<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended April 1, 2000
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
----
Commission File Number 333-57609
----
GROVE HOLDINGS LLC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----
DELAWARE
(STATE OR OTHER JURISDICTION OF INCORPORATION OR ORGANIZATION)
----
52-2089667
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
----
1565 BUCHANAN TRAIL EAST
SHADY GROVE, PENNSYLVANIA 17256
(717) 597-8121
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING
AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----
Indicate by check mark whether the registrant (1) has filed all the reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past ninety days. Yes /X/ No / /
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date. None.
<PAGE>
GROVE HOLDINGS LLC
INDEX TO QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED APRIL 1, 2000
PAGE
PART I
Item 1 Financial statements
Condensed Consolidated Balance Sheets as of
October 2, 1999 and April 1, 2000.....................1
Condensed Consolidated Statements of Operations for
the three and six months ended April 3, 1999 and
April 1, 2000.........................................2
Condensed Consolidated Statements of Comprehensive
Loss for the three and six months ended April 3, 1999
and April 1, 2000.....................................3
Condensed Consolidated Statements of Cash Flows
for the six months ended April 3, 1999 and April
1, 2000...............................................4
Notes to Condensed Consolidated Financial
Statements............................................5
Item 2 Managements discussion and analysis of financial
condition and results of operations......................9
Item 3 Quantitative and qualitative disclosures about market
risk....................................................14
PART II
Item 1 Legal proceedings.......................................15
Item 2 Changes in securities and use of proceeds...............15
Item 3 Defaults upon senior notes..............................15
Item 4 Submission of matters to a vote of security holders.....15
Item 5 Other information.......................................15
Item 6 Exhibits and reports on form 8-K........................15
Signatures..............................................16
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The results of operations for the three and six months ended April 3, 1999 have
been restated. See note 1 to the Condensed Consolidated Financial Statements and
the Company's quarterly reports on form 10Q/A filed with the Securities and
Exchange Commission on May 16, 2000.
Unless otherwise noted, the "Company" or "Grove" refers to Grove Worldwide LLC
and its subsidiaries. Grove Holdings LLC ("Holdings") assets consist only of
membership interests of the Company and capital stock of Grove Holdings Capital.
Holdings conducts all of its business through the Company. The Company's fiscal
year ends on the Saturday closest to the last day of September. References to
the (i) three months ended April 3, 1999 means the period from January 3, 1999
to April 3, 1999; (ii) three months ended April 1, 2000 means the period from
January 2, 2000 to April 1, 2000; (iii) six months ended April 3, 1999 means the
period from October 3, 1998 to April 3, 1999; and (iv) six months ended April 1,
2000 means the period from October 2, 1999 to April 1, 2000. References to
historical financial information are to the historical combined and consolidated
financial statements of Holdings. See "Item 2, Management's Discussion and
Analysis of Financial Condition and Results of Operations."
No separate financial statements of Grove Holdings Capital, Inc. ("Grove
Holdings Capital") are included herein. The Company considers that such
financial statements would not be material to holders of the Senior Discount
Debentures. As of April 1, 2000, Grove Holdings Capital had nominal assets, no
liabilities (other than its co-obligation under the Senior Discount Debentures)
and no operations.
ii
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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: (i) substantial leverage, ability to
service debt, and compliance with financial covenants in the Company's Bank
Credit Agreement; (ii) changing market trends in the mobile hydraulic crane,
aerial work platform and truck-mounted crane industries; (iii) general economic
and business conditions including a prolonged or substantial recession; (iv) the
ability of the Company to implement its business strategy and maintain and
enhance its competitive strengths; (v) the ability of the Company to implement
operational improvements; (vi) the ability of the Company to obtain financing
for general corporate purposes; (vii) competition; (viii) availability of key
personnel; (ix) industry overcapacity; and (x) changes in, or the failure to
comply with, government regulations. As a result of the foregoing and other
factors, no assurance can be given as to future results, levels of activity and
achievements, and neither the Company nor any other person assumes
responsibility for the accuracy and completeness of these forward-looking
statements. Any forward-looking statements contained herein speak solely as of
the date on which such statements are made, and the Company undertakes no
obligation to update any forward-looking statements to reflect events or
circumstances after the date on which such statements were made or to reflect
the occurrence of unanticipated events.
iii
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
GROVE HOLDINGS LLC AND SUBSIDIARIES
Condensed Consolidated Balance Sheets As of
October 2, 1999 and April 1, 2000
(Unaudited and in thousands)
1999 * 2000
------ ----
ASSETS
Current assets:
Cash and cash equivalents $ 16,864 $ 14,075
Trade receivables, net 142,271 124,558
Notes receivable 5,425 4,625
Inventories 193,123 208,355
Prepaid expenses and other current assets 7,405 11,072
---------- --------
Total current assets 365,088 362,685
Property, plant and equipment, net 213,731 205,622
Goodwill, net 269,556 264,513
Other assets 14,998 15,773
---------- --------
$ 863,373 $848,593
========== =========
LIABILITIES AND MEMBER'S EQUITY
Current liabilities:
Current maturities of long-term debt $ 12,000 $ 12,000
Short-term borrowings 19,108 20,945
Accounts payable 75,370 85,335
Accrued expenses and other current liabilities 84,946 86,371
---------- --------
Total current liabilities 191,424 204,651
Deferred revenue 74,368 73,274
Long-term debt 459,892 463,207
Other liabilities 90,127 91,660
---------- --------
Total liabilities 815,811 832,792
---------- --------
Member's equity:
Invested capital 115,886 116,412
Accumulated deficit (58,659) (84,081)
Accumulated other comprehensive loss (9,665) (16,530)
---------- --------
Total member's equity 47,562 15,801
---------- --------
$ 863,373 $848,593
========== =========
See accompanying notes to condensed consolidated financial statements.
* Amounts have been derived from the Company's audited consolidated balance
sheet
1
<PAGE>
GROVE HOLDINGS LLC AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For the three and six months ended April 3, 1999 and April 1, 2000
(unaudited and in thousands)
THREE MONTHS ENDED SIX MONTHS ENDED
1999 2000 1999 2000
--------- ------- ------- ------
(Restated) (Restated)
Net sales $ 186,044 $ 203,946 $350,369 $ 383,022
Cost of goods sold 147,653 168,341 284,895 317,543
--------- ----------- -------- ----------
Gross profit 38,391 35,605 65,474 65,479
Selling, engineering, general
and administrative expenses 29,868 26,741 59,564 54,651
Amortization of goodwill 1,663 1,749 3,486 3,520
Restructuring charges -- 917 -- 5,895
--------- ----------- -------- ----------
Income from operations 6,860 6,198 2,424 1,413
Interest expense, net (10,849) (13,050) (21,381) (24,692)
Other expense, net (13) (178) (54) (294)
--------- ----------- -------- ----------
Loss before
income taxes (4,002) (7,030) (19,011) (23,573)
Income taxes 1,888 1,689 2,821 2,151
--------- ----------- -------- ----------
Loss before cumulative
effect of change in
accounting principle (5,890) (8,719) (21,832) (25,724)
Cumulative effect of
a change in accounting
principle (note 6) -- -- -- 302
--------- ----------- -------- ----------
Net loss $ (5,890)$ (8,719) $(21,832)$ (25,422)
========== =========== ======== ==========
See accompanying notes to condensed consolidated financial statements.
2
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GROVE HOLDINGS LLC AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Loss
For the three and six months ended April 3, 1999 and April 1,2000
(unaudited and in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
1999 2000 1999 2000
--------- -------- -------- ----------
(Restated) (Restated)
<S> <C> <C> <C> <C>
Net loss $ (5,890) $ (8,719) $ (21,832) $ (25,422)
Unrealized net losses on cash
flow hedges of forecasted foreign
currency transactions -- (1,248) -- (1,248)
Change in foreign currency translation
adjustment (7,151) (5,590) (9,860) (6,865)
----------- --------- ---------- ---------
Comprehensive loss $ (13,041) $ (15,557) $ (31,692) $ (33,535)
=========== ========= ========== =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
GROVE HOLDINGS LLC AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the six months ended April 3, 1999 and April 1, 2000
(unaudited and in thousands)
<TABLE>
<CAPTION>
1999 2000
--------- ---------
(Restated)
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (21,832) $(25,422)
Adjustments to reconcile to net loss to net
cash provided by operating activities:
Depreciation and amortization 9,600 9,906
Depreciation of equipment held for rent 8,681 6,850
Amortization of deferred financing costs 962 1,151
Accretion of interest on senior discount debentures 2,938 3,380
Loss on sales of property, plant
and equipment -- 13
Deferred income tax expense (benefit) 53 (245)
Changes in operating assets and liabilities:
Trade receivables, net 6,473 10,609
Notes receivable 1,628 719
Inventories (18,668) (22,539)
Trade accounts payable 3,710 16,044
Other assets and liabilities, net 7,494 8,165
--------- ---------
Net cash provided by operating activities 1,039 8,631
--------- ---------
Cash flows from investing activities:
Additions to property, plant and equipment (4,080) (2,821)
Investment in equipment held for rent (19,189) (9,274)
Proceeds from sale of property, plant and equipment 779 --
Cash received from Hanson PLC 10,500 --
----------- ---------
Net cash used in investing activities (11,990) (12,095)
----------- ---------
Cash flows from financing activities:
Net short-term borrowings 8,187 1,779
Repayments of long-term debt, net (11,000) (1,000)
Other (838) 53
--------- ---------
Net cash (used in) provided by financing activities (3,651) 832
--------- ---------
Effect of exchange rate changes on cash (188) (157)
--------- ---------
Net change in cash and cash equivalents (14,790) (2,789)
Cash and cash equivalents, beginning of period 34,289 16,864
========= =========
Cash and cash equivalents, end of period $ 19,499 $ 14,075
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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(1) BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly, these financial
statements do not include all the information and notes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, the unaudited consolidated
financial statements include all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation of the
financial position and results of operations.
Grove Holdings LLC ("Holdings") is a sole member limited liability company
formed pursuant to the provisions of the Delaware Limited Liability
Company Act. Holdings is a sole member limited liability company that is
owned by Grove Investors LLC ("Investors"). Holdings conducts all of its
business through Grove Worldwide LLC (the "Company"). All earnings of
Holdings are available for distribution to Investors subject to
restrictions contained in Holdings' debt agreements.
Selling, engineering, general and administrative expenses for the three
months ended April 3, 1999 have been restated for a non-recurring $925
gain resulting from the remeasurement of the Company's pension obligation
as a result of employee terminations during the second quarter of fiscal
1999. This gain was previously included in the Company's fourth quarter
results for fiscal 1999. Management believes the gain is more
appropriately recognized in the second quarter of fiscal 1999. The effect
of the restatement was to decrease the net loss for the three and six
months ended April 3, 1999 and increase the net loss for the three months
ended October 2, 1999. The restatement has no effect on the audited
results for fiscal 1999.
Interim results for the six month period ended April 1, 2000 are not
necessarily indicative of the results that may be expected for a full
fiscal year. For further information, refer to the consolidated financial
statements and notes for the year ended October 2, 1999.
(2) INVENTORY
Inventories consist of the following as of October 2, 1999 and April 1,
2000:
1999 2000
---- ----
Raw materials $ 61,340 $ 53,137
Work in process 79,232 83,465
Finished goods 52,551 71,753
-------- ----------
$193,123 $208,355
======== ==========
Inventories are valued at the lower of cost or market, as determined
primarily under the first-in, first-out method.
5
<PAGE>
(3) INCOME TAXES
A significant portion of the Company's business is operated as a limited
liability company organized under the laws of Delaware. Accordingly,
earnings of the Company's U.S. mobile hydraulic crane and aerial work
platform businesses, as well as, earnings from its foreign subsidiaries
will not be directly subject to U.S. income taxes. Such taxable income
will be allocated to the equity holders of Investors and they will be
responsible for U.S. income taxes on such taxable income. The Company
intends to make distributions, in the form of dividends, to enable the
equity holders of Investors to meet their tax obligations with respect to
income allocated to them by the Company. No distributions were made for
taxes in the year ended October 2, 1999 or the six months ended April 1,
2000.
The difference between the Company's reported tax provision for the six
months ended April 1, 2000 and the tax provision computed based on U.S.
statutory rates is primarily attributed to the Company's structure as a
limited liability company.
(4) RESTRUCTURING
During the six months ended April 1, 2000, the Company adopted and
executed two restructuring plans that resulted in the termination of
approximately 210 employees principally in its US operations. In
connection with the terminations, the Company accrued severance costs of
$5,895. As of April 1, 2000, the Company has paid $2,343, and expects to
pay the remainder of the accrual through October 2001 in accordance with
separation agreements.
(5) ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive loss as of October 2, 1999 and April 1,
2000 consists of the following:
1999 2000
----- ----
Foreign currency translation adjustment ($1,697) ($7,314)
Unrealized net losses on cash flow
hedges of foreign currency transactions -- (1,248)
Minimum pension liability (7,968) (7,968)
--------- --------
($9,665) ($16,530)
========= ========
(6) SEGMENT INFORMATION
The Company is an international designer, manufacturer and marketer of a
comprehensive line of mobile hydraulic cranes, aerial work platforms and
truck-mounted cranes. The Company markets its products through three
operating divisions; Grove Crane, Grove Manlift and National Crane. Grove
Crane manufactures mobile hydraulic cranes in its Shady Grove,
Pennsylvania and Wilhelmshaven, Germany manufacturing facilities. Grove
Manlift manufactures aerial work platforms in its Shady Grove,
Pennsylvania and Tonneins, France manufacturing facilities. National Crane
6
<PAGE>
manufactures truck-mounted cranes in its Waverly, Nebraska manufacturing
facility. Information for each of the Company's operating division's
follows:
<TABLE>
<CAPTION>
Corporate,
Grove Grove National Eliminations,
Crane Manlift Crane and other Total
--------- ---------- ---------- ----------- -----
<S> <C> <C> <C> <C> <C>
For the three months
ended April 1, 2000
Net sales $146,180 $33,462 $ 24,322 $ (18) $203,946
Depreciation and amortization 2,730 119 265 1,749 4,863
Income (loss) from operations 10,650 (2,119) 2,720 (5,053) 6,198
Capital expenditures 1,142 183 175 -- 1,500
For the three months
ended April 3,1999
Net sales $131,893 $37,331 $ 16,844 $ (24) $186,044
Depreciation and amortization 2,444 79 232 1,664 4,419
Income (loss) from operations 14,655 (338) 1,813 (9,270) 6,860
Capital expenditures 2,889 19 222 -- 3,130
As of and for the six months
ended April 1, 2000
Net sales $272,002 $67,370 $ 43,642 $ 8 $383,022
Depreciation and amortization 5,655 201 530 3,520 9,906
Income (loss) from operations 17,672 (4,191) 4,706 (16,774) 1,413
Total assets 440,518 85,186 38,967 283,922 848,593
Capital expenditures 2,186 271 364 -- 2,821
As of and for six months
ended April 3, 2000
Net sales $247,244 $70,973 $ 32,200 $ (48) $350,369
Depreciation and amortization 5,485 161 467 3,487 9,600
Income (loss) from operations 18,863 (1,893) 3,154 (17,700) 2,424
Total assets 491,162 50,635 41,636 279,940 863,373
Capital expenditures 3,490 173 417 -- 4,080
</TABLE>
Corporate, eliminations and other consist principally of corporate
expenses, including the restructuring charge, and assets, goodwill and
intercompany eliminations. Depreciation and amortization excludes
depreciation of equipment held for rent.
<PAGE>
(7) ADOPTION OF NEW ACCOUNTING STANDARDS
On October 3, 1999, the Company adopted SFAS No. 133, ACCOUNTING FOR
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES. This statement establishes
accounting and reporting standards for derivative instruments and for
hedging activities. It requires that an entity recognize all derivatives
as either assets or liabilities measured at fair value. The net impact of
adopting SFAS 133 of $302 was presented as the cumulative effect of a
change in accounting principle in the condensed consolidated statements of
operations. A summary of the Company's hedging strategies and outstanding
derivative instruments are as follows:
INTEREST RATE RISK
The Company assesses interest rate cash flow risk by monitoring changes in
interest rate exposure that may adversely impact expected future cash
flows and by evaluating hedging opportunities. At April 1, 2000, the
Company had approximately $177 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 April 1, 2000 was $302 and $731, respectively.
Management has concluded that the interest rate collar did not qualify as
an effective hedge for accounting purposes as of October 3, 1999 and
throughout the period ended April 1, 2000, as LIBOR was below the ceiling
rate in the collar of 6.5%. Accordingly, the Company has recognized $429
as other income and $302 as the cumulative effect of a change in
accounting principle in the condensed consolidated statement of operations
for the six months ended April 1, 2000.
FOREIGN CURRENCY RISK
The Company has foreign operations in the U.K., France, Germany and
Australia. Therefore its earnings, cash flows and financial position are
exposed to foreign currency risk. In addition, the U.S. company regularly
purchases mobile hydraulic cranes from its German factory to meet the
demand of its U.S. customers. In order to protect profit margins the
Company will purchase forward currency contracts and options to hedge
future Deutsche mark payment obligations.
At April 1, 2000 the Company had $37.6 million in outstanding forward
contracts to purchase Deutsche marks with gross unrealized losses of $1.2
million. The contracts will settle at various dates through October 2000
and have been accounted for as cash flow hedges of forecasted foreign
currency transactions under FAS 133. The unrealized loss has been included
in the determination of other comprehensive income for the six months
ended April 1, 2000. Such amounts will be realized in earnings upon
completion of the forecasted transaction and sale of the related
inventory.
Currently the Company is not hedging any other foreign currency exposures
but it may do so in the future.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the more detailed
information and the historical consolidated financial statements included
elsewhere in this report.
OVERVIEW
Grove Holdings LLC ("Holdings") assets consist only of membership interests of
Grove Worldwide LLC and capital stock of Grove Holdings Capital. Holdings
conducts all of its business through Grove Worldwide LLC and its subsidiaries
(the "Company").
The Company generates most of its net sales from the manufacture and sale of new
mobile hydraulic cranes, aerial work platforms and truck-mounted cranes. The
Company markets its products through three operating divisions; Grove Crane,
Grove Manlift and National Crane. Grove Crane manufactures mobile hydraulic
cranes in its Shady Grove, Pennsylvania and Wilhelmshaven, Germany manufacturing
facilities. Grove Manlift manufactures aerial work platforms in its Shady Grove,
Pennsylvania and Tonneins, France manufacturing facilities. National Crane
manufactures truck-mounted cranes in its Waverly, Nebraska manufacturing
facility. The Company also generates a portion of its net sales from
after-market sales (parts and service) of the products it manufactures. Sales of
used equipment, included in other, are not material and are generally limited to
trade-ins on new equipment through Company-owned distributors in France,
Germany, and the United Kingdom.
Operating results for fiscal 1999 were below historical results. While the
Company has significant capital with which to operate, the Company needed to
negotiate an amendment to its bank credit facility to modify certain financial
covenants to make them less restrictive. Management of the Company has
undertaken a number of initiatives that it believes will improve operating
results during fiscal 2000. Management believes that the combination of these
initiatives, together with improved efficiencies at the Company's Shady Grove
manufacturing facilities, will enable the Company to improve operating results
and cash flows. However, there can be no assurance that the actions taken by the
Company will improve fiscal 2000 operating results. In the event that results do
not improve, the Company may need to seek further modifications of the financial
covenants contained in its bank credit facility.
The results of operations for the three and six months ended April 3, 1999 have
been restated. See note 1 to the Condensed Consolidated Financial Statements and
the Company's quarterly reports on form 10Q/A filed with the Securities and
Exchange Commission on May 16, 2000.
The following is a summary of net sales for the periods indicated (dollars in
millions).
THREE MONTHS ENDED SIX MONTHS ENDED
--------------------- -------------------
APRIL 3, APRIL 1, APRIL 3, APRIL 1,
1999 2000 1999 2000
---- ---- ---- ----
New equipment sold $143.2 $150.2 $270.8 $293.3
After-market 26.3 22.1 47.9 43.3
Other 16.5 31.6 31.7 46.4
------ ------ ------- -------
Net sales $186.0 $203.9 $350.4 $383.0
====== ====== ====== ======
9
<PAGE>
RESULTS OF OPERATIONS
THREE MONTHS ENDED APRIL 1, 2000 (THE "FISCAL 2000 THREE MONTHS") COMPARED TO
THE THREE MONTHS ENDED APRIL 3, 1999 (THE "FISCAL 1999 THREE MONTHS")
NET SALES. Net sales increased $17.9 million, or 9.6%, to $203.9 million for the
fiscal 2000 three months from $186.0 million for the fiscal 1999 three months.
The increase in net sales is principally the result of increased new equipment
unit sales.
Net sales for the Grove Crane division increased $14.3 million, or 10.8%, to
$146.2 million for the fiscal 2000 three months from $131.9 million for the
fiscal 1999 three months. The increase in net sales is the result of higher unit
sales. Net sales increased to both North American and European customers.
Net sales for the Grove Manlift division decreased $3.8 million, or 10.1%, to
$33.5 million for the fiscal 2000 three months from $37.3 million in the fiscal
1999 three months. The decrease was primarily a result of lower unit sales in
North America.
Net sales for the National Crane division increased $7.5 million, or 44.6%, to
$24.3 million for the fiscal 2000 three months from $16.8 million for the fiscal
1999 three months. Net sales increased as the result of higher unit sales and
increased demand for higher priced models.
After-market sales decreased $4.2 million, or 16.0%, to $22.1 million in the
fiscal 2000 three months from $26.3 million in the fiscal 1999 three months. Net
sales decreased in both the North American and European markets.
Other sales increased by $15.1 million to $31.6 million in the fiscal 2000 three
months from $16.5 million in the fiscal 1999 three months. The increase was
primarily due to higher government and used equipment sales volumes.
GROSS PROFIT. Gross profit decreased $2.8 million, or 7.3%, to $35.6 million in
the fiscal 2000 three months from $38.4 in the fiscal 1999 three months. The
decrease in gross profit was attributable primarily to a change in sales mix and
lower Manlift pricing. Gross profit as a percent of sales decreased to 17.5% in
the fiscal 2000 three months from 20.6% in the fiscal 1999 three months
primarily as the result of lower Manlift prices. The fiscal 1999 three months
operations were adversely impacted by costs associated with the start-up of the
Company's management information system in the US and inefficiencies at the
Company's Sunderland, U.K. manufacturing facility prior to its closure in
December, 1999.
SELLING, ENGINEERING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, engineering,
general and administrative expenses ("SG&A") decreased $3.2 million, or 10.7%,
to $26.7 million in the fiscal 2000 three months from $29.9 million (restated)
in the fiscal 1999 three months. Cost reductions in the US facility contributed
$0.8 million to the decline. The strength of the dollar against the German mark
resulted in a $0.6 million decline in reported SG&A for the fiscal 2000 three
months. SG&A for the fiscal 1999 three months includes approximately $1.8
million of consulting fees paid to the George Group in connection with the
Company's operational improvement program and a $0.9 million non-recurring gain
related to the remeasurement of the Company's pension obligations following a
restructuring of the US workforce in the second quarter of fiscal 1999. As a
percentage of net sales, SG&A was 13.1% in the fiscal 2000 three months and
16.1% (restated) in the fiscal 1999 three months.
10
<PAGE>
RESTRUCTURING CHARGES. In March 2000, the Company adopted and executed a second
restructuring plan that resulted in the termination of approximately 30
employees principally in its US operations. In connection with the terminations,
the Company accrued severance costs of $0.9 million. The terminations were
primarily general and administrative personnel.
INTEREST EXPENSE. Interest expense increased $2.3 million to $13.1 million for
the fiscal 2000 three months from $10.9 million in the fiscal 1999 three months
primarily as the result of higher borrowings on the Company's line of credit and
higher rates on those borrowings.
BACKLOG. The Company's backlog consists of firm orders for new equipment and
replacement parts. Total backlog as of as of April 1, 2000 was approximately
$227.1 million compared with total backlog as of April 3, 1999 of approximately
$212.9 million. Substantially all of the Company's backlog orders are expected
to be filled within one year, although there can be no assurance that all such
backlog orders will be filled within that time period. Parts orders are
generally filled on an as-ordered basis.
SIX MONTHS ENDED APRIL 1, 2000 (THE "FISCAL 2000 SIX MONTHS") COMPARED TO THE
SIX MONTHS ENDED APRIL 3, 1999 (THE "FISCAL 1999 SIX MONTHS")
NET SALES. Net sales increased $32.6 million, or 9.3%, to $383.0 million for the
fiscal 2000 six months from $350.4 million for the fiscal 1999 six months. The
increase in net sales is principally the result of increased new equipment unit
sales.
Net sales for the Grove Crane division increased $24.8 million, or 10.0%, to
$272.0 million for the fiscal 2000 six months from $247.2 million for the fiscal
1999 six months. The increase in net sales is the result of higher unit sales.
Net sales increased to both North American and European customers.
Net sales for the Grove Manlift division decreased $3.6 million, or 5.1%, to
$67.4 million for the fiscal 2000 six months from $71.0 million in the fiscal
1999 six months. The decrease was a result of lower units sales in North America
partially offset by higher unit sales in Europe.
Net sales for the National Crane division increased $11.4 million, or 35.4%, to
$43.6 million for the fiscal 2000 six months from $32.2 million for the fiscal
1999 six months. Net sales increased as the result of higher unit sales and
increased demand for higher priced models.
After-market sales decreased $4.6 million, or 9.6%, to $43.3 million in the
fiscal 2000 six months from $47.9 million in the fiscal 1999 six months
predominantly due to a decline in parts and service sales in Europe.
Other sales increased by $14.7 million to $46.4 million in the fiscal 2000 three
months from $31.7 million in the fiscal 1999 three months. The increase was
primarily due to higher government and used equipment sales volumes.
11
<PAGE>
GROSS PROFIT. Gross profit in the fiscal 2000 three months remained unchanged
from $65.5 million in the fiscal 1999 six months. The increased unit volumes
were offset by lower Manlift pricing. As a percent of sales, gross profit
decreased to 17.1% in the fiscal 2000 six months from 18.7% in the fiscal 1999
three months. The decrease was primarily due to lower Manlift pricing. The
fiscal 1999 six months operations were adversely impacted by costs associated
with the start-up of the Company's management information system in the US and
inefficiencies at the Company's Sunderland, U.K. manufacturing facility prior to
its closure in December, 1999.
SELLING, ENGINEERING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, engineering,
general and administrative expenses ("SG&A") decreased $4.9 million, or 8.2%, to
$54.7 million in the fiscal 2000 six months from $59.6 million (restated) in the
fiscal 1999 six months. The savings were primarily attributable to cost
reductions at the U.S. facility. The strength of the US dollar against the
German mark contributed $1.8 million to the decline in reported SG&A. Included
in SG&A are approximately $0.9 million and $3.8 million of consulting fees, for
the fiscal 2000 and fiscal 1999 six months, respectively, paid to the George
Group in connection with the Company's operational improvement program. In
addition, the fiscal 1999 six months includes a $0.9 million non-recurring gain
related to remeasurement of the Company's pension obligation following a
restructuring of the US workforce in the second quarter of fiscal 1999. As a
percentage of net sales, SG&A was 14.3% in the fiscal 2000 six months and 17.0%
(restated) in the fiscal 1999 six months.
RESTRUCTURING CHARGES. During the six months ended April 1, 2000, the Company
adopted and executed two restructuring plans that resulted in the termination of
approximately 210 employees principally in its US operations. In connection with
the terminations, the Company accrued severance costs of $5.9 million, of which
$2.3 million has been paid. The terminations were primarily general and
administrative personnel.
INTEREST EXPENSE. Interest expense increased $3.3 million to $24.7 million for
the fiscal 2000 three months from $21.4 million in the fiscal 1999 three months
primarily as the result of higher borrowings on the Company's line of credit and
higher rates on those borrowings.
LIQUIDITY AND CAPITAL RESOURCES
The Company's business is working capital-intensive, requiring significant
investments in receivables and inventory. In addition, the Company requires
capital for replacement and improvements of existing plant, equipment and
processes. During the six months ended April 1, 2000, the Company generated
approximately $8.6 million of cash in operating activities through a net
reduction of $4.8 million in working capital assets.
During the fiscal 2000 six months the Company made $1.0 million of payments on
its bank loan and obtained $1.8 million from short-term borrowings. Capital
expenditures were $2.8 million for the fiscal 2000 six months and are expected
to be approximately $13.0 million for fiscal 2000.
The Company expects that cash flows from foreign operations will be required to
meet its domestic debt service requirements. Such cash flows are expected to be
generated from intercompany interest expense on loans the Company made to
certain of its foreign subsidiaries to consummate the Acquisition. The loans
have been established with amounts and interest rates to allow for repatriation
without restriction or additional tax burden. However, there is no assurance
that the foreign subsidiaries will generate the cash flow required to service
the loans or that the laws in the foreign jurisdictions will not change to limit
repatriation or increase the tax burden of repatriation.
12
<PAGE>
GROVE HOLDINGS CAPITAL, INC.
Holdings and its wholly owned subsidiary, Grove Holdings Capital, a Delaware
corporation, issued the Senior Discount Debentures. Grove Holdings Capital was
organized as a direct wholly owned subsidiary of Holdings for the purpose of
acting as a co-issuer of the Senior Discount Debentures and was also a
co-registrant of the Registration Statement for the Senior Discount Debentures.
This was done so that certain institutional investors to which the Senior
Discount Debentures were marketed that might otherwise have been restricted in
their ability to purchase debt securities issued by a limited liability company,
such as Holdings, 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 Debentures. Grove Holdings Capital has no subsidiaries, nominal
assets, no liabilities (other than the co-obligation under the Senior Discount
Debentures) and no operations. Grove Holdings Capital does not have any revenues
and is prohibited from engaging in any business activities. As a result, holders
of the Senior Discount Debentures should not expect Grove Holdings Capital to
participate in servicing the interest and principal obligations on the Senior
Discount Debentures.
No separate financial statements of Grove Holdings Capital are included in this
report. Holdings believes that such financial statements would not be material
to the holders of the Senior Discount Debentures.
The ability of Holdings' subsidiaries to make cash distributions and loans to
Holdings is significantly restricted under the terms of the Senior Subordinated
Notes, the Indenture governing the Senior Subordinated Notes and the bank credit
facility.
13
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
The Company's principal market risk exposure is changing interest rates,
primarily changes in short-term interest rates. The Company does not enter into
financial instruments for trading or speculative purposes. The Company's policy
is to manage interest rates through use of a combination of fixed and floating
rate debt. The Company may also use derivative financial instruments to manage
its exposure to interest rate risk.
As of April 1, 2000, $177,000 of the Company's long-term debt, which is
outstanding under its bank term facility, bears interest at LIBOR plus 3.5%
(9.63%). In addition the Company has $225,000 of Senior Subordinated Notes
outstanding bearing interest at a fixed rate of 9.25%. Holdings has $88,000 face
value of Senior Discount Debentures outstanding accreting interest at a fixed
rate of 11.625%.
The Company has an interest rate collar to manage exposure to fluctuations in
interest rates on $100.0 million of its floating rate long-term debt through
September 2001. Under the agreement, the Company will receive on a $100.0
million notational amount, three month LIBOR and pay 6.5% anytime LIBOR exceeds
6.5%, and will receive three month LIBOR and pay 5.19% anytime LIBOR is below
5.19%. The agreement effectively caps the Company's exposure on $100.0 million
of its floating rate debt at 6.5% plus an applicable margin as detailed in the
Company's bank credit facility.
Movement in foreign currency exchange rates creates risk to the Company's
operations to the extent of sales made and costs incurred in foreign currencies.
The major foreign currencies, among others, in which the Company does business,
are the British pound sterling, German mark and French franc. In addition,
changes in currency exchange rates can affect the competitiveness of the
Company's products and could result in management reconsidering pricing
strategies to maintain market share. Specifically, the Company is most sensitive
to changes in the German mark relative to the dollar. During the past three
fiscal years, currency fluctuations have not had a significant impact on the
Company's results of operations.
On October 3, 1999, the Company adopted SFAS No. 133, ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES. This statement establishes accounting and
reporting standards for derivative instruments and for hedging activities. It
requires that an entity recognize all derivatives as either assets or
liabilities measured at fair value. The impact of adoption was accounted for as
the cumulative effect of a change in accounting principle. See note 7 to the
condensed consolidated financial statements.
In order to manage currency risk, the Company's practice is to contract for
purchases and sales of goods and services in the functional currency of the
Company's subsidiary executing the transaction. To the extent purchases or sales
are in currencies other than the functional currency of the subsidiary, the
Company will generally purchase forward contracts to hedge firm purchase and
sales commitments. As of April 1, 2000, the Company was party to fourteen such
contracts with an aggregate value of $37.6 million. These forward contracts
mature at various dates through October 2000. The Company has not taken any
action at this time to hedge its net investment in foreign subsidiaries but may
do so in the future.
The Company does not have any commodity contracts.
14
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings that have arisen in the
normal course of its operations. The outcome of these legal proceedings, 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 2. CHANGES IN SECURITIES
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit No. Description of Exhibit
27.1* Financial Data Schedule.
- ---------------
* Filed Herewith.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended April 1, 2000
15
<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 16, 2000 BY /s/ STEPHEN L. CRIPE
-----------------------
STEPHEN L. CRIPE
CHIEF FINANCIAL OFFICER
(PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER)
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
condensed consolidated balance sheet and statement of operations as of and for
the period ending January 1, 2000 for Grove Holdings LLC and subsidiaries, and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-03-1999
<PERIOD-END> APR-01-2000
<CASH> 14,075
<SECURITIES> 0
<RECEIVABLES> 130,015
<ALLOWANCES> (5,457)
<INVENTORY> 208,355
<CURRENT-ASSETS> 362,685
<PP&E> 270,978
<DEPRECIATION> (65,356)
<TOTAL-ASSETS> 848,593
<CURRENT-LIABILITIES> 204,651
<BONDS> 287,271
0
0
<COMMON> 0
<OTHER-SE> 15,801
<TOTAL-LIABILITY-AND-EQUITY> 848,593
<SALES> 383,022
<TOTAL-REVENUES> 383,022
<CGS> 317,543
<TOTAL-COSTS> 317,543
<OTHER-EXPENSES> 64,066
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 24,692
<INCOME-PRETAX> (23,573)
<INCOME-TAX> 2,151
<INCOME-CONTINUING> (25,724)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 302
<NET-INCOME> (25,422)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
