SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 3, 1999
Commission file number 333-57611
(MARK ONE)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended July 3, 1999
OR
|_| TRANSITION REPORT PERSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
GROVE WORLDWIDE LLC
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 23-2955766
- ------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1565 Buchanan Trail East
Shady Grove, PA 17256
- ------------------------ ----------
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (717) 597-8121
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. YES |X| NO |_|
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date. None.
Page 1 of 22
Exhibit List on Page 21 of 22
<PAGE>
GROVE WORLDWIDE LLC
INDEX
Page
----
Part I. Financial Information
Item 1. Financial Statements
Condensed Consolidated Statements of Operations and
Comprehensive Income (Loss) - For the nine week
period ended June 27, 1998, thirteen week period
ended July 3, 1999, and the thirty-nine week period
ended July 3, 1999 and the four week period ended
April 28, 1998, and the thirty week period ended
April 28, 1998.............................................. 4
Condensed Consolidated Balance Sheets as of July 3,
1999 and October 3, 1998.................................... 5
Condensed Consolidated Statements of Cash Flows -
Thirty-nine week period ended July 3, 1999, nine week
period ended June 27, 1998, and thirty week period
ended April 28, 1998........................................ 6
Notes to Condensed Consolidated Financial
Statements.................................................. 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations......................... 14
Item 3. Quantitative and Qualitative Disclosures About Market
Risk........................................................ 20
Part II. Other Information.................................................. 21
Exhibit List....................................................... 21
Signatures......................................................... 22
<PAGE>
Unless otherwise noted, "Grove Worldwide LLC" refers to Grove Worldwide LLC and
its subsidiaries and includes the Acquired Business (as defined). Grove
Worldwide LLC's fiscal year ends on the Saturday closest to the last day of
September. Reference to the (i) third quarter 1999 means the period from April
4, 1999 to July 3, 1999 and (ii) third quarter 1998 means the period from March
29, 1998 to June 27, 1998. References to historical financial information are to
the historical combined and consolidated financial results of the Acquired
Business. See "Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations."
No separate financial statements of the Subsidiary Guarantors (as defined) and
Grove Capital, Inc. ("Grove Capital") are included herein. Grove Worldwide LLC
considers that such financial statements would not be material to investors
because: (i) this report does include, in the notes to the combined and
consolidated financial statements of Grove Worldwide LLC, supplemental financial
information, setting forth on a consolidated basis, balance sheets, statements
of operations and cash flow information for the Subsidiary Guarantors, the
subsidiaries of Grove Worldwide LLC that are not guarantors (the "Non-Guarantor
Subsidiaries") and Grove Worldwide LLC; and (ii) the above-mentioned note
provides 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.
Special Note Regarding Forward Looking Statements
With the exception of the historical information contained in this report,
the matters described herein contain forward looking information based on Grove
Worldwide LLC's current expectations. Forward looking statements involve a
number of risks, uncertainties, or other factors which may cause the actual
results of Grove Worldwide LLC to be materially different from any future
results expressed or implied by such forward looking statements. The factors
include, but are not limited to : (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 and substantial recession, (iv) the
ability of Grove Worldwide LLC to implement its business strategy and maintain
and enhance its competitive strengths, (v) the ability of Grove Worldwide LLC to
implement its efficiency and cost-savings program, (vi) the ability of Grove
Worldwide LLC to obtain financing for general corporate purpose, (vii)
competition, (viii) availability of key personnel, (ix) industry over capacity,
(x) changes in or failure to comply with government regulations, and (xi) other
factors detailed in Grove Worldwide LLC's other reports filed with the
Securities and Exchange Commission. Readers are cautioned not to place undue
reliance on these forward looking statements, which speak only as of the date
hereof. Grove Worldwide LLC assumes no obligation to update such forward looking
statements to reflect events or circumstances after the date on which such
statements were made or to reflect the occurrences of unanticipated events.
3
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GROVE WORLDWIDE LLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE INCOME (LOSS) (unaudited)
<TABLE>
<CAPTION>
Predecessor
-------------------------
9 Week 13 Week 39 Week 4 Week 30 Week
Period Period Period Period Period
Ended Ended Ended Ended Ended
--------- --------- --------- --------- ---------
June 27, July 3, July 3, April 28, April 28,
1998 1999 1999 1998 1998
--------- --------- --------- --------- ---------
(thousands)
<S> <C> <C> <C> <C> <C>
Net Sales $ 154,780 $ 207,364 $ 557,733 $ 70,297 $ 476,200
Cost of Goods Sold 122,063 168,259 453,154 56,000 377,337
Write-Off of amount assigned to
inventory in excess of historical
costs resulting from purchase
accounting adjustments 10,000 -- -- -- --
- -------------------------------------------------------------------------------------------------------------------------
Gross Profit 22,717 39,105 104,579 14,297 98,863
Selling, Engineering, General and
Administrative Expenses 24,503 31,772 95,747 12,364 79,041
- -------------------------------------------------------------------------------------------------------------------------
Income (Loss) from Operations (1,786) 7,333 8,832 1,933 19,822
Interest and Debt Issuance Expense 7,365 10,048 30,786 569 2,437
Other Income (Expense), net 2,865 697 3,036 (4,440) (6,039)
- -------------------------------------------------------------------------------------------------------------------------
Income (Loss) before provision
for Income Taxes (6,286) (2,018) (18,918) (3,076) 11,346
Provision for Income Taxes 423 1,895 4,716 567 11,741
- -------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) (6,709) (3,913) (23,634) (3,643) (395)
Foreign Currency Translation (2,043) (4,151) (14,005) (5,582) (5,647)
- -------------------------------------------------------------------------------------------------------------------------
Comprehensive Income (Loss) $ (8,752) $ (8,064) $ (37,639) $ (9,225) $ (6,042)
=========================================================================================================================
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
4
<PAGE>
GROVE WORLDWIDE LLC
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
July 3, October 3,
1999 1998
--------- ---------
(thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 9,967 $ 34,289
Trade receivables, net 129,583 129,833
Due from Hanson PLC -- 10,500
Notes receivable 167 5,887
Inventories 214,998 207,248
Other current assets 9,580 8,893
- -------------------------------------------------------------------------------
Total current assets 364,295 396,650
Property, plant and equipment, net 216,641 207,175
Goodwill, net 276,324 288,499
Other non-current assets 16,620 18,024
- -------------------------------------------------------------------------------
TOTAL ASSETS $ 873,880 $ 910,348
===============================================================================
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 14,514 $ 15,027
Current maturities of long-term debt 12,000 7,000
Trade accounts payable 77,941 79,470
Other payables and accrued liabilities 102,422 104,951
- -------------------------------------------------------------------------------
Total current liabilites 206,877 206,448
Long-term debt, less current maturities 401,000 408,000
Deferred revenue 79,967 67,306
Other non-current liabilities 78,415 82,733
- -------------------------------------------------------------------------------
Total liabilities 766,259 764,487
- -------------------------------------------------------------------------------
Member's equity:
Member's equity 163,959 164,560
Accumulated deficit (47,615) (23,981)
Accumulated other comprehensive income (loss) (8,723) 5,282
- -------------------------------------------------------------------------------
Total member's equity 107,621 145,861
- -------------------------------------------------------------------------------
TOTAL LIABILITIES AND MEMBER'S EQUITY $ 873,880 $ 910,348
===============================================================================
The accompanying notes are an integral part of the condensed consolidated
financial statements.
5
<PAGE>
GROVE WORLDWIDE LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
<TABLE>
<CAPTION>
Predecessor
-----------
30 Week
39 Week 9 Week Period Period
Period Ended Ended Ended
--------------------------------------
July 3, June 27, April 28,
1999 1998 1998
--------------------------------------
(thousands)
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) $(23,634) $ (6,709) $ (395)
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Depreciation and amortization 13,859 2,749 11,399
Depreciation of equipment held for rent 12,648 2,529 5,501
Amortization of deferred financing cost 1,296 301 --
Write-off of amount assigned to inventory
in purchase accounting -- 10,000 --
Loss on sale of fixed assets -- -- 6,256
Deferred tax expense 125 11 2,358
Notes receivable -- -- 28,409
Changes in operating assets and liabilities, net (6,120) (30,498) 39,569
- --------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) operating activities (1,826) (21,617) 93,097
- --------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES:
Capital expenditures (6,088) (1,945) (19,521)
Investment in equipment held for rent (25,174) (8,335) (16,380)
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) --
Cash received from Hanson PLC 10,500 -- --
Other investing activities 779 -- 2,071
- --------------------------------------------------------------------------------------------------------------
Net cash used for investing activities (19,983) (573,823) (33,830)
- --------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES:
Net proceeds (repayments) from short-term borrowings (513) 4 6,821
Proceeds from issuance of long-term debt -- 450,200 --
Proceeds from revolving line of credit 10,000 -- --
Equity investment from Grove Investors LLC -- 168,209 --
Deferred financing costs -- (12,674) --
Repayment of long-term debt (12,000) -- --
Other financing activities -- 1,125 (61,870)
- --------------------------------------------------------------------------------------------------------------
Net cash provided by (used for) financing activities (2,513) 606,864 (55,049)
- --------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and cash equivalents (24,322) 11,424 4,218
Cash and Cash Equivalents at Beginning of Period 34,289 -- 5,024
- --------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 9,967 $ 11,424 $ 9,242
==============================================================================================================
</TABLE>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
6
<PAGE>
GROVE WORLDWIDE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Grove Worldwide LLC's condensed consolidated balance sheet as of October
3, 1998 has been condensed from the audited consolidated balance sheet at that
date. The condensed consolidated balance sheet as of July 3, 1999, the condensed
consolidated statements of operations for the four week period ended April 28,
1998, thirty week period ended April 28, 1998, thirteen week period ended July
3, 1999, and the thirty-nine week period ended July 3, 1999, and the condensed
consolidated statements of cash flows for the thirty week period ended April 28,
1998, nine week period ended June 27, 1998, and thirty-nine week period ended
July 3, 1999, have been prepared by Grove Worldwide LLC and have not been
audited by Grove Worldwide LLC's independent accountants. Financial information
for periods prior to April 29, 1998 relates to Grove Worldwide LLC prior to the
Acquisition ("the Predecessor") (See note 2). Financial information subsequent
to April 29, 1998 relates to Grove Worldwide LLC and the Acquired Business. The
Acquisition created a new basis of accounting and a different capital structure;
therefore, the operating results and cash flows, for 1999 and 1998 are not
directly comparable. In the opinion of management, all adjustments, consisting
only of normal recurring adjustments, considered necessary for a fair
presentation of the financial position, results of operations and cash flows,
have been included.
Grove Worldwide LLC primarily manufactures and sells new mobile hydraulic
cranes, aerial work platforms, and truck mounted cranes. In addition, Grove
Worldwide LLC has net sales from parts, service, and used equipment of the
products it manufactures. Sales of used equipment are not material and are
generally limited to trade-ins on new equipment through distributors in France,
Germany, and the United Kingdom. Grove Worldwide LLC is a wholly owned
subsidiary of Grove Holdings LLC ("Holdings") which is a wholly owned subsidiary
of Grove Investors LLC ("Investors").
The separate financial statements of Grove Capital, Inc. ("Grove Capital")
are not included since Grove Worldwide LLC considers that such financial
statements would not be material. Grove Worldwide LLC formed Grove Capital, Inc.
("Grove Capital") as a direct wholly owned subsidiary to act as a co-issuer of
the Senior Subordinated Notes. At July 3, 1999, Grove Capital had one hundred
dollars in cash and total assets, and no current or long-term liabilities other
than its contingent co-obligation with respect to the Senior Subordinated Notes.
For the thirty-nine week period ended July 3, 1999 Grove Capital had no income
ore loss and no revenues. Grove Capital has no subsidiaries and no operations
and is prohibited from engaging in any business activities.
Interim results for the thirteen and thirty-nine week periods ended July
3, 1999 are not necessarily indicative of the results that may be expected for a
full fiscal year.
Certain information and note disclosures normally included in the
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted in accordance with the rules and
regulations of the Securities and Exchange Commission. These condensed
consolidated financial statements should be read in conjunction with Grove
Worldwide LLC's consolidated financial statements and notes thereto as set forth
in Grove Worldwide LLC's Annual Report on Form 10-K for the fiscal year ended
October 3, 1998.
2. THE ACQUISITION
On April 29, 1998, Grove Worldwide LLC acquired from Hanson PLC and
certain of its subsidiaries ("Hanson") substantially all of the net assets of
Hanson's United States mobile hydraulic crane and aerial work platform
operations, the capital stock of Hanson's United States truck-mounted crane
operation and the capital stock of Hanson's British, French, German, and
Australian crane and aerial work platform subsidiaries ("Acquired Business") for
an aggregate purchase price of $583.0 million (the "Acquisition"). The purchase
price was subject to a post closing adjustment for which Grove Worldwide LLC
received $27.3 million from Hanson.
The Acquisition was accounted for as a purchase and the operations of the
Acquisition are included in the consolidated statements of operations and cash
flows from the date of acquisition. The cost of the Acquisition has been
allocated on the basis of the fair value of the assets acquired and the
liabilities assumed. The excess of the
7
<PAGE>
GROVE WORLDWIDE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
purchase price over the estimated fair value of the net assets acquired is being
amortized using the straight-line method over forty years. The allocation of the
purchase price for the Acquisition was based on appraisals, valuations, and
other studies of the fair value of the acquired assets and liabilities.
3. INVENTORIES
July 3, October 3,
Inventories consist of: 1999 1998
---------- ----------
(thousands)
Raw materials and supplies $ 67,777 $ 61,910
Work-in-process 80,749 72,299
Finished goods 66,472 73,039
-------- --------
Total $214,998 $207,248
======== ========
4. INCOME TAXES
Following the Acquisition, a significant portion of Grove Worldwide LLC's
business is operated as a Delaware limited liability company and is not subject
to federal and certain state income taxes. The taxable income of the limited
liability company in the United States is allocated to the equity holders of
Grove Worldwide LLC who are responsible for the applicable federal and state
income taxes. Grove Worldwide LLC expects to make cash distributions to the
equity holders for their tax obligations associated with Grove Worldwide LLC
taxable income. Foreign and certain domestic income taxes will continue to be
the responsibility of Grove Worldwide LLC.
The primary difference between Grove Worldwide LLC's effective income tax
rate and the United States statutory rate is due to Grove Worldwide LLC's
structure as a limited liability company. Therefore, income taxes included on
the condensed consolidated statement of operations and comprehensive income
(loss) relate to foreign and certain domestic operations.
5. CLOSURE OF SUNDERLAND MANUFACTURING FACILITY
As the result of recurring operating losses, Grove Worldwide LLC closed
its Sunderland, U.K. manufacturing facility on November 27, 1998. Management
believes closing the facility will eventually improve operating earnings as well
as provide the opportunity for additional cost reductions through product
rationalization, reduced selling, general and administrative expenses and
reduced manufacturing costs. Management has estimated total closure costs to be
approximately $18.5 million. Such amount consists of $11.5 million in severance
and related costs for 683 plant employees, $5.6 million for dismantlement and
disposal of plant equipment and $1.4 million for cleanup and closure of the
leased facility. Through July 3, 1999, Grove Worldwide LLC has expended $9.2
million of severance and related costs for 633 employees. As of July 3, 1999,
$2.3 million of severance and related costs for 50 plant employees, $2.4 million
of equipment disposal, and $0.5 million of plant cleanup costs remain to be
expended.
6. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL INFORMATION
Grove Worldwide LLC's payment obligations under the senior subordinated
notes are guaranteed by all of Grove Worldwide LLC'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 Grove
Worldwide LLC's management has determined that they would not be material to
investors. In addition, although a separate column in the condensed combined
financial statements set forth below normally would be provided for Grove
Capital, Grove Worldwide LLC's management believes that such information would
not be meaningful given Grove Capital's lack of assets and operations. The
8
<PAGE>
GROVE WORLDWIDE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL INFORMATION (continued)
ability of Grove Worldwide LLC's subsidiaries to make cash distributions and
loans to Grove Worldwide LLC and the Subsidiary Guarantors is not significantly
restricted under the terms of Grove Worldwide LLC's debt obligations. The
following supplemental financial information sets forth, on a combined basis,
balance sheets, statements of operations and cash flow information for the
Subsidiary Guarantors, the Non-Guarantor Subsidiaries and for Grove Worldwide
LLC.
Condensed Consolidating Balance Sheet at July 3, 1999
<TABLE>
<CAPTION>
Grove
Worldwide Subsidiary Other Consolidated
LLC Guarantors subsidiaries Eliminations Totals
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ASSETS (thousands)
CURRENT ASSETS:
Cash and cash equivalents $ 6,226 $ 109 $ 3,632 $ -- $ 9,967
Trade receivables, net -- 63,368 66,215 -- 129,583
Notes receivable -- 167 -- -- 167
Inventories -- 141,301 73,697 -- 214,998
Other current assets -- 3,850 5,730 -- 9,580
- ----------------------------------------------------------------------------------------------------------------
Total current assets 6,226 208,795 149,274 -- 364,295
Property, plant and equipment, net -- 115,953 100,688 -- 216,641
Goodwill, net -- 257,315 19,009 -- 276,324
Investment and due from subsidiaries 673,297 155,417 28,690 (857,404) --
Other non-current assets 12,333 4,201 86 -- 16,620
- ----------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 691,856 $ 741,681 $ 297,747 $(857,404) $ 873,880
- ----------------------------------------------------------------------------------------------------------------
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES
Short-term borrowings $ -- $ 2,572 $ 11,942 $ -- $ 14,514
Current maturities of long-term debt 12,000 -- -- -- 12,000
Trade accounts payable -- 43,694 34,247 -- 77,941
Other payables and accrued liabilities 4,986 46,631 50,805 -- 102,422
- ----------------------------------------------------------------------------------------------------------------
Total current liabilities 16,986 92,897 96,994 -- 206,877
Long-term debt 401,000 -- -- -- 401,000
Deferred revenue -- -- 79,967 -- 79,967
Due to subsidiaries 123,602 501,906 114,190 (739,698) --
Other non-current liabilities 100 63,165 15,150 -- 78,415
- ----------------------------------------------------------------------------------------------------------------
Total liabilities 541,688 657,968 306,301 (739,698) 766,259
Member's equity
Holder's equity 168,209 92,892 20,564 (117,706) 163,959
Accumulated deficit (18,041) (7,120) (22,454) -- (47,615)
Accumulated other comprehensive income -- (2,059) (6,664) -- (8,723)
- ----------------------------------------------------------------------------------------------------------------
Total member's equity 150,168 83,713 (8,554) (117,706) 107,621
- ----------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND MEMBER'S EQUITY $ 691,856 $ 741,681 $ 297,747 $(857,404) $ 873,880
================================================================================================================
</TABLE>
9
<PAGE>
GROVE WORLDWIDE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL INFORMATION (continued)
Condensed Consolidating Statement of Operations and Comprehensive Income for the
thirteen weeks ended July 3, 1999
<TABLE>
<CAPTION>
Grove
Worldwide Subsidiary Other Consolidated
LLC Guarantors subsidiaries Eliminations Totals
- ------------------------------------------------------------------------------------------------------------------------
(thousands)
<S> <C> <C> <C> <C> <C>
Net Sales $ -- $ 152,111 $ 75,907 $ (20,654) $ 207,364
Cost of goods sold -- 124,959 63,954 (20,654) 168,259
- ------------------------------------------------------------------------------------------------------------------------
Gross Profit -- 27,152 11,953 -- 39,105
Selling, engineering, general and administrative
expenses 4,468 17,560 9,744 -- 31,772
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations (4,468) 9,592 2,209 -- 7,333
Interest and debt issuance expense 9,193 10,001 1,865 (11,011) 10,048
Other income (expense), net 10,472 1,504 (268) (11,011) 697
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) before provision for income taxes (3,189) 1,095 76 -- (2,018)
Provision for income taxes -- 1,481 414 -- 1,895
- ------------------------------------------------------------------------------------------------------------------------
Net income (loss) (3,189) (386) (338) -- (3,913)
Foreign currency translation -- -- (4,151) -- (4,151)
- ------------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss) $ (3,189) $ (386) $ (4,489) $ -- (8,064)
========================================================================================================================
</TABLE>
Condensed Combining Statement of Operations for the nine weeks ended June 27,
1998
<TABLE>
<CAPTION>
Grove
Worldwide Subsidiary Other Consolidated
LLC Guarantors subsidiaries Eliminations Totals
- -------------------------------------------------------------------------------------------------------------------------
(thousands)
<S> <C> <C> <C> <C> <C>
Net Sales $ -- $ 120,497 $ 44,749 $ (10,466) $ 154,780
Cost of goods sold -- 95,436 37,093 (10,466) 122,063
Write-off of amount assigned to in excess of
historical costs resulting from purchase
accounting adjustments -- 6,000 4,000 -- 10,000
- -------------------------------------------------------------------------------------------------------------------------
Gross Profit -- 19,061 3,656 -- 22,717
Selling, engineering, general and
administrative expenses 3,444 12,531 8,528 -- 24,503
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations (3,444) 6,530 (4,872) -- (1,786)
Interest and debt issuance expenses -- 5,923 1,442 -- 7,365
Other income (expense), net -- 2,859 6 -- 2,865
- -------------------------------------------------------------------------------------------------------------------------
Income (loss) before provision for income taxes (3,444) 3,466 (6,308) -- (6,286)
Provision for income taxes -- 356 67 -- 423
- -------------------------------------------------------------------------------------------------------------------------
Net income (loss) (3,444) 3,110 (6,375) -- (6,709)
Foreign currency translation -- -- (2,043) -- (2,043)
- -------------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss) $ (3,444) $ 3,110 $ (8,418) $ -- $ (8,752)
=========================================================================================================================
</TABLE>
10
<PAGE>
GROVE WORLDWIDE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL INFORMATION (continued)
Condensed Consolidating Statement of Operations and Comprehensive Income for the
thirty-nine weeks ended July 3, 1999
<TABLE>
<CAPTION>
Grove
Worldwide Subsidiary Other Consolidated
LLC Guarantors subsidiaries Eliminations Totals
- ------------------------------------------------------------------------------------------------------------------------
(thousands)
<S> <C> <C> <C> <C> <C>
Net Sales $ -- $ 405,141 $ 224,413 $ (71,821) $ 557,733
Cost of goods sold -- 333,178 191,797 (71,821) 453,154
- ------------------------------------------------------------------------------------------------------------------------
Gross Profit -- 71,963 32,616 -- 104,579
Selling, Engineering, general and administrative
expenses 12,808 51,565 31,374 -- 95,747
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations (12,808) 20,398 1,242 -- 8,832
Interest and debt issuance expense 28,247 29,903 5,825 (33,189) 30,786
Other income (expense), net 31,952 3,937 335 (33,189) 3,036
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) before provision for income taxes (9,103) (5,568) (4,248) -- (18,918)
Provision for Income taxes -- 1,791 2,925 -- 4,716
- ------------------------------------------------------------------------------------------------------------------------
Net income (loss) (9,103) (7,359) (7,173) -- (23,634)
Foreign currency translation -- -- (14,005) -- (14,005)
- ------------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss) $ (9,103) $ (7,359) $ (21,178) $ -- (37,639)
========================================================================================================================
</TABLE>
Condensed Combining Statement of Operations for the thirty weeks ended April 28,
1998
<TABLE>
<CAPTION>
Subsidiary Other Consolidated
Guarantors subsidiaries Eliminations Totals
- ------------------------------------------------------------------------------------------------------------------------
(thousands)
<S> <C> <C> <C> <C>
Net Sales $ 346,565 $ 166,780 $ (37,145) $ 476,200
Cost of goods sold 263,440 151,017 (37,120) 377,337
- ------------------------------------------------------------------------------------------------------------------------
Gross Profit 83,125 15,763 (25) 98,863
Selling, engineering, general and administrative
expenses 49,846 29,195 -- 79,041
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) from operations 33,279 (13,432) (25) 19,822
Interest and debt issuance expense 2,359 78 -- 2,437
Other income (expense), net (2,085) (3,954) -- (6,039)
- ------------------------------------------------------------------------------------------------------------------------
Income (loss) before provision for income taxes 28,835 (17,464) (25) 11,346
Provision for income taxes 11,741 -- -- 11,741
- ------------------------------------------------------------------------------------------------------------------------
Net income (loss) 17,094 (17,464) (25) (395)
Foreign currency translation -- (5,647) -- (5,647)
- ------------------------------------------------------------------------------------------------------------------------
Comprehensive income (loss) $ 17,094 $ (23,111) $ (25) $ (6,042)
========================================================================================================================
</TABLE>
11
<PAGE>
GROVE WORLDWIDE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6. SUPPLEMENTAL CONDENSED COMBINED FINANCIAL INFORMATION (continued)
Condensed Consolidating Statement of Cash Flows for the thirty-nine weeks ended
July 3, 1999
<TABLE>
<CAPTION>
Grove Subsidiary Other Consolidated
Worldwide LLC Guarantors subsidiaries Totals
- -------------------------------------------------------------------------------------------------------
(thousands)
<S> <C> <C> <C> <C>
Operating activities
Net cash provided by operating activities $ (19,429) $ (936) $ 18,539 $ (1,826)
- -------------------------------------------------------------------------------------------------------
Investing activities
Capital expenditures -- (5,007) (1,081) (6,088)
Investment in equipment held for rent -- -- (25,174) (25,174)
Proceeds from sales of equipment -- -- -- --
Cash received from Hanson, PLC 10,500 -- -- 10,500
Other investing activities 779 -- -- 779
- -------------------------------------------------------------------------------------------------------
Net cash used in investing activities (11,279) (5,007) (26,255) (31,262)
- -------------------------------------------------------------------------------------------------------
Financing activities
Net proceeds from revolving line of credit 10,000 -- -- 10,000
Net proceeds from short-term borrowing -- -- (513) (513)
Principal payments on long-term debt (12,000) -- -- (12,000)
- -------------------------------------------------------------------------------------------------------
Net cash used in financing activities (2,000) -- (513) (2,513)
- -------------------------------------------------------------------------------------------------------
Net increase in cash and cash equivalents (10,150) (5,943) (8,229) (24,322)
Cash and cash equivalents, beginning of period 16,376 6,052 11,861 34,289
- -------------------------------------------------------------------------------------------------------
Cash and cash equivalent, end of period $ 6,226 $ 109 $ 3,632 $ 9,967
=======================================================================================================
</TABLE>
Condensed Combining Statement of Cash Flows for the thirty weeks ended April 28,
1998
<TABLE>
<CAPTION>
Subsidiary Other Consolidated
Guarantors subsidiaries Totals
- --------------------------------------------------------------------------------------
(thousands)
<S> <C> <C> <C>
Operating activities
Net cash provided by operating activities $ 44,125 $ 48,972 $ 93,097
- --------------------------------------------------------------------------------------
Investing activities
Capital expenditures (9,918) (9,603) (14,521)
Investment in equipment held for rent -- (16,380) (16,380)
Other investing activities 242 1,829 2,071
- --------------------------------------------------------------------------------------
Net cash used in investing activities (9,676) (24,154) (33,830)
- --------------------------------------------------------------------------------------
Financing activities
Net proceeds from short-term borrowings -- 6,821 6,821
Other financing activities (29,944) (31,924) (61,870)
- --------------------------------------------------------------------------------------
Net cash used in financing activities (29,944) (25,105) (55,049)
- --------------------------------------------------------------------------------------
Net increase in cash and cash equivalents 4,505 (287) 4,218
Cash and cash equivalents, beginning of period (492) 5,516 5,024
- --------------------------------------------------------------------------------------
Cash and cash equivalent, end of period $ 4,013 $ 5,229 $ 9,242
- --------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
GROVE WORLDWIDE LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Condensed Consolidating Statement of Cash Flows for the nine weeks ended June
27, 1998
<TABLE>
<CAPTION>
Grove
Worldwide Subsidiary Other Consolidated
LLC Guarantors subsidiaries Eliminations Totals
- ---------------------------------------------------------------------------------------------------------------------------
(thousands)
<S> <C> <C> <C> <C> <C>
Operating activities
Net cash provided by (used for) operating activities $ 4,505 $ (39,095) $ 12,973 $ -- (21,617)
- ---------------------------------------------------------------------------------------------------------------------------
Investing activities
Capital expenditures -- (1,745) (200) -- (1,945)
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 for investing activities (114,260) (467,803) (99,535) 107,775 (573,823)
- ---------------------------------------------------------------------------------------------------------------------------
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 76,035 -- 1,125
- ---------------------------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 111,899 506,898 95,842 (107,775) 606,864
- ---------------------------------------------------------------------------------------------------------------------------
Net increase in cash and cash
equivalents, end of period $ 2,144 $ -- $ 9,280 $ -- $ 11,424
===========================================================================================================================
</TABLE>
13
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the condensed
consolidated financial statements and related notes thereto of Grove Worldwide
LLC included in this report.
Introduction
Grove Worldwide LLC primarily manufactures and sells new mobile hydraulic
cranes, aerial work platforms, and truck mounted cranes. In addition, Grove
Worldwide LLC has net sales from parts, service, and used equipment of the
products it manufactures. Sales of used equipment are not material and generally
limited to trade-ins on new equipment through Grove Worldwide LLC distributors
in France, Germany, and the United Kingdom. Grove Worldwide LLC is a wholly
owned subsidiary of Grove Holdings LLC ("Holdings") which is a wholly owned
subsidiary of Grove Investors LLC ("Investors").
In April 1998, Grove Worldwide LLC acquired from Hanson PLC and certain of
its subsidiaries ("Hanson") all of the assets of Hanson's United States mobile
hydraulic crane and aerial work platform operations, the capital stock of
Hanson's United States truck-mounted crane operation and the capital stock of
Hanson's British, French, German and Australian crane and aerial work platform
subsidiaries (the "Acquisition") for an aggregate purchase price of
approximately $583.0 million. The purchase price was subject to a post closing
adjustment for which Grove Worldwide LLC received $27.3 million from Hanson.
Following the Acquisition, a significant portion of Grove Worldwide LLC's
business is operated as a limited liability company organized under the laws of
Delaware, as a result of which (i) Grove Worldwide LLC is not subject to income
tax, (ii) the taxable income of the mobile hydraulic crane and the aerial work
platform businesses in the United States is allocated to the equity holders, and
(iii) such equity holders are responsible for income taxes on such taxable
income. Grove Worldwide LLC 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 Grove Worldwide LLC.
The following discussion covers periods of operations of Grove Worldwide
LLC prior to and subsequent to the Acquisition. The thirteen week period ended
June 27, 1998 includes the four week period ended June 27, 1998 (subsequent to
the Acquisition) and the nine week period ended April 28, 1998 (prior to the
Acquisition). The thirty-nine week period ended June 27, 1998 includes the nine
week period ended June 27, 1998 (subsequent to the Acquisition) and the thirty
week period ended April 28, 1998 (prior to the Acquisition). Results of
operations following the Acquisition are significantly different principally as
the result of (i) changes in the amounts of depreciation and amortization caused
by purchase accounting adjustments, (ii) increased interest expense in respect
of amounts borrowed to consummate the Acquisition and (iii) reductions in income
tax caused by changes in corporate structure.
Operating results for fiscal 1999 are expected to be influenced by various
internal and external factors. These factors include, among other things, (i)
continued improvement in sales volume, (ii) continued implementation of cost
savings program designed to improve profitability, and (iii) fluctuations in
interest rates.
Results of Operations
Thirteen week period ended July 3, 1999 compared to the Thirteen week period
ended June 27, 1998.
Net sales for the thirteen week period ended July 3, 1999 were $207.4
million as compared to $225.1 million to the thirteen week period ended June 27,
1998, a decrease of $17.7 million or 7.9%. This decrease was primarily
associated with reduced unit sales compared to 1998. Although net sales
decreased as compared to 1998, Grove Worldwide LLC's sales backlog at July
3,1999 was higher than at April 3, 1999. Management believes this increase in
backlog was associated with a strong market and new products introduced at the
CONEXPO Trade Show.
Gross profit as a percentage of net sales decreased to 18.9% for the
thirteen week period ended July 3,1999 from 20.9% for the thirteen week period
ended June 27,1998 after excluding a $10.0 million charge in 1998 for the
write-off of purchase accounting adjustments related to inventory recorded in
the Acquisition. This decrease
14
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
primarily resulted from reduced unit sales and inefficiencies associated with
our new business systems offset by benefits received from our cost savings
program.
Selling, engineering, general and administrative expenses for the thirteen
week period ended July 3,1999 were $31.8 million compared to $36.9 million for
the thirteen week period ended June 27,1998. This decrease was primarily
associated with reductions from our cost savings program offset by approximately
$1.6 million of consulting costs in 1999, and approximately $0.9 million of
consulting costs in 1998. Also, selling, engineering, general and administrative
expenses decreased as a percentage of net sales to 15.3% in 1999 from 16.4% in
1998. This decrease was primarily attributable to the cost savings program,
offset by the reduced unit sales.
Income from operations decreased $2.8 million to $7.3 million for the
thirteen week period ended July 3, 1999 from $10.0 million in thirteen week
period ended June 27, 1998 after excluding the 1998 $10.0 million inventory
charge described above. This decrease is primarily due to the reduction in unit
sales discussed above.
Interest and debt issuance expense increased to $10.0 million for the
thirteen week period ended July 3, 1999 from $7.9 million for the thirteen week
period ended June 27, 1998. This increase was primarily due to the debt incurred
to finance the Acquisition and the change in Grove Worldwide LLC's capital
structure. See notes 1 and 2 to the condensed consolidated financial statements.
Other income (expense), net increased to income of $0.7 million for the
thirteen week period ended July 3, 1999 from an expense of $1.5 million for the
thirteen week period ended June 27, 1998.
Income taxes were $1.9 million for the thirteen week period ended July 3,
1999 as compared to $1.0 million for the thirteen week period ended June 27,
1998. This increase was primarily due to the improved operations of our foreign
subsidiaries.
Thirty-nine week period ended July 3, 1999 compared to the Thirty-nine week
period ended June 27, 1998
Net sales for the thirty-nine week period ended July 3, 1999 were $557.7
million as compared to $631.0 million for the thirty-nine week period ended June
27, 1998, a decrease of $73.3 million or 11.6%. This reduction primarily
resulted from reduced unit sales during 1999 and the repositioning of certain
aerial work platform manufacturing operations from the Sunderland U.K. facility
to our United States facility during the first half of fiscal year 1999.
However, as previously discussed, Grove Worldwide LLC's sales backlog has
increased at the end of July 3, 1999 as compared to April 3,1999. Management
believes this increased backlog was associated with a strong market and new
products introduced at the CONEXPO Trade Show.
Gross profit as a percentage of net sales decreased to 18.8% for the
thirty-nine week period ended July 3, 1999 from 20.8% in the thirty-nine week
period ended June 27,1998, after excluding the 1998 $10.0 million inventory
charge discussed above. This decrease was primarily due to the reduced unit
sales and inefficiencies associated with implementation of the new management
information systems.
Selling, engineering, general and administrative expenses for the
thirty-nine week period ended July 3, 1999 were $95.7 million compared to $103.5
million for the thirty-nine week period ended June 27, 1998. This decrease was
primarily associated with reductions from our cost savings program, offset by
increased consulting costs of approximately $5.4 million in 1999 as compared to
$0.9 million of consulting costs in 1998. However, selling, engineering, general
and administrative expenses increased as a percentage of net sales to 17.1% in
1999 from 16.4% in 1998. This increase was primarily attributable to the reduced
unit sales offset by our cost savings program.
Income from operations decreased to $8.8 million for the thirty-nine week
period ended July 3, 1999 from $28.0 million in the thirty-nine week period
ended June 27, 1998 after excluding the 1998 $10.0 million inventory charge
discussed above. In addition, the reduced unit sales decreased income from
operations.
Interest and debt issuance expense increased to $30.8 million for the
thirty-nine week period ended July 3, 1999 from $9.8 million for the thirty-nine
week period ended June 27,1998. This increase was primarily due to
15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
the debt incurred to finance the Acquisition and the change in Grove Worldwide
LLC's capital structure. See notes 1 and 2 to the condensed consolidated
financial statements.
Other income (expense), net increased to income of $3.0 million for
thirty-nine week period ended July 3, 1999 from an expense of $3.2 million for
the thirty-nine week period ended June 27, 1998 primarily due to a loss in 1998
on the sale of land and buildings prior to the Acquisition. Immediately after
the sale, Hanson leased the property back to Grove Worldwide LLC.
Income taxes were $4.7 million for the thirty-nine week period ended July
3, 1999 as compared to $12.2 million for the thirty-nine week period ended June
27, 1998. This decrease was primarily related to Grove Worldwide LLC's structure
as a limited liability company following the Acquisition.
Backlog
Net sales backlog as of July 31, 1999 was $212.4 million as compared to
$231.4 million at August 1, 1998.
Liquidity and Capital Resources
Grove Worldwide LLC is a holding company whose operations are conducted
through its domestic and foreign subsidiaries. The liquidity requirements of
Grove Worldwide LLC consists primarily of debt related payments and operating
cash requirements.
The debt related payments consist principally of principal and interest on
outstanding indebtedness. The operating cash requirements of Grove Worldwide LLC
consist principally of working capital requirements and capital expenditures.
Grove Worldwide LLC believes that cash flow from operating activities, cash on
hand and periodic borrowings under Grove Worldwide LLC's revolving credit
facility, if necessary, will be adequate to meet liquidity requirements. The
ability to meet such liquidity requirements could be impaired if Grove Worldwide
LLC were to fail to comply with any covenants contained in (i) its credit
agreement and such noncompliance was not cured or waived by the lenders or (ii)
in its indenture. Grove Worldwide LLC was in compliance with covenants set forth
in the credit agreement as of July 3, 1999.
Cash and cash equivalents decreased $24.3 million during 1999 to $10.0
million at July 3, 1999 from $34.3 million at October 3, 1998 primarily due to
cash used for net operating assets associated with the reduced operating
results. Working capital decreased $32.8 million during 1999 to $157.4 million
at July 3, 1999 from $190.2 million at October 3, 1998 primarily due to the
reduction in cash as discussed above. Net operating assets and liabilities
(comprised of accounts receivable, inventories and accounts payable) increased
$9.0 million during 1999 to $266.6 million at July 3, 1999 from $257.6 million
at October 3, 1998 primarily due to an increase in inventories and a decrease in
accounts payable. The increase in inventories is primarily due to inventory part
shortages that Grove Worldwide LLC has experienced and the increased sales
backlog at July 3, 1999. The decrease in accounts payable is primarily due to
the timing of cash payments.
Cash flow provided by operating activities decreased to a use of $1.8
million for the thirty-nine week period ended July 3, 1999 as compared to cash
provided of $71.5 million for the thirty-nine week period ended June 27, 1998,
primarily due to the reduced 1999 operating results and the sale of notes
receivable in 1998.
During the thirty-nine weeks ended July 3, 1999, Grove Worldwide LLC
received a payment from Hanson of $10.5 million in final settlement of the
purchase price, made $12.0 million of payments on its bank loan, and borrowed
$10.0 million in short-term borrowings. Capital expenditures were approximately
$6.1 million for the thirty - nine weeks ended July 3. 1999 and are expected to
be approximately $10.0 million for fiscal 1999.
Certain Subsidiaries of Grove Worldwide LLC
In connection with the Acquisition, Grove Worldwide LLC and its wholly
owned subsidiary, Grove
16
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
Capital, a Delaware corporation, issued the Senior Subordinated Notes. Grove
Capital was organized as a direct wholly owned subsidiary of Grove Worldwide LLC
for the purpose of acting as a co-issuer of the Senior Subordinated Notes and
was also a co-registrant of the registration statement for the Senior
Subordinated Notes. This was done so that certain institutional investors to
which the Debentures were marketed, that might otherwise have been restricted in
their ability to purchase debt securities issued by a limited liability company,
such as Grove Worldwide LLC, 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 Senior Subordinated Notes and as a borrower under the New Credit
Facility), and no operations. Grove Capital does not have any revenues and is
prohibited from engaging in any business activities. As a result, holders of the
Senior Subordinated Notes should not expect Grove Capital to participate in
servicing the interest and principal obligations on the Senior Subordinated
Notes.
The payment obligations of Grove Worldwide LLC and Grove Capital under the
Senior Subordinated Notes are fully and unconditionally guaranteed (the
"Subsidiary Guarantee") on a joint and several basis by the subsidiary
guarantors, all of which are wholly owned. 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 Worldwide LLC's domestic operating subsidiaries
together hold substantially all of Grove Worldwide LLC's domestic assets. The
remaining subsidiaries of Grove Worldwide LLC, which are foreign subsidiaries,
have not issued, and are not expected to issue, Subsidiary Guarantees.
No separate financial statements of the Subsidiary Guarantors and Grove
Capital are included in this report. Grove Worldwide LLC considers that such
financial statements and would not be material to investors because: (i) this
report does include, in the notes to the condensed consolidated financial
statements of Grove Worldwide LLC, supplemental financial information, setting
forth on a consolidated basis, balance sheets, statements of operations and cash
flows information for the Subsidiary Guarantors, the Non-Guarantor Subsidiaries
and Grove Worldwide LLC; and (ii) the above-mentioned note provides 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 ability of Grove Worldwide LLC's subsidiaries to make cash
distributions and loans to Grove Worldwide LLC and the Subsidiary Guarantors is
not significantly restricted under the terms of the Senior Subordinated Notes,
the Indenture governing the Senior Subordinated Notes, the Indenture governing
Holdings debentures or the new credit facility. The obligations of each
Subsidiary Guarantor under its Subsidiary Guarantee are limited so as not to
constitute a fraudulent conveyance under applicable law. For more information
regarding the assets, liabilities, revenues and cash flows of the Subsidiary
Guarantors and Grove Worldwide LLC's Non-Guarantor Subsidiaries, see Note 6 of
the Condensed Consolidated Financial Statements of Grove Worldwide LLC.
Management Information Systems and the Impact of Year 2000
Many computer programs and microprocessors use two digits rather than four
to define the applicable year. Computer programs that have date-sensitive
software and microprocessors may recognize a date using "00" as the year 1900
rather than the year 2000. This phenomenon could cause a disruption of
operations, including, among other things, a temporary inability to use
manufacturing equipment, send invoices or engage in similar normal business
activities.
In fiscal 1995, Grove Worldwide LLC conducted a Year-2000 assessment of
all management information systems used at its crane and aerial work platform
facilities in the Untied States, United Kingdom and Germany. Upon completing
this review in October 1995, Grove Worldwide LLC launched the Year-2000 project,
a campaign designed to replace all existing software and hardware that was not
Year-2000 compliant. In addition to replacing all business application software
and hardware, the Year-2000 project was designed to provide improved business
processes and procedures.
Grove Worldwide LLC determined that it did not need to implement the
Year-2000 project at our
17
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
National Crane facility in Waverly, Nebraska. Instead, National Crane upgraded
all of its existing hardware and software and converted all of its data.
Management believes the completion of this upgrade has rendered all of National
Crane's major computer systems Year-2000 compliant.
Grove Worldwide LLC also polled the manufacturers of its computerized
numerical control manufacturing/production equipment. These manufacturers have
informed us that there are no Year-2000 issues with respect to these
computerized numerical control equipment at the Shady Grove, Pennsylvania and
Waverly, Nebraska facilities. Grove Worldwide LLC is also conducting an internal
review of its computerized numerical control equipment to confirm the
equipments' Year-2000 readiness. Although Grove worldwide LLC believes that the
Year-2000 issue will not have a material adverse impact on its computerized
numerical control equipment, there can be no assurance that it will not.
Grove Worldwide LLC has also evaluated all of its non-information
technology systems for their state of readiness for proper operation in the year
2000. Grove Worldwide LLC believes that the majority of its non-information
technology systems are Year-2000 compliant. Grove Worldwide LLC expects that all
non-information technology systems that are not yet Year-2000 compliant will be
compliant by September 1999.
In addition, Grove Worldwide LLC initiated communications with suppliers
and customers to determine the extent to which Grove Worldwide LLC may be
vulnerable to their failure to remediate their own Year-2000 issues. There can
be no guarantee that the systems of other companies on which Grove Worldwide LLC
systems rely will be timely converted, or that a failure to convert by another
company, or a conversion that is incompatible with our systems, would not have a
material adverse effect on Grove Worldwide LLC. However, based on its current
assessment, Grove Worldwide LLC believes that the Year-2000 issue will not have
a material adverse impact on our future results of operations or financial
conditions, although there can be no assurance that this will be the case.
Grove Worldwide LLC is in the process of developing a business contingency
plan to address Year-2000 risks. Although Grove Worldwide LLC expects to
complete the plan by fall 1999, Grove Worldwide LLC will continue to enhance and
revise the plan, as appropriate, throughout the remainder of 1999 and into the
year 2000. The contingency plan will include identification of critical
processes, risk assessment and response techniques in the event of a system
failure. Grove Worldwide LLC's planned response to "worst case scenario" system
failure includes designating emergency response personnel to address and correct
any unforeseen problems, identification of alternate sources of supply, manual
processing of transactions, manual control of production processes and where
practical, the stockpiling of raw materials and finished goods in those
instances where a high risk of a supply failure is suspected. In addition, Grove
Worldwide LLC is considering obtaining back-up power sources to keep core
computer systems functioning in the event local utility companies are no longer
operational. In certain cases, especially global infrastructure failures, there
may be not practical alternative courses of action available to Grove Worldwide
LLC that will permit resumption of an interrupted business activity.
Grove Worldwide LLC expects to complete the Year-2000 project in September
1999. Grove Worldwide LLC expects the project will have a total cost of
approximately $38.0 million, of which approximately $36.0 million had been spent
as of July 3, 1999. If the Year-2000 project is delayed, Grove Worldwide LLC
will have to shorten its planning horizons and replace certain computerized
functions, like inventory and work-in-process tracking, billing and order
processing, with manual systems. Any delay in completing the project could
result in part shortages and slow the delivery of products to our customers.
Grove Worldwide LLC believes that all of our major computer systems will be
rendered Year-2000 complaint. If Grove Worldwide LLC does not complete the
modifications and conversions in a timely manner, the Year-2000 issue could have
a material impact on Grove Worldwide LLC's operations.
New Accounting Standards
Statement of Financial Accounting Standards No. 131 ("SFAS No. 131"),
"Disclosures about Segments of an Enterprise and Restated Information," was
issued by the Financial Accounting Standards Board in June 1997. This statement
establishes standards for reporting information about operating segments in
annual financial statements and requires reporting of selected financial
information about operating segments in interim financial reports issued to
stockholders. It also establishes standards for related disclosures about
products and services,
18
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
geographic areas, and major customers. Grove Worldwide LLC will adopt SFAS No.
131 for the year ended 1999 reporting. Grove Worldwide LLC is evaluating the
impact, if any, the standard will have on its present segment reporting.
In February 1998 the Financial Accounting Standards Board issued SFAS No.
132, "Employers' Disclosures about Pension and Other Postretirement Benefits"
("SFAS No. 132"), which is effective for fiscal years beginning after December
15, 1997. SFAS No. 132 revised the required disclosures about pension and other
postretirement benefit plans. Grove Worldwide LLC will adopt SFAS No.132 for the
year ended October 2, 1999 reporting.
In June 1998 the Financial Accounting Standards Board issued SFAS No. 133
("SFAS No. 133"), "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133, as amended, established new procedures for accounting
for derivatives and hedging activities and supersedes and amends a number of
existing standards. The statement is effective for fiscal years beginning after
June 15, 2000. Grove Worldwide will adopt the statement in fiscal year 2001.
19
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Grove Worldwide LLC's principal market risk exposure is changing interest
rates, primarily changes in short term interest rates. Grove Worldwide LLC does
not enter into financial instruments for trading or speculative purposes. Grove
Worldwide LLC's policy is to manage interest rates through use of a combination
of fixed and floating rate debt. Grove Worldwide LLC may also use derivative
financial instruments to manage its exposure to interest rate risk.
As of July 3, 1999, Grove Worldwide LLC had $178.0 million of term debt
outstanding under its credity facility which bears interest at LIBOR plus 2.50%
(7.69%) and $10.0 million of revolver debt under its credit facility which bears
interest at LIBOR plus 2.25% (7.44%). In addition Grove Worldwide LLC has $225.0
million of Senior Subordinated Notes outstanding bearing interest at a fixed
rate of 9.25%.
Grove Worldwide LLC has an interest rate collar to manage exposure to
fluctuations in interest rates on $100.0 million of its floating rate long-term
debt through September 2001. Under the agreement, Grove Worldwide LLC will
receive on a $100.0 million notional amount, three month LIBOR and be paid 6.5%
anytime LIBOR exceeds 6.5%, and will receive three month LIBOR and pay 5.19%
anytime LIBOR is below 5.19%. The agreement effectively caps Grove Worldwide
LLC's exposure on $100.0 million of its floating rate debt at 6.5% plus the
applicable margin.
Movement in foreign currency exchange rates creates risk to Grove
Worldwide LLC's operations to the extent of sales made and costs incurred in
foreign currencies. The major foreign currencies, among others, in which Grove
Worldwide LLC does business are the British pound sterling, German mark and
French franc. In addition, changes in currency exchange rates can affect the
competitiveness of Grove Worldwide LLC's products and could result in management
reconsidering pricing strategies to maintain market share. Specifically, Grove
Worldwide LLC is most sensitive to changes in the German mark. During the past
three fiscal years, the impact of currency fluctuations has not had a
significant impact on Grove Worldwide LLC's results of operations.
In order to manage currency risk, Grove Worldwide LLC's practice is to
contract for purchases and sales of goods and services in the functional
currency of Grove Worldwide LLC's subsidiary executing the transaction. To the
extent purchases or sales are in currencies other than the functional currency
of the subsidiary, Grove Worldwide LLC will generally purchase forward contracts
to hedge firm purchase and sales commitments. As of July 3, 1999, Grove
Worldwide LLC was party to 7 such contracts with an aggregate value of $5.8
million. These forward contracts generally have average maturities of less than
three months. Grove Worldwide LLC has not taken any action at this time to hedge
its net investment in foreign subsidiaries but may do so in the future.
Grove Worldwide LLC does not have any commodity contracts.
20
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
Grove Worldwide LLC 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 Grove Worldwide
LLC, is unlikely to have a material adverse effect to Grove
Worldwide LLC. Grove Worldwide LLC is also subject to product
liability claims for which it believes it has adequate insurance.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27(a) - Financial Data Schedule for the quarter ended July 3, 1999. (Filed
herein).
(b) The Company filed the following Current Reports on Form 8-K:
None
21
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GROVE WORLDWIDE LLC
Date: August 17, 1999 By: /s/ Stephen L. Cripe
-----------------------------
Stephen L. Cripe
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
22
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-02-1999
<PERIOD-START> OCT-04-1998
<PERIOD-END> JUL-03-1999
<CASH> 9,967
<SECURITIES> 0
<RECEIVABLES> 129,583
<ALLOWANCES> 0
<INVENTORY> 214,998
<CURRENT-ASSETS> 364,295
<PP&E> 216,641
<DEPRECIATION> 0
<TOTAL-ASSETS> 873,880
<CURRENT-LIABILITIES> 206,877
<BONDS> 401,000
0
0
<COMMON> 0
<OTHER-SE> 107,621
<TOTAL-LIABILITY-AND-EQUITY> 873,880
<SALES> 557,733
<TOTAL-REVENUES> 557,733
<CGS> 453,154
<TOTAL-COSTS> 453,154
<OTHER-EXPENSES> 95,746
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 30,786
<INCOME-PRETAX> (18,918)
<INCOME-TAX> 4,716
<INCOME-CONTINUING> (23,634)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (23,634)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
