FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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 1, 2000
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
----
Commission File Number 333-57611
----
GROVE WORLDWIDE LLC
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
----
23-2955766
(I.R.S. Employer
Identification Number)
----
1565 Buchanan Trail East
Shady Grove, Pennsylvania 17256
(717) 597-8121
(Address, including zip code, and telephone number,
including area code, of registrant's principal
executive offices)
----
Indicate by check mark whether the registrant (1) has filed all the reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve 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 ninety days. Yes |X| No |_|
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes 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>
Grove Worldwide LLC
Index to Quarterly Report on Form 10-Q
For the Quarterly Period Ended July 1, 2000
Page
----
Part I
Item 1 Financial statements
Condensed Consolidated Balance Sheets as of
October 2, 1999 and July 1, 2000.................................1
Condensed Consolidated Statements of Operations for
the three and nine months ended July 3, 1999 and
July 1, 2000.....................................................2
Condensed Consolidated Statements of Comprehensive Loss
for the three and nine months ended July 3, 1999 and
July 1, 2000.....................................................3
Condensed Consolidated Statements of Cash Flows for the
nine months ended July 3, 1999 and July 1, 2000..................4
Notes to Condensed Consolidated Financial
Statements.......................................................5
Item 2 Management's discussion and analysis of financial condition
and results of operations............................................15
Item 3 Quantitative and qualitative disclosures about market risk...........20
Part II
Item 1 Legal proceedings....................................................21
Item 2 Changes in securities................................................21
Item 3 Defaults upon senior securities......................................21
Item 4 Submission of matters to a vote of security holders..................21
Item 5 Other information....................................................21
Item 6 Exhibits and reports on form 8-K.....................................21
Signatures...........................................................22
i
<PAGE>
The results of operations for the nine months ended July 3, 1999 have been
restated. See note 1 to the Condensed Consolidated Financial Statements and the
Company's quarterly reports on form 10Q/A filed with the Securities and Exchange
Commission on May 16, 2000.
Unless otherwise noted, the "Company" or "Grove" refers to Grove Worldwide LLC
and its subsidiaries. The Company's fiscal year ends on the Saturday closest to
the last day of September. References to the (i) three months ended July 3, 1999
means the period from April 4, 1999 to July 3, 1999; (ii) three months ended
July 1, 2000 means the period from April 2, 2000 to July 1, 2000; (iii) nine
months ended July 3, 1999 means the period from October 3, 1998 to July 3, 1999;
and (iv) nine months ended July 1, 2000 means the period from October 2, 1999 to
July 1, 2000. References to historical financial information are to the
historical combined and consolidated financial statements of the Company. 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. The Company considers
that such financial statements would not be material to investors because: (i)
this report does include, in the notes to the consolidated financial statements
of the Company, supplemental financial information, setting forth on a
consolidated 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 (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.
ii
<PAGE>
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Certain statements in this report constitute "forward looking statements" within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Any statements
that express, or involve discussions as to, expectations, beliefs, plans,
objectives, assumptions of 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 report. Such factors
include, among others, the following: (i) substantial leverage, ability to
service debt, and compliance with financial covenants in the Company's Bank
Credit Agreement; (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
operational improvements; (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. 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.
iii
<PAGE>
PART I
Item 1. Financial Statements
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
As of October 2, 1999 and July 1, 2000
(Unaudited and in thousands)
1999 * 2000
--------- ---------
Assets
Current assets:
Cash and cash equivalents $ 16,864 $ 745
Trade receivables, net 142,271 127,115
Notes receivable 5,425 4,590
Inventories 193,123 228,772
Prepaid expenses and other current assets 7,405 9,850
--------- ---------
Total current assets 365,088 371,072
Property, plant and equipment, net 213,731 180,029
Goodwill, net 269,556 259,943
Other assets 13,126 13,695
--------- ---------
$ 861,501 $ 824,739
========= =========
Liabilities and Member's Equity
Current liabilities:
Current maturities of long-term debt $ 12,000 $ 22,000
Short-term borrowings 19,108 22,635
Accounts payable 75,370 84,674
Accrued expenses and other current liabilities 84,946 90,676
--------- ---------
Total current liabilities 191,424 219,985
Deferred revenue 74,368 50,633
Long-term debt 401,000 399,000
Other liabilities 90,141 89,081
--------- ---------
Total liabilities 756,933 758,699
--------- ---------
Member's equity:
Invested capital 163,710 164,262
Accumulated deficit (49,477) (76,916)
Accumulated other comprehensive loss (9,665) (21,306)
--------- ---------
Total member's equity 104,568 66,040
--------- ---------
$ 861,501 $ 824,739
========= =========
See accompanying notes to condensed consolidated financial statements.
* Amounts have been derived from the Company's audited consolidated balance
sheet.
1
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For the three and nine months ended July 3, 1999 and July 1, 2000
(unaudited and in thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
1999 2000 1999 2000
--------- --------- --------- ---------
(Restated)
<S> <C> <C> <C> <C>
Net sales $ 207,364 $ 223,662 $ 557,733 $ 606,684
Cost of goods sold 168,259 186,231 453,154 503,774
--------- --------- --------- ---------
Gross profit 39,105 37,431 104,579 102,910
Selling, engineering, general
and administrative expenses 30,109 27,664 89,673 82,307
Amortization of goodwill 1,663 1,766 5,149 5,286
Restructuring charges -- -- -- 5,895
--------- --------- --------- ---------
Income from operations 7,333 8,001 9,757 9,422
Interest expense, net (9,033) (11,122) (27,378) (32,336)
Other expense, net (318) (523) (372) (817)
--------- --------- --------- ---------
Loss before
income taxes (2,018) (3,644) (17,993) (23,731)
Income taxes 1,895 1,859 4,716 4,010
--------- --------- --------- ---------
Loss before cumulative
effect of change in
accounting principle (3,913) (5,503) (22,709) (27,741)
Cumulative effect of
a change in accounting
principle (note 7) -- -- -- 302
--------- --------- --------- ---------
Net loss $ (3,913) $ (5,503) $ (22,709) $ (27,439)
========= ========= ========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Loss
For the three and nine months ended July 3, 1999 and July 1, 2000
(unaudited and in thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
1999 2000 1999 2000
-------- -------- -------- --------
(Restated)
<S> <C> <C> <C> <C>
Net loss $ (3,913) $ (5,503) $(22,709) $(27,439)
Unrealized net gain (loss) on cash flow
hedges of forecasted foreign
currency transactions -- 560 -- (688)
Change in foreign currency translation
adjustment (4,151) (3,639) (14,005) (10,953)
-------- -------- -------- --------
Comprehensive loss $ (8,064) $ (8,582) $(36,714) $(39,080)
======== ======== ======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the nine months ended July 3, 1999 and July 1, 2000
(unaudited and in thousands)
<TABLE>
<CAPTION>
1999 2000
-------- --------
(Restated)
<S> <C> <C>
Cash flows from operating activities:
Net loss $(22,709) $(27,439)
Adjustments to reconcile to net loss to net
cash provided by operating activities:
Depreciation and amortization 13,859 14,781
Depreciation of equipment held for rent 12,648 10,275
Amortization of deferred financing costs 1,296 1,485
Loss on sales of property, plant
and equipment -- 13
Deferred income tax expense (benefit) 125 (305)
Changes in operating assets and liabilities:
Trade receivables, net (7,893) 6,834
Notes receivable 5,719 754
Inventories (18,200) (43,474)
Trade accounts payable 12,404 15,644
Other assets and liabilities, net 1,139 5,998
-------- --------
Net cash used in operating activities (1,612) (15,434)
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (6,088) (5,842)
Investment in equipment held for rent (25,174) (6,060)
Proceeds from sale of property, plant and equipment 779 --
Cash received from Hanson PLC 10,500 --
-------- --------
Net cash used in investing activities (19,983) (11,902)
-------- --------
Cash flows from financing activities:
Net short-term borrowings (513) 3,472
Repayments of long-term debt,net (2,000) 8,000
Other -- 27
-------- --------
Net cash (used in) provided by financing activities (2,513) 11,499
-------- --------
Effect of exchange rate changes on cash (214) (282)
-------- --------
Net change in cash and cash equivalents (24,322) (16,119)
Cash and cash equivalents, beginning of period 34,289 16,864
-------- --------
Cash and cash equivalents, end of period $ 9,967 $ 745
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands)
================================================================================
(1) Basis of Presentation
The accompanying unaudited condensed 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.
The Company is a sole member limited liability company formed
pursuant to the provisions of the Delaware Limited Liability Company
Act. Grove Holdings LLC ("Holdings") is the sole member of the
Company. All earnings of the Company are available for distribution
to Holdings subject to restrictions contained in the Company's debt
agreements. Holdings is a sole member limited liability company that
is owned by Grove Investors LLC ("Investors").
Selling, engineering, general and administrative expenses for the
nine months ended July 3, 1999 have been restated for a
non-recurring $925 gain resulting from the remeasurement of the
Company's pension obligation as a result of employee terminations
during the second quarter of fiscal 1999. This gain was previously
included in the Company's fourth quarter results for fiscal 1999.
Management believes the gain is more appropriately recognized in the
second quarter of fiscal 1999. The effect of the restatement was to
decrease the net loss for the nine months ended July 3, 1999 and
increase the net loss for the three months ended October 2, 1999.
The restatement has no effect on the full year results for fiscal
1999.
Interim results for the nine month period ended July 1, 2000 are not
necessarily indicative of the results that may be expected for a
full fiscal year. For further information, refer to the consolidated
financial statements and notes for the year ended October 2, 1999.
(2) Inventory
Inventories consist of the following as of October 2, 1999 and July
1, 2000:
1999 2000
---- ----
Raw materials $ 61,340 $ 65,408
Work in process 79,232 89,453
Finished goods 52,551 73,911
-------- --------
$193,123 $228,772
======== ========
Inventories are valued at the lower of cost or market, as determined
primarily under the first-in, first-out method.
5
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands)
================================================================================
(3) Income Taxes
A significant portion of the Company's business is operated as a
limited liability company organized under the laws of Delaware.
Accordingly, earnings of the Company's U.S. mobile hydraulic crane
and aerial work platform businesses, as well as, earnings from its
foreign subsidiaries will not be directly subject to U.S. income
taxes. Such taxable income will be allocated to the equity holders
of Investors and they will be responsible for U.S. income taxes on
such taxable income. The Company intends to make distributions, in
the form of dividends, to enable the equity holders of Investors to
meet their tax obligations with respect to income allocated to them
by the Company. No distributions were made for taxes in the year
ended October 2, 1999 or the nine months ended July 1, 2000.
The difference between the Company's reported tax provision for the
nine months ended July 1, 2000 and the tax provision computed based
on U.S. statutory rates is primarily attributed to the Company's
structure as a limited liability company.
(4) Restructuring
During the nine months ended July 1, 2000, the Company adopted and
executed two restructuring plans that resulted in the termination of
approximately 210 employees principally in its US operations. In
connection with the terminations, the Company accrued severance
costs of $5,895. As of July 1, 2000, the Company has paid $3,282,
and expects to pay the remainder of the accrual through October 2001
in accordance with separation agreements.
(5) Accumulated Other Comprehensive Loss
Accumulated other comprehensive loss as of October 2, 1999 and July
1, 2000 consists of the following:
1999 2000
---- ----
Foreign currency translation adjustment ($ 1,697) ($12,650)
Unrealized net losses on cash flow
hedges of foreign currency transactions -- ( 688)
Minimum pension liability ( 7,968) ( 7,968)
-------- --------
($ 9,685) ($21,306)
======== ========
(6) Segment Information
The Company is an international designer, manufacturer and marketer
of a comprehensive line of mobile hydraulic cranes, aerial work
platforms and truck-mounted cranes. The Company markets its products
through three operating divisions; Grove Crane, Grove Manlift and
National Crane. Grove Crane manufactures mobile hydraulic cranes in
its Shady Grove, Pennsylvania and Wilhelmshaven, Germany
manufacturing facilities. Grove Manlift manufactures aerial work
platforms in its Shady Grove, Pennsylvania and Tonneins, France
manufacturing facilities. National Crane manufactures truck-mounted
cranes in its Waverly, Nebraska manufacturing facility. Information
for each of the Company's operating division's follows:
6
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands)
================================================================================
<TABLE>
<CAPTION>
Corporate,
Grove Grove National eliminations,
Crane Manlift Crane and other Total
----- ------- ----- --------- -----
<S> <C> <C> <C> <C> <C>
For the three months
ended July 1, 2000
Net sales $ 155,376 $ 41,926 $ 26,370 $ (10) $ 223,662
Depreciation and amortization 2,275 107 221 2,272 4,875
Income (loss) from operations 14,723 (4,227) 4,288 (6,783) 8,001
Capital expenditures 2,858 112 53 -- 3,023
For the three months
ended July 3, 1999
Net sales $ 135,490 $ 47,916 $ 24,219 $ (261) $ 207,364
Depreciation and amortization 2,275 107 221 1,623 4,226
Income (loss) from operations 10,419 2,059 4,199 (9,344) 7,333
Capital expenditures 1,733 38 234 -- 2,005
As of and for the nine months
ended July 1, 2000
Net sales $ 427,378 $ 109,296 $ 70,012 $ (2) $ 606,684
Depreciation and amortization 8,369 332 792 5,288 14,781
Income (loss) from operations 32,774 (8,597) 8,994 (23,749) 9,422
Total assets 430,535 80,187 41,182 272,835 824,739
Capital expenditures 5,043 382 417 -- 5,842
As of and for the nine months
ended July 3, 1999
Net sales $ 382,734 $ 118,889 $ 56,419 $ (309) $ 557,733
Depreciation and amortization 7,760 268 688 5,143 13,859
Income (loss) from operations 29,282 166 7,353 (27,044) 9,757
Total assets 475,141 61,360 43,247 294,132 873,880
Capital expenditures 5,302 135 651 -- 6,088
</TABLE>
Corporate, eliminations and other consist principally of corporate
expenses, including the restructuring charge, and assets, goodwill
and intercompany eliminations. Depreciation and amortization
excludes depreciation of equipment held for rent.
7
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands)
================================================================================
(7) Adoption of New Accounting Standards
On October 3, 1999, the Company adopted SFAS 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. The net impact of adopting SFAS 133 of $302 was
presented as the cumulative effect of a change in accounting
principle in the condensed consolidated statements of operations. A
summary of the Company's hedging strategies and outstanding
derivative instruments are as follows:
Interest Rate Risk
The Company assesses interest rate cash flow risk by monitoring
changes in interest rate exposure that may adversely impact expected
future cash flows and by evaluating hedging opportunities. At July
1, 2000, the Company had approximately $196 million of variable rate
borrowings under its bank credit facility. Management believes it
prudent to limit the variability of its interest payments. To meet
this objective, the Company has an interest rate collar arrangement
with a multinational bank to limit its exposure to rising interest
rates on $100 million of its variable rate bank borrowings. Under
the agreement the Company will receive, on a $100 million notional
amount, three-month LIBOR and pay 6.5% anytime LIBOR exceeds 6.5%,
and will receive three-month LIBOR and pay 5.19% anytime LIBOR is
below 5.19%. The contract does not require collateral.
The estimated fair value (unrecognized gain) of the interest rate
collar at October 3, 1999 and July 1, 2000 was $302 and $671,
respectively. Management has concluded that the interest rate collar
did not qualify as an effective hedge for accounting purposes as of
October 3, 1999 and July 1, 2000. Accordingly, the Company has
recognized $369 as other income and $302 as the cumulative effect of
a change in accounting principle in the condensed consolidated
statement of operations for the nine months ended July 1, 2000.
Foreign Currency Risk
The Company has foreign operations in the U.K., France, Germany and
Australia. Therefore its earnings, cash flows and financial position
are exposed to foreign currency risk. In addition, the U.S. company
regularly purchases mobile hydraulic cranes from its German factory
to meet the demand of its U.S. customers. In order to protect profit
margins the Company will purchase forward currency contracts and
options to hedge future Deutsche mark payment obligations.
At July 1, 2000 the Company had $26.1 million in outstanding forward
contracts to purchase Deutsche marks with gross unrealized losses of
$0.7 million. The contracts will settle at various dates through
November 2000 and have been accounted for as cash flow hedges of
forecasted foreign currency transactions under FAS 133. The
unrealized loss has been included in the determination of other
comprehensive loss for the nine months ended July 1, 2000. Such
amounts will be realized in earnings upon completion of the
forecasted transaction and sale of the related inventory.
Currently the Company is not hedging any other foreign currency
exposures but it may do so in the future.
8
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands)
================================================================================
(8) 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 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. Information with respect to the
Company is related to Grove Worldwide LLC and Grove Capital, Inc. on
a combined basis.
9
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands)
================================================================================
Condensed Consolidating Balance Sheet at July 1, 2000
<TABLE>
<CAPTION>
Subsidiary Other Consolidated
Company guarantors subsidiaries Eliminations totals
------- ---------- ------------ ------------ ------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,500 $ (6,175) $ 5,420 $ -- $ 745
Trade receivables, net -- 48,174 78,941 -- 127,115
Notes receivable -- 4,590 -- -- 4,590
Inventories -- 138,110 90,662 -- 228,772
Prepaid expenses and
other current assets 731 3,908 5,211 -- 9,850
--------- --------- --------- --------- ---------
Total current assets 2,231 188,607 180,234 -- 371,072
Property, plant and
equipment, net -- 105,924 74,105 -- 180,029
Goodwill, net -- 244,946 14,997 -- 259,943
Investment and due
from subsidiaries 681,402 233,356 36,521 (951,279) --
Other assets 10,595 2,702 398 -- 13,695
--------- --------- --------- --------- ---------
$ 694,228 $ 775,535 $ 306,255 $(951,279) $ 824,739
========= ========= ========= ========= =========
Liabilities and Member's Equity
Current liabilities:
Current maturities $ 22,000 $ -- $ -- $ -- $ 22,000
of long-term debt
Short-term borrowings -- 5,552 17,083 -- 22,635
Accounts payable -- 42,284 42,390 -- 84,674
Accrued expenses and
other current liabilities 2,557 36,083 52,036 -- 90,676
--------- --------- --------- --------- ---------
Total current liabilities 24,557 83,919 111,509 -- 219,985
Deferred revenue -- -- 50,633 -- 50,633
Long-term debt 399,000 -- -- -- 399,000
Due to subsidiaries 171,355 515,973 150,315 (837,643) --
Other liabilities 100 74,845 14,136 -- 89,081
--------- --------- --------- --------- ---------
Total liabilities 595,012 674,737 326,593 (837,643) 758,699
--------- --------- --------- --------- ---------
Member's equity:
Invested capital 164,262 92,892 20,744 (113,636) 164,262
Accumulated deficit (65,046) 8,594 (20,464) -- (76,916)
Accumulated other
comprehensive loss -- (688) (20,618) -- (21,306)
--------- --------- --------- --------- ---------
Total member's equity 99,216 100,798 (20,338) (113,636) 66,040
--------- --------- --------- --------- ---------
$ 694,228 $ 775,535 $ 306,255 $(951,279) $ 824,739
========= ========= ========= ========= =========
</TABLE>
10
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands)
================================================================================
Condensed Consolidating Statement of Operations and Comprehensive Loss
for the three months ended July 3, 1999
<TABLE>
<CAPTION>
Subsidiary Other Consolidated
Company guarantors subsidiaries Eliminations totals
------- ---------- ------------ ------------ ------
<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 16,038 9,603 -- 30,109
Amortization of goodwill -- 1,522 141 -- 1,663
--------- --------- --------- --------- ---------
Income (loss)
from operations (4,468) 9,592 2,209 -- 7,333
Interest income (expense), net 1,271 (8,683) (1,621) -- (9,033)
Other income (expense), net 8 186 (512) -- (318)
--------- --------- --------- --------- ---------
Loss before income taxes (3,189) 1,095 76 -- (2,018)
Income taxes -- 1,481 414 -- 1,895
--------- --------- --------- --------- ---------
Net loss (3,189) (386) (338) -- (3,913)
Other comprehensive loss -- -- (4,151) -- (4,151)
--------- --------- --------- --------- ---------
Comprehensive loss $ (3,189) $ (386) $ (4,489) $ -- $ (8,064)
========= ========= ========= ========= =========
</TABLE>
Condensed Consolidating Statement of Operations and Comprehensive Loss for
the three months ended July 1, 2000
<TABLE>
<CAPTION>
Subsidiary Other Consolidated
Company guarantors subsidiaries Eliminations totals
------- ---------- ------------ ------------ ------
<S> <C> <C> <C> <C> <C>
Net sales $ -- $ 159,492 $ 97,935 $ (33,765) $ 223,662
Cost of goods sold -- 136,501 83,495 (33,765) 186,231
--------- --------- --------- --------- ---------
Gross profit -- 22,991 14,440 -- 37,431
Selling, engineering,
general and
administrative expenses 6,336 9,970 11,358 -- 27,664
Amortization of goodwill -- 1,478 288 -- 1,766
Restructuring charges -- -- -- -- --
--------- --------- --------- --------- ---------
Income (loss)
from operations (6,336) 11,543 2,794 -- 8,001
Interest income (expense), net 4,446 (10,198) (5,370) -- (11,122)
Other income (expense), net -- (764) 241 -- (523)
--------- --------- --------- --------- ---------
Loss before income taxes (1,890) 581 (2,335) -- (3,644)
Income taxes -- 694 1,165 -- 1,859
--------- --------- --------- --------- ---------
Net loss (1,890) (113) (3,500) -- (5,503)
Other comprehensive loss -- 560 (3,639) -- (3,079)
--------- --------- --------- --------- ---------
Comprehensive loss $ (1,890) $ 447 $ (7,139) $ -- $ (8,582)
========= ========= ========= ========= =========
</TABLE>
11
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands)
================================================================================
Condensed Consolidating Statement of Operations and Comprehensive Loss for
the nine months ended July 3, 1999 (Restated)
<TABLE>
<CAPTION>
Subsidiary Other Consolidated
Company guarantors subsidiaries Eliminations totals
------- ---------- ------------ ------------ ------
<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 46,258 30,607 -- 89,673
Amortization of goodwill -- 4,382 767 -- 5,149
--------- --------- --------- --------- ---------
Income (loss)
from operations (12,808) 21,323 1,242 -- 9,757
Interest income (expense), net 3,698 (26,139) (4,937) -- (27,378)
Other income (expense), net 7 174 (553) -- (372)
--------- --------- --------- --------- ---------
Loss before income taxes (9,103) (4,642) (4,248) -- (17,993)
Income taxes -- 1,791 2,925 -- 4,716
--------- --------- --------- --------- ---------
Net loss (9,103) (6,433) (7,173) -- (22,709)
Other comprehensive loss -- -- (14,005) -- (14,005)
--------- --------- --------- --------- ---------
Comprehensive loss $ (9,103) $ (6,433) $ (21,178) $ -- $ (36,714)
========= ========= ========= ========= =========
</TABLE>
Condensed Consolidating Statement of Operations and Comprehensive Loss for
the nine months ended July 1, 2000
<TABLE>
<CAPTION>
Subsidiary Other Consolidated
Company guarantors subsidiaries Eliminations totals
------- ---------- ------------ ------------ ------
<S> <C> <C> <C> <C> <C>
Net sales $ -- $ 449,552 $ 264,490 $(107,358) $ 606,684
Cost of goods sold -- 387,892 223,240 (107,358) 503,774
--------- --------- --------- --------- ---------
Gross profit -- 61,660 41,250 -- 102,910
Selling, engineering,
general and
administrative expenses 18,010 33,196 31,101 -- 82,307
Amortization of goodwill -- 4,382 904 -- 5,286
Restructuring charges 5,895 -- -- -- 5,895
--------- --------- --------- --------- ---------
Income (loss)
from operations (23,905) 24,082 9,245 -- 9,422
Interest income (expense), net 3,980 (30,561) (5,755) -- (32,336)
Other income (expense), net 429 2,484 (3,730) -- (817)
--------- --------- --------- --------- ---------
Loss before income taxes (19,496) (3,995) (240) -- (23,731)
Income taxes -- 1,612 2,398 -- 4,010
--------- --------- --------- --------- ---------
Loss before cumulative effect
of change in accounting
principle (19,496) (5,607) (2,638) -- (27,741)
Cumulative effect of a change
in accounting principle 302 -- -- -- 302
--------- --------- --------- --------- ---------
Net loss (19,194) (5,607) (2,638) -- (27,439)
Other comprehensive loss -- (688) (10,953) -- (11,641)
--------- --------- --------- --------- ---------
Comprehensive loss $ (19,194) $ (6,295) $ (13,591) $ -- $ (39,080)
========= ========= ========= ========= =========
</TABLE>
12
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands)
================================================================================
Condensed Consolidating Statement of Cash Flows for the nine months ended
July 3, 1999
<TABLE>
<CAPTION>
Subsidiary Other Consolidated
Company guarantors subsidiaries totals
------- ---------- ------------ ------
<S> <C> <C> <C> <C>
Operating activities
Net cash provided by (used in)
operating activities $(19,429) $ (722) $ 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 779 -- -- 779
Cash received from Hanson PLC 10,500 -- -- 10,500
-------- -------- -------- --------
Net cash provided by
investing activities 11,279 (5,007) (26,255) (19,983)
-------- -------- -------- --------
Financing activities
Net proceeds from
short-term borrowings -- -- (513) (513)
Repayment of
long-term debt (2,000) -- -- (2,000)
Other -- -- -- --
-------- -------- -------- --------
Net cash (used in) provided by
financing activities (2,000) -- (513) (2,513)
-------- -------- -------- --------
Effect of exchange rate
changes on cash -- (214) -- --
-------- -------- -------- --------
Net change 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 equivalents,
end of period $ 6,226 $ 109 $ 3,632 $ 9,967
======== ======== ======== ========
</TABLE>
13
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands)
================================================================================
Condensed Consolidating Statement of Cash Flows for the nine months ended
July 1, 2000
<TABLE>
<CAPTION>
Subsidiary Other Consolidated
Company guarantors subsidiaries totals
------- ---------- ------------ ------
<S> <C> <C> <C> <C>
Operating activities
Net cash provided by (used in)
operating activities $(15,194) $ (6,600) $ 6,360 $(15,434)
-------- -------- -------- --------
Investing activities
Capital expenditures -- (3,784) (2,058) (5,842)
Investment in equipment
held for rent -- -- (6,060) (6,060)
-------- -------- -------- --------
Net cash used in
investing activities -- (3,784) (8,118) (11,902)
-------- -------- -------- --------
Financing activities
Net proceeds from
short-term borrowings -- -- 3,472 3,472
Repayments of
long-term debt 8,000 -- -- 8,000
Other 27 -- -- 27
-------- -------- -------- --------
Net cash provided by
financing activities 8,027 -- 3,472 11,499
-------- -------- -------- --------
Effect of exchange rate
changes on cash -- -- (282) (282)
-------- -------- -------- --------
Net change in cash
and cash equivalents (7,167) (10,384) 1,432 (16,119)
Cash and cash equivalents,
beginning of period 8,667 4,209 3,988 16,864
-------- -------- -------- --------
Cash and cash equivalents,
end of period $ 1,500 $ (6,175) $ 5,420 $ 745
======== ======== ======== ========
</TABLE>
14
<PAGE>
Item 2. 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 consolidated financial statements included
elsewhere in this report.
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 markets its products through three operating divisions; Grove Crane,
Grove Manlift and National Crane. Grove Crane manufactures mobile hydraulic
cranes in its Shady Grove, Pennsylvania and Wilhelmshaven, Germany manufacturing
facilities. Grove Manlift manufactures aerial work platforms in its Shady Grove,
Pennsylvania and Tonneins, France manufacturing facilities. National Crane
manufactures truck-mounted cranes in its Waverly, Nebraska manufacturing
facility. The Company also generates a portion of its net sales from
after-market sales (parts and service) of the products it manufactures. Sales of
used equipment, included in other, are not material and are generally limited to
trade-ins on new equipment through Company-owned distributors in France,
Germany, and the United Kingdom.
Operating results for the first three quarters of fiscal 2000 have not improved
to the extent expected at the beginning of the fiscal year. This trend appears
likely to continue during the fourth quarter. As a result, management believes
it is likely that the Company will fail to meet certain financial covenants
required by the Company's bank credit facility in the fourth quarter. In this
event, the Company will be required to negotiate amendments to its loan
agreement. Management has held preliminary discussions with its lenders and
believes it should be able to obtain the required consents; however no assurance
can be given that the Company will acquire such consents. In addition, while
management cannot predict the outcome of these negotiations, an amended bank
agreement could result in lower credit availability, higher fees, further
covenant restrictions and requirements to dispose of certain assets.
Management continues to evaluate the recovery of its long-lived assets including
goodwill. While it currently believes the Company can recover these amounts on
an undiscounted cash flow basis, results of any credit agreement negotiations
and any other actions which management may take to improve operating results
could require a write-down of the value of certain long-lived assets through
impairment charges.
The results of operations for the nine months ended July 3, 1999 have been
restated. See note 1 to the Condensed Consolidated Financial Statements and the
Company's quarterly reports on form 10Q/A filed with the Securities and Exchange
Commission on May 16, 2000.
The following is a summary of net sales for the periods indicated (dollars in
millions).
Three months ended Nine months ended
------------------ -----------------
July 3, July 1, July 3, July 1,
1999 2000 1999 2000
---- ---- ---- ----
New equipment sold $ 164.1 $ 180.9 $ 434.9 $ 474.4
After-market 23.3 22.2 71.2 65.4
Other 20.0 20.6 51.6 66.9
------- ------- ------- -------
Net sales $ 207.4 $ 223.7 $ 557.7 $ 606.7
======= ======= ======= =======
15
<PAGE>
Results of Operations
Three months ended July 1, 2000 (the "fiscal 2000 three months") compared to the
three months ended July 3, 1999 (the "fiscal 1999 three months")
Net Sales. Net sales increased $16.3 million, or 7.9%, to $223.7 million for the
fiscal 2000 three months from $207.4 million for the fiscal 1999 three months.
The increase in net sales is principally the result of increased Crane unit
sales partially offset by lower Manlift unit sales.
Net sales for the Grove Crane division increased $19.9 million, or 14.7%, to
$155.4 million for the fiscal 2000 three months from $135.5 million for the
fiscal 1999 three months. The increase in net sales is primarily the result of
higher unit sales. Net sales increased to both North American and European
customers.
Net sales for the Grove Manlift division decreased $6.0 million, or 12.5%, to
$41.9 million for the fiscal 2000 three months from $47.9 million in the fiscal
1999 three months. The decrease was primarily a result of lower unit sales and
decreased pricing in North America and Europe.
Net sales for the National Crane division increased $2.2 million, or 8.9%, to
$26.4 million for the fiscal 2000 three months from $24.2 million for the fiscal
1999 three months. Net sales increased as the result of higher unit sales and
increased demand for higher priced models.
After-market sales decreased $1.1 million, or 4.7%, to $22.2 million in the
fiscal 2000 three months from $23.3 million in the fiscal 1999 three months. Net
sales decreased in both the North American and European markets.
Other sales increased by $0.6 million to $20.6 million in the fiscal 2000 three
months from $20.0 million in the fiscal 1999 three months. The increase was
primarily due to higher government and used equipment sales volumes.
Gross Profit. Gross profit decreased $1.7 million, or 4.3%, to $37.4 million in
the fiscal 2000 three months from $39.1 million in the fiscal 1999 three months.
The decrease in gross profit was attributable primarily to a decline in Manlift
volumes and pricing and manufacturing inefficiencies in the Company's US
operation partially offset by stronger Crane margins. The manufacturing
inefficiencies were caused, in part, by a failed attempt by a labor union to
organize US employees. The Crane margin increase is a result of stronger unit
volumes partially offset by softer parts volumes. Gross profit as a percent of
sales decreased to 16.7% in the fiscal 2000 three months from 18.9% in the
fiscal 1999 three months primarily as the result of lower Manlift prices.
Selling, Engineering, General and Administrative Expenses. Selling, engineering,
general and administrative expenses ("SG&A") decreased $2.4 million, or 8.1%, to
$27.7 million in the fiscal 2000 three months from $30.1 million in the fiscal
1999 three months. The strength of the dollar against the German mark resulted
in a $0.8 million decline in reported SG&A for the fiscal 2000 three months.
SG&A for the fiscal 1999 three months includes approximately $1.6 million of
consulting fees paid to the George Group in connection with the Company's
operational improvement program. As a percentage of net sales, SG&A was 12.4% in
the fiscal 2000 three months and 14.5% in the fiscal 1999 three months.
Interest expense. Interest expense increased $2.1 million to $11.1 million for
the fiscal 2000 three months from $9.0 million in the fiscal 1999 three months
primarily as the result of higher borrowings on the Company's line of credit and
higher rates on those borrowings.
16
<PAGE>
Backlog. The Company's backlog consists of firm orders for new equipment and
replacement parts. Total backlog as of July 1, 2000 was approximately $172.7
million compared with total backlog as of July 3, 1999 of approximately $225.8
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.
Nine months ended July 1, 2000 (the "fiscal 2000 nine months") compared to the
nine months ended July 3, 1999 (the "fiscal 1999 nine months")
Net Sales. Net sales increased $49.0 million, or 8.8%, to $606.7 million for the
fiscal 2000 nine months from $557.7 million for the fiscal 1999 nine months. The
increase in net sales is principally the result of increased new equipment unit
sales.
Net sales for the Grove Crane division increased $44.7 million, or 11.7%, to
$427.4 million for the fiscal 2000 nine months from $382.7 million for the
fiscal 1999 nine months. The increase in net sales is primarily the result of
higher unit sales. Net sales increased to both North American and European
customers.
Net sales for the Grove Manlift division decreased $9.6 million, or 8.1%, to
$109.3 million for the fiscal 2000 nine months from $118.9 million in the fiscal
1999 nine months. The decrease was a result of lower units sales in North
America and decreased pricing partially offset by higher unit sales in Europe.
Net sales for the National Crane division increased $13.6 million, or 24.1%, to
$70.0 million for the fiscal 2000 nine months from $56.4 million for the fiscal
1999 nine months. Net sales increased as the result of higher unit sales and
increased demand for higher priced models.
After-market sales decreased $5.8 million, or 8.1%, to $65.4 million in the
fiscal 2000 nine months from $71.2 million in the fiscal 1999 nine months
predominantly due to a decline in parts and service sales in Europe.
Other sales increased by $15.3 million to $66.9 million in the fiscal 2000 nine
months from $51.6 million in the fiscal 1999 nine months. The increase was
primarily due to higher government and used equipment sales volumes.
Gross Profit. Gross profit decreased $1.7 million, or 1.6%, to $102.9 million in
the fiscal 2000 nine months from $104.6 million in the fiscal 1999 nine months.
The decrease in gross profit was attributable primarily to a decline in Manlift
volumes and pricing and manufacturing inefficiencies in the Company's US
operation partially offset by stronger Crane margins. The manufacturing
inefficiencies were caused, in part, by a failed attempt by a labor union to
organize US employees. The Crane margin increase is a result of stronger unit
volumes partially offset by softer parts volumes. Gross profit as a percent of
sales decreased to 17.0% in the fiscal 2000 nine months from 18.8% in the fiscal
1999 nine months primarily as the result of lower Manlift pricing.
Selling, Engineering, General and Administrative Expenses. Selling, engineering,
general and administrative expenses ("SG&A") decreased $7.4 million, or 8.2%, to
$82.3 million in the fiscal 2000 nine months from $89.7 million (restated) in
the fiscal 1999 nine months. Cost reductions in the US facility contributed $0.8
million to the decline. The strength of the US dollar against the German mark
contributed $2.1 million to the decline in reported SG&A. Included in SG&A are
approximately $0.9 million and $5.4 million of consulting fees, for the fiscal
2000 and fiscal 1999 nine months, respectively, paid to the George Group in
connection with the Company's operational improvement program. In addition, the
fiscal 1999 nine months includes a $0.9 million non-recurring gain related to
remeasurement of the Company's pension obligation following a
17
<PAGE>
restructuring of the US workforce in the second quarter of fiscal 1999. As a
percentage of net sales, SG&A was 13.6% in the fiscal 2000 nine months and 16.1%
(restated) in the fiscal 1999 nine months.
Restructuring charges. During the nine months ended July 1, 2000, the Company
adopted and executed two restructuring plans that resulted in the termination of
approximately 210 employees principally in its US operations. In connection with
the terminations, the Company accrued severance costs of $5.9 million, of which
$3.3 million has been paid. The terminations were primarily general and
administrative personnel.
Interest expense. Interest expense increased $4.9 million to $32.3 million for
the fiscal 2000 nine months from $27.4 million in the fiscal 1999 nine months
primarily as the result of higher borrowings on the Company's line of credit and
higher rates on those borrowings.
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 nine months ended July 1, 2000, the Company used
approximately $15.4 million of cash in operating activities through a net
increase of $20.2 million in working capital assets.
During the fiscal 2000 nine months the Company made $2.0 million of payments on
its term loan, borrowed $10.0 million of the revolving line of credit and
obtained $3.5 million from short-term borrowings. Capital expenditures were $5.8
million for the fiscal 2000 nine months and are expected to be approximately
$11.0 million for fiscal 2000.
Management believes it is likely that the Company will fail to meet certain
financial covenants required by the Company's bank credit facility in the fourth
quarter. In this event, the Company will be required to negotiate amendments to
its loan agreement. Management has held preliminary discussions with its lenders
and believes it should be able to obtain the required consents, however no
assurance can be given that we will acquire such consents. In addition, while
management cannot reasonably predict the outcome of these negotiations, an
amended bank agreement could result in lower credit availability, higher fees,
further covenant restrictions and requirements to dispose of certain assets.
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 made to
certain of its foreign subsidiaries to consummate the Acquisition. 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.
Certain Subsidiaries of the Company
The Company and its wholly owned subsidiary, Grove Capital, a Delaware
corporation, issued the Senior Subordinated Notes. Grove Capital was organized
as a direct wholly owned subsidiary of the Company 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 Senior Subordinated Notes were
marketed that might otherwise have been restricted in their ability to purchase
debt securities issued by a limited liability company, such as the Company, 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 bank 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.
18
<PAGE>
The payment obligations of the Company and Grove Capital under the Senior
Subordinated Notes are fully and unconditionally guaranteed (the "Subsidiary
Guarantees") 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 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.
No separate financial statements of the Subsidiary Guarantors and Grove Capital
are included in this report. The Company considers that such financial
statements would not be material to investors because: (i) this report does
include, in the notes to the condensed consolidated financial statements of the
Company, 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 the Company; 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 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 governing the
Senior Subordinated Notes, the Indenture governing the Debentures or the bank
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 the Company's
non-guarantor subsidiaries, see Note 8 of Notes to the Condensed Consolidated
Financial Statements of the Company.
19
<PAGE>
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's principal market risk exposure is changing interest rates,
primarily changes in short-term interest rates. The Company does not enter into
financial instruments for trading or speculative purposes. The Company's policy
is to manage interest rates through use of a combination of fixed and floating
rate debt. The Company may also use derivative financial instruments to manage
its exposure to interest rate risk.
As of July 1, 2000, $196.0 million of the Company's long-term debt, which is
outstanding under its bank term facility, bears interest at LIBOR plus 3.5%
(10.3%). In addition the Company has $225.0 million of Senior Subordinated Notes
outstanding bearing interest at a fixed rate of 9.25%.
The Company 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, the Company will receive on a $100.0
million notational amount, three month LIBOR and pay 6.5% anytime LIBOR exceeds
6.5%, and will receive three month LIBOR and pay 5.19% anytime LIBOR is below
5.19%. The agreement effectively caps the Company's exposure on $100.0 million
of its floating rate debt at 6.5% plus an applicable margin as detailed in the
Company's bank credit facility.
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. Specifically, the Company is most sensitive
to changes in the German mark relative to the dollar. During the past three
fiscal years, currency fluctuations have not had a significant impact on the
Company's results of operations.
On October 3, 1999, the Company adopted SFAS 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. The impact of adoption was accounted for as
the cumulative effect of a change in accounting principle. See note 7 to the
condensed consolidated financial statements.
In order to manage currency risk, the Company's practice is to contract for
purchases and sales of goods and services in the functional currency of the
Company's subsidiary executing the transaction. To the extent purchases or sales
are in currencies other than the functional currency of the subsidiary, the
Company will generally purchase forward contracts to hedge firm purchase and
sales commitments. As of July 1, 2000, the Company was party to eleven such
contracts with an aggregate value of $26.1 million. These forward contracts
mature at various dates through November 2000. The Company has not taken any
action at this time to hedge its net investment in foreign subsidiaries but may
do so in the future.
The Company does not have any commodity contracts.
20
<PAGE>
PART II
Item 1. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings that have arisen in the
normal course of its operations. The outcome of these legal proceedings is
unlikely to have a material adverse effect on the Company. The Company is also
subject to product liability claims for which it believes it has adequate
insurance.
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Item 5. OTHER INFORMATION
Not applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit No. Description of Exhibit
27.1* Financial Data Schedule.
----------
* Filed Herewith.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended July 1, 2000
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
By /s/ Stephen L. Cripe
----------------------
Stephen L. Cripe
Chief Financial Officer
Date: August 15, 2000 (Principal Financial and Accounting Officer)
22
