<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------
FORM 10-K
[x] Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934. For the fiscal year ended September 30, 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 23-2955766
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1565 BUCHANAN TRAIL EAST SHADY GROVE, PENNSYLVANIA 17256
--------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (717) 597-8121
--------------
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No __
Indicate by check mark if disclosure of delinquent files pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of the Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
State the aggregate market value of the voting and non-voting common equity
held by non-affiliates of the Registrant. NONE
Documents incorporated by reference: NONE
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GROVE WORLDWIDE LLC
INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2000
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PAGE
PART I
<S> <C>
Item 1. Business. 1
Item 2. Properties. 8
Item 3. Legal Proceedings. 9
Item 4. Submission of Matters to a Vote of Security Holders. 9
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters. 9
Item 6. Selected Financial Data. 10
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 11
Item 7A. Quantitative and Qualitative Disclosures about
Market Risk. 20
Item 8. Financial Statements and Supplementary Data. 21
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. 21
PART III
Item 10. Directors and Executive Officers of the Registrant. 22
Item 11. Executive Compensation. 25
Item 12. Security Ownership of Certain Beneficial Owners and Management. 30
Item 13. Certain Relationships and Related Transactions. 31
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. 33
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The following report is qualified in its entirety by, and should be read in
conjunction with, the more detailed information and combined financial
statements of The Grove Companies, the predecessor to the Company, and the
consolidated financial statements of Grove Worldwide LLC including the notes
thereto (the "financial statements"), included elsewhere in this report. 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 fiscal 1996, fiscal 1997, fiscal 1998, fiscal
1999 and fiscal 2000 refer to the fiscal years ended September 28, 1996,
September 27, 1997, October 3, 1998, October 2, 1999 and September 30, 2000,
respectively. Reference to the (i) seven months ended April 28, 1998 means the
period from September 27, 1997 to April 28, 1998 and (ii) five months ended
October 3, 1998 means the period from April 28, 1998 to October 3, 1998.
References to historical financial information are to the historical combined
and consolidated financial results of the acquired business. See "Item 7.
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 combined and 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.
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 or future events or performance (often, but not always,
through the use of words or phrases such as "will likely result," "are expected
to," "will continue," "anticipates," "expects," "estimates," "intends," "plans,"
"projects," and "outlook") are not historical facts and may be forward-looking.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors that may cause the actual results, levels of activity, cost
savings, performance or achievements of the Company, or industry results, to be
materially different from any future results, levels of activity, cost savings,
performance or achievements expressed or implied by such forward-looking
statements, and accordingly, such statements should be read in conjunction with
and are qualified in their entirety by reference to, such risks, uncertainties
and other factors, which are discussed throughout this report. Such factors
include, among others, the following:
o substantial leverage, ability to service debt, and the ability of the
Company to comply with financial and other covenants in the Company's
credit agreement. In fiscal 1999 and fiscal 2000, the Company was required
to obtain waivers and amendments to its credit agreement to remain in
compliance with certain financial covenants. In connection with the most
recent amendments, the credit agreement was modified to place significant
restrictions on the amount of borrowings available to the Company for
working capital purposes, particularly during the period though April 30,
2001, a period during which the Company's need for working capital is
projected to be the greatest. During a 14-day period ending April 16, 2001
and a 5-day period ending April 23, 2001, borrowings under the revolving
credit facility will be limited to $40 million and $35 million,
respectively. The Company may require additional amendments in the future
and, if required, there can be no assurance that such amendments will be
obtained;
o changing market trends in the mobile hydraulic crane, aerial work platform
and truck-mounted crane industries;
o general economic and business conditions including a prolonged or
substantial recession;
o the ability of the Company to implement its business strategy and maintain
and enhance its competitive strengths;
o the effectiveness of the Company's recent initiatives to improve operating
results and cash flows by selling the Company's Manlift operations in
France, reducing the remaining Manlift operations, restructuring the
Company's main manufacturing operations and reducing the number of
employees. If these initiatives are not successful, the Company may be
unable to generate sufficient cash flows from operations and meet bank
covenants.
o the ability of the Company to obtain financing for general corporate
purposes;
o competition;
o availability of key personnel;
o industry overcapacity; and
o 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.
i
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PART I
ITEM 1. BUSINESS
RECENT DEVELOPMENTS
During the years ended October 2, 1999 and September 30, 2000, the Company
incurred significant operating losses that would have resulted in non-compliance
with certain financial covenants included in the Company's Bank Credit Facility
(see note 11 of the Company's financial statements). The Company obtained
waivers of these financial covenants as well as certain covenant modifications
to help position the Company for future compliance. Nevertheless, future
compliance will depend on achieving significantly improved operating results
during fiscal 2001 and beyond. Furthermore, modifications of the Bank Credit
Facility place significant restrictions on the amount of borrowings available to
the Company for working capital purposes, particularly during the period through
April 30, 2001, a period during which the Company's need is projected to be the
greatest.
Management has undertaken a number of initiatives to help improve operating
results and cash flows including: (i) reduction of Manlift operations,
(ii) the planned sale of Delta Manlift operations in France, (iii) restructuring
Shady Grove, Pennsylvania manufacturing operations by improving product flow
and (iv) reducing the number of sales, marketing, engineering and
administrative employees, principally in Shady Grove and the UK.
The reduction of Manlift operations allows the Company to produce a product line
which management believes is complementary with the Company's Crane products and
strategy. Manlift will continue to provide full support for the installed base
of aerial work platforms through parts and service, including discontinued
models, and to manufacture six models of boom Manlifts. In order to take
advantage of synergies, the Company has merged Manlift's production, engineering
and sales and marketing functions with those of Grove Crane. Accordingly, the
Company's Manlift operations are discussed with Grove Crane.
GENERAL
The Company is an international designer, manufacturer and marketer of a
comprehensive line of mobile hydraulic cranes and truck-mounted cranes. The
Company's products are used in a wide variety of applications by commercial and
residential building contractors, as well as by industrial, municipal and
military end-users. The Company's products are marketed to independent equipment
rental companies and directly to end-users under three widely recognized brand
names -- GROVE CRANE, GROVE MANLIFT and NATIONAL CRANE.
The Company's products are sold in over 50 countries primarily through an
established, global network of approximately 210 independent distributors. The
Company's major markets are North America (approximately 65% of fiscal 1999 and
67% of fiscal 2000 new equipment sales), Europe (approximately 26% of fiscal
1999 and fiscal 2000 new equipment sales), Africa and the Middle East
(approximately 4% of fiscal 1999 and 2% of fiscal 2000 new equipment sales),
Asia (approximately 2% of fiscal 1999 and fiscal 2000 new equipment sales) and
Latin America (approximately 3% of fiscal 1999 and fiscal 2000 new equipment
sales).
GROVE CRANE designs and manufactures 24 models of mobile hydraulic cranes. The
Company's mobile hydraulic cranes, which are used primarily in industrial,
commercial and public works construction, are capable of reaching maximum
heights of 374 feet and lifting up to 350 tons.
GROVE MANLIFT, now manufactured, distributed and serviced by Grove Crane, has
six models of aerial work platforms, which are used primarily in industrial
applications. Aerial work platforms elevate workers and their materials more
safely, quickly and easily than alternative methods such as scaffolding and
ladders.
NATIONAL CRANE designs and manufactures 11 models of telescoping and 14 models
of articulating truck-mounted cranes. The Company's telescoping and articulating
cranes, which are used primarily in industrial, commercial, public works and
construction applications, are capable of reaching maximum heights of 175 feet
and lifting up to 40 tons. Telescoping and articulating cranes are mounted on a
standard truck chassis or on a pedestal at a fixed location.
1
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Grove Worldwide was formed as a Delaware limited liability company in 1997. The
Company and its predecessors have been in business for over 50 years. The
principal executive offices of the Company are located at 1565 Buchanan Trail
East, Shady Grove, Pennsylvania 17256. The telephone number of the Company's
executive offices is (717) 597-8121.
THE INVESTOR GROUP
Grove Holdings LLC ("Grove Holdings") owns all of the limited liability
company interests of the Company. Grove Investors LLC ("Grove Investors")
owns all of the limited liability company interests of Grove Holdings. All of
Grove Investors' outstanding membership interests are owned by (i) FW Grove
Coinvestors, L.P., (ii) Oak Hill Strategic Partners, L.P., formerly known as
FW Strategic Partners, L.P., (iii) GGEP-Grove, L.P., (iv) Michael L. George,
(v) institutional investors and (vi) members of the Company's senior
management (collectively, the "investor group").
FW Grove Coinvestors is a limited partnership formed in order to acquire Grove
Investors' membership interests. Keystone, Inc. ("Keystone"), the principal
investment entity of Robert M. Bass, is a limited partner of FW Grove
Coinvestors. In addition, certain principals of Keystone and its related
entities are limited partners in a partnership which is a limited partner of FW
Grove Coinvestors.
Oak Hill Strategic Partners is a limited partnership that invests primarily in
public and private debt and equity securities. Oak Hill Strategic Partners was
formed by certain principals and employees of Keystone and its related entities.
GGEP-Grove is an entity that was formed by certain principals and employees of
the George Group Inc., an acquisition and management consulting firm that
applies its strategic and operations management expertise to manufacturing
businesses. The George Group is the general partner of GGEP-Grove. Michael L.
George is the Chief Executive Officer of the George Group and its majority
shareholder.
PRODUCTS
MOBILE HYDRAULIC CRANES (GROVE CRANE)
GROVE CRANE manufactures 24 models of mobile hydraulic cranes, which are used
primarily in the industrial, commercial and public works construction and in
maintenance applications to lift material at job sites. There are four main
types of mobile hydraulic cranes: (i) Rough-Terrain, (ii) All-Terrain, (iii)
Truck-Mounted and (iv) Industrial. In addition, Grove Crane produces three
models of specialty cranes for the U.S. Department of Defense.
ROUGH-TERRAIN CRANES are designed to lift materials and equipment on rough or
uneven terrain. These cranes cannot be driven on highways, and, accordingly,
must be transported by truck to a work site. Grove Crane produces nine models of
rough-terrain cranes, believed to be the broadest such line in the world,
capable of working heights of up to 208 feet and maximum load capacities of up
to 100 tons.
ALL-TERRAIN CRANES are versatile cranes designed to lift materials and equipment
on rough or uneven terrain and yet are highly maneuverable and capable of
highway speeds. Grove Crane produces eight models of all-terrain cranes capable
of working heights of up to 374 feet and maximum load capacities of up to 350
tons.
2
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TRUCK-MOUNTED CRANES are designed to provide simple set-up, long reach high
capacity booms and the capability of traveling from site to site at highway
speeds. These cranes are suitable for urban and suburban uses. Grove Crane
produces three models of truck-mounted cranes, believed to be the broadest such
line in the world, capable of working heights of up to 202 feet and maximum load
capacities of up to 75 tons.
INDUSTRIAL CRANES are designed primarily for plant maintenance, storage yard and
material handling jobs. Grove Crane produces four models of industrial cranes
capable of working heights of up to 74 feet and maximum load capacities of up to
15 tons. Effective October 1, 2000, three telescoping and three articulating
boom aerial work platforms will be manufactured, sold and supported with
industrial cranes.
TRUCK-MOUNTED CRANES (NATIONAL CRANE)
NATIONAL CRANE manufactures 25 models of truck-mounted cranes used primarily by
contractors engaged in industrial, commercial, public works and residential
construction, railroad and oil field service industries. They are also used in
maintenance applications to lift materials or personnel at the same job site or
to move material to another job site or location. The Company manufactures two
types of truck-mounted cranes: telescoping and articulating, and also produces
four models of pedestal-mounted, fixed location cranes.
TELESCOPING CRANES are used primarily for lifting material and personnel on a
job site. National Crane produces 11 models of truck-mounted telescoping cranes
capable of working heights of up to 175 feet and maximum load capacities of up
to 36 tons.
ARTICULATING CRANES are used primarily to load and unload truck beds at a job
site. National Crane produces 14 models of truck-mounted articulating cranes
capable of working heights of up to 71 feet and maximum load capacities of up to
46 tons.
OTHER CRANES include five models of pedestal-mounted cranes designed for docks,
factories, yards, and other areas where fixed, stationary lifting is required.
These cranes are capable of working heights of up to 95 feet and maximum load
capacities of up to 28 tons.
MARKETING AND DISTRIBUTION
GENERAL
The Company benefits from an established base of approximately 210 independent
distributors located in 50 countries around the world. Over two thirds of Grove
Crane's North American distributors have been with the Company for over 10
years.
MOBILE HYDRAULIC CRANES
The Company distributes its mobile hydraulic cranes primarily through a global
network of independent distributors, except in Germany, France and the United
Kingdom, where the Company has its own distributors. In addition, the Company
sells directly to certain large corporate customers and the United States
Government.
3
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In fiscal 2000, 72% of the Company's unit sales of mobile hydraulic cranes were
derived from units shipped to North American and Latin American distributors and
end users. The Company has longstanding relationships with its 45 North American
and 24 Latin American distributors. Shipments to Europe comprised approximately
23% of the Company's shipments in fiscal 2000 through three Company stores,
located in the U.K., Germany and France, and 42 third-party distributors. In
fiscal 2000, shipments to Asia, Africa and the Middle East comprised
approximately 2%, 1% and 2% of the Company's unit shipments, respectively.
TRUCK-MOUNTED CRANES (NATIONAL CRANE)
The Company's North American truck-mounted crane distribution network consists
of 60 distributors that carry multiple product lines, the majority of which
maintain rental fleets. In addition, the Company has eight distributors that
focus either on limited product lines and/or market niches. Certain of the
Company's "niche" distributors primarily sell to railroads and are a particular
strength of the Company's customer base.
END-USERS AND CUSTOMERS
Mobile hydraulic cranes are primarily used by contractors engaged in industrial,
commercial and public works construction, and for maintenance applications and
job site material handling. National Crane's truck-mounted cranes are primarily
used by contractors engaged in industrial, commercial, public works and
residential construction, railroad and oil field service industries, and in
maintenance applications to lift materials or personnel at the same job site or
to move material to another job site or location. In addition, U.S. railroad
companies and U.S. equipment rental companies use the Company's truck-mounted
cranes. Mobile hydraulic cranes are also sold to the U.S. Department of Defense
and other government agencies.
The Company's top five customers for the fiscal years ended October 3, 1998,
October 2, 1999 and September 30, 2000 accounted for approximately 24%, 20%
and 17%, respectively, of the Company's whole good revenues for such periods.
No one customer accounts for more than 10% of total revenue. Approximately
20% and 17% of the outstanding accounts and notes receivable balance as of
October 2, 1999 and September 30, 2000, respectively, were due from these
customers.
DEALER FINANCING PROGRAM
The Company offers certain of its customers terms of up to one year. Units sold
under this program generate secured notes receivable, which the Company sells,
from time to time, to third-party financial institutions. Generally, this
program is used by customers to finance equipment for their rental fleets.
However, the terms of the notes provide that if the customer sells the equipment
prior to the maturity of the notes, the notes must be repaid immediately along
with any interest accrued thereon.
The Company has agreements with three major international banks to sell up to
$135.0 million of notes receivable generated from sales of mobile hydraulic
cranes, aerial work platforms and truck-mounted cranes under the dealer
financing program, subject to certain conditions. However, the Company's Bank
Credit Facility limits the aggregate sold amount of receivables outstanding
under the arrangements to $110.0 million at all times. The banks purchase the
notes receivable at face value on a 90% non-recourse basis. The agreements
require the Company to purchase credit insurance on behalf of the third-party to
insure the 90% risk assumed by the bank. The Company retains 10% of the credit
risk.
ENGINEERING AND DESIGN
The Company's team of engineers focuses on developing innovative, high
performance, low maintenance products that create significant brand loyalty
among customers. Design engineers work closely with the Company's manufacturing
and marketing staff, enabling the Company to quickly identify changing end-user
requirements, implement new technologies and effectively introduce product
innovations. The Company spent approximately $14.1 million, $12.4 million and
$10.7 million in fiscal 1998, fiscal 1999 and fiscal 2000, respectively, on
Company-sponsored research and development activities.
4
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COMPETITION
The markets in which the Company competes are highly competitive. To compete
successfully, the Company must remain competitive in areas of quality, value,
product line, ease of use, safety, comfort and customer service. The Company
faces competition in both of its operating divisions from a number of
manufacturers. Competition in each of the Company's markets generally is
based on product design, overall product quality, maintenance costs and
price. The following table sets forth the Company's primary competitors in
its major product groups:
<TABLE>
<CAPTION>
OPERATING
DIVISIONS PRODUCTS PRIMARY COMPETITORS
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<S> <C> <C>
Grove Crane Mobile Hydraulic Cranes Liebherr Werk Nenzing, Link-Belt Construction Equipment Co.,
Mannesman Dematic, Tadano Ltd. and Terex Corporation ("Terex")
National Crane Truck-Mounted Cranes Fassi Gru Idrauliche SpA, Hiab BV, Iowa Mold Tooling Co. Inc. (IMT),
Palfinger GmbH, Terex and Manitowoc
</TABLE>
RAW MATERIALS
Principal materials used by the Company in its various manufacturing processes
include steel, castings, engines, tires, axles, transmissions, hydraulic
components and controls, hydraulic cylinders, electric controls, motors, and a
variety of other fabricated or manufactured items either purchased complete or
manufactured internally. Substantially all materials are normally available from
multiple suppliers but are designed and tested to meet specific requirements.
Current and potential suppliers are evaluated on a regular basis on their
ability to meet the Company's requirements and standards regarding quality,
delivery and value.
CYCLICALITY
The Company markets a large portion of its products in North America and
Europe, and historically, sales of products manufactured and sold by the
Company have been subject to cyclical variations caused by, among other
things, changes in general economic conditions and, in particular, in
conditions in the construction industry. During periods of expansion in
construction activity, the Company generally has benefited from increased
demand for its products. Conversely, during recessionary periods, the Company
has been adversely affected by reduced demand for such products. Downward
cycles may result in reduction of the Company's new unit sales and pricing,
which may materially and adversely impact the Company's results of operations.
BACKLOG
The Company's backlog consists of firm orders for new equipment and replacement
parts. Total backlog as of December 9, 2000 was approximately $130.6 million
compared to total backlog as of December 11, 1999 of $237.1 million.
Approximately $45.0 million of the decline in backlog is due to the reduction of
the manlift product line. 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.
5
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EMPLOYEES
As of September 30, 2000, the Company had a total of approximately 3,626
employees, of which approximately 2,469 were employed in the United States.
Approximately 29% of the Company's employees are represented by labor unions. In
the United States, workers at the Company's Waverly, Nebraska facility are
organized and are subject to a collective bargaining agreement that expires on
June 9, 2002. Certain employees at the Company's Wilhelmshaven, Germany and
Tonneins, France facilities are also organized under the host country's labor
laws. The collective bargaining agreements covering the Wilhelmshaven, Germany
employees will not terminate unless due notice is given by either party pursuant
to special provisions within the collective bargaining agreements, but are
subject to renegotiation at various times. Throughout all facilities, the
Company considers its relations with its employees and union representatives to
be good.
ENVIRONMENTAL MATTERS
The Company generates hazardous and non-hazardous waste in the normal course of
its manufacturing operations. As a result, the Company is subject to a wide
range of Federal, state, local and foreign environmental laws, including the
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA"),
that (i) govern activities or operations that may have adverse environmental
effects, such as discharges to air and water, as well as handling and disposal
practices for hazardous and nonhazardous wastes, and (ii) impose liability for
the costs of cleaning up, and certain damages resulting from, sites of past
spills, disposals or other releases of hazardous substances. Compliance with
such laws has required, and will continue to require, expenditures by the
Company on a continuing basis. The Company does not expect that these
expenditures will have a material adverse effect on its financial condition or
results of operations.
In 1990, the Clean Air Act was amended and established a list of 189 toxic air
pollutants that must be controlled using maximum achievable control technology
("MACT") as prescribed by the EPA. The Company believes that by 2003 it will be
subject to MACT regulations with respect to its surface coating air omissions.
At this time, the Company does not expect the cost of compliance with these MACT
regulations to have a significant impact on the Company.
INTELLECTUAL PROPERTY
The Company's products are sold primarily under the logo "G-Registered
Trademark-", and the trademarks GROVE-Registered Trademark-, G GROVE
WORLDWIDE-Registered Trademark-, GROVE MANLIFT-Registered Trademark-,
MANLIFT-Registered Trademark-, G MANLIFT-Registered Trademark-, G MEGATRAK
-Registered Trademark-, MAXX-Registered Trademark-, SUPER-MAXX-Registered
Trademark-, TOUCAN-Registered Trademark-, and YARDBOSS-Registered Trademark-.
The Company owns a number of patents and trademarks relating to the products it
manufactures that have been obtained over a number of years.
6
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ITEM 2. PROPERTIES
The Company maintains major manufacturing and engineering facilities in Shady
Grove, Pennsylvania and Wilhelmshaven, Germany, as well as plants in Tonneins,
France and Waverly, Nebraska. All such manufacturing facilities are ISO 9001
certified. The Company also maintains administrative and service facilities in
the United Kingdom, France, Germany, and Australia, and offices in Singapore,
the United Arab Emirates, and China. The Tonneins facility will be sold in
connection with the Company's sale of Delta Manlift.
The following table outlines the principal facilities owned or leased by the
Company:
<TABLE>
<CAPTION>
APPROXIMATE
FACILITY LOCATION TYPE OF FACILITY SQUARE FOOTAGE OWNED/LEASED
--------------------------- ---------------------------- -------------- ------------
<S> <C> <C> <C>
Shady Grove, Pennsylvania Manufacturing/ Headquarters 1,165,600 owned
Quincy, Pennsylvania Manufacturing 40,100 owned
Chambersburg, Pennsylvania Office/Storage 81,000 owned
Waverly, Nebraska Manufacturing/ Headquarters 303,800 owned
Antwerp, Belgium Warehouse/Machine and Parts Storage 107,600 leased
Sunderland, U.K.(1) Office/Storage 14,000 leased
Wilhelmshaven, Germany(2) Manufacturing/ Storage/Office 410,400 owned/leased
Langenfeld, Germany(3) Storage/Office/ Field Testing 80,300 leased
Tonneins, France(4) Manufacturing/ Storage/Office 101,900 owned/leased
Osny, France Storage/Repair/Office 43,000 owned
</TABLE>
(1) The lease for the Sunderland facilities runs 15 years from September 1, 1999
with termination clauses at five-year intervals.
(2) The buildings are owned by the Company and the underlying land is leased
from the Federal Republic of Germany and Friedrich Krupp AG Hoesch Krupp
("Krupp"). The lease with the Federal Republic of Germany expires December
31, 2043 and the lease with Krupp expires December 31, 2042.
(3) The lease at Langenfeld, Germany runs year to year, through July 31, 2001.
The Company has signed a commitment to lease new facilities upon completion
of construction in the summer of 2001.
(4) Includes two facilities, one of which is leased. The lease expires on
November 29, 2004.
To the extent any such properties are leased, the Company expects to be able to
renew such leases or lease comparable facilities on terms commercially
acceptable to the Company. Management believes that the Company's facilities are
suitable for its operations and provide sufficient capacity to meet the
Company's requirements for the foreseeable future.
The obligations of the Company under the Bank Credit Facility are secured by a
mortgage on certain of the Company's owned, domestic real properties.
7
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ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings which have arisen in the
normal course of its operations. The outcome of these legal proceedings, if
determined adversely to the Company, is unlikely to have a material adverse
effect on the Company. The Company is also subject to product liability claims
for which it believes it has adequate insurance.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Grove Holdings, the sole holder of the Company's membership interests, approved
and ratified the following (i) an amendment dated as of October 22, 1999 to the
Credit Agreement, dated as of April 29, 1998; and (ii) on May 9, 2000, an
amendment to the Company's Indenture dated as of April 29, 1998.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
HOLDERS
There is no established trading market for the membership interests of the
Company. Grove Holdings owns all of the limited liability company interests of
the Company and Grove Investors owns all of the limited liability company
interests of Grove Holdings. For certain information concerning the ownership of
the limited liability company interests of Grove Investors, see "Item 12.
Security Ownership of Certain Beneficial Owners and Management."
MARKET INFORMATION
No dividends have been paid on the Company's membership interests. The
Company's borrowing arrangements limit the ability of the Company to pay
dividends. See "Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources."
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ITEM 6. SELECTED FINANCIAL DATA
The following table presents selected historical financial data of the Company
(i) as of and for each of the fiscal years ended September 28, 1996 and
September 27, 1997, for the seven months ended April 28, 1998 (the "Predecessor
Periods"), as of and for the five months ended October 3, 1998 and the fiscal
years ended October 2, 1999 and September 30, 2000 (the "Successor Period"). As
a result of the Acquisition, which was accounted for using the purchase method,
results of operations for the Successor Period are not comparable with those for
the Predecessor Periods. The selected historical financial data set forth below
should be read in conjunction with "Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations" and the historical financial
statements and the related notes thereto included elsewhere in this report.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
----------------------------- ---------------------------------
SEVEN FIVE
MONTHS MONTHS
ENDED ENDED
APRIL 28, OCTOBER 3,
1996 1997 1998 1998 1999 2000
-------- -------- -------- -------- --------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Statement of operations data:
Net sales (1) $ 807,229 $ 870,858 $ 486,255 $ 401,008 $ 793,784 $ 850,562
Gross profit (2) 185,079 203,273 98,863 58,015 147,782 124,882
Operating expenses 134,459 135,382 79,041 61,189 131,584 123,444
Goodwill impairment (3) -- -- -- -- -- 53,351
Income (loss) from
operations 50,620 67,891 19,822 (3,174) 16,198 (51,913)
Net income (loss) (4) 25,448 42,220 (395) (23,981) (25,496) (102,605)
Balance sheet data (at period end):
Cash and cash equivalents 8,184 5,024 -- 34,289 15,498 16,102
Total assets 730,158 881,496 -- 910,348 861,501 726,135
Total debt 7,443 7,265 -- 430,027 432,108 456,967
Total member's equity (deficit) 502,554 628,492 -- 145,861 104,568 (11,711)
Other data:
Depreciation and
amortization (5) 17,313 17,985 11,399 8,213 18,537 20,209
Capital expenditures 19,443 32,491 19,521 7,230 9,405 8,775
Sales backlog at end
of period 185,237 229,513 268,682 163,314 178,300 108,891
</TABLE>
(1) Net sales amounts have been restated to exclude freight costs which
historically had been netted with freight revenues. The impact of the
restatement was to increase net sales and cost of goods sold by $13,020,
$14,046, $10,055, $7,229, $12,555 and $13,719 for the years ended
September 28, 1996 and September 27, 1997, the seven months ended
April 28, 1998, five months ended October 3, 1998 and years ended
October 2, 1999 and September 30, 2000, respectively.
(2) Gross profit for the five months ended October 3, 1998 was adversely
impacted by the write-off of $27.7 million of purchase accounting
adjustments with respect to the amount assigned to inventory in excess of
historical cost.
(3) During the fourth quarter of fiscal 2000, management of the Company adopted
a plan, approved by the Management Committee, to reduce the size of
Manlift operations. In connection with the plan, the Company recognized a
goodwill impairment charge of $53,351.
(4) Includes losses by the Company's Sunderland U.K. facility of $14,085, $5,999
and $3,554 for the seven months ended April 28, 1998, five months ended
October 3, 1998 and year ended October 2, 1999, respectively. Effective
December 1998, the Company ceased manufacturing operations at its
Sunderland, United Kingdom facility due to recurring operating losses.
(5) Depreciation and amortization excludes depreciation on equipment held for
rent.
9
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the more detailed
information and the historical combined and consolidated financial statements
included elsewhere in this report.
LIQUIDITY OVERVIEW
During the years ended October 2, 1999 and September 30, 2000, the Company
incurred significant operating losses that would have resulted in
non-compliance with certain financial covenants included in the Company's
Bank Credit Facility (see notes 11 and 24 of the Company's financial
statements). The Company obtained waivers of these financial covenants as
well as certain covenant modifications to help position the Company for
future compliance. Nevertheless, future compliance will depend on achieving
significantly improved operating results during fiscal 2001 and beyond.
Furthermore, modifications of the Bank Credit Facility place significant
restrictions on the amount of borrowings available to the Company for working
capital purposes, particularly during the period through April 30, 2001, a
period during which the Company's need is projected to be the greatest. In
addition, the modified covenants require the Company to achieve certain
earnings targets on a quarterly basis through fiscal 2001, including a
requirement to achieve adjusted earnings before interest, taxes, depreciation
and amortization ("Adjusted EBITDA"), as defined, of $20 million for the six
months ended March 31, 2001. Effective January 12, 2001, the Company obtained
further amendment of a covenant in its Bank Credit Facility, whereby the
minimum Adjusted EBITDA, as defined, required for the six-month period ended
March 31, 2001, was reduced to $16.5 million. The amendment will be null and
void in the event the Company receives an audit report on its consolidated
financial statements as of and for the year ended September 30, 2000 with a
qualification or explanatory paragraph related to its ability to continue as
a going concern.
Management has undertaken a number of initiatives to help improve operating
results and cash flows including: (i) reduction of Manlift operations, (ii)
the planned sale of Delta Manlift operations in France, (iii) restructuring
Shady Grove, Pennsylvania manufacturing operations by improving product flow
and (iv) reducing the number of sales, marketing, engineering and
administrative employees, principally in Shady Grove and the UK.
The reduction of Manlift operations allows the Company to produce a product line
which management believes is complementary with the Company's Crane products and
strategy. Manlift will continue to provide full support for the installed base
of aerial work platforms through parts and service, including discontinued
models, and to manufacture six models of boom Manlifts. In order to take
advantage of synergies, the Company has merged Manlift's production, engineering
and sales and marketing functions with those of Grove Crane.
Management believes the initiatives undertaken will enable the Company to
maintain compliance with bank financial covenants as well as provide
sufficient cash flow to meet the Company's obligations as they become due.
However, if the initiatives are not successful or if there are unforeseen
increases in working capital needs, the Company may be unable to meet bank
covenants and/or to generate sufficient cash flows from operations. In such
case, the Company will be required to obtain additional covenant
modifications and additional sources of funding. There is no assurance that
such covenant modifications will be obtained or that such funding, if needed,
will be available.
RESULTS OF OPERATIONS
For financial reporting purposes, the acquisition of the Company by Grove
Worldwide from Hanson Plc in April 1998 created a new basis of accounting and,
accordingly, the Company was required to report results prior to the acquisition
separate from results subsequent to the acquisition. For purposes of the
following discussion of the Company's results of operations, the Company has
compiled certain financial information for the fiscal year ended October 3, 1998
by combining results of operations for the seven months ended April 28, 1998
(prior to the acquisition) with those for the five months October 3, 1998
(subsequent to the acquisition). In connection with the acquisition, the Company
was formed as a limited liability company and its capital structure was changed
significantly.
10
<PAGE>
The Company generates most of its net sales from the manufacture and sale of new
mobile hydraulic cranes and truck-mounted cranes. The Company also generates a
portion of its net sales from after-market sales (parts, service and used
equipment) of the products it manufactures. Sales of used equipment are not
material and are generally limited to trade-ins on new equipment through
Company-owned distributors in France, Germany and the United Kingdom.
The following is a summary of net sales for the periods indicated (dollars in
millions):
<TABLE>
<CAPTION>
FISCAL YEAR
----------------------------------------
1998 1999 2000
-------- ------- -------
<S> <C> <C> <C>
New equipment sold $ 719.0 $ 624.1 $ 660.5
After-market 101.6 94.8 89.5
Other (1) 66.7 74.9 100.6
-------- ------- -------
Net sales $ 887.3 $ 793.8 $ 850.6
======== ======= =======
</TABLE>
(1) Includes used equipment and specialty cranes and equipment sold to the U.S.
government.
Consistent with industry practice, particularly in Germany, certain of the
Company's mobile hydraulic crane sales (generally less than 5% of units sold
annually) are made with residual value guarantees under which the full sales
price is collected in cash on normal commercial terms following delivery of the
cranes. However, these sales are accounted for in a manner similar to operating
leases. Upon collection, the sales price is deferred and accounted for as
deferred revenue (current and non-current) while the related inventory is
reclassified as "property, plant and equipment/equipment held for rent." Over
the term of the residual value guarantee, deferred revenue is recognized as
sales and the depreciation of the related equipment held for rent is classified
as cost of goods sold, the effect of which is to recognize sales, costs of goods
sold and gross profit over the residual value guarantee period, typically five
years, as opposed to at the time of delivery of the crane. Losses with respect
to residual value guarantees have been insignificant. See note 4 of Notes to
Combined and Consolidated Financial Statements.
Set forth below is certain information regarding the Company's results of
operations for fiscal 1998, fiscal 1999 and fiscal 2000 (dollars in thousands).
<TABLE>
<CAPTION>
FISCAL YEAR
------------------------------------------------
1998 1999 2000
--------- -------- ---------
<S> <C> <C> <C>
Net sales $887,263 $ 793,784 $850,562
Cost of goods sold 702,678 646,002 725,680
Write-off of amounts assigned to inventory in excess of
historical costs resulting from purchase accounting
adjustments 27,707 -- --
--------- -------- ---------
Gross profit 156,878 147,782 124,882
Selling, engineering, general and administrative expenses 131,924 124,704 107,658
Amortization of goodwill 8,306 6,880 7,029
Restructuring charges -- -- 8,757
Goodwill impairment charge -- -- 53,351
--------- -------- ---------
Income (loss) from operations $ 16,648 $ 16,198 $(51,913)
========= ======== =========
</TABLE>
Net sales have been restated to exclude freight costs which historically had
been netted with freight revenue. The impact of restatement was to increase net
sales and cost of goods sold by $17,284, $12,555 and $13,719 for fiscal 1998,
fiscal 1999 and fiscal 2000, respectively.
11
<PAGE>
FISCAL 2000 COMPARED TO FISCAL 1999
NET SALES. Net sales increased $56.8 million, or 7.2%, from $793.8 million for
fiscal 1999 to $850.6 million for fiscal 2000. Net sales would have been
approximately 4% higher had foreign exchange rates been stable from fiscal 1999
to fiscal 2000 against the U.S. dollar. New equipment sales increased $36.4
million, or 5.8%, principally as the result of higher unit sales by the Grove
Crane operating division. After-market sales for the Company, including parts
and services, decreased from fiscal 1999 to fiscal 2000 due primarily to a
decline in parts and service sales in Europe. Other sales for the Company
increased 34.3% as a result of higher sales to the U.S. government and used
equipment sales.
Net sales for the Grove Crane division increased $51.7 million, or 9.5%, from
$545.1 million in fiscal 1999 to $596.8 million in fiscal 2000 on higher unit
sales. The increase was almost entirely related to sales of North American and
European customers.
Net sales for the Grove Manlift division decreased $9.2 million, or 5.5%, from
$167.8 million in fiscal 1999 to $158.6 million in fiscal 2000. The decrease was
the result of lower net sales in North America and decreased pricing partially
offset by higher unit sales in Europe.
Net sales the National Crane division increased $14.0 million, or 17.2%, from
$81.3 million in fiscal 1999 to $95.3 million in fiscal 2000. Net sales
increased as the result of higher unit sales and increased demand for higher
priced models.
GROSS PROFIT. Gross profit decreased $22.9 million, or 15.5%, from $147.8
million in fiscal 1999 to $124.9 million in fiscal 2000, as a result of a
decline in Manlift volumes and pricing, manufacturing inefficiencies in the
Company's US operation and the impact of the strengthening U.S. dollar against
European currencies. Gross profit would have been approximately 6% higher had
foreign exchange rates been stable from fiscal 1999 to fiscal 2000 against the
U.S. dollar. The manufacturing inefficiencies were caused, in part, by a failed
attempt by a labor union to organize U.S. employees. In connection with the
decision to cease manufacture of certain aerial work platform models, the
Company recorded inventory write-downs of $12.5 million in fiscal 2000. Gross
profit as a percent of sales decreased to 14.7% in fiscal 2000 from 18.6% in
fiscal 1999 primarily as the result of lower Manlift pricing.
SELLING, ENGINEERING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, engineering,
general and administrative expenses (SG&A) decreased $17.0 million, or 13.7%,
from $124.7 million in fiscal 1999 to $107.7 million in fiscal 2000. Cost
reductions at the Shady Grove facility contributed approximately $8.0 million to
the decline. The strength of the US dollar against European currencies
contributed $4.4 million to the decline. Included in SG&A are approximately $0.9
million and $5.4 million of consulting fees, for fiscal 2000 and fiscal 1999,
respectively, paid to the George Group in connection with the Company's
operational improvement program. As a percentage of net sales, SG&A was 12.7% in
fiscal 2000 and 15.7% in fiscal 1999.
RESTRUCTURING CHARGES. During the year ended September 30, 2000, the Company
adopted and executed restructuring plans that resulted in the termination of
approximately 470 employees principally in its US operations. In connection with
the terminations, the Company accrued severance costs of $8.8 million, of which
$4.7 million has been paid, with the balance being payable during fiscal 2001.
The terminations included manufacturing, general and administrative personnel.
During October and November 2000, the Company terminated approximately 220
employees resulting in severance expense of $1.6 million which will be
recognized in fiscal 2001.
GOODWILL IMPAIRMENT CHARGE. During the fourth quarter of fiscal 2000, management
of the Company adopted a plan, approved by the Management Committee, to reduce
the size of its Manlift operations. In connection with the decision to reduce
Manlift operations, the Company recognized a goodwill impairment charge of $53.4
million.
12
<PAGE>
INCOME FROM OPERATIONS. Income from operations, excluding the goodwill
impairment charge of $53.4 million and restructuring charge of $8.8 million in
fiscal 2000, decreased $6.0 million from $16.2 million in fiscal 1999 to $10.2
million in fiscal 2000. The declines were principally related to lower operating
profits by the Grove Manlift division caused by the factors described above as
well as the strengthening of the U.S. dollar against European currencies.
INTEREST INCOME (EXPENSE), NET. Net interest expense increased $7.7 million in
fiscal 2000 as compared to fiscal 1999 as the result of higher borrowings on the
Company's line of credit and higher rates on these borrowings.
INCOME TAXES. The Company'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 itself subject to income tax, (ii) the taxable income of
the mobile hydraulic crane, aerial work platform and truck-mounted crane
businesses in the United States is allocated to the equity holders of Grove
Worldwide, and (iii) such equity holders are responsible for income taxes on
such taxable income. The Company intends to make distributions in the form of
dividends to equity holders to enable them to meet their tax obligations with
respect to income allocated to them by the Company. Income taxes expense for
fiscal 1999 and 2000 related principally to the Company's subsidiary in
Waverly, Nebraska, which is incorporated as a C-corporation, and the
Company's German subsidiary.
FISCAL 1999 COMPARED TO FISCAL 1998
NET SALES. Net sales decreased $93.5 million, or 10.5%, from $887.3 million for
fiscal 1998 to $793.8 million for fiscal 1999. New equipment sales decreased
$94.9 million, or 13.2%, principally as the result of lower unit sales by the
Grove Crane and Grove Manlift operating divisions. These declines are
principally related to (i) production delays at the Company's Shady Grove
manufacturing facilities, which impacted the Company's ability to take advantage
of market opportunities and (ii) softer demand for certain products resulting
from distributors and rental companies delaying purchasing decisions as the
result of uncertainty caused by mergers and acquisitions within the Company's
customer base. After-market sales for the Company, including parts and services,
decreased slightly from fiscal 1998 to fiscal 1999. This decrease was due
primarily to a decline in parts and service sales and used equipment sales.
Other sales for the Company increased 12.3% as a result of higher sales to the
U.S. government, offset to some extent by lower revenues from unit sales that
were accounted for as operating leases.
Net sales for the Grove Crane division declined $43.2 million, or 7.3%, from
$588.3 million in fiscal 1998 to $545.1 million in fiscal 1999 on lower unit
sales. The decline was almost entirely related to sales of North American
customers. The impact of lower unit sales was offset to some extent by a shift
in product mix to higher sales value units.
Net sales for the Grove Manlift division decreased $42.2 million, or 20.1%, from
$210.0 million in fiscal 1998 to $167.8 million in fiscal 1999. Unit sales of
aerial work platforms were down as a result of a weaker North American market,
partially offset by increases in sales to European customers.
Net sales the National Crane division decreased $7.9 million, or 8.9%, from
$89.2 million in fiscal 1998 to $81.3 million in fiscal 1999. Net sales to North
American customers declined but were slightly offset by an increase in sales to
Latin American customers.
GROSS PROFIT. Gross profit, excluding the write-off of amounts assigned to
inventory in excess of historical costs in fiscal 1998, decreased $36.8 million,
or 19.9%, from $184.6 million in fiscal 1998 to $147.8 million in fiscal 1999,
as a result of higher price concessions, lower volume, and inefficiencies caused
by the start-up
13
<PAGE>
of the Company's new information systems in the United States. These factors
contributed to a lower gross margin for fiscal 1999 versus fiscal 1998. Gross
profit was also adversely impacted by the closure of the Sunderland U.K.
manufacturing facility which incurred losses of $3.6 million for the period
ending December 1998, the date of final closure.
SELLING, ENGINEERING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, engineering,
general and administrative expenses decreased $7.2 million, or 5.5%, from $131.9
million in fiscal 1998 to $124.7 million in fiscal 1999. As a percentage of net
sales, selling, engineering, general and administrative expenses were 14.9% in
fiscal 1998 and 15.7% in fiscal 1999. Although George Group expenses increased
$4.1 million in fiscal 1999, from $2.7 million in fiscal 1998 to $6.8 million in
fiscal 1999, the Company's operations improvement program as well as reducing
the Company's cost structure through workforce reduction, has more than offset
the increases. Fiscal 1999 includes a change for special one-time early
retirement benefits of $2.3 million and a pension and postretirement curtailment
gain of $3.3 million.
INCOME FROM OPERATIONS. Income from operations, excluding the write-off of
amounts assigned to inventory in excess of historical costs in fiscal 1998,
decreased $28.2 million. The declines were principally related to lower
operating profits by the Grove Crane division caused by the factors described
above.
INTEREST INCOME (EXPENSE), NET. Net interest expense increased $21.2 million in
fiscal 1999 as compared to fiscal 1998 as the result of a full year of interest
expense on borrowings under the Bank Credit Facility and the Senior Subordinated
Notes in fiscal 1999 as compared to only five months in fiscal 1998.
INCOME TAXES. The Company'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 itself subject to income tax, (ii) the taxable income of the mobile
hydraulic crane, aerial work platform and truck-mounted crane businesses in the
United States is allocated to the equity holders of Grove Worldwide, and (iii)
such equity holders are responsible for income taxes on such taxable income. The
Company intends to make distributions in the form of dividends to equity holders
of Grove Worldwide to enable them to meet their tax obligations with respect to
income allocated to them by the Company. Income taxes expense for the five
months ended October 3, 1998 and fiscal 1999 related principally to the
Company's subsidiary in Waverly, Nebraska, which is incorporated as a
C-corporation, and the Company's German subsidiary.
GEOGRAPHIC COMPARISONS DURING THE THREE YEARS ENDED SEPTEMBER 30, 2000.
Net sales to unaffiliated customers by the Company's domestic subsidiaries
contributed 65% of the Company's sales in fiscal 2000. Net sales to unaffiliated
customers by the Company's domestic subsidiaries increased by $13 million or 2%
in fiscal 2000 as compared to fiscal 1999. The increase in net sales by the
Company's domestic subsidiaries was a result of an increase in crane sales
offset by a decrease in aerial work platform sales. Net sales to unaffiliated
customers by the Company's foreign subsidiaries increased by $45.8 million or
18.3% in fiscal 2000 as compared to fiscal 1999. The increase in net sales by
the Company's foreign subsidiaries was primarily the result of higher crane
sales. Operating losses by the Company's U.K. operations of $5.7 million in
fiscal 2000 partially offset operating earnings of the Company's German and
French subsidiaries during the same period.
Net sales to unaffiliated customers by the Company's domestic subsidiaries
contributed 68% of the Company's sales in fiscal 1999 and virtually all of its
income from operations. Net sales to unaffiliated customers by the Company's
domestic subsidiaries decreased by $98.4 million or 15.6% in fiscal 1999 as
compared to fiscal 1998. The decline in net sales by the Company's domestic
subsidiaries occurred in each of the Company's product lines. Net sales to
unaffiliated customers by the Company's foreign subsidiaries increased by $9.6
million or 4.0% in fiscal 1999 as compared to fiscal 1998. The increase in net
sales by the Company's foreign subsidiaries was primarily the result of higher
aerial work platform sales. Operating losses by the Company's U.K. operations of
approximately $5.9 million in fiscal 1999 partially offset operating earnings of
the Company's German and French subsidiaries during the same period.
14
<PAGE>
Net sales to unaffiliated customers by the Company's domestic subsidiaries
contributed in excess of 70% of the Company's sales in fiscal 1998 and virtually
all of its income from operations. Net sales to unaffiliated customers by the
Company's domestic subsidiaries increased by $23.8 million or 3.9% in fiscal
1998 as compared to fiscal 1997. The increase in net sales by the Company's
domestic subsidiaries occurred by strong sales of aerial work platforms and
truck-mounted cranes. Net sales of mobile hydraulic cranes by the Company's
domestic subsidiaries were virtually unchanged in fiscal 1998 as compared to
fiscal 1997. Net sales to unaffiliated customers by the Company's foreign
subsidiaries decreased by $10.6 million or 4.2% in fiscal 1998 as compared to
fiscal 1997. The decrease in net sales by the Company's foreign subsidiaries was
primarily the result of Sunderland's completion of the Ministry of Defense
contract in February 1998. Recurring operating losses by the Company's
manufacturing facility in Sunderland, U.K. of approximately $15.9 million in
fiscal 1998 exceeded all of the operating earnings of the Company's German and
French subsidiaries during the same period.
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 fiscal 2000, the Company's operating activities used approximately $8.3
million in operating cash flow. This amount resulted primarily from a loss from
operations before non-cash charges of $13.5 million offset by declines in the
investment in working capital of $5.2 million.
During fiscal 2000, the Company used $15.7 million in investing activities,
consisting of $8.8 million for capital expenditures and $6.9 million for
investment in equipment held for rent (due to the operating lease treatment
relating to certain sales which are accounted for as operating leases). The cash
flows used in investing activities were funded from cash resources.
The Company plans to sell its Delta Manlift subsidiary in Tonneins, France.
Net proceeds from the sale after payment of income taxes will be used to
retire amounts outstanding under the Bank Credit Facility. The sale, which is
expected to result in a gain, is expected to close during the second quarter
of fiscal 2001.
The Company expects that cash flows from foreign operations will be required to
meet its domestic debt service requirements. Such cash flows are expected to be
generated from intercompany interest expense on loans the Company has made to
certain of its foreign subsidiaries. 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.
The Company has a bank credit facility (the "Bank Credit Facility"), which
consists of a $200 million term loan facility ("Term Loan Facility") and a
$66,250,000 revolving credit facility ("Revolving Credit Facility").
Subsequent to year end, in order to obtain modifications to certain financial
covenants, the Company negotiated an amendment to the credit agreement which
provided for (i) higher borrowing and facility fee rates, (ii) limitations in
the amount of the revolving credit facility available for general operating
purposes and (iii) a borrowing base. As amended, the Revolving Credit
Facility enables the Company to obtain revolving credit loans for working
capital and general corporate purposes of up to $66,250,000, subject to a
borrowing base consisting of eligible accounts receivable and inventory.
Effective April 1, 2001, the maximum borrowings available under the Revolving
Credit Facility declines to $60 million. However, during a 14-day period
ending April 16, 2001 and 5-day period ending April 23, 2001, borrowings
under the Revolving Credit
15
<PAGE>
Facility will be limited to $40 million and $35 million, respectively. A
portion of the Revolving Credit Facility is available for borrowings by the
Company in the Eurocurrency markets of British pounds sterling, German marks,
French francs and certain other currencies. The Company also pays a 0.75% fee
on the unused portion of the Bank Credit Facility. Without the covenant
modifications, the Company would not have been in compliance with certain of
the financial covenants required by the Bank Credit Facility. Management has
undertaken a number of initiatives to improve the Company's operating
results. In the event that results do not improve, the Company may need to
seek further modifications to the covenants contained in the Bank Credit
Facility. There can be no assurances that the Company will be able to obtain
such modifications, if required.
At September 30, 2000, borrowings of $35 million were outstanding under the
Revolving Credit Facility. Based on the borrowing limitations imposed
following the amendment, the Company would have had available approximately
$26 million of additional borrowings at September 30, 2000.
The Company also has agreements with three third-party financial institutions
to sell up to $135.0 million of notes receivable obtained under the Company's
special North American Dealer Finance Program, subject to certain conditions.
However, the Company's Bank Credit Facility limits the aggregate sold amount
of receivables outstanding under the arrangements to $110.0 million at all
times. The third-party financial institutions purchase the notes at face
value on a 90% non-recourse basis. The Company retains 10% of the credit
risk. The sale of the notes qualifies as a sale under generally accepted
accounting principles and, accordingly, upon sale, the notes receivable are
removed from the Company's balance sheet. See note 5 of Notes to Combined and
Consolidated Financial Statements.
Management believes that the Company's income from operations and available
borrowings under the Revolving Credit Facility will be sufficient to meet its
debt service obligations, capital expenditure requirements and distributions
in the form of dividends to equity holders of Grove Holdings to enable them
to meet their tax obligations with respect to income allocated to them by the
Company for at least the next twelve months. Through April 29, 2004, the
Company's annual debt service obligations are limited to (i) principal
payments of $2 million plus 75% of excess cash flow as defined in the bank
credit agreement; (ii) periodic interest payments on borrowings under the
bank credit facility and (iii) semi-annual interest payments on the 9 1/4%
Senior Subordinated Notes. Effective November 2003, Grove Holdings is
required to make semi-annual cash interest payments on its $88 million of 11
5/8% senior discount debentures. The cash interest payments are expected to
be generated by distributions from the Company, to the extent permitted under
the Company's borrowing arrangements. However, based on the Company's
operating results and restrictions included in the Bank Credit Facility and
Senior Subordinated Note agreements, the Company currently would be unable to
meet any cash debt service requirements of Grove Holdings, if such were
required.
GROVE CAPITAL, INC.
Grove Capital, a Delaware corporation, 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 relating to the acquisition of The Grove
Companies from Hanson Funding (G) PLC and certain of its subsidiaries in April
1998. 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 subsidiaries, nominal assets, no
liabilities (other than the co-obligation under the Senior Subordinated Notes)
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.
16
<PAGE>
The payment obligations of the Company and Grove Capital under the Senior
Subordinated Notes are fully and unconditionally guaranteed on a joint and
several basis by the Subsidiary Guarantors (the "Subsidiary Guarantees'), 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 combined and 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 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 23 of Notes to
the Combined and Consolidated Financial Statements of the Company.
BACKLOG
The Company's backlog consists of firm orders for new equipment and replacement
parts. Total backlog as of December 9, 2000 was approximately $130.5 million
compared to total backlog as of December 11, 1999 of $237.1 million.
Approximately $45.0 million of the decline in backlog is due to the reduction of
the manlift product line. Substantially all of the Company's backlog orders are
expected to be filled within one year, although there can be no assurance that
all such backlog orders will be filled within that time period. Parts orders are
generally filled on an as-ordered basis.
CYCLICALITY
Historically, sales of products manufactured and sold by the Company have been
subject to cyclical variations based, among other things, on general economic
conditions and, in particular, on conditions in the construction industry.
During periods of expansion in construction activity, the Company generally has
benefited from increased demand for construction equipment. Conversely, during
recessionary times, the Company has been adversely affected by reduced demand
for such products. Downward cycles result in reductions in the Company's new
unit sales and prices, which adversely impact the Company's results of
operations. Significant deterioration of the U.S. or European economy or a
further strengthening of the U.S. dollar against European currencies could have
a material adverse impact upon the Company.
17
<PAGE>
IMPACT OF CONVERSION BY THE EUROPEAN UNION TO A COMMON CURRENCY
On January 1, 1999, eleven of the fifteen member countries of the European Union
established fixed conversion rates between their existing currencies and the
euro, a new European currency, and adopted the euro as their common legal
currency. Either the euro or a participating country's present currency will be
accepted as legal tender until January 1, 2002, from which date forward only the
euro will be accepted. The euro currently is an additional currency both in
domestic and foreign markets for European businesses domiciled in the European
monetary zone. In fiscal 2000, approximately 27% of the Company's revenues were
derived from operations in member countries of the European monetary union.
The Company has initiated an assessment of euro-related issues and their impact
on information systems, currency exchange rate risk, employment and benefits,
taxation, contracts, competition, selling prices and costs, communications,
finance and administration. Initially the Company intends to continue to do
business in the national currency of the countries adopting the euro. Customers
and vendors who wish to do business in the euro are being accommodated by the
Company. During fiscal 2001, the Company intends to upgrade its information
systems in Germany and France to facilitate its ability to transact all business
using the euro by January 1, 2002. After this date all transactions involving
the Company with respect to countries participating in the euro conversion will
be based solely on the euro. The Company does not currently expect the cost of
such modifications to have a material effect on the Company's results of
operations or financial condition.
The Company has outstanding foreign exchange contracts involving the currencies
of countries participating in the euro conversion. The Company believes that
conversion to the euro may reduce the amount of the Company's exposure to
exchange rate risk, due to the netting effect of having assets and liabilities
denominated in a single currency as opposed to the various legacy currencies. As
a result, the Company's foreign exchange hedging costs could be reduced.
Conversely, because there will be less diversity in the Company's exposure to
foreign currencies, movements of the euro's value relative to the U.S. dollar
could have a more pronounced effect, whether positive or negative.
The largest European country which is not currently participating in the euro
conversion is the United Kingdom, which, in fiscal 2000, accounted for
approximately 8% of the Company's consolidated net sales. The Company is
considering the potential impact which the United Kingdom's nonparticipation
might have on trading activities with countries participating in the euro
conversion as well as on internal United Kingdom operations.
The Company does not expect the euro conversion, including the costs of
implementation, to have a material adverse effect upon the Company's results of
operations, financial condition or cash flow. However, the Company cannot
guarantee that, with respect to the euro conversion, all problems, including
long-term competitive implications of the conversion, will be foreseen and
corrected, that no material disruption of the Company's business will occur, or
that there will be no delays in the dates targeted by the Company for the euro
conversion process.
ENVIRONMENTAL MATTERS
The Company generates hazardous and non-hazardous waste in the normal course of
its manufacturing operations. As a result, the Company is subject to a wide
range of Federal, state, local and foreign environmental laws, including CERCLA,
that (i) govern activities or operations that may have adverse environmental
effects, such as discharges to air and water, as well as handling and disposal
practices for hazardous and nonhazardous wastes, and (ii) impose liability for
the costs of cleaning up, and certain damages resulting from, sites of past
spills, disposals or other releases of hazardous substances. Compliance with
such laws has required, and will continue to require, expenditures by the
Company on a continuing basis. The Company does not expect that these
expenditures will have a material adverse effect on its financial condition or
results of operations.
18
<PAGE>
In 1990, the Clean Air Act was amended and established a list of 189 toxic air
pollutants that must be controlled using MACT as prescribed by the EPA. The
Company believes that by 2003 it will be subject to MACT regulations with
respect to its surface coating air omissions. At this time, the Company does not
expect the cost of compliance with these MACT regulations to have a significant
impact on the Company.
ITEM 7A. 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. A summary of the Company's principal financial
instruments which are subject to interest rate risk at September 30, 2000 is as
follows (dollars in thousands):
<TABLE>
<CAPTION>
AMOUNT
OUTSTANDING AT
SEPTEMBER 30, INTEREST FAIR
DESCRIPTION 2000 RATE VALUE
--------- --------- ---------
<S> <C> <C> <C>
Revolving credit facility $ 35,000 Floating $ 35,000
Term loan facility 176,000 Floating 176,000
Senior subordinated notes 225,000 9.25% 22,500
</TABLE>
At the Company's option, loans under the Bank Credit Facility bear interest (a)
in the case of loans in U.S. dollars, at the highest of (x) 1/2 of 1% in excess
of the Federal Funds Effective Rate (as defined in the Bank Credit Facility),
(y) 1.0% in excess of a certificate of deposit rate and (z) the bank's prime
rate, plus the applicable margin (as defined in the Bank Credit Facility), or
(b) in the case of all loans, the relevant Eurocurrency Rate (as defined in the
Bank Credit Facility) as determined by the Lender, plus the applicable margin.
At September 30, 2000, borrowings of $35 million were outstanding under the
Revolving Credit Facility, bearing interest based on LIBOR plus an applicable
margin of 3.0% (9.79% at September 30, 2000). The interest rate on borrowings
under the Term Loan Facility at September 30, 2000 was based on LIBOR plus an
applicable margin of 3.5% (10.29% at September 30, 2000). Following amendment of
the Bank Credit Facility, the applicable margin on Eurocurrency Rate borrowings
will be 4%, except for borrowings under the Revolving Credit Facility above $60
million where the applicable margin will be 5% and the applicable margin on all
other rate based borrowings will be 3%, except for borrowings under the
Revolving Credit Facility above $60 million where the applicable margin will be
4%. The average interest rate on borrowings under the Revolving Credit and Term
Loan Facilities were 7.71% and 9.71%, respectively, for the years ended October
2, 1999 and September 30, 2000.
The Revolving Credit Facility expires in fiscal 2005. The Term Loan Facility
matures in fiscal 2006 and must be repaid in semi-annual installments in October
and April of each fiscal year in an aggregate amount of (i) $2 million through
fiscal 2004, (ii) $88 million during fiscal 2005 and (iii) the balance in fiscal
2006. The Senior Subordinated Notes mature in fiscal 2008.
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 notional amount, three month LIBOR and pay 6.5%, anytime LIBOR exceeds
6.5%, and will receive three month LIBOR and pay 5.19% anytime LIBOR is below
5.19%. The agreement effectively caps the Company's interest rate on $100.0
million of its floating rate debt at 6.5% plus the applicable margin.
19
<PAGE>
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. For fiscal 2000, approximately 35% of the
Company's net sales were transacted in foreign currencies, of which
approximately 52% was transacted in German marks. Based on the Company's overall
currency rate exposure at September 30, 2000, a 10% change in currency rates
would not have had a material effect on the financial position, results of
operations or cash flows of the Company.
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 the 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 September 30, 2000, the Company was a party to six such
contracts with an aggregate obligation of $15.5 million. The Company's
obligation exceeded the estimated fair value of the contracts by $1.7 million.
These forward contracts generally have average maturities of less than three
months. The Company has not taken any actions 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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Combined and Consolidated Financial Statements of the Company, along with
the Report of Independent Accountants, are included on pages F-1 through F-46 of
this Form 10-K.
Supplementary data called for by this item is not presented, as it is not
applicable to the Company.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
20
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Grove Holdings, as Managing Member, sets the terms of office of the members of
the Management Committee of the Company (the "Company Management Committee").
The executive officers of the Company serve at the discretion of the Company
Management Committee. See "Item 11. Executive Compensation--Employment
Arrangements." The following table sets forth information concerning executive
officers of the Company and the members of the Company Management Committee,
each of whom (except James Patell, who is a member of the Management Committee
of the Company only) is also a member of the Management Committee of Grove
Holdings (the "Holdings Management Committee" and, together with the Company
Management Committee, the "Management Committees"):
<TABLE>
<CAPTION>
Name Age Position
------------------- ---- --------------------------------------------------------
<S> <C> <C>
Jeffry D. Bust 47 Chairman and Chief Executive Officer, Grove Worldwide and
Member of each Management Committee
Stephen L. Cripe 44 Senior Vice President and Chief Financial Officer, Grove Worldwide
Keith R. Simmons 50 Senior Vice President, General Counsel and Human Resources,
Grove Worldwide
Theodore J. Urbanek 66 President, National Crane Corporation
John Wheeler 54 President and Chief Operating Officer
J. Taylor Crandall 46 Member of each Management Committee
Michael L. George 60 Member of each Management Committee
Gerald Grinstein 68 Member of each Management Committee
Steven B. Gruber 42 Member of each Management Committee
Robert B. Henske 39 Member of each Management Committee
Gerard E. Holthaus 51 Member of each Management Committee
James M. Patell 52 Member of the Company Management Committee
</TABLE>
Mr. Bust serves as Chairman and Chief Executive Officer of the Company and
serves as a member of each Management Committee, positions he assumed in October
1999. From June 1998 to October 1999, he was President and Chief Operating
Officer of Grove Crane, where he was responsible for the business direction of
Grove Crane, including directly overseeing the manufacturing, quality,
marketing, sales, product support and engineering departments at Grove Crane's
Shady Grove, Pennsylvania facility, and indirectly at Wilhelmshaven, Germany and
Sunderland, United Kingdom facilities. From November 1994 to June 1998, he
served as President and General Manager for Manitowoc Cranes, Inc. and the
Lattice Crane Group. From January 1989 to November 1994, he held the positions
of Senior Vice President, Mining Equipment Division, and Vice President of
Operations for Harnischfeger Corporation. He also held various management
positions with FMC Corporation from June 1982 to January 1989.
21
<PAGE>
Mr. Cripe serves as Senior Vice President and Chief Financial Officer of the
Company, a position in which he has served since August 1998. Mr. Cripe is
responsible for accounting and control, treasury functions, budgeting and
planning and information systems oversight for the Company and its operating
companies. From April 1996 to August 1998, he was Vice President -- Finance of
Tenneco Automotive, Lake Forest, Illinois. From 1993 to April 1996, he was
Controller for the Industrial Fibers Group of AlliedSignal.
Mr. Simmons serves as Senior Vice President, General Counsel and Human Resources
of the Company. He has served in this position since October 1999, and is
responsible for managing the legal affairs and personnel and employment matters
of Grove Worldwide and its operating companies. From May 1995 to October 1999,
he was Senior Vice President, General Counsel and Business Development,
responsible for managing the legal affairs of the Company, and in conjunction
with the operating companies, for developing and implementing external growth
initiatives. From April 1992 to May 1995, he was Senior Vice President and
General Counsel for Grove Worldwide.
Mr. Urbanek serves as President of National Crane, a position in which he has
served since 1975. Mr. Urbanek is responsible for the business direction of
National Crane, including overseeing the manufacturing, engineering, marketing,
sales, product support, quality, human resources, accounting and information
services departments at the Waverly, Nebraska facility. His past positions (all
while also serving as President of National Crane) include acting Vice President
and General Manager of Grove Manlift from 1981 to 1983 and Group Vice President
for Circle Steel Corp. and Cook Pump (a Grove Worldwide operation) from 1984 to
1987.
Mr. Wheeler serves as President and Chief Operating Officer, a position to which
he was appointed in August 2000. Mr. Wheeler is responsible for the Company's
day-to-day manufacturing operations and product support, as well as for
marketing, sales and finance activities in Europe, Africa, the Middle East and
Asia-Pacific. He served as President -- Europe, Africa and the Middle East from
December 1998 to August 2000. From 1995 to December 1998, he served as Senior
Vice President-Worldwide Operations for the Grove Crane operation of the
Company. From January 1985 to June 1995, Mr. Wheeler held various executive and
manufacturing management positions with Ingersoll Rand. Prior to that, he served
in various positions at Grove from 1974 to 1984.
Mr. Crandall serves as a member of each Management Committee. Mr. Crandall
has been a Managing Partner of Oak Hill Capital Management, Inc. since
November 1998, and the Chief Operating Officer of Keystone since October
1998. Between 1986 and October 1998, he served as Chief Financial Officer and
Vice President of Keystone. Since 1991, he has served as a President and a
director of Acadia MGP, Inc. Mr. Crandall is a director (or General Partner)
of Bell & Howell Company, Quaker State Corporation, Specialty Foods, Inc.,
Washington Mutual, Inc., Integrated Orthopedics, Inc., Physician Reliance
Network Inc. and Sunterra Corporation. Mr. Crandall also serves on the Board
of Advisors of Oak Hill Strategic Partners, L.P., on the Investment
Committees of Insurance Partners, L.P. and Brazos Fund L.P. and on the
Advisory Committees of Boston Ventures Limited Partnership V and B-K Capital
Partners, L.P.
Mr. George serves as a member of each Management Committee. Since 1987, Mr.
George has served as Chief Executive Officer and Chairman of the Board of
George Group, a management consulting firm based in Dallas, Texas.
22
<PAGE>
Mr. Grinstein serves as a member of each Management Committee. Since October
1999, Mr. Grinstein has been the non-executive Chairman of the Board of
Agilent Technologies. He served as non-executive Chairman of Delta Air Lines,
Inc. from August 1977 to October 1999. He is also a principal of Madrona
Investment Group, a Seattle-based investment company. He served as Chairman
of Burlington Northern Santa Fe Corp., a railroad transportation company,
until his retirement in 1995. He was Chairman and Chief Executive Officer of
Burlington Northern Inc. from 1991 to 1995. Before joining Burlington
Northern in 1987, he was Chairman of Western Airlines from 1983 to 1987 and a
partner in the law firm of Preston, Thorgrimson, Ellis and Holman from 1969
to 1983. In addition to being a director of Agilent Technologies, Mr.
Grinstein also serves as a director of Delta Airlines, Inc., PACCAR Inc.,
Imperial Sugar Corp., The Pittston Company, Vans, Inc., and Expedia.com.
Mr. Gruber serves as a member of each Management Committee. Mr. Gruber has
been a Managing Partner of Oak Hill Capital Management, Inc. since November
1988, and has been a Managing Director of Oak Hill Partners, Inc. since March
1992. From May 1990 to March 1992, he was a Managing Director of Rosecliff,
Inc. Since February 1994, Mr. Gruber has also been an officer of Insurance
Partners Advisors, L.P., an investment adviser to Insurance Partners, L.P.
Since October 1992, he has been a Vice President of Keystone. From 1981 to
1990, Mr. Gruber was a Managing Director and co-head of High Yield Securities
and held various other positions at Lehman Brothers, Inc. Mr. Gruber serves
as a director of Superior National Insurance Group, Inc., MVE Holdings, Inc.,
Reliant Building Products, Inc. and several private companies related to
Keystone, Insurance Partners, L.P. and Oak Hill Partners, Inc.
Mr. Henske serves as a member of each Management Committee. In May 2000, Mr.
Henske joined Synopsys, Inc. and currently serves as Senior Vice President
and Chief Financial Officer. From January 1997 to April 2000, Mr. Henske was
a Managing Partner of Oak Hill Capital Management, Inc. From January 1996 to
December 1996, he was Executive Vice President, Chief Financial Officer and
Board Member of American Savings Bank, F.A., a federally chartered thrift.
From 1986 to December 1995, he was a business strategy and financial
consultant with Bain & Company, Inc., where he last held the position of Vice
President. Mr. Henske is a director of Reliant Building Products, Inc. and
Williams Scotsman, Inc.
Mr. Holthaus serves as a member of each Management Committee. In April 1999,
Mr. Holthaus became Chairman of the Board of Williams Scotsman, Inc., and he
has been its President and Chief Executive Officer since April 1997. From
September 1995 to April 1997, he was President and Chief Operating Officer of
Williams Scotsman, Inc. and was Executive Vice President and Chief Financial
Officer prior thereto. He has served as a director of Williams Scotsman, Inc.
since June 1994. Before joining Williams Scotsman, Inc., Mr. Holthaus served
as Senior Vice President of MNC Financial, Inc. from April 1988 to June 1994.
From 1971 to 1988, Mr. Holthaus was associated with the accounting firm of
Ernst & Young (Baltimore), where he served as a partner from 1982 to 1988. He
is a director of the Baltimore Life Companies and Avatech Solutions.
Mr. Patell serves as a member of the Management Committee of the Company.
Since September 1991, Mr. Patell has served as the Herbert Hoover Professor
of Public and Private Management at the Stanford Graduate School of Business.
He was named co-director of the Stanford Integrated Manufacturing Association
in June 1995. From 1975 to the present, he has held various other positions
with the Stanford Graduate School of Business, including Associate Dean for
Academic Affairs. Mr. Patell is a member of the editorial board of the
Journal of Accounting Research and the Journal of Management Accounting
Research. Mr. Patell is a Director of Reliant Building Products, Inc. He also
serves as a Director of the Center for Quality of Management - West, and as
an advisor to the Corporate Design Foundation, both non-profit institutions.
23
<PAGE>
MANAGEMENT COMMITTEE SUBCOMMITTEES AND FEES
The Company Management Committee has an executive committee, compensation
committee, operating committee, finance committee, and audit/ethics committee.
Except for Mr. Patell, none of the members of the Company Management Committee
and the subcommittees are compensated for their services as such. Mr. Patell was
granted 1,333 Phantom Shares (under Grove Investors' Long-Term Incentive Plan)
for his Management Committee service in fiscal year 2000.
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth all cash compensation paid during the last fiscal
year to Grove Worldwide's current and former Chief Executive Officers, those
officers who were, at September 30, 2000, the next four highest paid officers of
Grove Worldwide, and those additional individuals for whom disclosure would have
been provided but for the fact that such individuals were not serving as
executive officers of Grove Worldwide at the end of the last completed fiscal
year (collectively, together with the Chief Executive Officers, the "Named
Executive Officers"):
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION AWARDS
-------------------------
ANNUAL COMPENSATION (a) SECURITIES ALL OTHER
------------------------------------ UNDERLYING LTIP COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS (b) PAYOUTS (c)
------------------------- -------- ------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
S. Bonanno, CEO,
Grove Worldwide (d) 2000 $ 26,923 -- -- -- 1,479,084(e)
1999 500,004 37,292 -- -- 199,604(f)
1998 273,718 -- 1,500 -- 67,626(g)
J. Bust, CEO, Grove Worldwide (h) 2000 471,756 -- 750 -- 19,255(i)
1999 270,000 43,380 -- -- 117,166(j)
1998 85,154 -- 750 -- 291,262(k)
S. Cripe, CFO, Grove Worldwide 2000 251,777 -- 325 -- 21,423(l)
1999 249,996 -- 525 -- 163,169(m)
1998 31,410 -- -- -- 30,428(n)
K. Simmons, General Counsel and
Human Resources, 2000 246,311 -- 190 -- 24,539(t)
Grove Worldwide (s) 1999 208,751 10,852 187 -- 36,547(u)
1998 192,759 45,540 -- 161,238 14,120(v)
J. Wheeler, President and COO,
Grove Worldwide (o) 2000 219,458 -- 300 -- 31,410(p)
1999 206,378 25,069 -- -- 59,922(q)
1998 185,205 69,882 300 98,580 13,190(r)
J. Danules, President,
Grove Manlift (w) 2000 208,686 -- -- -- 146,610(x)
1999 85,624 -- -- -- 34,593(y)
</TABLE>
(a) The value of perquisites and benefits for each Named Executive Officer does
not exceed the lesser of $50,000 or 10% of the total annual salary and bonus
of such executive officer and, accordingly, is not reported herein.
(b) Certain of the Named Executive Officers have been granted options to
purchase limited liability interests in Grove Investors denominated in Class
A Units (as defined in the Option Plan).
24
<PAGE>
(c) Represents the value of a vehicle allowance, employer-matching contributions
under Grove Worldwide's 401(k) plan, excess group term life insurance value,
supplemental health care insurance and long-term disability insurance
premiums. Does not include benefits that are made available to all
employees.
(d) Salvatore J. Bonanno served as CEO of Grove Worldwide until October 5, 1999.
(e) Includes payments of $1,470,180 to Mr. Bonanno under the terms of his
severance agreement with Grove Worldwide.
(f) Includes a payment of $100,000 made to Mr. Bonanno under the terms of his
employment agreement with Grove Worldwide, $64,042 for relocation costs
incurred in connection with becoming Chairman and CEO of Grove Worldwide on
April 29, 1998, a vehicle allowance in the amount of $12,000, employer
matching contributions under the Grove Worldwide 401(k) plan of $10,000,
excess group term life insurance valued at $8,500 and supplemental health
insurance benefits in the amount of $3,877.
(g) Includes a payment of $63,462 to compensate Mr. Bonanno for compensation
foregone under an employment arrangement with his former employer.
(h) Mr. Bust was employed by Grove Worldwide on June 8, 1998 in the
position of President, Grove Crane. Mr. Bust became CEO effective October
1999.
(i) Includes a vehicle allowance of $12,000, excess group term life insurance
valued at $3,383, and $2,738 for relocation costs.
(j) Includes $98,870 for relocation costs incurred in connection with becoming
President of Grove Crane, a vehicle allowance of $12,000, excess group term
life insurance valued at $2,645 and supplemental health insurance benefits
of $2,517.
(k) Includes $290,000 paid in accordance with the terms of his employment
arrangement with Grove Worldwide as President, Grove Crane.
(l) Includes a vehicle allowance of $12,000, employer matching contributions
under the Grove Worldwide 401(k) plan of $4,250, excess group term life
insurance valued at $1,429 and supplemental health insurance benefits of
$2,610.
(m) Includes a vehicle allowance of $12,000, payment of $101,000 in accordance
with the terms of his employment arrangement with Grove Worldwide and
$46,987 for relocation costs incurred in connection with becoming the Chief
Financial Officer.
(n) Includes $30,000 paid in accordance with the terms of his employment
arrangement with Grove Worldwide as Chief Financial Officer effective August
17, 1998.
(o) Mr. Wheeler was named President and Chief Operating Officer on August 8,
2000, having previously served as President - Europe, Africa, and the Middle
East.
(p) Includes a vehicle allowance of $6,000, excess group term life insurance
valued at $4,715, employer matching contributions under the Grove Worldwide
401(k) of $4,250, and $15,019 under his employment arrangement with Grove
Worldwide as President and Chief Operating Officer.
(q) Includes a vehicle allowance of $12,000, use of company vehicle valued at
$3,144, excess group term life insurance valued at $3,341, supplemental
health insurance benefits of $2,398, $33,016 paid in connection with Mr.
Wheeler's transfer to Germany as an expatriate employee following his
promotion to the position of President Grove Europe, Africa and Middle East
on December 1, 1998, and $4,376 employer matching contributions under the
Grove Worldwide 401(k) plan.
(r) Includes employer-matching contributions under Grove Worldwide's 401(k)
plan of $5,000.
(s) As the Company's General Counsel, Mr. Simmons assumed additional
responsibility for the Company's worldwide Human Resources function
effective October 6, 1999.
(t) Includes a vehicle allowance of $12,000, excess group term life insurance
valued at $5,625, employer matching contributions under the Grove Worldwide
401(k) plan of $4,250 and supplemental health insurance benefits of $1,530.
(u) Includes a vehicle allowance in the amount of $12,000, use of company
vehicle valued at $4,689, excess group term life insurance valued at $3,063,
employer matching contributions under the Grove Worldwide 401(k) plan of
$4,188 and $10,000 in accordance with his employment arrangement with Grove
Worldwide.
(v) Includes the use of a company vehicle valued at $4,660 and employer matching
contributions under Grove Worldwide's 401(k) plan of $5,000.
(w) Mr. Danules became President of Grove Manlift effective October 20, 1999,
having previously served as Senior Vice President, Sales & Marketing of
Grove Manlift.
(x) Includes a vehicle allowance of $12,000, $30,684 for relocation costs,
excess group term life insurance valued at $2,792, and $100,000 under his
employment arrangement with Grove Worldwide as President, Grove Manlift.
(y) Includes a vehicle allowance of $5,333, $2,906 for relocation costs, excess
group term life insurance valued at $880, and $25,000 under his employment
arrangement with Grove Worldwide as Senior Vice President, Sales &
Marketing, Grove Manlift.
25
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth individual grants of options pursuant to the
Grove Investors LLC Management Option Plan (the "Option Plan") for officers,
members and employees during the last fiscal year to the Named Executive
Officers:
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES PERCENT
UNDERLYING OF TOTAL OPTIONS/
OPTIONS/SARS SARS GRANTED EXERCISE OR
GRANTED TO EMPLOYEES IN BASE PRICE EXPIRATION
NAME (#) (1) FISCAL YEAR ($/SECURITY) DATE (2)
-------------- ----------- ---------------------- ----------------- -------------------
<S> <C> <C> <C> <C>
J. Bust 750 48% $500 January 2, 2010
S. Cripe 325 21% $500 January 2, 2010
J. Wheeler 300 19% $500 January 2, 2010
K. Simmons 190 12% $500 January 2, 2010
-------------- ----------- ---------------------- ----------------- -------------------
</TABLE>
(1) Options to purchase limited liability interests in Grove Investors
denominated in Class A Units (as defined in the Option Plan).
(2) The options may be exercised: (i) January 2, 2010; (ii) 30 days following
termination of the Named Executive Officer concerned without cause (as
described in the Option Plan); (iii) one year following the death or
disability of the Named Executive Officer concerned; (iv) the effective date
of termination for cause (as described in the Option Plan); or (v) the
effective date of voluntary termination for any reason (as described in the
Option Plan).
PENSION BENEFITS
The following table sets forth the standard annual benefits payable to
participants in the Company's pension plan and nonqualified supplemental benefit
plan:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
-----------------------------------------------------------------------------
RENUMERATION 15 20 25 30 35
--------------------- ------------ ------------ ------------- ------------- ------------
<S> <C> <C> <C> <C> <C>
$ 125,000 $ 27,515 $ 36,687 $ 45,859 $ 55,031 $ 64,202
150,000 33,703 44,937 56,171 67,406 78,640
175,000 39,890 53,187 66,484 79,781 93,077
200,000 46,078 61,437 76,796 92,156 107,515
225,000 52,265 69,687 87,109 104,531 121,952
300,000 60,928 81,237 101,546 121,856 142,165
400,000 60,928 81,237 101,546 121,856 142,165
450,000 60,928 81,237 101,546 121,856 142,165
500,000 60,928 81,237 101,546 121,856 142,165
</TABLE>
Salaried employees of the Company are eligible to participate in the Company's
defined benefit pension plan, and each named Executive Officer participates in a
supplemental excess retirement plan. Under the aggregated plans, benefits are
determined based on years of service and average annual base salary (up to
$260,000 for years after 1996) for the highest three of the last 10 years of
service. Benefits under the plan equal 1% of final average pay up to Social
Security covered compensation plus 1.65% of final average pay in excess of
social security covered compensation, minus any benefits payable under the
Company's prior plan.
All of the Named Executive Officers are participants in the pension plan.
26
<PAGE>
The following table sets forth the estimated credited years of service for each
of the Named Executive Officers as of the end of fiscal 2000:
ESTIMATED CREDITED YEARS OF SERVICE AS OF THE END OF FISCAL YEAR 2000
<TABLE>
<CAPTION>
CREDITED YEARS
NAME OF SERVICE
--------------------- -------------------
<S> <C>
S. Bonanno 1.5
J. Bust 2.3
S. Cripe 2.2
J. Wheeler 15.8
K. Simmons 15.1
J. Danules 1.5
</TABLE>
DESCRIPTION OF MANAGEMENT OPTION PLAN
In April 1998, Grove Investors, the parent company of Grove Holdings, adopted
the Option Plan. The purpose of the Option Plan is to promote the interests of
Grove Investors and its members by (i) attracting and retaining exceptional
officers and other key employees of Grove Investors and its affiliates,
specifically the Company, and (ii) enabling such individuals to acquire an
equity interest in, and participate in the long-term growth and financial
success of Grove Investors.
Subject to a participant's continued employment with the Company or its
affiliates, options granted under the Option Plan will vest over a five-year
period as follows. For each of the first five fiscal years beginning after the
date the options are granted, the options will vest and become cumulatively
exercisable with respect to 20% of Grove Investors' membership interests subject
to such options on the last day of such fiscal year if the Company and its
subsidiaries meet the EBITDA target established for that fiscal year. If the
EBITDA actually achieved for a year is less than the EBITDA target for that
year, then the vesting schedule for that year will be proportionately reduced.
In addition, options will not vest in any year if the actual EBITDA for that
year is less than a minimum percentage of the EBITDA target. No options are
currently vested.
To the extent not previously canceled, any unvested portion of an option will,
as of the date of a Change in Control (as defined in the Option Plan), be deemed
vested and exercisable immediately prior to such Change in Control. In addition,
as a result of a termination of employment by any participant, Grove Investors
has the assignable right but not the obligation to purchase the participant's
membership interests in Grove Investors for an amount to be calculated based on
the participant's reason for termination of employment.
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
During fiscal 1999, Grove Investors adopted a Phantom Share Appreciation Rights
(PSAR) Plan for the purpose of (i) attracting and retaining exceptional
employees and (ii) enabling such individuals to participate in the long-term
growth of the Company. Under this plan, key employees and management committee
members are granted equity appreciation rights (PSAR). Upon the occurrence of a
"realization event", generally a change of control, as defined, the holder of
the PSAR is paid an amount equal to the fair value of the PSAR over its initial
grant price, plus the cumulative dividends paid by the Company since the date of
grant. Rights cannot be assigned, sold or transferred and generally vest over a
five-year period assuming achievement of certain earnings targets. Rights vest
immediately if a realization event occurs. If the employee is terminated due to
death, disability, or without cause, the vested portion of the PSAR remains
effective and the non-vested portion is canceled. If the employee is terminated
for any other reason, the entire PSAR is canceled. The committee that
administers the plan has the right to equitably adjust the number of shares,
grant price or make cash payments if it determines that some event has affected
the value of the PSAR's
27
<PAGE>
to the employees. The committee is currently authorized to grant up to 22,000
rights which is the equivalent of approximately a 1% equity interest in
Investors. The committee also has the ability to designate any other event or
time other than a change of control as a realization event. The plan expires
after ten years unless specifically amended. None of the Named Executives
participate in this plan.
During the year ended September 30, 2000, the Company granted 2,870 and 1,333
rights with exercise prices of 37.50 and 0.00 dollars per right,
respectively. For the year ended September 30, 2000, the Company did not
achieve the earnings targets. The Company has not recognized any compensation
with respect to the vesting since the estimated fair value of the underlying
equity interest is less than the exercise price. At September 30, 2000,
15,709 rights were outstanding of which 4,998 were vested.
SHORT-TERM INCENTIVE PLAN
The Company's short-term incentive plan (the "STIP") permits the Company to pay
officers and other key employees, including prospective officers and employees,
of the Company and its affiliates an annual bonus conditioned on the attainment
of certain pre-established financial performance criteria based on EBITDA and
inventory turn targets for the Company and/or designated business sub-units. The
STIP is administered by certain persons designated by the Compensation Committee
of the Company.
EMPLOYMENT ARRANGEMENTS
Mr. Bonanno's employment with the Company terminated on October 5, 1999.
Pursuant to the terms of an employment contract with the Company dated as of
April 28, 1998, Mr. Bonanno is entitled to the following severance: (i)
continued salary for twenty-four months based on an annual salary of $500,000;
(ii) bonus payable in twenty-four monthly payments equal to 1/12 of a target
bonus amount of $500,000; and (iii) a special bonus of $450,000 paid on March
31, 2000. There is no unpaid incentive compensation due with respect to any
prior completed fiscal year, nor is any amount due for incentive compensation
for the completed months of his employment during fiscal year 1999. The Company
exercised its termination call rights to purchase all of Mr. Bonanno's interests
in Grove Investors at fair market value. Effective November 15, 1999, this fair
market value of $1,000,000 was applied against the unpaid principal and interest
amounts due under a promissory note for $1,000,000 dated June 27, 1998. The
remaining unpaid interest accrued on the promissory note was withheld and offset
from the monthly bonus payments. All of Mr. Bonanno's options under the Option
Plan were unvested and, therefore, were automatically canceled upon termination.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
In July 1998, a compensation committee, made up of members of the Company's
Management Committee (the "Compensation Committee"), was formed to approve
executive compensation policies. The chairman of the Compensation Committee is
Mr. Crandall. Messrs. Gruber and Bust are also members of the Compensation
Committee, which determines the compensation of the executive officers of the
Company. Traditionally, the Company's compensation practices had been based on a
modified "Hay" system. The Company has determined that a combination of its
traditional modified "Hay" system and a "market" value approach to executive
compensation provides appropriate compensation controls and meets the need for
competitive compensation to enable the Company to recruit, retain and reward its
executives.
28
<PAGE>
MANAGEMENT OF GROVE CAPITAL
Messrs. Henske, Crandall and Bust are the directors of Grove Capital. They are
not compensated in any way for acting in their capacity as such. The board of
directors of Grove Capital does not have a compensation committee, audit
committee or nominating committee.
Mr. Bust is the Chief Executive Officer of Grove Capital. Mr. Simmons is the
Vice President and Secretary of Grove Capital. Mr. Cripe is the Vice
President and Chief Financial Officer of Grove Capital. None of the executive
officers of Grove Capital are compensated for their services as such. See
"Item 10. Directors and Executive Officers of the Registrant" for
biographical information on the members and executive officers of Grove
Capital.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of the issued and outstanding membership interests of the Company are
beneficially owned by Grove Holdings whose principal address is 1565 Buchanan
Trail East, Shady Grove, Pennsylvania 17256. All shares of the issued and
outstanding capital stock of Grove Capital are beneficially owned by the
Company, whose principal address is 1565 Buchanan Trail East, Shady Grove,
Pennsylvania 17256. All of the issued and outstanding membership interests of
Grove Holdings are beneficially owned by Grove Investors, whose principal
address is 201 Main Street, Fort Worth, Texas 76102.
29
<PAGE>
The following table sets forth certain information regarding beneficial
ownership of the membership interests of Grove Investors, the managing member of
Grove Holdings, by (i) each person or entity who owns five percent or more
thereof, (ii) each member of the Company Management Committee individually who
holds membership interests, (iii) each Named Executive Officer who holds
membership interests and (iv) all executive officers and members of the Company
Management Committee as a group:
<TABLE>
<CAPTION>
MEMBERSHIP
NAME OF BENEFICIAL OWNER INTERESTS (7)
-------------------------------------------- ------------------
<S> <C>
Oak Hill Strategic Partners, L.P.(1) (2)
201 Main Street, Suite 3200
Forth Worth, Texas 76102 44.27%
FW Grove Coinvestors, L.P. (2) (3)
201 Main Street, Suite 3200
Forth Worth, Texas 76102 44.27%
GGEP-Grove, L.P. (2) (4)
One Galleria Tower
13355 Noel Road, Suite 1100
Dallas, Texas 75240 2.71%
D. Brown (3) 44.27%
J. Crandall (1) 44.27%
M. George (2) (4) 1.92%
J. Bust (5) 1.50%
S. Cripe (5) 1.58%
K. Simmons (5) *
J. Wheeler (5) *
All executive officers and members of the
Company Management Committee as
a group (8 persons) (6) 50.46%
</TABLE>
*Indicates less than one percent.
(1)The general partner of Oak Hill Strategic Partners, L.P. is FW
Strategic Asset Management, L.P., whose general partner is Strategic
Genpar, Inc. J Taylor Crandall is the sole stockholder of Strategic
Genpar, Inc. Accordingly, Mr. Crandall may be deemed to be the beneficial
owner of the membership interests of Oak Hill Strategic Partners, L.P. Mr.
Crandall disclaims beneficial ownership of these membership interests. In
addition, Mr. Crandall is a member of the Company Management Committee.
(2)Represents Class B Membership Interests. The Class B Membership Interests
and the Class A Membership Interests are substantially identical except that,
under the terms of the Grove Investors LLC Operating Agreement, the issuance
of additional Class B Membership Interests will not result in dilution to the
holders of the Class A Membership Interests.
(3)The general partner of FW Grove Coinvestors, L.P. is FW Group Genpar,
Inc. ("Group Genpar"). David G. Brown is the sole stockholder of Group
Genpar. Accordingly, Mr. Brown may be deemed to be the beneficial owner of
the membership interests of FW Grove Coinvestors, L.P. Mr. Brown disclaims
beneficial ownership of these membership interests.
(4)GGEP-Grove, L.P., is an entity formed by certain employees of George
Group. Mr. George is the Chief Executive Officer and Chairman of the Board
and majority stockholder of George Group. Accordingly, he may be deemed to
be the beneficial owner of the membership interests of GGEP-Grove, L.P. In
addition, Mr. George is a member of the Company Management Committee.
(5)Represents Class A Membership Interests.
(6)Includes membership interests which may be deemed to be beneficially
owned by Messrs. Crandall and George.
(7)Percentage of membership interests represents Class A and Class B membership
interests combined into one group.
30
<PAGE>
Certain members of senior management of the Company have purchased
approximately 4.3% of the membership interests of Grove Investors. The
purchase price of such interests was partially financed through approximately
$1,338,000 in loans from the Company. Certain members of the senior
management have also been granted options to purchase membership interests of
Investors under the Option Plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
OPERATING AGREEMENTS
GROVE WORLDWIDE LLC OPERATING AGREEMENT
The Company is wholly owned by Grove Holdings, which is also the managing
member. As managing member, Grove Holdings has delegated the management of the
Company to the Company Management Committee. Subject to restrictions contained
in the New Credit Facility and the Indenture relating to the Senior Subordinated
Notes, all distributions in respect of membership interests of the Company will
be made to Grove Holdings.
GROVE HOLDINGS LLC OPERATING AGREEMENT
Grove Holdings is wholly owned by Grove Investors, which is also the managing
member of Grove Holdings. As managing member, Grove Investors has delegated the
management of the Company to the Holdings Management Committee, which has the
same composition as the Company Management Committee (except J. Patell, who is a
member only of the Company Management Committee). Subject to restrictions
contained in the Indenture relating to the Debentures, all distributions in
respect of membership interests of Grove Holdings will be made to Grove
Investors.
AGREEMENTS WITH GEORGE GROUP INC. FOR MANAGEMENT CONSULTING SERVICES
George Group provided consulting services to facilitate the Company's
development and achievement of its business plan, including services with
respect to an operations improvement program, strategic planning, operations and
financial matters. For such services, George Group was paid cash fees equivalent
to its costs and was reimbursed for its out-of-pocket expenses. The Company paid
George Group approximately $0.9 million in fiscal 2000. The consulting agreement
expired on December 31, 1999.
LOANS TO CERTAIN EXECUTIVE OFFICERS
The Company has provided loans to certain executive officers of the Company to
finance their investment in the membership interest of Grove Investors. These
loans are evidenced by promissory notes which bear interest at a rate per annum
equal to the prime rate of Wells Fargo Bank and are secured by a pledge of the
executive's membership interests in Grove Investors. All of the notes are due
ten years from their date of issuance. As of September 30, 2000, Messrs. Bust,
Wheeler, and Cripe were indebted to the Company in the amounts of approximately
$650,000, $179,000, and $677,000, including accrued interest, respectively.
31
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) (1) List of Financial Statements.
The following Combined and Consolidated Financial Statements of the Company and
the Report of Independent Accountants set forth on pages F-1 through F-46
respectively, are incorporated by reference into this Item 14 of Form 10-K by
Item 8 hereof:
See Index to Combined and Consolidated Financial Statements and Financial
Statement Schedule on page F-1.
(a) (2) Financial Statement Schedules.
The following is a list of all financial statement schedules filed as part of
this Report:
See Index to Combined and Consolidated Financial Statements and Financial
Statement Schedule on page F-1.
Schedules other than those listed in the Index to Combined and Consolidated
Financial Statements and Financial Statement Schedule on page F-1 have been
omitted because they are not required or are not applicable, or the required
information has been included in the Combined and Consolidated Financial
Statements or the Notes thereto.
(a) (3) Exhibits.
<TABLE>
<CAPTION>
Exhibit No. DESCRIPTION OF EXHIBIT
----------- ----------------------
<S> <C>
3.1* Second Amended and Restated Limited Liability Company Agreement
of Grove Worldwide LLC ("Grove")
4.1* Indenture dated as of April 29, 1998, by and among Grove, Grove
Capital, Inc. ("Grove Capital"), the Subsidiary Guarantors and
the United States Trust Company of New York.
4.2* Form of 9 1/4% Senior Subordinated Notes due 2008.
4.3* Credit Agreement dated April 29, 1998, by and among Grove, Grove
Capital and Chase Bank of Texas, National Association, as
administrative agent, Donaldson, Lufkin & Jenrette Securities
Corporation, as documentation agent, and BankBoston, N.A., as
syndication agent.
4.4* Registration Rights Agreement dated as of April 29, 1998, by and
among Grove, Grove Capital, the Subsidiary Guarantors and Chase
Securities Inc., Donaldson, Lufkin & Jenrette Securities
Corporation and BankBoston Securities Inc.
10.3* George Group Consulting Agreement dated as of April 29, 1998 by and
between Grove and George Group Inc.
10.4* Employment Agreement dated as of March 5, 1998 by and between
Grove and Salvatore J. Bonanno
32
<PAGE>
Exhibit No. Description of Exhibit
----------- ----------------------
10.5* Change of Control Agreement dated July 24, 1997 by and between
Grove and Keith R. Simmons.
10.6* Change of Control Agreement dated July 24, 1997 by and between
Grove and Theodore J. Urbanek.
10.7* Grove Investors LLC Management Option Plan.
10.8* Grove Worldwide LLC Short-Term Incentive Plan.
10.9* Guarantee and Collateral Agreement by Grove Holdings LLC, Grove,
Grove Capital and certain of their subsidiaries in favor of Chase
Bank of Texas, National Association, as administrative agent.
10.10* Form of Grove Investors LLC Option Agreement.
10.11* First Amendment, dated June 23, 1998, to Employment Agreement of
Salvatore J. Bonanno.
10.12* Promissory Note dated June 27, 1998 by and between Grove and
Salvatore J. Bonanno.
10.13* Promissory Noted dated June 27, 1998 by and between Grove and
Jeffry D. Bust.
10.14* Promissory Note dated June 27, 1998 by and between Grove and
John Wheeler.
10.15* Promissory Note dated October 27, 1998 by and between Grove and
Stephen L. Cripe.
10.16* Promissory Note dated October 27, 1998 by and between Grove and
Stephen L. Cripe.
10.17* First Amendment, dated October 22, 1999, to the Credit Agreement
dated April 29, 1998, by and among Grove Worldwide LLC, Grove
Capital, Inc. and Chase Bank of Texas, National Association, as
administrative agent, Donaldson, Lufkin & Jenrette Securities
Corporation as documentation agent, and BankBoston, N.A., as
syndication agent.
10.18* Severance Agreement and General Release, dated October 6, 1999
by and among Grove Investors LLC, Grove Worldwide LLC, and
Salvatore J. Bonanno.
10.19* Grove Investors LLC Realization Event Plan (PSAR)
10.20* First Amendment to the Consulting Agreement dated April 29,
1998, by and between Grove Worldwide LLC and George Group, Inc
10.22 Second Amendment and Waiver, dated as of October 20, 2000, to
the Credit Agreement, dated as of April 29, 1998, as amended, among
Grove Worldwide LLC, Grove Capital, Inc., the several banks and
other financial institutions or entities from time to time parties
to the Credit Agreement and The Chase Manhattan Bank, as
administrative agent.
10.23 Amendment to indenture dated as of May 11, 2000 among Grove
Worldwide LLC, a Delaware limited liability company, Grove
Capital, Inc., a Delaware corporation, Crane Acquisition Corp.,
a Delaware corporation, Crane Holding, Inc., a Delaware
corporation, National Crane Corp., a Delaware corporation, Grove
Finance LLC, a Delaware limited liability company and Grove U.S.
LLC, a Delaware limited liability company and the United States
Trust Company of New York, as trustee, to the Indenture dated as
of April 29, 1998 among the issuers, the Subsidiary Guarantors
and the Trustee
10.24 Third amendment and consent, dated as of January 11, 2001, to the
Credit Agreement, dated as of April 29, 1998, as amended, among
Grove Worldwide LLC, Grove Capital, Inc., the several banks and
other financial institutions or entities from time to time parties
to this Agreement (collectively, the "Lenders"; individually, a
"Lender") and THE CHASE MANHATTAN BANK, as Administrative Agent (as
hereinafter defined) for the Lenders hereunder.
21.1* Subsidiaries of the Company.
27.1 Financial Data Schedule.
</TABLE>
* Incorporated herein by reference from the Registration Statement on Form S-4
filed by Grove Worldwide LLC, Grove Capital, Inc. and the Subsidiary
Guarantors (Commission File Number 333-57611).
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended September 30, 2000.
33
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 on January 12, 2001.
GROVE WORLDWIDE LLC
/s/ Jeffry D. Bust
------------------
Jeffry D. Bust
Chairman and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated on January 12, 2001.
<TABLE>
<CAPTION>
Signatures Title
---------- -----
<S> <C>
/s/ Jeffry D. Bust Chairman and Chief Executive Officer and
---------------------- Member (Principal Executive Officer)
Jeffry D. Bust
/s/ Stephen L. Cripe Chief Financial Officer (Principal Financial
---------------------- and Accounting Officer)
Stephen L. Cripe
/s/ J Taylor Crandall Member
----------------------
J Taylor Crandall
/s/ Michael L. George Member
----------------------
Michael L. George
/s/ Gerald Grinstein Member
----------------------
Gerald Grinstein
/s/ Steven B. Gruber Member
----------------------
Steven B. Gruber
/s/ Robert B. Henske Member
----------------------
Robert B. Henske
/s/ Gerard E. Holthaus Member
----------------------
Gerard E. Holthaus
/s/ James Patell Member
----------------------
James Patell
</TABLE>
34
<PAGE>
SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION
15(d) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT TO
SECTION 12 OF THE ACT.
The registrant has not sent the following to security holders: (i) any annual
report to security holders covering the registrant's last fiscal year; or (ii)
any proxy statement, form of proxy or other proxy soliciting material with
respect to any annual or other meeting of security holders.
35
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
FINANCIAL STATEMENTS
Independent Auditors' Report F-2
Consolidated Balance Sheets as of October 2, 1999 and September 30, 2000 F-3
Combined Statements of Operations for the seven months ended April 28,
1998 and Consolidated Statements of Operations for the five months
ended October 3, 1998 and years ended October 2, 1999 and
September 30, 2000 F-4
Combined Statements of Comprehensive Loss for the seven months ended
April 28, 1998 and Consolidated Statements of Comprehensive Loss for
the five months ended October 3, 1998 and years ended October 2,
1999 and September 30, 2000 F-5
Combined Statements of Predecessor Capital for the seven months ended
April 28, 1998 and Consolidated Statements of Members' Equity (Deficit)
for the five months ended October 3, 1998 and years ended October 2,
1999 and September 30, 2000 F-6
Combined Statements of Cash Flows for the seven months ended April 28,
1998 and Consolidated Statements of Cash Flows for the five months
ended October 3, 1998 and years ended October 2, 1999 and
September 30, 2000 F-7
Notes to Combined and Consolidated Financial Statements F-8
FINANCIAL STATEMENT SCHEDULE
Schedule II - Valuation and Qualifying Accounts S-1
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Management Committee of
Grove Worldwide LLC:
We have audited the accompanying consolidated balance sheets of Grove
Worldwide LLC and subsidiaries as of October 2, 1999 and September 30, 2000
and the related consolidated statements of operations, comprehensive loss,
member's equity (deficit) and cash flows for the five months ended October 3,
1998 and the years ended October 2, 1999 and September 30, 2000 (Successor
Periods) and the combined statements of operations, comprehensive loss,
predecessor capital and cash flows for the seven months ended April 28, 1998
(Predecessor Period). In connection with our audit of the combined and
consolidated financial statements, we have also audited the combined and
consolidated financial statement schedule listed under Item 14(a)(2). These
combined and consolidated financial statements and financial statement
schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these combined and consolidated
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Grove Worldwide LLC
and subsidiaries as of October 2, 1999 and September 30, 2000, and the results
of their operations and their cash flows for the Successor Periods, in
conformity with accounting principles generally accepted in the United States of
America. Furthermore, in our opinion, the aforementioned combined financial
statements present fairly, in all material respects, the results of operations
and cash flows of The Grove Companies for the Predecessor Period, in conformity
with accounting principles generally accepted in the United States of America.
Also in our opinion, the related combined and consolidated financial statement
schedule, when considered in relation to the basic consolidated and combined
financial statements taken as a whole, presents fairly, in all material
respects, the information set forth therein.
As discussed in note 3 to the combined and consolidated financial statements, on
April 28, 1998, Grove Worldwide LLC acquired The Grove Companies in a business
combination accounted for as a purchase. As a result of the acquisition, the
consolidated information for periods following the acquisition is presented on a
different cost basis than that for the periods before the acquisition and,
therefore is not comparable.
/s/ KPMG LLP
January 12, 2001
F-2
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Consolidated Balance Sheets
October 2, 1999 and September 30, 2000
(in thousands)
<TABLE>
<CAPTION>
1999 2000
------------ -------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 15,498 $ 16,102
Cash restricted as to its use (note 5) 1,366 1,688
Trade receivables, net (note 5) 142,271 131,405
Notes receivable (note 5) 5,425 6,801
Inventories (note 6) 193,123 175,181
Net assets of subsidiary held for sale (note 22) -- 3,308
Prepaid expenses and other current assets 7,405 10,116
------------ -------------
Total current assets 365,088 344,601
Property, plant and equipment, net (note 7) 213,731 168,696
Goodwill, net (note 8) 269,556 199,861
Other assets 13,126 12,977
------------ -------------
$ 861,501 $ 726,135
============ =============
LIABILITIES AND MEMBER'S EQUITY (DEFICIT)
Current liabilities:
Current maturities of long-term debt (notes 2, 11 and 24) $ 12,000 $ 37,000
Short-term borrowings (note 9) 19,108 20,967
Accounts payable 75,370 75,780
Accrued expenses and other current liabilities (note 10) 84,946 83,064
------------ -------------
Total current liabilities 191,424 216,811
Deferred revenue (note 4) 74,368 37,170
Long-term debt (notes 2, 11 and 24) 401,000 399,000
Other liabilities (notes 12 and 13) 90,141 84,865
------------ -------------
Total liabilities 756,933 737,846
------------ -------------
Member's equity (deficit):
Invested capital 163,710 164,289
Accumulated deficit (49,477) (152,082)
Accumulated other comprehensive loss (9,665) (23,918)
------------ -------------
Total member's equity (deficit) 104,568 (11,711)
Commitments and contingencies (notes 2, 17, 18 and 19)
------------ -------------
$ 861,501 $ 726,135
============ =============
</TABLE>
See accompanying notes to combined and consolidated financial statements.
F-3
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Combined Statement of Operations for the seven months ended
April 28, 1998 and Consolidated Statements of Operations for
the five months ended October 3, 1998 and
years ended October 2, 1999 and September 30, 2000
(in thousands)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
---------------- ---------------------------------------------------
APRIL 28, OCTOBER 3, OCTOBER 2, SEPTEMBER 30,
1998 1998 1999 2000
-------------- --------------- --------------- -------------
<S> <C> <C> <C> <C>
Net sales $ 486,255 $ 401,008 $ 793,784 $ 850,562
Cost of goods sold (note 6) 387,392 342,993 646,002 725,680
-------------- --------------- --------------- -------------
Gross profit 98,863 58,015 147,782 124,882
Selling, engineering, general
and administrative expenses 73,826 58,098 124,704 107,658
Amortization of goodwill 5,215 3,091 6,880 7,029
Restructuring charges (note 16) -- -- -- 8,757
Goodwill impairment charge (note 8) -- -- -- 53,351
-------------- --------------- --------------- -------------
Income (loss) from
operations 19,822 (3,174) 16,198 (51,913)
Interest income (expense), net (note 11) 1,048 (15,916) (36,020) (43,703)
Other expense, net (9,524) (554) (139) (1,036)
-------------- --------------- --------------- -------------
Income (loss) before
income taxes 11,346 (19,644) (19,961) (96,652)
Income taxes (note 15) 11,741 4,337 5,535 6,255
-------------- --------------- --------------- -------------
Net loss before cumulative
effect of change in
accounting principle (395) (23,981) (25,496) (102,907)
Cumulative effect of change in
accounting principle (note 18) -- -- -- 302
-------------- --------------- --------------- -------------
Net loss $ (395) $ (23,981) $ (25,496) $ (102,605)
============== =============== =============== =============
</TABLE>
See accompanying notes to combined and consolidated financial statements.
F-4
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Combined Statement of Comprehensive Loss for the seven months
ended April 28, 1998 and Consolidated Statements of Comprehensive
Loss for the five months ended October 3, 1998 and
years ended October 2, 1999 and September 30, 2000
(in thousands)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------ ----------------------------------------------
APRIL 28, OCTOBER 3, OCTOBER 2, SEPTEMBER 30,
1998 1998 1999 2000
------------ ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net loss $ (395) $ (23,981) $ (25,496) $ (102,605)
Change in minimum pension liability
(note 13) (1,371) (2,059) (5,909) 7,708
Unrealized net losses on cash flow hedges
of forecasted foreign currency
transactions -- -- -- (992)
Change in foreign currency translation
adjustment (5,764) 7,341 (9,038) (20,969)
------------ ----------- ----------- -----------
Comprehensive loss $ (7,530) $ (18,699) $ (40,443) $ (116,858)
============ =========== =========== ===========
</TABLE>
See accompanying notes to combined and consolidated financial statements.
F-5
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Combined Statement of Predecessor Capital for the seven months
ended April 28, 1998 and Consolidated Statements of Member's Equity
(Deficit) for the five months ended October 3, 1998 and
years ended October 2, 1999 and September 30, 2000
(in thousands)
<TABLE>
<CAPTION>
COMPANY
-------------------------------------------------------
ACCUMULATED TOTAL
OTHER MEMBER'S
PREDECESSOR INVESTED ACCUMULATED COMPREHENSIVE EQUITY
CAPITAL CAPITAL DEFICIT INCOME (LOSS) (DEFICIT)
----------- --------- ----------- ------------- ---------
<S> <C> <C> <C> <C> <C>
Balance, September 27, 1997 $ 628,492 $ -- $ -- $ -- $ --
Net loss (395) -- -- -- --
Net transactions with affiliates (111,216) -- -- -- --
Other comprehensive loss (7,135)
----------- --------- ----------- ------------- ---------
Balance, April 28, 1998 509,746 -- -- -- --
Elimination of predecessor capital (509,746) -- -- -- --
Initial capitalization
Advances to Grove -- 168,209 -- -- 168,209
Holdings LLC (note 20) -- (3,649) -- -- (3,649)
Net loss -- -- (23,981) -- (23,981)
Other comprehensive income -- -- -- 5,282 5,282
---------- --------- ----------- ------------- ---------
Balance, October 3, 1998 -- 164,560 (23,981) 5,282 145,861
Advances to Grove
Holdings LLC (note 20) -- (850) -- -- (850)
Net loss -- -- (25,496) -- (25,496)
Other comprehensive loss -- -- -- (14,947) (14,947)
---------- --------- ----------- ------------- ---------
Balance, October 2, 1999 -- 163,710 (49,477) (9,665) 104,568
Contribution from Grove
Holdings LLC (note 20) -- 579 -- -- 579
Net loss -- -- (102,605) -- (102,605)
Other comprehensive loss -- -- -- (14,253) (14,253)
---------- --------- ----------- ------------- ---------
Balance, September 30, 2000 $ -- $ 164,289 $ (152,082) $ (23,918) $ (11,711)
========== ========= =========== ============= =========
</TABLE>
See accompanying notes to combined and consolidated financial statements.
F-6
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Combined Statement of Cash Flows for the seven months ended
April 28, 1998 and Consolidated Statements of Cash Flows for
the five months ended October 3, 1998 and
years ended October 2, 1999 and September 30, 2000
(in thousands)
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
---------- -------------------------------------
APRIL 28, OCTOBER 3, OCTOBER 2, SEPTEMBER 30,
1998 1998 1999 2000
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net loss $ (395) $ (23,981) $ (25,496) $ (102,605)
Adjustments to reconcile to net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 11,399 8,213 18,537 20,209
Depreciation of equipment held for rent 5,501 7,400 14,921 15,998
Amortization of deferred financing costs -- 722 1,872 1,909
Goodwill impairment charge -- -- -- 53,351
Write-off of amount assigned to inventory
in purchase accounting -- 27,707 -- --
(Gain) loss on sales of property, plant
and equipment 6,256 -- (255) 31
Deferred income tax expense (benefit) 2,358 1,249 2,680 (304)
Changes in operating assets and liabilities:
Trade receivables, net 32,096 (6,790) (16,951) (3,383)
Notes receivable 28,409 (3,607) 462 (1,457)
Inventories (8,828) 17,936 6,907 1,593
Accounts payable and accrued expenses 7,542 2,489 (14,854) 8,749
Other assets and liabilities, net 8,759 25,962 12,863 (2,421)
---------- ---------- ---------- ----------
Net cash provided by (used in)
operating activities 93,097 57,300 686 (8,330)
---------- ---------- ---------- ----------
Cash flows from investing activities:
Additions to property, plant and equipment (19,521) (7,230) (9,405) (8,775)
Investment in equipment held for rent (16,380) (20,751) (23,793) (6,876)
Acquisition of businesses from Hanson, PLC
including transaction costs of $5,783 net of cash
acquired of $9,241 and post-closing adjustment
received of $27,300 -- (562,742) 10,500 --
Other investing activities 2,071 1,321 3,408 --
---------- ---------- ---------- ----------
Net cash used in investing activities (33,830) (589,402) (19,290) (15,651)
---------- ---------- ---------- ----------
Cash flows from financing activities:
Net proceeds from short-term borrowings 6,821 941 4,139 1,801
Proceeds from issuance of long-term debt -- 450,200 10,000 25,000
Repayments of long-term debt -- (35,200) (12,000) (2,000)
Equity investment from Grove Holdings LLC -- 168,209 -- --
Change in amount advanced to Grove Holdings LLC -- (3,649) (850) 579
Deferred financing costs -- (14,453) -- --
Other financing activities (62,087) -- (1,366) (322)
---------- ---------- ---------- ----------
Net cash provided by (used in)
financing activities (55,266) 566,048 (77) 25,058
---------- ---------- ---------- ----------
Effect of exchange rate changes on cash 217 343 (110) (473)
---------- ---------- ---------- ----------
Net change in cash and cash equivalents 4,218 34,289 (18,791) 604
Cash and cash equivalents, beginning of period 5,024 -- 34,289 15,498
---------- ---------- ---------- ----------
Cash and cash equivalents, end of period $ 9,242 $ 34,289 $ 15,498 $ 16,102
========== ========== ========== ==========
</TABLE>
See accompanying notes to combined and consolidated financial statements.
F-7
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
(1) ORGANIZATION, DESCRIPTION OF BUSINESS, AND BASIS OF PRESENTATION
Grove Worldwide LLC (the "Company") is primarily engaged in the design,
production, sale, and after-sale support of mobile hydraulic cranes, aerial
work platforms and truck-mounted cranes. The Company's domestic
manufacturing plants and related facilities are located in Shady Grove and
Chambersburg, Pennsylvania and Waverly, Nebraska. The Company's foreign
facilities are located in Sunderland, United Kingdom; Wilhelmshaven and
Langenfeld, Germany; and Tonneins and Cergy, France. The majority of the
Company's sales are to independent distributors, rental companies, and end
users which serve the heavy industrial and construction industries in the
United States and Europe.
The Company is a sole member limited liability company formed in December
1997 pursuant to the provisions of the Delaware Limited Liability Company
Act. The Company had no substantive operations prior to its initial
capitalization and the acquisition of The Grove Companies (as defined
below) on April 28, 1998 (see note 3). 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 (see note 11). Holdings is a sole member limited
liability company that is owned by Grove Investors LLC ("Investors").
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany balances
and transactions have been eliminated in consolidation.
Combined financial statements for the seven month period ended April 28,
1998 consist of the combined operations and substantially all of the
assets and liabilities of Kidde Industries, Inc. and the following legal
entities: Grove Europe Ltd., Crane Holdings, Inc., Delta Manlift SAS,
Grove France SAS, Deutsche Grove GmbH, and Grove Manlift Pty. Ltd.
(together "The Grove Companies" or "Predecessor"). All of the Grove
Companies were either directly or indirectly owned by Hanson PLC, a
United Kingdom company.
(2) LIQUIDITY
During the years ended October 2, 1999 and September 30, 2000, the Company
incurred significant operating losses that would have resulted in
non-compliance with certain financial covenants included in the Company's
Bank Credit Facility (see note 11). The Company has obtained waivers of
these financial covenant defaults as well as certain covenant modifications
to help position the Company for future compliance. Nevertheless, future
compliance will depend upon achieving significantly improved operating
results during fiscal 2001 and beyond. Furthermore, modifications to the
Bank Credit Facility place significant restrictions on the amount of
borrowings available to the Company for working capital purposes,
particularly during the period through April 30, 2001, a period during
which the Company's need is projected to be the greatest (see note 11).
F-8
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
Management has undertaken a number of initiatives to help improve operating
results and cash flows including (i) reduction in Manlift operations, (ii)
sale of Delta Manlift operations in France, (iii) restructuring of Shady
Grove, Pennsylvania manufacturing operations by improving product flow and
(iv) reducing the number of sales, marketing, engineering and
administrative employees, principally in Shady Grove and the UK.
Management believes the initiatives undertaken will enable the Company to
maintain compliance with bank financial covenants as well as provide
sufficient cash flow to meet the Company's obligations as they become due.
However, if the initiatives are not successful or if there are unforeseen
increases in working capital needs, the Company may be unable to meet bank
covenants and/or to generate sufficient cash flows from operations. In such
case, the Company will be required to obtain additional covenant
modifications and additional sources of funding. There is no assurance that
such covenant modifications or funding, if needed, will be available.
(3) ACQUISITION
On April 29, 1998, the Company acquired (the "Acquisition") from Hanson PLC
("Hanson") and certain of its subsidiaries, substantially all of the assets
of Hanson's U.S. mobile hydraulic crane and aerial work platform
operations, the capital stock of Hanson's U.S. truck-mounted crane
operation and the capital stock of Hanson's British, French, German, and
Australian crane and aerial work platform subsidiaries for an aggregate
purchase price of $583,000. The purchase price was subject to a post
closing adjustment for which the Company received $16,800 during fiscal
1998 and an additional $10,500 in November 1998. The Acquisition was
accounted for as a purchase. Funds required by the Company to consummate
the Acquisition, including the payment of related fees and expenses, were
as follows:
<TABLE>
<S> <C>
Sources:
Issuance of the Senior Subordinated Notes $ 225,000
Borrowings under Revolving Credit Facility 10,106
Borrowings under Term Loan Facility 200,000
Equity investment by Holdings 168,209
------------
$ 603,315
============
Uses:
Acquisition price $ 583,000
Transaction costs 5,783
------------
Aggregate purchase price 588,783
Debt financing costs 14,532
------------
$ 603,315
============
</TABLE>
F-9
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
Proceeds from the equity investment by Holdings of $168,209 were
generated by Holdings through the issuance of 100% of its equity to
Investors in exchange for $120,000, and net proceeds of $48,209 from its
issuance of $88,000 of 11-5/8% Senior Discount Debentures due May 2009.
Such debentures have no cash interest requirement prior to November,
2003. On May 1, 2003, the debentures will have accreted to $88,000 and
will require semi-annual payments of interest based on a per annum rate
of 11 5/8%. The cash interest payments are expected to be generated by
distributions from the Company. The equity investment by Investors in
Holdings of $120,000 was generated by Investors through issuance of its
equity to its members for $75,000, and net proceeds of $45,000 from its
issuance of $47,375 of 14 1/2% Senior Debentures. Such debentures have no
cash interest requirement prior to their maturity on May 1, 2010.
(4) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) CASH AND CASH EQUIVALENTS
The Company defines cash equivalents as highly liquid investments with
initial maturities of three months or less.
(b) TRADE RECEIVABLES AND NOTES RECEIVABLE
Trade receivables are net of allowance for doubtful accounts of $3,095
and $5,057 as of October 2, 1999 and September 30, 2000, respectively.
Notes receivable relate to sales of new equipment to North American
customers on terms of up to one year. Payment of interest and
principal are due at the maturity of the note unless the dealer sells
the equipment prior to maturity in which case the notes must be repaid
immediately along with any interest accrued thereon.
(c) INVENTORIES
Inventories are valued at the lower of cost or market, as determined
primarily under the first-in, first-out method.
F-10 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
(d) PROPERTY, PLANT AND EQUIPMENT
Property, plant, and equipment are stated at cost. Maintenance and
repairs are charged to operations when incurred, while expenditures
having the effect of extending the useful life of an asset are
capitalized. Depreciation is computed primarily using the straight-line
method. The useful lives by asset category are as follows:
<TABLE>
<S> <C>
Land improvements 3-20 years
Buildings and improvements 10-30 years
Machinery and equipment 3-12 years
Equipment held for rent Lease term
Furniture and fixtures 3-10 years
</TABLE>
(e) GOODWILL
The excess of the purchase price of the Company and its subsidiaries
over the fair value of the net assets acquired was recorded as
goodwill. Amortization expense is recorded on the straight-line method
over 40 years. The Company assesses the recovery of goodwill by
determining whether amortization of the goodwill over its remaining
life can be recovered through undiscounted cash flows of the acquired
operations. Goodwill impairment, if any, is measured by determining the
amount by which the carrying value of the goodwill exceeds its fair
value based upon discounting of future cash flows.
(f) IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews long-lived assets and certain identifiable
intangibles for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future undiscounted
net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of assets exceed
the fair value of the assets. Assets to be disposed of are reported at
the lower of the carrying amount or net realizable value.
(g) REVENUE RECOGNITION
Revenue is generally recognized as title transfers, usually as products
are shipped to customers. However, for certain transactions, the
Company provides guarantees of the residual value of the equipment to
third party leasing companies. Such guarantees generally, given for
periods of up to five years, take the form of end-of-term residual
value guarantees or reducing residual value guarantees that decline
with the passage of time. The Company records these transactions in
accordance with the lease principles established by Statement of
Financial Accounting Standards (SFAS) No. 13. If the transaction
qualifies as an operating lease, the Company records deferred
F-11 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
revenue for the amount of the net proceeds received upon the
equipment's initial transfer to the customer. The liability is then
subsequently reduced on a pro rata basis over the period to the first
exercise date of the guarantee, to the amount of the guaranteed
residual value at that date, with corresponding credits to revenue in
the Company's statement of operations. Any further reduction in the
guaranteed residual value resulting from the purchaser's decision to
continue to use the equipment is recognized in a similar manner.
Depreciation of equipment held for rent is recognized in a similar
manner over the term of the lease agreement. As of October 2, 1999 and
September 30, 2000, the amount of deferred revenue relating to
transactions involving residual value guarantees, which is classified
as deferred revenue or other current liabilities, was $89,250 and
$49,739, respectively.
(h) PRODUCT WARRANTIES
Product warranty expenses are provided for estimated normal warranty
costs at the time of sale. Additional warranty expense is provided for
specific performance issues when identified. Specific performance
issues relate to situations in which the Company issues a part
replacement notice for models that are experiencing a particular
problem.
(i) FOREIGN CURRENCY TRANSLATION
The financial statements of subsidiaries located outside the United
States are measured using the local currency as the functional
currency. Assets, including goodwill, and liabilities are translated at
the rates of exchange at the balance sheet date. The resulting
translation gains and losses are included as a separate component of
member's equity. Income and expense items are translated at average
monthly rates of exchange. Gains and losses from foreign currency
transactions of these subsidiaries are included in net income.
Aggregate gains (losses) on foreign currency transactions are not
material for the seven months ended April 28, 1998, the five months
ended October 3, 1998 and the year ended October 2, 1999. For the year
ended September 30, 2000, the Company had aggregate losses on foreign
currency transactions of $2,256.
(j) RESEARCH AND DEVELOPMENT
Research and development expenditures are charged to operations as
incurred. Research and development costs were $8,242, $5,878, $12,371
and $10,749 for the seven months ended April 28, 1998, the five months
ended October 3, 1998 and years ended October 2, 1999 and September 30,
2000, respectively, and are included as part of selling, engineering,
general and administrative expenses.
F-12 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
(k) ADVERTISING
All costs associated with advertising and promoting products are
expensed when incurred. Advertising expense amounted to $2,324, $1,568,
$2,289 and $2,893 for the seven months ended April 28, 1998, the five
months ended October 3, 1998 and years ended October 2, 1999 and
September 30, 2000, respectively.
(l) STOCK-BASED COMPENSATION
The Company has elected to follow Accounting Principles Board Opinion
No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES, and related
interpretations in accounting for its stock-based employee compensation
arrangements.
(m) FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of a financial instrument represents the amount at which
the instrument could be exchanged in a current transaction between
willing parties, other than a forced sale or liquidation. Significant
differences can arise between the fair value and carrying amount of
financial instruments that are recognized at historical cost amounts.
The following methods and assumptions were used by the Company in
estimating fair value disclosures for financial instruments:
Cash, trade receivables, notes receivable, trade accounts payable
and short-term borrowings: The amounts reported in the consolidated
balance sheets approximate fair value.
Foreign currency contracts: The fair value of forward exchange
contracts is estimated using prices established by financial
institutions for comparable instruments (see note 18).
Long-term debt: For bank borrowings, the amount reported in the
consolidated balance sheet approximates fair value. The fair value
of the Senior Subordinated Notes is based on quoted market prices
(see note 11).
(n) ADOPTION OF NEW ACCOUNTING STANDARD
In 2000, the FASB issued EITF 00-10, ACCOUNTING FOR SHIPPING AND
HANDLING FEES AND COSTS. In accordance with the consensus, net sales
amounts have been restated to exclude freight costs, which
historically had been netted with freight revenues. The impact of the
restatement was to increase net sales and cost of goods sold by
$10,055, $7,229, $12,555 and $13,719 for the seven months ended
April 28, 1998, five months ended October 3, 1998 and years ended
October 2, 1999 and September 30, 2000, respectively.
F-13 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
(o) USE OF ESTIMATES
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
consolidated financial statements and the reported amounts of revenues
and expenses during the reporting period to prepare these consolidated
financial statements in conformity with accounting principles generally
accepted in the United States of America. Actual results could differ
significantly from those estimates.
(p) RECLASSIFICATIONS
Certain amounts for fiscal 1999 have been reclassified to conform to
the presentation for fiscal 2000.
(5) ACCOUNTS AND NOTES RECEIVABLE
Trade receivables subject the Company to concentration of credit risk,
because they are concentrated in distributors and rental companies that
serve the heavy industrial and construction industries, which are subject
to business cycle variations. For the seven months ended April 28, 1998 and
the five months ended October 3, 1998, approximately 23% and 24%,
respectively, of revenues were generated from five major customers, with no
one customer accounting for more than 10% of net sales. For the years ended
October 2, 1999 and September 30, 2000, approximately 20% and 17% of
revenues were generated from five major customers with no one customer
accounting for more than 10% of net sales. Approximately 20% and 17% of the
outstanding trade and notes receivable balance as of October 2, 1999 and
September 30, 2000 were due from these customers, respectively.
The Company generally offers terms of up to 30 days to its customers and
generally obtains a security interest in the underlying machinery sold. In
addition, the Company offers a special financing program primarily to its
U.S. customers which provides credit terms of periods up to one year in
exchange for an interest-bearing note. The Company generally retains a
security interest in the machinery sold.
The Company has agreements with three major international banks to sell up
to $135,000 of notes receivable obtained under the special financing
program, subject to certain conditions. The bank purchases the notes
receivable at face value on a 90% non-recourse basis. However, the
Company's Bank Credit Facility limits the aggregate sold amount of
receivables outstanding under the arrangements to $110.0 million at all
times. The agreements provide that the Company purchase credit insurance on
behalf of the bank to insure the 90% risk assumed by the bank. The Company
retains 10% of the credit risk on a first loss basis. The Company is
responsible for administrative and collection activities. The cost of
administrative and collection activities is immaterial. Cash collections on
the
F-14 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
notes are deposited directly into an account for the benefit of the major
international banks. Amounts held by the Company at October 2, 1999 and
September 30, 2000 are shown as restricted cash in the accompanying
consolidated balance sheet. The bank has the power to sell or pledge the
notes receivable purchased at any time and the Company has no rights or
obligation to repurchase of the notes receivable.
Notes receivable sold under this arrangement meet the criteria for sale
under SFAS No. 125 and, accordingly, are removed from the Company's balance
sheet upon sale. At September 30, 2000, the Company had credit risk of
$8,005 with respect to notes receivable that had been sold under the
arrangement.
(6) INVENTORIES
Inventories consist of the following as of October 2, 1999 and September
30, 2000:
<TABLE>
<CAPTION>
1999 2000
------------- -------------
<S> <C> <C>
Raw materials and supplies $ 61,340 $ 60,367
Work in process 79,232 51,524
Finished goods 52,551 63,290
------------- -------------
$ 193,123 $ 175,181
============= =============
</TABLE>
In connection with the Acquisition, the Company assigned $27,700 of the
purchase price to work in process and finished goods inventories in excess
of their historical carrying value. Such amounts were charged to costs of
goods sold in the five month period ended October 3, 1998.
During the year ended September 30, 2000, management of the Company made
the decision to reduce the number of aerial work platform models
manufactured. The decision together with further rationalization of the
Company U.S. crane products resulted in inventory write-downs of $12,500,
which are included in cost of goods sold.
F-15 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
(7) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following as of October 2,
1999 and September 30, 2000:
<TABLE>
<CAPTION>
1999 2000
------------- -------------
<S> <C> <C>
Land and improvements $ 5,989 $ 5,921
Buildings and improvements 68,690 68,586
Machinery and equipment 42,799 44,856
Equipment held for rent 105,099 55,258
Furniture and fixtures 30,149 30,236
Construction in progress 470 3,271
------------- -------------
253,196 208,128
Less accumulated depreciation and amortization 39,465 39,432
------------- -------------
$ 213,731 $ 168,696
============= =============
</TABLE>
Depreciation expense (including depreciation expense on equipment held for
rent) for the seven months ended April 28, 1998, the five months ended
October 3, 1998 and years ended October 2, 1999 and September 30, 2000 was
$11,685, $12,522, $26,578 and $29,178, respectively.
(8) GOODWILL
Goodwill consists of the following as of October 2, 1999 and September 30,
2000:
<TABLE>
<CAPTION>
1999 2000
------------- -------------
<S> <C> <C>
Goodwill $ 280,153 $ 214,529
Less accumulated amortization 10,597 14,668
------------- -------------
$ 269,556 $ 199,861
============= =============
</TABLE>
During the fourth quarter of fiscal 2000, management of the Company adopted
a plan, approved by the Management Committee, to reduce the size of its
Manlift operations. Under the plan, the Company plans to sell the Delta
Manlift subsidiary in France (see note 22) and will discontinue all sales,
marketing and production of 34 Manlift models elsewhere in the world
including Shady Grove, PA on or about December 31, 2000. In connection with
the decision to reduce Manlift operations, the Company recognized a
goodwill impairment charge of $53,351.
F-16 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
(9) SHORT-TERM BORROWINGS
The Company's German operation maintains a DM58,000 (approximately $28,000)
credit facility available for discounting certain accounts receivable. As
of October 2, 1999 and September 30, 2000, $19,108 and $20,967 were drawn
against this facility. The interest rate charged on the outstanding
borrowings was 3.75% and 7.20% at October 2, 1999 and September 30, 2000,
respectively. This arrangement does not have a termination date and is
reviewed periodically. No material commitment fees are required to be paid
on the undrawn portion of the credit facility.
(10) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following as
of October 2, 1999 and September 30, 2000:
<TABLE>
<CAPTION>
1999 2000
------------- -------------
<S> <C> <C>
Salaries, wages and benefits $ 23,023 15,174
Warranty 12,787 11,818
Deferred revenue associated with equipment held for rent, current 14,882 12,589
Interest 9,364 9,964
Sunderland, U.K. shut-down costs 712 --
Other 24,178 33,697
------------- -------------
$ 84,946 83,242
============= =============
</TABLE>
(11) LONG-TERM DEBT
Long-term debt consists of the following as of October 2, 1999 and
September 30, 2000:
<TABLE>
<CAPTION>
1999 2000
------------- -------------
<S> <C> <C>
Revolving credit facility $ 10,000 $ 35,000
Term loan facility 178,000 176,000
Senior subordinated notes 225,000 225,000
------------- -------------
413,000 436,000
Less current maturities 12,000 37,000
------------- -------------
Long-term debt $ 401,000 $ 399,000
============= =============
</TABLE>
F-17 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
BANK CREDIT FACILITY -- The Company has a bank credit facility (the "Bank
Credit Facility"), which consists of a $200,000 term loan facility ("Term
Loan Facility") and a $66,250 revolving credit facility ("Revolving Credit
Facility"). Subsequent to year end, in order to obtain modifications to
certain financial covenants, the Company negotiated an amendment to the
credit agreement which provides for (i) higher borrowing and facility fee
rates, (ii) limitations on the amount of the revolving credit facility
available for general operating purposes and (iii) a borrowing base. As
amended, the Revolving Credit Facility enables the Company to obtain
revolving credit loans for working capital and general corporate purposes
of up to $66,250, subject to eligible amounts of receivables and inventory.
Effective April 1, 2001, maximum borrowings under the Revolving Credit
Facility will decline from $66,250 to $60,000. However, during a 14-day
period ending April 16, 2001 and a 5-day period ending April 23, 2001
borrowings under the Revolving Credit facility will be limited to $40,000
and $35,000, respectively. A portion of the Revolving Credit Facility is
available for borrowings by the Company in the Eurocurrency markets of
British pounds sterling, German marks, French francs and certain other
currencies. The Company also pays a 0.75% fee on the unused portion of the
Bank Credit Facility. The Bank Credit Facility contains various covenants
that restrict the Company from taking various actions and that require the
Company to achieve and maintain certain financial ratios. In addition,
the modified covenants require the Company to achieve certain earnings
targets on a quarterly basis through fiscal 2001, including a
requirement to achieve adjusted earnings before interest, taxes,
depreciation and amortization, ("Adjusted EBITDA") as defined, of $20,000
for the six months ended March 31, 2001. (see note 24)
Without the covenant modifications, the Company would not have been in
compliance with certain of the financial covenants required by the Bank
Credit Facility at September 30, 2000. Management has undertaken a number
of initiatives to improve the Company's operating results. In the event
that results do not improve, the Company may need to seek further
modifications to the covenants. There can be no assurance that the Company
will obtain such modifications, if required.
Furthermore, the credit agreement provides that at the Company's option,
loans under the Bank Credit Facility bear interest (a) in the case of loans
in U.S. dollars, at the highest of (x) 1/2 of 1% in excess of the Federal
Funds Effective Rate (as defined in the Bank Credit Facility), (y) 1.0% in
excess of a certificate of deposit rate and (z) the bank's prime rate, plus
the applicable margin (as defined in the Bank Credit Facility), or (b) in
the case of all loans, the relevant Eurocurrency Rate (as defined in the
Bank Credit Facility) as determined by the Administrative Agent, plus the
applicable margin. At September 30, 2000, borrowings of $35,000 were
outstanding under the Revolving Credit Facility, bearing interest based on
LIBOR plus an applicable margin of 3.0% (9.79% at September 30, 2000). The
interest rate on borrowings under the Term Loan Facility at September 30,
2000 was based on LIBOR plus an applicable margin of 3.5% (10.29% at
September 30, 2000). Following amendment of the Bank Credit Facility, the
applicable margin on Eurocurrency Rate borrowings will be 4%, except for
borrowings under the Revolving Credit Facility above $60 million where the
applicable margin will be 5% and the applicable margin on all other rate
based borrowings will be 3%, except for borrowings under the Revolving
Credit Facility above $60 million where the applicable margin will be 4%.
The average interest rate on borrowings under the Revolving Credit and Term
Loan Facilities were 7.71% and 9.71%, respectively, for the years ended
October 2, 1999 and September 30, 2000.
F-18 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
The Term Loan Facility has a term of eight years and must be repaid in
semi-annual installments in October and April of each fiscal year in an
aggregate amount of (i) $2,000 through fiscal 2004, (ii) $88,000 during
fiscal 2005 and (iii) the balance during fiscal 2006. The Revolving Credit
Facility expires in April 2005. In connection with the Amendment, if the
amounts outstanding under the Revolving Credit Facility are not paid in
full by September 30, 2001, the Company will be required to pay an exit fee
of approximately $2.6 million upon final payment of amounts outstanding
under the Revolving Credit Facility. The Company is required to make
annual payments, in excess of the schedule principal payments, on the
Term Loan Facility of up to 75% of the Company's "excess cash flow" as
defined in the Bank Credit Facility. No payments were due with respect
to this provision for the year ended September 30, 2000. In addition,
the Bank Credit Facility requires mandatory prepayments upon the
occurrence of certain events including the change of control of
Holdings. At September 30, 2000, the Company had outstanding letters of
credit of $5,300 and available borrowings under the Revolving Credit
Facility, as amended, for general operating purposes of approximately
$25,950.
The obligations of the Company under the Bank Credit Facility are
guaranteed by Holdings and each of the Company's domestic subsidiaries (the
"Guarantors"). The obligations of the Company under the Bank Credit
Facility are secured by a first priority lien (subject to permitted
encumbrances) on substantially all of the Company's and each Guarantor's
real, personal, and intellectual property and on the capital stock of the
Company and all of the capital stock of the Company's domestic and certain
of its foreign subsidiaries.
SENIOR SUBORDINATED NOTES -- The Senior Subordinated Notes bear interest at
a rate of 9 1/4% per annum payable semi-annually on May 1 and November 1 of
each year. The Senior Subordinated Notes are general unsecured obligations
of the Company and its co-issuer, Grove Capital, Inc., and are guaranteed
by all of the Company's domestic subsidiaries (see note 23). The Senior
Subordinated Notes are redeemable at the option of the Company, in whole or
in part, at any time on or after, May 1, 2003, at a declining redemption
price and mature on May 1, 2008.
In addition, at any time prior to May 1, 2001, the Company may redeem up to
35% of the originally issued aggregate principal amount of the Senior
Subordinated Notes at 109.25% of the principal amount thereof, plus accrued
and unpaid interest and liquidated damages, if any, with net proceeds of
one or more public offerings of the Company's equity (or that of Investors
or Holdings), provided at least 65% of the principal amount of the
originally issued Senior Subordinated Notes remain outstanding. Upon the
occurrence of a change of control, as defined in the Indenture governing
the Senior Subordinated Notes (the "Indenture"), each holder of the Senior
Subordinated Notes will have the right to require the Company to repurchase
such holder's notes at an offer price in cash equal to 101% of the
aggregate principal amount thereof plus accrued and unpaid interest and
liquidated damages, if any, thereon to the date of purchase.
F-19 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
The Indenture contains certain covenants that limit, among other things,
the ability of the Company to (i) pay dividends, redeem capital stock or
make certain other restricted payments, (ii) incur additional indebtedness
or issue certain preferred equity interests, (iii) merge into or
consolidate with certain other entities or sell all or substantially all of
its assets, (iv) create liens on assets and (v) enter into certain
transactions with affiliates or related persons.
The Company expects that cash flows from foreign operations will be
required to meet its domestic debt service requirements. Such cash flows
are expected to be generated from intercompany interest expense on loans
the Company made to certain of its foreign subsidiaries to consummate the
acquisition of Hanson's crane and aerial work platform subsidiaries in the
U.K., Germany and France and for working capital requirements. The loans
have been established with amounts and interest rates to allow for
repatriation without restriction or additional tax burden. However, there
is no assurance that the foreign subsidiaries will generate the cash flow
required to service the loans or that the laws in the foreign jurisdictions
will not change to limit repatriation or increase the tax burden of
repatriation.
The estimated fair value of the Company's long-term debt at September 30,
2000 was approximately $234,000.
Aggregate annual scheduled maturities of long-term debt are as follows:
$2,000 in 2001, $2,000 in 2002, $2,000 in 2003, $2,000 in 2004 and $88,000
in 2005.
INTEREST EXPENSE -- Interest income (expense), net consists of the
following for the seven months ended April 28, 1998, the five months ended
October 3, 1998 and yeas ended October 2, 1999 September 30, 2000.
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
------------ ---------------------------------------------
APRIL 28, OCTOBER 3, OCTOBER 2, SEPTEMBER 30,
1998 1998 1999 2000
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
Interest expense $ (263) $ (17,410) $ (38,711) $ (48,401)
Interest expense paid to Hanson (2,174) -- --
Amortization of deferred financing
costs -- (722) (1,872) (1,909)
Interest income 3,485 2,216 4,563 6,607
------------ ------------- ------------- -------------
$ 1,048 $ (15,916) $ (36,020) $ (43,703)
============ ============= ============= =============
</TABLE>
The Company paid interest of $7,503, $39,254 and $48,430 for the five
months ended October 3, 1998 and for the years ended October 2, 1999 and
September 30, 2000, respectively.
F-20
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
The Company has entered into an interest rate agreement with a major
commercial bank to collar the interest rate on approximately $100,000 of
the Company's floating rate borrowings for the three years ended September
2001. Under the agreement the Company will receive, on a $100,000 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 (see note 18).
(12) OTHER LIABILITIES
Other liabilities consist of the following as of October 2, 1999 and
September 30, 2000:
<TABLE>
<CAPTION>
1999 2000
---------- ----------
<S> <C> <C>
Accrued liability for defined benefit pension plans $ 31,198 $ 18,096
Accrued liability for postretirement benefit plan 31,696 33,023
Product liability 18,000 22,513
Other 9,247 11,233
---------- ----------
$ 90,141 $ 84,865
========== ==========
</TABLE>
(13) EMPLOYEE BENEFIT PLANS
The Company sponsors defined benefit pension plans which cover
substantially all of its U.S. employees. Plans covering salaried employees
provide pension benefits that are based on the participant's final average
salary and credited service. Plans covering hourly employees provide
benefits based on the participant's career earnings and service with the
Company. The Company's funding policy for all plans is to make the minimum
annual contributions required by applicable regulations, plus such
additional amounts as the Company may determine to be appropriate from time
to time.
In addition to providing pension benefits, the Company provides certain
health care and prescription drug benefits to certain retirees.
Substantially all of the Company's domestic eligible employees may qualify
for benefits if they reach normal retirement age while working for the
Company. The Company funds benefits on a pay-as-you-go basis, while
retirees pay monthly premiums. These benefits are subject to deductibles,
co-payment provisions and other limitations.
F-21 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
The following tables provide reconciliations of the changes in benefit
obligations and plan assets for the years ended October 2, 1999 and
September 30, 2000 and the funded status of the plans as of October 2, 1999
and September 30, 2000.
<TABLE>
<CAPTION>
POST-RETIREMENT
PENSION BENEFITS BENEFITS
-------------------------- ---------------------------
OCTOBER 2, SEPTEMBER 30, OCTOBER 2, SEPTEMBER 30,
1999 2000 1999 2000
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of period $ 61,811 $ 56,358 $ 28,367 $ 28,013
Service cost 3,239 2,893 1,317 847
Interest 4,191 4,294 1,820 1,572
Special termination benefits 1,347 71 1,002 827
Participant contributions -- -- -- 644
Amendments 204 1,452 -- --
Actuarial (gain) loss (9,811) (5,018) (3,757) (8,557)
Curtailment gain (3,308) -- -- --
Benefits paid (1,315) (1,146) (736) (1,770)
------------ ------------ ------------- -------------
Benefit obligation at
end of period $ 56,358 $ 58,904 $ 28,013 $ 21,576
============ ============ ============= =============
Change in plan assets:
Fair value of plan assets at beginning
of period $ 44,438 $ 52,684 $ -- $ --
Actual return on plan assets 5,374 7,896 -- --
Company contributions 4,187 4,934 736 1,126
Participant contributions -- -- -- 644
Benefits paid (1,315) (1,146) (736) (1,770)
------------ ------------ ------------- -------------
Fair value of plan assets at
end of period $ 52,684 $ 64,368 $ -- $ --
============ ============ ============= =============
Funded status $ (3,674) $ 5,464 $ (28,013) $ (21,576)
Unrecognized actuarial gain (loss) (6,605) (14,153) (3,683) (11,447)
Unrecognized prior service cost 204 1,482 -- --
------------ ------------ ------------- -------------
Net amount recognized $ (10,075) $ (7,207) $ (31,696) $ (33,023)
============ ============ ============= =============
Amounts recognized in consolidated
balance sheets consists of:
Accrued benefit liability $ (10,075) $ (7,207) $ (31,696) $ (33,023)
Accumulated other comprehensive
income -- -- -- --
------------ ------------ ------------- -------------
Net amount recognized $ (10,075) $ (7,207) $ (31,696) $ (33,023)
============ ============ ============= =============
Weighted average assumptions at balance
sheet date:
Discount rates 7.50% 8.00% 7.50% 8.00%
Rate of return on assets 10.00% 10.00% -- --
Rate of compensations increases 4.25% 4.25% -- --
</TABLE>
F-22 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
The assumed health care cost trend rate used in measuring the accumulated
post retirement benefit obligation for 1999 was 7.5% decreasing gradually
over 18 years to an ultimate trend rate of 5.0%. The assumed health care
cost trend rate used in measuring the accumulated post retirement benefit
obligation for 2000 was 8.25% decreasing gradually over 18 years to an
ultimate trend rate of 5.0%. A one percentage point increase in the assumed
health care cost rate for each year would increase the accumulated
postretirement benefit obligation by approximately 13% as of September 30,
2000 and the net postretirement benefit costs by approximately 14% for the
year ended September 30, 2000. A one percentage point decrease in the
assumed health care cost rate for each year would decrease the accumulated
postretirement benefit obligation by approximately 11% as of September 30,
2000 and the net postretirement benefit costs by approximately 12% for the
year ended September 30, 2000.
The components of the net periodic benefits costs for all U.S. defined
benefit plans for the seven months ended April 28, 1998, for the five
months ended October 3, 1998 and the years ended October 2, 1999 and
September 30, 2000 are summarized below:
<TABLE>
<CAPTION>
PENSION BENEFITS POSTRETIREMENT BENEFITS
---------------------------------------------- -------------------------------------------------
PREDECESSOR COMPANY PREDECESSOR COMPANY
---------------------------------------------- -------------------------------------------------
APR. 28 OCT. 3, OCT. 2, SEPT. 30, APR. 28, OCT. 3, OCT. 2, SEPT. 30,
1998 1998 1999 2000 1998 1998 1999 2000
--------- -------- -------- ---------- --------- --------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Service costs $ 1,542 $ 1,322 $ 3,239 $ 2,893 $ 622 $ 511 $ 1,317 $ 847
Interest costs 2,163 1,621 4,191 4,294 1,096 725 1,820 1,572
Gain on plan
curtailment -- -- (3,308) -- -- -- -- --
Special termination
benefits -- -- 1,347 -- -- -- 1,002 827
Expected return on
plan assets (1,898) (1,528) (4,469) (5,379) -- -- -- --
Net amortization
and deferral 465 -- -- 99 74 -- -- (443)
--------- -------- -------- --------- --------- --------- ----------- ----------
$ 2,272 $ 1,415 $ 1,000 $ 1,907 $ 1,792 $ 1,236 $ 4,139 $ 2,803
========= ======== ======== ========= ========= ========= =========== ==========
</TABLE>
During the year ended October 2, 1999, in an effort to reduce operating
costs at its Shady Grove Facility, the Company involuntarily terminated or
offered special one-time early retirement benefits to approximately 220
employees. These actions, together with other voluntary terminations,
resulted in a curtailment gain of $3,300 which was recognized in net
periodic pension costs for the year ended October 2, 1999. Special early
retirement benefits resulted in net periodic benefit costs of $2,300 and
$827 for the years ended October 2, 1999 and September 30, 2000,
respectively.
F-23 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
The Company also sponsors defined benefit pension plans which cover
substantially all of its foreign employees. The following tables provide
reconciliations of the changes in benefit obligations and plan assets for
the years ended October 2, 1999 and September 30, 2000 and the funded
status of the plans as of October 2, 1999 and September 30, 2000.
<TABLE>
<CAPTION>
OCTOBER 2, SEPTEMBER 30,
1999 2000
------------- ------------
<S> <C> <C>
Change in benefit obligation:
Benefit obligation at beginning of period $ 36,402 $ 49,166
Service cost 1,759 1,097
Interest 2,315 2,475
Actuarial (gain) loss 7,959 (7,450)
Benefits paid (1,271) (2,179)
Impact of translation of foreign currency 2,002 (5,587)
------------- ------------
Benefit obligation at end of period $ 49,166 $ 37,522
============= ============
Change in plan assets:
Fair value of plan assets at beginning of period $ 22,160 $ 28,043
Actual return on plan assets 2,368 1,852
Company contributions 5,272 2,275
Benefits paid (1,271) (2,179)
Impact of translation of foreign currency (486) (3,358)
------------- ------------
Fair value of plan assets at end of period $ 28,043 $ 26,633
============= ============
Funded status $ (21,123) $ (10,889)
Unrecognized actuarial loss 7,968 260
------------- ------------
Net amount recognized $ (13,155) $ (10,629)
============= ============
Amounts recognized in consolidated statements
balance sheets consists of:
Accrued benefit liability $ (21,123) $ (10,889)
Accumulated other comprehensive income 7,968 260
------------- ------------
Net amount recognized $ (13,155) $ (10,629)
============= ============
Weighted average assumptions at balance sheet date:
Discount rates 5.00% to 6.50% 6.00% to 6.50%
Rate of return on assets 6.00% 7.00%
Rate of compensation increases 2.25% to 3.75% 2.50% to 3.75%
</TABLE>
F-24 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
The components of the net periodic pension costs for all foreign defined
benefit plans for the seven months ended April 28, 1998, for the five
months ended October 3, 1998 and years ended October 2, 1999 and September
30, 2000 are summarized below:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
----------------- -----------------------------------------------------
APRIL 28, OCTOBER 3, OCTOBER 2, SEPTEMBER 30,
1998 1998 1999 2000
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Service cost $ 1,169 $ 927 $ 1,759 $ 1,040
Interest cost 1,289 933 2,280 2,332
Actual return on assets (904) (667) (2,182) (1,735)
Net amortization and deferral 536 -- 1,626 --
-------------- -------------- -------------- --------------
$ 2,090 $ 1,193 $ 3,483 $ 1,637
============== ============== ============== ==============
</TABLE>
Assets of domestic and foreign defined benefit plans consist principally of
investments in equity securities, debt securities, and cash equivalents.
The Company also has a defined contribution plan covering substantially all
of its U.S. employees. Eligible employees may contribute a portion of their
base compensation to the plan and their contributions are matched by the
Company at rates specified in the Plan documents. Contributions by the
Company for the seven months ended April 28, 1998, the five months ended
October 3, 1998 and years ended October 2, 1999 and September 30, 2000 were
approximately $1,169, $835, $1,708 and $1,496, respectively.
(14) MANAGEMENT OPTION AND SHARE APPRECIATION PLANS
Investors has a management option plan whereby the Investor Management
Committee can grant options to purchase equity units of Investors to key
employees and management committee members of the Company at fair value.
The options generally vest over a five-year period only upon the
achievement of certain earnings targets.. During the five months ended
October 3, 1998 and the years ended October 2, 1999 and September 30, 2000,
Investors granted options to employees and management committee members to
purchase 2,700, 1,237.5 and 1,565 Class A units of Investors. Options
granted in 1998 and 1999 had an exercise price or 1,000 dollars. Options
granted in 2000 had an exercise price of 500 dollars. Options generally
expire ten years from the date of grant. During the year ended September
30, 2000 options totaling 2,025 were forfeited. At September 30, 2000
options totaling 1,912.5, with an exercise price of 1,000 dollars, and
options totaling 1,565, with an exercise price of 500 dollars, were
outstanding. No options are currently vested. Assuming an option life of
six years, a risk free rate of 5.5% and no dividend or volatility rates,
the estimated fair value of the options would not exceed 275 dollars for
options granted in 1998 and 1999 and 140 dollars for options granted in
2000. Had the Company accounted for options in accordance with the
provisions of SFAS No. 123, compensation expense with respect to options
granted during the five months ended October 3, 1998 and the years ended
October 2, 1999 and September 30, 2000 would have been immaterial.
F-25 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
During fiscal 1999, Investors adopted a Phantom Share Appreciation Rights
(PSAR) Plan for the purpose of (i) attracting and retaining exceptional
employees and (ii) enabling such individuals to participate in the
long-term growth of the Company. Under this plan, key employees are granted
equity appreciation rights (PSAR). Upon the occurrence of a "realization
event", generally a change of control, as defined, the holder of the PSAR
is paid an amount equal to the fair value of the PSAR over its initial
grant price, plus the cumulative dividends paid by the Company since the
date of grant. Rights cannot be assigned, sold or transferred and generally
vest over a five-year period assuming achievement of certain earnings
targets. Rights vest immediately if a realization event occurs. If the
employee is terminated due to death, disability, or without cause, the
vested portion of the PSAR remains effective and the non-vested portion is
canceled. If the employee is terminated for any other reason, the entire
PSAR is canceled. The committee that administers the plan has the right to
equitably adjust the number of shares, grant price or make cash payments if
it determines that some event has affected the value of the PSAR's to the
employees. The committee is currently authorized to grant up to 22,000
rights which is the equivalent of approximately a 1% equity interest in
Investors as a realization event. The plan expires after ten years unless
specifically amended.
During the years ended October 2, 1999 and September 30, 2000, the
Company granted 15,640 and 2,403 rights, respectively, with an exercise
price of 37.5 dollars per right (except for 1,333 rights which have an
exercise price of zero). During the year ended September 30, 2000 rights
totaling 2,334 were forfeited. Since inception of the plan the Company
has not achieved earnings targets, however, in 1999 the committee
authorized vesting of 20% of the then outstanding rights. At September
30, 2000, rights totaling 15,709 were outstanding of which 4,998 rights,
with an exercise price of 37.5 dollars, were vested. The Company has not
recognized any compensation expense with respect to the vesting since
the estimated fair value of the underlying equity interest is less than
the exercise price.
(15) 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 years ended October 2, 1999 and September 30, 2000.
The provision for income taxes following the Acquisition, will be limited
to foreign taxes with respect to earnings of the Company's foreign
subsidiaries and U.S. state and local taxes with respect to the earnings of
the Company's truck-mounted crane business.
F-26 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
For periods prior to the Acquisition, each of the Grove Companies filed
their own income tax returns or were part of a consolidated group return
with other Hanson entities. Income tax expense for such periods was
determined as if the Grove Companies were a stand-alone entity. In
connection with the Acquisition, Hanson has indemnified the Company with
respect to certain tax obligations arising from activities occurring prior
to the Acquisition.
Domestic and foreign income (loss) before income taxes were as follows for
the seven months ended April 28, 1998, for the five months ended October 3,
1998 and years ended October 2, 1999 and September 30, 2000:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
----------------- ------------------------------------------------
APRIL 28, OCTOBER 3, OCTOBER 2, SEPTEMBER 30,
1998 1998 1999 2000
-------------- ------------ -------------- --------------
<S> <C> <C> <C> <C>
United States $ 30,446 $ (6,460) $ (19,435) $ (100,206)
Other countries (19,100) (13,184) (526) 3,554
-------------- ------------ -------------- --------------
$ 11,346 $ (19,644) $ (19,961) $ (96,652)
============== ============ ============== ==============
</TABLE>
The provision (benefit) for income taxes consisted of the following for the
for the seven months ended April 28, 1998, for the five months ended
October 3, 1998 and years ended October 2, 1999 and September 30, 2000:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
-------------- -----------------------------------------------------
APRIL 28, OCTOBER 3, OCTOBER 2, SEPTEMBER 30,
1998 1998 1999 2000
-------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Current:
United States, state
and local $ 9,383 $ 2,958 $ 1,110 $ 2,064
Other countries - 130 1,745 4,495
-------------- -------------- -------------- --------------
9,383 3,088 2,855 6,559
-------------- -------------- -------------- --------------
Deferred:
United States, state
and local 2,358 (1,551) 1,702 469
Other countries - 2,800 978 (773)
-------------- -------------- -------------- --------------
2,358 1,249 2,680 (304)
-------------- -------------- -------------- --------------
$ 11,741 $ 4,337 $ 5,535 $ 6,255
============== ============== ============== ==============
</TABLE>
The Company paid income taxes of $272, $2,925 and $4,086 for the five
months ended October 3, 1998 and for the years ended October 2, 1999 and
September 30, 2000, respectively.
F-27 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
Significant components of the Company's deferred tax liability are as
follows as of October 2, 1999 and September 30, 2000:
<TABLE>
<CAPTION>
1999 2000
---------- ----------
<S> <C> <C>
Allowance for doubtful accounts $ 104 $ 141
Inventory reserves 369 184
Accrued expenses 3,088 2,944
Accumulated depreciation (4,000) (3,370)
Other 64 30
---------- ----------
Total deferred tax liability $ (375) $ (71)
========== ==========
</TABLE>
Income taxes for the years ended October 2, 1999 and September 30, 2000
relate principally to the Company's subsidiary in Waverly, Nebraska, which
is incorporated as a C-corporation, and the Company's German subsidiary.
(16) RESTRUCTURING
In fiscal 2000, the company adopted and executed restructuring plans that
resulted in the termination of approximately 470 employees principally in
its US operations. In connection with the terminations, the Company accrued
severance costs of $8,757. As of September 30, 2000, the Company has paid
$4,747 and expects to pay the remainder of the amount accrued through
October 2001 in accordance with separation agreements.
In October and November 2000, the Company terminated approximately 220
employees pursuant to the restructuring plans. The terminations will result
in an additional restructuring charge of $1.6 million in fiscal 2001.
F-28 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
(17) LEASES
The Company and its subsidiaries lease office space, machinery and other
equipment under noncancelable operating and capital leases with varying
terms, some of which contain renewal and/or purchase options.
The following is a schedule of future minimum lease payments required under
operating and capital leases that have initial or remaining noncancelable
lease terms in excess of one year:
<TABLE>
<CAPTION>
OPERATING CAPITAL
------------- ------------
<S> <C> <C>
2001 $ 3,175 $ 954
2002 1,633 839
2003 737 760
2004 399 558
2005 54 572
Thereafter - 157
------------ ------------
Future minimum lease payments $ 5,998 3,840
============
Less portion representing interest 448
Less current portion of capital lease obligations 784
------------
Long-term portion of capital lease obligations $ 2,608
============
</TABLE>
Rental expense associated with operating leases was approximately $2,496,
$1,795, $4,977 and $5,905 for the seven months ended April 28, 1998, the
five months ended October 3, 1998 and years ended October 2, 1999 and
September 30, 2000, respectively. It is expected that, in the normal course
of business, leases that expire will be renewed or replaced by leases on
other property and equipment.
(18) DERIVATIVE FINANCIAL INSTRUMENTS
On October 3, 1999 and July 2, 2000, the Company adopted SFAS No. 133,
ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES and SFAS
No. 138, ACCOUNTING FOR CERTAIN DERIVATIVE INSTRUMENTS AND CERTAIN
HEDGING ACTIVITIES (AN AMENDMENT TO SFAS NO. 133), respectively. These
statements establish accounting and reporting standards for derivative
instruments and for hedging activities. They require that an entity
recognize all derivatives as either assets or liabilities measured at
fair value. The impact of adoption of SFAS No. 133 of $302 is presented
as the cumulative effect of a change in accounting principle in the
consolidated statement of operations. There was no impact from the
adoption of SFAS No. 138.
F-29 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
A summary of the Company's hedging strategies and outstanding derivative
instruments are as follows:
(a) 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 September 30,
2000, the Company has approximately $211 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 September 30, 2000 was $302 and $203,
respectively. Management has concluded that the interest rate collar
was ineffective as of October 3, 1999 and throughout the period ended
September 30, 2000. Accordingly, the Company has recognized $99 as
other loss and $302 as the cumulative effect of a change in accounting
principle in the consolidated statement of operations for the year
ended September 30, 2000.
(b) 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 maintain profit
margins the Company will purchase forward currency contracts and
options at date of commitment to hedge Deutsche mark payment
obligations. At September 30, 2000, the Company had $15.5 million in
outstanding forward contracts to purchase Deutsche marks with gross
unrealized losses of approximately $1.7 million. Each of the contracts
are expected to settle within 90 days and have been accounted for as
hedges under SFAS 133. Of the unrealized losses at September 30, 2000,
$992 has been included in the determination of other comprehensive loss
for those forward contracts related to forecasted transactions or
completed transactions whereby the cranes are still in inventory at
September 30, 2000. The remaining unrealized losses at September 30,
2000, which relates to hedges of Deutsche Mark payable obligations,
were included in earnings for the period. The amount in other
comprehensive loss will be realized in earnings upon completion of the
sale of the related inventory.
F-30 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
(19) OTHER COMMITMENTS AND CONTINGENCIES
LEGAL -- The Company is involved in various lawsuits and administrative
proceedings arising in the ordinary course of business. These matters
primarily involve claims for damages arising out of the use of the
Company's products as well as employment matters and commercial disputes.
Some of these lawsuits include claims for punitive as well as compensatory
damages. The Company is insured for product liability and workers'
compensation claims for amounts in excess of established deductibles and
accrues for the estimated liability up to the limits of the deductibles.
The Company accrues for all other claims and lawsuits on a case-by-case
basis. The Company's estimate of the undiscounted costs associated with
legal and environmental exposures is accrued if, in management's judgment,
the likelihood of a loss is probable. The Company's policy is to also
accrue the probable legal costs to be incurred in defending the Company
against such claims. The Company has followed this policy during each of
the periods in the three-year period ended September 30, 2000, with respect
to all investigations, claims and litigation. Insurance recoveries for
environmental and certain general liability claims are not recognized until
realized.
In the opinion of management, while the ultimate results of lawsuits or
other proceedings against the Company cannot be predicted with certainty,
the amounts accrued for awards or assessments in connection with these
matters are adequate and, accordingly, management believes that the
ultimate resolution of these matters will not have a material effect on the
Company. As of September 30, 2000, the Company had no known probable but
inestimable exposures that could have a material effect on the Company.
PRODUCT LIABILITY AND WORKERS' COMPENSATION -- Hanson, on behalf of the
Company, purchased an insurance policy which effectively indemnifies the
Company against North American product liability and workers' compensation
claims arising prior to October 1, 1997 up to an aggregate loss limit of
$85,000. Losses in excess of that amount, if any, are the responsibility of
the Company. For product liability claims arising on or after October 1,
1997, the Company is self-insured for losses up to $2,000 per occurrence,
with a $15,000 annual aggregate loss limit. For workers' compensation
claims arising on or after such date, the Company is self-insured for
losses up to $250 per occurrence with a $1,000 annual aggregate loss limit.
Losses over the loss limits are covered by umbrella insurance coverage up
to $100,000. The Company accrues a reserve for the estimated amount of
claims which will be self-insured. The estimates are provided by a third
party actuary based upon historical trends. The reserve for claims includes
estimates of legal and administrative costs to be incurred.
F-31 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
ENVIRONMENTAL MATTERS -- The Company is also involved in lawsuits and
administrative proceedings with respect to claims involving the discharge
of hazardous substances into the environment. Certain of these claims
assert damages and liability for remedial investigations and cleanup costs
with respect to sites at which the Company has been identified as a
potentially responsible party under federal and state environmental laws
and regulations (off-site). Other matters involve sites that the Company
currently owns and operates or has previously sold (on-site). For off-site
claims, the Company makes an assessment of the costs involved based on
environmental studies, prior experience at similar sites, and the
experience of other named parties. The Company also considers the ability
of other parties to share costs, the percentage of the Company's exposure
relative to all other parties, and the effects of inflation on these
estimated costs. For on-site matters associated with properties currently
owned, the Company makes an assessment as to whether an investigation and
remediation effort is necessary and estimates other potential costs
associated with the site.
OTHER -- The Company provides guarantees of residual value to third party
financing companies in support of certain customers' financing
arrangements. These guarantees generally are only exercisable should the
Company's customer default on their financing agreements. The Company has
not and does not expect to incur losses under these guarantees. Exercises
of these guarantees have not been significant for the periods in the three
years ended September 30, 2000. Aggregate residual value guarantees were
approximately $63,200 at September 30, 2000.
(20) TRANSACTIONS WITH RELATED PARTIES
The Company made advances to Holdings of $3,649 and $850, respectively,
during the five months ended October 3, 1998 and year ended October 2,
1999. Such amount included loans to the Company's executive officers to
purchase certain equity interest in Investors and transactions costs
incurred by Holdings and Investors to consummate the Acquisition and
related financing. Such amounts have been accounted for as a reduction of
member's equity. Repayments from Holdings to the Company were $579 for the
year ended September 30, 2000.
The Company engaged a consulting group controlled by one of Investor's
minority owners, to help the Company develop and achieve its business
plan. For the five months ended October 3, 1998 and the years ended
October 2, 1999 and September 30, 2000, the consulting group was paid
approximately $2,700, $6,800 and $900, respectively, for services
rendered. The agreement expired on December 31, 2000.
(21) 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. Through fiscal 2000, the Company marketed 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.
F-32 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
The Company plans to significantly reduce its Manlift operations through
the sale of Delta Manlift and a significant reduction in the number of
aerial work platforms manufactured. Manlift will continue to provide full
support for the installed base through parts and service, including
discontinued models, and to manufacture six models of boom Manlifts. In
order to take advantage of synergies in fiscal 2001, the Company will merge
Manlift's production, engineering and sales and marketing functions with
those of Grove Crane.
The accounting policies for the three operating business segments are the
same as those described in the summary of significant accounting policies
in note 4. Operating information for each of the three operating divisions
is as follows:
<TABLE>
<CAPTION>
CORPORATE,
GROVE GROVE NATIONAL ELIMINATIONS
CRANE MANLIFT CRANE AND OTHER TOTAL
------------ ------------ ----------- ------------ ------------
<S> <C> <C> <C> <C> <C>
For the seven months ended
April 28, 1998:
Net sales $ 316,844 $ 119,376 $ 50,048 $ (13) $ 486,255
Depreciation and amortization 9,983 517 899 - 11,399
Income (loss) from operations 12,868 3,943 7,680 (4,669) 19,822
Capital expenditures 16,740 1,513 1,268 - 19,521
As of and for the five months ended
October 3, 1998:
Net sales $ 271,447 $ 90,633 $ 39,173 $ (245) $ 401,008
Depreciation and amortization 4,623 127 372 3,091 8,213
Income (loss) from operations 5,622 1,582 6,560 (16,938) (3,174)
Total assets 490,278 62,910 45,428 311,732 910,348
Capital expenditures 6,376 351 503 - 7,230
As of and for the year ended
October 2, 1999:
Net sales $ 545,062 $ 167,812 $ 81,299 $ (389) $ 793,784
Depreciation and amortization 10,407 348 902 6,880 18,537
Income (loss) from operations 44,381 679 11,694 (40,556) 16,198
Total assets 472,949 59,742 41,818 286,992 861,501
Capital expenditures 8,359 277 769 - 9,405
As of and for the year ended
September 30, 2000:
Net sales $ 596,820 $ 158,561 $ 95,263 $ (82) $ 850,562
Depreciation and amortization 11,742 437 1,001 7,029 20,209
Goodwill impairment charge - - - 53,351 53,351
Income (loss) from operations 43,880 (22,691) 12,936 (86,038) (51,913)
Total assets 396,435 62,736 41,258 225,706 726,135
Capital expenditures 7,540 513 722 - 8,775
</TABLE>
F-33 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
Corporate, eliminations and other consist principally of corporate expenses
and assets, goodwill and intercompany eliminations. Depreciation and
amortization excludes depreciation of equipment held for rent. For fiscal
1999 and 2000, the Company allocates certain assets and expenses between
operating divisions differently than for prior periods. Accordingly, such
information is not comparable.
Information with respect to the Company's domestic and foreign operations
is as follows for the seven months ended April 28, 1998, and as of and for
the five months ended October 3, 1998 and the years ended October 2, 1999
and September 30, 2000:
<TABLE>
<CAPTION>
PREDECESSOR COMPANY
--------------- ------------------------------------------------------
APRIL 28, OCTOBER 3, OCTOBER 2, SEPTEMBER 30,
1998 1998 1999 2000
--------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Net sales:
Generated by domestic
operations $ 362,866 $ 314,291 $ 575,682 $ 619,768
Generated by foreign
operations 168,842 126,359 319,008 372,596
Elimination of intercompany
sales (45,453) (39,642) (100,906) (141,802)
--------------- -------------- --------------- ---------------
$ 486,255 $ 401,008 $ 793,784 $ 850,562
=============== ============== =============== ===============
Property, plant and equipment:
Held by domestic operations $ 112,522 $ 113,348 $ 106,488
Held by foreign operations 94,653 100,383 62,208
-------------- --------------- ---------------
$ 207,175 $ 213,731 $ 168,696
============== =============== ===============
</TABLE>
(22) NET ASSETS OF SUBSIDIARY HELD FOR SALE
The Company plans to sell its Delta Manlift subsidiary in Tonneins,
France. Net proceeds from the sale after payment of income taxes will be
used to retire amounts outstanding under the Bank Credit Facility. The
sale, which is expected to result in a gain, is expected to be
completed in the second quarter of fiscal 2001. The net assets of Delta
Manlift are presented as net assets of subsidiary held for sale in the
accompanying consolidated financial statements. The total assets and
total liabilities of Delta Manlift at September 30, 2000, were $7,688
and $4,380, respectively.
(23) SUPPLEMENTAL CONDENSED COMBINED AND CONSOLIDATED FINANCIAL INFORMATION
The Company formed Grove Capital, Inc. as a direct wholly owned
subsidiary to act as a co-issuer of the Senior Subordinated Notes (see
note 11). At September 30, 2000, Grove Capital, Inc. had one hundred
dollars in cash and total assets, and no current or long-term
liabilities other than is contingent co-obligation with respect to the
Senior Subordinated Notes. For the years ended October 2, 1999 and
September 30, 2000, Grove Capital, Inc. had no income or loss and no
revenues. Grove Capital, Inc. has no subsidiaries, no operations and is
prohibited from engaging in any business activities.
F-34 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
The Company's payment obligations under the senior subordinated notes (see
note 11) are guaranteed by all of the Company's domestic subsidiaries other
than Grove Capital, Inc. (the "Subsidiary Guarantors"). Such guarantees are
full, unconditional and joint and several. The Subsidiary Guarantors are
wholly owned by the Company. Grove Capital, Inc. is a wholly owned
subsidiary of the Company. Grove Capital, Inc. and the Company are
co-obligors of the senior subordinated notes and are jointly and severally
liable for such indebtedness. Separate financial statements of Grove
Capital, Inc. and 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
and consolidated basis, balance sheets, statements of operations and
comprehensive income (loss) and statements of cash flows information for
the Subsidiary Guarantors, the Company's non-guarantor subsidiaries and the
Company and its subsidiaries on a combined and consolidated basis. A
separate column for Grove Capital, Inc. has not been provided because Grove
Capital, Inc. has no assets or operations and accordingly, such information
would not be meaningful.
CONDENSED CONSOLIDATING BALANCE SHEETS AS OF OCTOBER 2, 1999
<TABLE>
<CAPTION>
SUBSIDIARY OTHER CONSOLIDATED
COMPANY GUARANTORS SUBSIDIARIES ELIMINATIONS TOTALS
----------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 8,667 $ 2,843 $ 3,988 $ - $ 15,498
Cash restricted as to use - 1,366 - - 1,366
Trade receivables, net - 55,650 86,621 - 142,271
Notes receivable - 5,425 - - 5,425
Inventories - 134,424 58,699 - 193,123
Prepaid expenses other
current assets - 2,306 5,099 7,405
----------- ------------ ------------- ------------- -------------
Total current assets 8,667 202,014 154,407 - 365,088
Property, plant, and
equipment, net - 113,348 100,383 - 213,731
Goodwill - 249,328 20,228 - 269,556
Investment and due from
subsidiaries 679,312 188,338 32,747 (900,397) -
Other assets 11,900 2,197 (971) - 13,126
----------- ------------ ------------- ------------- -------------
Total assets $ 699,879 $ 755,225 $ 306,794 $ (900,397) $ 861,501
=========== ============ ============= ============= =============
</TABLE>
F-35 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
CONDENSED CONSOLIDATING BALANCE SHEETS AS OF OCTOBER 2, 1999, CONTINUED
<TABLE>
<CAPTION>
SUBSIDIARY OTHER CONSOLIDATED
COMPANY GUARANTORS SUBSIDIARIES ELIMINATIONS TOTALS
------------ -------------- ------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
LIABILITIES AND MEMBER'S EQUITY (DEFICIT)
Current liabilities:
Current maturities of
long-term debt $ 12,000 $ - $ - $ - $ 12,000
Short-term borrowings - - 19,108 - 19,108
Accounts payable - 41,706 33,664 - 75,370
Accrued expenses and other
current liabilities 9,191 31,076 44,679 - 84,946
------------ -------------- ------------ ------------ -------------
Total current liabilities 21,191 72,782 97,451 - 191,424
Deferred revenue - - 74,368 - 74,368
Long-term debt 401,000 - - - 401,000
Due to subsidiaries 161,424 510,474 114,865 (786,763) -
Other liabilities 101 64,171 25,869 - 90,141
------------ -------------- ------------ ------------ -------------
Total liabilities 583,716 647,427 312,553 (786,763) 756,933
------------ -------------- ------------ ------------ -------------
Member's equity (deficit):
Invested capital 163,710 92,892 20,742 (113,634) 163,710
Accumulated deficit (45,850) 14,906 (18,533) - (49,477)
Accumulated other
comprehensive loss (1,697) - (7,968) - (9,665)
------------ -------------- ------------ ------------ -------------
Total member's equity
(deficit) 116,163 107,798 (5,759) (113,634) 104,568
------------ -------------- ------------ ------------ -------------
Total liabilities and
member's equity
(deficit) $ 699,879 $ 755,225 $ 306,794 $ (900,397) $ 861,501
============ ============== ============ ============ =============
</TABLE>
F-36 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
CONDENSED CONSOLIDATING BALANCE SHEETS AS OF SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
SUBSIDIARY OTHER CONSOLIDATED
COMPANY GUARANTORS SUBSIDIARIES ELIMINATIONS TOTALS
----------- ------------ ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 15,593 $ (4,598) $ 5,107 $ - $ 16,102
Cash restricted as to its use - 1,688 - - 1,688
Trade receivables, net (500) 50,862 81,043 - 131,405
Notes receivable - 6,801 - - 6,801
Inventories - 108,008 67,173 - 175,181
Assets held for sale - - 3,308 - 3,308
Prepaid expenses and other
current assets 203 3,497 6,416 - 10,116
----------- ------------ ------------- ------------- -------------
Total current assets 15,296 166,258 163,047 - 344,601
Property, plant and equipment,
net - 106,489 62,207 - 168,696
Goodwill - 189,916 9,945 - 199,861
Investment in and due from
subsidiaries 697,937 233,429 30,807 (962,173) -
Other assets 10,169 2,641 167 - 12,977
----------- ------------ ------------- ------------- -------------
Total assets $ 723,402 $ 698,733 $ 266,173 $ (962,173) $ 726,135
=========== ============ ============= ============= =============
</TABLE>
F-37 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
CONDENSED CONSOLIDATING BALANCE SHEETS AS OF SEPTEMBER 30, 2000,
CONTINUED
<TABLE>
<CAPTION>
SUBSIDIARY OTHER CONSOLIDATED
COMPANY GUARANTORS SUBSIDIARIES ELIMINATIONS TOTALS
---------- ----------- -------------- ------------ -------------
<S> <C> <C> <C> <C> <C>
LIABILITIES AND MEMBER'S EQUITY
Current liabilities:
Current maturities of
long-term debt $ 37,000 $ - $ - $ - $ 37,000
Short-term borrowings - - 20,967 - 20,967
Accounts payable - 37,848 37,932 - 75,780
Accrued expenses and other
current liabilities 10,516 28,716 43,832 - 83,064
---------- ----------- -------------- ------------ -------------
Total current liabilities 47,516 66,564 102,731 - 216,811
Deferred revenue - - 37,170 - 37,170
Long-term debt 399,000 - - - 399,000
Due to subsidiaries 208,789 528,953 113,926 (851,668) -
Other liabilities 100 71,082 13,709 (26) 84,865
---------- ----------- -------------- ------------ -------------
Total liabilities 655,405 666,599 267,536 (851,694) 737,846
---------- ----------- -------------- ------------ -------------
Member's equity (deficit):
Invested capital 164,289 92,892 17,587 (110,479) 164,289
Accumulated deficit (73,626) (59,766) (18,690) - (152,082)
Accumulated other
comprehensive loss (22,666) (992) (260) - (23,918)
---------- ----------- -------------- ------------ -------------
Total member's equity
(deficit) 67,997 32,134 (1,363) (110,479) (11,711)
---------- ----------- -------------- ------------ -------------
Total liabilities and
member's equity
(deficit) $ 723,402 $ 698,733 $ 266,173 $ (962,173) $ 726,135
========== ============ ============== ============ =============
</TABLE>
F-38 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
CONDENSED COMBINING STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(LOSS) FOR THE SEVEN MONTHS ENDED APRIL 28, 1998
<TABLE>
<CAPTION>
SUBSIDIARY OTHER COMBINED
GUARANTORS SUBSIDIARIES ELIMINATIONS TOTALS
------------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Net sales $ 362,866 $ 168,842 $ (45,453) $ 486,255
Cost of goods sold 281,447 151,398 (45,453) 387,392
------------- ------------- ------------ --------------
Gross profit 81,419 17,444 - 98,863
Selling, engineering, general, and
administrative expenses 49,748 29,293 - 79,041
------------- ------------- ------------ --------------
Income (loss) from operations 31,671 (11,849) - 19,822
Interest income, net 970 78 - 1,048
Other expense, net (2,195) (7,329) - (9,524)
------------- ------------- ------------ --------------
Income (loss) before income taxes 30,446 (19,100) - 11,346
Income taxes 11,741 - - 11,741
------------- ------------- ------------ --------------
Net income (loss) 18,705 (19,100) - (395)
Other comprehensive loss (7,135) - - (7,135)
------------- ------------- ------------ --------------
Comprehensive income (loss) $ 11,570 $ (19,100) $ - $ (7,530)
============= ============= ============ ==============
</TABLE>
F-39 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE FIVE MONTHS ENDED OCTOBER 3, 1998
<TABLE>
<CAPTION>
SUBSIDIARY OTHER CONSOLIDATED
COMPANY GUARANTORS SUBSIDIARIES ELIMINATIONS TOTALS
---------- ----------- ------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Net sales $ - $ 314,291 $ 126,359 $ (39,642) $ 401,008
Cost of goods sold - 267,105 115,530 (39,642) 342,993
---------- ----------- ------------- ------------ --------------
Gross profit - 47,186 10,829 - 58,015
Selling, engineering, general,
and administrative expenses 10,318 30,246 20,625 - 61,189
---------- ----------- ------------- ------------ --------------
Income (loss) from operations (10,318) 16,940 (9,796) - (3,174)
Interest (expense) income, net 1,370 (14,832) (2,454) - (15,916)
Other income (expense), net 10 370 (934) - (554)
---------- ----------- ------------- ------------ --------------
Income (loss) before income
taxes (8,938) 2,478 (13,184) - (19,644)
Income taxes - 1,407 2,930 - 4,337
---------- ----------- ------------- ------------ --------------
Net income (loss) (8,938) 1,071 (16,114) - (23,981)
Other comprehensive income (loss) 7,341 (2,059) - - 5,282
---------- ----------- ------------- ------------ --------------
Comprehensive loss $ (1,597) $ (988) $ (16,114) $ - $ (18,699)
========== =========== ============= ============ ==============
</TABLE>
F-40 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE
INCOME (LOSS) FOR THE YEAR ENDED OCTOBER 2, 1999
<TABLE>
<CAPTION>
SUBSIDIARY OTHER CONSOLIDATED
COMPANY GUARANTORS SUBSIDIARIES ELIMINATIONS TOTALS
---------- ------------ ------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Net sales $ - $ 575,682 $ 319,008 $ (100,906) $ 793,784
Cost of goods sold - 475,850 271,058 (100,906) 646,002
---------- ------------ ------------- ------------ --------------
Gross profit - 99,832 47,950 - 147,782
Selling, engineering, general,
and administrative expenses 42,189 47,692 41,703 - 131,584
---------- ------------ ------------- ------------ --------------
Income (loss) from operations (42,189) 52,140 6,247 - 16,198
Interest (expense) income, net 5,278 (34,789) (6,509) - (36,020)
Other income (expense), net - 125 (264) - (139)
---------- ------------ ------------- ------------ --------------
Income (loss) before income
taxes (36,911) 17,476 (526) - (19,961)
Income taxes - 2,812 2,723 - 5,535
---------- ------------ ------------- ------------ --------------
Net income (loss) (36,911) 14,664 (3,249) - (25,496)
Other comprehensive income (loss) (9,038) 2,059 (7,968) - (14,947)
---------- ------------ ------------- ------------ --------------
Comprehensive income (loss) $ (45,949) $ 16,723 $ (11,217) $ - $ (40,443)
========== ============ ============= ============ ==============
</TABLE>
F-41 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
CONDENSED CONSOLIDATING STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
FOR THE YEAR ENDED SEPTEMBER 30, 2000
<TABLE>
<CAPTION>
SUBSIDIARY OTHER CONSOLIDATED
COMPANY GUARANTORS SUBSIDIARIES ELIMINATIONS TOTALS
---------- ------------ ------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Net sales $ - $ 619,768 $ 372,596 $ (141,802) $ 850,562
Cost of goods sold - 552,607 314,875 (141,802) 725,680
---------- ------------ ------------- ------------ --------------
Gross profit - 67,161 57,721 - 124,882
Selling, engineering, general,
and administrative expenses 23,666 48,330 42,691 - 114,687
Restructuring charges 8,757 - - - 8,757
Goodwill impairment charge - 53,351 - - 53,351
---------- ------------ ------------- ------------ --------------
Income (loss) from operations (32,423) (34,520) 15,030 - (51,913)
Interest (expense) income, net 5,492 (41,065) (8,130) - (43,703)
Other income (expense), net (1,134) 3,444 (3,346) - (1,036)
---------- ------------ ------------- ------------ --------------
Loss before income taxes (28,065) (72,141) 3,554 - (96,652)
Income taxes - 2,533 3,722 - 6,255
---------- ------------ ------------- ------------ --------------
Net loss before cumulative
effect of change in
accounting principle (28,065) (74,674) (168) - (102,907)
Cumulative effect of change in
accounting principle - 302 - - 302
---------- ------------ ------------- ------------ --------------
Net loss (28,065) (74,372) (168) - (102,605)
Other comprehensive loss (20,969) (992) 7,708 - (14,253)
---------- ------------ ------------- ------------ --------------
Comprehensive loss $ (49,034) $ (75,364) $ 7,540 $ - $ (116,858)
========== ============ ============= ============ ==============
</TABLE>
F-42 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
CONDENSED COMBINING STATEMENTS OF CASH FLOWS FOR THE SEVEN MONTHS ENDED
APRIL 28, 1998
<TABLE>
<CAPTION>
SUBSIDIARY OTHER COMBINED
GUARANTORS SUBSIDIARIES TOTALS
------------ ------------- -------------
<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) (19,521)
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) (32,143) (62,087)
------------ ------------- -------------
Net cash used in financing activities (29,944) (25,322) (55,266)
------------ ------------- -------------
Effect of exchange rate changes on cash - 217 217
------------ ------------- -------------
Net change in cash and cash equivalents 4,505 (287) 4,218
Cash and cash equivalents at beginning of year (492) 5,516 5,024
------------ ------------- -------------
Cash and cash equivalents at end of period $ 4,013 $ 5,229 $ 9,242
============ ============= =============
</TABLE>
F-43 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE FIVE MONTHS
ENDED OCTOBER 3, 1998
<TABLE>
<CAPTION>
SUBSIDIARY OTHER CONSOLIDATED
COMPANY GUARANTORS SUBSIDIARIES ELIMINATIONS TOTALS
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net cash provided by operating
activities $ 2,062 $ 43,830 $ 11,408 $ - $ 57,300
------------ ------------ ----------- ----------- -------------
INVESTING ACTIVITIES:
Capital expenditures - (5,665) (1,565) - (7,230)
Investment in equipment held for rent - - (20,751) - (20,751)
Acquisition of businesses from Hanson PLC,
including transaction costs of $5,783,
net of cash acquired of $9,241 and
post-closing adjustment of $27,300 - (484,279) (78,463) - (562,742)
Other investing activities (113,635) 103 1,218 113,635 1,321
------------ ------------ ----------- ----------- -------------
Net cash used in investing
activities (113,635) (489,841) (99,561) 113,635 (589,402)
------------ ------------ ----------- ----------- -------------
FINANCING ACTIVITIES:
Net proceeds from short-term borrowings - - 941 - 941
Proceeds from issuance of long-term debt 450,200 - - - 450,200
Repayments of long-term debt (35,200) - - - (35,200)
Equity investment from Grove
Holdings LLC 168,209 92,892 20,743 (113,635) 168,209
Advances to Grove Holdings LLC (3,649) - - - (3,649)
Deferred financing costs (14,453) - - - (14,453)
Other financing activities (437,158) 359,171 77,987 - -
------------ ------------ ----------- ----------- -------------
Net cash provided by financing
activities 127,949 452,063 99,671 (113,635) 566,048
------------ ------------ ----------- ----------- -------------
Effect of exchange rate changes on cash - - 343 - 343
------------ ------------ ----------- ----------- -------------
Net increase in cash and cash
equivalents and cash
equivalents at end of year $ 16,376 $ 6,052 $ 11,861 $ - $ 34,289
============ ============ =========== =========== =============
</TABLE>
F-44 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED
OCTOBER 2, 1999
<TABLE>
<CAPTION>
SUBSIDIARY OTHER CONSOLIDATED
COMPANY GUARANTORS SUBSIDIARIES TOTALS
------------ ----------- ------------ --------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net cash provided by operating activities $ (18,332) $ 3,500 $ 15,518 $ 686
------------ ----------- ----------- --------------
INVESTING ACTIVITIES:
Capital expenditures - (5,778) (3,627) (9,405)
Investment in equipment held for rent - - (23,793) (23,793)
Acquisition of businesses from Hanson PLC,
including transaction costs of $5,783,
net of cash acquired of $9,241 and
post-closing adjustment of $27,300 10,500 - - 10,500
Other investing activities 2,973 435 - 3,408
------------ ----------- ----------- --------------
Net cash used in investing activities 13,473 (5,343) (27,420) (19,290)
------------ ----------- ----------- --------------
FINANCING ACTIVITIES:
Net proceeds from short-term borrowings - - 4,139 4,139
Proceeds from issuance of long-term debt 10,000 - - 10,000
Repayments of long-term debt (12,000) - - (12,000)
Advances to Grove Holdings LLC (850) - - (850)
Other financing activities - (1,366) - (1,366)
------------ ----------- ----------- --------------
Net cash provided by financing activities (2,850) (1,366) 4,139 (77)
------------ ----------- ----------- --------------
Effect of exchange rate changes on cash - - (110) (110)
------------ ----------- ----------- --------------
Net decrease in cash and cash equivalents (7,709) (3,209) (7,873) (18,791)
Cash and cash equivalents at beginning of year 16,376 6,052 11,861 34,289
------------ ----------- ----------- --------------
Cash and cash equivalents at end of year $ 8,667 $ 2,843 $ 3,988 $ 15,498
============ =========== =========== ==============
</TABLE>
F-45 (Continued)
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED
SEPTEMBER 30, 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 $ (16,653) $ (1,692) $ 10,015 $ (8,330)
------------ ----------- ----------- --------------
Investing activities:
Capital expenditures - (5,427) (3,348) (8,775)
Investment in equipment held for rent - - (6,876) (6,876)
------------ ----------- ----------- --------------
Net cash used in investing activities - (5,427) (10,224) (15,651)
------------ ----------- ----------- --------------
Financing activities:
Net proceeds from short-term borrowings - - 1,801 1,801
Proceeds from issuance of long-term debt 25,000 - - 25,000
Repayments of long-term debt (2,000) - - (2,000)
Advances to Grove Holdings LLC 579 - - 579
Other financing activities - (322) - (322)
------------ ----------- ----------- --------------
Net cash provided by financing activities 23,579 (322) 1,801 25,058
------------ ----------- ----------- --------------
Effect of exchange rate changes on cash - (473) (473)
------------ ----------- ----------- --------------
Net increase (decrease) in cash and cash
equivalents 6,926 (7,441) 1,119 604
Cash and cash equivalents at beginning of year 8,667 2,843 3,988 15,498
------------ ----------- ----------- --------------
Cash and cash equivalents at end of year $ 15,593 $ (4,598) $ 5,107 $ 16,102
============ =========== =========== ==============
</TABLE>
(24) Subsequent Event
Effective January 12, 2001, the Company obtained further amendment of a
covenant in its Bank Credit Facility, whereby the minimum Adjusted EBITDA,
as defined, required for the six-month period ended March 31, 2001, was
reduced to $16,500 (see Note 11). The amendment will be null and void in
the event the Company receives an audit report on its consolidated
financial statements as of and for the year ended September 30, 2000 with a
qualification or explanatory paragraph related to its ability to continue
as a going concern.
F-46
<PAGE>
GROVE WORLDWIDE LLC AND SUBSIDIARIES SCHEDULE II
Valuation and Qualifying Accounts
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER DEDUCTIONS AT END
OF YEAR EXPENSES ACCOUNTS (a) (b) OF YEAR
--------- --------- ------------ ---------- -------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful accounts
(in thousands):
Seven months ended
April 28, 1998 $ 2,717 880 $ 12 146 $ 3,463
Five months ended
October 3, 1998 3,463 290 121 799 3,075
Year ended October 2, 1999 3,075 552 31 563 3,095
Year ended
September 30, 2000 3,095 5,519 (534) 3,023 5,057
(a) Impact of exchange rates
(b) Write-offs
</TABLE>
S-1
