1998 seven months, the Company used (i) $27.9 million in
investing activities, consisting of $20.2 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 certain sales which are accounted for as operating
leases), and (ii) $59.5 million in financing activities, principally consisting
of amounts paid to Hanson.
Cash used in investing activities in fiscal 1997 was related primarily to
capital expenditures of $32.5 million and costs of equipment held for rent of
$37.9 million. Such equipment related to sales that are accounted for as
operating leases as described under the caption, "Overview," above. Costs are
recognized over the term of the residual guarantees, but the Company collects
the invoiced price of equipment on normal commercial terms after shipment.
Capital expenditures in fiscal 1997 consisted of $14.0 million related to
the installation of the new management information systems, $8.3 million in
discretionary spending (including $2.5 million to expand aerial work platform
capacity) and $10.2 million for the replacement of existing plant and equipment.
The Company estimates that capital expenditures for the fiscal year ending
September 26, 1998 will be approximately $31.7 million of which $18.7 million
will be related to the completion of the installation of the new management
information systems in its North American and European operations. See
"--Management Information Systems and the Impact of Year 2000."
The Company plans to close its Sunderland, U.K. manufacturing facility
because 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 $17.0 million, consisting
of approximately $10.0 million of employee severance and $7.0 million of plant
shut-down costs, all of which are expected to be expended in the next twelve
months.
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.
In connection with the Acquisition, the Company entered into a seven-year,
$125 million Revolving Credit Facility, which will allow the Issuers, 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 by the
Issuers in the Eurocurrency markets of British pounds sterling, German marks and
French francs and certain other currencies. Management believes that the
Company's income from operations and available borrowings under the Revolving
Credit Facility will be sufficient to meet its debt service obligations, capital
expenditure requirements and distributions in the form of dividends to equity
holders of Holdings to enable them to
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meet their tax obligations with respect to income allocated to them by the
Company for at least the twelve months following the Acquisition. See
"Description of Certain Indebtedness--New Credit Facility."
BACKLOG
The Company's backlog consists of firm orders for new equipment and
replacement parts. Total backlog as of August 1, 1998, was approximately $231.4
million compared to total backlog as of July 26, 1997 of $247.3 million.
Substantially all of the Company's backlog orders are expected to be filled
within one year, although there can be no assurance that all such backlog orders
will be filled within that time period. Parts orders are generally filled on an
as-ordered basis.
CYCLICALITY
Historically, sales of products manufactured and sold by the Company have
been subject to cyclical variations based, among other things, on general
economic conditions and, in particular, on conditions in the construction
industry. During periods of expansion in construction activity, the Company
generally has benefited from increased demand for construction equipment.
Conversely, during recessionary times, the Company has been adversely affected
by reduced demand for such products. Downward cycles result in reductions in the
Company's new unit sales and prices, which adversely impact the Company's
results of operations. Management believes there are several factors that may
mitigate the effects of future cyclical trends in the Company's business. These
factors include the continued growth of its aerial work platform business, which
has a lower correlation to the results of the construction industry, the global
diversification of its sales network and the decrease in the fixed costs
elements of the Company's overall business. After-market sales for parts and
services accounted for 12% of the Company's net sales and 26% of gross profits
in fiscal 1997. Such 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 the Company. See "Risk Factors--Industry Cyclicality."
During fiscal 1996, fiscal 1997 and the nine months ended June 27, 1998 net
sales of new units to Asian customers represented 5.6%, 5.1% and 2.7% of the
Company's net sales, respectively. The Asian economic crisis has had a limited
impact on the Company's results of operations. Although the Company is not
dependent on sales to Asian customers, management cannot reasonably predict what
impact, if any, the crisis will have on its competitors or on markets outside of
Asia where the Company sells its products.
MANAGEMENT INFORMATION SYSTEMS AND THE IMPACT OF YEAR 2000
Certain computer programs and microprocessors use two digits rather than
four to define the applicable year. Any of the Company's 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 (the "Year-2000
Issue") could cause a disruption of operations, including, among other things, a
temporary inability to utilize manufacturing equipment, send invoices or engage
in similar normal business activities.
In fiscal 1995, the Company conducted a Year-2000 assessment of all
management information systems used at its crane and aerial work platform
facilities in the United States, United Kingdom and Germany. Upon completing
this review in October 1995, the Company launched a campaign designed to replace
all existing software and hardware that was not Year-2000 compliant (the
"Year-2000 Project"). In addition to replacing all business application software
and hardware, the Year-2000 Project was designed to provide improved business
processes and procedures.
The Company determined that the Year-2000 Project would not need to be
implemented at its National Crane facility in Waverly, Nebraska. Instead,
National Crane implemented upgrades to all of its existing hardware and software
and converted all of its data. Management believes the completion of this
project has rendered all of National Crane's major computer systems Year-2000
compliant.
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The Year-2000 Project is expected to be completed at the end of first
quarter of fiscal 1999 and will have a total cost of approximately $38.0
million, of which approximately $35.0 million had been expended as of June 27,
1998. If the Year-2000 Project is delayed, the Company will be required to
shorten its planning horizons and replace certain computerized functions, such
as inventory and work-in-process tracking, billing and order processing, with
manual systems. Any such delay could result in part shortages and slow the
delivery of products to the Company's customers. Management believes that all of
the Company's major computer systems will be rendered Year-2000 compliant. If
such modifications and conversions are not completed in a timely manner, the
Year-2000 Issue could have a material impact on the operations of the Company.
See "Business--Management Information Systems."
The Company has also polled the manufacturers of its computerized numerical
control ("CNC") manufacturing/production equipment. The Company has been
informed by such manufacturers that there are no Year-2000 Issues with respect
to the Company's CNC equipment at its Shady Grove, Pennsylvania and Waverly,
Nebraska facilities. The Company is also conducting an internal review of its
CNC equipment to confirm its Year-2000 readiness. Although management believes
that the Year-2000 Issue will not have a material adverse impact on its CNC
equipment, there can be no assurance that it will not.
In addition, the Company has initiated communications with suppliers and
customers to determine the extent to which the Company may be vulnerable to such
parties' failure to remediate their own Year-2000 Issues. There can be no
guarantee that the systems of other companies on which the Company's systems
rely will be timely converted, or that a failure to convert by another company,
or a conversion that is incompatible with the Company's systems, would not have
material adverse effect on the Company. However, based on its current
assessment, management believes that the Year-2000 Issue will not have a
material adverse impact on the Company's future results of operations or
financial conditions, although there can be no assurance that such will be the
case.
DERIVATIVE FINANCIAL INSTRUMENTS, INFLATION AND INTEREST RATE RISK
Movement in foreign currency exchange rates creates risk to the Company's
operations to the extent of sales made and costs incurred in foreign currencies.
The major foreign currencies, among others, in which the Company does business
are the British pound sterling, German mark and French franc. In addition,
changes in currency exchange rates can affect the competitiveness of the
Company's products and could result in management reconsidering pricing
strategies to maintain market share. In fiscal 1997, approximately 29% of the
Company's net sales were transacted in foreign currencies. During the past three
fiscal years, the impact of currency fluctuations has not had significant impact
on the Company's results of operations.
Historically, the Company's currency risk had been coordinated with Hanson.
The Company is now responsible for its own cash management activities and
expects to use forward exchange contracts and options to manage its foreign
currency risk. As of June 27, 1998, the Company was obligated under forward
exchange contracts of approximately $3.7 million primarily for the purchase and
sale of U.S. dollars, French francs, German marks and British pounds sterling.
The Company historically has been able to adjust prices to offset increased
inflation, and, therefore, inflation has not had, nor is it expected to have, a
significant effect on the operations of the Company.
Interest rates on borrowings under the Company's Term Loan Facility and
Revolving Credit Facility are based, at the option of the Company, on the
Alternative Base Rate or the relevant Eurocurrency Rate (each as defined in the
Credit Agreement) plus an Applicable Margin, as defined in the Credit Agreement.
As of June 27, 1998, borrowings under the Term Loan Facility and Revolving
Credit Facility bore interest at LIBOR plus 250 and 225 basis points,
respectively. In July 1998, the Company entered into an interest rate agreement
to collar the interest rate on approximately $100.0 million of the Company's
floating rate borrowings for the three years ended September 2001. The Company
may enter into additional interest
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rate caps, swaps or collars to hedge its interest rate risk. See "Description of
Certain Indebtedness--New Credit Facility."
ENVIRONMENTAL MATTERS
The Company generates hazardous and non-hazardous waste in the normal course
of its manufacturing operations. As a result, the Company is subject to a wide
range of Federal, state, local and foreign environmental laws, including CERCLA,
that (i) 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 (ii) impose liability for
the costs of cleaning up, and certain damages resulting from sites of past
spills, disposals or other releases of hazardous substances. Compliance with
such laws has required, and will continue to require, expenditures by the
Company on a continuing basis. The Company does not expect that these
expenditures will have a material adverse effect on its financial condition or
results of operations.
The Company is currently developing a remediation program with respect to an
area that has been contaminated by petroleum hydrocarbons at its Shady Grove,
Pennsylvania facility. The Company believes that this contamination is confined
to the Shady Grove site and has not migrated to any adjacent properties. The
Company also believes that the costs of remediating this contamination will not
have a material adverse effect on its financial condition or results of
operations.
CHANGE IN ACCOUNTING STANDARDS
In 1997, the Financial Accounting Standards Board 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. Management will adopt the provisions of
this Standard in fiscal year 1999.
In 1998, the American Institute of Certified Public Accountants issued
Statement No. 98-1, "Accounting for the Costs of Computer Software Developed or
Obtained For Internal Use." This Statement requires capitalization of: (i)
external direct costs of materials and services incurred in developing or
obtaining internal-use computer software, (ii) payroll and payroll-related costs
for employees who are directly associated with and who devote time to the
internal-use computer software project and (iii) interest costs incurred in
developing computer software for internal use. Costs that are considered to be
related to research and development activities would be expensed as incurred.
Similarly, training and maintenance costs would be expensed, and allocations to
amounts capitalized of general and administrative or overhead costs would not be
permitted. The proposal is effective for fiscal years beginning after December
15, 1998. Application would be prospective. Earlier application of this
Statement of the beginning of the fiscal year is encouraged for years for which
annual financial statements have not been issued. The Company is not expected to
early-adopt this Statement. The adoption of this Statement is not expected to
have a material effect on the financial position or results of the Company.
In 1998, the Financial Accounting Standards Board 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. Adoption of this statement will be required for the
fiscal year beginning October 1999.
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THE EXCHANGE OFFER
GENERAL
The Issuers hereby offer, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal (which
together constitute the Exchange Offer), to exchange up to $225.0 million
aggregate principal amount of Exchange Notes for a like aggregate principal
amount of Senior Subordinated Notes properly tendered on or prior to the
Expiration Date and not withdrawn as permitted pursuant to the procedures
described below. The Exchange Offer is being made with respect to any and all of
the Senior Subordinated Notes.
As of the date of this Prospectus, $225.0 million aggregate principal amount
of the Senior Subordinated Notes is outstanding. This Prospectus, together with
the Letter of Transmittal, is first being sent on or about , 1998, to
all holders of Senior Subordinated Notes known to the Company. The Issuers'
obligations to accept Senior Subordinated Notes for exchange pursuant to the
Exchange Offer is subject to certain conditions set forth under "--Certain
Conditions to the Exchange Offer" below. The Issuers currently expect that each
of the conditions will be satisfied and that no waivers will be necessary.
PURPOSE OF THE EXCHANGE OFFER
The Senior Subordinated Notes were issued on April 29, 1998 in a transaction
exempt from the registration requirements of the Securities Act. Accordingly,
the Senior Subordinated Notes may not be reoffered, resold, or otherwise
transferred unless so registered or unless an applicable exemption from the
registration and prospectus delivery requirements of the Securities Act is
available.
In connection with the issuance and sale of the Senior Subordinated Notes,
the Issuers and the Subsidiary Guarantors entered into the Registration Rights
Agreement, which requires the Issuers to file with the Commission a registration
statement relating to the Exchange Offer not later than June 29, 1998 (60 days
after the date of issuance of the Senior Subordinated Notes) and to use their
reasonable best efforts to cause the registration statement relating to the
Exchange Offer to become effective under the Securities Act not later than
October 29, 1998 (180 days after the date of issuance of the Senior Subordinated
Notes) and the Exchange Offer to be consummated not later than 30 business days
after the date of the effectiveness of the Registration Statement. In addition,
under certain circumstances the Issuers are required to use their reasonable
best efforts to file a shelf registration statement with respect to resales of
the Notes not later than 60 days after such filing obligation arises and cause
such registration statement to become effective not later than 120 days after
the date on which the Issuers become obligated to file such shelf registration
statement). A copy of the Registration Rights Agreement has been filed as an
exhibit to the Registration Statement.
The Exchange Offer is being made by the Issuers to satisfy their obligations
with respect to the Registration Rights Agreement. The term "holder," with
respect to the Exchange Offer, means any person in whose name Senior
Subordinated Notes are known to the Company or any other person who has obtained
a properly completed bond power from the registered holder, or any person whose
Senior Subordinated Notes are held of record by The Depository Trust Company.
Other than pursuant to the Registration Rights Agreement, the Issuers are not
required to file any registration statement to register any outstanding Senior
Subordinated Notes. Holders of Senior Subordinated Notes that do not tender
their Senior Subordinated Notes or whose Senior Subordinated Notes are tendered
but not accepted would have to rely on exemptions to registration requirements
under the securities laws, including the Securities Act, if they wish to sell
their Senior Subordinated Notes.
TERMS OF THE EXCHANGE
The Issuers hereby offer to exchange, subject to the conditions set forth
herein and in the Letter of Transmittal accompanying this Prospectus, $1,000 in
principal amount of Exchange Notes for each $1,000
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in principal amount of the Senior Subordinated Notes. The terms of the Exchange
Notes are the same in all material respects (including principal amount,
interest rate, maturity and ranking) as the terms of the Senior Subordinated
Notes for which they may be exchanged pursuant to the Exchange Offer, except
that the Exchange Notes have been registered under the Securities Act, and
therefore will not be subject to certain restrictions on transfer applicable to
the Senior Subordinated Notes and will not be entitled to registration rights
except under certain limited circumstances. The Exchange Notes will evidence the
same indebtedness as the Senior Subordinated Notes and will be entitled to the
benefits of the Indenture. See "Description of Notes."
The Exchange Offer is not conditioned upon any minimum aggregate amount of
Senior Subordinated Notes being tendered for exchange.
The Issuers have not requested, and do not intend to request, an
interpretation by the Staff with respect to whether the Exchange Notes issued
pursuant to the Exchange Offer in exchange for the Senior Subordinated Notes 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 set forth in a
series of no-action letters issued to third parties, the Issuers believe that
Exchange Notes issued pursuant to the Exchange Offer in exchange for Senior
Subordinated Notes may be offered for sale, resold and otherwise transferred by
any holder of such Exchange Notes (other than any holder which is (i) an
Affiliate of the Company or (ii) a broker-dealer that purchases Notes from the
Issuers to resell pursuant to Rule 144A or any other available exemption)
without compliance with the registration and prospectus delivery provisions of
the Securities Act, provided that such Exchange Notes are acquired in the
ordinary course of such holder's business and such holder has no arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes and neither such holder nor any other such person is
participating in or intends to participate in a distribution of such Exchange
Notes. Since the Commission has not considered the Exchange Offer in the context
of a no-action letter, there can be no assurance that Staff would make a similar
determination with respect to the Exchange Offer. Any holder who is an Affiliate
of the Company or who tenders in the Exchange Offer for the purpose of
participating in a distribution of the Exchange Notes may be deemed to have
received restricted securities and cannot rely on such interpretation by the
Staff and must comply with the registration and prospectus delivery requirements
of the Securities Act in accordance with any resale transaction. Each holder
must acknowledge, among other things, that it is not participating in, and does
not intend to participate in, a distribution of Exchange Notes. Each
broker-dealer that receives Exchange Notes for its own account in exchange for
Senior Subordinated Notes, where such Senior Subordinated Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any such resale of the Exchange Notes. See "Plan of Distribution."
Interest on the Exchange Notes will accrue from the last Interest Payment
Date on which interest was paid on the Senior Subordinated Notes so surrendered
or, if no interest has been paid on such Senior Subordinated Notes, from April
29, 1998.
Tendering holders of the Senior Subordinated Notes shall not be required to
pay brokerage commissions or fees or, subject to the instructions in the Letter
of Transmittal, transfer taxes with respect to the exchange of the Senior
Subordinated Notes pursuant to the Exchange Offer.
EXPIRATION DATE; EXTENSION; TERMINATION; AMENDMENT
The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1998, unless the Issuers have extended the period of time for which
the Exchange Offer is open (such date, as it may be extended, is referred to
herein as the "Expiration Date"). The Expiration Date will be at least 20
business days after the commencement of the Exchange Offer in accordance with
Rule 14e-1(a) under the Exchange Act. The Issuers expressly reserve the right,
at any time or from time to time, in their sole
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discretion, to extend the period of time during which the Exchange offer is
open, and thereby delay acceptance for exchange of any Senior Subordinated
Notes, 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 such
extension, all Senior Subordinated Notes previously tendered will remain subject
to the Exchange Offer unless properly withdrawn.
The Issuers expressly reserve the right to (i) terminate or amend the
Exchange Offer and not to accept for exchange any Senior Subordinated Notes not
theretofore accepted for exchange upon the occurrence of any of the events
specified below under "--Certain Conditions to the Exchange Offer" which have
not been waived by the Issuers and (ii) amend the terms of the Exchange Offer in
any manner which, in their good faith judgment, is advantageous to the holders
of the Senior Subordinated Notes, whether before or after any tender of the
Senior Subordinated Notes. If any such termination or amendment occurs, the
Issuers will notify the Exchange Agent and will either issue a press release or
give oral or written notice to the holders of the Senior Subordinated Notes as
promptly as practicable.
For purposes of the Exchange Offer, the term "business day" has the meaning
set forth in Rule 14d-1(c)(6) under the Exchange Act.
PROCEDURES FOR TENDERING SENIOR SUBORDINATED NOTES
The tender to the Issuers of Senior Subordinated Notes by a holder thereof
as set forth below and the acceptance thereof by the Issuers will constitute a
binding agreement between the tendering holder and the Issuers upon the terms
and subject to the conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal.
A holder of Senior Subordinated Notes may tender the same by (i) properly
completing and signing the Letter of Transmittal or a facsimile thereof (all
references in this Prospectus to the Letter of Transmittal shall be deemed to
include a facsimile thereof) and delivering the same, together with the
certificate or certificates representing the Senior Subordinated Notes being
tendered and any required signature guarantees and any other documents required
by the Letter of Transmittal, to the Exchange Agent at its address set forth
below on or prior to the Expiration Date (or complying with the procedure for
book-entry transfer described below) or (ii) complying with the guaranteed
delivery procedures described below. A tender will not be deemed to have been
timely received if the tendering holder's properly completed and duly signed
Letter of Transmittal accompanied by the Senior Subordinated Notes is mailed
prior to the Expiration Date but is received by the Exchange Agent after the
Expiration Date.
Any beneficial owner whose Senior Subordinated Notes are registered in the
name of a broker, dealer, commercial bank, trust company or other nominee and
who wishes to tender should contact such registered holder promptly and instruct
such registered holder to tender on such beneficial owner's behalf. If such
beneficial owner wishes to tender on such beneficial owner's behalf, such
beneficial owner must, prior to completing and executing the Letter of
Transmittal and delivering the Senior Subordinated Notes, either make
appropriate arrangements to register ownership of the Senior Subordinated Notes
in such beneficial owner's name or obtain a properly completed bond power from
the registered holder. The transfer of registered ownership may take
considerable time.
THE METHOD OF DELIVERY OF SENIOR SUBORDINATED NOTES, LETTERS OF TRANSMITTAL
AND ALL OF THE REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. IF
SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL PROPERLY
INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO INSURE TIMELY DELIVERY. NO SENIOR SUBORDINATED NOTES OR
LETTERS OF TRANSMITTAL SHOULD BE SENT TO THE ISSUERS.
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If tendered Senior Subordinated Notes are registered in the name of the
signer of the Letter of Transmittal and the Exchange Notes to be issued in
exchange therefor are to be issued (and any untendered Senior Subordinated Notes
are to be reissued) in the name of the registered holder (which term, for the
purposes described herein, shall include any participant in The Depository Trust
Company ("DTC" or the "Book-Entry Transfer Facility") whose name appears on a
security listing as a owner of Senior Subordinated Notes), the signature of such
signer need not be guaranteed. In any other case, the tendered Senior
Subordinated Notes must be endorsed or accompanied by written instruments of
transfer, in form satisfactory to the Issuers and duly executed by the
registered holder, and the signature on the endorsement or instrument of
transfer must be guaranteed by a bank, broker, dealer, credit union, savings
association, clearing agency or other institution (each an "Eligible
Institution") that is a member of a registered signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Exchange Act. If the
Exchange Notes and/or Senior Subordinated Notes not exchanged are to be
delivered to an address other than that of the registered holder appearing on
the note registrar for the Senior Subordinated Notes, the signature in the
Letter of Transmittal must be guaranteed by an Eligible Institution.
The Issuers understand that the Exchange Agent has confirmed with DTC that
any financial institution that is a participant in DTC's system may utilize
DTC's Automated Tender Offer Program ("ATOP") to tender Senior Subordinated
Notes. The Issuers further understand that the Exchange Agent will request,
within two business days after the date the Exchange Offer commences, that DTC
establish an account with respect to the Senior Subordinated Notes for the
purpose of facilitating the Exchange Offer, and any participant may make
book-entry delivery of Senior Subordinated Notes by causing DTC to transfer such
Senior Subordinated Notes into the Exchange Agent's account in accordance with
DTC's ATOP procedures for transfer. However, the exchange of the Senior
Subordinated Notes so tendered will only be made after timely confirmation (a
"Book-Entry Confirmation") of such book-entry transfer and timely receipt by the
Exchange Agent of an Agent's Message (as defined in the next sentence), 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 DTC and received by the Exchange Agent and forming part of a
Book-Entry Confirmation, which states that DTC has received an express
acknowledgment from a participant tendering Senior Subordinated Notes which are
the subject of such Book-Entry Confirmation and that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that the Issuers may enforce such agreement against such participant.
If a holder desires to tender Senior Subordinated Notes in the Exchange
Offer and time will not permit a letter of Transmittal or Senior Subordinated
Notes to reach the Exchange Agent before the Expiration Date or the procedure
for book-entry transfer cannot be completed on a timely basis, a tender may be
effected if the Exchange Agent has received at its address set forth below on or
prior to the Expiration Date, a letter, telegram or facsimile transmission
(receipt confirmed by telephone and an original delivered by guaranteed
overnight courier) from an Eligible Institution setting forth the name and
address of the tendering holder, the names in which the Senior Subordinated
Notes are registered and, if possible, the certificate number of the Senior
Subordinated Notes to be tendered, and stating that the tender is being made
thereby and guaranteeing that within three business days after the Expiration
Date, the Senior Subordinated Notes in proper form for transfer (or a
confirmation of book-entry transfer of each Senior Subordinated Notes into the
Exchange Agent's account at the Book-Entry Transfer Facility), will be delivered
by such Eligible Institution together with a properly completed and duly
executed Letter of Transmittal (and any other required documents). Unless Senior
Subordinated Notes being tendered by the above-described method are deposited
with the Exchange Agent within the time period set forth above (accompanied or
preceded by a properly completed Letter of Transmittal and any other required
documents), the Issuers may, at their option, reject the tender. Copies of the
notice of guaranteed delivery ("Notice of Guaranteed Delivery") which may be
used by Eligible Institutions for the purposes described in this paragraph are
available from the Exchange Agent.
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A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Senior Subordinated Notes (or a confirmation of book-entry
transfer of such Senior Subordinated Notes into the Exchange Agent's account at
the Book-Entry Transfer Facility) is received by the Exchange Agent, or (ii) a
Notice of Guaranteed Delivery or letter, telegram or facsimile transmission to
similar effect (as provided above) from an Eligible Institution is received by
the Exchange Agent. Issuances of Exchange Notes in exchange for Senior
Subordinated Notes tendered pursuant to a Notice of Guaranteed Delivery or
letter, telegram or facsimile transmission to similar effect (as provided above)
by an Eligible Institution will be made only against deposit of the Letter of
Transmittal (and any other required documents) and the tendered Senior
Subordinated Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Senior Subordinated Notes tendered for exchange will
be determined by the Issuers in their sole discretion, which determination shall
be final and binding on all parties. The Issuers reserve the absolute right to
reject any and all tenders of any particular Senior Subordinated Note not
properly tendered or not to accept any particular Senior Subordinated Notes
which acceptance might, in the judgment of the Issuers or their counsel, be
unlawful. The Issuers also reserve the absolute right to waive any defects or
irregularities or conditions of the Exchange Offer as to any particular Senior
Subordinated Notes either before or after the Expiration Date (including the
right to waive the ineligibility of any holder who seeks to tender Senior
Subordinated Notes in the Exchange Offer). The interpretation of the terms and
conditions of the Exchange Offer (including the Letter of Transmittal and the
instructions thereto) by the Issuers shall be final and binding on all parties.
Unless waived, any defects or irregularities in connection with tenders of
Senior Subordinated Notes for exchange must be cured within such reasonable
period of time as the Issuers shall determine. Neither the Issuers, the Exchange
Agent nor any other person shall be under any duty to give notification of any
defect or irregularity with respect to any tender of Senior Subordinated Notes
for exchange, nor shall any of them incur any liability for failure to give such
notification.
If the Letter of Transmittal is signed by a person or persons other than the
registered holder or holders of Senior Subordinated Notes, such Senior
Subordinated Notes 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 Senior Subordinated Notes.
If the Letter of Transmittal or any Senior Subordinated Notes 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, such persons should so indicate when signing, and,
unless waived by the Issuers, proper evidence satisfactory to the Issuers of
their authority to so act must be submitted.
By tendering, each holder will represent to the Issuers, among other things,
that (A) the Exchange Notes acquired pursuant to the Exchange Offer are being
acquired in the ordinary course of business of the person receiving such
Exchange Notes, whether or not such person is the holder; (B) it is not an
Affiliate of the Issuers or any Subsidiary Guarantor; (C) it is not
participating in, and does not intend to participate in, and has no arrangement
or understanding with any Person to participate in, a distribution of the Senior
Subordinated Notes or the Exchange Notes; and (D) if such holder is a broker or
dealer registered under the Exchange Act, it will receive the Exchange Notes for
its own account in exchange for the Senior Subordinated Notes that were acquired
as a result of market-making activities or other trading activities.
Each broker-dealer referred to in clause (D) of the preceding sentence must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. See "Plan of Distribution."
TERMS AND CONDITIONS OF THE LETTER OF TRANSMITTAL
The Letter of Transmittal contains, among other things, the following terms
and conditions, which are part of the Exchange Offer.
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The party tendering Senior Subordinated Notes for exchange (the
"Transferor") exchanges, assigns and transfers the Senior Subordinated Notes to
the Issuers and irrevocably constitutes and appoints the Exchange Agent as the
Transferor's agent and attorney-in-fact to cause the Senior Subordinated Notes
to be assigned, transferred and exchanged. The Transferor represents and
warrants that it has full power and authority to tender, exchange assign and
transfer the Senior Subordinated Notes and to acquire Exchange Notes issuable
upon the exchange of such tendered Senior Subordinated Notes, and that, when the
same are accepted for exchange, the Issuers will acquire good and unencumbered
title to the tendered Senior Subordinated Notes, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim. The
Transferor also warrants that it will, upon request, execute and deliver any
additional documents deemed by the Exchange Agent or the Issuers to be necessary
or desirable to complete the exchange, assignment and transfer of tendered
Senior Subordinated Notes or transfer ownership of such Senior Subordinated
Notes on the account books maintained by a Book-Entry Transfer Facility. The
Transferor further agrees that acceptance of any tendered Senior Subordinated
Notes by the Issuers and the issuance of Exchange Notes in exchange therefor
shall constitute performance in full by the Issuers of certain of its
obligations under the Registration Rights Agreement. All authority conferred by
the Transferor will survive the death or incapacity of the Transferor and every
obligation of the Transferor shall be binding upon the heirs, legal
representatives, successors, assigns, executors and administrators of such
Transferor. The Transferor will also make the representations described above
under "Procedures for Tendering Senior Subordinated Notes."
WITHDRAWAL RIGHTS
Tenders of Senior Subordinated Notes may be withdrawn at any time prior to
5:00 p.m., New York City time, on the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone) or letter must
be received by the Exchange Agent at the address set forth herein prior to the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having tendered the Senior Subordinated Notes to be withdrawn (the
"Depositor"), (ii) identify the Senior Subordinated Notes to be withdrawn
(including the certificate number or numbers and principal amount of such Senior
Subordinated Notes), (iii) specify the principal amount of Senior Subordinated
Notes to be withdrawn, (iv) include a statement that such holder is withdrawing
his election to have such Senior Subordinated Notes exchanged, (v) be signed by
the holder in the same manner as the original signature on the Letter of
Transmittal by which such Senior Subordinated Notes 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 such Senior Subordinated Notes into the name
of the person withdrawing the tender and (vi) specify the name in which any such
Senior Subordinated Notes are to be registered, if different from that of the
Depositor. The Exchange Agent will return the properly withdrawn Senior
Subordinated Notes promptly following receipt of notice of withdrawal. If Senior
Subordinated Notes 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 Book-Entry Transfer Facility to be credited with the withdrawn
Senior Subordinated Notes or otherwise comply with the Book-Entry Transfer
Facility's procedure. All questions as to the validity of notices of
withdrawals, including time of receipt, will be determined by the Issuers in
their sole discretion and such determination will be final and binding on all
parties.
Any Senior Subordinated Notes so withdrawn will be deemed not to have been
validly tendered for exchange for purposes of the Exchange Offer. Any Senior
Subordinated Notes which have been tendered for exchange but which are not
exchanged for any reason will be returned to the holder thereof without cost to
such holder (or, in the case of Senior Subordinated Notes tendered by book-entry
transfer into the Exchange Agent's account at the Book-Entry Transfer Facility
pursuant to the book-entry transfer procedures described above, such Senior
Subordinated Notes will be credited to an account with such
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Book-Entry Transfer Facility specified by the holder) as soon as practicable
after withdrawal, rejection of tender or termination of the Exchange Offer.
Properly withdrawn Senior Subordinated Notes may be retendered by following one
of the procedures described under "--Procedures for Tendering Senior
Subordinated Notes" above at any time on or prior to the Expiration Date.
ACCEPTANCE OF SENIOR SUBORDINATED NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Issuers will accept, promptly after the Exchange Date, all Senior
Subordinated Notes properly tendered and will issue the Exchange Notes promptly
after such acceptance. See "--Certain Conditions to the Exchange Offer" below.
For purposes of the Exchange Offer, the Issuers shall be deemed to have accepted
properly tendered Senior Subordinated Notes for exchange when, as and if the
Issuers have given oral or written notice thereof to the Exchange Agent.
For each Senior Subordinated Note accepted for exchange, the holder of such
Senior Subordinated Note will receive an Exchange Note having a principal amount
equal to that of the surrendered Senior Subordinated Note.
In all cases, issuance of Exchange Notes for Senior Subordinated Notes that
are accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of certificates for such Senior
Subordinated Notes or a timely book-entry confirmation of such Senior
Subordinated Notes into the Exchange Agent's account at the Book-Entry Transfer
Facility, a properly completed and duly executed Letter of Transmittal and all
other required documents. If any tendered Senior Subordinated Notes are not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Senior Subordinated Notes are submitted for a greater principal
amount than the holder desires to exchange, such unaccepted or non-exchanged
Senior Subordinated Notes will be returned without expense to the tendering
holder thereof (or, in the case of Senior Subordinated Notes tendered by
book-entry transfer into the Exchange Agent's account the Book-Entry Transfer
Facility pursuant to the book-entry transfer procedures described above, such
non-exchanged Senior Subordinated Notes will be credited to an account
maintained with such Book-Entry Transfer Facility) as promptly as practicable
after the Exchange Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, or any extension
of the Exchange Offer, the Issuers shall not be required to accept for exchange,
or to issue Exchange Notes in exchange for, any Senior Subordinated Notes and
may terminate or amend the Exchange Offer (by oral or written notice to the
Exchange Agent or by a timely press release) if at any time before the
acceptance of such Senior Subordinated Notes for exchange or the exchange of the
Exchange Notes for such Senior Subordinated Notes, any of the following
conditions exist:
(a) any action or proceeding is instituted or threatened in any court or by
or before any governmental agency or regulatory authority or any
injunction, order or decree is issued with respect to the Exchange Offer
which, in the sole judgment of the Issuers, might materially impair the
ability of the Issuers to proceed with the Exchange Offer or have a
material adverse effect on the contemplated benefits of the Exchange
Offer to the Issuers; or
(b) any change (or any development involving a prospective change) shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Issuers that is or may be adverse to the Issuers, or the
Issuers shall have become aware of facts that have or may have adverse
significance with respect to the value of the Senior Subordinated Notes
or the Exchange Notes or that may materially impair the contemplated
benefits of the Exchange Offer to the Issuers; or
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<PAGE>
(c) any law, rule or regulation or applicable interpretation of the Staff is
issued or promulgated which, in the good faith determination of the
Issuers, does not permit the Issuers to effect the Exchange Offer; or
(d) any governmental approval has not been obtained, which approval the
Issuers, in their sole discretion, deems necessary for the consummation
of the Exchange Offer; or
(e) 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, in the sole judgment of the Issuers, might materially
impair the ability of the Issuers to proceed with the Exchange Offer or
have a material adverse effect on the contemplated benefits of the
Exchange Offer to the Issuers; or
(f) there shall occur a change in the current interpretation by the Staff of
the Commission which permits the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Senior Subordinated Notes to be offered
for resale, resold and otherwise transferred by holders thereof (other
than any such holder that is a broker-dealer or an "affiliate" of the
Company 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 such Exchange Notes are acquired in the
ordinary course of such holders' business and such holders have no
arrangement with any person to participate in the distribution of such
Exchange Notes.
The Issuers expressly reserve the right to terminate the Exchange Offer and
not accept for exchange any Senior Subordinated Notes upon the occurrence of any
of the foregoing conditions. In addition, the Issuers may amend the Exchange
Offer at any time prior to the Expiration Date if any of the conditions set
forth above occur. Moreover, regardless of whether any of such conditions has
occurred, the Issuers may amend the Exchange Offer in any manner which, in its
good faith judgment, is advantageous to holders of the Senior Subordinated
Notes.
The foregoing conditions are for the sole benefit of the Issuers and may be
asserted by the Issuers regardless of the circumstances giving rise to any such
condition or may be waived by the Issuers in whole or in part at any time and
from time to time in their sole discretion. The failure by the Issuers at any
time to exercise any of the foregoing rights shall not be deemed a waiver of any
such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
In addition, the Issuers will not accept for exchange any Senior
Subordinated Notes tendered, and no Exchange Notes will be issued in exchange
for any such Senior Subordinated Notes, if at such time any stop order shall be
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, as amended (the "Trust Indenture Act"). In any such
event the Issuers are required to use their best efforts to obtain the
withdrawal of any stop order at the earliest possible time.
The Exchange Offer is not conditioned upon any minimum principal amount of
Senior Subordinated Notes being tendered for exchange.
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EXCHANGE AGENT
United States Trust Company of New York has been appointed as the Exchange
Agent for the Exchange Offer. All executed Letters of Transmittal should be
directed to the Exchange Agent the addresses set forth 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 HAND United States Trust Company of New York
AFTER 4:30 PM ON THE EXPIRATION DATE ONLY: 770 Broadway, 13th Floor
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>
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 should be directed to the Exchange Agent at the address and
telephone number set forth above.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSIONS OF
INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS SET FORTH ABOVE, WILL NOT
CONSTITUTE A VALID DELIVERY.
SOLICITATION OF TENDERS; FEES AND EXPENSES
The Issuers 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. The Issuers, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Issuers and are estimated in the aggregate to be
approximately $135,000 which includes fees and expenses of the Exchange Agent,
Trustee, registration fees, accounting, legal, printing and related fees and
expenses.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representation should
not be relied upon as having been authorized by the Issuers.
Neither the delivery of this Prospectus nor any exchange made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Issuers since the respective dates as of which
information is given herein. The Exchange Offer is not being made to (nor will
tenders be accepted from or on behalf of) holders of Senior Subordinated Notes
in any jurisdiction in which the making of the Exchange Offer or the acceptance
thereof would not be in compliance with the
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laws of such jurisdiction. However, the Issuers may, at their discretion, take
such action as it may deem necessary to make the Exchange Offer in any such
jurisdiction and extend the Exchange Offer to holders of Senior Subordinated
Notes in such jurisdiction.
TRANSFER TAXES
The Issuers will pay all transfer taxes, if any, applicable to the exchange
of Senior Subordinated Notes pursuant to the Exchange Offer. If, however,
certificates representing Exchange Notes or Senior Subordinated Notes 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 Senior Subordinated Notes tendered, or if tendered Senior Subordinated
Notes are registered in the name of any person other than the person signing the
Letter of Transmittal, or if a transfer tax is imposed for any reason other than
the exchange of Senior Subordinated Notes pursuant to the Exchange Offer, then
the amount of any such 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 such taxes or exemption therefrom is not submitted with
the Letter of Transmittal, the amount of such transfer taxes will be billed
directly to such tendering holder.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the carrying value of the Senior
Subordinated Notes as reflected in the Company's accounting records on the
Exchange Date. Accordingly, no gain or loss for accounting purposes will be
recognized by the Issuers upon the exchange of Exchange Notes for Senior
Subordinated Notes. Expenses incurred in connection with the issuance of the
Exchange Notes will be amortized over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Senior Subordinated Notes who do not exchange their Senior
Subordinated Notes for Exchange Notes pursuant to the Exchange Offer will
continue to be subject to the restrictions on transfer of such Senior
Subordinated Notes as set forth in the legend thereon. Senior Subordinated Notes
not exchanged pursuant to the Exchange Offer will continue to remain outstanding
in accordance with their terms. In general, the Senior Subordinated Notes may
not be offered or sold unless 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. The Issuers do not
currently anticipate that they will register the Senior Subordinated Notes under
the Securities Act. However, under certain limited circumstances the Issuers may
be required to file with the Commission a shelf registration statement to cover
resales of the Senior Subordinated Notes by the Holders thereof who satisfy
certain conditions relating to the provision of information in connection with
such shelf registration statement. See "Description of Notes--Registration
Rights; Liquidated Damages."
Participation in the Exchange Offer is voluntary, and holders of Senior
Subordinated Notes should carefully consider whether to participate. Holders of
Senior Subordinated Notes are urged to consult their financial and tax advisors
in making their own decision whether or not to tender their Senior Subordinated
Notes. See "Certain Federal Income Tax Consequences."
As a result of the making of, and upon acceptance for exchange of all
validly tendered Senior Subordinated Notes pursuant to the terms of, this
Exchange Offer, the Issuers will have fulfilled a covenant contained in the
Registration Rights Agreement. Holders of Senior Subordinated Notes who do not
tender their Senior Subordinated Notes in the Exchange Offer will continue to
hold such Senior Subordinated Notes and will be entitled to all the rights and
limitations applicable thereto under the Indenture, except for any such rights
under the Registration Rights Agreement that by their terms terminate or cease
to have further effectiveness as a result of the making of this Exchange Offer.
To the extent that Senior Subordinated Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered,
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<PAGE>
or tendered but unaccepted, Senior Subordinated Notes could be adversely
affected. See "Risk Factors-- Adverse Consequences of Failure to Exchange."
The Issuers may in the future seek to acquire, subject to the terms of the
Indenture, untendered Senior Subordinated Notes in open market or privately
negotiated transactions, through subsequent exchange offers or otherwise. The
terms of any such purchases or offers may differ form the terms of the Exchange
Offer. The Issuers have no present plan to acquire any Senior Subordinated Notes
which are not tendered in the Exchange Offer.
RESALE OF EXCHANGE NOTES
The Issuers are making the Exchange Offer in reliance on the position of the
Staff of the Commission as set forth in certain interpretive letters addressed
to third parties in other transactions. However, the Issuers have not sought
their own interpretive letter and there can be no assurance that the Staff would
make a similar determination with respect to the Exchange Offer as it has in
such interpretive letters to third parties. Based on these interpretations by
the Staff, the Issuers believe that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for Senior Subordinated Notes may be offered for
resale, resold and otherwise transferred by a holder (other than any holder
which is (i) an Affiliate of the Company or (ii) a broker-dealer that purchases
Notes from the Issuers to resell pursuant to Rule 144A or any other available
exemption) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such holder's business and such holder has no
arrangement or understanding with any person to participate in the distribution
of such Exchange Notes and neither such holder nor any other such person is
engaging in or intends to engage in a distribution of such Exchange Notes.
However, any holder who is an Affiliate of the Company or who has an arrangement
or understanding with respect to the distribution of the Exchange Notes to be
acquired pursuant to the Exchange Offer, or any broker-dealer who purchased
Senior Subordinated Notes from the Issuers to resell pursuant to Rule 144A or
any other available exemption under the Securities Act (i) cannot rely on the
applicable interpretations of the Staff and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act. A
broker-dealer who holds Senior Subordinated Notes 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 Exchange Notes. Each such broker-dealer that
receives Exchange Notes for its own account in exchange for Senior Subordinated
Notes, where such Senior Subordinated Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities (other than
Senior Subordinated Notes acquired directly from the Issuers) must acknowledge
in the Letter of Transmittal that it will deliver a prospectus in connection
with any resale of such Exchange Notes. A secondary resale transaction in the
United States by a holder using the Exchange Offer to participate in a
distribution of Senior Subordinated Notes must be covered by an effective
registration statement containing the selling security holder information
required by Item 507 of Regulation S-K. See "Plan of Distribution."
In addition, to comply with the securities laws of certain jurisdictions, if
applicable, the Exchange Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Issuers
have agreed, pursuant to the Registration Rights Agreement and subject to
certain specified limitations therein, to register or qualify the Exchange Notes
for offer or sale under the securities or blue sky laws of such jurisdictions as
any holder of the Exchange Notes reasonably requests. Such 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 Exchange Notes.
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BUSINESS
Grove Worldwide is 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, the Company's
largest operating division, has a number one market position and a 45% market
share. The Company's products are used in a wide variety of applications by
commercial and residential building contractors, as well as by industrial,
municipal and military end-users. The Company's products are marketed to
independent equipment rental companies and directly to end-users under three
widely recognized brand names--GROVE CRANE, GROVE MANLIFT and NATIONAL CRANE.
The Company believes it has achieved a leading position in each of its principal
markets due to its: (i) strong brand name and reputation for quality products;
(ii) superior customer service; (iii) established network of distributors; (iv)
broad product line; and (v) commitment to superior engineering design and
product innovation.
The Company's products are sold in over 50 countries primarily through an
established, global network of approximately 240 independent distributors. The
Company's major markets are North America (67% of fiscal 1997 new equipment
sales), Europe (19% of fiscal 1997 new equipment sales), Africa and the Middle
East (4% of fiscal 1997 new equipment sales), Asia (7% of fiscal 1997 new
equipment sales) and Latin America (3% of fiscal 1997 new equipment sales). The
Company markets its products through three operating divisions:
- - GROVE CRANE (approximately 69% of fiscal 1997 net sales) designs and
manufactures over 40 models of mobile hydraulic cranes. The Company's mobile
hydraulic cranes, which are used primarily in industrial, commercial and
public works construction, are capable of reaching maximum heights of 372 feet
and lifting up to 300 tons. From fiscal 1993 to fiscal 1997, Grove Crane's net
sales (including acquisitions) increased from $290 million to $587 million,
representing a CAGR of 19.4%.
- - GROVE MANLIFT (approximately 23% of fiscal 1997 net sales) designs and
manufactures over 60 models of aerial work platforms. The Company's aerial
work platforms, which are used primarily in industrial, commercial and
construction applications, are capable of lifting people to maximum working
heights ranging from 19 to 131 feet. Aerial work platforms elevate workers and
their materials more safely, quickly and easily than alternative methods such
as scaffolding and ladders. From fiscal 1993 to fiscal 1997, Grove Manlift's
net sales (including acquisitions) increased from $57 million to $199 million,
representing a CAGR of 36.8%.
- - NATIONAL CRANE (approximately 8% of fiscal 1997 net sales) designs and
manufactures over 14 models of telescoping and 14 models of articulating
truck-mounted cranes. The Company's telescoping and articulating cranes, which
are used primarily in industrial, commercial, public works and construction
applications, are capable of reaching maximum heights of 166 feet and lifting
up to 36 tons. Telescoping and articulating cranes are mounted on a standard
truck chassis or on a pedestal at a fixed location. From fiscal 1993 to fiscal
1997, National Crane's net sales increased from $40 million to $71 million,
representing a CAGR of 15.4%.
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COMPETITIVE STRENGTHS
The Company believes that it benefits from the following competitive
strengths:
- - LEADING MARKET POSITIONS. The Company believes that its three operating
divisions have established a leading position in each of their principal
markets.
<TABLE>
<CAPTION>
DIVISION PRODUCTS PRINCIPAL MARKETS MARKET POSITION(1) MARKET SHARE(1)
- ---------------- ------------------------- ------------------------ ----------------------- -------------------
<S> <C> <C> <C> <C>
Grove Crane Mobile Hydraulic Cranes North America 1 43%(2)
Europe (excluding 2 14%
Russia)
Grove Manlift Aerial Work Platforms North America 3 10%
Europe (excluding 3 16%
Russia)
National Crane Truck-Mounted Cranes:
Telescoping North America 1 43%
Articulating North America 4 13%(3)
</TABLE>
- - STRONG BRAND NAME AND REPUTATION FOR QUALITY PRODUCTS. The Company has created
significant brand equity as a result of its innovative designs, quality
products and product reliability. With over 100,000 units sold during the past
50 years, the Company believes that it currently has one of the industry's
largest installed bases of cranes and aerial work platforms. The quality of
the Company's products and the value of its brand name are reflected in the
North American marketplace, where the Company believes that its cranes
generally command premium prices and have higher residual values than
comparable products manufactured by its 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 its competitors' products.
- - SUPERIOR CUSTOMER SERVICE. The Company is committed to providing superior
training, sales and service support to its distributors and end-users as a
standard part of its sales and marketing effort. Management believes that no
other major competitor matches the extent and quality of its customer support
services and that such services significantly contribute to the Company's
ability to charge premium prices for its products. In addition, the Company
has focused on providing ready availability of service parts. For example, in
fiscal 1997, the Company shipped over 80% of its replacement parts worldwide
within 24 hours after receipt of an order. After-market sales for parts and
services accounted for 12% of the Company's net sales and 26% of gross profits
in fiscal 1997. Such sales typically have higher gross margins and are less
cyclical than new equipment sales.
- - ESTABLISHED NETWORK OF DISTRIBUTORS. The Company benefits 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 the Company's products for over 10 years. The Company believes that,
in many cases, its products represent an important portion of its
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. Management believes that the strength of its distributor
network is an important competitive advantage. For example, within twelve
months after acquiring the mobile hydraulic crane business of Krupp in August
1995, the Company leveraged Grove's brand name and distribution network to
increase annual sales in the United States of the cranes, formerly
manufactured by Krupp, by 100% from approximately 40 units in 1995 to
approximately 80 units in 1996.
- ------------------------------
(1) All market share data are based on units shipped during fiscal 1997, except
for data on Grove Manlift's share of the North American and European aerial
work platform markets, which are based on fiscal 1997 revenues. With respect
to aerial work platforms, management believes that because the Company
primarily competes in the North American and European markets for larger,
high-end aerial work platforms, comparisons based on revenues are more
appropriate. Market data were derived from management estimates including,
as applicable, management assumptions regarding unit price.
(2) Does not include industrial cranes.
(3) In the United States, the Company has a number three market position and a
17% market share. National Crane has a nominal presence in the Canadian
market for articulating cranes.
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- - BROAD PRODUCT LINE. The Company believes it has the broadest product line in
the industry, with 10 product categories and over 120 models offered by its
three operating divisions. Management believes the breadth of the Company's
product offerings enables it to more effectively serve the equipment rental
market, which management estimates represents approximately 80% of the
Company's net sales. The Company's broad product line allows it 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
As a result of the Acquisition, the Company is operated on a stand-alone
basis rather than as part of a larger diversified enterprise. The Company's
management team expects to capitalize on the experience and expertise of new
senior management as it implements the Operations Improvement Program in
cooperation with the George Group Inc. (the "George Group"), an acquisition and
management consulting firm that applies strategic and operations management
expertise to manufacturing businesses. Management is led by Salvatore J. Bonanno
who joined the Company in March 1998 from Foamex International Inc., where he
led an organizational restructuring designed to reduce manufacturing and
overhead costs. The Company will implement the Operations Improvement Program
and the other key elements of the Company's business strategy described below in
order to reach its objective of increased net sales and EBITDA.
- - OPERATIONS IMPROVEMENT PROGRAM. The Company, in cooperation with the George
Group, has developed a comprehensive program which it believes will enable the
Company to reduce its annual costs by approximately $35 million to $50 million
and achieve significant working capital efficiencies by fiscal 2001. The
Operations Improvement Program is intended to improve the Company's operating
efficiency and margins by: (i) rationalizing product lines; (ii) reducing
manufacturing costs; and (iii) reducing selling, general and administrative
expenses. In addition, the Company believes the Operations Improvement Program
should enable it to reduce its working capital requirements by decreasing
inventory levels by approximately $40 million to $50 million.
- - CONTINUE TO PROVIDE SUPERIOR PRODUCTS. The Company has maintained a commitment
to superior engineering design and technological innovation. The Company
believes that it has the most extensive engineering capability in the crane
industry, with an extensive engineering group focusing on developing
innovative, high performance, low maintenance products that satisfy the
demands of its customers. Together with the Company's manufacturing and
marketing staff, these engineers seek to utilize new technologies and
effectively introduce new products. For example, the Company has introduced
lighter booms with greater lifting capacity, electronic controls that
facilitate operations and product features that enhance safety and increase
versatility. The Company believes that the greater sophistication of its
products contributes to its ability to sustain higher residual values. The
Company intends to intensify its efforts to design products that meet evolving
customer needs while reducing manufacturing costs and the period from product
conception to introduction.
- - EXPAND EXISTING INTERNATIONAL BUSINESS. The Company intends to leverage its
significant brand equity and strong distribution network to opportunistically
expand its existing international business. As an industry leader, the Company
believes it is well-positioned to increase sales internationally as
infrastructure development in existing and emerging markets stimulates demand
for cranes and aerial work platforms. In 1995, the Company expanded its
product offerings and strengthened its manufacturing and distribution presence
in Europe by acquiring the mobile hydraulic crane business of Krupp in Germany
and the aerial work platform business of Delta in France. In addition, all of
the Company's manufacturing facilities have received ISO 9001 certifications,
which enhances the Company's international marketing efforts.
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- - CAPITALIZE ON THE GROWTH OF THE WORLDWIDE AERIAL WORK PLATFORM MARKET. The
Company seeks to capitalize on the increasing recognition by end-users
worldwide that aerial work platforms are economical and safe alternatives to
scaffolding and ladders. The North American aerial work platform industry
experienced a CAGR in total unit shipments from 1992 to 1997 of 32%. In 1997,
approximately 41,000 aerial work platforms were shipped in North America while
only 13,000 units were shipped in markets outside of North America. The
Company expects 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
The Company, in cooperation with George Group, has developed a comprehensive
program which it believes will enable it to reduce its annual costs by
approximately $35 million to $50 million and achieve significant working capital
efficiencies by fiscal 2001. The Operations Improvement Program is intended to
improve the Company's operating efficiency and its margins by: (i) rationalizing
product lines; (ii) reducing manufacturing costs; and (iii) reducing selling,
general and administrative expenses. In addition, the Company believes the
Operations Improvement Program should enable it to reduce its working capital
requirements by decreasing inventory levels by approximately $40 million to $50
million. It is expected that these cost savings will be offset by non-recurring
costs of up to approximately $25 million associated with the implementation of
the Operations Improvement Program. Estimates of potential cost savings and
implementation costs are inherently uncertain and the description of the
Operations Improvement Program should be read in conjunction with "Special Note
Regarding Forward Looking Statements" and "Risk Factors--Realization of Benefits
of Operations Improvement Program." The key components of the Operations
Improvement Program are as follows:
RATIONALIZE PRODUCT LINES. The Company expects to implement a product line
rationalization program which will position it to reduce both operating costs
and working capital requirements without diminishing the advantages derived from
its broad product line. The Company will monitor product line data to enable it
to simplify its engineering processes by reducing the number of models and
manufacturing components, standardizing options and using platform design
concepts. The Company believes this program will enable it to eliminate certain
models that have low demand, low margins or features and capabilities that are
redundant with other models. The product line rationalization program will
identify key product requirements by different customer groups within each of
the market segments which the Company serves. Such information will be used to
define a more focused product portfolio which, when compared to the existing
product lines, will help the Company identify opportunities to reduce
components, standardize features and eliminate models. Management believes that
these actions will (i) reduce inventory, (ii) increase labor productivity, (iii)
improve purchasing leverage and (iv) help reduce selling, general and
administrative expenses without negatively impacting revenue.
REDUCE MANUFACTURING COSTS. Management intends to reduce the annual costs
of goods sold by approximately $25 million to $30 million by fiscal 2001 by
rationalizing its product line and undertaking the following initiatives to
improve the Company's manufacturing process:
- - Accelerate the recently initiated DFMA program and continue to implement value
analysis programs. These established techniques are designed to lower material
and labor costs by redesigning products, incorporating more standardized
components and allowing a simplified fabrication and assembly process. Initial
efforts during fiscal 1997 resulted in a 28% reduction in labor costs for a
test model.
- - Consolidate sourcing by using fewer suppliers to fulfill the Company's global
requirements. As a result of its product rationalization and DFMA programs,
the Company expects to purchase a greater volume of fewer components, enabling
it to significantly reduce its vendor base and benefit from increased sourcing
leverage.
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- - Implement other procedures to reduce manufacturing costs, including: (i)
improving planning and scheduling by introducing continuous flow manufacturing
principles and integrating the Company's new management information system;
(ii) improving product flow and reducing cycle time in order to increase
manufacturing flexibility and capacity; and (iii) shifting the production of
certain models and components to facilities where they can be more efficiently
produced.
REDUCE SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Management believes it
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 the Company's new management information system and
streamlining existing business processes, including redesigning sales and
administrative functions. See "Business--Management Information System."
REDUCE WORKING CAPITAL REQUIREMENTS. Management believes the Operations
Improvement Program will enable the Company to reduce its working capital
requirements by reducing inventory levels by approximately $40 million to $50
million. The Company expects to reduce its inventory levels primarily as a
result of: (i) improved manufacturing processes; (ii) the shifting of production
of certain models and components to facilities where they can be more
efficiently produced; and (iii) product rationalization.
INDUSTRY OVERVIEW
The markets in which the Company competes include North America, (defined as
the United States and Canada), Latin America (defined as Central and South
America), Europe, Africa, the Middle East and Asia. All statistical and
numerical information set forth below are based on industry data, which the
Company has not independently verified, together with management estimates and
assumptions regarding unit prices.
MOBILE HYDRAULIC CRANES (GROVE CRANE)
The mobile hydraulic crane business was a $2.8 billion industry worldwide in
1997 with a demand for approximately 11,000 machines. Demand in this industry is
primarily dependent upon industrial and construction activity and replacement
cycles for existing cranes. Because of the different demands of each project,
such as 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. Management estimates 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 1997, demand for mobile hydraulic cranes in North America was
approximately 2,400 machines, representing 22% of global demand. From 1992 to
1997, demand grew at a CAGR of 12.6%. The Company believes that, based on the
superior reputation of its products as well as the Company's strong network of
distributors, it is well positioned to capitalize on any growth in the North
American mobile hydraulic crane market. In addition, Grove's product line, which
is 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. See "--Competitive
Strengths."
Demand for mobile hydraulic cranes in Europe was approximately 1,700
machines in 1997, representing 16% of global demand. Since 1992, demand in
Europe has experienced little growth. European construction activity has
remained at recessionary levels for the last five years. The Company believes
that this has been due initially to a cyclical downturn and more recently to
fiscal tightening as European countries attempt to meet the budget deficit
targets established by the Maastricht Treaty. The Company believes that it is
well positioned to participate in any cyclical improvements in Europe due to its
local manufacturing operations, strong local distribution and its established
market position in the region. The
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Company believes 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 62% of global demand in 1997 with approximately 6,800 units
shipped. The Japanese market represents approximately 29% of the worldwide
market on a unit basis, with approximately 3,200 machines sold in 1997. The
Company, like other crane manufacturers in the United States and Europe, has
chosen not to compete in Japan due to economic fundamentals and certain barriers
to entry. Japanese crane manufacturers generally do not compete in the United
States or Europe. The Chinese market accounted for approximately 2,100 machines
sold in 1997, the majority of which were manufactured locally. However, the
People's Republic of China has been an emerging market for the Company, where it
has sold an average of 8 units per year since 1995, representing approximately
10% of imported units.
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 ladders. The products are used for
indoor or outdoor applications in a variety of construction, industrial and
commercial settings which require workers to be lifted to high elevations. Rapid
growth of the industry has been due to efficiency considerations as well as
regulations mandating safety standards for people working in elevated areas. The
Company believes that approximately 90% 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: (i) contractors require 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 (ii) industrial customers increasingly outsource their
equipment requirements to rental providers.
In terms of market penetration of aerial work platforms, the United States
is the most advanced market in the world, indicating strong fundamental growth
potential for the industry outside North America. Since 1992, demand in North
America has grown at a CAGR of 32%. In 1997, demand for aerial work platforms in
North America was approximately 41,000 machines, representing 76% of global
demand. The demand for aerial work platforms in the worldwide market, excluding
North America, in comparison, was only 13,000 units in 1997. The Company expects
increased sales of aerial work platforms in international markets, where the
number of aerial work platforms remains significantly lower than in the United
States.
The Company expects the aerial work platform division to be an important
factor in its long-term growth strategy. Growth in the aerial work platform
market is expected to 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, the Company expects to capture its
share of international growth given its strong existing international market
presence and distribution capabilities, particularly in Europe.
TRUCK-MOUNTED CRANES (NATIONAL CRANE)
The truck-mounted crane division manufactures both telescoping cranes 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 1997, demand for truck-mounted telescoping cranes in North
America was approximately 2,100 machines, representing 48% of total North
American demand. Since 1992, demand has grown at a CAGR of 16%.
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Demand for truck-mounted articulating cranes in North America was approximately
2,300 machines in 1997, representing 52% of total North American demand. Since
1992, demand has grown at a CAGR of 5%. Telescoping cranes are more popular in
the United States while articulating cranes are more popular in Europe.
PRODUCTS
MOBILE HYDRAULIC CRANES (GROVE CRANE)
Grove Crane manufactures over 40 models of mobile hydraulic cranes, which
are used primarily in the industrial, commercial and public works construction
industries and in maintenance applications, to lift material at job sites. There
are four main types of mobile hydraulic cranes: (i) Rough-Terrain, (ii) All-
Terrain, (iii) Truck-Mounted and (iv) Industrial. In addition, Grove Crane
produces three models of specialty cranes for the U.S. 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 15 models of
rough-terrain cranes, believed to be the broadest such line in the world,
capable of working heights of up to 208 feet and maximum load capacities of up
to 100 tons.
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 working heights of up to 372 feet and maximum load capacities of up to 300
tons.
TRUCK-MOUNTED CRANES are designed to provide simple set-up and long reach
high capacity booms and are capable of traveling from site to site at highway
speeds. These cranes are suitable for urban and suburban uses. Grove Crane
produces 10 models of truck-mounted cranes, believed to be the broadest such
line in the world, capable of working heights of up to 270 feet and maximum load
capacities of up to 150 tons.
INDUSTRIAL CRANES are designed primarily for plant maintenance, storage yard
and material handling jobs. Grove Crane produces 5 models of industrial cranes
capable of working heights of up to 85 feet and maximum load capacities of up to
18 tons.
AERIAL WORK PLATFORMS (GROVE MANLIFT)
Grove Manlift manufactures over 60 models of aerial work platforms which
elevate workers and their materials more safely, quickly and easily than
alternative methods such as scaffolding and ladders. The work platform is
mounted on either a telescoping and/or articulating boom or on a vertical
lifting scissor mechanism. The boom truck lifting mechanism is mounted on a
chassis powered by electric motors or gas, diesel or propane engines. The
Company manufactures four types of aerial work platforms: (i) Scissor Lift, (ii)
Articulating Boom, (iii) Telescoping Boom and (iv) 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
19 models of scissor lifts capable of working heights of up to 46 feet and
maximum load capacities of up to 2,000 pounds.
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 20 models of articulating boom
lifts capable of working heights of up to 131 feet and maximum load capacities
of up to 800 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,
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commercial and industrial construction and maintenance projects. Grove Manlift
produces 11 models of telescoping boom lifts capable of working heights of up to
116 feet and 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 16 models of vertical mast lifts capable of
working heights of up to 46 feet and maximum load capacities of up to 500
pounds.
TRUCK-MOUNTED CRANES (NATIONAL CRANE)
National Crane manufactures 24 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 and in
maintenance applications to lift materials or personnel at the same job site or
to move material to another job site or location. The Company manufactures two
types of truck-mounted cranes: telescoping and articulating. The Company also
manufactures 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 10 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.
OTHER CRANES include 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
The Company benefits 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 the Company
for over 10 years. While the Company's distributors generally do not sell the
Company's products exclusively, management believes that, in many cases, the
Company's products represent a significant portion of the distributor's
business. Many of Grove Crane's distributors also represent Caterpillar Inc. or
Komatsu Ltd. and, as such, are considered among the best-capitalized in the
industry. Management believes that the strength of its distributor network is an
important competitive advantage. For example, within twelve months after
acquiring the mobile hydraulic crane business of Krupp in August 1995, the
Company leveraged its brand name and distribution network to increase annual
sales from approximately 40 units to approximately 80 units of the cranes
formerly manufactured by Krupp.
MOBILE HYDRAULIC CRANES
The Company distributes its mobile hydraulic cranes primarily through a
global network of independent distributors, except in Germany, France and the
United Kingdom, where the Company has its own distributors. In addition, the
Company sells directly to certain large corporate customers and the United
States Government. The Company believes that its distribution network is one of
its key strengths.
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In fiscal 1997, 67% of the Company's unit sales of mobile hydraulic cranes
were derived from units shipped to North American and Latin American
distributors. The Company has longstanding relationships with its 45 North
American and 24 Latin American distributors, of which over 40% have been
distributors for the Company for over 25 years. Shipments to Europe comprised
approximately 21% of the Company's shipments in fiscal 1997 through three
Company stores, located in the U.K., Germany and France, and 42 third-party
distributors. In fiscal 1997, shipments to Asia, Africa and the Middle East
comprised approximately 5%, 4% and 2% of the Company's unit shipments,
respectively.
AERIAL WORK PLATFORMS
In fiscal 1997, aerial work platforms sold by North American distributors
represented approximately 63% of the Company's unit sales of aerial work
platforms. The Company has 65 authorized distributors in 187 locations across
North America providing coverage in most major markets. To take advantage of
growth in the aerial work platform market, the Company has increased the number
of North American distributors by 18% since 1992. Approximately 50% of the
Company's North American distributors carry only the Company's aerial work
platforms.
In fiscal 1997, sales to customers in Europe represented approximately 24%
of the Company's units shipped of aerial work platforms. The Company's 13
European distributors include independent and Company-owned distributors. Three
Company locations in the U.K., Germany and France and a major independent
distributor in the Netherlands collectively accounted for more than 50% of
aerial work platform net sales in Europe. Asian customers purchased
approximately 11% of the Company's units shipped in fiscal 1997. 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 the Company's units shipped in fiscal
1997. African and Middle Eastern customers purchased less than 1% of the
Company's units shipped in fiscal 1997.
TRUCK-MOUNTED CRANES
The Company's 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, the Company has eight distributors
that focus either on limited product lines and/or market niches. Certain of the
Company's "niche" distributors primarily sell to railroads and are a particular
strength of the Company's customer base. Most of these distributors have been
with the Company for over 15 years. The Company believes that these distributors
account for a significant portion of the U.S. railroad market for articulating
truck-mounted cranes. The Company sells directly to E.I. du Pont de Nemours and
Company, The Hertz Corporation, the Tennessee Valley Authority, Union Pacific
Railroad Corporation and U.S. Rentals, Inc. In fiscal 1997, direct sales
accounted for 9% of all truck-mounted cranes sold by the Company.
END-USERS AND CUSTOMERS
Mobile hydraulic cranes are primarily used by contractors engaged in
industrial, commercial and public works construction and for plant maintenance
and material handling jobs. Aerial work platforms are primarily used by
contractors engaged in residential, commercial and industrial construction and
in maintenance projects. Truck-mounted cranes are primarily used 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 addition, U.S. railroad companies
and U.S. equipment rental companies use the Company's truck-mounted cranes.
Mobile hydraulic cranes and aerial work platforms are also sold to the U.S.
Department of Defense and other government agencies.
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<PAGE>
For the fiscal years ended September 30, 1995, September 28, 1996 and
September 27, 1997, approximately 20%, 20% and 19%, respectively, of the
Company's revenues were generated from sales to six major customers, with no one
customer accounting for more than 5% of total revenue. Approximately 15% and 31%
of the outstanding accounts and notes receivable balance as of September 28,
1996 and September 27, 1997, respectively, were due from these customers.
DEALER FINANCING PROGRAM
The Company offers certain of its distributors up to 360-day inventory
financing. Units sold under this program generate secured notes receivable,
which the Company sells, from time to time, to a third party financial
institution. The terms of the notes provide that if the distributor sells the
equipment prior to the maturity of the notes, the notes must be repaid
immediately along with any interest accrued thereon.
In June 1998, the Company entered into an agreeement with a third-party
financial institution to sell up to $50.0 million of notes receivable generated
from sales of mobile hydraulic cranes and aerial work platforms on credit terms
of up to 360 days on a revolving basis. The third-party financial institution
purchases the notes receivable at face value on a 90% non-recourse basis. The
agreement requires the Company to purchase credit insurance on behalf of the
third-party to insure the 90% risk assumed by the third-party financial
institution. The Company retains 10% of the credit risk. See Note 4 of Notes to
Unaudited Condensed Financial Statements.
ENGINEERING AND DESIGN
The Company believes that its engineering and design capabilities are among
the Company's major strengths. The Company's team of engineers focuses on
developing innovative, high performance, low maintenance products that create
significant brand loyalty among customers. Design engineers work closely with
the Company's manufacturing and marketing staff, enabling the Company to quickly
identify changing end-user requirements, implement new technologies and
effectively introduce product innovations. As part of its ongoing commitment to
provide superior products, the Company intends to intensify its efforts to
design products that meet evolving customer demands and reduce the period from
product conception to product introduction.
The Company believes its investment in systems and techniques will enable it
to continually improve its cost position in the industry. The Company is now
positioned to realize the benefits of this investment as it reduces costs,
improves productivity and product development times, and enhances inventory
management.
MANUFACTURING AND FACILITIES
The Company maintains major manufacturing and engineering facilities in
Shady Grove, Pennsylvania, Sunderland, United Kingdom, and Wilhelmshaven,
Germany, as well as plants in Tonneins, France and Waverly, Nebraska. All such
manufacturing facilities are ISO 9001 certified. The Company also maintains
service facilities in the United Kingdom, Germany and France, and offices in the
United Arab Emirates, Singapore, Australia and China.
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<PAGE>
The following table outlines the principal facilities owned or leased by the
Company:
<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) Manufacturing/Storage/Office 775,000 leased
Wilhelmshaven, Germany(2) Manufacturing/Storage/Office 410,400 owned/leased
Storage/Office/Field
Langenfeld, Germany(3) 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 expires on April 30, 2000. The Company has an option to purchase
the facility at any time prior to February 27, 1999 for a nominal amount.
The Company plans to close this facility as a result of recurring operating
losses. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations-Liquidity and Capital Resources."
(2) The buildings are owned by the Company and the underlying land is leased
from the Federal Republic of Germany and Friedrich Krupp AG Hoesch Krupp
("Krupp"). The lease with the Federal Repubic of Germany expires December
31, 2043 and the lease with Krupp expires December 31, 2042.
(3) The lease for the Langenfeld, Germany facility expires in July 1998. Unless
otherwise terminated, the lease will be automatically renewed annually
unless either party gives notice of termination.
(4) Includes two facilities, one of which is leased. The lease expires on
November 29, 2004.
To the extent any such properties are leased, the Company expects to be able
to renew such leases or lease comparable facilities on terms commercially
acceptable to the Company. Management believes that the Company's facilities are
suitable for its operations and provide sufficient capacity to meet the
Company's requirements for the foreseeable future.
The obligations of the Company under the New Credit Facility are secured by
a mortgage on certain of the Company's owned, domestic real properties.
COMPETITION
The markets in which the Company operates are highly competitive. The
Company faces competition in each of its operating divisions from a number of
manufacturers. Competition in each of the Company's markets generally is based
on product design, overall product quality, maintenance costs and price. The
Company believes it benefits from the following competitive advantages: (i)
leading market positions; (ii) a strong brand name and reputation for quality
products and service; (iii) an established network of global distributors; (iv)
a broad product line and (v) a commitment to engineering design and product
innovation. The following table sets forth the Company's primary competitors in
each of its operating divisions:
<TABLE>
<CAPTION>
OPERATING
DIVISIONS PRODUCTS PRIMARY COMPETITORS
- ------------------ ---------------------- ---------------------------------------------------------------------
<S> <C> <C>
Grove Crane Mobile Hydraulic Liebherr Werk Nenzing, Link-Belt Construction Equipment Co.,
Cranes Mannesman DeMag, Tadano Ltd. and Terex Corporation ("Terex")
Grove Manlift Aerial Work Platforms Genie Industries, JLG Industries, Inc., Sky Jack Inc., Snorkel
Company, Terex 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 and USTC Inc.
</TABLE>
RAW MATERIALS
Principal materials used by the Company in its various manufacturing
processes include steel, castings, engines, tires, axles, transmissions,
hydraulic valves and controls, hydraulic cylinders, electric controls and
motors, and a variety of other fabricated or manufactured items. Substantially
all materials are normally available from multiple suppliers. Current and
potential suppliers are evaluated on a regular basis on their ability to meet
the Company's requirements and standards.
64
<PAGE>
EMPLOYEES
As of June 27, 1998, the Company had a total of approximately 5,225
employees, of which approximately 3,050 were employed in the United States.
Approximately 26% of the Company's employees are represented by labor unions. In
the United States, workers at the Company's Waverly, Nebraska facility are
organized and are subject to a collective bargaining agreement that expires on
April 11, 1999. Certain employees at the Company's Sunderland, United Kingdom,
Wilhelmshaven, Germany and Tonneins, France facilities are also organized under
the host country's labor laws. The collective bargaining agreements applicable
to remaining employees at the Company's Sunderland, United Kingdom facility are
subject to renegotiation in October 1998. The collective bargaining agreements
covering the Wilhelmshaven, Germany employees will not terminate unless due
notice is given by either party pursuant to special provisions within the
collective bargaining agreements, but are subject to renegotiation at various
times. Throughout all facilities, the Company considers its relations with its
employees and union representatives to be good.
MANAGEMENT INFORMATION SYSTEMS
In fiscal 1995, the Company initiated the Year-2000 Project. The Year-2000
Project, which is expected to be completed at the end of the first quarter of
fiscal 1999, will have a total cost of approximately $38.0 million, of which
approximately $35.0 million had been expended as of June 27, 1998. The Company
believes that this new system will enable the Company to reduce costs, improve
productivity and product development times, and enhance inventory management.
The Company's new resource planning system is expected to provide improved
cost data, facilitate inventory and work-in-process tracking and provide
improved order processing. In addition, the system is expected to yield improved
organizational performance due to timely and meaningful performance measurements
and the availability of timely and accurate management information across all
functions and all levels. The new software will cover the Company's 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 the Company's global
requirements such as a multi-lingual and multi-currency system to cover all of
its facilities.
The completion of the project is expected to render all of the Company's
major computer systems Year-2000 compliant. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Management
Information Systems and the Impact of Year 2000."
ENVIRONMENTAL MATTERS
The Company generates hazardous and non-hazardous waste in the normal course
of its manufacturing operations. As a result, the Company is subject to a wide
range of Federal, state, local and foreign environmental laws, including CERCLA,
that (i) 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 (ii) impose liability for
the costs of cleaning up, and certain damages resulting from, sites of past
spills, disposals or other releases of hazardous substances. Compliance with
such laws has required, and will continue to require, expenditures by the
Company on a continuing basis. The Company does not expect that these
expenditures will have a material adverse effect on its financial condition or
results of operations.
The Company is currently developing a remediation program with respect to an
area that has been contaminated by petroleum hydrocarbons at its Shady Grove,
Pennsylvania facility. The Company believes that this contamination is confined
to the Shady Grove site and has not migrated to any adjacent properties. The
Company also believes that the costs of remediating this contamination will not
have a material adverse effect on its financial condition or results of
operations.
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<PAGE>
LEGAL PROCEEDINGS
The Company is involved in various legal proceedings which have arisen in
the normal course of its operations. The outcome of these legal proceedings, if
determined adversely to the Company, is unlikely to have a material effect on
the Company. The Company is also subject to product liability claims for which
it believes it has adequate insurance.
INTELLECTUAL PROPERTY
The Company's products are sold primarily under the logo
"G-Registered Trademark-", and the trademarks GROVE-Registered Trademark-,
MANLIFT-Registered Trademark-, GROVE WORLDWIDE-Registered Trademark-, G
MANLIFT-Registered Trademark-, G MEGA TRAK-Registered Trademark-,
MAXX-Registered Trademark- and SUPER-MAXX-Registered Trademark-. The Company
owns a number of patents and trademarks relating to the products it manufactures
that have been obtained over a number of years. These patents and trademarks
have been of value in the growth of the Company's business and may continue to
be of value in the future. The Company does not regard any portion of the
Company's business as being dependent upon any single patent or group of
patents.
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<PAGE>
MANAGEMENT
MANAGEMENT COMMITTEE AND EXECUTIVE OFFICERS OF THE COMPANY
Holdings, as Managing Member, sets the terms of office of the members of the
Management Committee of the Company (the "Company Management Committee"). Aside
from Mr. Bonanno, the executive officers of the Company serve at the discretion
of the Company Management Committee. See "--Employment Arrangements." The
following table sets forth information concerning executive officers of the
Company and the members of the Company Management Committee, each of whom is
also a member of the Management Committee of Holdings (the "Holdings Management
Committee," and, together with the Company Management Committee, the "Management
Committees"):
<TABLE>
<CAPTION>
NAME AGE
- ------------------------------------------------------------- ---
<S> <C> <C>
Salvatore J. Bonanno......................................... 57
James A. Kolinski............................................ 56
Joseph A. Shull.............................................. 52
Jeffry D. Bust............................................... 45
Theodore J. Urbanek.......................................... 63
Stephen L. Cripe............................................. 42
Keith R. Simmons............................................. 48
J Taylor Crandall............................................ 43
Michael L. George............................................ 58
Gerald Grinstein............................................. 66
Steven B. Gruber............................................. 40
Robert B. Henske............................................. 37
Gerard E. Holthaus........................................... 49
Anthony P. Scotto............................................ 50
<CAPTION>
NAME POSITION
- ------------------------------------------------------------- -------------------------------------------------------------
<S> <C>
Salvatore J. Bonanno......................................... Chairman and Chief Executive Officer, Grove Worldwide and
Member of each Management Committee
James A. Kolinski............................................ President and Chief Operating Officer, Grove Manlift
Joseph A. Shull.............................................. Chairman, Grove Crane
Jeffry D. Bust............................................... President and Chief Operating Officer, Grove Crane
Theodore J. Urbanek.......................................... President, National Crane Corporation
Stephen L. Cripe............................................. Senior Vice President and Chief Financial Officer, Grove
Worldwide
Keith R. Simmons............................................. Senior Vice President, General Counsel and Senior Business
Development Officer, Grove Worldwide
J Taylor Crandall............................................ Member of each Management Committee
Michael L. George............................................ Member of each Management Committee
Gerald Grinstein............................................. Member of each Management Committee
Steven B. Gruber............................................. Member of each Management Committee
Robert B. Henske............................................. Member of each Management Committee
Gerard E. Holthaus........................................... Member of each Management Committee
Anthony P. Scotto............................................ Member of each Management Committee
</TABLE>
Mr. Bonanno serves as Chairman and Chief Executive Officer of the Company
and serves as a member of each 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. ("Foamex"), a $1 billion polyurethane manufacturing company, where he was
responsible for directing all manufacturing operations, strategic planning and
policy-making activities for Foamex's cushioning foams, automotive foams and
technical foams businesses. While at Foamex, Mr. Bonanno led an organizational
restructuring which included eliminating 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. Kolinski serves as President and Chief Operating Officer of Grove
Manlift, a position in which he has served since May 1993. Mr. Kolinski is
responsible for Grove Manlift's sales, marketing, engineering and service
worldwide. As President, Chief Operating Officer and director of Simon Aerials
Inc., he was responsible for worldwide sales and North American operations from
August 1989 through April 1993.
Mr. Shull serves as Chairman of Grove Crane, a position in which he has
served since June 1998. From September 1995 to June 1998, Mr. Shull was
President and Chief Operating Officer of Grove Crane, where he was responsible
for the business direction of Grove Crane, including overseeing the
manufacturing, quality, marketing, sales, product support and engineering
departments at Grove Crane's Shady Grove, Pennsylvania, Sunderland, United
Kingdom and Wilhelmshaven, Germany facilities. He began his
67
<PAGE>
career at Grove Crane in June 1968. From May 1995 to September 1995, Mr. Shull
was the Senior Vice President of Sales and Product Support for Grove Crane.
Mr. Bust serves as President and Chief Operating Officer of Grove Crane, a
position in which he has served since June 1998, and is responsible for the
business direction of Grove Crane, including overseeing the manufacturing,
quality, marketing, sales, product support and engineering departments at Grove
Crane's Shady Grove, Pennsylvania, Sunderland, United Kingdom, and
Wilhelmshaven, Germany facilities. From November 1994 to June 1998, he served as
President and General Manager for Manitowoc Cranes, Inc., and the Lattice Crane
Group. From January 1989 to November 1994, he held the positions of Senior Vice
President, Mining Equipment Division, and Vice President of Operations for
Harnischfeger Corporation. He also held various management positions with FMC
Corporation from June 1982 to January 1989.
Mr. Urbanek serves as President of National Crane, the position in which he
has served since 1975. Mr. Urbanek is responsible for the business direction of
National Crane, including overseeing the manufacturing, engineering, marketing,
sales, product support, quality, human resources, accounting and information
services departments at the Waverly, Nebraska facility. His past positions
include acting Vice President and General Manager of Grove Manlift from 1981 to
1983 and Group Vice President for Circle Steel Corp. and Cook Pump (a Grove
Worldwide operation) from 1984 to 1987.
Mr. Cripe serves as Senior Vice President and Chief Financial Officer of the
Company, a position in which he has served since August 1998. Mr. Cripe is
responsible for accounting and control, treasury functions, internal auditing,
budgeting and planning and information systems oversight for the Company and its
operating companies. From April 1996 to August 1998, he was Vice President and
Chief Financial Officer of the Tenneco Automotive Group, Lake Forest, Illinois.
From 1990 to April 1996, he was Controller for the Industrial Fibers Group of
Allied Signal.
Mr. Simmons serves as Senior Vice President, General Counsel and Senior
Business Development Officer of the Company. He has served as the Senior Vice
President, General Counsel and Senior Business Development Officer for Grove
Worldwide since May 1995, and is responsible for managing the legal affairs of
Grove Worldwide and its operating companies and for developing and implementing
all external growth initiatives. From April 1992 to May 1995, he was Senior Vice
President and General Counsel for Grove Worldwide.
Mr. Crandall serves as a member of each Management Committee. Since 1986,
Mr. Crandall has served as Chief Financial Officer and Vice President of
Keystone. Since 1991, he has served as a President and a director of Acadia MGP,
Inc. Mr. Crandall is currently a director of Bell & Howell Company, Quaker State
Corporation, Specialty Foods Corporation, Washington Mutual, Inc., Integrated
Orthopedic, Inc. and Signature Resorts, Inc. Mr. Crandall also serves on the
Board of Advisors of FEP Capital Holdings, L.P., and on the Investment
Committees of Insurance Partners and Brazos Fund, L.P.
Mr. George serves as a member of each Management Committee. Since 1984, Mr.
George has served as Chief Executive Officer and Chairman of the Board of George
Group, an acquisition and management consulting firm based in Dallas, Texas. He
is currently a Director of Reliant Building Products, Inc.
Mr. Grinstein serves as a member of each Management Committee. Since August
1997, Mr. Grinstein has been the non-executive Chairman of Delta Airlines. 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. and Imperial Holly Corp.
68
<PAGE>
Mr. Gruber serves as a member of each Management Committee. Since March
1992, Mr. Gruber has been a Managing Director of Oak Hill Partners, Inc. 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. 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. and several private companies related to Keystone, Insurance
Partners, L.P. and Oak Hill Partners, Inc.
Mr. Henske serves as a member of each Management Committee. 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 and held various other positions
with Bain & Company, Inc., a management consulting firm. Mr. Henske is currently
a director of Reliant Building Products, Inc. and Williams Scotsman, Inc.
Mr. Holthaus serves as a member of each 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 (Baltimore), where he served as a partner from
1982 to 1988.
Mr. Scotto serves as a member of each Management Committee. Since 1992, he
has served as a Managing Director of Oak Hill Partners, Inc., the investment
advisor and management company for Acadia Partners, L.P. and Keystone. Mr.
Scotto is currently a director of Holophane Corporation, Ivex Packaging
Corporation and Specialty Foods Corporation.
MANAGEMENT COMMITTEE SUBCOMMITTEES AND FEES
Neither Management Committee has a compensation committee, audit committee
or nominating committee. The members of the Management Committees are not
compensated for their services as such.
SUMMARY COMPENSATION TABLE
The following table sets forth all cash compensation paid during the last
fiscal year to Grove Worldwide's Chief Executive Officer and those officers who
were, at September 27, 1997, the next four highest paid officers of the Company
(collectively, together with the Chief Executive Officer, the "Named Executive
Officers"):
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARD
---------------------- ------------- ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(1) LTIP PAYOUTS COMPENSATION(2)
- -------------------------------------------------------------- --------- ---------- ---------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
R. Stift, Chairman and CEO,
Grove Worldwide(3).......................................... 1997 $ 391,000 $ 390,000 $ 23,776 $ 21,129(4)
J. Shull, Chairman, Grove Crane............................... 1997 221,008 220,000 3,237 15,928(5)
J. Kolinski, President, Grove Manlift......................... 1997 201,004 142,000 10,364 19,555(6)
K. Simmons, General Counsel, Grove Worldwide.................. 1997 186,004 138,750 3,214 15,728(7)
F. Heidinger, CFO, Grove Worldwide(8)......................... 1997 175,408 131,250 7,781 13,320(9)
</TABLE>
- ------------------------
(1) Attributable to the fiscal year 1996 through fiscal year 1997, but paid in
December 1997.
69
<PAGE>
(2) Represents value of personal use of a company vehicle, employer matching
contributions under Grove Worldwide's 401(k) plan, excess group term life
insurance value, supplemental health care insurance and long-term disability
insurance premiums. Does not include benefits that are made available to all
employees.
(3) Robert C. Stift served as Chairman and Chief Executive Officer of Grove
Worldwide until April 29, 1998.
(4) Includes excess group term life insurance valued at $8,550.
(5) Includes the use of a company vehicle valued at $4,990 and employer matching
contributions under Grove Worldwide's 401(k) plan of $4,197.
(6) Includes the use of a company vehicle valued at $6,279 and excess group term
life insurance valued at $8,550.
(7) Includes the use of a company vehicle valued at $4,579 and employer matching
contributions under Grove Worldwide's 401(k) plan of $5,430.
(8) G. Fred Heidinger served as Senior Vice President and Chief Financial
Officer of Grove Worldwide until May 15, 1998.
(9) Includes the use of a company vehicle valued at $4,328 and employer matching
contributions under Grove Worldwide's 401(k) plan of $5,052.
Kidde, Grove Worldwide and/or Hanson maintained certain other compensation
programs that were terminated on or prior to the consummation of the
Transactions.
70
<PAGE>
EXERCISE OF OPTIONS DURING FISCAL 1997
The following table sets forth certain information with regard to stock
options held by the Named Executive Officers during fiscal 1997:
AGGREGATED OPTIONS EXERCISES DURING FISCAL 1997 AND YEAR-END VALUES (1)
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED IN-
UNEXERCISED OPTIONS AT THE THE-MONEY OPTIONS AT THE END OF
SECURITIES AGGREGATE END OF FISCAL 1997(#) FISCAL 1997
ACQUIRED ON VALUE -------------------------- --------------------------------
NAME EXERCISE(2) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------------------- ----------- ----------- ----------- ------------- ----------- -------------------
<S> <C> <C> <C> <C> <C> <C>
R. Stift................................ 19,457 $ 9,850 151,336 0 $ 39,386 0
J. Shull................................ 0 0 38,358 11,641 0 0
J. Kolinski............................. 0 0 11,641 15,521 0 0
K. Simmons.............................. 0 0 35,475 11,641 0 0
F. Heidinger............................ 0 0 46,564 11,641 0 0
</TABLE>
- ------------------------
(1) Hanson maintained the stock option plan under which the options described in
this table were issued. The participation of the Named Executive Officers
will cease as of the Closing Date in connection with the Closing of the
Transactions.
(2) All options described in this table are to purchase the ordinary shares of
Hanson.
PENSION BENEFITS
The following table sets forth the standard annual benefits payable to
participants in the Company's pension plan and nonqualified supplemental benefit
plan:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
--------------------------------------------------------
REMUNERATION 15 20 25 30 35
- ------------- --------- --------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
1$25,000..... $ 27,903 $ 37,203 $ 46,504 $ 55,805 $ 65,106
1$50,000..... $ 34,090 $ 45,453 $ 56,817 $ 68,180 $ 79,543
1$75,000..... $ 40,278 $ 53,703 $ 67,129 $ 80,555 $ 93,981
2$00,000..... $ 46,465 $ 61,953 $ 77,442 $ 92,930 $ 108,418
2$25,000..... $ 52,653 $ 70,203 $ 87,754 $ 105,356 $ 122,856
3$00,000..... $ 61,315 $ 81,753 $ 101,192 $ 122,630 $ 143,068
4$00,000..... $ 61,315 $ 81,753 $ 102,192 $ 122,630 $ 143,068
4$50,000..... $ 61,315 $ 81,753 $ 102,192 $ 122,630 $ 143,068
5$00,000..... $ 61,315 $ 81,753 $ 102,192 $ 122,630 $ 143,068
</TABLE>
Salaried employees of the Company are eligible to participate in the
Company's defined benefit pension plan, and each named Executive Officer
participates in a supplemental excess retirement plan. Under the aggregated
plans, benefits are determined based on years of service and average annual base
salary (up to $260,000 for years after 1996) for the highest three of the last
10 years of service. Benefits under the plan equal 1% of final average pay plus
0.65% of final average pay in excess of social security covered compensation,
minus any benefits payable under the Company's prior plan. Mr. Stift is covered
by a special, non-qualified, unfunded supplemental retirement plan, which
provides a total retirement benefit of 66 2/3% of base pay averaged over the
full 60 months prior to retirement. This total benefit is reduced by benefits
from the Grove and Hanson pension plans, 50% of the Primary Social Security
benefit and for employment after July 1, 1984 of less than 20 years.
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<PAGE>
All of the Named Executive Officers are participants in the pension plan.
The following table sets forth the estimated credited years of service are
for the Named Executive Officers as of the end of fiscal 1997:
ESTIMATED CREDITED YEARS OF SERVICE AS OF THE END OF FISCAL YEAR 1997
<TABLE>
<CAPTION>
CREDITED YEARS
NAME OF SERVICE
- ----------------------------------------------------------------------------------- -----------------
<S> <C>
R. Stift(1)........................................................................ 13.8
J. Shull........................................................................... 29.3
J. Kolinski........................................................................ 4.4
K. Simmons......................................................................... 12.1
F. Heidinger....................................................................... 4.2
</TABLE>
- ------------------------------
(1) Includes 8.4 credited years of service with Hanson.
DESCRIPTION OF MANAGEMENT OPTION PLAN
In April 1998, Grove Investors adopted the Grove Investors LLC Management
Option Plan (the "Option Plan"). The purpose of the Option Plan is to promote
the interests of Grove Investors and its members by (i) attracting and retaining
exceptional officers and other key employees of Grove Investors and its
affiliates, specifically the Company, and (ii) enabling such individuals to
acquire an equity interest in, and participate in the long-term growth and
financial success of Grove Investors.
Subject to a participant's continued employment with the Company 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 Grove Investors' membership interests subject
to such options on the last day of such fiscal year if the Company 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 (as defined in the Option Plan), be
deemed vested and exercisable immediately prior to such Change in Control. In
addition, as a result of a termination of employment by any participant, Grove
Investors has the assignable right but not the obligation to purchase the
participant's membership interests in Grove Investors 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 the Company 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, STIP awards and two additional payments of
$450,000 on March 31, 1999 and March 31, 2000. See "Short-Term Incentive Plan."
Mr. Bonanno will also receive an amount equal to the positive difference between
the fair market value of shares of stock of Mr. Bonanno's former employer under
options that Mr. Bonanno held that were not exercisable when he terminated his
previous employment and the exercise price thereof. Further, the Company will
purchase Mr. Bonanno's former residence for $675,000.
As part of his employment contract, Mr. Bonanno was granted an option under
the Option Plan to purchase 2.0% of the outstanding membership interests of
Grove Investors, calculated as of the Closing
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Date. See "--Description of Management Option Plan." The contract also provides
that Mr. Bonanno has the option to purchase additional membership interests of
Grove Investors.
In March 1998, Mr. Bonanno entered into a separate employment agreement with
the Company 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 such period based on a yearly salary of $500,000.
Mr. Shull entered into an executive agreement with the Company in June 1998.
Mr. Shull's term of employment is four months, beginning on June 1, 1998. Mr.
Shull is entitled to a ratable payment based on his current salary and STIP
awards. See "Short-Term Incentive Plan." In addition, in consideration of his
agreeing not to compete with the Company through August 31, 2001, and to waive
his change of control agreement, Mr. Shull will receive additional annual
payments through August 31, 2001. See "--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.
Mr. Cripe entered into an employment arrangement with the Company in July
1998. Under his arrangement, Mr. Cripe is entitled to an annual salary of
$250,000, STIP awards and severance payments. See "--Short-Term Incentive Plan."
In addition, Mr. Cripe will be compensated for the loss of certain payments that
he would have been entitled to if he had not terminated his previous employment.
He will also receive certain payments to compensate him for stock options that
were not exercisable when he terminated such employment. Mr. Cripe was also
granted an option under the Option Plan to purchase membership interests of
Grove Investors. See "--Description of Management Option Plan."
TERMINATION AND CHANGE OF CONTROL AGREEMENTS
Effective March 1, 1997, each of Messrs. Heidinger, Kolinski, Shull,
Simmons, Sliwa and Urbanek 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 (as defined therein) or due to
death, disability or retirement, or (b) the executive terminates his employment
for Good Reason, then, in addition to payment for certain unreimbursed expenses,
deferred compensation, health coverage premiums (including reimbursement for any
income tax liability resulting from such payment) 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
prior to the change of control and (y) his highest annual bonus paid or payable
for either of the last two completed years by the Company or its predecessors.
Each executive is also entitled to the above-described severance amount in the
event his employment is within 180 days prior to a change in control terminated
(a) by the Company 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. See "--Employment Arrangements."
SHORT-TERM INCENTIVE PLAN
The Company's short-term incentive plan (the "STIP"), will permit the
Company to pay officers and other key employees, including prospective officers
and employees, of the Company and its affiliates an annual bonus conditioned on
the attainment of certain pre-established financial performance criteria based
on EBITDA targets for the Company and/or designated business sub-units. The STIP
will be administered by the Committee of the Company or any person or persons
designated by the Committee to administer the STIP.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
None of the Named Executive Officers had an employment contract during
fiscal 1997. During fiscal 1997, the compensation of the executive officers of
Grove Worldwide and National Crane, other than
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Mr. Stift, was determined by Mr. Stift and by Mr. Andrew Dougal, Chief Executive
Officer of Hanson. Mr. Stift's compensation was determined by Mr. Dougal. No
other executive officers of Grove Worldwide or National Crane participated in
deliberations regarding their compensation.
MANAGEMENT OF GROVE CAPITAL
Messrs. Henske, Scotto and Bonanno are the directors of Grove Capital. They
are not compensated in any way for acting in their capacity as such. The board
of directors of Grove Capital does not have a compensation committee, audit
committee or nominating committee.
Mr. Bonanno is the Chief Executive Officer of Grove Capital. Mr. Simmons is
the Secretary of Grove Capital. Neither of the executive officers of Grove
Capital are compensated as such. See "--Management Committee and Executive
Officers of the Company" for biographical information on the members and
executive officers of Grove Capital.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
All of the issued and outstanding membership interests of the Company are
beneficially owned by Holdings whose principal address is 201 Main Street, Fort
Worth, Texas 76102. All shares of the issued and outstanding capital stock of
Grove Capital are beneficially owned by the Company, whose principal address is
1565 Buchanan Trail East, Shady Grove, Pennsylvania 17256. All of the issued and
outstanding membership interests of Holdings are beneficially owned by Grove
Investors, whose principal address is 201 Main Street, Fort Worth, Texas 76102.
The following table sets forth certain information regarding beneficial
ownership of the membership interests of Grove Investors, the managing member of
Holdings, by (i) each member of the Company Management Committee individually,
(ii) each Named Executive Officer and (iii) all executive officers and members
of the Company Management Committee as a group:
<TABLE>
<CAPTION>
PERCENTAGE OF
GROVE INVESTORS
NAME OF BENEFICIAL OWNER MEMBERSHIP INTERESTS
- ------------------------------------------------------------------------------------------------------------ ---------------------
<S> <C>
FW Strategic Partners, L.P.(1).............................................................................. 43.83%
FW Grove Coinvestors, L.P.(2)............................................................................... 43.83%
GGEP-Grove, L.P............................................................................................. 2.68%
Squam Lake Investors, II, L.P............................................................................... *
Sunapee Securities, Inc..................................................................................... *
DLJ Capital Corporation..................................................................................... 1.27%
J Crandall.................................................................................................. --
M. George................................................................................................... 1.90%
G. Grinstein................................................................................................ --
S. Gruber................................................................................................... --
R. Henske................................................................................................... --
G. Holthaus................................................................................................. --
A. Scotto................................................................................................... --
S. Bonanno(3)............................................................................................... 2.67%
R. Stift.................................................................................................... --
J. Shull.................................................................................................... *
J. Bust..................................................................................................... 1.0%
J. Kolinski................................................................................................. *
K. Simmons.................................................................................................. *
F. Heidinger................................................................................................ --
T. Bratthauar............................................................................................... *
J. Wheeler.................................................................................................. *
All executive officers and members of the Company Management Committee as a group (13 persons).............. 7.10%
</TABLE>
- ------------------------
* Indicates less than one percent.
(1) The address of this entity is 201 Main Street, Suite 3200, Fort Worth, Texas
76102. The general partner of FW 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 these
membership interests. Mr. Crandall disclaims beneficial ownership of these
membership interests.
(2) The address of this entity is 201 Main Street, Suite 3200, Fort Worth, Texas
76102 The general partner of FW Grove Coinvestors, L.P. is FW Group Genpar,
Inc. ("Group Genpar"). David G. Brown is the sole stockholder of Group
Genpar. Accordingly, Mr. Brown may be deemed to be the beneficial owner of
these membership interests. Mr. Brown disclaims beneficial ownership of
these membership interests.
(3) Mr. Bonanno has options to acquire up to an additional 2.0% of the
outstanding membership interests of Grove Investors, calculated as of the
Closing Date.
Certain members of senior management of the Company (the "Senior Management
Members") have purchased approximately 5.0% of the membership interests of Grove
Investors. The purchase price of such interests was partially financed through
approximately $2.5 million in loans from the Company. The Senior Management
Members have also been granted options to purchase membership interests of Grove
Investors under the Option Plan. See "Management--Description of Management
Option Plan." Grove Investors membership interests held by Senior Management
Members are subject to calls by Grove Investors upon a termination of
employment. See "Management-- Description of Management Option Plan."
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CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
OPERATING AGREEMENTS
GROVE WORLDWIDE LLC OPERATING AGREEMENT
The Company is wholly owned by Holdings, which is also the managing member.
As managing member, Holdings has delegated the management of the Company to the
Company Management Committee. Subject to restrictions contained in the New
Credit Facility and the Indenture, all distributions in respect of membership
interests of the Company will be made to Holdings.
GROVE HOLDINGS LLC OPERATING AGREEMENT
Grove Holdings is wholly owned by Grove Investors, which is also the
managing member. As managing member, Grove Investors has delegated the
management of the Company to the Holdings Management Committee, which is
identical in composition to the Company Management Committee. Subject to
restrictions contained in the Debenture Indenture, all distributions in respect
of membership interests of Holdings will be made to Grove Investors.
AGREEMENTS WITH GEORGE GROUP INC. FOR MANAGEMENT CONSULTING SERVICES
George Group provides consulting services to facilitate the Company's
development and achievement of its business plan, including services with
respect to strategic planning, operations and financial matters. For such
services, George Group will be paid cash fees equivalent to their costs and will
be reimbursed for its out-of-pocket expenses. George Group has advised the
Company that it estimates its engagement will be completed within 48 months and
that the total cash fees and expenses would approximate $14 million. The Company
has 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 Company Management Committee,
is Chief Executive Officer and Chairman of the Board of George Group. See "The
Acquisition."
AGREEMENTS WITH CERTAIN EXECUTIVE OFFICERS
The Company has entered into certain agreements with Messrs. Bonanno, Stift,
Simmons, Urbanek, Kolinski and Shull. See "Management--Employment Arrangements"
and "--Termination and Change of Control Agreements." The Company has also
provided approximately $2.5 million in loans to the Senior Management Members to
finance their investments in the membership interests of Grove Investors. In
addition, the Company has entered into an executive agreement with Mr. Shull.
See "Management-- Employment Arrangements."
CERTAIN TRANSACTIONS WITH HANSON PRIOR TO THE CLOSING DATE
Prior to the consummation of the Transactions, the Company and its
subsidiaries were affiliates of Hanson. Hanson provided the Company and its
subsidiaries with various services, including, without limitation, cash
management, tax reporting and risk management services and charged a management
fee for such services. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Results of Operations." Prior to the
consummation of the Transactions, Hanson also purchased small quantities of the
Company's products on an arms-length basis.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
NEW CREDIT FACILITY
As part of the Transactions, the Company entered into the New Credit
Facility with a syndicate of banks, as lenders, and Chase, as administrative
agent, DLJ, as documentation agent, and BankBoston, as syndication agent. Each
of Chase and DLJ is an affiliate of one of the Initial Purchasers. The New
Credit Facility consists of a $200 million term loan facility, which was fully
drawn at Closing (the "Term Loan Facility"), and a $125 million revolving credit
facility (the "Revolving Credit Facility"). The Revolving Credit Facility
enables the Issuers to obtain revolving credit loans and the issuance of letters
of credit for the account of the Company from time to time 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 New Credit Facility will
bear interest (a) in the case of loans in U.S. dollars, at the highest of (x)
1/2 of 1% in excess of the Federal Funds Effective Rate (as defined in the New
Credit Facility), (y) 1.0% in excess of a certificate of deposit rate and (z)
the Agent's prime rate, plus the Applicable Margin (as defined in the New Credit
Facility), or (b) in the case of all loans, the relevant Eurocurrency Rate (as
defined in the New Credit Facility) as determined by the Agent, plus the
Applicable Margin. The Company will also pay certain fees with respect to the
New Credit Facility. The Term Loan Facility has a term of eight years unless
terminated sooner upon an event of default (as defined in the New Credit
Facility). The Term Loan Facility must be repaid in semi-annual installments
until the date that is eight years after the closing date of the Term Loan
Facility (the "Closing Date") in an aggregate amount for each year following the
Closing Date of (i) $2 million for the first six years, (ii) $88 million during
the seventh year and (iii) $100 million during the eighth year. The Revolving
Credit Facility has a term of seven years, unless terminated sooner upon an
event of default, and outstanding revolving credit loans will be payable on such
date or such earlier date as may be accelerated following the occurrence of any
event of default.
The obligations of the Company under the New Credit Facility are guaranteed
by Holdings and each of the Company's domestic subsidiaries (the "Guarantors").
The obligations of the Company under the New Credit Facility are secured by a
first priority lien (subject to permitted encumbrances) on substantially all of
the Company's and each Guarantor's real, personal and intellectual property and
on the capital stock of the Company, all of the capital stock of the Company's
domestic subsidiaries and 65% of the capital stock of the Company's first-tier
foreign subsidiaries (such amount to be increased to 100% for a first-tier
foreign subsidiary if, and only for so long as, (i) such first-tier foreign
subsidiary has elected, and continues to elect, to be treated as a partnership
for United States federal income tax purposes (any such first-tier foreign
subsidiary, a "Partnership Subsidiary"), and (ii) the pledge of the greater
percentage does not result in material adverse tax consequences). Each
Partnership Subsidiary will pledge its equity interests in its subsidiaries to
secure any intercompany notes owing by it, but only so long as (i) such
Partnership Subsidiary continues to elect to be treated as a partnership for
United States federal income tax purposes and (ii) such pledge does not result
in material adverse tax consequences.
The New Credit Facility contains various covenants that restrict the Company
from taking various actions and that require the Company to achieve and maintain
certain financial covenants. The New Credit Facility includes covenants relating
to balance sheet, fixed charge coverage and leverage ratios, and limitations on,
among other things, capital expenditures, liens, indebtedness, guarantees,
mergers, acquisitions, disposition of assets, dividends, changes in business
activities and certain corporate activities. The New Credit Facility prohibits
the Company from prepaying the Notes.
The New Credit Facility also contains events of default, including
nonpayment of principal, interest or fees, violation of covenants, inaccuracy of
representations or warranties in any material respect, cross default and cross
acceleration to certain other indebtedness, bankruptcy, ERISA, material
judgments and certain changes in control of the Company or Holdings.
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Oak Hill Securities Fund, L.P. ("OHSF") participated as a lender in the Term
Loan Facility and received customary fees in connection therewith. OHSF is a
Delaware limited partnership that acquires and actively manages a diverse
portfolio of investments principally in leveraged companies. Certain principals
of the general partner of OHSF and Oak Hill Advisors, Inc., the adviser of OHSF,
have business relationships with Keystone, and Keystone has an equity investment
in OHSF. Keystone is a member of the Investor Group. See "The Transactions."
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DESCRIPTION OF NOTES
GENERAL
The Senior Subordinated Notes were, and the Exchange Notes offered hereby
will be, issued pursuant to the Indenture, a copy of which is filed as an
exhibit to the Registration Statement of which this Prospectus forms a part, in
a private transaction that was not subject to the registration requirements of
the Securities Act. The form and terms of the Exchange Notes are identical in
all material respects to those of the Senior Subordinated Notes, except for
certain transfer restrictions and registration rights relating to the Existing
Notes, which do not apply to the Exchange Notes. The terms of the Notes include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act. The Notes are subject to all such terms, and Holders
of Notes are referred to the Indenture and the Trust Indenture Act for a
statement thereof. The following summary of the material provisions of the
Indenture does not purport to be complete and is qualified in its entirety by
reference to the Indenture, including the definitions therein of certain terms
used below. Copies of the Indenture and Registration Rights Agreement are
available as set forth below under "--Additional Information." The definitions
of certain terms used in the following summary are set forth below under
"--Certain Definitions." For purposes of this summary, the term "Company" refers
only to Grove Worldwide and not to any of its Subsidiaries.
The Notes are general unsecured obligations of the Issuers, subordinated in
right of payment to all existing and future Senior Debt of the Issuers,
including Indebtedness pursuant to the New Credit Facility. The Issuers'
obligations under the Notes are guaranteed on a senior subordinated basis by the
Subsidiary Guarantors. See "--Subsidiary Guarantees." As of June 27, 1998, on a
pro forma basis after giving effect to the Transactions, the Notes would have
been subordinated to $238.8 million of Senior Debt and effectively subordinated
to $118.6 million of liabilities of the Company's subsidiaries that are not
Subsidiary Guarantors. As of June 27, 1998, approximately $99.8 million was
available for additional borrowing under the New Credit Facility. The Indenture
will permit the incurrence of additional Senior Debt in the future. See "Risk
Factors--Subordination."
The operations of the Company are conducted through its Subsidiaries and,
therefore, the Issuers are dependent upon the cash flow of such Subsidiaries to
meet their obligations, including their obligations under the Notes. All of the
existing domestic Restricted Subsidiaries of the Company (other than Grove
Capital) are, and all future domestic Restricted Subsidiaries are expected to
be, Subsidiary Guarantors. As of the date of the Indenture, all of the Company's
Subsidiaries are Restricted Subsidiaries. However, under certain circumstances,
the Company is able to designate current or future Subsidiaries as Unrestricted
Subsidiaries. Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants set forth in the Indenture. The Issuers and their
Restricted Subsidiaries are also subject to certain covenants, which are
contained in the Debenture Indenture and certain other agreements. While the
restrictions placed on Holdings and its subsidiaries in the Debenture Indenture
and certain other agreements are substantially the same as those applicable to
the Company and its subsidiaries under the Indenture, additional indebtedness of
Holdings (including that represented by the Debentures) will have the effect of
making the covenants contained in the Debenture Indenture that are applicable to
the Company and its subsidiaries (including those described herein under the
captions "--Certain Covenants--Restricted Payments" and "--Incurrence of
Indebtedness and Issuance of Disqualified Stock") more restrictive than the
corresponding covenants contained in the Indenture.
Grove Capital is a wholly owned subsidiary of the Company that was
incorporated in Delaware solely for the purpose of serving as a co-issuer of the
Senior Subordinated Notes in order to facilitate the Offering. The Company
believes that certain prospective purchasers of the Senior Subordinated Notes
would have been restricted in their ability to purchase debt securities of
limited liability companies, such as the Company, unless such debt securities
were jointly issued by a corporation. Other than serving as a co-issuer of the
Notes and as a borrower under the New Credit Facility, Grove Capital has no
assets, operations or revenues and is prohibited from engaging in any business
activities. As a result, holders of
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the Notes should not expect Grove Capital to participate in servicing the
interest and principal obligations on the Notes.
PRINCIPAL, MATURITY AND INTEREST
The Notes are limited in aggregate principal amount to $325.0 million, of
which $225.0 million was issued in the Offering, and will mature on May 1, 2008.
Interest on the Notes will accrue at the rate of 9 1/4% per annum and will be
payable semi-annually in arrears on May 1 and November 1 of each year,
commencing November 1, 1998, to Holders of record on the immediately preceding
April 15 and October 15. Additional Notes may be issued 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 Senior Subordinated Notes and the Exchange Notes are
treated as a single class for all purposes under the Indenture, including
without limitations, waivers, amendments, redemptions and offers to purchase.
Interest on the Notes will accrue from the most recent date to which interest
has been paid or, if no interest has been paid, from the date of original
issuance. Interest is computed on the basis of a 360-day year comprised of
twelve 30-day months. Principal, premium and Liquidated Damages, if any, and
interest on the Notes will be payable at the office or agency of the Issuers
maintained for such purpose within the City and State of New York or, at the
option of the Issuers, payment of principal, premium, interest and Liquidated
Damages, if any, may be made by check mailed to the Holders of the Notes at
their respective addresses set forth in the register of Holders of Notes;
PROVIDED that all payments of principal, premium, interest and Liquidated
Damages, if any, with respect to Notes the Holders of which have given wire
transfer instructions to the Issuers will be required to be made by wire
transfer of immediately available funds to the accounts specified by the Holders
thereof. Until otherwise designated by the Issuers, the Issuers' office or
agency in New York will be the office of the Trustee maintained for such
purpose. The Exchange Notes, like the Senior Subordinated Notes, will be issued
in denominations of $1,000 and integral multiples thereof.
SUBORDINATION
The payment of principal of, premium, if any, and interest on the Notes are
subordinated in right of payment, as set forth in the Indenture, to the prior
payment in full of all Senior Debt, whether outstanding on the date of the
Indenture or thereafter incurred. The Notes will rank equal in right of payment
with all other senior subordinated Indebtedness of the Issuers and senior in
right of payment to all subordinated Indebtedness.
Upon any distribution to creditors of the Issuers in a liquidation or
dissolution of either of the Issuers or in a bankruptcy, reorganization,
insolvency, receivership or similar proceeding relating to either of the Issuers
or their property, an assignment for the benefit of creditors or any marshaling
of either of the Issuers' assets and liabilities, the holders of Senior Debt are
entitled to receive payment in full of all Obligations due in respect of such
Senior Debt (including interest after the commencement of any such proceeding at
the rate specified in the applicable Senior Debt whether or not such interest is
allowed in such proceeding) before the Holders of Notes are entitled to receive
any payment or distribution of any kind with respect to the Notes, and until all
Obligations with respect to Senior Debt are paid in full, any distribution to
which the Holders of Notes would be entitled shall be made to the holders of
Senior Debt (except that Holders of Notes may receive and retain Permitted
Junior Securities and payments or distributions made from the trust described
under "--Legal Defeasance and Covenant Defeasance").
The Issuers also may not make any payment upon or in respect of the Notes
(except in Permitted Junior Securities or from the trust described under
"--Legal Defeasance and Covenant Defeasance") if (i) a default in the payment of
the principal of, premium, if any, or interest on Designated Senior Debt occurs
and is continuing beyond any applicable period of grace or (ii) any other
default occurs and is continuing with respect to Designated Senior Debt that
permits holders of the Designated Senior Debt as to which such default relates
to accelerate its maturity and the Trustee receives a notice of such default (a
"Payment Blockage Notice") from the Issuers or the holders of any Designated
Senior Debt or the trustee
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or agent acting on behalf of the holders of such Designated Senior Debt.
Payments on the Notes may and shall be resumed (a) in the case of a payment
default, upon the date on which such default is cured or waived and (b) in case
of a nonpayment default, the earlier of the date on which such nonpayment
default is cured or waived or 179 days after the date on which the applicable
Payment Blockage Notice is received, unless the maturity of any Designated
Senior Debt has been accelerated. No new period of payment blockage may be
commenced unless and until 360 days have elapsed since the effectiveness of the
immediately prior Payment Blockage Notice. No nonpayment default that existed or
was continuing on the date of delivery of any Payment Blockage Notice to the
Trustee shall be, or be made, the basis for a subsequent Payment Blockage
Notice.
The Indenture also requires that the Issuers promptly notify holders of
Senior Debt if payment of the Notes is accelerated because of an Event of
Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, Holders of Notes may recover less ratably than
creditors of the Issuers who are holders of Senior Debt. The Indenture limits,
subject to certain financial tests, the amount of additional Indebtedness,
including Senior Debt, that the Issuers and their Subsidiaries can incur. See
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Disqualified
Stock."
SUBSIDIARY GUARANTEES
The Issuers' payment obligations under the Notes are fully and
unconditionally guaranteed on a joint and several basis by the Subsidiary
Guarantors. The Subsidiary Guarantors are Grove U.S. LLC, a Delaware limited
liability company, Grove Finance LLC, a Delaware limited liability company,
Crane Acquisition Corp., a Delaware corporation, Crane Holding Inc., a Delaware
corporation, and National Crane Corporation, a Delaware corporation. Grove U.S.
LLC and National Crane Corporation are the Company's domestic operating
subsidiaries and together hold substantially all of the Company's domestic
assets. The remaining subsidiaries of the Company, which are foreign
subsidiaries, have not issued, and are not expected to issue, Subsidiary
Guarantees. For more information regarding the assets, liabilities, revenues and
cash flows of the Subsidiary Guarantors and the Company's non-guarantor
subsidiaries, see Note 19 to the Notes to the Combined Financial Statements of
the Company and Note 9 to the Notes to the Unaudited Condensed Financial
Statements of the Company. The obligations of each subsidiary guarantor under
its Subsidiary Guarantee are limited so as not to constitute a fraudulent
conveyance under applicable law. See, however, "Risk Factors--Risk of Fraudulent
Transfer Liability."
The Indenture provides that no Subsidiary Guarantor may consolidate with or
merge with or into (whether or not such Subsidiary Guarantor is the surviving
Person), another Person whether or not affiliated with such Subsidiary Guarantor
unless (i) subject to the provisions of the following paragraph, the Person
formed by or surviving any such consolidation or merger (if other than such
Subsidiary Guarantor) assumes all the obligations of such Subsidiary Guarantor
pursuant to a supplemental indenture in form and substance reasonably
satisfactory to the Trustee, under the Notes, the Subsidiary Guarantees, the
Indenture, and the Registration Rights Agreement; (ii) immediately after giving
effect to such transaction, no Default or Event of Default exists; and (iii) the
Issuers would be permitted by virtue of the Company's pro forma Fixed Charge
Coverage Ratio, immediately after giving effect to such transaction, to incur at
least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the covenant described above under the caption
"--Incurrence of Indebtedness and Issuance of Disqualified Stock"; provided that
the merger of any Subsidiary Guarantor with or into the Company or another
Subsidiary Guarantor under circumstances where the Company or such Subsidiary
Guarantor, as applicable, is the surviving Person shall not be subject to the
foregoing provisions.
The Indenture provides that in the event of a sale or other disposition of
all or substantially all of the assets of any Subsidiary Guarantor, by way of
merger, consolidation or otherwise, or a sale or other disposition of all of the
capital stock of any Subsidiary Guarantor, then such Subsidiary Guarantor (in
the event of a sale or other disposition, by way of such a merger, consolidation
or otherwise, of all of the
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capital stock of such Subsidiary Guarantor) or the corporation or other entity
acquiring the property (in the event of a sale or other disposition of all or
substantially all of the assets of such Subsidiary Guarantor) will be released
and relieved of any obligations under its Subsidiary Guarantee; PROVIDED that
the Net Proceeds of such sale or other disposition are applied in accordance
with the applicable provisions of the Indenture. See "Redemption or Repurchase
at Option of Holders--Asset Sales." In addition, the Indenture provides that, in
the event the Company designates a Restricted Subsidiary to become an
Unrestricted Subsidiary in accordance with the Indenture, then such Restricted
Subsidiary shall, in accordance with the Indenture, be released from its
obligations under its Subsidiary Guarantee upon the effectiveness of such
designation.
OPTIONAL REDEMPTION
The Notes are redeemable at any time at the option of the Issuers, in whole
or in part upon not less than 30 nor more than 60 days' notice, in cash at the
redemption prices (expressed as percentages of principal amount) set forth below
plus accrued and unpaid interest and Liquidated Damages, if any, thereon to the
applicable redemption date, if redeemed during the twelve-month period beginning
on May 1 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------------------------------- -----------
<S> <C>
2003.................................................................................. 104.625%
2004.................................................................................. 103.083%
2005.................................................................................. 101.542%
2006 and thereafter................................................................... 100.000%
</TABLE>
Notwithstanding the foregoing, at any time prior to May 1, 2001, the Issuers
may (but will not have the obligation to) on any one or more occasions redeem up
to 35% of the aggregate principal amount of Notes originally issued at a
redemption price equal to 109.250% of the principal amount thereof, plus accrued
and unpaid interest and Liquidated Damages, if any, thereon to the redemption
date, with the net cash proceeds of one or more Public Equity Offerings;
PROVIDED that at least 65% of the aggregate principal amount of Notes originally
issued remain outstanding immediately after the occurrence of such redemption
(excluding Notes held by the Company and its Subsidiaries); and PROVIDED,
FURTHER, that such redemption shall occur within 60 days of the date of the
closing of such Public Equity Offering.
SELECTION AND NOTICE
If less than all of the Notes are to be redeemed or repurchased at any time,
selection of Notes for redemption or repurchase will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Notes are listed, or, if the Notes are not so listed, on a
pro rata basis, by lot or by such method as the Trustee shall deem fair and
appropriate; PROVIDED that no Notes of $1,000 or less shall be redeemed in part.
Notices of redemption shall be mailed by first class mail at least 30 but not
more than 60 days before the redemption date to each Holder of Notes to be
redeemed at its registered address. Notices of redemption or repurchase may not
be conditional. If any Note is to be redeemed or repurchased in part only, the
notice of redemption or repurchase that relates to such Note shall state the
portion of the principal amount thereof to be redeemed or repurchased. A new
Note in principal amount equal to the unredeemed or unrepurchased portion
thereof will be issued in the name of the Holder thereof upon cancellation of
the original Note. Notes 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 ceases to accrue on Notes or
portions of them called for redemption or repurchase.
MANDATORY REDEMPTION
The Issuers are not required to make mandatory redemption or sinking fund
payments with respect to the Notes.
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REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Notes will have
the right to require the Issuers to repurchase all or any part (equal to $1,000
or an integral multiple thereof) of such Holder's Notes pursuant to the offer
described below (the "Change of Control Offer") at an offer price in cash equal
to 101% of the aggregate principal amount thereof plus accrued and unpaid
interest and Liquidated Damages thereon, if any, to the date of purchase (the
"Change of Control Payment"). Within 30 days following any Change of Control,
the Issuers will mail a notice to each Holder describing the transaction or
transactions that constitute the Change of Control and offering to repurchase
Notes on the date specified in such notice, which date shall be no earlier than
30 days and no later than 60 days from the date such notice is mailed (the
"Change of Control Payment Date"), pursuant to the procedures required by the
Indenture and described in such notice. The Issuers will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Notes 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, the Company will comply with the applicable
securities laws and regulations and shall not be deemed to have breached its
obligations described in the Indenture by virtue thereof.
On the Change of Control Payment Date, the Issuers will, to the extent
lawful, (1) accept for payment all Notes or portions thereof properly tendered
pursuant to the Change of Control Offer, (2) deposit with the Paying Agent an
amount equal to the Change of Control Payment in respect of all Notes or
portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Issuers. The Paying Agent will promptly mail to each Holder of Notes so tendered
the Change of Control Payment for such Notes, and the Trustee will promptly
authenticate and mail (or cause to be transferred by book entry) to each Holder
a new Note equal in principal amount to any unpurchased portion of the Notes
surrendered, if any; PROVIDED that each such new Note will be in a principal
amount of $1,000 or an integral multiple thereof. The Indenture provides that,
prior to complying with the provisions of this covenant, but in any event within
90 days following a Change of Control, the Issuers will either repay all
outstanding Senior Debt or obtain the requisite consents, if any, under the
agreements governing outstanding Senior Debt to permit the repurchase of Notes
required by this covenant. The Issuers 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 are applicable whether or
not any other provisions of the Indenture are applicable (and will not affect
the subordination provisions). Except as described above with respect to a
Change of Control, the Indenture does not contain provisions that permit the
Holders of the Notes to require that the Issuers repurchase or redeem the Notes
in the event of a takeover, recapitalization or similar transaction. The New
Credit Agreement currently prohibits the Issuers from repurchasing any Notes and
also provides that certain change of control events with respect to the Issuers
would constitute a default thereunder. Any future credit agreements or other
agreements relating to Senior Debt to which the Issuers become a party may
contain similar restrictions and provisions. In the event a Change of Control
occurs at a time when the Issuers are prohibited from purchasing Notes, the
Issuers could seek the consent of their lenders to the purchase of Notes or
could attempt to refinance the borrowings that contain such prohibition. If the
Issuers do not obtain such a consent or repay such borrowings, the Issuers will
remain prohibited from purchasing Notes. In such case, the Issuers' failure to
purchase tendered Notes would constitute an Event of Default under the Indenture
which would, in turn, constitute as default under the New Credit Agreement. In
such circumstances, the subordination provisions in the Indenture would likely
restrict payments to the Holders of Notes. In addition, the exercise by Holders
of the Notes of their right to require the Company to repurchase the Notes could
cause a default under such Senior Debt, even if the Change of Control itself
does not, due to the financial effect of such
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repurchases on the Company. Finally, the Company's ability to pay cash to the
Holders of Notes upon a repurchase may be limited by the Company's then existing
financial resources.
The Issuers 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 the Issuers and
purchases all Notes validly tendered and not withdrawn under such Change of
Control Offer.
"Change of Control" means the occurrence of any of the following: (i) 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 Holdings and its Subsidiaries (determined on
a consolidated basis) or the Company and its Subsidiaries (determined on a
consolidated basis), in each case, to any "person" (as such term is used in
Section 13(d)(3) of the Exchange Act) other than the Company or a Wholly Owned
Restricted Subsidiary or any Permitted Holder or Permitted Holders, (ii) the
adoption of a plan relating to the liquidation or dissolution of one of both of
the Issuers (other than in a transaction which complies with the provisions
described under "--Merger, Consolidation or Sale of Assets"), (iii) the
consummation of any transaction (including, without limitation, any merger or
consolidation) the result of which is that any "person" (as defined above),
other than one or more Permitted Holders, becomes the "beneficial owner" (as
such term is defined 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 such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 50% of the Voting Stock of the
Company (measured by voting power rather than number of shares) and the
Permitted Holders do not beneficially own as much or more of the Voting Stock of
the Company (measured by voting power rather than by number of shares) than such
person, (iv) the first day on which a majority of the members of the Management
Committee of the Company are not Continuing Members or (v) the first day on
which the Company fails to own 100% of the issued and outstanding Equity
Interests of Grove Capital (other than by reason of the merger of Grove Capital
with and into a corporate successor to the Company).
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 the Company 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 Notes to require
the Issuers to repurchase such Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of the Company
and its Subsidiaries taken as a whole to another Person or group may be
uncertain.
"Continuing Members" means, as of any date of determination, any member of
the Management Committee of the Company who (i) was a member of such Management
Committee on the date of the Indenture or (ii) was nominated for election or
elected to such Management Committee with the approval of a majority of the
Continuing Members who were members of such Management Committee at the time of
such nomination or election.
"Permitted Holders" means (i) any of Keystone, Inc., FW Grove Coinvestors,
L.P., FW Strategic Partners, L.P., George Group Employee Partners-Grove, L.P.
and Michael George and their respective affiliates on the date of the Indenture;
(ii) any of the Permitted Transferees of the Persons referred to in clause (i);
and (iii) any person or group which holds, directly or indirectly, Equity
Interests in the Company so long as a majority of the Equity Interests in the
Company are beneficially owned by the Persons referred to in clauses (i) and
(ii).
"Permitted Transferee" means, with respect to any Person: (a) 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 in such Person or such individual's spouse or children
or any trust for the benefit of such Persons; and (b) in the
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case of any Person who is a natural person, the heirs, executors, administrators
or personal representatives upon death of such Person or upon the incompetence
or disability of such Person for purposes of the protection and management of
such individual's assets.
ASSET SALES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company
(or the Restricted Subsidiary, as the case may be) receives consideration at the
time of such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Management Committee set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 75% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of cash and
Cash Equivalents; PROVIDED that the amount of (x) any liabilities (as shown on
the Company's or such Restricted Subsidiary's most recent balance sheet), of the
Company or any Restricted Subsidiary (other than contingent liabilities and
liabilities that are by their terms subordinated to the Notes or any guarantee
thereof) that are assumed by the transferee of any such assets pursuant to a
customary novation agreement that releases the Company or such Restricted
Subsidiary from further liability and (y) any securities, Notes or other
obligations received by the Company or any such Restricted Subsidiary from such
transferee that are converted by the Company or such Restricted Subsidiary into
cash (to the extent of the cash received) within 60 days following the closing
of such Asset Sale, shall be deemed to be cash for purposes of this provision.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Company or any Restricted Subsidiary may apply such Net Proceeds, at its
option, (a) to repay Senior Debt, (b) to the acquisition of a majority of the
assets of, or a majority of the Voting Stock of, another Permitted Business, the
making of a capital expenditure or the acquisition of other long-term assets
that are used or useful in a Permitted Business or (c) for a combination of uses
described in clauses (a) and (b). Pending the final application of any such Net
Proceeds, the Company and its Restricted Subsidiaries may temporarily reduce
revolving credit borrowings or otherwise invest such Net Proceeds in any manner
that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that
are not applied or invested as provided in the first sentence of this paragraph
are deemed to constitute "Excess Proceeds." When the aggregate amount of Excess
Proceeds exceeds $10.0 million, the Issuers are required to make an offer to all
Holders of Notes (an "Asset Sale Offer") to purchase the maximum principal
amount of Notes that may be purchased out of the Excess Proceeds, at an offer
price in cash in an amount equal to 100% of the principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of repurchase, in accordance with the procedures set forth in the Indenture. To
the extent that any Excess Proceeds remain after consummation of an Asset Sale
Offer, the Company may use such Excess Proceeds for any purpose not otherwise
prohibited by the Indenture. If the aggregate principal amount of Notes tendered
into such Asset Sale Offer surrendered by Holders thereof exceeds the amount of
Excess Proceeds, the Trustee shall select the Notes to be purchased on a pro
rata basis. Upon completion of such offer to purchase, the amount of Excess
Proceeds shall be reset at zero.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or distribution on account of the Company's
or any of its Restricted Subsidiaries' Equity Interests (including, without
limitation, any payment in connection with any merger or consolidation involving
the Company or any of its Restricted Subsidiaries) or to the direct or indirect
holders of the Company's or any of its Restricted Subsidiaries' Equity Interests
in their capacity as such (other than dividends or distributions payable in
Equity Interests (other than Disqualified Stock) of the Company or dividends or
distributions payable to the Company or a Restricted Subsidiary of the Company);
(ii) purchase, redeem or otherwise
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acquire or retire for value (including, without limitation, in connection with
any merger or consolidation involving the Issuers) any Equity Interests of the
Company (other than Equity Interests owned by the Company or any Restricted
Subsidiary of the Company) or any direct or indirect parent of the Company;
(iii) 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 Notes (other than any subordinated indebtedness held by the Company or any
Subsidiary Guarantor), except a payment of interest or principal at Stated
Maturity; or (iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively referred
to as "Restricted Payments"), unless, at the time of and after giving effect to
such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such 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) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Indenture (excluding Restricted Payments
permitted by clauses (ii), (iii), (iv), (vi), (viii), (x), (xi), (xiii) and
(xiv) of the next succeeding paragraph), is less than the sum, without
duplication, of (i) 50% of the Consolidated Net Income of the Company for
the period (taken as one accounting period) from the beginning of the first
fiscal quarter commencing after the date of the Indenture to the end of the
Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit), plus (ii) 100% of the aggregate net cash proceeds received by the
Company since the date of the Indenture as a contribution to its equity
capital or from the issue or sale of Equity Interests of the Company (other
than Disqualified Stock) or from the issue or sale of Disqualified Stock or
debt securities of the Company that have been converted into such Equity
Interests (other than Equity Interests (or Disqualified Stock or convertible
debt securities) sold to a Subsidiary of the Company), plus (iii) 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 (iv) 50% of any dividends received by
the Company or a Wholly Owned Restricted Subsidiary after the date of the
Indenture from an Unrestricted Subsidiary of the Company, to the extent that
such dividends were not otherwise included in Consolidated Net Income of the
Company for such period, plus (v) 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 the Company's
Investment in such Subsidiary as of the date of such redesignation or (B)
such fair market value as of the date on which such Subsidiary was
originally designated as an Unrestricted Subsidiary.
The foregoing provisions does not prohibit: (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any PARI PASSU or subordinated Indebtedness or Equity Interests
of the Company or any Subsidiary Guarantor in exchange for, or out of the net
cash proceeds of the substantially concurrent sale (other than to a Subsidiary
of the Company) of, other Equity Interests of the Company (other than any
Disqualified Stock); PROVIDED that the amount of any such net cash proceeds that
are utilized for any such redemption, repurchase, retirement, defeasance or
other acquisition shall be excluded from clause (c) (ii) of the preceding
paragraph; (iii) the defeasance, redemption, repurchase or other acquisition of
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness;
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(iv) the payment of any dividend or making of any distribution by a Subsidiary
of the Company to the holders of its Equity Interests on a pro rata basis; (v)
the repurchase, redemption or other acquisition or retirement for value of any
Equity Interests of Grove Investors, Holdings or the Company or any Subsidiary
of the Company held by any former member of Holdings' or the Company's (or any
of their Subsidiaries') Management Committee or any former officer, employee or
director of the Company or any of its subsidiaries pursuant to the Holdings
operating agreement or the Grove Investors operating agreement, any equity
subscription agreement, stock option agreement, employment agreement or other
similar agreements and any dividends or distributions to Holdings and Grove
Investors to fund such purchase, redemption or other acquisition or retirement;
PROVIDED that (A) the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests shall not exceed (1) $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
(2)) of $10.0 million PLUS (2) the aggregate cash proceeds received by Grove
Investors, Holdings or the Company during such calendar year from any reissuance
of Equity Interests by Grove Investors, Holdings or the Company to members of
management of the Company 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
(2) above shall be excluded from clause (c)(ii) of the preceding paragraph; (vi)
so long as the Company 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 the Company,
prepared based on such officer's best knowledge, at least annually),
distributions to members of the Company in an amount with respect to any period
after December 31, 1997 not to exceed the Tax Amount of the Company for such
period; PROVIDED, HOWEVER, that such distributions 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 the Company (or, if the Company 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 the Company becomes
included in a consolidated tax group for federal income tax purposes, payments
to Holdings or 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 the Company and its subsidiaries on a stand-alone basis for such
period; (vii) any Investment to the extent that the consideration therefor
consists of the net cash proceeds of the concurrent issue and sale (other than
to a Restricted Subsidiary) of Equity Interests of the Company (other than any
Disqualified Stock); (viii) the payment of dividends or the making of loans or
advances for costs and expenses incurred by Grove Investors or Holdings in its
capacity as a holding company, or for services rendered by Grove Investors or
Holdings on behalf of the Company in an aggregate amount not to exceed $2.0
million in each calendar year pursuant to this clause (viii); (ix) so long as no
Default or Event of Default has occurred and is continuing and the Company 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," the declaration and payment of dividends to holders of any class or
series of Disqualified Stock of the Company, or any Subsidiary Guarantor 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"; (x) Investments made by the Company within 30 days of the date of the
Indenture, the proceeds of which are used to fund the Transactions or capitalize
Restricted Subsidiaries; (xi) repurchase of Equity Interests deemed to occur
upon exercise of stock options if such Equity Interests represent a portion of
the exercise price of such options; (xii) Restricted Investments having an
aggregate fair market value, taken together with all other Restricted
Investments made pursuant to this clause (xii) that are at that time
outstanding, not to exceed $20.0 million (with the fair market value of each
Investment being measured at the time made and without giving effect to
subsequent changes in value); (xiii) distributions or payments of Receivables
Fees; (xiv) dividends or distributions to Grove Investors or Holdings to fund
severance costs incurred by Grove Investors or Holdings in connection with the
Transactions; and (xv) Restricted Payments not to exceed $10.0 million since the
date of the Indenture.
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The Management Committee may designate any Restricted Subsidiary, other than
Grove Capital, to be an Unrestricted Subsidiary if such designation would not
cause a Default. For purposes of making such determination, all outstanding
Investments by the Company and its Restricted Subsidiaries (except to the extent
repaid in cash) in the Subsidiary so designated are deemed to be Restricted
Payments at the time of such designation and will reduce the amount available
for Restricted Payments under the first paragraph of this covenant. All such
outstanding Investments are deemed to constitute Investments in an amount equal
to the fair market value of such Investments at the time of such designation.
Such designation will only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
For purposes of determining compliance with this covenant, in the event that
a Restricted Payment meets the criteria of more than one of the exceptions
described in (i) through (xv) above or is entitled to be made pursuant to the
first paragraph of this covenant, the Company shall, in its sole discretion,
classify such Restricted Payment in any manner that complies with the covenant.
The amount of all Restricted Payments (other than cash) shall 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 the Company or such Restricted
Subsidiary, as the case may be, pursuant to the Restricted Payment. The fair
market value of any non-cash Restricted Payment shall be determined by the
Management Committee whose resolution with respect thereto shall be delivered to
the Trustee, such determination to be based upon an opinion or appraisal issued
by an accounting, appraisal or investment banking firm of national standing if
such fair market value exceeds $5.0 million. Not later than the date of making
any Restricted Payment, the Issuers shall deliver to the Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by the covenant "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 the Company 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) and that the Company will not issue any Disqualified Stock and
will not permit any of its Subsidiaries to issue any shares of preferred stock;
PROVIDED, HOWEVER, that the Issuers may incur Indebtedness (including Acquired
Debt) or issue shares of Disqualified Stock and the Company's Subsidiaries may
incur Indebtedness or issue preferred equity if the Fixed Charge Coverage Ratio
for the Company's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date on
which such additional Indebtedness is incurred or such Disqualified Stock is
issued would have been at least 2.0 to 1, determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred, or the Disqualified Stock had been
issued, as the case may be, at the beginning of such 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"):
(i) the incurrence by the Issuers and the Subsidiary Guarantors 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 such 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 such 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;
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(ii) the incurrence by the Issuers and the Restricted Subsidiaries of
Indebtedness and letters of credit under Credit Facilities; PROVIDED that
the aggregate principal amount of all revolving credit Indebtedness (with
letters of credit being deemed to have a principal amount equal to the
maximum face amount thereunder) outstanding under all Credit Facilities
after giving effect to such 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";
(iii) the incurrence by the Company and its Restricted Subsidiaries of
the Existing Indebtedness;
(iv) the incurrence by the Issuers of Indebtedness represented by the
Notes sold in the Offering and the incurrence by the Subsidiary Guarantors
of Indebtedness represented by the Subsidiary Guarantees of such Notes;
(v) the incurrence by the Company 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 the Company or such Restricted Subsidiary, in an
aggregate principal amount not to exceed $10.0 million at any time
outstanding;
(vi) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness in connection with the acquisition of assets or a new
Subsidiary; PROVIDED that such Indebtedness was incurred by the prior owner
of such assets or such Subsidiary prior to such acquisition by the Company
or one of its Restricted Subsidiaries and was not incurred in connection
with, or in contemplation of, such acquisition by the Company or one of it
Restricted Subsidiaries; and PROVIDED FURTHER that the principal amount (or
accreted value, as applicable) of such Indebtedness, together with any other
outstanding Indebtedness incurred pursuant to this clause (vi) and any
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (vi), does not exceed
$10.0 million;
(vii) the incurrence by the Company 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 hereof or clauses (iii), (iv), (v), (vi)
or (x) of this paragraph;
(viii) the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among the Company and any of its
Wholly Owned Subsidiaries, including a pledge of assets in connection
therewith; PROVIDED, HOWEVER, that (i) if one of the Issuers is the obligor
on such Indebtedness, such Indebtedness is expressly subordinated to the
prior payment in full in cash of all Obligations with respect to the Notes
and (ii)(A) any subsequent issuance or transfer of Equity Interests that
results in any such Indebtedness being held by a Person other than the
Company or a Restricted Subsidiary thereof and (B) any sale or other
transfer of any such Indebtedness to a Person that is not either the Company
or a Wholly Owned Restricted Subsidiary thereof shall be deemed, in each
case, to constitute an incurrence of such Indebtedness by the Company or
such Restricted Subsidiary, as the case may be, that was not permitted by
this clause (viii);
(ix) the incurrence by the Company or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred for the purpose of fixing or
hedging (i) interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Indenture to be
outstanding , (ii) the value of foreign currencies purchased or received by
the Company in the ordinary course of business as conducted by the Company
or (iii) commodity risk relating to commodity agreements to the extent
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entered into in the ordinary course of business to protect the Company and
its Restricted Subsidiaries from fluctuations in the prices of raw materials
used in its business;
(x) the incurrence by the Company or any of its Restricted Subsidiaries
of additional Indebtedness (which may include Senior Debt) 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 (x),
not to exceed $25.0 million;
(xi) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, PROVIDED, HOWEVER, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (xi);
(xii) the Guarantee by the Issuers or any of the Subsidiary Guarantors of
Indebtedness of the Company or a Subsidiary of the Company, which
Indebtedness was permitted to be incurred by another provision of this
covenant;
(xiii) 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 the Company or a Restricted Subsidiary in the ordinary course of business
and consistent with past practices;
(xiv) the incurrence of Indebtedness, including Guarantees, by the
Company or any of its Restricted Subsidiaries in connection with a Dealer
Financing Program;
(xv) the incurrence of Equipment Financing Guarantees; and
(xvi) the incurrence of Indebtedness arising from agreements of the
Company 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; PROVIDED that the maximum
aggregate liability of such Indebtedness shall at no time exceed the gross
proceeds actually received by the Company and its Restricted Subsidiaries in
connection with any such disposition or the gross proceeds actually paid by
the Company and its Restricted Subsidiaries in connection with any such
acquisition.
For purposes of determining compliance with this covenant, in the event that
an item of Indebtedness meets the criteria of more than one of the categories of
Permitted Debt described in clauses (i) through (xvi) above or is entitled to be
incurred pursuant to the first paragraph of this covenant, the Issuers shall, in
their sole discretion, classify such 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
such case, that the amount thereof is included in Fixed Charges of the Company
as accrued.
NO SENIOR SUBORDINATED DEBT
The Indenture provides that (i) the Issuers will not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Senior Debt and senior in any
respect in right of payment to the Notes, and (ii) no Subsidiary Guarantor will
incur, create, issue, assume, guarantee or otherwise become liable for any
Indebtedness that is subordinate or junior in right of payment to the Senior
Guarantees and senior in any respect in right of payment to the Subsidiary
Guarantees.
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LIENS
The Indenture provides that the Issuers will not, and will not permit any of
their Restricted Subsidiaries to, directly or indirectly, create, incur, assume
or suffer to exist any Lien securing Indebtedness or trade payables on any asset
now owned or hereafter acquired, or any income or profits therefrom or assign or
convey any right to receive income therefrom, except Permitted Liens.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i)(a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1) on
its Capital Stock or (2) with respect to any other interest or participation in,
or measured by, its profits, or (b) pay any indebtedness owed to the Company or
any of its Restricted Subsidiaries, (ii) make loans or advances to the Company
or any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries. However, the
foregoing restrictions will not apply to encumbrances or restrictions existing
under or by reason of (a) Existing Indebtedness as in effect on the date of the
Indenture, (b) the New Credit Agreement as in effect as of the date of the
Indenture, and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, PROVIDED that
such amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacement or refinancings are no more restrictive, taken as a
whole, with respect to such dividend and other payment restrictions than those
contained in the New Credit Agreement as in effect on the date of the Indenture,
(c) the Indenture and the Notes and the Debenture Indenture and the Debentures,
(d) applicable law, (e) any instrument governing Indebtedness or Capital Stock
of a Person acquired by the Company or any of its Restricted Subsidiaries as in
effect at the time of such acquisition (except to the extent such Indebtedness
was incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person, so acquired, PROVIDED that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of the Indenture to be incurred, (f)
customary non-assignment provisions in leases and other agreements entered into
in the ordinary course of business and consistent with past practices, (g)
purchase money obligations for property acquired in the ordinary course of
business that impose restrictions of the nature described in clause (iii) above
on the property so acquired, (h) any agreement for the sale of a Restricted
Subsidiary that restricts distributions by that Restricted Subsidiary pending
its sale, (i) Permitted Refinancing Indebtedness, PROVIDED that the restrictions
contained in the agreements governing such Permitted Refinancing Indebtedness
are no more restrictive, taken as a whole, than those contained in the
agreements governing the Indebtedness being refinanced, (j) secured Indebtedness
otherwise permitted to be incurred pursuant to the provisions of the covenant
described above under the caption "--Liens" that limits the right of the debtor
to dispose of the assets securing such Indebtedness, (k) provisions with respect
to the disposition or distribution of assets or property in joint venture
agreements and other similar agreements entered into in the ordinary course of
business, (l) restrictions on cash or other deposits or net worth imposed by
customers under contracts entered into in the ordinary course of business, (m)
purchase money obligations or other Indebtedness or contractual requirements
incurred in connection with or permitted by the covenant described below under
the caption "--Sales of Accounts Receivable", (n) any Equipment Financing
Guarantees, and (o) restrictions on transfers of assets pursuant to agreements
relating to a Dealer Financing Program.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indenture provides that neither Issuer may consolidate or merge with or
into (whether or not such Issuer is the surviving corporation), 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
unless
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(i) such Issuer is the surviving corporation or the entity or the Person formed
by or surviving any such consolidation or merger (if other than one of the
Issuers) or to which such 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; (ii) the entity or Person formed by or surviving any such
consolidation or merger (if other than one of the Issuers) or the entity or
Person to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made assumes all the obligations of such Issuer
under the Registration Rights Agreement, the Notes and the Indenture pursuant to
a supplemental indenture in a form reasonably satisfactory to the Trustee; (iii)
immediately after such transaction no Default or Event of Default exists; and
(iv) except in the case of a merger of one of the Issuers with or into a Wholly
Owned Subsidiary of the Company, the Issuer or the Person formed by or surviving
any such consolidation or merger (if other than one of the Issuers), 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, the Company is permitted to reorganize as a
corporation in accordance with the procedures established in the Indenture (and
Grove Capital may thereafter liquidate); PROVIDED that the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that such reorganization (and, if
applicable, liquidation of Grove Capital) is not adverse to holders of the Notes
(it being recognized that such reorganization shall not be deemed adverse to the
holders of the Notes solely because (i) of the accrual of deferred tax
liabilities resulting from such reorganization or (ii) 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 Code or any similar state or local law)
and certain other conditions are satisfied.
LIMITATION ON LEASES
The Indenture provides that the Company 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 the Company 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, any affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Issuers deliver to the Trustee
(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 such Affiliate Transaction complies with clause (i) above and
that such 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 such 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 shall not be deemed
to be Affiliate Transactions: (i) 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
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course of business of Grove Investors or such Restricted Subsidiary, as well as
customary change of control and severance payments, (ii) transactions between or
among the Issuers and/or its Restricted Subsidiaries, (iii) payment of
reasonable managers and directors fees to Persons who are not otherwise
affiliates of the Issuers, (iv) 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," (v) any
Permitted George Group Transaction; (vi) loans and advances to officers,
directors and employees of the Company or any Restricted Subsidiary for travel,
entertainment, moving and other relocation expenses, in each case made in the
ordinary course of business; (vii) transactions permitted by the provisions of
the covenant described below under the caption "--Sales of Accounts
Receivables"; (viii) transactions permitted by clauses (xii) and (xiv) of the
covenant described above under the caption "--Incurrence of Indebtedness and
Issuance of Disqualified Stock"; and (ix) 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 such amendment, modification
or replacement is no less favorable to the Company 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 the Company will not, and will not permit any of
its Restricted Subsidiaries to, enter into any sale and leaseback transaction;
PROVIDED that the Company or any of its Restricted Subsidiaries may enter into a
sale and leaseback transaction if (i) the Company or such Restricted Subsidiary
could have (a) incurred Indebtedness in an amount equal to the Attributable Debt
relating to such sale and leaseback transaction pursuant to 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," (ii) the gross cash
proceeds of such 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 Trustee) of the property that
is the subject of such sale and leaseback transaction and (iii) the transfer of
assets in such sale and leaseback transaction is permitted by, and if
applicable, the Issuers apply the proceeds of such transaction in compliance
with, the covenant described above under the caption "--Asset Sales."
Notwithstanding the foregoing, Delta Manlift, S.A. and Grove France, S.A. and
its successor may enter into any sale and leaseback transaction; PROVIDED that
such 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 such transactions
does not exceed $4.0 million in any calendar year.
RESTRICTIONS ON PREFERRED STOCK OF SUBSIDIARIES
The Indenture provides that the Company 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 the Company or a Subsidiary Guarantor of the
Company.
LIMITATION ON ISSUANCES AND SALES OF EQUITY INTERESTS IN WHOLLY OWNED
SUBSIDIARIES
The Indenture provides that the Company (i) will not, and will not permit
any Wholly Owned Restricted Subsidiary of the Company to, transfer, convey,
sell, lease or otherwise dispose of any Equity Interests in any Wholly Owned
Restricted Subsidiary of the Company to any Person (other than the Company or a
Wholly Owned Restricted Subsidiary of the Company), unless (a) such transfer,
conveyance, sale, lease or other disposition is of all the Equity Interests in
such Wholly Owned Restricted Subsidiary and (b) the cash Net Proceeds from such
transfer, conveyance, sale, lease or other disposition are applied in accordance
with the covenant described above under the caption "--Asset Sales," and (ii)
will not
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permit any Wholly Owned Restricted Subsidiary of the Company to issue any of its
Equity Interests (other than, if necessary, shares of its Capital Stock
constituting directors' qualifying shares) to any Person other than to the
Company or a Wholly Owned Restricted Subsidiary of the Company.
BUSINESS ACTIVITIES
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses, except to such extent as
would not be material to the Company and its Restricted Subsidiaries taken as a
whole.
RESTRICTIONS ON ACTIVITIES OF GROVE CAPITAL
The Indenture provides that Grove Capital may not hold any assets, become
liable for any obligations or engage in any business activities; PROVIDED that
Grove Capital may be a co-obligor with respect to Notes issued pursuant to the
Indenture and the Senior Debt and engage in any activities directly related or
necessary in connection therewith.
PAYMENTS FOR CONSENT
The Indenture provides that neither the Company 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 Notes for or as an inducement to any consent, waiver or amendment of any of
the terms or provisions of the Indenture or the Notes unless such consideration
is offered to be paid or is paid to all Holders of the Notes that consent, waive
or agree to amend in the time frame set forth in the solicitation documents
relating to such consent, waiver or agreement.
ADDITIONAL SUBSIDIARY GUARANTEES
The Indenture provides that if the Issuers or any of their Restricted
Subsidiaries shall acquire or create another domestic Subsidiary after the date
of the Indenture, then such newly acquired or created Subsidiary shall become a
Subsidiary Guarantor and execute a Supplemental Indenture and deliver an opinion
of counsel, in accordance with the terms of the Indenture.
LIMITATIONS ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS
The Indenture provides that the Company will not permit any Restricted
Subsidiary, directly or indirectly, to Guarantee any other Indebtedness of the
Company unless, if such Restricted Subsidiary is not a Guarantor, such
Restricted Subsidiary simultaneously executes and delivers a supplemental
indenture to the Indenture providing for the Guarantee of the payment of the
Notes by such Restricted Subsidiary, which Guarantee shall be senior to or rank
equal with such Subsidiary's Guarantee of such other Indebtedness unless such
other Indebtedness is Senior Debt, in which case the Guarantee of the Notes may
be subordinated to the Guarantee of such Senior Debt to the same extent as the
Notes are subordinated to such Senior Debt; PROVIDED, HOWEVER, the foregoing
shall not apply to Indebtedness incurred pursuant to clauses (viii), (xiv) and
(xv) of the covenant described above under the caption "Incurrence of
Indebtedness and Issuance of Disqualified Stock." Notwithstanding the foregoing,
any such Guarantee by a Subsidiary of the Notes shall provide by its terms that
it shall be automatically and unconditionally released and discharged upon any
sale, exchange or transfer, to any Person not an affiliate of the Company, of
all of the Company's stock in, or all or substantially all the assets of, such
Restricted Subsidiary, which sale, exchange or transfer is made in compliance
with the applicable provisions of the Indenture. The form of such Guarantee is
attached as an exhibit to the Indenture.
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SALES OF ACCOUNTS RECEIVABLE
The Company 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; PROVIDED that (i) the
aggregate consideration received in each such sale is at least equal to the
aggregate fair market value of the receivables sold, as determined by the
Management Committee in good faith, (ii) no less than 80% of the consideration
received in each such sale consists 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 Interest in such Accounts Receivable Subsidiary;
PROVIDED FURTHER that the initial sale will include all accounts receivable of
the Company and/or its Restricted Subsidiaries that are party to such
arrangements that constitute eligible receivables under such arrangements, (iii)
the cash proceeds received from the initial sale less reasonable and customary
transaction costs are deemed to be Net Proceeds and are applied in accordance
with the second paragraph of the covenant described above under the caption
entitled "--Repurchase at the Option of Holders-Assets Sales," and (iv) the
Company and its Restricted Subsidiaries will sell all accounts receivable that
constitute eligible receivables under such arrangements to the Accounts
Receivable Subsidiary no less frequently than on a weekly basis.
The Company (i) will not permit any Accounts Receivable Subsidiary to sell
any accounts receivable purchased from the Company 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, (ii) 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 the Company and
its Restricted Subsidiaries and activities incidental thereto, (iii) will not
permit any Accounts Receivable Subsidiary to incur Indebtedness in an amount in
excess of the book value of such Accounts Receivable Subsidiary's total assets,
as determined in accordance with GAAP, (iv) will, at least as frequently as
monthly, cause the Accounts Receivable Subsidiary to remit to the Company 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 and (v) will not, and will not permit any of its
Subsidiaries to, sell accounts receivable to any Accounts Receivable Subsidiary
upon (1) the occurrence of a Default with respect to the Company and its
Restricted Subsidiaries and (2) 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 Commission, so long as any Notes are outstanding, the Company
will furnish to the Holders of Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company 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 the Issuers and their consolidated Subsidiaries and, with respect
to the annual information only, a report thereon by the Issuers' certified
independent accountants and (ii) all current reports that would be required to
be filed with the Commission on Form 8-K if the Company was required to file
such reports, in each case within the time periods specified in the Commission's
rules and regulations. In addition, following the consummation of the exchange
offer contemplated by the Registration Rights Agreement, whether or not required
by the rules and regulations of the Commission, the Company will file a copy of
all such information and reports with the Commission for public availability
within the time periods specified in the Commission's rules and regulations
(unless the Commission will not accept such a filing) and make such information
available to securities analysts and prospective investors upon request. In
addition, (i) at all times the Commission does not accept the filings provided
for
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in the preceding sentence or (ii) such 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, the
Company has agreed that, for so long as any Notes remain outstanding, it will
furnish to the Holders 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.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not permitted by the
subordination provisions of the Indenture); (ii) default in payment when due of
the principal of or premium, if any, on the Notes (whether or not permitted by
the subordination provisions of the Indenture); (iii) failure by the Company or
any of its Restricted Subsidiaries for 30 days after notice by the Trustee or by
the Holders of at least 25% in principal amount of Notes then outstanding to
comply with the provisions described under the captions "--Change of Control,"
"--Asset Sales," "--Restricted Payments" or "--Incurrence of Indebtedness and
Issuance of Disqualified Stock"; (iv) failure by the Company or any of its
Restricted Subsidiaries for 60 days after notice by the Trustee or by the
Holders of at least 25% in principal amount of Notes then outstanding to comply
with any of its other agreements in the Indenture or the Notes; (v) 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 the Company or any of its Restricted Subsidiaries (or the payment of which is
guaranteed by the Company or any of its Restricted Subsidiaries) whether such
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 such Indebtedness prior to the expiration of the
grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness prior
to its stated maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such 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 the Company or
such Restricted Subsidiary, as applicable, defaults in its payment obligations
under such guarantee after demand has been made in accordance with the terms of
such guarantee; (vi) failure by the Company 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; (vii) certain events of
bankruptcy or insolvency with respect to the Company or any of its Subsidiaries;
(viii) failure by the Company or its Subsidiaries to apply the proceeds from the
Offering as set forth under the caption "Use of Proceeds" above prior to the
10th Business Day after the date of the Indenture; and (ix) except as permitted
by the Indenture, any Subsidiary Guarantee shall be held in any judicial
proceeding to be unenforceable or invalid or shall cease for any reason to be in
full force and effect or any Subsidiary Guarantor, or any Person acting on
behalf of any Subsidiary Guarantor, shall deny or disaffirm its obligations
under its Subsidiary Guarantee. In the event of a declaration of acceleration of
the Notes because an Event of Default has occurred and is continuing as a result
of the acceleration of any Indebtedness described in clause (v) of the preceding
paragraph, the declaration of acceleration of the Notes shall be automatically
annulled if the holders of any Indebtedness described in clause (v) of the
preceding paragraph have rescinded the declaration of acceleration in respect of
such Indebtedness within 30 days of the date of such declaration and if (a) the
annulment of the acceleration of Notes would not conflict with any judgment or
decree of a court of competent jurisdiction and (b) all existing Events of
Default, except nonpayment of principal or interest on the Notes that became due
solely because of the acceleration of the Notes have been cured or waived.
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If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately; PROVIDED, that so long as any
Indebtedness permitted to be incurred pursuant to the New Credit Agreement shall
be outstanding, such acceleration shall not be effective until the earlier of
(i) an acceleration of any such Indebtedness under the New Credit Agreement or
(ii) five business days after receipt by the Issuers 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 the
Issuers, any Significant Subsidiary or any group of Subsidiaries that, taken
together, would constitute a Significant Subsidiary, all outstanding Notes will
become due and payable without further action or notice. Holders of the Notes
may not enforce the Indenture or the Notes except as provided in the Indenture.
Subject to certain limitations, Holders of a majority in principal amount of the
then outstanding Notes may direct the Trustee in its exercise of any trust or
power. The Trustee may withhold from Holders of the Notes 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 not taken) by or on behalf of the Issuers with
the intention of avoiding payment of the premium that the Issuers would have had
to pay if the Issuers then had elected to redeem the Notes 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 Notes. If an Event of Default occurs prior to May
1, 2003 by reason of any willful action (or inaction) taken (or not taken) by or
on behalf of the Issuers with the intention of avoiding the prohibition on
redemption of the Notes prior to May 1, 2003, then the premium specified in the
Indenture shall also become immediately due and payable to the extent permitted
by law upon the acceleration of the Notes.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes 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 Notes.
The Issuers are required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Issuers are required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee 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 the
Issuers, as such, shall have any liability for any obligations of the Issuers
under the Notes, the Indenture or the Subsidiary Guarantees or for any claim
based on, in respect of, or by reason of, such obligations or their creation.
Each Holder of Notes by accepting a Note waives and releases all such liability.
The waiver and release are part of the consideration for issuance of the Notes.
Such waiver may not be effective to waive liabilities under the federal
securities laws and it is the view of the Commission that such a waiver is
against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Issuers may, at their option and at any time, elect to have all of their
obligations and the obligations of the Subsidiary Guarantors discharged with
respect to the outstanding Notes ("Legal Defeasance") except for (i) the rights
of Holders of outstanding Notes to receive payments in respect of the principal
of, premium and Liquidated Damages, if any, and interest on such Notes when such
payments are due from the trust referred to below, (ii) the Issuers' obligations
with respect to the Notes concerning issuing temporary Notes, registration of
Notes, mutilated, destroyed, lost or stolen Notes and the maintenance of an
office or agency for payment and money for security payments held in trust,
(iii) the rights, powers, trusts, duties and immunities of the Trustee, and the
Issuers' obligations in connection
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therewith and (iv) the Legal Defeasance provisions of the Indenture. In
addition, the Issuers may, at their option and at any time, elect to have the
obligations of the Issuers 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 Notes. 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 Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Issuers must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as 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 Notes on the stated maturity or on the applicable redemption
date, as the case may be, and the Issuers must specify whether the Notes are
being defeased to maturity or to a particular redemption date; (ii) in the case
of Legal Defeasance, the Issuers shall have delivered to the Trustee an opinion
of counsel in the United States reasonably acceptable to the Trustee confirming
that (A) the Issuers 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 thereon such opinion of counsel shall confirm that,
subject to customary assumptions and exceptions, the Holders of the outstanding
Notes will not recognize income, gain or loss for federal income tax purposes as
a result of such 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; (iii) in the case of
Covenant Defeasance, the Issuers shall have delivered to the Trustee an opinion
of counsel in the United States reasonably acceptable to the Trustee confirming
that, subject to customary assumptions and exceptions, the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such 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; (iv) no
Default or Event of Default shall have occurred and be continuing on the date of
such deposit (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; (v) such Legal
Defeasance or Covenant Defeasance will not result in a breach or violation of,
or constitute a default under any material agreement or instrument (other than
the Indenture) to which the Company or any of its Subsidiaries is a party or by
which the Company or any of its Subsidiaries is bound; (vi) the Issuers must
have delivered to the Trustee an opinion of counsel to the effect that, subject
to customary assumptions and exceptions, after the 91st day following the
deposit, the trust funds will not be subject to the effect of any applicable
bankruptcy, insolvency, reorganization or similar laws affecting creditors'
rights generally; (vii) the Issuers must deliver to the Trustee an Officers'
Certificate stating that the deposit was not made by the Issuers with the intent
of preferring the Holders of Notes over the other creditors of the Issuers with
the intent of defeating, hindering, delaying or defrauding creditors of the
Issuers or others; and (viii) the Issuers must deliver to the Trustee 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.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Issuers may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Issuers are not required to transfer or exchange any Note
selected for redemption.
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Also, the Issuers are not required to transfer or exchange any Note for a period
of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note is treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture, the
Subsidiary Guarantees or the Notes may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the Notes
then outstanding (including, without limitation, consents obtained in connection
with a purchase of, or tender offer or exchange offer for, Notes), and any
existing default or compliance with any provision of the Indenture, the Notes or
the Subsidiary Guarantees may be waived with the consent of the Holders of a
majority in principal amount of the then outstanding Notes (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the caption
"--Repurchase at the Option of Holders"), (iii) reduce the rate of or change the
time for payment of interest on any Note, (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, or interest on the
Notes (except a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration), (v) make any Note payable
in money other than that stated in the Notes, (vi) make any change in the
provisions of the Indenture relating to waivers of past Defaults or the rights
of Holders of Notes to receive payments of principal of or premium, if any, or
interest on the Notes, (vii) waive a redemption payment with respect to any Note
(other than a payment required by one of the covenants described above under the
caption "-- Repurchase at the Option of Holders") or (viii) make any change in
the foregoing amendment and waiver provisions. In addition, any amendment to the
provisions of Article 10 of the Indenture (which relate to subordination) will
require the consent of the Holders of at least 75% in aggregate principal amount
of the Notes then outstanding if such amendment would adversely affect the
rights of Holders of the Notes.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Subsidiary Guarantors, the Issuers and the Trustee may amend or supplement
the Indenture, the Subsidiary Guarantees or the Notes to cure any ambiguity,
defect or inconsistency, to provide for uncertificated Notes in addition to or
in place of certificated Notes, to provide for the assumption of the Issuers' or
a Subsidiary Guarantor's obligations to Holders of Notes in the case of a merger
or consolidation or sale of all or substantially all of the Issuers' assets, to
make any change that would provide any additional rights or benefits to the
Holders of Notes or that does not adversely affect the legal rights under the
Indenture of any such Holder, or to comply with requirements of the Commission
in order to effect or maintain the qualification of the Indenture under the
Trust Indenture Act or to allow any Subsidiary Guarantor to guarantee the Notes.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Issuers, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee is permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the
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Trustee, subject to certain exceptions. The Indenture provides that in case an
Event of Default shall occur (which shall not be cured), the Trustee is
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 such provisions, the Trustee
is under no obligation to exercise any of its rights or powers under the
Indenture at the request of any Holder of Notes, unless such Holder shall have
offered to the Trustee security and indemnity satisfactory to it against any
loss, liability or expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Indenture and
Registration Rights Agreement without charge by writing to the Issuers at 1565
Buchanan Trail East, P.O. Box 21, Shady Grove, Pennsylvania 17256, Attention:
Keith R. Simmons.
BOOK-ENTRY; DELIVERY AND FORM
The Exchange Notes will initially be issued in the form of one or more
registered Exchange Notes in global form without coupons (collectively, the
"Global Notes").The Global Notes will be deposited on the date of the closing of
the exchange of the Exchange Notes for Senior Subordinated Notes with, or on
behalf of, DTC and registered in the name of DTC 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 Notes may be transferred, in whole and
not in part, only to another nominee of DTC or to a successor DTC or its
nominee. Beneficial interests in the Global Notes may not be exchange for Notes
in certificated form except in the limited circumstances described below. In
addition, transfers of beneficial interests in the Global Notes will be subject
to the applicable rules and procedures of DTC and its direct or indirect
participants, which may change from time to time.
The Notes may be presented for registration of transfer and exchange at the
offices of the Registrar.
DEPOSITARY PROCEDURES
DTC has advised the Issuers that DTC is a limited-purpose trust company
created to hold securities for its participating organizations (collectively,
the "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 (including the Initial Purchasers), banks, trust
companies, clearing corporations and certain other organizations. Access to
DTC's system is also available to other entities that clear through or maintain
a direct or indirect, custodial relationship with a Direct Participant
(collectively, the "Indirect Participants"). DTC may hold securities
beneficially owned by other persons only through the Direct Participants or
Indirect Participants and such 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
DTC.
DTC has also advised the Issuers that, pursuant to DTC's procedures, (i)
upon deposit of the Global Notes, DTC will credit the accounts of the Direct
Participants designated by the Initial Purchasers with portions of the principal
amount of the Global Notes allocated by the Initial Purchasers to such Direct
Participants, and (ii) DTC will maintain records of the ownership interests of
such Direct Participants in the Global Notes and the transfer of ownership
interests by and between Direct Participants. DTC 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 Notes. 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 Notes.
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Investors in the Global Notes may hold their interests therein directly
through DTC if they are Direct Participants in DTC or indirectly through
organizations that are Direct Participants in DTC. All ownership interests in
any Global Notes may be subject to the procedures and requirements of DTC.
The laws of some states require that certain persons take physical delivery
in definitive, certificated form of securities that they own. This may limit or
curtail the ability to transfer beneficial interests in a Global Note to such
persons. Because DTC 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 Note to pledge such interest to persons
or entities that are not Direct Participants in DTC, or to otherwise take
actions in respect of such interests, may be affected by the lack of physical
certificates evidencing such interests. For certain other restrictions on the
transferability of the Notes.
Except as described in "Transfers of Interests in Global Notes for
Certificated Notes," owners of beneficial interests in the Global Notes will not
have Notes registered in their names, will not receive physical delivery of
Notes in certificated form and will not be considered the registered owners or
holders thereof under the Indenture for any purpose.
Under the terms of the Indenture, the Issuers, the Subsidiary Guarantors and
the Trustee will treat the persons in whose names the Notes are registered
(including Notes represented by Global Notes) as the owners thereof for the
purpose of receiving payments and for any and all other purposes whatsoever.
Payments in respect of the principal, premium, Liquidated Damages, if any, and
interest on Global Notes registered in the name of DTC or its nominee will be
payable by the Trustee to DTC or its nominee as the registered holder under the
Indenture. Consequently, neither the Issuers, the Trustee nor any agent of the
Issuers or the Trustee has or will have any responsibility or liability for (i)
any aspect of DTC'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 Notes or for maintaining, supervising or
reviewing any of DTC's records or any Direct Participant's or Indirect
Participant's records relating to the beneficial ownership interests in any
Global Note or (ii) any other matter relating to the actions and practices of
DTC or any of its Direct Participants or Indirect Participants.
DTC has advised the Issuers that its current payment practice (for payments
of principal, interest and the like) with respect to securities such as the
Notes is to credit the accounts of the relevant Direct Participants with such
payment on the payment date in amounts proportionate to such Direct
Participant's respective ownership interests in the Global Notes as shown on
DTC's records. Payments by Direct Participants and Indirect Participants to the
beneficial owners of the Notes will be governed by standing instructions and
customary practices between them and will not be the responsibility of DTC, the
Trustee, the Issuers or the Subsidiary Guarantors. Neither the Issuers, the
Subsidiary Guarantors nor the Trustee will be liable for any delay by DTC or its
Direct Participants or Indirect Participants in identifying the beneficial
owners of the Notes, and the Issuers and the Trustee may conclusively rely on
and will be protected in relying on instructions from DTC or its nominee as the
registered owner of the Notes for all purposes.
Interests in the Global Notes are expected to be eligible to trade in DTC's
Same-Day Funds Settlement System and, therefore, transfers between Direct
Participants in DTC will be effected in accordance with DTC's 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 such Direct Participant but generally will
settle in immediately available funds.
DTC has advised the Issuers that it will take any action permitted to be
taken by a holder of Notes only at the direction of one or more Direct
Participants to whose account interests in the Global Notes are credited and
only in respect of such portion of the aggregate principal amount of the Notes
as to which such Direct Participant or Direct Participants has or have given
direction. However, if there is an Event of Default under the Notes, DTC
reserves the right to exchange Global Notes (without the direction of one or
more of its Direct Participants) for legended Notes in certificated form, and to
distribute such
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certificated forms of Notes to its Direct Participants. See "--Transfers of
Interests in Global Notes for Certificated Notes."
Although DTC has agreed to the foregoing procedures to facilitate transfers
of interests in the Global Notes among Direct Participants, they are under no
obligation to perform or to continue to perform such procedures, and such
procedures may be discontinued at any time. None of the Issuers, the Subsidiary
Guarantors, the Initial Purchasers or the Trustee will have any responsibility
for the performance by DTC, Direct and Indirect Participants of their respective
obligations under the rules and procedures governing any of their operations.
The information in this section concerning DTC, and its book-entry system
has been obtained from sources that the Issuers believe to be reliable, but the
Issuers take no responsibility for the accuracy thereof.
TRANSFERS OF INTERESTS IN GLOBAL NOTES FOR CERTIFICATED NOTES
An entire Global Note may be exchanged for definitive Notes in registered,
certificated form without interest coupons ("Certificated Notes") if (i) DTC (x)
notifies the Issuers that it is unwilling or unable to continue as depositary
for the Global Notes and the Issuers thereupon fail to appoint a successor
depositary within 90 days or (y) has ceased to be a clearing agency registered
under the Exchange Act, (ii) the Issuers, at their option, notify the Trustee in
writing that they elect to cause the issuance of Certificated Notes or (iii)
there shall have occurred and be continuing a Default or an Event of Default
with respect to the Notes. In any such case, the Issuers will notify the Trustee
in writing that, upon surrender by the Direct and Indirect Participants of their
interest in such Global Note, Certificated Notes will be issued to each person
that such Direct and Indirect Participants and DTC identify as being the
beneficial owner of the related Notes.
Beneficial interests in Global Notes held by any Direct or Indirect
Participant may be exchanged for Certificated Notes upon request to DTC, by such
Direct Participant (for itself or on behalf of an Indirect Participant), but
only upon at least 20 days' prior written notice given to the Trustee by or on
behalf of DTC in accordance with customary DTC procedures. Certificated Notes
delivered in exchange for any beneficial interest in any Global Note will be
registered in the names, and issued in any approved denominations, requested by
DTC on behalf of such Direct or Indirect Participants (in accordance with DTC's
customary procedures).
Neither the Issuers, the Subsidiary Guarantors nor the Trustee will be
liable for any delay by the holder of the Global Notes or the DTC in identifying
the beneficial owners of Notes, and the Issuers and the Trustee may conclusively
rely on, and will be protected in relying on, instructions from the holder of
the Global Note or the DTC for all purposes.
SAME DAY SETTLEMENT AND PAYMENT
The Indenture requires that payments in respect of the Notes represented by
the Global Notes (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 such Global Note. With respect to
Certificated Notes, the Issuers 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 thereof or, if no such
account is specified, by mailing a check to each such holder's registered
address. The Issuers expect that secondary trading in the Certificated Notes
will also be settled in immediately available funds.
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REGISTRATION RIGHTS; LIQUIDATED DAMAGES
The Issuers, the Subsidiary Guarantors and the Initial Purchasers entered
into the Registration Rights Agreement on April 29, 1998. Pursuant to the
Registration Rights Agreement, the Issuers agreed to file with the Commission
this Registration Statement under the Securities Act with respect to the Notes.
As required by the Registration Rights Agreement, upon the effectiveness of the
Registration Statement, the Issuers 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 Exchange
Notes. If (i) the Issuers 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 Commission policy or (ii) any Holder of Transfer
Restricted Securities notifies the Issuers prior to the 20th day following
consummation of the Exchange Offer that (A) such Holder is prohibited by law or
Commission policy from participating in the Exchange Offer or (B) that it may
not resell the Exchange Notes 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 (C) that it is a
broker-dealer and owns Notes acquired directly from the Issuers or an affiliate
of the Issuers, the Issuers will file with the Commission a shelf registration
statement to cover resales of the Transfer Restricted Securities by the Holders
thereof who satisfy certain conditions relating to the provision of information
in connection with the shelf registration statement. The Issuers will use their
best efforts to cause the applicable registration statement to be declared
effective as promptly as possible by the Commission. For purposes of the
foregoing, "Transfer Restricted Securities" means each Senior Subordinated Note
until the date on which such Senior Subordinated Note (i) is exchanged in the
Exchange Offer for an Exchange Note which is entitled to be resold to the public
by the holder thereof without complying with prospectus delivery requirements of
the Securities Act, (ii) has been disposed of in accordance with a shelf
registration statement (and the purchasers thereof have been issued Exchange
Notes), or (iii) 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 Exchange Note until the date on which such Exchange Note is disposed of
by a broker-dealer pursuant to the "Plan of Distribution" contemplated by this
Registration Statement.
Pursuant to the Registration Rights Agreement, the Issuers were obligated to
file this Registration Statement with the Commission on or before June 29, 1998
(60 days after the Closing Date). In addition, the Registration Rights Agreement
provides that (i) the Issuers will use their best efforts to have the
Registration Statement declared effective by the Commission on or prior to
October 29, 1998 (180 days after the Closing Date), (ii) unless the Exchange
Offer would not be permitted by applicable law or Commission policy, the Issuers
will commence the Exchange Offer and use their best efforts to issue on or prior
to 30 business days after the date on which the Registration Statement is
declared effective by the Commission, Exchange Notes in exchange for all Notes
tendered prior thereto in the Exchange Offer and (iii) if obligated to file the
shelf registration statement, the Issuers will use their best efforts to file
the shelf registration statement with the Commission on or prior to 60 days
after such filing obligation arises and to cause the shelf registration
statement to be declared effective by the Commission on or prior to 120 days
after such obligation arises. If (a) the Issuers fail to file any of the
registration statements required by the Registration Rights Agreement on or
before the date specified for such filing, (b) any of such registration
statements is not declared effective by the Commission on or prior to the date
specified for such effectiveness (the "Effectiveness Target Date"), (c) the
Issuers fail to consummate the Exchange Offer within 30 business days of the
Effectiveness Target Date with respect to the Registration Statement, or (d) the
Registration Statement or the 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 the Issuers will pay Liquidated Damages to each
Holder of Notes, 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 Notes held by such Holder. The amount of the
Liquidated Damages will increase by an additional $.05 per week per $1,000
principal
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amount of Notes 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 Notes. All accrued Liquidated Damages will be paid by the Issuers on
each Damages Payment Date to the Global Note 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 Notes are required to make certain representations to the Issuers
(as described in the Registration Rights Agreement) in order 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 in order to have their Notes included in the shelf
registration statement and benefit from the provisions regarding Liquidated
Damages set forth above. See "The Exchange Offer."
The foregoing description of the Registration Rights Agreement is a summary
only and does not purport to be 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 herein for which no definition is provided.
"ACCOUNTS RECEIVABLE SUBSIDIARY" means a Wholly Owned Subsidiary of the
Company (i) 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 the Company and/or its
Restricted Subsidiaries, (ii) which is designated by the Management Committee of
the Company as an Accounts Receivables Subsidiary pursuant to a Management
Committee resolution set forth in an Officers' Certificate and delivered to the
Trustee, (iii) 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, (iv) no portion of Indebtedness or any other obligation (contingent
or otherwise) of which (a) is at any time recourse to or obligates the Company
or any Restricted Subsidiary of the Company in any way, other than pursuant to
(I) 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 (II) any guarantee of any
such accounts receivable financing by the Company 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 the Company or any Restricted
Subsidiary of the Company, directly or indirectly, contingently or otherwise, to
the satisfaction thereof, other than pursuant to (I) representations and
covenants entered into in the ordinary course of business in connection with
sales of accounts receivable and/or notes receivable or (II) any guarantee of
any such accounts receivable financing by the Company 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," (v) with which neither the Company nor any Restricted Subsidiary of the
Company 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 (vi) with respect to which neither the Company nor
any Restricted Subsidiary of the Company has any obligation (a) to subscribe for
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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 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, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such 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 such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such 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 such 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, shall mean
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; PROVIDED that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
"ASSET SALE" means (i) 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 the Company and its Subsidiaries
(determined on a consolidated basis) are 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 not by
the provisions of the Asset Sale covenant), and (ii) the issue or sale by the
Company or any of its Subsidiaries of Equity Interests of any of the Company's
Subsidiaries, in the case of either clause (i) or (ii), 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 shall not be deemed
to be Asset Sales: (i) a transfer of assets by the Issuers to a Wholly Owned
Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to the Issuers
or to another Wholly Owned Restricted Subsidiary, (ii) an issuance of Equity
Interests by a Wholly Owned Restricted Subsidiary to the Issuers or to another
Wholly Owned Restricted Subsidiary, (iii) a Restricted Payment that is permitted
by the covenant described above under the caption "--Restricted Payments," (iv)
the sale and leaseback of any assets within 90 days of the acquisition of such
assets; PROVIDED that such sale and leaseback complies with the covenant
described above under the caption "--Sale and Leaseback Transactions," (v)
foreclosures of assets, and (vi) 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 the Company 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 such sale and leaseback transaction (including any period
for which such 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 the
Company and its Restricted Subsidiaries as of such
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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, the Company may utilize 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 such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) 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 (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (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, (iii) 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, (iv) repurchase obligations with
a term of not more than thirty days for underlying securities of the types
described in clauses (ii) and (iii) above entered into with any financial
institution meeting the qualifications specified in clause (iii) above, (v)
obligations issued or fully guaranteed by any state of the United States of
America or any political subdivision of any such state or any public
instrumentality thereof 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., (vi) 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 (vii) money
market funds at least 95% of the assets of which constitute Cash Equivalents of
the kinds described in clauses (i) through (vii) of this definition.
"CODE" means the Internal Revenue Code of 1986, as amended.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) 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 such losses were deducted in computing such Consolidated Net Income),
plus (ii) provision for taxes based on income or profits or the Tax Amount of
such Person and its Subsidiaries for such period or, following the
reorganization of the Company 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 such provision for taxes was included in computing such
Consolidated Net Income, plus (iii) consolidated interest expense of such Person
and its Subsidiaries for such 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 such Consolidated Net Income, plus (iv) 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 such non-cash expense to the
extent that it represents an accrual of or reserve for cash expenses in any
future period or
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amortization of a prepaid cash expense that was paid in a prior period) of such
Person and its Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, plus (v) any interest expense on
Indebtedness of another person that is guaranteed by such person or a Subsidiary
of such person or secured by a Lien on the assets of such person or one of its
Subsidiaries (to the extent that such interest expense was deducted in computing
Consolidated Net Income in such period), plus (vi) any charges of up to $30.0
million relating to a facility closing, plus (vii) any charges of up to $16.0
million resulting from fees payable to the George Group in connection with the
consulting arrangements with the Company, plus (viii) 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 (ix) any expenses or
charges related to any Equity Offering, Permitted Investment or Indebtedness
permitted to be incurred by the Indenture (including such expenses or charges
related to the Transactions) and deducted in such period in computing
Consolidated Net Income, minus (x) non-cash items increasing such Consolidated
Net Income for such 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 such Person and only if a
corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Subsidiary without prior approval (that has
not been obtained), pursuant to the terms of its charter and all agreements,
instruments, 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 such Person and its Subsidiaries for such
period, on a consolidated basis, determined in accordance with GAAP; PROVIDED
that (i) the Net Income (but not loss) of any Person that is not a Subsidiary
(other than the Company) or that is accounted for by the equity method of
accounting shall 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 that is a Subsidiary Guarantor, (ii)
the Net Income of any Restricted Subsidiary shall 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
agreement, instrument, judgment, decree, order, statute, rule or governmental
regulation applicable to that Subsidiary or its stockholders, unless such
restriction with respect to the payment of dividends or in similar distributions
has been legally waived, provided that Consolidated Net Income of the Company
shall 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 that is a Subsidiary
Guarantor in respect of such period, (iii) the Net Income of any Person acquired
in a pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, (iv) the cumulative effect of a change in
accounting principles shall be excluded and (v) the Net Income (but not loss) of
any Unrestricted Subsidiary shall be excluded, whether or not distributed to the
Company or one of its Subsidiaries.
"CREDIT FACILITIES" means, with respect to the Issuers or their 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.
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"DEALER FINANCING PROGRAM" means (x) that certain financing program pursuant
to which (i) distributors of the Company and its Restricted Subsidiaries can
obtain up to 366-day inventory financing for the purchase of the Company's
products, (ii) units financed will generate secured notes receivable, accounts
receivable, chattel paper, instruments or other intangibles (collectively,
"Receivables"), which the Company may sell, from time to time, to financial
institutions at 100% of face value and (iii) the Company will insure (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.
"DESIGNATED SENIOR DEBT" means (i) any Indebtedness outstanding under the
New Credit Agreement (ii) any other Senior Debt permitted under the Indenture
the principal amount of which is $25.0 million or more and that has been
designated by the Issuers as "Designated Senior Debt."
"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 prior to the date that is 91 days after the date on
which the Notes mature; PROVIDED, HOWEVER, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require the Issuers to repurchase such Capital Stock upon the occurrence of a
Change of Control or an Asset Sale shall not constitute Disqualified Stock if
the terms of such Capital Stock provide that the Issuers may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such repurchase
or redemption complies with the covenant described above under the caption
"--Certain Covenants-- Restricted Payments"; and PROVIDED FURTHER, that Capital
Stock issued to any plan for the benefit of employees of the Company or its
subsidiaries or by any such plan to such employees shall not constitute
Disqualified Stock solely because it may be required to be repurchased by the
Company in order 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 the Company 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 the Company or a
Restricted Subsidiary, the proceeds of which Indebtedness is used solely to pay
the purchase price of such inventory to such 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 the Company or such Restricted
Subsidiary is required to make payment with respect to such guarantee, the
Company or such 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 the Company 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 such Person for such period
to the Fixed Charges of such Person for such
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period. In the event that 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 subsequent to
the commencement of the period for which the Fixed Charge Coverage Ratio is
being calculated but prior to the date on which the event for which the
calculation of the Fixed Charge Coverage Ratio is made (the "Calculation Date"),
then the Fixed Charge Coverage Ratio shall be calculated giving pro forma effect
to such incurrence, assumption, Guarantee or redemption of Indebtedness, or such
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, (i) acquisitions that have
been made by the Company or any of its Restricted Subsidiaries, including
through mergers or consolidations and including any related financing
transactions, during the four-quarter reference period or subsequent to such
reference period and on or prior to the Calculation Date shall be deemed to have
occurred on the first day of the four-quarter reference period and Consolidated
Cash Flow for such reference period shall be calculated without giving effect to
clause (iii) of the proviso set forth in the definition of Consolidated Net
Income and shall 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 the Company's accountants), (ii)
the Consolidated Cash Flow attributable to discontinued operations, as
determined in accordance with GAAP, and operations or businesses disposed of
prior to the Calculation Date, shall be excluded, (iii) the Fixed Charges
attributable to discontinued operations, as determined in accordance with GAAP,
and operations or businesses disposed of prior to the Calculation Date, shall be
excluded, but only to the extent that the obligations giving rise to such Fixed
Charges will not be obligations of the referent Person or any of its Restricted
Subsidiaries following the Calculation Date, and (iv) the amount of interest
expense attributable to financings pursuant to the Dealer Financing Program
shall be subtracted from the numerator and excluded from the denominator in
calculating the Fixed Charge Coverage Ratio provided that the interest income
from such financings exceeds interest expense.
"FIXED CHARGES" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such 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 shall any
amortization of deferred financing costs incurred in connection with the
Transactions be included in fixed charges) and (ii) the consolidated interest of
such Person and its Restricted Subsidiaries that was capitalized during such
period, and (iii) any interest expense on Indebtedness of another Person that is
Guaranteed by such Person or one of its Restricted Subsidiaries or secured by a
Lien on assets of such 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 (iv) if and for so long as
such 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 such Person or, if such 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 such 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 such Person expressed as a decimal, in each case, on a consolidated
basis and in accordance with GAAP.
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"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 such other statements by such
other entity as 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 (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), 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.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) interest rate or currency swap agreements, interest rate
cap agreements and interest rate collar agreements, (ii) other agreements or
arrangements designed to protect such Person against fluctuations in interest or
currency exchange rates and (iii) commodities purchase and sale agreements and
other similar agreements designed to protect such Person against fluctuations in
the price of raw materials used by the Company and its Restricted Subsidiaries
in the ordinary course of business.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
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 such 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 such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the Guarantee
by such 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 (i) the accreted value thereof, in the case of any
Indebtedness issued with original issue discount, and (ii) the principal amount
thereof, together with any interest thereon that is more than 30 days past due,
in the case of any other Indebtedness.
"INVESTMENT GRADE SECURITIES" means (i) securities issued or directly and
fully guaranteed or insured by the United States government or any agency or
instrumentality thereof (other than Cash Equivalents), (ii) debt securities or
debt instruments with a rating of BBB- or higher by Standard & 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 & 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 the Company and its Subsidiaries, and (iii) investments
in any fund that invests exclusively in investments of the type described in
clauses (i) and (ii) which fund may also hold immaterial amounts of cash pending
investment and/or distribution.
"INVESTMENTS" means, with respect to any Person, all investments by such
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 (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
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;
provided that an acquisition of assets, Equity Interests or other securities by
the Issuers or any of their Restricted Subsidiaries for consideration consisting
solely of Equity Interests (other than Disqualified Stock) of the
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Company shall not be deemed to be an Investment. If the Company or any
Restricted Subsidiary of the Company sells or otherwise disposes of any Equity
Interests of any direct or indirect Restricted Subsidiary of the Company such
that, after giving effect to any such sale or disposition, such Person is no
longer a Restricted Subsidiary of the Company, the Company shall be deemed to
have made an Investment on the date of any such 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 such 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 (i) for so long as the Company is a limited
liability company, the Management Committee of the Company and (ii) otherwise
the Board of Directors of the Company.
"NET INCOME" means, with respect to any Person for any period, (i) the net
income (loss) of such 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 (1)
any Asset Sale (including, without limitation, dispositions pursuant to sale and
leaseback transactions) or (2) the disposition of any securities by such Person
or any of its Restricted Subsidiaries or the extinguishment of any Indebtedness
of such 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 (ii) in the case of any Person that is a partnership or limited
liability company, the Tax Amount of such person for such period.
"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, any taxes or Tax Distributions paid or payable as
a result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), and any reserve for adjustment in
respect of the sale price of such asset or assets established in accordance with
GAAP.
"NEW CREDIT AGREEMENT" means that certain New Credit Agreement, dated as of
the date of the Indenture, by and among the Issuers and Chase Bank of Texas,
National Association, as administrative agent, BankBoston, N.A., as syndication
agent and Donaldson, Lufkin & Jenrette Securities Corporation, 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 the Issuers and the 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.
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"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the Company
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 (ii) 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 Notes being offered hereby) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity; and
(iii) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of the Company or any of its Restricted
Subsidiaries.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, costs, expenses, reimbursement obligations, damages and other
liabilities and obligations which may arise under or in connection with the New
Credit Agreement or the documentation governing any Indebtedness, and in all
cases whether direct or indirect, absolute or contingent, now outstanding or
hereafter created, assumed or incurred and including, without limitation,
interest accruing subsequent to the filing of a petition in bankruptcy or the
commencement of any insolvency, reorganization or similar proceedings at the
rate provided in the relevant document, whether or not an allowed claim, and any
obligation to redeem or defease any of the foregoing.
"PERMITTED BUSINESS" means any of the businesses and any other businesses
related to the businesses engaged in by the Company 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 thereunder made, provided that such payments shall not exceed $8.0
million in any fiscal year (with such amount being subject to reasonable
adjustments in connection with advisory and consulting services rendered in
connection with Permitted Investments).
"PERMITTED INVESTMENTS" means (a) any Investment in the Company or in a
Wholly Owned Restricted Subsidiary of the Company that is a Subsidiary Guarantor
and is engaged in a Permitted Business; (b) any Investment in Cash Equivalents
and Investment Grade Securities; (c) any Investment by the Company or any
Restricted Subsidiary of the Company in a Person, if as a result of such
Investment (i) such Person becomes a Wholly Owned Restricted Subsidiary of the
Company and a Subsidiary Guarantor and is engaged in a Permitted Business or
(ii) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
the Company or a Wholly Owned Restricted Subsidiary of the Company that is a
Subsidiary Guarantor and that is engaged in Permitted Business; (d) 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"; (e) any acquisition of assets solely in exchange for the
issuance of Equity Interests (other than Disqualified Stock) of the Company; (f)
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 (f) that are at the time outstanding, not to exceed
$10 million; (g) 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; (h)
Investments existing on the date of the Indenture or made in connection with the
Transactions; (i) Investments consisting of receivables owing to the Company 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 pursuant to or in
connection with a Dealer Financing Program; (j) 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
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course of business and consistent with past practices not to exceed $1.0
million; (k) any Hedging Obligation; (l) 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," (m) Investments consisting
of intercompany loans from the Company and its Restricted Subsidiaries to
Restricted Subsidiaries, including Restricted Subsidiaries that are not
Subsidiary Guarantors; (n) Investments consisting of capital contributions from
the Company or any Restricted Subsidiaries to Restricted Subsidiaries that are
not Subsidiary Guarantors in an aggregate amount at any one time outstanding not
to exceed $25.0 million; (o) Equipment Financing Guarantees permitted by the
terms of clause (xv) of the covenant described above under the caption
"--Certain Covenants--Incurrence of Indebtedness and Issuance of Preferred
Stock" and (p) loans made to managers and officers of Grove Investors, Holdings
or the Company, and promissory notes or other instruments issued by managers and
officers of Grove Investors, Holdings or the Company, in each case, in
connection with the purchase of Equity Interests of Grove Investors or Holdings.
"PERMITTED JUNIOR SECURITIES" means Equity Interests in the Company or any
Subsidiary Guarantor or debt securities that are subordinated to all Senior Debt
(and any debt securities issued in exchange for Senior Debt) to substantially
the same extent as, or to a greater extent than, the Notes are subordinated to
Senior Debt pursuant to Article 10 of the Indenture; PROVIDED that no such
Equity Interests or debt securities may be issued if the rights of the holders
of the Senior Debt are impaired by any such issuance in connection with a
reorganization, including, without limitation, by reason of such rights being
impaired within the meaning of Section 1124 of Title 11 of the United States
Code.
"PERMITTED LIENS" means (i) Liens securing Senior Debt and Liens on assets
of Restricted Subsidiaries securing Senior Debt permitted by the terms of the
Indenture to be incurred; (ii) Liens in favor of the Issuers or a Restricted
Subsidiary; (iii) Liens on property of a Person existing at the time such Person
becomes a Restricted Subsidiary of the Company or is merged into or consolidated
with one of the Company or any Subsidiary of the Company; PROVIDED that such
Liens were in existence prior to 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 the Company or any Subsidiary of the Company;
(iv) Liens on property existing at the time of acquisition thereof by the
Company or any Subsidiary of the Company, PROVIDED that such Liens were in
existence prior to the contemplation of such acquisition; (v) Liens to secure
Indebtedness (including Capital Lease Obligations) permitted by clause (v) 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 such Indebtedness; (vi) Liens existing on the date of the
Indenture; (vii) 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; (viii) Liens on assets of
Unrestricted Subsidiaries that secure Non-Recourse Debt of Unrestricted
Subsidiaries; (ix) Liens incurred in the ordinary course of business of the
Issuers or any Subsidiary of the Issuers 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 thereof in the operation of business by the Issuers or such
Subsidiary; (x) liens on assets of the Subsidiary Guarantors to secure Senior
Debt of such Subsidiary Guarantors that was permitted to be incurred under the
Indenture; (xi) 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; (xii) 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
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for the payment of borrowed money); (xiii) judgment or attachment Liens not
giving rise to an Event of Default; (xiv) 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 the Company or any of its Restricted Subsidiaries; (xv) 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 such lease; (xvi) Liens upon specific
items of inventory or other goods and proceeds of any Person securing such
Person's obligations in respect of bankers' acceptances issued or created for
the account of such Person to facilitate the purchase, shipment or storage of
such inventory or other goods; (xvii) Liens securing reimbursement obligations
with respect to letters of credit and products and proceeds thereof; (xviii)
Liens securing Hedging Obligations which Hedging Obligations relate to
Indebtedness that is otherwise permitted under the Indenture; (xix) Liens
arising out of consignment, conditional sale or similar arrangements for the
purchase of goods entered into by the Company or any Restricted Subsidiary in
the ordinary course of business; (xx) 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; (xxi) Liens with respect to
Equipment Financing Guarantees and related inventory and equipment; (xxii) Liens
incurred in connection with the Dealer Financing Program; and (xxiii) Liens
incurred in the ordinary course of business on equipment and inventory held for
lease by the Company or any of its Restricted Subsidiaries.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Issuers
or any of their Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used within 60 days after the incurrence thereof to
extend, refinance, renew, replace, defease or refund other Indebtedness of the
Issuers or any of their Restricted Subsidiaries (other than intercompany
Indebtedness); PROVIDED that: (i) the principal amount (or accreted value, if
applicable) of such 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); (ii) 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; (iii) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, 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 Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Issuers or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"PUBLIC EQUITY OFFERING" means a public offering pursuant to an effective
registration statement under the Securities Act of Equity Interests (other than
Disqualified Stock) of (i) the Company; or (ii) Holdings (or any other person
that owns, directly or indirectly, 100% of the common equity of the Issuers) to
the extent the net proceeds thereof are contributed to the Company as a capital
contribution, that, in each case, results in the net proceeds to the Company of
at least $25.0 million.
"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.
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"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"SENIOR DEBT" means (i) all Indebtedness outstanding under the New Credit
Agreement, including any Guarantee thereof and all Hedging Obligations with
respect thereto, (ii) any other Indebtedness permitted to be incurred by the
Issuers under the terms of the Indenture, unless the instrument under which such
Indebtedness is incurred expressly provides that it is on a parity with or
subordinated in right of payment to the Notes and (iii) all Obligations with
respect to the foregoing. Notwithstanding anything to the contrary in the
foregoing, Senior Debt will not include (w) any liability for federal, state,
local or other taxes owed or owing by the Issuers, (x) any Indebtedness of the
Issuers to any of their Subsidiaries or other Affiliates, (y) any trade payables
or (z) any Indebtedness that is incurred in violation of the Indenture.
"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 such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"SUBSIDIARY" means, with respect to any Person, (i) 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 such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) 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 such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"SUBSIDIARY GUARANTORS" means each of (i) Crane Acquisition Corp., Crane
Holding Inc., National Crane Corporation, Grove U.S. LLC, Grove Finance LLC and
(ii) any other subsidiary that executes a Subsidiary Guarantee in accordance
with the provisions of the Indenture, and their respective successors and
assigns.
"TAX AMOUNT" means, with respect to the Company for any period, the product
of (i) the taxable income of the Company for such period and (ii) the maximum
combined Federal, state and local income tax rates applicable to an individual
resident in New York City or California, whichever is higher; PROVIDED, HOWEVER,
that in determining the Tax Amount, the effect thereon of any net operating loss
carryforwards or other carryforwards or tax attributes, such as alternative
minimum tax carryforwards 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
the Company for state and local income tax purposes.
"TAX DISTRIBUTION" means a distribution in respect of taxes to the members
of the Company pursuant to clause (vi) of the second paragraph of the covenant
described above under the caption "Certain Covenants--Restricted Payments."
"TRANSACTIONS" means each of (i) the acquisition by the Company 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"); (ii) approximately $203.0
million of borrowings under the New Credit Facility; (iii) approximately $225.0
million of estimated gross proceeds from the Offering;
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and (iv) an approximately $168.0 million equity contribution to the Company by
Grove Holdings LLC, a Delaware limited liability company (the "Equity
Contribution").
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary (other than Grove
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 such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company; (c) is a Person with respect to which
neither the Company 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; (d) has not guaranteed or
otherwise directly or indirectly provided credit support for any Indebtedness of
the Company or any of its Restricted Subsidiaries; and (e) has at least one
director on its board of directors that is not a director or executive officer
of the Company or any of its Restricted Subsidiaries and has at least one
executive officer that is not a director or executive officer of the Company or
any of its Restricted Subsidiaries. Any such designation by the Management
Committee shall be evidenced to the Trustee by filing with the Trustee a
certified copy of the Board Resolution giving effect to such designation and an
Officers' Certificate certifying that such 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 shall thereafter cease to be an Unrestricted
Subsidiary for purposes of the Indenture and any Indebtedness of such Subsidiary
shall be deemed to be incurred by a Restricted Subsidiary of the Company as of
such date (and, if such Indebtedness is not permitted to be incurred as of such
date under the covenant described under the caption "Incurrence of Indebtedness
and Issuance of Disqualified Stock," the Issuers shall be in default of such
covenant). The Management Committee of the Company may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (i) 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 such designation had occurred at the
beginning of the four-quarter reference period, and (ii) no Default or Event of
Default would be in existence following such designation.
"VOTING STOCK" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Management
Committee of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
at any date, the number of years obtained by dividing (i) 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 (ii) the then outstanding principal
amount of such Indebtedness.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than (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) shall at the time be owned by such Person or by one or more Wholly Owned
Restricted Subsidiaries of such Person and one or more Wholly Owned Restricted
Subsidiaries of such Person.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
In the opinion of Paul, Weiss, Rifkind, Wharton & Garrison, counsel to the
Issuers, the following discussion is an accurate general description of certain
of the material anticipated Federal income tax consequences of the pruchase,
ownership and disposition of the Notes. The tax treatment of the holders of the
Notes may vary depending upon their particular situations. This discussion is
based upon the United States Federal tax law now in effect, which is subject to
change, possibly retroactively, which could affect the continued validity of
this summary. The discussion does not purport to deal with all aspects of
Federal taxation that may be relevant to particular investors in light of their
personal investment circumstances, nor does it discuss Federal tax laws
applicable to special classes of taxpayers (for example, insurance companies,
tax-exempt organizations, financial institutions, subsequent purchasers of Notes
and broker-dealers). In addition, the description does not consider the effect
of any estate, gift. foreign, state, local or other tax laws that may be
applicable to a particular investor. In general, the summary assumes that a
holder acquires a Note at original issuance and holds such Note as a capital
asset within the meaning of section 1221 of the Internal Revenue Code of 1986,
as amended (the "Code"), and not as part of an integrated investment (for
example, a hedge, straddle or conversion transaction). Prospective investors are
strongly urged to consult their own tax advisors regarding the tax consequences
of purchasing, holding and disposing of the Notes.
UNITED STATES HOLDERS
As used herein, the term "United States Holder" means the beneficial owner
of a Note that is, for United States Federal income tax purposes, (i) a citizen
or resident of the United States, (ii) a domestic corporation or other entity
taxable as a corporation, (iii) an estate or trust the income of which is
subject to United States Federal income taxation regardless of its source or
(iv) 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 Paul, Weiss, Rifkind, Wharton & Garrison, counsel to the
Issuers, the exchange of a Senior Subordinated Note for an Exchange Note will
not be a taxable event to a United States Holder of a Senior Subordinated Note,
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 Exchange Note as it had in a Senior
Subordinated Note immediately before the exchange. Further, the tax consequences
of ownership and disposition of any Exchange Note will be the same as the tax
consequences of ownership and disposition of a Senior Subordinated Note.
INTEREST
Interest on a Note will generally be taxable to a United States Holder as
ordinary income from domestic sources at the time it is paid or accrued in
accordance with the United States Holder's method of accounting for tax
purposes.
MARKET DISCOUNT
If a United States Holder purchases a Note for an amount that is less than
its principal amount, 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. Under the market discount rules, 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 Note 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 a Note at the time of such
payment or disposition. In addition, the United States Holder may be required to
defer, until the maturity
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of the Note 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 Note.
Any market discount will be considered to accrue ratably during the period
from the date of acquisition to the maturity date of the Note, unless the United
States Holder elects to accrue on a constant interest method. A United States
Holder of a Note 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 (the "IRS").
AMORTIZABLE BOND PREMIUM
A United States Holder that purchases a Note for an amount in excess of the
sum of its principal amount will be considered to have purchased the Note at a
"premium." A holder generally may elect to amortize the premium over the
remaining term of the Note on a constant yield method. The amount amortized in
any year will be treated as a reduction of the United States Holder's interest
income from the Note. Bond premium on a Note held by a United States Holder that
does not make such an election will decrease the gain or increase the loss
otherwise recognized on disposition of the Note. The election to amortize
premium on a constant yield method once made applies to all debt obligations
held or subsequently acquired by the electing United States Holder on or after
the first day of the first taxable year to which the election applies and may
not be revoked with the consent of the IRS.
Final Treasury regulations issued on December 30, 1997 provide that, at a
holder's election, premium may be amortized to offset interest income only as a
United States Holder takes the qualified stated interest into account under the
United States Holder's regular accounting method. In the case of instruments
that provide for alternative payment schedules, bond premium is calculated by
assuming that (i) the holder will exercise or not exercise options in a manner
that maximizes the holder's yield and (ii) the issuer will exercise or not
exercise options in a manner that minimizes the holder's yield except with
respect to call options for which the issuer is assumed to exercise such call
options in a manner that maximizes the holder's yield. The final regulations are
effective for debt instruments acquired on or after March 2, 1998. However, if a
United States Holder elects to amortize bond premium for the taxable year
containing March 2, 1998, or any subsequent taxable year, the final regulations
would apply to all the United States Holder's debt instruments held on or after
the first day of that taxable year. Once made, the election cannot be revoked
without the consent of the IRS.
GAIN ON DISPOSITION
A United States Holder's tax basis in a Note will, in general, be the United
States Holder's cost therefor, increased by market discount previously included
in income by the holder and reduced by any amortized premium. Upon the sale,
exchange or retirement of a Note, a United States Holder will recognize gain or
loss equal to the difference between the amount realized upon the sale, exchange
or retirement (less any accrued interest, which will be taxable as such ) and
the adjusted tax basis of the Note. Except as described above with respect to
market discount, such gain or loss will be capital gain or loss and will be
long-term capital gain or loss if at the time of sale, exchange or retirement
the Note has been held for more than one year. Under current law, long-term
capital gains of individuals are, under certain circumstances, taxed at lower
rates than items of ordinary income. The deductibility of capital losses is
subject to limitations.
118
<PAGE>
INFORMATION REPORTING AND BACKUP WITHHOLDING
In general, information reporting requirements will apply to certain
payments of principal, interest and premium paid on Notes and to the proceeds of
sale of a Note made to United States Holders other than certain exempt
recipients (such as corporations). A 31% backup withholding tax will apply to
such payments if the holder fails to provide a taxpayer identification number or
certification of foreign or other exempt status or fails to report in full
dividend and interest income.
Any amounts withheld under the backup withholding rules will be allowed as a
refund or a credit against such United States Holder's United States Federal
income tax liability, provided the required information is furnished to the IRS.
NON-UNITED STATES HOLDERS
As used herein, the term "Non-United States Holder" means a beneficial owner
of a Note 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 Senior Subordinated Note for an Exchange Note will not be
a taxable event to a Non-United States Holder of a Senior Subordinated Note, 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 Exchange Note as it had in a
Senior Subordinated Note immediately before the exchange. Further, the tax
consequences of ownership and disposition of any Exchange Note will be the same
as the tax consequences of ownership and disposition of a Senior Subordinated
Note.
INTEREST
Subject to the discussion of information reporting and backup withholding
below, payments of interest 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 (i)
such Non-United States Holder is not a bank for United States Federal income tax
purposes, (ii) such Non-United States Holder is not a "10-percent shareholder"
within the meaning of section 871(h)(3)(B) of the Code, (iii) such Non-United
States Holder is not a controlled foreign corporation for United States Federal
income tax purposes that is related to the Company through stock ownership, and
(iv) 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 Note by
or on behalf of a Non-United States Holder generally will not be subject to
United States Federal withholding or income tax, unless (i) such gain is
effectively connected with a United States trade or business of such Non-United
States Holder, (ii) the Non-United States Holder is an individual that is
present in the United States for
119
<PAGE>
183 days or more during the taxable year of the sale, exchange or retirement and
certain other requirements are met, or (iii) 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.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Under temporary Treasury Regulations now in effect, information reporting
and backup withholding will not apply to payments by the Company 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 does not have 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 Notes.
Certification that complies with the procedures in the Final Withholding
Regulations, where required, must be provided not later than the earlier of (i)
the date after December 31, 1999 on which such Non-United States Holders'
certification is no longer accurate or has expired, and (ii) 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 Notes 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 in order 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 NOTES 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 IRS.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY OR MAY NOT BE APPLICABLE DEPENDING UPON A
HOLDER'S PARTICULAR SITUATION. INVESTORS SHOULD CONSULT THEIR TAX ADVISOR WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF OWNERSHIP AND DISPOSITION OF THE
NOTES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL FOREIGN AND OTHER TAX
LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
120
<PAGE>
ERISA CONSIDERATIONS
Sections 406 and 407 of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and Section 4975 of the Code 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 ERISA or
"disqualified persons" under the Code. A violation of these "prohibited
transactions" rules may generate excise taxes under the Code and other
liabilities under ERISA for such persons. Possible violations of the prohibited
transaction rules occur if the Notes are purchased with the assets of any Plan
if the Company or any of its affiliates is a party in interest 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 Notes
should consult its legal advisors regarding the consequences of such purchases
under ERISA and the Code. If the Plan is not subject to ERISA, the fiduciary
should consult its legal advisors regarding the consequences of any state law or
Code considerations.
PLAN OF DISTRIBUTION
Based on interpretations by the Staff set forth in no-action letters issued
to third parties, the Issuers believe that a holder (other than a person that is
an affiliate of the Company within the meaning of Rule 405 under the Securities
Act or a "broker" or "dealer" registered under the Exchange Act (each a "Broker
Dealer") that purchases Notes from the Issuers to resell pursuant to Rule 144A
under the Securities Act or any other exemption) that exchanges Senior
Subordinated Notes for Exchange Notes 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 Exchange Notes will be allowed to resell the Exchange Notes to the public
without further registration under the Securities Act and without delivering to
the purchasers of the Exchange Notes a prospectus that satisfies the
requirements of Section 10 thereof. However, if any holder acquires Exchange
Notes in the Exchange Offer for the purpose of distributing or participating in
a distribution of the Exchange Notes, such holder cannot rely on the position of
the Staff enunciated in Exxon Capital Holdings Corporation (available May 13,
1988) 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 Exchange Notes obtained by
such holder in exchange for Senior Subordinated Notes acquired by such holder
directly from the Issuers 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
the Issuers in the Letter of Transmittal that (A) it is not an Affiliate of the
Issuers or any Subsidiary Guarantor; (B) it is not participating in, and does
not intend to participate in, and has no arrangement or understanding with any
Person to participate in, a distribution of the Senior Subordinated Notes or the
Exchange Notes; (C) it is acquiring the Exchange Notes in the ordinary course of
business; and (D) if such holder is a Broker Dealer, it will receive the
Exchange Notes for its own account in exchange for the Senior Subordinated Notes
that were acquired as a result of market-making activities or other trading
activities. Each Broker Dealer referred to in clause (D) of the preceding
sentence must acknowledge that it will deliver a prospectus in connection with
any resale of such Exchange Notes.
Any Broker Dealer who holds Senior Subordinated Notes that were acquired for
its own account as a result of market-making activities or other trading
activities (other than Senior Subordinated Notes acquired directly from the
Issuers or any Affiliate of the Issuers) may exchange such Senior Subordinated
121
<PAGE>
Notes for Exchange Notes 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 Exchange Notes received by
it in the Exchange Offer, which prospectus delivery requirement may be satisfied
by the delivery by such Broker Dealer of this Prospectus, as it may be amended
or supplemented from time to time. The Issuers have agreed to use their
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
Exchange Notes 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.
The Issuers will not receive any proceeds from any sale of Exchange Notes by
Broker Dealers. Exchange Notes received by Broker-Dealers for their own account
pursuant to the Exchange Offer may be sold from time to time in one or more
transactions in the over-the-counter market, in negotiated transactions, through
the writing of options on the Exchange Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchaser 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 Exchange Notes. Any Broker Dealer that
resells Exchange Notes that were received by it for its own account pursuant to
the Exchange Offer and any Broker Dealer that participates in a distribution of
such Exchange Notes may be deemed to be an "underwriter" within the meaning of
the Securities Act and any profit on any such resale of Exchange Notes and any
commission or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act.
The Issuers have agreed to pay all expenses incident to the Exchange Offer
(including the reasonable expenses of one counsel for holders of the Senior
Subordinated Notes) other than commissions and concessions of Broker Dealers,
and will indemnify the holders of the Senior Subordinated Notes (including any
Broker Dealers) against certain liabilities, including liabilities under the
Securities Act.
LEGAL MATTERS
Certain legal matters in connection with the Exchange Notes offered hereby
will be passed upon for the Company, Grove Capital and the Subsidiary
Guarantors, by Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York.
EXPERTS
The historical financial statements of the Company as of September 28, 1996
and September 27, 1997 and for the fiscal years then ended, included in this
Prospectus have been so included in reliance on the report of Ernst & Young LLP
("Ernst & Young"), independent auditors, given on the authority of said firm as
experts in auditing and accounting. The historical financial statements of the
Company for the fiscal year ended September 30, 1995, included in this
Prospectus have been so included in reliance on the report of
PricewaterhouseCoopers LLP, independent auditors, given on the authority of said
firm as experts in auditing and accounting.
CHANGE IN ACCOUNTANTS
As indicated above, Ernst & Young was the independent accountant of the
Company. In July 1998, Ernst & Young was replaced by KPMG Peat Marwick, LLP
("KPMG") as the independent accountant of the Company. Ernst & Young did not
resign nor was it dismissed under adverse circumstances. Ernst & Young's report
on the financial statements for the past two years 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 parent of the Company.
122
<PAGE>
INDEX TO UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Introduction............................................................................................... P-2
Unaudited Pro Forma Combined Statement of Operations for the year ended September 27, 1997................. P-3
Unaudited Pro Forma Combined Statement of Operations for the nine months ended June 27, 1998............... P-4
Notes to Unaudited Pro Forma Combined Statements of Operations............................................. P-5
</TABLE>
P-1
<PAGE>
GROVE WORLDWIDE LLC
UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
The following unaudited pro forma combined financial data of the Company
have been derived by the application of pro forma adjustments to the historical
combined and consolidated financial statements of the Company appearing
elsewhere in this Prospectus. The unaudited pro forma combined statements of
operations for the nine months ended June 27, 1998 (the "fiscal 1998 nine
months") and the year ended September 27, 1997 ("fiscal 1997") give effect to
the Transactions as if they were consummated at the beginning of fiscal 1997.
The pro forma adjustments are described in the accompanying notes and are
based upon available information and upon certain assumptions that management
believes are reasonable. The unaudited pro forma combined information and
accompanying notes should be read in conjunction with the Combined and
Consolidated Financial Statements and related notes, and other financial
information pertaining to the Company, including "Capitalization" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," included elsewhere in this Prospectus.
The unaudited pro forma combined financial data are provided for
informational data only and are not necessarily indicative of the operating
results that would have occurred had the Transactions been consummated on the
dates described above, nor are they necessarily indicative of the Company's
future results of operations or financial position.
The unaudited pro forma combined financial data have been prepared
accounting for the Acquisition using the purchase method. The estimated total
purchase price of $583 million and related acquisition fees and expenses of
approximately $6.5 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. Such allocation is based on studies which
have not yet been completed. Accordingly, the allocation reflected in the
unaudited pro forma combined financial data is preliminary and subject to
revision. Such revision could be material.
The unaudited pro forma combined statements of operations data do not
include annual costs savings the Company estimates it can achieve by fiscal 2001
through the implementation of a detailed program to improve the manufacturing
process and reduce selling, general and administrative expenses described
elsewhere in this Prospectus. It is expected that cost savings during the next
four years will be offset by non-recurring costs of approximately $25.0 million
associated with the implementation of the Operations Improvement Program.
P-2
<PAGE>
GROVE WORLDWIDE LLC
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
YEAR ENDED SEPTEMBER 27, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- -----------
<S> <C> <C> <C>
Net sales................................................................ $ 856,812 $ -- $ 856,812
Cost of goods sold....................................................... 653,539 1,421(a) 654,960
---------- ----------- -----------
Gross profit........................................................... 203,273 (1,421) 201,852
Selling, engineering, general and administrative expenses................ 120,909 587(a)
(1,404)(c) 120,092
Restructuring costs...................................................... 1,960 -- 1,960
Business process reengineering costs associated with new computer system
installation........................................................... 1,283 -- 1,283
Amortization of goodwill................................................. 9,054 (1,899)(d) 7,155
Management fees paid to Hanson........................................... 2,176 (2,176)(e) --
---------- ----------- -----------
Operating profit....................................................... 67,891 3,471 71,362
Other income (expense):
Interest income........................................................ 2,085 (1,606)(f) 479
Interest expense....................................................... (2,042) 1,404(g)
(39,451)(h) (40,089)
Other income, net...................................................... 535 -- 535
---------- ----------- -----------
Income before income taxes........................................... 68,469 (36,182) 32,287
Income taxes............................................................. 26,249 (22,543)(i) 3,706
---------- ----------- -----------
Net income........................................................... $ 42,220 $ (13,639) $ 28,581
---------- ----------- -----------
---------- ----------- -----------
</TABLE>
See notes to unaudited pro forma combined statements of operations
P-3
<PAGE>
GROVE WORLDWIDE LLC
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
NINE MONTHS ENDED JUNE 27, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
---------------- ----------------
SEVEN TWO
MONTHS ENDED MONTHS ENDED PRO FORMA
APRIL 28, 1998 JUNE 27, 1998 ADJUSTMENTS PRO FORMA
---------------- ---------------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales....................................... $ 476,199 $ 154,780 $ -- $ 630,979
Cost of goods sold.............................. 375,732 121,144 829(a) 497,705
Write-off of amount assigned to inventory in
excess of historical costs resulting from
purchase accounting adjustments............... -- 10,000 (10,000)(b) --
-------- -------- ----------- -----------
Gross profit.................................. 100,467 23,636 9,171 133,274
Selling, engineering, general and administrative
expenses...................................... 72,893 23,162 342(a)
(1,484)(c) 94,913
Restructuring costs............................. -- -- -- --
Business process reengineering costs associated
with new computer system installation......... 142 -- -- 142
Amortization of goodwill........................ 5,215 1,164 (1,013)(d) 5,366
Management fees paid to Hanson.................. 162 -- (162)(e) --
-------- -------- ----------- -----------
Operating profit (loss)....................... 22,055 (690) 11,488 32,853
Other income (expense):
Interest income............................... 3,484 340 (3,144)(f) 680
Interest expense.............................. (2,437) (7,326) 2,174(g)
(22,546)(h) (30,135)
Other income (expense), net................... (6,993) 6 -- (6,987)
-------- -------- ----------- -----------
Income (loss) before income taxes........... 16,109 (7,670) (12,028) (3,589)
Income taxes.................................... 11,673 1,751 (9,007)(i) 4,417
-------- -------- ----------- -----------
Net income (loss)........................... $ 4,436 $ (9,421) $ (3,021) $ (8,006)
-------- -------- ----------- -----------
-------- -------- ----------- -----------
</TABLE>
See notes to unaudited pro forma combined statements of operations
P-4
<PAGE>
GROVE WORLDWIDE LLC
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS (CONTINUED)
(IN THOUSANDS)
(a) To reflect additional depreciation expense as a result of the fair values
assigned to property, plant and equipment.
<TABLE>
<CAPTION>
FISCAL 1998
FISCAL 1997 NINE MONTHS
----------- ------------
<S> <C> <C>
Additional depreciation expense:
Included in cost of goods sold................................... $ 1,421 $ 829
Included in selling, engineering, general and administrative
expenses....................................................... 587 342
----------- ------------
$ 2,008 $ 1,172
----------- ------------
----------- ------------
</TABLE>
(b) In connection with the allocation of the purchase price, the Company has
assumed that it will assign a value to inventory of approximately $25,000 in
excess of its net book value. The amount in excess of net book value will be
charged against operations over the first six months following the
Acquisition. The charge of $10,000 for the two months ended June 27, 1998 is
eliminated in the pro forma combined statements of operations for the nine
months ended June 27, 1998 since such charge is non-recurring.
(c) To adjust selling, engineering, general and administrative expenses for cost
increases and reductions resulting from the Acquisition and the operation of
the Company on a stand-alone basis.
<TABLE>
<CAPTION>
FISCAL 1998
FISCAL 1997 NINE MONTHS
----------- ------------
<S> <C> <C>
Elimination of long-term incentive plan for senior executives.... $ (750) $ (190)
Elimination of other executive perquisites....................... (600) (350)
Adjustment to pension and postretirement expense resulting from
purchase accounting adjustments................................ (1,054) (615)
Estimated additional costs to replace certain administrative
costs provided by Hanson....................................... 1,000 583
Professional fees and expenses in connection with the sale of the
Company........................................................ -- (912)
----------- ------------
Net reduction in expenses........................................ $ (1,404) $ (1,484)
----------- ------------
----------- ------------
</TABLE>
In connection with the Acquisition, the Company replaced the long-term
incentive plan with an option plan which provides for the granting of
options to purchase membership interests at fair market value.
(d) To adjust goodwill amortization to $7,155 in fiscal 1997 and $5,366 in the
fiscal 1998 nine months based on goodwill of $286,180 amortized over 40
years.
(e) To eliminate management fees paid to Hanson ($2,176 in fiscal 1997 and $162
in the fiscal 1998 nine months).
(f) To eliminate interest income ($1,606 in fiscal 1997 and $3,144 in the fiscal
1998 nine months) earned on notes receivable from customers using the
special North American dealer financing program. Virtually all notes
receivable outstanding under this dealer financing program at the date of
the Acquisition were retained by Hanson. The Company intends to continue the
dealer financing program
P-5
<PAGE>
GROVE WORLDWIDE LLC
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS (CONTINUED)
(IN THOUSANDS)
and in July 1998 entered into an agreement with a third-party to purchase
notes receivable as they are issued. The Company will generate interest
income generally at the prime rate from new notes issued under the dealer
financing program. No interest income from the notes receivable has been
assumed in the pro forma combined statements of operations for periods prior
to the Acquisition.
(g) To eliminate interest expense paid to Hanson ($1,404 in fiscal 1997 and
$2,174 in the fiscal 1998 nine months) with respect to intercompany
obligations.
(h) To reflect interest expense based upon the pro forma debt of the Company,
including pro forma borrowings under the Revolving Credit Facility, as
follows for fiscal 1997 and the fiscal 1998 nine months:
<TABLE>
<CAPTION>
FISCAL 1998
FISCAL 1997 NINE MONTHS
----------- -----------
<S> <C> <C>
Revolving Credit Facility (7.95% per annum).................................... $ 488 $ 352
Term Loan Facility (8.20% per annum)........................................... 16,400 12,300
9 1/4% Senior Subordinated Notes due 2008...................................... 20,813 15,610
Other borrowing costs.......................................................... 638 560
Amortization of deferred financing costs....................................... 1,750 1,313
----------- -----------
$ 40,089 $ 30,135
----------- -----------
----------- -----------
</TABLE>
Interest expense on the Revolving Credit Facility includes the unused
facility fee (0.375%) of $457 and $352 in fiscal 1997 and fiscal 1998 nine
months, respectively.
Interest rates with respect to borrowings under the Revolving Credit Facility
and the Term Loan Facility are variable. A 25-basis point increase in
interest rates on borrowings under the Revolving Credit Facility and the
Term Loan Facility would increase pro forma interest expense by $500
annually.
(i) To eliminate certain United States Federal and state income taxes. Following
the Acquisition, a significant portion of the Company's business will be
operated as a United States limited liability company, whereby the limited
liability company will not itself be subject to income tax, the taxable
income of the limited liability company in the United States will be
allocated to the equity holders of Holdings and such equity holders will be
responsible for income taxes on such taxable income. The Company expects to
make distributions in the form of dividends to equity holders of Holdings to
enable them to meet their tax obligations with respect to income allocated
to them by the Company. Foreign and domestic taxes payable on taxable income
generated by the Company's foreign subsidiaries and its truck-mounted crane
business will continue to be the responsibility of the Company. The pro
forma adjustment does not reflect income tax planning techniques which may
be implemented to reduce such foreign and domestic taxes.
P-6
<PAGE>
INDEX TO COMBINED AND CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
THE GROVE COMPANIES:
Report of Independent Auditors............................................................................. F-2
Report of Independent Accountants.......................................................................... F-3
Combined Balance Sheets as of September 28, 1996 and September 27, 1997.................................... F-4
Combined Statements of Operations for the years ended September 30, 1995, September 28, 1996 and September
27, 1997................................................................................................. F-5
Combined Statements of Changes in Invested Capital for the years ended September 30, 1995, September 28,
1996 and September 27, 1997.............................................................................. F-6
Combined Statements of Cash Flows for the years ended September 30, 1995, September 28, 1996 and September
27, 1997................................................................................................. F-7
Notes to Combined Financial Statements..................................................................... F-8
GROVE WORLDWIDE LCC:
Unaudited Condensed Consolidated Balance Sheet as of June 27, 1998......................................... F-33
Unaudited Condensed Combined Statements of Operations for the nine months ended June 28, 1997 and seven
months ended April 28, 1998 and Unaudited Condensed Consolidated Statement of Operations for the two
months ended June 27, 1998............................................................................... F-34
Unaudited Condensed Combined Statements of Cash Flows for the nine months ended June 28, 1997, and seven
months ended April 28, 1998 and Unaudited Condensed Consolidated Statement of Cash Flows for and the two
months ended and June 27, 1998........................................................................... F-35
Notes to Unaudited Condensed Financial Statements.......................................................... F-36
</TABLE>
Grove Worldwide LLC and Grove 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 has not provided
herein any financial statements for such entities for any period prior to the
Acquisition.
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Shareholder of
The Grove Companies
We have audited the accompanying combined balance sheets as of September 27,
1997 and September 28, 1996 of the Grove Companies (as listed in Note 1), and
the related combined statements of income, changes in invested capital, and cash
flows for each of the two years in the period ended September 27, 1997. Our
audits also included the financial statements schedule 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 schedule 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 at September 27, 1997
and September 28, 1996, 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 schedule, when
considered in relation to the basis financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
ERNST & YOUNG LLP
December 15, 1997
except for Note 19, as to which the date is
April 29, 1998
Baltimore, Maryland
F-2
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder of
The Grove Companies
In our opinion, the combined statements of operations, of cash flows and of
changes in invested capital for the year ended September 30, 1995 present
fairly, in all material respects, the results of operations and cash flows of
The Grove Companies for the year ended September 30, 1995, in conformity with
generally accepted accounting principles. Our audit also included the financial
statement schedule listed in the Index as Item 21(b). These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audit. We
conducted our audit of these statements in accordance with generally accepted
auditing standards which 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, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for the opinion expressed above. We have not
audited the combined statements of The Grove Companies for any period subsequent
to September 30, 1995.
PricewaterhouseCoopers LLP
December 15, 1997
Florham Park, NJ
F-3
<PAGE>
THE GROVE COMPANIES
COMBINED BALANCE SHEETS
AS OF SEPTEMBER 28, 1996 AND SEPTEMBER 27, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................. $ 8,184 $ 5,024
Trade receivables (net)............................................................... 121,044 149,164
Notes receivable...................................................................... -- 68,450
Inventories........................................................................... 222,542 215,332
Other current assets.................................................................. 6,680 7,633
Deferred tax assets................................................................... -- 14,936
---------- ----------
Total current assets.............................................................. 358,450 460,539
Property, plant, and equipment (net)...................................................... 101,176 147,588
Goodwill.................................................................................. 264,844 254,728
Deferred tax assets....................................................................... -- 11,415
Other non-current assets.................................................................. 5,688 7,226
---------- ----------
Total assets...................................................................... $ 730,158 $ 881,496
---------- ----------
---------- ----------
LIABILITIES AND INVESTED CAPITAL
Current liabilities:
Trade accounts payable................................................................ $ 70,779 $ 70,327
Short-term borrowings................................................................. 7,443 7,265
Income taxes payable.................................................................. -- 4,622
Deferred tax liability................................................................ 4,828 --
Other payables and accrued liabilities................................................ 90,206 86,112
---------- ----------
Total current liabilities......................................................... 173,256 168,326
Non-current liabilities:
Deferred tax liability................................................................ 4,047 --
Deferred revenue...................................................................... 21,154 46,509
Other non-current liabilities......................................................... 29,147 38,169
---------- ----------
Total liabilities................................................................. 227,604 253,004
Total invested capital.................................................................... 502,554 628,492
---------- ----------
Total liabilities and invested capital............................................ $ 730,158 $ 881,496
---------- ----------
---------- ----------
</TABLE>
See notes to combined financial statements.
F-4
<PAGE>
THE GROVE COMPANIES
COMBINED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30, 1995,
SEPTEMBER 28, 1996, AND SEPTEMBER 27, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------
SEPTEMBER 30, SEPTEMBER 28, SEPTEMBER 27,
1995 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
Net sales........................................................... $ 503,815 $ 794,209 $ 856,812
Cost of goods sold.................................................. 377,226 609,130 653,539
------------- ------------- -------------
Gross profit.................................................... 126,589 185,079 203,273
Selling, engineering, general, and administrative expenses.......... 84,826 128,804 131,246
Management fees..................................................... 3,390 5,655 2,176
Restructuring charges............................................... -- -- 1,960
------------- ------------- -------------
Operating profit................................................ 38,373 50,620 67,891
Net interest (expense) income, net of interest income of $302, $535,
and $2,085 respectively........................................... (2,312) (2,791) 43
Other (expense) income, net......................................... (279) (193) 535
------------- ------------- -------------
Income before income taxes...................................... 35,782 47,636 68,469
Income taxes........................................................ 19,013 22,188 26,249
------------- ------------- -------------
Net income...................................................... $ 16,769 $ 25,448 $ 42,220
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See notes to combined financial statements.
F-5
<PAGE>
THE GROVE COMPANIES
COMBINED STATEMENTS OF CHANGES IN INVESTED CAPITAL
FOR THE YEARS ENDED SEPTEMBER 30, 1995,
SEPTEMBER 28, 1996, AND SEPTEMBER 27, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
MINIMUM
PENSION TOTAL
INVESTED LIABILITY TRANSLATION INVESTED
CAPITAL ADJUSTMENT ADJUSTMENT CAPITAL
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Balance at October 1, 1994...................................... $ 420,401 $ (975) $ (19,664) $ 399,762
Net income.................................................... 16,769 -- -- 16,769
Dividend paid to parent....................................... (11,097) -- -- (11,097)
Net transactions with affiliates.............................. 61,825 -- -- 61,825
Change in minimum pension liability........................... -- (1,102) -- (1,102)
Change in foreign currency translation........................ -- -- 1,149 1,149
---------- ----------- ----------- ----------
Balance at September 30, 1995................................... 487,898 (2,077) (18,515) 467,306
Net income.................................................... 25,448 -- -- 25,448
Dividend paid to parent....................................... (30,057) -- -- (30,057)
Net transactions with affiliates.............................. 42,394 -- -- 42,394
Change in minimum pension liability........................... -- (162) -- (162)
Change in foreign currency translation........................ -- -- (2,375) (2,375)
---------- ----------- ----------- ----------
Balance at September 28, 1996................................... 525,683 (2,239) (20,890) 502,554
Net income.................................................... 42,220 -- -- 42,220
Net transactions with affiliates.............................. 88,524 -- -- 88,524
Change in minimum pension liability........................... -- 601 -- 601
Change in foreign currency translation........................ -- -- (5,407) (5,407)
---------- ----------- ----------- ----------
Balance at September 27, 1997................................... $ 656,427 $ (1,638) $ (26,297) $ 628,492
---------- ----------- ----------- ----------
---------- ----------- ----------- ----------
</TABLE>
See notes to combined financial statements.
F-6
<PAGE>
THE GROVE COMPANIES
COMBINED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED SEPTEMBER 30, 1995,
SEPTEMBER 28, 1996, AND SEPTEMBER 27, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
-------------------------------------------
SEPTEMBER 30, SEPTEMBER 28, SEPTEMBER 27,
1995 1996 1997
------------- ------------- -------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income........................................................ $ 16,769 $ 25,448 $ 42,220
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................... 13,765 17,313 17,985
Depreciation of equipment held for rent......................... 196 3,805 8,352
(Gain)/loss on sale of fixed assets............................. (1,297) 5 (600)
Deferred tax expense............................................ 183 126 1,969
Changes in operating assets and liabilities:
Trade receivables (net)....................................... (13,241) (48,405) (23,266)
Notes receivable.............................................. -- -- (68,450)
Inventories................................................... (33,766) (27,528) (162)
Trade accounts payable........................................ (1,022) 21,559 564
Other assets and liabilities (net)............................ 25,366 17,503 33,383
------------- ------------- -------------
Net cash provided by operating activities......................... 6,953 9,826 11,995
------------- ------------- -------------
INVESTING ACTIVITIES
Capital expenditures.............................................. (7,385) (19,443) (32,491)
Investment in equipment held for rent............................. (552) (22,527) (37,904)
Proceeds from sales of property, plant, and equipment............. 1,733 432 1,603
Acquisition of businesses......................................... (40,370) (3,703) --
------------- ------------- -------------
Net cash used in investing activities............................. (46,574) (45,241) (68,792)
------------- ------------- -------------
FINANCING ACTIVITIES
Net proceeds from short-term borrowings........................... (127) 7,443 204
Net amounts received from parent.................................. 61,825 48,366 54,145
Cash dividends paid to parent..................................... (11,097) (30,057) --
------------- ------------- -------------
Net cash provided by financing activities......................... 50,601 25,752 54,349
------------- ------------- -------------
Effect of exchange rate changes on cash........................... 570 (838) (712)
------------- ------------- -------------
Net increase (decrease) in cash and cash equivalents.............. 11,550 (10,501) (3,160)
Cash and cash equivalents at beginning of year.................... 7,135 18,685 8,184
------------- ------------- -------------
Cash and cash equivalents at end of year.......................... $ 18,685 $ 8,184 $ 5,024
------------- ------------- -------------
------------- ------------- -------------
</TABLE>
See notes to combined financial statements.
F-7
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS
(IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
ORGANIZATION AND BASIS OF PRESENTATION
The Grove Companies (the "Company") and the accompanying combined financial
statements 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 Holding Inc., Delta Manlift SAS, Grove France
SA, Deutsche Grove GmbH and Grove Manlift Pty. Ltd. All of the Grove Companies
are either directly or indirectly wholly owned by Hanson PLC, a United Kingdom
company.
All significant intercompany transactions have been eliminated in the
accompanying combined financial statements.
DESCRIPTION OF BUSINESS
The Company 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 manufacturing plants and primary related
facilities are located in: Shady Grove and Chambersburg, Pennsylvania and
Waverly, Nebraska, United States; 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.
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 invested capital. 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.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make reasonable estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
The Company defines cash equivalents as highly liquid investments with a
maturity of less than three months when purchased.
TRADE RECEIVABLES AND NOTES RECEIVABLE
Trade receivables are net of allowance for doubtful accounts of $2,553 and
$2,717 as of September 28, 1996 and September 27, 1997, respectively.
Notes receivable relate to sales of new equipment to North American
distributors on terms of up to 360 days. Payment of interest and principle are
due at the maturity of the note unless the dealer sells the
F-8
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
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 for financial reporting purposes. The
depreciation periods for these assets are as follows:
<TABLE>
<S> <C>
Land improvements............................................... 3-20 years
10-50
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 periods of up to 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
In accordance with FASB Statement No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," 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.
POSTRETIREMENT BENEFITS
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. Prior service costs and unrecognized gains or
losses in excess of the corridor for defined benefit plans are generally
amortized on the straight-line method over the estimated remaining service
periods of participants.
F-9
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Certain employees of the Company are covered by defined contribution plans.
The Company's contributions to the plans are based on percentage of employee
compensation or employee contributions. The plans are funded on a current basis.
In addition to pension benefits, the Company provides certain postretirement
medical, and prescription drug benefits, principally to certain former United
States employees. These plans are unfunded. Retirees in other countries are
generally covered by government-sponsored programs.
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments are utilized by the Company to reduce
foreign currency exchange risks and consist primarily of forward 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. If and when the hedged transactions are no longer likely to occur,
the derivative financial instruments are marked-to-market and recognized through
the income statement as other income or expense.
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 leasing companies. Such
guarantees generally take the form of end-of-term residual value guarantees or
reducing residual value guarantees. Reducing residual value guarantees represent
guarantees of residual value that decline with the passage of time. End-of-term
guarantees and reducing residual value guarantees are generally over periods of
five years. The Company records these transactions in accordance with the lease
principles established by FASB Statement 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 income statement. 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 28, 1996 and September 27, 1997, the amount of deferred revenue
relating to transactions involving residual value guarantees which is included
in other current or noncurrent liabilities was $24,179 and $53,150,
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. Estimated obligations beyond one year are
classified as other non-current liabilities.
F-10
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
RESEARCH AND DEVELOPMENT
Research and development expenditures are charged to operations as incurred.
Research and development costs were $9,337, $14,976, and $15,427 for the years
ended September 30, 1995, September 28, 1996, and September 27, 1997,
respectively.
ADVERTISING
All costs associated with advertising and promoting products are expensed
when incurred. Advertising expense amounted to $3,952, $3,887, and $4,802 for
the years ended September 30, 1995, September 28, 1996, and September 27, 1997,
respectively.
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 compensation arrangements.
ADOPTION OF NEW ACCOUNTING STANDARDS
In October 1996, the Accounting Standards Executive Committee of the
American Institute of Certified Public Accountants issued Statement of Position
(SOP) 96-1, "Environmental Remediation Liabilities." The SOP provides
authoritative guidance on the recognition, measurement, display, and disclosure
of environmental liabilities.
The SOP provides benchmarks that should be considered when evaluating the
probability that a loss has been incurred and the extent to which the amount of
any loss is reasonably estimable at each benchmark. Management does not believe
that the adoption of this SOP will have a material effect on the Company's
financial position or on its results of operations.
In June 1997, the Financial Accounting Standards Board 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 Financial Accounting Standards Board 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. Management will adopt the provisions of
this standard in fiscal year 1999.
2. ACQUISITIONS
On August 30, 1995, the Company acquired certain assets and liabilities of
Krupp Mobilkrane GmbH and affiliates of the Fried.Krupp AG Hoesch-Krupp's
("Krupp") mobile hydraulic crane business, for approximately $40,370. The
acquisition was accounted for under the purchase method. The purchase price was
allocated based on the fair values of the assets and liabilities acquired, with
the excess allocated to goodwill. In connection with the acquisition, the
Company recognized $10,454 in goodwill which is being
F-11
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
2. ACQUISITIONS (CONTINUED)
amortized on the straight-line basis over a period of 15 years. Results of the
Company's operations from the date of acquisition, including the amortization of
goodwill, have been reflected in the statement of operations.
Pro forma unaudited combined operating results of the Company for the year
ended September 30, 1995, assuming that the acquisition had been made as of
October 2, 1994 are summarized below:
<TABLE>
<S> <C>
Net sales......................................................... $ 639,203
Operating profit.................................................. $ 38,210
Net income........................................................ $ 15,799
</TABLE>
These pro forma results have been prepared for comparative purposes only and
include certain adjustments, including the recognition of additional
amortization expense as a result of goodwill. They do not purport to be
indicative of the results of operations which actually would have resulted had
the combination been in effect on October 2, 1994 or of future results of
operations of the combined entities.
A summary of the fair value of assets acquired and liabilities assumed as of
August 30, 1995 are as follows:
<TABLE>
<S> <C>
Inventories........................................................ $ 58,492
Property, plant, and equipment..................................... 14,203
Goodwill........................................................... 10,454
Other non-current assets........................................... 1,571
---------
Total assets..................................................... 84,720
---------
---------
Trade accounts payable............................................. 10,535
Other payables and accrued liabilities............................. 33,410
Other non-current liabilities...................................... 405
---------
Total liabilities................................................ 44,350
---------
Total cash paid.................................................. $ 40,370
---------
---------
</TABLE>
In 1996, the Company acquired the operations of Delta Manlift SAS for a
purchase price of $3,703. The acquisition was accounted for under the purchase
method and is not significant to the Company's operations.
3. RESTRUCTURING
In 1996, the Company restructured certain operations obtained in the
acquisition of Krupp's mobile hydraulic crane business and recorded a purchase
accounting reserve (and increase to goodwill) of $1,642.
In 1997, the Company recorded a restructuring charge of approximately $1,960
related to the gradual phase-out of crane production at its Sunderland, United
Kingdom location.
F-12
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
4. INVENTORY
The components of inventory are as follows as of September 28, 1996 and
September 27, 1997:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Raw materials and supplies............................................ $ 58,749 $ 76,573
Work in process....................................................... 88,005 78,993
Finished goods........................................................ 75,788 59,766
---------- ----------
$ 222,542 $ 215,332
---------- ----------
---------- ----------
</TABLE>
5. PROPERTY, PLANT AND EQUIPMENT
The components of property, plant and equipment are as follows as of
September 28, 1996 and September 27, 1997:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Land and improvements................................................. $ 12,789 $ 12,765
Buildings and improvements............................................ 60,348 63,052
Machinery and equipment............................................... 62,904 71,864
Equipment held for rent............................................... 24,845 58,455
Furniture and fixtures................................................ 15,845 17,016
Construction in progress.............................................. 7,090 20,329
---------- ----------
183,821 243,481
Less accumulated depreciation and amortization........................ (82,645) (95,893)
---------- ----------
$ 101,176 $ 147,588
---------- ----------
---------- ----------
</TABLE>
Depreciation expense for the years ended September 30, 1995, September 28,
1996, and September 27, 1997 was $5,898, $11,933 and $17,295, respectively.
Gains and losses on the sale of fixed assets are included in other (expense)
income.
Construction in progress consists primarily of costs related to the
Company's installation of new manufacturing and administrative systems,
including computer hardware and software components. The project is expected to
be completed during the latter part of fiscal year 1998. As of September 28,
1996 and September 27, 1997, total capitalized costs related to this project
were approximately $4,286 and $18,328, respectively. Project costs related to
reengineering, training of personnel, and the current and future operational
state assessments have been expensed as incurred.
6. GOODWILL
Goodwill consists of the following as of September 28, 1996 and September
27, 1997:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Goodwill.............................................................. $ 338,505 $ 337,443
Accumulated amortization.............................................. (73,661) (82,715)
---------- ----------
$ 264,844 $ 254,728
---------- ----------
---------- ----------
</TABLE>
F-13
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
7. SHORT-TERM BORROWINGS AND LINES OF CREDIT
The Company's European operations maintain credit facilities. As of
September 27, 1997, the Company had $14,998 of credit facilities available for
discounting certain accounts receivable. As of September 28, 1996 and September
27, 1997, $7,443 and $7,265 were drawn against these facilities. The interest
rate charged on the outstanding borrowings was 3.25% and 3.0% at September 28,
1996 and September 27, 1997, respectively. As of September 27, 1997, the Company
also had available revolving lines-of-credit in the amount of $14,072. These
arrangements do not have termination dates and are reviewed periodically. No
material commitment fees are required to be paid on the undrawn portion of the
credit facilities and the revolving lines of credit.
8. OTHER PAYABLES AND ACCRUED LIABILITIES
The components of other payables and accrued liabilities are as follows as
of September 28, 1996 and September 27, 1997:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Salaries and wages...................................................... $ 18,639 $ 21,036
Employee benefits....................................................... 8,511 8,603
Accrued warranty........................................................ 23,940 18,044
Deferred revenue associated with equipment held for rent................ 3,025 6,641
Product, workers' compensation and general liability.................... 12,923 12,757
All other............................................................... 23,168 19,031
--------- ---------
$ 90,206 $ 86,112
--------- ---------
--------- ---------
</TABLE>
All other consists primarily of accruals for advertising, commissions, and
accruals for inventory receipts.
9. CREDIT AND FOREIGN EXCHANGE RISK
Trade receivables subject the Company to concentration of credit risk,
because they are concentrated in distributors and rental companies which serve
the heavy industrial and construction industries, which are subject to business
cycle variations. For the fiscal years ended September 30, 1995, September 28,
1996 and September 27, 1997, approximately 20%, 20% and 19%, respectively, of
revenues were generated from six major customers, with no one customer
accounting for more than 5% of total revenue. Approximately 15% and 31% of the
outstanding trade and notes receivable balance as of September 28, 1996 and
September 27, 1997, respectively, were due from these customers. This risk is
managed by the periodic evaluation of customers' financial condition.
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 the
year ended September 27, 1997, the Company offered a special financing program
primarily to its U.S. distributors which provides credit terms of periods up to
360 days in exchange for an interest-bearing note. The Company generally retains
a security interest in the machinery sold.
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
F-14
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
9. CREDIT AND FOREIGN EXCHANGE RISK (CONTINUED)
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 or
from the Company's parent, Hanson PLC. 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 28, 1996 and September 27, 1997,
including details by major currency as of September 27, 1997. 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 28, 1996............................................... $ 48,856 $ (49,145)
--------- ----------
--------- ----------
As of September 27, 1997:
United States Dollars.................................................. $ 2,098 $ (6,880)
Japanese Yen........................................................... -- (208)
German Marks........................................................... 10,651 (1,687)
Pounds Sterling........................................................ 7,347 (5,175)
French Francs.......................................................... 21 (6,443)
--------- ----------
$ 20,117 $ (20,393)
--------- ----------
--------- ----------
</TABLE>
The Company's credit exposure on its foreign currency derivatives was $352
and $259 as of September 28, 1996 and September 27, 1997, respectively,
including $17 and $38, respectively with Hanson PLC. Gross deferred realized
gains and losses on firm commitments were not significant as of September 28,
1996 and September 27, 1997. Substantially all of the amounts deferred at
September 27, 1997 are expected to be recognized in income during fiscal year
1998, when the gains or losses on the underlying transactions will also be
recognized.
10. 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 combined balance sheets
approximate fair value.
F-15
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
10. FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Foreign currency contracts: The fair value of forward exchange contracts
is estimated using prices established by financial institutions for
comparable instruments. As of September 28, 1996 and September 27, 1997, the
carrying amounts of forward currency contracts reported in the balance
sheets were in a net liability of $225 and $276, respectively. The fair
value of the forward contracts approximated the carrying amounts as of
September 28, 1996 and September 27, 1997.
11. INCOME TAXES
For the period presented, federal and state income taxes are provided as if
the Company filed its own separate income tax returns. The Company files its
foreign income tax returns separately for each subsidiary. In the U.S., certain
of the Company's operations were included in a U.S. consolidated return with
other Hanson PLC affiliates until the demerger of Millennium Chemicals Inc.
("Millennium"). As a result of transactions consummated pursuant to the
demerger, the U.S. operations now file separate U.S. federal and state income
tax returns. The Company is charged for its share of taxes by Hanson PLC. These
charges are reflected in invested capital. In 1995 and 1996, Hanson PLC did not
charge the Company for its share of federal taxes.
The Company uses the liability method in accounting for income taxes. Under
this method, deferred tax assets and liabilities are determined based on the
differences between financial reporting and tax bases of assets and liabilities
and are measured using enacted tax rates and laws that will be in effect when
the differences are expected to reverse.
Income (losses) from continuing operations before income taxes were as
follows for the fiscal years ended September 30, 1995, September 28, 1996 and
September 27, 1997:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
United States................................................ $ 39,979 $ 47,535 $ 66,721
Other Countries.............................................. (4,197) 101 1,748
--------- --------- ---------
$ 35,782 $ 47,636 $ 68,469
--------- --------- ---------
--------- --------- ---------
</TABLE>
The provision for income taxes is comprised of the following for the fiscal
years ended September 30, 1995, September 28, 1996 and September 27, 1997:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Current:
United States.............................................. $ 18,979 $ 21,623 $ 23,979
Other Countries............................................ (149) 439 301
--------- --------- ---------
18,830 22,062 24,280
--------- --------- ---------
Deferred:
United States.............................................. 183 126 1,969
Other Countries............................................ -- -- --
--------- --------- ---------
183 126 1,969
--------- --------- ---------
$ 19,013 $ 22,188 $ 26,249
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-16
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
11. INCOME TAXES (CONTINUED)
Significant components of the Company's deferred tax liabilities and assets
are as follows as of September 28, 1996 and September 27, 1997:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Deferred tax liabilities:
Intercompany basis differences......................................... $ (7,557) $ (7,557)
Fixed assets........................................................... (7,492) --
Other.................................................................. (6,423) (122)
--------- ---------
Total deferred tax liabilities....................................... (21,472) (7,679)
--------- ---------
Deferred tax assets:
Fixed assets........................................................... -- 6,977
Tax-deductible goodwill................................................ -- 5,074
Inventory differences.................................................. -- 1,881
Accrued expenses....................................................... 1,114 12,221
Foreign net operating losses and AMT credits........................... 6,957 6,323
Other.................................................................. 11,483 7,877
--------- ---------
Total deferred tax assets.............................................. 19,554 40,353
--------- ---------
Valuation allowance.................................................... (6,957) (6,323)
--------- ---------
Net deferred tax assets (liabilities).................................... $ (8,875) $ 26,351
--------- ---------
--------- ---------
</TABLE>
As stated above, the Company's ultimate parent, Hanson PLC, demerged several
of their businesses. In connection with the Millennium demerger, one of the
Company's U.S. subsidiaries as well as the Company's German subsidiaries were
owned by Millennium Chemicals Inc. from September 29, 1996 to October 6, 1996.
On October 6, 1996, these subsidiaries were reacquired by Hanson PLC, which
resulted in a new tax basis in certain assets and liabilities. The impact of
this "step-up" in basis, generated additional deferred tax assets, of which
$37,195 has been recorded as a component of invested capital. The combined
financial statements reflect the results of operations of these entities for the
full year.
Tax carryforwards at September 28, 1996 and September 27, 1997 consist of
alternative minimum tax credit carryforwards of $700 which do not expire, and
other foreign net operating loss carryforwards of $17,878 and $16,066, which do
not expire.
F-17
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
11. INCOME TAXES (CONTINUED)
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 30,
1995, September 28, 1996 and September 27, 1997:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Applicable income taxes based on federal statutory tax
rate....................................................... $ 12,524 $ 16,673 $ 23,964
State taxes, net of federal tax benefit...................... 1,879 1,130 2,520
Goodwill amortization........................................ 2,822 2,955 333
Foreign operating loss benefits not previously recognized.... (229) (1,020) (1,409)
Foreign operating loss valuation allowances.................. 1,915 2,182 1,405
Other........................................................ 102 268 (564)
--------- --------- ---------
$ 19,013 $ 22,188 $ 26,249
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company does not provide for income taxes on the undistributed earnings
of a subsidiary not consolidated for U.S. federal income tax purposes since it
intends to retain these earnings in the business. The additional taxes payable
if these earnings were distributed would principally represent the difference
between applicable U.S. income tax rates and credits allowed for taxes
previously paid by such subsidiary.
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 30, 1995, September 28, 1996,
and September 27, 1997 are summarized below:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Service cost.................................................. $ 1,480 $ 1,787 $ 2,172
Interest cost................................................. 2,149 2,482 3,128
Actual return on assets....................................... (1,773) (1,895) (2,748)
Net amortization and deferral................................. 122 341 539
--------- --------- ---------
Net periodic pension costs.................................... $ 1,978 $ 2,715 $ 3,091
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-18
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
12. EMPLOYEE BENEFIT PLANS (CONTINUED)
The following tables set forth the U.S. plans' funded status at September
28, 1996 and September 27, 1997:
<TABLE>
<CAPTION>
PLANS WHOSE PLANS WHOSE
ASSETS ACCUMULATED
EXCEED BENEFITS
ACCUMULATED EXCEED
BENEFITS ASSETS
------------ ------------
<S> <C> <C>
As of September 28, 1996
Projected benefit obligation for service rendered to date........................... $ (25,587) $ (14,179)
Plan assets at fair value, primarily marketable securities.......................... 17,436 11,889
------------ ------------
Underfunded projected benefit obligation............................................ (8,151) (2,290)
Unrecognized net loss............................................................... 3,764 3,445
Unrecognized prior service cost..................................................... 835 3,491
Adjustment to recognize the required minimum pension liability...................... -- (6,936)
------------ ------------
Pension liability recognized in the balance sheets.................................. $ (3,552) $ (2,290)
Actuarial present value of accumulated benefit obligation, including vested benefits
of $15,380 and $14,088, respectively................................................ $ 15,565 $ 14,179
------------ ------------
------------ ------------
As of September 27, 1997
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)
------------ ------------
------------ ------------
Actuarial present value of accumulated benefit obligation, including vested benefits
of $18,574 and $16,776, respectively.............................................. $ 18,859 $ 17,259
------------ ------------
------------ ------------
</TABLE>
The weighted average discount rate and the rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation shown in the above domestic plan tables were 7.5%
and 4.25%, respectively, for all periods presented above. The expected return on
plan assets was 9.0% for all periods presented above.
The plans' assets relating to the domestic plans are included in the HM
Holdings Master Trust (the "Trust"). The Trust invests principally in listed
stocks and bonds, including common stock of Hanson PLC which, at market values,
comprised 2.1% of the Trust's assets at September 28, 1996. These assets were
subsequently transferred to the Hanson North America Inc. Master Trust effective
November 1, 1996.
F-19
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
12. EMPLOYEE BENEFIT PLANS (CONTINUED)
The components of the net periodic pension costs for all foreign defined
benefit plans for the years ended September 30, 1995, September 28, 1996, and
September 27, 1997 are summarized below:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Service cost.................................................. $ 1,216 $ 1,804 $ 1,978
Interest cost................................................. 1,108 1,481 1,782
Actual return on assets....................................... (1,870) (2,176) (3,038)
Net amortization and deferral................................. 220 80 802
--------- --------- ---------
Net periodic pension costs.................................... $ 674 $ 1,189 $ 1,524
--------- --------- ---------
--------- --------- ---------
</TABLE>
The following table sets forth the foreign plans' unfunded status at
September 30, 1996 and September 27, 1997:
<TABLE>
<CAPTION>
1996 1997
---------- ----------
<S> <C> <C>
Projected benefit obligation for service rendered to date............. $ (22,093) $ (25,906)
Plan assets at fair value, primarily marketable securities............ 15,940 19,911
---------- ----------
Underfunded projected benefit obligation.............................. (6,153) (5,995)
Unrecognized net loss (gain).......................................... 77 (367)
---------- ----------
Pension liability recognized in the balance sheets.................... $ (6,076) $ (6,362)
---------- ----------
---------- ----------
Actuarial present value of accumulated benefit obligation, including
vested benefits of $19,056 and
$22,792, respectively............................................... $ 19,813 $ 23,449
---------- ----------
---------- ----------
</TABLE>
The weighted average discount rate and the rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation shown in the above foreign plan tables were at
rates ranging from 6.5% to 8.0% and 6.0%, respectively for all periods presented
above. The expected return on plan assets was 9.0% for all periods presented.
Assets of the 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 30, 1995, September 28, 1996 and
September 27, 1997 were approximately $1,532, $1,797, and $1,902, 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 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-20
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
12. EMPLOYEE BENEFIT PLANS (CONTINUED)
Net periodic postretirement benefit expense included the following
components as of September 30, 1995, September 28, 1996 and September 27, 1997:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Service expense.................................................. $ 149 $ 797 $ 833
Interest expense................................................. 597 1,423 1,464
Net amortization and deferral.................................... 305 550 458
--------- --------- ---------
Net periodic postretirement benefit cost......................... $ 1,051 $ 2,770 $ 2,755
--------- --------- ---------
--------- --------- ---------
</TABLE>
The reconciliation of the accumulated postretirement benefit obligation to
the liability recognized in the combined balance sheet at September 30, 1996 and
1997 is as follows:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.............................................................. $ 4,822 $ 5,542
Fully eligible active participants.................................... 3,796 5,214
Other active participants............................................. 11,243 14,503
--------- ---------
Total................................................................... 19,861 25,259
Unrecognized prior service (cost) benefit............................... (251) 3,407
Unrecognized net loss................................................... (2,720) (9,807)
--------- ---------
Net postretirement benefit liability recognized in the balance sheets... $ 16,890 $ 18,859
--------- ---------
--------- ---------
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.5% for 1996 and 1997. The assumed health care cost trend rate
used in measuring the accumulated postretirement benefit obligation was 9.5% and
9.0% for 1996 and 1997, respectively, 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 11.6% and the net
postretirement benefit cost by approximately 13.2% as of September 27, 1997.
13. STOCK COMPENSATION PLANS
The Hanson PLC Long Term Incentive Plan, which became effective January 1,
1997 allocates Hanson PLC stock to eligible management employees based on
continued employment and achievement of certain performance objectives. The
Company has recorded a provision of $1,378 as an estimate of the value of the
shares earned for the nine months ended September 27, 1997.
In 1993, the Board of Directors of Hanson PLC approved a Stock Option Plan
("the Plan") which authorizes up to 65,530,000 shares of Hanson PLC stock for
participants in the Plan, including certain employees of the Company, as well as
including employees of other Hanson PLC divisions and subsidiaries. The Plan
provides for the granting of options to officers and other key employees at an
exercise price not lower than the fair market value of the stock on the date of
grant. Under the terms of the plan, the maximum term for the options granted is
ten years with the options vesting ratably over a period of three
F-21
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
13. STOCK COMPENSATION PLANS (CONTINUED)
years. The Plan only permits the issuance of non-qualified options. The
following table summarizes the activity related to the Company's participation
in the Plan:
<TABLE>
<CAPTION>
STOCK WEIGHTED
OPTIONS AVERAGE
OUTSTANDING EXERCISE PRICE
----------- ---------------
<S> <C> <C>
October 1, 1994...................................................................... 1,064,090 $ 6.07
Granted.............................................................................. 244,447 6.53
Exercised............................................................................ (70,009) 5.55
----------- -----
September 30, 1995................................................................... 1,238,528 6.20
Granted.............................................................................. 162,651 5.49
Exercised............................................................................ (42,882) 4.13
Forfeited............................................................................ (32,498) 6.31
----------- -----
September 28, 1996................................................................... 1,325,799 6.11
Exercised............................................................................ (24,945) 4.79
Forfeited............................................................................ (83,843) 6.76
----------- -----
September 27, 1997................................................................... 1,217,011 $ 6.29
----------- -----
----------- -----
Options exercisable at September 30, 1995............................................ 566,159 $ 5.25
Options exercisable at September 28, 1996............................................ 682,361 5.61
Options exercisable at September 27, 1997............................................ 847,545 6.29
</TABLE>
Exercise prices for options outstanding as of September 27, 1997, ranged
from $3.79 to $7.76. The following table sets forth certain information with
respect to those stock options outstanding at September 27, 1997:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
WEIGHTED REMAINING
STOCK OPTIONS AVERAGE EXERCISE CONTRACTUAL
RANGE OF EXERCISE PRICES OUTSTANDING PRICE LIFE
- ---------------------------------------------------------------- ------------- ----------------- ---------------
<S> <C> <C> <C>
Under $4.82..................................................... 121,402 $ 4.22 0.94 years
4.82 to $6.42................................................... 493,080 5.81 4.77 years
Over $6.42...................................................... 602,529 7.10 6.36 years
------------- ----- ---------------
1,217,011 $ 6.29 5.17 years
------------- ----- ---------------
------------- ----- ---------------
</TABLE>
F-22
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
13. STOCK COMPENSATION PLANS (CONTINUED)
The following table sets forth certain information with respect to those
stock options exercisable at September 27, 1997:
<TABLE>
<CAPTION>
WEIGHTED
STOCK OPTIONS AVERAGE EXERCISE
RANGE OF EXERCISE PRICES EXERCISABLE PRICE
- --------------------------------------------------------------------------------- ------------- -----------------
<S> <C> <C>
Under $4.82...................................................................... 121,402 $ 4.22
$4.82 to $6.42................................................................... 344,781 5.86
Over $6.42....................................................................... 381,362 7.37
------------- -----
847,545 $ 6.29
------------- -----
------------- -----
</TABLE>
14. TRANSACTIONS WITH RELATED PARTIES
The common stock reflected in the combined statements of changes in invested
capital represent the legal capital of Grove Europe Ltd. The total number of
authorized shares is 10,000, of which 5,307 are issued and outstanding for all
periods presented. The total amount of invested capital relating to the common
stock of Grove Europe Ltd. was $8,976 for all periods presented.
The Company receives certain services provided by Hanson PLC and its
affiliates that include cash management, tax reporting, and risk management and
is charged a management fee for such services. The allocation of these
management fees was based on percentage of total group sales in 1995 and 1996
and on total group operating profits in 1997. In the opinion of management,
these methods of allocation are reasonable.
The amount of invested 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 are no terms of settlement associated
with the account balance. Generally, there are 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 the parent's central
cash management program, wherein all the Company's cash receipts are remitted to
the parent and all cash disbursements are funded by the parent. Other
transactions included in invested capital are management fees, taxes, insurance,
employee benefits, and miscellaneous other administrative expenses incurred by
the parent on behalf of the Company.
Intercompany interest expense for the fiscal years ended September 30, 1995,
September 28, 1996 and September 27, 1997 was $2,553, $2,610, and $1,404,
respectively. Substantially all of the interest expense related to borrowings by
one of the Company's subsidiaries from Hanson which are clasified as invested
capital in the combined balance sheet. Such borrowings averaged $25,052, $24,548
and $19,000 for the fiscal years ended September 30, 1995, September 28, 1996
and September 27, 1997, respectively.
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.
15. 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
F-23
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
15. BUSINESS SEGMENT AND GEOGRAPHIC AREAS (CONTINUED)
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 30, 1995, September 28, 1996 and
September 27, 1997.
Information relating to operations by geographic area is as follows as of
and for the fiscal years ended September 30, 1995, September 28, 1996 and
September 27, 1997:
<TABLE>
<CAPTION>
CORPORATE
UNITED OTHER AND
STATES EUROPE COUNTRIES ELIMINATIONS COMBINED
---------- ---------- ----------- ------------ ----------
<S> <C> <C> <C> <C> <C>
1995
Sales to unaffiliated customers..................... $ 397,095 $ 106,720 $ -- $ -- $ 503,815
Transfers between geographic areas.................. 28,025 10,726 -- (38,751) --
---------- ---------- ----------- ------------ ----------
Net sales........................................... $ 425,120 $ 117,446 $ -- $ (38,751) $ 503,815
---------- ---------- ----------- ------------ ----------
---------- ---------- ----------- ------------ ----------
Operating profit.................................... $ 47,267 $ (4,457) $ -- $ (4,437) $ 38,373
Identifiable assets................................. $ 528,998 $ 177,971 $ -- $ (60,706) $ 646,263
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
Identifiable assets................................. $ 530,605 $ 230,849 $ -- $ (31,296) $ 730,158
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
Identifiable assets................................. $ 648,578 $ 261,768 $ 3,548 $ (32,398) $ 881,496
</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 5.0% of the
combined net sales of the Company during each of the years in the three year
period ended September 27, 1997.
Net sales by the Company's U.S. operations to foreign customers were less
than 10.0% of the combined net sales of the Company during each of the years in
the three year period ended September 27, 1997.
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-24
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
16. LEASES (CONTINUED)
The following is a schedule of future minimum lease payments required under
third party operating leases that have initial or remaining noncancelable lease
terms in excess of one year:
<TABLE>
<CAPTION>
YEAR
- -----------------------------------------------------------------------------------
<S> <C>
1998............................................................................... $ 4,570
1999............................................................................... 2,701
2000............................................................................... 1,870
2001............................................................................... 640
2002............................................................................... 327
Thereafter......................................................................... 9,768
---------
Total.......................................................................... $ 19,876
---------
---------
</TABLE>
The major component of the future minimum lease payments due after the year
2002 relates to leases of the Company's manufacturing facility and land in
Germany that expires in 2043.
Rental expense associated with third party operating leases was
approximately $1,608, $2,809, and $3,489 for the fiscal years ended September
30, 1995, September 28, 1996, and September 27, 1997, 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. COMMITMENTS AND CONTINGENCIES
The Company is involved in various lawsuits arising in the ordinary course
of business. These lawsuits primarily involve claims for damages arising out of
the use of the Company's products. The Company is also involved in litigation
and administrative proceedings relating to 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. The Company
accrues for all other claims and lawsuits on a case-by-case basis. The Company's
policy is to accrue the probable legal costs to be incurred in defending the
Company against the claims. The Company has followed this policy during each of
the years in the three year period ended September 27, 1997 with respect to all
investigations, claims and litigation.
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 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.
F-25
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
17. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company's estimate of the costs associated with legal, product
liability, and environmental exposures is accrued if, in management's judgment,
the likelihood of a loss is probable. These accrued liabilities are not
discounted.
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 September 27, 1997, the Company had no known probable but inestimable
exposures that could have a material effect on the Company.
The Company provides conditional loss guarantees to certain financing
companies on behalf of their customers. As of September 28, 1996 and September
27, 1997, the Company had outstanding guarantees of $2,438 and $1,297
respectively. These guarantees mature at various dates ranging from October 1997
through August 2000. The Company has not and does not expect to incur losses as
a result of these guarantees.
As noted under the Company's revenue recognition policy, 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 years ended
September 30, 1995, September 28, 1996 and September 27, 1997.
As of September 27, 1997, the Company had approximately $595 in outstanding
letters of credit relating to the purchase of certain equipment.
As collateral for performance and for import duties, the Company is
contingently liable under bonds in the amount of $3,125 at September 27, 1997.
18. SUBSEQUENT EVENTS
DEALER FINANCING PROGRAM
In the first quarter of fiscal year 1998, the Company entered into an
agreement to finance certain of its notes receivable. The agreement enables the
transfer to a financial institution of up to 90% of these receivables (up to a
limit of $90,000), without recourse.
PRODUCT LIABILITY AND WORKERS' COMPENSATION INSURANCE
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. The Company is responsible for claims arising on
or after October 1, 1997. For product liability claims arising on or after such
date, 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
F-26
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
18. SUBSEQUENT EVENTS (CONTINUED)
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.
F-27
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
19. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL INFORMATION
The Company's payment obligations under the Notes are guaranteed by all of
the Company's wholly-owned domestic subsidiaries other than Grove Capital (the
"Subsidiary Guarantors"). Such guarantees are full, unconditional and joint and
several. Separate financial statements of the Subsidiary Guarantors are not
presented because the Company's management has determined that they would not be
material to investors. The ability of the Company's subsidiaries to make cash
distributions and loans to the Company and the Subsidiary Guarantors is not
significantly restricted under the terms of the Company's debt obligations. The
following supplemental financial information sets forth, on a combined basis,
balance sheets, statements of operations and statements of cash flows
information for the Subsidiary Guarantors, the Company's non-guarantor
subsidiaries and for the Company.
CONDENSED COMBINING BALANCE SHEETS AT SEPTEMBER 28, 1996
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
----------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................................. $ 470 $ 7,714 $ -- $ 8,184
Trade receivables (net).................................... 65,200 55,844 -- 121,044
Inventories................................................ 112,258 113,181 (2,897) 222,542
Other current assets....................................... 4,869 1,811 -- 6,680
----------- ----------- ------------ ----------
Total current assets....................................... 182,797 178,550 (2,897) 358,450
Property, plant, and equipment (net)......................... 56,852 44,324 -- 101,176
Goodwill..................................................... 257,060 7,784 -- 264,844
Due from Grove Companies..................................... 28,399 -- (28,399) --
Other non-current assets..................................... 5,497 191 -- 5,688
----------- ----------- ------------ ----------
Total assets............................................. $ 530,605 $ 230,849 $ (31,296) $ 730,158
----------- ----------- ------------ ----------
----------- ----------- ------------ ----------
LIABILITIES AND INVESTED CAPITAL
Current liabilities:
Trade accounts payable..................................... $ 41,194 $ 29,585 $ $ 70,779
Short-term borrowings...................................... 7,443 -- -- 7,443
Deferred tax liability..................................... 4,828 -- -- 4,828
Other payables and accrued liabilities..................... 42,331 47,875 -- 90,206
----------- ----------- ------------ ----------
Total current liabilities................................ 95,796 77,460 -- 173,256
Deferred tax liability..................................... 4,047 -- -- 4,047
Non-current liabilities:
Due to Grove Companies..................................... -- 28,399 (28,399) --
Deferred revenue........................................... -- 21,154 -- 21,154
Other non-current liabilities................................ 18,556 10,591 -- 29,147
----------- ----------- ------------ ----------
Total liabilities........................................ 118,399 137,604 (28,399) 227,604
Total invested capital....................................... 412,206 93,245 (2,897) 502,554
----------- ----------- ------------ ----------
Total liabilities and invested capital................... $ 530,605 $ 230,849 $ (31,296) $ 730,158
----------- ----------- ------------ ----------
----------- ----------- ------------ ----------
</TABLE>
F-28
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
19. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL INFORMATION (CONTINUED)
CONDENSED COMBINING BALANCE SHEETS AT SEPTEMBER 27, 1997
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
------------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................ $ (492) $ 5,516 $ -- $ 5,024
Trade receivables (net).................................. 65,823 83,341 -- 149,164
Notes receivable......................................... 68,450 -- -- 68,450
Inventories.............................................. 123,621 94,395 (2,684) 215,332
Other current assets..................................... 3,923 3,710 -- 7,633
Deferred tax assets...................................... 14,936 -- -- 14,936
------------- ----------- ------------ ----------
Total current assets................................... 276,261 186,962 (2,684) 460,539
Property, plant, and equipment (net)....................... 75,884 71,704 -- 147,588
Goodwill................................................... 248,620 6,108 -- 254,728
Deferred tax assets........................................ 11,415 -- -- 11,415
Due from Grove Companies................................... 29,272 442 (29,714) --
Other non-current assets................................... 7,126 100 -- 7,226
------------- ----------- ------------ ----------
Total assets........................................... $ 648,578 $ 265,316 $ (32,398) $ 881,496
------------- ----------- ------------ ----------
------------- ----------- ------------ ----------
LIABILITIES AND INVESTED CAPITAL
Current liabilities:
Trade accounts payable................................... $ 45,072 $ 25,255 $ -- $ 70,327
Short-term borrowings.................................... -- 7,265 -- 7,265
Income taxes payable..................................... 4,622 -- -- 4,622
Other payables and accrued liabilities................... 46,423 39,689 -- 86,112
------------- ----------- ------------ ----------
Total current liabilities.............................. 96,117 72,209 -- 168,326
Non-current liabilities:
Due to Grove Companies................................. 442 29,272 (29,714) --
Deferred revenue....................................... -- 46,509 -- 46,509
Other non-current liabilities.............................. 27,781 10,388 --......... 38,169
------------- ----------- ------------ ----------
Total liabilities...................................... 124,340 158,378 (29,714) 253,004
Total invested capital..................................... 524,238 106,938 (2,684) 628,492
------------- ----------- ------------ ----------
Total liabilities and invested capital................. $ 648,578 $ 265,316 $ (32,398) $ 881,496
------------- ----------- ------------ ----------
------------- ----------- ------------ ----------
</TABLE>
F-29
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
19. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL INFORMATION (CONTINUED)
CONDENSED COMBINING STATEMENTS OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30,
1995
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
----------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Net sales.................................................... $ 425,120 $ 117,446 $ (38,751) $ 503,815
Cost of goods sold........................................... 315,864 99,066 (37,704) 377,226
----------- ----------- ------------ ----------
Gross profit............................................. 109,256 18,380 (1,047) 126,589
Selling, engineering, general, and administrative expenses... 61,989 22,837 -- 84,826
Management fees.............................................. 3,390 -- -- 3,390
----------- ----------- ------------ ----------
Operating profit......................................... 43,877 (4,457) (1,047) 38,373
Net interest (expense)/income................................ (2,572) 260 -- (2,312)
Other expense, net........................................... (279) -- -- (279)
----------- ----------- ------------ ----------
Income before income taxes............................... 41,026 (4,197) (1,047) 35,782
Income taxes................................................. 19,162 (149) -- 19,013
----------- ----------- ------------ ----------
Net income............................................... $ 21,864 $ (4,048) $ (1,047) $ 16,769
----------- ----------- ------------ ----------
----------- ----------- ------------ ----------
</TABLE>
CONDENSED COMBINING STATEMENTS OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 28,
1996
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
----------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Net sales.................................................... $ 600,016 $ 315,208 $ (121,015) $ 794,209
Cost of goods sold........................................... 458,629 269,066 (118,565) 609,130
----------- ----------- ------------ ----------
Gross profit............................................. 141,387 46,142 (2,450) 185,079
Selling, engineering, general, and administrative expenses... 82,734 46,070 -- 128,804
Management fees.............................................. 5,655 -- -- 5,655
----------- ----------- ------------ ----------
Operating profit......................................... 52,998 72 (2,450) 50,620
Net interest (expense)/income................................ (2,820) 29 -- (2,791)
Other expense, net........................................... (193) -- -- (193)
----------- ----------- ------------ ----------
Income before income taxes............................... 49,985 101 (2,450) 47,636
Income taxes................................................. 21,749 439 -- 22,188
----------- ----------- ------------ ----------
Net income............................................... $ 28,236 $ (338) $ (2,450) $ 25,448
----------- ----------- ------------ ----------
----------- ----------- ------------ ----------
</TABLE>
F-30
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
19. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL INFORMATION (CONTINUED)
CONDENSED COMBINING STATEMENTS OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 27,
1997
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
----------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Net sales.................................................... $ 641,228 $ 314,643 $ (99,059) $ 856,812
Cost of goods sold........................................... 486,381 266,430 (99,272) 653,539
----------- ----------- ------------ ----------
Gross profit............................................. 154,847 48,213 213 203,273
Selling, engineering, general, and administrative expenses... 85,563 45,683 -- 131,246
Management fees.............................................. 2,176 -- -- 2,176
Restructuring charges........................................ -- 1,960 -- 1,960
----------- ----------- ------------ ----------
Operating profit......................................... 67,108 570 213 67,891
Net interest (expense)/income................................ 275 (232) -- 43
Other income, net............................................ 535 -- -- 535
----------- ----------- ------------ ----------
Income before income taxes............................... 67,918 338 213 68,469
Income taxes................................................. 25,948 301 -- 26,249
----------- ----------- ------------ ----------
Net income............................................... $ 41,970 $ 37 $ 213 $ 42,220
----------- ----------- ------------ ----------
----------- ----------- ------------ ----------
</TABLE>
CONDENSED COMBINING STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED SEPTEMBER 30,
1995
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES TOTALS
----------- ----------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net cash provided by operating activities.................................. $ 5,025 $ 1,928 $ 6,953
----------- ----------- ----------
INVESTING ACTIVITIES
Capital expenditures....................................................... (7,701) 316 (7,385)
Investment in equipment held for rent...................................... -- (552) (552)
Proceeds from sales of property, plant, and equipment...................... 1,733 -- 1,733
Acquisition of businesses.................................................. -- (40,370) (40,370)
----------- ----------- ----------
Net cash used in investing activities...................................... (5,968) (40,606) (46,574)
----------- ----------- ----------
FINANCING ACTIVITIES
Net proceeds from short-term borrowings.................................... (127) -- (127)
Net amounts received from parent........................................... 12,017 49,808 61,825
Cash dividends paid to parent.............................................. (11,097) -- (11,097)
----------- ----------- ----------
Net cash provided by financing activities.................................. 793 49,808 50,601
----------- ----------- ----------
Effect of exchange rate changes on cash.................................... -- 570 570
----------- ----------- ----------
Net (decrease) increase in cash and cash equivalents....................... (150) 11,700 11,550
Cash and cash equivalents at beginning of year............................. 663 6,472 7,135
----------- ----------- ----------
Cash and cash equivalents and end of year.................................. $ 513 $ 18,172 $ 18,685
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
F-31
<PAGE>
THE GROVE COMPANIES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
(IN THOUSANDS)
19. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL INFORMATION (CONTINUED)
CONDENSED COMBINING STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED SEPTEMBER 28,
1996
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES TOTALS
----------- ----------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net cash (used in) provided by operating activities........................ $ 35,276 $ (25,450) $ 9,826
----------- ----------- ----------
INVESTING ACTIVITIES
Capital expenditures....................................................... (16,522) (2,921) (19,443)
Investment in equipment held for rent...................................... -- (22,527) (22,527)
Proceeds from sales of property, plant, and equipment...................... 432 -- 432
Acquisition of businesses.................................................. -- (3,703) (3,703)
----------- ----------- ----------
Net cash used in investing activities...................................... (16,090) (29,151) (45,241)
----------- ----------- ----------
FINANCING ACTIVITIES
Net proceeds from short-term borrowings.................................... 7,443 -- 7,443
Net amounts received from parent........................................... 3,385 44,981 48,366
Cash dividends paid to parent.............................................. (30,057) -- (30,057)
----------- ----------- ----------
Net cash (used in) provided by financing activities........................ (19,229) 44,981 25,752
----------- ----------- ----------
Effect of exchange rate changes on cash.................................... -- (838) (838)
----------- ----------- ----------
Net decrease in cash and cash equivalents.................................. (43) (10,458) (10,501)
Cash and cash equivalents at beginning of year............................. 513 18,172 18,685
----------- ----------- ----------
Cash and cash equivalents and end of year.................................. $ 470 $ 7,714 $ 8,184
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
CONDENSED COMBINING STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED SEPTEMBER 27,
1997
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES TOTALS
----------- ----------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net cash (used in) provided by operating activities........................ $ (5,448) $ 17,443 $ 11,995
----------- ----------- ----------
INVESTING ACTIVITIES
Capital expenditures....................................................... (25,521) (6,970) (32,491)
Investment in equipment held for rent...................................... -- (37,904) (37,904)
Proceeds from sales of property, plant, and equipment...................... 1,587 16 1,603
----------- ----------- ----------
Net cash used in investing activities...................................... (23,934) (44,858) (68,792)
----------- ----------- ----------
FINANCING ACTIVITIES
Net proceeds from short-term borrowings.................................... (7,443) 7,647 204
Net amounts received from parent........................................... 35,863 18,282 54,145
----------- ----------- ----------
Net cash provided by financing activities.................................. 28,420 25,929 54,349
----------- ----------- ----------
Effect of exchange rate changes on cash.................................... -- (712) (712)
----------- ----------- ----------
Net decrease in cash and cash equivalents.................................. (962) (2,198) (3,160)
Cash and cash equivalents at beginning of year............................. 470 7,714 8,184
----------- ----------- ----------
Cash and cash equivalents and end of year.................................. $ (492) $ 5,516 $ 5,024
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
F-32
<PAGE>
GROVE WORLDWIDE LLC
CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 27, 1998
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents........................................................................ $ 11,424
Trade receivables (net).......................................................................... 134,540
Notes receivable................................................................................. 21,471
Inventories...................................................................................... 240,292
Due from Hanson PLC.............................................................................. 16,700
Other current assets............................................................................. 22,687
-------------
Total current assets....................................................................... 447,114
Property, plant, and equipment (net)............................................................... 195,921
Goodwill........................................................................................... 285,016
Other non-current assets........................................................................... 21,628
-------------
Total assets............................................................................... $ 949,679
-------------
-------------
LIABILITIES AND HOLDER'S EQUITY
Current Liabilities:
Trade accounts payable........................................................................... $ 86,999
Current maturities of long-term debt............................................................. 27,200
Short-term borrowings............................................................................ 13,600
Other payables and accrued liabilities........................................................... 124,885
-------------
Total current liabilities.................................................................. 252,684
Non-current liabilities:
Long-term debt, less current maturities.......................................................... 423,000
Deferred revenue................................................................................. 61,545
Other non-current liabilities.................................................................... 55,705
-------------
Total liabilities.......................................................................... 792,934
-------------
Holder's equity:
Holder's equity.................................................................................. 168,209
Accumulated deficit.............................................................................. (9,421)
Cumulative translation adjustment................................................................ (2,043)
-------------
Total holder's equity...................................................................... 156,745
-------------
$ 949,679
-------------
-------------
</TABLE>
See notes to unaudited condensed financial statements.
F-33
<PAGE>
GROVE WORLDWIDE LLC
CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED JUNE 28, 1997 AND SEVEN MONTHS ENDED APRIL 28, 1998
AND CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE TWO MONTHS ENDED JUNE 27, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------------ -----------
NINE SEVEN TWO
MONTHS MONTHS MONTHS
ENDED ENDED ENDED
JUNE 28, APRIL 28, JUNE 27,
1997 1998 1998
----------- ----------- -----------
<S> <C> <C> <C>
Net sales.............................................. $ 633,845 $ 476,199 $ 154,780
Cost of goods sold..................................... 487,759 375,732 121,144
Write-off of amount assigned to inventory in excess of
historical costs resulting from purchase accounting
adjustments.......................................... -- -- 10,000
----------- ----------- -----------
Gross profit......................................... 146,086 100,467 23,636
Selling, engineering, general, and administrative
expenses............................................. 93,774 73,197 23,162
Amortization of goodwill............................... 6,801 5,215 1,164
----------- ----------- -----------
Operating profit (loss).............................. 45,511 22,055 (690)
Net interest (expense)/income.......................... (938) 1,047 (6,986)
Other (expense) income, net............................ 495 (6,993) 6
----------- ----------- -----------
Income (loss) before income taxes.................... 45,068 16,109 (7,670)
Income taxes........................................... 17,748 11,673 1,751
----------- ----------- -----------
Net income (loss).................................... $ 27,320 $ 4,436 $ (9,421)
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See notes to unaudited condensed financial statements.
F-34
<PAGE>
GROVE WORLDWIDE LLC
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED JUNE 28, 1997 AND THE SEVEN MONTHS ENDED APRIL 28,
1998
AND CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR
THE TWO MONTHS ENDED JUNE 27, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------------------ -----------
NINE SEVEN TWO
MONTHS MONTHS MONTHS
ENDED ENDED ENDED
JUNE 28, APRIL 28, JUNE 27,
1997 1998 1998
----------- ----------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).................................... $ 27,320 $ 4,436 $ (9,421)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization...................... 13,560 10,934 2,749
Depreciation of equipment held for rent............ 4,384 5,501 2,529
Amortization of deferred financing costs........... -- -- 301
Write-off of amount assigned to inventory in excess
of historical costs resulting from purchase
accounting adjustments........................... -- -- 10,000
Loss (gain) on sale of fixed assets................ (42) 4,714 --
Deferred tax expense............................... 1,268 2,358 11
Changes in operating assets and liabilities:
Trade receivables (net).......................... (11,935) 32,096 (15,992)
Notes receivable................................. (46,889) 28,409 (21,471)
Inventories...................................... (10,126) (10,157) 1,183
Trade accounts payable........................... 7,960 7,542 8,500
Other assets and liabilities, net................ (7,503) 10,631 1,096
----------- ----------- -----------
Net cash provided by (used in) operating activities.... (22,003) 96,464 (20,515)
----------- ----------- -----------
INVESTING ACTIVITIES
Capital expenditures................................. (26,282) (20,254) (3,047)
Investment in equipment held for rent................ (12,907) (16,380) (8,335)
Acquisition of businesses from Hanson PLC, including
transaction costs of $6,485, net of cash acquired
of $9,242 and post-closing adjustment of $16,700... -- -- (563,543)
Other investing activities........................... 350 3,630 --
----------- ----------- -----------
Net cash used in investing activities................ (38,839) (33,004) (574,925)
----------- ----------- -----------
FINANCING ACTIVITIES
Net proceeds from short-term borrowings.............. (363) 2,628 4
Proceeds from issuance of long-term debt............. -- -- 450,200
Equity investment from Grove Holdings LLC............ -- -- 168,209
Deferred financing costs............................. -- -- (12,674)
Other financing activities........................... 59,214 (62,087) 1,213
----------- ----------- -----------
Net cash provided by (used in) financing
activities......................................... 58,851 (59,459) 606,952
----------- ----------- -----------
Effect of exchange rate changes on cash.............. (464) 217 (88)
----------- ----------- -----------
Net increase (decrease) in cash and cash
equivalents........................................ (2,455) 4,218 11,424
Cash and cash equivalents at beginning of period..... 8,184 5,024 --
----------- ----------- -----------
Cash and cash equivalents at end of period............. $ 5,729 $ 9,242 $ 11,424
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See notes to unaudited condensed financial statements.
F-35
<PAGE>
GROVE WORLDWIDE LLC
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 27, 1998
(UNAUDITED)
(IN THOUSANDS, UNLESS OTHERWISE NOTED)
1. THE ACQUISITION
On April 29, 1998, Grove Worldwide LLC (the "Company") acquired (the
"Acquisition") from Hanson 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 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 for which the Company received $16.7 million from Hanson
in July 1998. The Company is a wholly owned subsidiary of Grove Holdings LLC
("Holdings"), which is a wholly owned subsidiary of Grove Investors LLC
("Investors"). 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...................................... 9,500
Borrowings under Term Loan Facility............................................. 200,000
Equity investment by Holdings................................................... 168,209
---------
$ 602,709
---------
---------
Uses:
Acquisition price............................................................... $ 583,000
Transaction costs............................................................... 6,485
---------
Aggregate purchase price...................................................... 589,485
Debt financing costs............................................................ 13,224
---------
$ 602,709
---------
---------
</TABLE>
Proceeds from the equity investment by Holdings of $168,209 were generated
by Holdings through the issuance of 100% of its equity in exchange for $119,992
and $48,217 of net proceeds through the issuance of $88,000 at maturity of
Holdings' 11 5/8% Senior Discount Debentures due May 2009. Such Debentures have
no cash interest requirement prior to May 2003. On May 1, 2003, the Debentures
will have accreted to $88,000 and will require semi-annual payments of interest
based on a per annum rate of 11 5/8% commencing on November 1, 2003. Subject to
restrictions contained in the Indenture relating to the Company's Senior
Subordinated Notes, the cash interest payments are expected to be generated by
distributions from the Company.
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 $6.5 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. Such allocation is based on studies which
have not yet been completed. Accordingly, the allocation reflected in the
unaudited consolidated financial statements is preliminary and subject to
revision. 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 and
the industry in which it
F-36
<PAGE>
GROVE WORLDWIDE LLC
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 27, 1998
(UNAUDITED)
(IN THOUSANDS, UNLESS OTHERWISE NOTED)
1. THE ACQUISITION (CONTINUED)
operates. The estimated fair values of the assets acquired and liabilities
assumed in the Acquisition are summarized as follows:
<TABLE>
<CAPTION>
Cash and cash equivalents........................................................ $ 9,241
<S> <C>
Due from Hanson for post-closing adjustment...................................... 16,700
Trade receivables................................................................ 122,616
Notes receivable................................................................. 2,280
Inventories...................................................................... 251,316
Other current assets............................................................. 10,602
Property, plant and equipment.................................................... 185,855
Goodwill......................................................................... 286,180
Other non-current assets......................................................... 720
Short-term borrowings............................................................ (14,086)
Trade accounts payable........................................................... (79,493)
Accrued expenses and other current liabilities................................... (77,187)
Accrual for closure of Sunderland U.K. manufacturing facility.................... (17,000)
Other non-current liabilities.................................................... (108,259)
---------
Aggregate purchase price..................................................... $ 589,485
---------
---------
</TABLE>
2. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information. Accordingly, these financial statements do not include
all the information and notes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, the
unaudited consolidated financial statements include all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation of
the financial position and results of operations.
Information prior to April 29, 1998 relates to the Company prior to the
Acquisition (the "Predecessor"). Information subsequent to April 29, 1998
relates to the Company following the Acquisition. Following the Acquisition, the
Company has a new basis of accounting and a different capital structure, and,
accordingly, the results for the Predecessor and for the Company are not
directly comparable.
Interim results for the two month period ended June 27, 1998 are not
necessarily indicative of the results that may be expected for a full fiscal
year. For further information, refer to the combined financial statements and
notes for the year ended September 27, 1997.
3. ADOPTION OF NEW ACCOUNTING STANDARDS
In 1998, the Financial Accounting Standards Board issued Statement 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
F-37
<PAGE>
GROVE WORLDWIDE LLC
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 27, 1998
(UNAUDITED)
(IN THOUSANDS, UNLESS OTHERWISE NOTED)
3. ADOPTION OF NEW ACCOUNTING STANDARDS (CONTINUED)
impact on the Company's operations. Adoption of this statement will be required
for the fiscal year beginning October 1999.
4. SALE OF NOTES RECEIVABLE
Prior to the Acquisition, the predecessor of the Company entered into an
agreement to sell certain notes receivable to a third-party financial
institution 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 financial institution 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
credit risk. The cost of providing administrative support is immaterial.
Following the Acquisition, the Company entered into an agreement with a
third-party financial institution 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 360 days on a revolving basis. The third-party financial
institution purchases the notes receivable at face value on a 90% non-recourse
basis. The agreement requires the Company to purchase credit insurance on behalf
of the third-party financial institution to insure the 90% risk assumed by the
third-party. The Company retains 10% of the credit risk.
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
third-party financial institution. The third-party financial institution has the
power to sell or pledge the notes receivable purchased at any time and the
Company has no rights to repurchase the notes receivable
Notes receivable sold by the Company under this arrangement meet the
criteria for sale under SFAS No. 125 and, accordingly, will be removed from the
Company's balance sheet upon sale.
5. INVENTORY
The components of inventory at June 27, 1998 consisted of the following:
<TABLE>
<S> <C>
Raw materials and supplies............................................................................ $ 61,544
Work in process....................................................................................... 81,291
Finished goods (including a purchase accounting adjustment of $15,000 in 1998)........................ 97,457
----------
$ 240,292
----------
----------
</TABLE>
Inventories are valued at the lower of cost or market, as determined
primarily under the first-in, first-out method.
In connection with the Acquisition, the Company has allocated $25,000 of the
purchase price to the inventories acquired in excess of their historical costs.
Such amount is being charged to operations as inventory turns over the five
months following the Acquisition. As of June 27, 1998, $10,000 has been charged
to operations and the balance has been included in determination of inventory
carrying value.
F-38
<PAGE>
GROVE WORLDWIDE LLC
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 27, 1998
(UNAUDITED)
(IN THOUSANDS, UNLESS OTHERWISE NOTED)
6. INCOME TAXES
Following the Acquisition, a significant portion of the Company's business
is operated as a United States limited liability company, whereby the limited
liability company is not itself subject to income tax. The taxable income of the
limited liability company in the United States will be allocated to the equity
holders of Holdings and such equity holders will be responsible for income taxes
on such taxable income. The Company expects to make distributions in the form of
dividends to equity holders of Holdings to enable them to meet their tax
obligations with respect to income allocated to them by the Company. Foreign and
domestic taxes payable on taxable income generated by the Company's foreign
subsidiaries and its truck-mounted crane business will continue to be the
responsibility of the Company.
The difference between the Company's reported tax provision for the two
months ended June 27, 1998 and the tax provision computed based on U.S.
statutory rates is primarily attributed to the Company's structure as a limited
liability company and losses generated in foreign operations for which a tax
benefit will not be recognized until realization is deemed to be more likely
than not.
7. LONG-TERM DEBT
BANK CREDIT FACILITY. The Bank Credit Facility, which was entered into on
April 29, 1998, 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 $9,500 million under the Revolving Credit Facility.
The Revolving Credit Facility will enable 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 will bear
interest (a) in the case of loans in U.S. dollars, at the highest of (x) 1/2 of
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 Agent, 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 Company will also pay certain fees with respect to the unused portion of the
Bank 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. At June 27, 1998, the Company had
outstanding borrowings of $25,200 and available borrowing of $99,788 under the
Revolving Credit Facility.
The obligations of the Company under the Bank Credit Facility are guaranteed
by Holdings and 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 all of
the Company's and each Guarantor's real, personal, and intellectual property and
on the capital
F-39
<PAGE>
GROVE WORLDWIDE LLC
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 27, 1998
(UNAUDITED)
(IN THOUSANDS, UNLESS OTHERWISE NOTED)
7. LONG-TERM DEBT (CONTINUED)
stock of the Company, all of the capital stock of the Company's domestic
subsidiaries, and 65% of the capital stock of the Company's first-tier foreign
subsidiaries.
In addition, the Bank Credit Facility contains various covenants that
restrict the Company 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 all of the Company's domestic subsidiaries, other then Grove
Capital, Inc. 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.
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 or Holdings),
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 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.
8. RELATED PARTY TRANSACTIONS
On February 27, 1998, the Company sold the land and building of its U.K.
subsidiary to Hanson for $2,524 and recognized a loss of $4,769. The purchase
price was determined by an independent third party appraisal. Immediately after
the sale, Hanson leased the property back to the Company.
F-40
<PAGE>
GROVE WORLDWIDE LLC
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 27, 1998
(UNAUDITED)
(IN THOUSANDS, UNLESS OTHERWISE NOTED)
9. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL INFORMATION
The Company's payment obligations under the Notes are guaranteed by all of
the Company's wholly-owned domestic subsidiaries other than Grove Capital, Inc.
(the "Subsidiary Guarantors"). Such guarantees are full, unconditional, and
joint and several. Separate financial statements of the Guarantor Subsidiaries
are not presented because the Company's management has determined that they
would not be material to investors. The ability of the Company's subsidiaries to
make cash distributions and loans to the Company and the Subsidiary Guarantors
is not significantly restricted under the terms of the Senior Subordinated
Notes, the Indenture, the Senior Discount Debenture Indenture or the Bank Credit
Facility. The following supplemental financial information sets forth, on a
combined basis, balance sheets, statements of operations and statements of cash
flow information for the Guarantor Subsidiaries and for the Company's
Non-Guarantor Subsidiaries. Information with respect to the Company relates to
Grove Worldwide LLC and Grove Capital, Inc. on a combined basis.
CONDENSED CONSOLIDATING BALANCE SHEETS AT JUNE 27, 1998
<TABLE>
<CAPTION>
GUARANTOR OTHER CONSOLIDATED
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
---------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.................... $ 2,144 $ -- $ 9,280 $ -- $ 11,424
Trade receivables, net....................... -- 59,989 74,551 -- 134,540
Notes receivable............................. -- 21,471 -- -- 21,471
Inventories.................................. -- 144,883 95,409 -- 240,292
Due from Hanson, PLC......................... -- 16,700 -- -- 16,700
Other current assets......................... -- 13,890 8,797 -- 22,687
---------- ----------- ----------- ------------ ------------
Total current assets..................... 2,144 256,933 188,037 -- 447,114
Property, plant, and equipment (net)........... -- 109,477 86,444 -- 195,921
Goodwill....................................... -- 268,016 17,000 -- 285,016
Other non-current assets....................... 672,210 113,338 10,513 (774,433) 21,628
---------- ----------- ----------- ------------ ------------
Total assets............................. $ 674,354 $ 747,764 $ 301,994 $ (774,433) $ 949,679
---------- ----------- ----------- ------------ ------------
---------- ----------- ----------- ------------ ------------
LIABILITIES AND HOLDER'S EQUITY
Current liabilities:
Trade accounts payable....................... $ -- $ 54,256 $ 32,743 $ -- $ 86,999
Current maturities of long-term debt......... 27,200 -- -- -- 27,200
Short-term borrowings........................ -- -- 13,600 -- 13,600
Other payables and accrued liabilities....... 7,473 44,016 73,396 -- 124,885
---------- ----------- ----------- ------------ ------------
Total current liabilities................ 34,673 98,272 119,739 -- 252,684
Long-term debt, less current maturities........ 423,000 -- -- -- 423,000
Deferred revenue............................... -- -- 61,545 -- 61,545
Other non-current liabilities.................. 50,997 562,041 109,325 (666,658) 55,705
---------- ----------- ----------- ------------ ------------
Total liabilities........................ 508,670 660,313 290,609 (666,658) 792,934
Holder's equity:
Holder's equity.............................. 168,209 87,972 19,803 (107,775) 168,209
Accumulated deficit.......................... (2,525) (521) (6,375) -- (9,421)
Cumulative translation adjustment............ -- -- (2,043) -- (2,043)
---------- ----------- ----------- ------------ ------------
Total holder's equity.......................... 165,684 87,451 11,385 (107,775) 156,745
---------- ----------- ----------- ------------ ------------
Total liabilities and holder's equity.... $ 674,354 $ 747,764 $ 301,994 $ (774,433) $ 949,679
---------- ----------- ----------- ------------ ------------
---------- ----------- ----------- ------------ ------------
</TABLE>
F-41
<PAGE>
GROVE WORLDWIDE LLC
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 27, 1998
(UNAUDITED)
(IN THOUSANDS, UNLESS OTHERWISE NOTED)
9. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS FOR THE TWO MONTHS ENDED JUNE
27, 1998
<TABLE>
<CAPTION>
GUARANTOR OTHER CONSOLIDATED
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales...................................... $ -- $ 120,497 $ 44,749 $ (10,466) $ 154,780
Cost of goods sold............................. -- 94,517 37,093 (10,466) 121,144
Write-off of amount assigned to inventory in
excess of historical costs resulting from
purchase accounting adjustments.............. -- 6,000 4,000 -- 10,000
----------- ----------- ----------- ------------ ------------
Gross profit............................. -- 19,980 3,656 -- 23,636
Selling, engineering, general and
administrative expenses...................... 3,444 11,287 8,431 -- 23,162
Amortization of goodwill....................... -- 1,067 98 -- 1,164
----------- ----------- ----------- ------------ ------------
Operating profit/loss.......................... (3,444) 7,626 (4,872) -- (690)
Net interest (expense)/income.................. 919 (6,463) (1,442) -- (6,986)
Other expense, net............................. -- -- 6 -- 6
----------- ----------- ----------- ------------ ------------
Income (loss) before income taxes........ (2,525) 1,163 (6,308) -- (7,670)
Income Taxes................................... -- 1,684 67 -- 1,751
----------- ----------- ----------- ------------ ------------
Net income (loss)........................ $ (2,525) $ (521) $ (6,375) $ -- $ (9,421)
----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ------------ ------------
</TABLE>
CONDENSED COMBINING STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED JUNE 28,
1997
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
----------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Net sales.................................................... $ 463,061 $ 247,445 $ (76,661) $ 633,845
Cost of goods sold........................................... 354,672 209,762 (76,675) 487,759
----------- ----------- ------------ ----------
Gross profit............................................. 108,389 37,683 14 146,086
Selling, engineering, general
and administrative expenses................................. 57,777 35,997 -- 93,774
Amortization of goodwill..................................... 6,330 471 -- 6,801
----------- ----------- ------------ ----------
Operating profit......................................... 44,282 1,215 14 45,511
Net interest (expense)/income................................ (931) (7) -- (938)
Other expense, net........................................... 438 57 -- 495
----------- ----------- ------------ ----------
Income before income taxes................................... 43,789 1,265 14 45,068
Income taxes................................................. 17,319 429 -- 17,748
----------- ----------- ------------ ----------
Net income................................................... $ 26,470 $ 836 $ 14 $ 27,320
----------- ----------- ------------ ----------
----------- ----------- ------------ ----------
</TABLE>
F-42
<PAGE>
GROVE WORLDWIDE LLC
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 27, 1998
(UNAUDITED)
(IN THOUSANDS, UNLESS OTHERWISE NOTED)
9. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL INFORMATION (CONTINUED)
CONDENSED COMBINING STATEMENT OF OPERATIONS FOR THE SEVEN MONTHS ENDED APRIL 28,
1998
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES ELIMINATIONS TOTALS
----------- ----------- ------------ ----------
<S> <C> <C> <C> <C>
Net sales.................................................... $ 346,564 $ 166,780 $ (37,145) $ 476,199
Cost of goods sold........................................... 261,835 151,017 (37,120) 375,732
----------- ----------- ------------ ----------
Gross profit............................................. 84,729 15,763 (25) 100,467
Selling, engineering, general
and administrative expenses................................ 44,343 28,854 -- 73,197
Amortization of goodwill..................................... 4,874 341 -- 5,215
----------- ----------- ------------ ----------
Operating profit (loss)...................................... 35,512 (13,432) (25) 22,055
Net interest (expense)/income................................ 969 78 -- 1,047
Other (expense) income, net.................................. 20 (7,013) -- (6,993)
----------- ----------- ------------ ----------
Income (loss) before income taxes............................ 36,501 (20,367) (25) 16,109
Income taxes................................................. 11,673 -- -- 11,673
----------- ----------- ------------ ----------
Net income (loss)............................................ $ 24,828 $ (20,367) $ (25) $ 4,436
----------- ----------- ------------ ----------
----------- ----------- ------------ ----------
</TABLE>
CONDENSED COMBINING STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED JUNE 28,
1997
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES TOTALS
----------- ----------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net cash provided by (used in) operating activities........................ $ (27,003) $ 5,000 $ (22,003)
----------- ----------- ----------
INVESTING ACTIVITIES
Capital expenditures....................................................... (19,338) (6,944) (26,282)
Investment in equipment held for rent...................................... -- (12,907) (12,907)
Other investing activities................................................. 170 180 350
----------- ----------- ----------
Net cash used in investing activities...................................... (19,168) (19,671) (38,839)
----------- ----------- ----------
FINANCING ACTIVITIES
Net proceeds from short-term borrowings.................................... (7,443) 7,080 (363)
Other financing activities................................................. 52,920 6,294 59,214
----------- ----------- ----------
Net cash provided by financing activities.................................. 45,477 13,374 58,851
----------- ----------- ----------
Effect of exchange rate changes on cash.................................... -- (464) (464)
----------- ----------- ----------
Net decrease in cash and cash equivalents.................................. (694) (1,761) (2,455)
Cash and cash equivalents at beginning of period........................... 470 7,714 8,184
----------- ----------- ----------
Cash and cash equivalents at end of period................................. $ (224) $ 5,953 $ 5,729
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
F-43
<PAGE>
GROVE WORLDWIDE LLC
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 27, 1998
(UNAUDITED)
(IN THOUSANDS, UNLESS OTHERWISE NOTED)
9. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL INFORMATION (CONTINUED)
CONDENSED COMBINING STATEMENT OF CASH FLOWS FOR THE SEVEN MONTHS ENDED APRIL 28,
1998
<TABLE>
<CAPTION>
GUARANTOR OTHER COMBINED
SUBSIDIARIES SUBSIDIARIES TOTALS
----------- ----------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net cash provided by operating activities.................................. $ 44,841 $ 51,623 $ 96,464
----------- ----------- ----------
INVESTING ACTIVITIES
Capital expenditures....................................................... (10,651) (9,603) (20,254)
Investment in equipment held for rent...................................... -- (16,380) (16,380)
Other investing activities................................................. 259 3,371 3,630
----------- ----------- ----------
Net cash used in investing activities...................................... (10,392) (22,612) (33,004)
----------- ----------- ----------
FINANCING ACTIVITIES
Net proceeds from short-term borrowings.................................... -- 2,628 2,628
Other financing activities................................................. (29,944) (32,143) (62,087)
----------- ----------- ----------
Net cash provided by financing activities.................................. (29,944) (29,515) (59,459)
----------- ----------- ----------
Effect of exchange rate changes on cash.................................... -- 217 217
----------- ----------- ----------
Net increase (decrease) in cash and cash equivalents....................... 4,505 (287) (4,218)
Cash and cash equivalents at beginning of period........................... (492) 5,516 5,024
----------- ----------- ----------
Cash and cash equivalents at end of period................................. $ 4,013 $ 5,229 $ 9,242
----------- ----------- ----------
----------- ----------- ----------
</TABLE>
F-44
<PAGE>
GROVE WORLDWIDE LLC
NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 27, 1998
(UNAUDITED)
(IN THOUSANDS, UNLESS OTHERWISE NOTED)
9. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL INFORMATION (CONTINUED)
CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE TWO MONTHS ENDED JUNE
27, 1998
<TABLE>
<CAPTION>
GUARANTOR OTHER CONSOLIDATED
COMPANY SUBSIDIARY SUBSIDIARIES ELIMINATIONS TOTALS
----------- ----------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net cash provided by (used in) operating
activities................................. $ 4,505 $ (37,993) $ 12,973 $ -- $ (20,515)
----------- ----------- ----------- ------------ ------------
INVESTING ACTIVITIES
Capital expenditures......................... -- (2,847) (200) -- (3,047)
Investment in equipment held for rent........ -- -- (8,335) -- (8,335)
Investments in subsidiaries.................. (107,775) -- -- 107,775 --
Acquisition of businesses from Hanson PLC.... (6,485) (466,058) (91,000) -- (563,543)
----------- ----------- ----------- ------------ ------------
Net cash used in investing activities........ (114,260) (468,905) (99,535) 107,775 (574,925)
----------- ----------- ----------- ------------ ------------
FINANCING ACTIVITIES
Net proceeds from short-term borrowings...... -- -- 4 -- 4
Proceeds from issuance of long-term debt..... 450,200 -- -- -- 450,200
Equity investment from parent................ 168,209 87,972 19,803 (107,775) 168,209
Deferred financing........................... (12,674) -- -- -- (12,674)
Other financing activities................... (493,836) 418,926 76,123 -- 1,213
----------- ----------- ----------- ------------ ------------
Net cash provided by financing activities.... 111,899 506,898 95,930 (107,775) 606,952
----------- ----------- ----------- ------------ ------------
Effect of exchange rate changes on cash...... -- -- (88) -- (88)
----------- ----------- ----------- ------------ ------------
Net increase and cash and cash equivalents
end of period.............................. $ 2,144 $ -- $ 9,280 $ -- $ 11,424
----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ------------ ------------
</TABLE>
10. CLOSURE OF SUNDERLAND MANUFACTURING FACILITY
The Company plans to close its Sunderland, U.K. 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 $17,000, consisting of
approximately $10,000 of employee severance and $7,000 of plant shut-down costs,
all of which are expected to be expended in the next twelve months. Such amount
has been accrued in purchase accounting.
F-45
<PAGE>
GROVE WORLDWIDE LLC
SCHEDULE OF
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE AT
BEGINNING CHARGED TO CHARGED TO
OF COSTS AND OTHER DEDUCTIONS- BALANCE AT
YEAR EXPENSES ACCOUNTS(A) DESCRIBE(B) END OF YEAR
----------- --------------- ------------- --------------- -----------
ALLOWANCE FOR DOUBTFUL ACCOUNTS:
Year ended September 30, 1995.................. $ 2,590 86 5 790 $ 1,891
----------- --- --- --- -----------
----------- --- --- --- -----------
Year ended September 28, 1996.................. $ 1,891 688 (14) 12 $ 2,553
----------- --- --- --- -----------
----------- --- --- --- -----------
Year ended September 27, 1997.................. $ 2,553 538 (114) 260 $ 2,717
----------- --- --- --- -----------
----------- --- --- --- -----------
</TABLE>
- ------------------------------
(a) Impact of exchange rates
(b) Write-offs
S-1
<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 THE COMPANY OR GROVE 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 THE COMPANY OR
GROVE 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.
--------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 3
Special Note Regarding Forward-Looking Statements......................... 4
Prospectus Summary........................................................ 5
Risk Factors.............................................................. 22
The Transactions.......................................................... 28
Use of Proceeds........................................................... 30
Capitalization............................................................ 31
Selected Historical Financial Data........................................ 32
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 33
The Exchange Offer........................................................ 43
Business.................................................................. 54
Management................................................................ 67
Security Ownership of Certain Beneficial Owners and Management............ 75
Certain Relationships and Related Transactions............................ 76
Description of Certain Indebtedness....................................... 77
Description of Notes...................................................... 79
Certain Federal Income Tax Considerations................................. 117
ERISA Considerations...................................................... 121
Plan of Distribution...................................................... 121
Legal Matters............................................................. 122
Experts................................................................... 122
Change in Accountants..................................................... 122
Index to Unaudited Pro Forma Combined Financial Data...................... P-1
Index to Combined and Consolidated Financial Statements................... F-1
</TABLE>
--------------------------
UNTIL , 1998, ALL DEALERS EFFECTING TRANSACTIONS IN THE EXCHANGE
SECURITIES, 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.
$225,000,000
GROVE WORLDWIDE LLC
GROVE CAPITAL, INC.
OFFER TO EXCHANGE THEIR
9 1/4% SENIOR SUBORDINATED NOTES
DUE 2008
WHICH HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933,
AS AMENDED,
FOR ANY AND ALL OF
THEIR OUTSTANDING
9 1/4% SENIOR SUBORDINATED NOTES
DUE 2008
---------------------
PROSPECTUS
---------------------
, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<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 6.1 of the Grove Worldwide LLC ("Grove") 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, 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 6.2 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 or its affiliates is a "Covered
Person." No Covered Person shall be liable to Grove 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 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 and upon
such information, opinions, reports or statements presented to Grove 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, 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 Capital, Inc. ("Grove Capital") certificate of
incorporation and Article 8 of Grove Capital's by-laws provide that Grove
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 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 Capital, or, at the
request of Grove 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, 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
II-1
<PAGE>
officers of Grove Capital (or otherwise entitled to indemnification pursuant to
the preceding sentence) may be similarly indemnified in respect of service to
Grove Capital or to an Other Entity at the request of Grove Capital to the
extent the board of directors of Grove 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 (i) any
breach of the director's duty of loyalty to the corporation or its stockholders,
(ii) acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of the law, (iii) breaches under Section 174 of the DGCL,
which relate to unlawful payments of dividends or unlawful stock repurchase or
redemptions, and (iv) any transaction from which the director derived an
improper personal benefit.
Section 7 of Grove Capital's certificate of incorporation limits the
personal liability of directors of the company to the fullest extent permitted
by paragraph (7) of subsection (b) of Section 102 of the DGCL.
Each of Grove U.S. LLC and Grove Finance LLC, Crane Acquisition Corp., Crane
Holding Inc. and National Crane Corporation (collectively, the "Subsidiary
Guarantors") is a direct or indirect wholly owned subsidiary of Grove.
Grove U.S. LLC and Grove Finance LLC are Delaware limited liability
companies. Section 18-108 of 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 6.1 of each of the Grove U.S. LLC and Grove Finance LLC Amended and
Restated Limited Liability Company Agreements provides that a member shall not
be personally liable for any debt, obligation or other liability of such
company, 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 Amended and Restated Limited Liability Company Agreements, the
Act and any other applicable law. Section 6.2 of each of the Amended and
Restated Limited Liability Company Agreements 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 such company or its affiliates is a "Covered
Person." No Covered Person shall be liable to such company 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 such
company and in a manner reasonably believed to be within the scope of authority
conferred on such Covered Person by the Amended and Restated Limited Liability
Company Agreements , 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 such company and upon such
information, opinions, reports or statements presented to such company 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 such company, 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 8 of the Crane Acquisition Corp. certificate of incorporation and
Article 8 of the Crane Acquisition Corp. by-laws provide that Crane Acquisition
Corp. 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 Crane Acquisition Corp. 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 Crane Acquisition
Corp., or, at the request of Crane
II-2
<PAGE>
Acquisition Corp., 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, 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
Crane Acquisition Corp. (or otherwise entitled to indemnification pursuant to
the preceding sentence) may be similarly indemnified in respect of service to
Crane Acquisition Corp. or to an Other Entity at the request of Crane
Acquisition Corp. to the extent the board of directors of Crane Acquisition
Corp. at any time specifies that such persons are entitled to the benefits of
each of their individual indemnification provisions.
Article 9 of each of the Crane Holding Inc. and National Crane Corporation
amended and restated by-laws provide that Crane Holding Inc. and National Crane
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of such Company) by reason of the fact that such
person is or was a director, officer, employee or agent of such Company, or is
or was serving at the request of such Company as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' and other professionals'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such action, suit or proceeding if
such person acted in good faith and in a manner reasonably believed to be in or
not opposed to the best interests of such Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe the conduct
was unlawful. The termination of any action, suit or proceeding by judgment,
order settlement, conviction, or upon a plea of NOLO CONTENDERE or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner reasonably believed to be in or not opposed to
the best interests of such Company, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that the conduct was unlawful.
Section 18-108 of 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 145 of 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 such company 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
such company, 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 such company where the person involved
is adjudged to be liable to such company.
The Directors' and Officers' Liability and Reimbursement Insurance Policy
covering Grove, Grove Capital and the Subsidiary Guarantors is designed to
reimburse Grove, Grove Capital and the Subsidiary Guarantors 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, Grove
Capital and each of the Subsidiary Guarantors pursuant to the foregoing
provisions, Grove, Grove Capital and each of the Subsidiary Guarantors has been
informed that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
Pursuant to Section 8 of the Registration Rights Agreement, the holders of
the Notes have agreed to indemnify Grove, Grove Capital and each of the
Subsidiary Guarantors and their directors and controlling
II-3
<PAGE>
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 and Grove Capital.
The Purchase Agreement dated as of April 29, 1998, by and among Grove, Grove
Capital, the Subsidiary Guarantors and Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ"), Chase Securities Inc. ("Chase Securities") and BancBoston
Securities Inc. ("BancBoston Securities" and, together with DLJ and Chase
Securities, the "Initial Purchasers"), contains provisions by which the Initial
Purchasers agree to indemnify Grove, Grove Capital and the Subsidiary Guarantors
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 and Grove
Capital.
Section 12.07 of the Indenture dated as of April 29, 1998, by and among
Grove, Grove Capital, the Subsidiary Guarantors and the United States Trust
Company of New York provides that the holders of the Notes have agreed to waive
all liability for any obligations incurred by Grove or Grove Capital under the
Notes, the Indenture or the Subsidiary Guarantees or for any claim based on, in
repsect of, or by reason of such obligations or their creation, against any
incorporator, member, director, officer, employee or stockholder, as such, of
Grove or Grove Capital, and have agreed to the release of such persons from any
such liability.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ---------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Purchase Agreement dated as of April 29, 1998, by and among Grove, Grove Capital, the Subsidiary
Guarantors and Donaldson, Lufkin & Jenrette Securities Corporation, Chase Securities Inc. and
BancBoston Securities Inc.
3.1 Amended and Restated Limited Liability Company Agreement of Grove.
3.2 Articles of Incorporation of Grove Capital.
3.3 By-laws of Grove Capital.
3.4 Amended and Restated Limited Liability Company Agreement of Grove U.S. LLC.
3.5 Amended and Restated Limited Liability Company Agreement of Grove Finance LLC.
3.6 Articles of Incorporation of Crane Acquisition Corp.
3.7 By-laws of Crane Acquisition Corp.
3.8 Articles of Incorporation of Crane Holding Inc.
3.9 By-laws of Crane Holding Inc.
3.10 Articles of Incorporation of National Crane Corporation.
3.11 By-laws of National Crane Corporation.
4.1 Indenture dated as of April 29, 1998, by and among Grove, Grove Capital, the Subsidiary Guarantors and
the United States Trust Company of New York (the "Indenture").
4.2 Form of 9 1/4% Senior Subordinated Notes due 2008 (see Exhibit A of the Indenture).
4.3 Form of new 9 1/4% Senior Subordinated Notes due 2008.
4.4 Registration Rights Agreement dated as of April 29, 1998, by and among Grove, Grove Capital, the
Subsidiary Guarantors and the Initial Purchasers.
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ---------------------------------------------------------------------------------------------------------
<C> <S>
4.5 Credit Agreement dated April 29, 1998, by and among Grove, Grove Capital 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 Notes.
8.1 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to certain federal income tax matters.
10.1 Stock and Asset Purchase Agreement, dated March 10, 1998 (the "Acquisition Agreement"), by and among
Grove and Hanson Funding (G) Limited, Deutsche Grove Corporation, Hanson America 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 and the Sellers.
10.3 George Group Consulting Agreement dated as of April 29, 1998 by and between Grove and George Group Inc.
10.4 Employment Agreement dated as of March 5, 1998 by and between Grove and Salvatore J. Bonanno.
10.5 Change of Control Agreement dated July 24, 1997 by and between Grove and James A. Kolinski.
10.6 Change of Control Agreement dated July 24, 1997 by and between Grove and Joseph A. Shull.
10.7 Change of Control Agreement dated July 24, 1997 by and between Grove and Robert J. Sliwa.
10.8 Change of Control Agreement dated July 24, 1997 by and between Grove and Keith R. Simmons.
10.9 Change of Control Agreement dated July 24, 1997 by and between Grove and Theodore J. Urbanek.
10.10 Change of Control Agreement dated July 24, 1997 by and between Grove 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, 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.
12.1* Statement of Computation of Ratios of Earnings to Fixed Charges.
21.1 Subsidiaries of the Company.
23.1* Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Ernst & Young LLP.
23.3 Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in the opinions filed as Exhibits 5.1 and
8.1 of this Registration Statement).
24.1 Powers of Attorney (contained on signature pages).
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT
- ----------- ---------------------------------------------------------------------------------------------------------
<C> <S>
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>
- ------------------------
* Filed herewith. All other exhibits were previously filed.
(B) FINANCIAL STATEMENTS SCHEDULE
S-1 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 Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that 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;
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) 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
Commission pursuant to 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;
(iii) To include any material information with respect to the plan of
distribution 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
II-6
<PAGE>
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 prior to 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 (i) that is filed pursuant to paragraph (4)
immediately proceeding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933 and is used in connection
with a 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 purpose 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 subsequent to 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-7
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, GROVE WORLDWIDE LLC HAS
DULY CAUSED THIS AMENDMENT NO. 2 TO THE 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 SEPTEMBER 10, 1998.
<TABLE>
<S> <C> <C>
GROVE WORLDWIDE LLC
By /s/ SALVATORE J. BONANNO
-----------------------------------------
Salvatore J. Bonanno
CHAIRMAN AND CHIEF EXECUTIVE OFFICER
</TABLE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS AMENDMENT NO. 2 TO
THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON
BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED, ON SEPTEMBER 10, 1998.
<TABLE>
<CAPTION>
SIGNATURES TITLE
- ------------------------------ ---------------------------
<C> <S> <C>
Chairman and Chief
/s/ SALVATORE J. BONANNO Executive Officer and
- ------------------------------ Member (Principal
Salvatore J. Bonanno Executive Officer)
Chief Financial Officer
/s/ STEPHEN L. CRIPE (Principal
- ------------------------------ Financial Officer and
Stephen L. Cripe Principal
Accounting Officer)
*
- ------------------------------ Member
J Taylor Crandall
*
- ------------------------------ Member
Michael L. George
*
- ------------------------------ Member
Gerard Grinstein
*
- ------------------------------ Member
Steven B. Gruber
*
- ------------------------------ Member
Robert B. Henske
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
SIGNATURES TITLE
- ------------------------------ ---------------------------
<C> <S> <C>
*
- ------------------------------ Member
Gerard E. Holthaus
*
- ------------------------------ Member
Anthony P. Scotto
</TABLE>
<TABLE>
<S> <C> <C> <C>
*By: /s/ SALVATORE J.
BONANNO
-------------------------
Salvatore J. Bonanno
ATTORNEY-IN-FACT
</TABLE>
II-9
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, GROVE CAPITAL, INC. HAS
DULY CAUSED THIS AMENDMENT NO. 2 TO THE 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 SEPTEMBER 10, 1998.
GROVE CAPITAL, INC.
By /s/ SALVATORE J. BONANNO
-----------------------------------------
Salvatore J. Bonanno
CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS AMENDMENT NO. 2 TO
THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON
BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED, ON SEPTEMBER 10, 1998.
SIGNATURES TITLE
- ------------------------------ ---------------------------
Chief Executive Officer and
Director (Principal
/s/ SALVATORE J. BONANNO Executive Officer,
- ------------------------------ Principal Financial
Salvatore J. Bonanno Officer and Principal
Accounting Officer)
*
- ------------------------------ Director
Robert B. Henske
*
- ------------------------------ Director
Anthony P. Scotto
<TABLE>
<S> <C> <C> <C>
*By /s/ SALVATORE J.
BONANNO
-------------------------
Salvatore J. Bonanno
ATTORNEY-IN-FACT
</TABLE>
II-10
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, GROVE U.S. LLC HAS DULY
CAUSED THIS AMENDMENT NO. 2 TO THE 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 SEPTEMBER 10, 1998.
<TABLE>
<S> <C> <C>
GROVE U.S. LLC
By /s/ SALVATORE J. BONANNO
-----------------------------------------
Salvatore J. Bonanno
CHIEF EXECUTIVE OFFICER
</TABLE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS AMENDMENT NO. 2 TO
THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON
BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED, ON SEPTEMBER 10, 1998.
SIGNATURES TITLE
- ------------------------------ ---------------------------
/s/ SALVATORE J. BONANNO Chief Executive Officer
- ------------------------------ (Principal Executive
Salvatore J. Bonanno Officer)
Chief Financial Officer
/s/ STEPHEN L. CRIPE (Principal
- ------------------------------ Financial Officer and
Stephen L. Cripe Principal
Accounting Officer)
/s/ SALVATORE J. BONANNO
- ------------------------------ Grove Worldwide LLC, Member
Salvatore J. Bonanno
II-11
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, GROVE FINANCE LLC HAS
DULY CAUSED THIS AMENDMENT NO. 2 TO THE 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 SEPTEMBER 10, 1998.
<TABLE>
<S> <C> <C>
GROVE FINANCE LLC
BY /S/ SALVATORE J. BONANNO
-----------------------------------------
Salvatore J. Bonanno
CHIEF EXECUTIVE OFFICER
</TABLE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS AMENDMENT NO. 2 TO
THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON
BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED, ON SEPTEMBER 10, 1998.
SIGNATURES TITLE
- ------------------------------ ---------------------------
Chief Executive Officer
(Principal Executive
/s/ SALVATORE J. BONANNO Officer, Principal
- ------------------------------ Financial Officer and
Salvatore J. Bonanno Principal Accounting
Officer)
/s/ SALVATORE J. BONANNO
- ------------------------------ Grove Worldwide LLC, Member
Salvatore J. Bonanno
II-12
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, CRANE ACQUISITION CORP.
HAS DULY CAUSED THIS AMENDMENT NO. 2 TO THE 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 SEPTEMBER 10, 1998.
CRANE ACQUISITION CORP.
By /s/ SALVATORE J. BONANNO
-----------------------------------------
Salvatore J. Bonanno
CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS AMENDMENT NO. 2 TO
THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON
BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED, ON SEPTEMBER 10, 1998.
SIGNATURES TITLE
- ------------------------------ ---------------------------
Chief Executive Officer
(Principal Executive
/s/ SALVATORE J. BONANNO Officer, Principal
- ------------------------------ Financial Officer and
Salvatore J. Bonanno Principal Accounting
Officer)
/s/ SALVATORE J. BONANNO
- ------------------------------ Director
Salvatore J. Bonanno
II-13
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, CRANE HOLDING INC. HAS
DULY CAUSED THIS AMENDMENT NO. 2 TO THE 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 SEPTEMBER 10, 1998.
CRANE HOLDING INC.
By /s/ SALVATORE J. BONANNO
-----------------------------------------
Salvatore J. Bonanno
CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS AMENDMENT NO. 2 TO
THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON
BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED, ON SEPTEMBER 10, 1998.
SIGNATURES TITLE
- ------------------------------ ---------------------------
Chief Executive Officer
(Principal Executive
/s/ SALVATORE J. BONANNO Officer, Principal
- ------------------------------ Financial Officer and
Salvatore J. Bonanno Principal Accounting
Officer)
/s/ SALVATORE J. BONANNO
- ------------------------------ Director
Salvatore J. Bonanno
II-14
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, NATIONAL CRANE
CORPORATION HAS DULY CAUSED THIS AMENDMENT NO. 2 TO THE 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 SEPTEMBER 10, 1998.
NATIONAL CRANE CORPORATION
By /s/ SALVATORE J. BONANNO
-----------------------------------------
Salvatore J. Bonanno
CHIEF EXECUTIVE OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, THIS AMENDMENT NO. 2 TO
THE REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON
BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED, ON SEPTEMBER 10, 1998.
SIGNATURES TITLE
- ------------------------------ ---------------------------
Chief Executive Officer
(Principal Executive
/s/ SALVATORE J. BONANNO Officer, Principal
- ------------------------------ Financial Officer and
Salvatore J. Bonanno Principal Accounting
Officer)
/s/ THEODORE J. URBANEK
- ------------------------------ Director
Theodore J. Urbanek
/s/ SALVATORE J. BONANNO
- ------------------------------ Director
Salvatore J. Bonanno
II-15
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE
- ----------- -------------------------------------------------------------------------------------------------- -----
<C> <S> <C>
1.1 Purchase Agreement dated as of April 29, 1998, by and among Grove, Grove Capital, the Subsidiary
Guarantors and Donaldson, Lufkin & Jenrette Securities Corporation, Chase Securities Inc. and
BancBoston Securities Inc.
3.1 Amended and Restated Limited Liability Company Agreement of Grove.
3.2 Articles of Incorporation of Grove Capital.
3.3 By-laws of Grove Capital.
3.4 Amended and Restated Limited Liability Company Agreement of Grove U.S. LLC.
3.5 Amended and Restated Limited Liability Company Agreement of Grove Finance LLC.
3.6 Articles of Incorporation of Crane Acquisition Corp.
3.7 By-laws of Crane Acquisition Corp.
3.8 Articles of Incorporation of Crane Holding Inc.
3.9 By-laws of Crane Holding Inc.
3.10 Articles of Incorporation of National Crane Corporation.
3.11 By-laws of National Crane Corporation.
4.1 Indenture dated as of April 29, 1998, by and among Grove, Grove Capital, the Subsidiary Guarantors
and the United States Trust Company of New York (the "Indenture").
4.2 Form of 9 1/4% Senior Subordinated Notes due 2008 (see Exhibit A of the Indenture).
4.3 Form of new 9 1/4% Senior Subordinated Notes due 2008.
4.4 Registration Rights Agreement dated as of April 29, 1998, by and among Grove, Grove Capital, the
Subsidiary Guarantors and the Initial Purchasers.
4.5 Credit Agreement dated April 29, 1998, by and among Grove, Grove Capital 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 Notes.
8.1 Opinion of Paul, Weiss, Rifkind, Wharton & Garrison as to certain federal income tax matters.
10.1 Stock and Asset Purchase Agreement, dated March 10, 1998 (the "Acquisition Agreement"), by and
among Grove and Hanson Funding (G) Limited, Deutsche Grove Corporation, Hanson America 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 and the
Sellers.
10.3 George Group Consulting Agreement dated as of April 29, 1998 by and between Grove and George Group
Inc.
10.4 Employment Agreement dated as of March 5, 1998 by and between Grove and Salvatore J. Bonanno.
10.5 Change of Control Agreement dated July 24, 1997 by and between Grove and James A. Kolinski.
10.6 Change of Control Agreement dated July 24, 1997 by and between Grove and Joseph A. Shull.
10.7 Change of Control Agreement dated July 24, 1997 by and between Grove and Robert J. Sliwa.
10.8 Change of Control Agreement dated July 24, 1997 by and between Grove and Keith R. Simmons.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION OF EXHIBIT PAGE
- ----------- -------------------------------------------------------------------------------------------------- -----
<C> <S> <C>
10.9 Change of Control Agreement dated July 24, 1997 by and between Grove and Theodore J. Urbanek.
10.10 Change of Control Agreement dated July 24, 1997 by and between Grove 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, 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.
12.1* Statement of Computation of Ratios of Earnings to Fixed Charges.
21.1 Subsidiaries of the Company.
23.1* Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Ernst & Young LLP.
23.3 Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in the opinions filed as Exhibits
5.1 and 8.1 of this Registration Statement).
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>
- ------------------------
* To be filed by amendment. All other exhibits were previously filed.
(B) FINANCIAL STATEMENTS SCHEDULE
S-1 VALUATION AND QUALIFYING ACCOUNTS
<PAGE>
Exhibit 5.1
[LETTERHEAD OF PAUL, WEISS, RIFKIND, WHARTON & GARRISON]
July 9, 1998
Grove Worldwide LLC
Grove Capital, Inc.
Grove U.S. LLC
Grove Finance LLC
Crane Acquisition Corp.
Crane Holding Inc.
National Crane Corporation
1565 Buchanan Trail East
Shady Grove, Pennsylvania 17256
Registration Statement on Form S-4 (File No. 333-57611)
-------------------------------------------------------
Ladies and Gentlemen:
In connection with the Registration Statement on Form S-4 (the
"Registration Statement") filed by Grove Worldwide LLC, a Delaware limited
liability company (the "Company"), Grove Capital, Inc., a Delaware
corporation ("Grove Capital" and, together with the Company, the "Issuers"),
Grove US LLC, a Delaware limited liability company, Grove Finance LLC, a
Delaware limited liability company, Crane Acquisition Corp., a Delaware
corporation, Crane Holding
<PAGE>
Grove Worldwide LLC 2
Inc., a Delaware corporation, and National Crane Corporation, a Delaware
corporation (collectively, the "Subsidiary Guarantors"), with the Securities
and Exchange Commission (the "SEC") under the Securities Act of 1933, as
amended (the "Act"), and the rules and regulations under it, we have been
requested to render our opinion as to the legality of the securities being
registered under the Act. The Registration Statement relates to the
registration under the Act of the Issuers' 9 1/4% Senior Subordinates Notes
due 2008 (the "Exchange Notes") and the guarantees of the Exchange Notes by
the Subsidiary Guarantors (the "New Subsidiary Guarantees"). The Exchange
Notes are to be offered in exchange for the Issuers' outstanding 9 1/4%
Senior Subordinates Notes due 2008 (the "Existing Notes") issued and sold by
the Issuers on April 29, 1998 in an offering exempt from registration under
the Act. The Exchange Notes will be issued by the Issuers in accordance with
the terms of the Indenture (the "Indenture"), dated as of April 29, 1998,
among the Issuers, the Subsidiary Guarantors and United States Trust Company
of New York, as trustee (the "Trustee"). Capitalized terms used in this
opinion and not otherwise defined shall have the respective meanings ascribed
to them in the Registration Statement.
In connection with this opinion, we have examined originals, conformed
copies or photocopies, certified or otherwise identified to our satisfaction,
of the following documents (collectively, the "Documents"):
(i) the Registration Statement (including its exhibits);
<PAGE>
Grove Worldwide LLC 3
(ii) the Indenture included as Exhibit 4.1 to the Registration
Statement;
(iii) the Purchase Agreement, dated as of April 29, 1998, among the
Issuers, the Subsidiary Guarantors and Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ"), Chase Securities Inc. (Chase Securities") and
BancBoston Securities Inc. ("BancBoston Securities" and, together with DLJ
and Chase Securities, the "Initial Purchasers") included as Exhibit 1.1 to
the Registration Statement;
(iv) the proposed form of the Exchange Notes included as Exhibit
4.3 to the Registration Statement; and
(v) the Registration Rights Agreement, dated as of April 29, 1998,
among the Issuers, the Subsidiary Guarantors and the Initial Purchasers (the
"Registration Rights Agreement"), included as Exhibit 4.2 to the Registration
Statement.
In addition, we have examined: (i) corporate and limited liability
company records of the Issuers and the Subsidiary Guarantors as we have
considered appropriate; and (ii) other certificates, agreements and other
documents as we deemed relevant and necessary as a basis for the opinions
expressed below.
In our examination of the Documents and in rendering the opinions set
forth below, we have assumed without independent investigation (i) the
enforceability of the Documents against each party to them (other than the
Issuers and the Subsidiary Guarantors),
<PAGE>
Grove Worldwide LLC 4
(iii) that the authorization, execution and delivery by each of the Issuers
and the Subsidiary Guarantors of each Document to which it is a party and the
consummation by each of the Issuers and the Subsidiary Guarantors of the
transactions contemplated by them do not violate or result in a breach of or
default under the party's charter documents, operating agreements or other
organizational documents, as the case may be, (iv) that the Exchange Notes
will be issued as described in the Registration Statement and in the form
reviewed by us and that any information omitted from the form will be
properly added, (v) the genuineness of all signatures, (vi) the legal
capacity of all individuals who have executed any of the documents which we
examined, (vii) the authenticity of all documents submitted to us as
originals, (viii) the conformity to the original documents of all documents
submitted to us as certified, photostatic, reproduced or conformed copies of
validly existing agreements or other documents and (ix) the authenticity of
all the latter documents.
In expressing the opinion set forth below, we have relied upon the
factual matters contained in the representations and warranties of the
Issuers and the Subsidiary Guarantors made in the Documents and upon
certificates of public officials and officers of the Issuers and the
Subsidiary Guarantors.
<PAGE>
Grove Worldwide LLC 5
Based upon the above, and subject to the stated assumptions, exceptions
and qualifications, we are of the opinion that:
(a) When issued, authenticated and delivered in accordance with
the terms of the Indenture and against exchange for the Existing Notes in
accordance with the terms set forth in the Registration Rights Agreement, the
Exchange Notes will be legal, valid and binding obligations of the Issuers
enforceable against the Issuers in accordance with their terms; and
(b) When issued, authenticated and delivered in accordance with
the terms of the Indenture and against exchange for the Subsidiary Guarantees
in accordance with the terms set forth in the Registration Rights Agreement,
the New Subsidiary Guarantees will be legal, valid and binding obligations of
each of the Subsidiary Guarantors, enforceable against the Subsidiary
Guarantors in accordance with their terms.
The foregoing opinions are subject to the assumption and qualification
that the enforceability of the Indenture, the Exchange Notes and the New
Subsidiary Guarantees may be limited by (i) bankruptcy, insolvency,
fraudulent conveyance or transfer, reorganization, moratorium, and other
similar laws affecting creditors' rights generally and (ii) general principles
of equity (regardless of whether enforcement is considered in a proceeding in
equity or at law).
<PAGE>
Grove Worldwide LLC 6
Our opinion expressed above is limited to the laws of the State of New
York, the Delaware General Corporation Law and the Limited Liability Company
Act of the State of Delaware. Our opinion is rendered only with respect to
the laws, and the rules, regulations and orders under them, that are currently
in effect.
We consent to the use of our name in the registration Statement and in
the prospectus contained in it as it appears in the caption "Legal Matters"
and to the use of this opinion as an exhibit to the Registration Statement.
In giving this consent, we do not admit that we come within the category of
persons whose consent is required by the Act or by the rules and regulations
promulgated under it.
Very truly yours,
/s/ PAUL, WEISS, RIFKIND, WHARTON & GARRISON
<PAGE>
Exhibit 10.17
OPTION AGREEMENT
GROVE INVESTORS LLC
MANAGEMENT OPTION PLAN
Dear Mr.:
We are pleased to inform you that the Management Committee of Grove
Investors LLC, a Delaware limited liability company (the "Company"), has
selected you to receive an option under the Grove Investors LLC Management
Option Plan (the "Plan"). This letter serves as the Option Agreement governing
your Option, as described in the Plan and is subject to the terms of the Plan.
The grant date of this Option is the Effective Date, as defined in the Plan.
The Company hereby grants you the right and option (the "Option") to
purchase, on the terms and conditions set forth in the Plan and this Agreement,
all or any part of an aggregate of ______ Class A Units (representing __% of the
initial purchased Interests of the Company), subject to adjustment as set forth
in the Plan. The exercise price of each whole Class A Unit subject to the
Option shall be $1000 per Class A Unit (the "Exercise Price").
This Option is subject to the provisions of the Plan, a copy of which
has been furnished to you. By accepting the Option, you hereby agree to the
terms of the Plan, including the provisions with respect to vesting, exercise,
call, cancellation, payment, withholding and termination of the Option. If
there is any inconsistency between the terms of this letter and the Plan, the
Plan shall govern.
Sincerely,
GROVE INVESTORS LLC
-------------------------------
Salvatore J. Bonanno
Chief Executive Officer
I have received and read this Agreement
and a copy of the Plan and I agree to
be bound by the terms thereof.
- -------------------------------
XXXXXXXX
<PAGE>
EXHIBIT 12
GROVE WORLDWIDE LLC
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
---------------------------------------------------------------------
FISCAL YEAR ENDED
---------------------------------------------------------------------
OCTOBER 2, OCTOBER 1, SEPTEMBER 30, SEPTEMBER 28, SEPTEMBER 27,
1993 1994 1995 1996 1997
----------- ----------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Earnings (loss) before income taxes.............. $ 6,168 $ 4,203 $ 35,782 $ 47,636 $ 68,469
Interest expense................................. 2,771 3,170 2,614 3,326 2,042
Amortization of deferred financing costs......... -- -- -- -- --
Portion of rent expense representative of
interest (a)................................... 850 832 535 935 1,162
----------- ----------- ------------- ------------- -------------
Earnings before fixed charges.................... $ 9,789 $ 8,205 $ 38,931 $ 51,897 $ 71,673
----------- ----------- ------------- ------------- -------------
----------- ----------- ------------- ------------- -------------
Fixed charges:
Interest expense............................... $ 2,771 $ 3,170 $ 2,614 $ 3,326 $ 2,042
Amortization of deferred financing costs......... -- -- -- -- --
Portion of rent expense representative of
interest (a)................................... 850 832 535 935 1,162
----------- ----------- ------------- ------------- -------------
Total fixed charges........................ $ 3,621 $ 4,002 $ 3,149 $ 4,261 $ 3,204
----------- ----------- ------------- ------------- -------------
----------- ----------- ------------- ------------- -------------
Ratio of earnings to fixed charges............... 2.7 2.1 12.4 12.2 22.4
----------- ----------- ------------- ------------- -------------
<CAPTION>
COMPANY PRO FORMA
----------- ------------------------------
NINE MONTHS SEVEN MONTHS TWO MONTHS FISCAL YEAR NINE MONTHS
ENDED ENDED ENDED ENDED ENDED
JUNE 28, APRIL 28, JUNE 27, SEPTEMBER 27, ENDED JUNE 27,
1997 1998 1998 1997 1998
------------- ------------- ----------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Earnings (loss) before income taxes.............. $ 45,068 $ 16,109 $ (7,670) $ 32,287 $ (3,589)
Interest expense................................. 1,926 938 7,025 38,339 28,822
Amortization of deferred financing costs......... -- -- 301 1,750 1,313
Portion of rent expense representative of
interest (a)................................... 978 832 238 1,162 1,070
------------- ------------- ----------- ------------- -------
Earnings before fixed charges.................... $ 47,972 $ 17,879 $ (106) $ 73,538 $ 27,616
------------- ------------- ----------- ------------- -------
------------- ------------- ----------- ------------- -------
Fixed charges:
Interest expense............................... $ 1,926 $ 938 $ 7,025 $ 38,339 $ 28,822
Amortization of deferred financing costs......... -- -- 301 1,750 1,313
Portion of rent expense representative of
interest (a)................................... 978 832 238 1,162 1,070
------------- ------------- ----------- ------------- -------
Total fixed charges........................ $ 2,904 $ 1,770 $ 7,564 $ 41,251 $ 31,205
------------- ------------- ----------- ------------- -------
------------- ------------- ----------- ------------- -------
Ratio of earnings to fixed charges............... 16.5 10.1 (b) 1.8 (c)
------------- ------------- ----------- ------------- -------
</TABLE>
- ------------------------
(a) Deemed to be one-third of interest expense
(b) Earnings before fixed charges were insufficient to cover fixed charges by
$7,670 for the two months ended June 27, 1998. Earnings for the two months
June 27, 1998 include non-cash charges of $13,050.
(c) Pro forma earnings before fixed charges were insufficient to cover fixed
charges by $3,589 for the nine months ended June 27, 1998. Earnings for the
nine months June 27, 1998 include non-cash charges of $15,154.
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Prospectus constituting part of this
Registration Statement on Form S-4 of Grove Worldwide LLC and Grove Capital,
Inc. of our report dated December 15, 1997 relating to the financial
statements of The Grove Companies which appear in such Prospectus. We also
consent to the references to us under the headings "Expert" and "Selected
Financial Data" in such Prospectus. However, it should be noted that
PricewaterhouseCoopers LLP has not prepared or certified such "Selected
Financial Data."
PricewaterhouseCoopers LLP
Florham Park, NJ
September 9, 1998
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and
"Selected Historical Financial Data" and to the use of our report dated
December 15, 1997 (except for Note 19, as to which the date is April 29,
1998), in Amendment No. 2 to the Registration Statement (Form S-4 No.
333-57611) and related Prospectus of Grove Worldwide LLC and Grove Capital,
Inc. for the registration of $225,000,000 9 1/4% Senior Subordinated Notes
due 2008.
Ernst & Young LLP
Baltimore, Maryland
September 9, 1998
