SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 3, 1999
Commission file number 333-57609
GROVE HOLDINGS LLC
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(Exact name of registrant as specified in its charter)
Delaware 52-2089467
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1565 Buchanan Trail East
Shady Grove, PA 17256
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(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including area code: (717) 597-8121
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
--- ---
APPLICABLE ONLY TO CORPORATE ISSURES:
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date. None.
Page 1 of 15
Exhibit List on Page 14 of 15
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GROVE HOLDINGS LLC
INDEX
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Page
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Part I. Financial Information:
Item 1. Financial Statements
Condensed Consolidated Statements of Operations and Comprehensive
Income (Loss)-Thirteen Week and Twenty-Six Week Periods
Ended April 3, 1999 and March 28,1998 4
Condensed Consolidated Balance Sheets as of April 3, 1999 and October 3, 1998 5
Condensed Consolidated Statements of Cash Flows - Twenty-Six Week Periods Ended
April 3, 1999 and March 28, 1998 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations 9
Item 3. Quantitative and Qualitative Disclosures About Market Risk 13
Part II. Other Information 14
Exhibit List 14
Signatures 15
</TABLE>
2
<PAGE>
Unless otherwise noted, "Grove Holdings LLC" refers to Grove Holdings LLC and
its subsidiaries and includes the Acquired Business (as defined). Grove Holdings
LLC's fiscal year ends on the Saturday closest to the last day of September.
Reference to the (i) second quarter 1999 means the period from January 3, 1999
to April 3, 1999 and (ii) second quarter 1998 means the period from December 28,
1997 to March 28, 1998. References to historical financial information are to
the historical combined and consolidated financial results of the Acquired
Business. See "Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations."
No separate financial statements of Grove Holdings Capital, Inc. ("Holdings
Capital") are included herein. Grove Holdings LLC considers that such financial
statements would not be material to investors.
Special Note Regarding Forward Looking Statements
With the exception of the historical information contained in this
report, the matters described herein contain forward looking information based
on Grove Holdings LLC current expectations. Forward looking statements involve a
number of risks, uncertainties, or other factors which may cause the actual
results of Grove Holdings LLC to be materially different from any future results
expressed or implied by such forward looking statements. The factors include,
but are not limited to : (i) substantial leverage and ability to service debt,
(ii) changing market trends in the mobile hydraulic crane, aerial work platform,
and truck mounted crane industries, (iii) general economic and business
conditions, including a prolonged and substantial recession, (iv) the ability of
Grove Holdings LLC to implement its business strategy and maintain and enhance
its competitive strengths, (v) the ability of Grove Holdings LLC to implement
its efficiency and cost-savings program, (vi) the ability of Grove Holdings LLC
to obtain financing for general corporate purpose, (vii) competition, (viii)
availability of key personnel, (ix) industry over capacity, (x) changes in or
failure to comply with government regulations, and (xi) other factors detailed
in Grove Holdings LLC's other reports filed with the Securities and Exchange
Commission. Readers are cautioned not to place undue reliance on these forward
looking statements, which speak only as of the date hereof. Grove Holdings LLC
assumes no obligation to update such forward looking statements to reflect
events or circumstances after the date on which such statements were made or to
reflect the occurrences of unanticipated events.
3
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GROVE HOLDINGS LLC
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME (LOSS) (unaudited)
<TABLE>
<CAPTION>
13 Week Periods Ended 26 Week Periods Ended
--------------------------- ---------------------------
| Predecessor | Predecessor
| ----------- | -----------
April 3, | March 28, April 3, | March 28,
1999 | 1998 1999 | 1998
- ------------------------------------------ ----------- | ----------- ----------- | ----------
| (thousands) |
<S> <C> | <C> <C> | <C>
NET SALES $186,044 | $200,945 $350,369 | $405,903
COST OF GOODS SOLD 147,653 | 159,951 284,895 | 321,337
-------- | -------- -------- | --------
GROSS PROFIT 38,391 | 40,994 65,474 | 84,566
SELLING, ENGINEERING, GENERAL AND | |
ADMINISTRATIVE EXPENSES 32,456 | 32,400 63,974 | 66,677
-------- | -------- -------- | --------
INCOME FROM OPERATIONS 5,935 | 8,594 1,500 | 17,889
INTEREST AND DEBT ISSUANCE EXPENSE 11,789 | 1,346 23,775 | 1,868
OTHER INCOME (EXPENSE), NET 927 | (3,279) 2,339 | (1,599)
-------- | -------- -------- | --------
INCOME (LOSS) BEFORE PROVISION | |
FOR INCOME TAXES (4,927) | 3,969 (19,936) | 14,422
PROVISION FOR INCOME TAXES 1,888 | 6,128 2,821 | 11,174
-------- | -------- -------- | --------
NET INCOME (LOSS) (6,815) | (2,159) (22,757) | 3,248
FOREIGN CURRENCY TRANSLATION (7,151) | (65) (9,860) | 1,653
-------- | -------- -------- | --------
COMPREHENSIVE INCOME (LOSS) $(13,966) | $(2,224) $(32,617) | $ 4,901
======== | ======== ======== | ========
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
4
<PAGE>
GROVE HOLDINGS LLC
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
<TABLE>
<CAPTION>
April 3, October 3,
1999 1998
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(thousands)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 19,499 $ 34,289
Trade receivables, net 118,033 129,833
Due from Hanson PLC - 10,500
Notes receivable 4,258 5,887
Inventories 218,901 207,248
Other current assets 6,580 8,893
-------- --------
Total current assets 367,271 396,650
Property, plant and equipment, net 217,577 207,175
Goodwill, net 275,690 288,499
Other noncurrent assets 19,137 20,106
-------- --------
TOTAL ASSETS $879,675 $912,430
======== ========
LIABILITIES AND MEMBER'S EQUITY
CURRENT LIABILITIES:
Short-term borrowings $23,214 $15,027
Current maturities of long-term debt 2,000 7,000
Trade accounts payable 70,709 79,470
Other payables and accrued liabilites 108,839 104,951
-------- --------
Total current liabilities 204,762 206,448
Long-term debt, less current maturities 457,517 460,535
Deferred revenue 78,284 67,306
Other noncurrent liabilities 77,163 82,733
-------- --------
Total liabilities 817,725 817,018
-------- --------
Member's equity:
Member's equity 115,892 116,730
Accumulated deficit (49,364) (26,600)
Accumulated other comprehensive income (4,578) 5,282
-------- --------
Total member's equity 61,950 95,412
-------- --------
TOTAL LIABILITIES AND MEMBER'S EQUITY $879,675 $912,430
======== ========
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
5
<PAGE>
GROVE HOLDINGS LLC
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
<TABLE>
<CAPTION>
26 Week Periods Ended
Predecessor
-----------
April 3, March 28,
1999 1998
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(thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income (loss) ($22,757) | $ 3,248
Adjustments to reconcile net income (loss) to net cash provided |
by (used for) operating activities: |
Depreciation and amortization 9,600 | 9,384
Depreciation of equipment held for rent 8,681 | 5,501
Amortization of deferred financing cost 1,688 | -
Loss on sale of fixed assets - | 4,719
Other operating activities - | 2,602
Changes in operating assets and liabilities, net 3,639 | 60,564
-------- | --------
Net cash provided by operating activities 851 | 86,018
-------- | --------
INVESTING ACTIVITIES: |
Capital expenditures (4,080) | (15,197)
Investment in equipment held for rent (19,189) | (16,380)
Proceeds from sale of property, plant and equipment 779 | 3,630
Cash received from Hanson PLC 10,500 | -
-------- | --------
Net cash used for investing activities (11,990) | (27,947)
-------- | --------
FINANCING ACTIVITIES: |
Net proceeds from short-term borrowings 8,187 | 2,639
Repayment of long-term debt (11,000) | -
Other financing activities (838) | (61,649)
-------- | --------
Net cash used for financing activities (3,651) | (59,010)
-------- | --------
NET DECREASE IN CASH AND CASH EQUIVALENTS (14,790) | (939)
|
CASH AND CASH EQUIVALENTS |
AT BEGINNING OF PERIOD 34,289 | 5,024
-------- | --------
CASH AND CASH EQUIVALENTS |
AT END OF PERIOD $ 19,499 | $ 4,085
======== | ========
</TABLE>
The accompanying notes are an integral part of the condensed
consolidated financial statements.
6
<PAGE>
GROVE HOLDINGS LLC
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Grove Holdings LLC's condensed consolidated balance sheet as of October
3, 1998 has been condensed from the audited consolidated balance sheet at that
date. The condensed consolidated balance sheet as of April 3, 1999, the
condensed consolidated statements of operations for the thirteen week and
twenty-six week periods ended April 3, 1999 and March 28, 1998 and the condensed
consolidated statements of cash flows for the twenty-six week periods ended
April 3, 1999 and March 28, 1998 have been prepared by Grove Holdings LLC and
have not been audited by Grove Holdings LLC's independent accountants. Financial
information for periods prior to April 29, 1998 (the "Predecessor") relates to
the businesses acquired in connection with the Acquisition (See note 2).
Financial information subsequent to April 29, 1998 relates to Grove Holdings LLC
and the Acquired Business. The Acquisition created a new basis of accounting and
a different capital structure, therefore, the operating results and cash flows
for 1999 and 1998 are not directly comparable. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, considered
necessary for a fair presentation of the financial position, results of
operations and cash flows have been included.
Grove Holdings LLC primarily manufactures and sells new mobile hydraulic
cranes, aerial work platforms and truck mounted cranes. In addition, Grove
Holdings LLC has net sales from parts, service and used equipment of the
products it manufactures. Sales of used equipment are not material and are
generally limited to trade-ins on new equipment through distributors in France,
Germany, and the United Kingdom. Grove Holdings LLC is a wholly owned subsidiary
of Grove Investors LLC ("Investors").
The separate financial statements of Grove Holdings Capital, Inc.
("Holdings Capital") are not included since Grove Holdings LLC considers that
such financial statements would not be material.
Interim results for the thirteen and twenty-six week periods ended
April 3, 1999 are not necessarily indicative of the results that may be expected
for a full fiscal year.
Certain information and note disclosures normally included in the
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted in accordance with the rules and
regulations of the Securities and Exchange Commission. These condensed
consolidated financial statements should be read in conjunction with Grove
Holdings LLC's consolidated financial statements and notes thereto as set forth
in Grove Holdings LLC's Annual Report on Form 10-K for the fiscal year ended
October 3, 1998.
2. THE ACQUISITION
On April 29, 1998, Grove Holdings LLC acquired from Hanson PLC and
certain of its subsidiaries ("Hanson") substantially all of the net assets of
Hanson's United States mobile hydraulic crane and aerial work platform
operations, the capital stock of Hanson's United States truck-mounted crane
operation and the capital stock of Hanson's British, French, German, and
Australian crane and aerial work platform subsidiaries (the "Acquired Business")
for an aggregate purchase price of $583.0 million (the "Acquisition"). The
purchase price was subject to a post closing adjustment for which Grove Holdings
has received $27.3 million from Hanson.
The Acquisition was accounted for as a purchase and the operations of the
Acquisition are included in the consolidated statements of operations and cash
flows from the date of acquisition. The cost of the Acquisition has been
allocated on the basis of the fair value of the assets acquired and the
liabilities assumed. The excess of the purchase price over the estimated fair
value of the net assets acquired is being amortized using the straight-line
method over forty years. The allocation of the purchase price for the
Acquisition is based upon preliminary estimates and assumptions and is subject
to revision once appraisals, valuations and other studies of the fair value of
the acquired assets and liabilities have been completed.
7
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3. INVENTORIES
Inventories consist of:
April 3, October 3,
1999 1998
----------- ---------
(thousands)
Raw materials and supplies $ 68,204 $ 61,910
Work-in-process 71,984 72,299
Finished goods 78,713 73,039
-------- --------
Total $218,901 $207,248
======== ========
4. INCOME TAXES
Following the Acquisition, a significant portion of Grove Holdings LLC's
business is operated as a Delaware limited liability company and is not
subject to federal and certain state income taxes. The taxable income of the
limited liability company in the United States is allocated to the equity
holders of Grove Holdings LLC who are responsible for the applicable federal and
state income taxes. Grove Holdings LLC expects to make cash distributions to the
equity holders for their tax obligations associated with Grove Holdings LLC
taxable income. Foreign and certain domestic income taxes will continue to be
the responsibility of Grove Holdings LLC.
The primary difference between Grove Holdings LLC's effective income tax
rate and the United States statutory rate is due to Grove Holdings LLC's
structure as a limited liability company. Therefore, income taxes included on
the condensed consolidated statement of operations and comprehensive income
(loss) relate to foreign and certain domestic operations.
5. CLOSURE OF SUNDERLAND MANUFACTURING FACILITY
As the result of recurring operating losses, Grove Holdings LLC closed
its Sunderland, U.K. manufacturing facility on November 27, 1998. Management
believes closing the facility will eventually improve operating earnings as well
as provide the opportunity for additional cost reductions through product
rationalization, reduced selling, general and administrative expenses and
reduced manufacturing costs. Management estimates total closure costs to be
approximately $18.5 million, consisting of approximately $11.5 million of
employee severance and $7.0 million of plant shut-down costs (asset disposal and
plant clean-up costs), all of which are expected to be expended in the next
twelve months. During the twenty-six week period ended April 3, 1999, Grove
Holdings LLC paid approximately $7.4 million in employee severance costs related
to the closure of its Sunderland, U.K. manufacturing facility.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the condensed
consolidated financial statements and related notes thereto of Grove Holdings
LLC included in this report.
Introduction
Grove Holding's LLC's assets consist solely of membership interests of
Grove Worldwide LLC and capital stock of Holdings Capital. Grove Holdings
conducts all of its business through Grove Worldwide LLC which primarily
manufactures and sells new mobile hydraulic cranes, aerial work platforms and
truck mounted cranes. Also, Grove Holdings LLC has net sales from parts, service
and used equipment of the products it manufactures. Sales of used equipment are
not material and generally limited to trade-ins on new equipment through Grove
Holdings LLC distributors in France, Germany, and the United Kingdom. Grove
Holdings LLC is a wholly owned subsidiary of Grove Investors LLC ("Investors").
In April 1998, Grove Worldwide LLC acquired from Hanson PLC and certain
of its subsidiaries ("Hanson") all of the assets of Hanson's United States
mobile hydraulic crane and aerial work platform operations, the capital stock of
Hanson's United States truck-mounted crane operation and the capital stock of
Hansn's British, French, German and Australian crane and aerial work platform
subsidiaries (the "Acquisition") for an aggregate purchase price of
approximately $583.0 million. The purchase price was subject to a post closing
adjustment for which Grove Holdings LLC received $27.3 million from Hanson.
Operating results for fiscal 1999 are expected to be influenced by
various internal and external factors. These factors include, among other
things, (i) continued improvement in sales volume, (ii) continued implementation
of operations improvement programs designed to improve profitability, and (iii)
fluctuations in interest rates.
13 Week Period Ended April 3, 1999 Compared to 13 Week Period Ended March 28,
1998
Results of Operations
Net sales for the second quarter of 1999 were $186.0 million as compared
to $200.9 million for the second quarter of 1998, a decrease of $14.9 million or
7.4%. This reduction was primarily associated with reduced sales volume for
aerial work platform equipment. Although net sales decreased as compared to
1998, Grove Holdings LLC's sales backlog at the end of the second quarter of
1999 was higher than at the close of the first quarter of 1999 by approximately
$41.0 million or 24%. This increased backlog is partially associated with new
customers resulting from Grove Worldwide LLC's participation in the CONEXPO
Trade Show and new product introductions.
Gross profit as a percentage of net sales increased to 20.6% for the
second quarter of 1999 from 20.4% in the second quarter of 1998 primarily as a
result of cost saving programs initiated by Grove Holdings LLC offset by reduced
sales volume of aerial work platform equipment. In addition, gross profit as a
percentage of net sales in the second quarter of 1999 was reduced by the
shifting of Sunderland, U.K. manufacturing production requirenments to the
United States.
Selling, engineering, general and administrative expenses for the second
quarter of 1999 were $32.5 million compared to $32.4 million for the second
quarter of 1998. Selling, engineering, general and administrative expenses
included approximately $1.8 million of consulting costs which were offset by
reductions from cost saving programs. Also, selling, engineering, general and
administrative expenses increased as a percentage of net sales to 17.4% in 1999
from 16.1% in 1998. This increase was primarily associated with the reduced
sales volume offset by cost saving programs initiated by Grove Holdings LLC.
Income from operations decreased $2.7 million to $5.9 million for the
second quarter of 1999 from $8.6 million in the second quarter of 1998 primarily
due to the reduction in sales volume discussed above.
Interest and debt issuance expense increased to $11.8 million for the
second quarter of 1999 from $1.3 million for the second quarter of 1998
primarily due to the debt incurred to finance the Acquisition and the change in
Grove Holdings LLC's capital structure. See notes 1 and 2 to the condensed
consolidated financial statements.
Other income (expense), net increased to $0.9 million for the second
quarter of 1999 from an expense of $3.3 million for the second quarter of 1998
primarily due to a loss in 1998 on the sale of land and buildings by
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
the Predecessor's U.K. subsidiary to Hanson. Immediately after the sale, Hanson
leased the property back to Grove Holdings LLC.
Income taxes were $1.9 million for the second quarter of 1999 as compared
to $6.1 million for the second quarter of 1998. This decrease was primarily
related to Grove Holdings LLC's structure as a limited liability company
following the Acquisition.
26 Week Period Ended April 3, 1999 Compared to 26 Week Period Ended March 28,
1998
Results of Operations
Net sales for the twenty-six week period ended April 3, 1999 were $350.4
million as compared to $405.9 million for the twenty-six week period ended March
28, 1998, a decrease of $55.5 million or 13.7%. This reduction primarily
resulted from reduced sales volume during the first half of fiscal year 1999 and
the repositioning of certain aerial work platform manufacturing operations
between Sunderland and the United States. However, as previously discussed,
Grove Holdings LLC's sales backlog has increased at the end of the second
quarter of 1999 as compared to the first quarter of 1999 by approximately $41.0
million or 24%. This increased backlog is partially associated with new
customers resulting from Grove Worldwide LLC's participation in the CONEXPO
Trade Show and new product introductions.
Gross profit as a percentage of net sales decreased to 18.7% for the
twenty-six week period ended April 3, 1999 from 20.8% in the twenty-six week
period ended March 28, 1998 primarily due to the reduced sales volume and
inefficiencies associated with implementation of the new business system
initiatives.
Selling, engineering, general and administrative expenses for the
twenty-six week period ended April 3, 1999 were $64.0 million compared to $66.7
million for the twenty-six week period ended March 28, 1998. This decrease was
primarily associated with reductions from cost saving programs offset by
increased consulting costs of approximately $3.8 million. Also, selling,
engineering, general and administrative expenses increased as a percentage of
net sales to 18.3% in 1999 from 16.4% in 1998. This increase was primarily
associated with the reduced sales volume offset by cost saving programs
initiated by Grove Holdings LLC.
Income from operations decreased to $1.5 million for the twenty-six week
period ended April 3, 1999 from $17.9 million in the twenty-six week period
ended March 28, 1998 primarily due to the reasons discussed above.
Interest and debt issuance expense increased to $23.8 million for the
twenty-six week period ended April 3, 1999 from $1.9 million for the twenty-six
week period ended March 28, 1998 primarily due to the debt incurred to finance
the Acquisition and the change in Grove Holdings LLC's capital structure. See
notes 1 and 2 to the condensed consolidated financial statements.
Other income (expense), net increased to $2.3 million for 1999 from an
expense of $1.6 million in 1998 primarily due to a loss in 1998 on the sale of
land and buildings by the Predecessor's U.K. subsidiary to Hanson. Immediately
after the sale Hanson leased the property back to Grove Holdings LLC.
Income taxes were $2.8 million for 1999 as compared to $11.2 million in
1998. This decrease was primarily related to Grove Holdings LLC's structure as a
limited liability company following the Acquisition.
Backlog
Net sales backlog as of May 8, 1999 was $258.4 million as compared to
$278.5 million at May 16, 1998.
Liquidity and Capital Resources
Grove Holdings LLC is a holding company whose operations are conducted
through its domestic and foreign subsidiaries.
The operating cash requirements primarily relate to Grove Worldwide LLC
which include debt related payments consisting principally of principal and
interest on outstanding indebtedness of Grove Worldwide LLC and operating cash
requirements. The operating cash requirements of Grove Worldwide LLC consist
principally of working capital requirements and capital expenditures. Grove
Holdings LLC believes that cash flow from operating activities, cash on hand and
periodic borrowings under Grove Worldwide LLC's revolving credit facility, if
necessary, will be adequate to meet liquidity requirements. The ability to meet
such liquidity requirements could be impaired if Grove Holdings LLC or Grove
Worldwide LLC were to fail to comply with any covenants contained in the
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
credit agreement and such noncompliance was not cured or waived by the lenders
or contained in its indentures. Grove Holdings LLC and Grove Worldwide LLC were
in compliance with covenants set forth in the credit agreement as of April 3,
1999 and expect to be in compliance with such covenants for the foreseeable
future.
Cash and cash equivalents decreased $14.8 million during 1999 to $19.5
million at April 3, 1999 from $34.3 million at October 3, 1998 primarily due to
cash used for net operating assets, capital expenditures, and debt repayments.
Working capital decreased $27.7 million during 1999 to $162.5 million at April
3, 1999 from $190.2 million at October 3, 1998 primarily due to cash used for
capital expenditures, debt repayments and the decreased operating results as
compared to 1998. Net operating assets and liabilities (comprised of accounts
receivable, inventories and accounts payable) increased $8.6 million during 1999
to $266.2 million at April 3, 1999 from $257.6 million at October 3, 1998
primarily due to increases in inventories and decreases in accounts receivable
and accounts payable. The increase in inventories is primarily due to the
increased sales backlog at April 3, 1999. The decreases in accounts receivable
and accounts payable are primarily due to the timing of cash receipts and cash
payments.
Cash flow provided by operating activities decreased to $0.9 million for
the twenty-six weeks ended April 3, 1999 as compared to $86.0 million the
twenty-six weeks ended March 28, 1998 primarily due to the reduced 1999
operating results and the sale of notes receivable in 1998.
During the twenty-six weeks ended April 3, 1999, Grove Holdings LLC
received a payment from Hanson PLC of $10.5 million in final settlement of the
purchase price and made $11.0 million of payments on its bank loan and borrowed
$8.2 million in short-term borrowings. Capital expenditures were approximately
$4.1 million for the twenty-six weeks ended April 3, 1999 and are expected to be
approximately $15.7 million for fiscal 1999.
Grove Holdings Capital
In connection with the Acquisition, Grove Holdings LLC and its wholly
owned subsidiary, Holdings Capital, a Delaware corporation, issued Senior
Discount Notes (the "Debentures"). Holdings Capital was organized as a direct
wholly owned subsidiary of Grove Holdings LLC for the purpose of acting as a
co-issuer of the Debentures and was also a co-registrant of the registration
statement for the Debentures. This was done so that certain institutional
investors to which the Debentures were marketed that might otherwise have been
restricted in their ability to purchase debt securities issued by a limited
liability company, such as Grove Holdings LLC, by reason of the legal investment
laws of their states of organization or their charter documents, would be able
to invest in the Debentures. Holdings Capital has no assets, no liabilities
(other than the Debentures), and no operations. Holdings Capital does not have
any revenues and is prohibited from engaging in any business activities. As a
result, holders of the Debentures should not expect Holdings Capital to
participate in servicing the interest and principal obligations on the
Debentures.
No separate financial statements of Holdings Capital are included herein.
Grove Holdings LLC believes that providing separate financial statements and
other disclosures concerning Holdings Capital would not be material to holders
of the Debentures. As of April 3, 1999, Holdings Capital had no assets,
liabilities, or operations.
The ability of Grove Holdings LLC subsidiaries to make cash distributions
and loans to Grove Holdings LLC is significantly restricted under the terms of
the Indenture governing the Senior Subordinated Notes and the New Credit
Facility.
11
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
Management Information Systems and the Impact of Year 2000
Certain computer programs and microprocessors use two digits rather than
four to define the applicable year. Computer programs that have date-sensitive
software and microprocessors may recognize a date using "00" as the year 1900
rather than the year 2000. This phenomenon (the "Year-2000 issue") could cause a
disruption of operations, including, among other things, a temporary inability
to utilize manufacturing equipment, send invoices or engage in similar normal
business activities.
In fiscal 1995, a Year-2000 assessment was conducted of all management
information systems used at its crane and aerial work platform facilities in the
United States, United Kingdom and Germany. Upon completing this review in
October 1995, a campaign was designed to replace all existing software and
hardware that was not Year-2000 compliant (the "Year-2000 Project"). In addition
to replacing all business application software and hardware, the Year-2000
Project was designed to provide improved business processes and procedures.
Grove Holdings LLC determined that the Year-2000 Project would not need
to be implemented at its National Crane facility in Waverly, Nebraska. National
Crane implemented upgrades to all of its existing hardware and software and
converted all of its data. Management believes the completion of this project
has rendered all of National Crane's major computer systems Year-2000 compliant.
The Year-2000 Project is expected to be completed in September 1999 and
will have a total cost of approximately $38.0 million, of which approximately
$35.0 million had been expended as of April 3, 1999. If the Year-2000 Project is
delayed, Grove Holdings LLC will be required to shorten its planning horizons
and replace certain computerized functions, such as inventory and
work-in-process tracking, billing and order processing, with manual systems. Any
such delay could result in parts shortages and slow the delivery of products to
Grove Holdings LLC customers. Management believes that all of Grove Holdings
LLC's major computer systems will be rendered Year-2000 compliant. If such
modifications and conversions are not completed in a timely manner, the
Year-2000 Issue could have a material impact on the operations of Grove Holdings
LLC.
Grove Holdings LLC has also polled the manufacturers of its computerized
numerical control ("CNC") manufacturing/production equipment. Grove Holdings LLC
has been informed by such manufacturers that there are no Year-2000 Issues with
respect to Grove Holdings LLC's CNC equipment at its Shady Grove, Pennsylvania
and Waverly, Nebraska facilities. Grove Holdings LLC is also conducting an
internal review of its CNC equipment to confirm its Year-2000 readiness.
Although management believes that the Year-2000 Issue will not have a material
adverse impact on its CNC equipment, there can be no assurance that it will not.
12
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
RESULTS OF OPERATIONS (continued)
In addition, Grove Holdings LLC has initiated communications with
suppliers and customers to determine the extent to which Grove Holdings LLC may
be vulnerable to such parties' failure to remediate their own Year-2000 Issues.
There can be no guarantee that the systems of other companies on which Grove
Holdings LLC's systems rely will be timely converted, or that a failure to
convert by another company, or a conversion that is incompatible with Grove
Holdings LLC's systems, would not have material adverse impact on Grove Holdings
LLC. However, based on its current assessment, management believes that the
Year-2000 Issue will not have a material adverse impact on Grove Holdings LLC's
future results of operations or financial conditions, although there can be no
assurance that such will be the case.
New Accounting Standards
Statement of Financial Accounting Standards No. 131 ("SFAS No. 131"),
"Disclosures about Segments of an Enterprise and Restated Information," was
issued by the Financial Accounting Standards Board in June 1997. This statement
establishes standards for reporting information about operating segments in
annual financial statements and requires reporting of selected financial
information about operating segments in interim financial reports issued to
stockholders. It also establishes standards for related disclosures about
products and services, geographic areas, and major customers. Grove Holdings LLC
will adopt SFAS No. 131 for the year ended 1999 reporting. Grove Holdings LLC is
evaluating the impact, if any, the standard will have on its present segment
reporting.
In February 1998 the Financial Accounting Standards Board issued SFAS No.
132, "Employers' Disclosures about Pension and Other Postretirement Benefits"
("SFAS No. 132"), which is effective for fiscal years beginning after December
15, 1997. SFAS No. 132 revised the required disclosures about pension and other
postretirement benefit plans. Grove Holdings LLC will adopt SFAS No. 132 for
year ended 1999 reporting.
In June 1998 the Financial Accounting Standards Board issued SFAS No. 133
("SFAS No. 133"), "Accounting for Derivative Instruments and Hedging
Activities." SFAS No. 133 established new procedures for accounting for
derivatives and hedging activities and supercedes and amends a number of
existing standards. The statement is effective for fiscal years beginning after
June 15, 1999.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Grove Holdings LLC's principal market risk exposure is changing interest
rates, primarily changes in short term interest rates. Grove Holdings LLC does
not enter into financial instruments for trading or speculative purposes. Grove
Holdings LLC's policy is to manage interest rates through use of a combination
of fixed and floating rate debt. Grove Holdings LLC may also use derivative
financial instruments to manage its exposure to interest rate risk.
As of April 3, 1999, $179.0 million of Grove Worldwide LLC's long-term
debt, which is outstanding under its bank term facility, bears interest at LIBOR
plus 2.5% (7.25%). In addition Grove Worldwide LLC has $225.0 million of Senior
Subordinated Notes outstanding bearing interest at a fixed rate of 9.25%.
Grove Worldwide LLC has an interest rate collar to manage exposure to
fluctuations in interest rates on $100.0 million of its floating rate long-term
debt through September 2001. Under the agreement, Grove Worldwide LLC will
receive on a $100.0 million notional amount, three month LIBOR and 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 Grove Worldwide
LLC's exposure on $100.0 million of its floating rate debt at 6.5% plus the
applicable margin.
Movement in foreign currency exchange rates creates risk to Grove
Worldwide LLC's operations to the extent of sales made and costs incurred in
foreign currencies. The major foreign currencies, among others, in which Grove
Worldwide LLC does business are the British pound sterling, German mark and
French franc. In addition, changes in currency exchange rates can affect the
competitiveness of Grove Worldwide LLC's products and could result in management
reconsidering pricing strategies to maintain market share. Specifically, Grove
Worldwide LLC is most sensitive to changes in the German mark. During the past
three fiscal years, the impact of currency fluctuations has not had a
significant impact on Grove Worldwide LLC's results of operations.
In order to manage currency risk, Grove Worldwide LLC's practice is to
contract for purchases and sales of goods and services in the functional
currency of Grove Worldwide LLC's subsidiary executing the transaction. To the
extent purchases or sales are in currencies other than the functional currency
of the subsidiary, Grove Worldwide LLC will generally purchase forward contracts
to hedge firm purchase and sales commitments. As of April 3, 1999, Grove
Worldwide LLC was party to 10 such contracts with an aggregate value of $15.1
million. These forward contracts generally have average maturities of less than
three months. Grove Worldwide LLC has not taken any action at this time to hedge
its net investment in foreign subsidiaries but may do so in the future.
Grove Worldwide LLC does not have any commodity contracts.
13
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
Grove Holdings LLC is involved in various legal proceedings which
have arisen in the normal course of its operations. The outcome of
these legal proceedings, if determined adversely to Grove Holdings
LLC, is unlikely to have a material adverse effect to Grove Holdings
LLC. Grove Holdings LLC is also subject to product liability claims
for which it believes it has adequate insurance.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 - Financial Data Schedule for the quarter ended April 3, 1999.
(Filed herein).
- ----------------------------
(b) The Company filed the following Current Reports on Form 8-K:
None
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GROVE HOLDINGS LLC
Date: May 20, 1999
By: /s/ Stephen L. Cripe
-------------------------
Stephen L. Cripe
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer)
15
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