<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: 333-57609
GROVE HOLDINGS LLC
------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 52-2089667
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of 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
<PAGE>
GROVE HOLDINGS LLC
INDEX TO ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2000
<TABLE>
PAGE
PART I
<S> <C> <C>
Item 1. Business. 1
Item 2. Properties. 7
Item 3. Legal Proceedings. 7
Item 4. Submission of Matters to a Vote of Security Holders. 7
PART II
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters. 8
Item 6. Selected Financial Data. 9
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 10
Item 7A. Quantitative and Qualitative Disclosures about
Market Risk. 19
Item 8. Financial Statements and Supplementary Data. 20
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure. 20
PART III
Item 10. Directors and Executive Officers of the Registrant. 21
Item 11. Executive Compensation. 23
Item 12. Security Ownership of Certain Beneficial Owners and Management. 25
Item 13. Certain Relationships and Related Transactions. 27
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. 28
</TABLE>
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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 Grove Holdings LLC ("Grove
Holdings"), and the consolidated financial statements of Grove Holdings
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 Grove Holdings Capital, Inc. ("Grove
Holdings Capital") are included herein. Grove Holdings believes that such
financial statements would not be material to holders of the Debentures (as
defined). As of September 30, 2000, Grove Holdings Capital had nominal assets,
no liabilities (other than its co-obligation under the Debentures (as defined))
and no operations.
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
Grove Holdings' assets consist solely of membership interests of Grove Worldwide
(the "Company") and capital stock of Grove Holdings Capital. Grove Holdings
conducts all of its business through the Company.
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 Holdings was formed as a Delaware limited liability company in 1997. Grove
Worldwide and its predecessors have been in business for over 50 years. The
principal executive offices of Grove Holdings 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 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 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
problem 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.
4
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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.
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
----------------- ------------------------- ------------------------------------------------------------------------
<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.
5
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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.
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.
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
None.
7
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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 Grove
Holdings. 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 Grove Holdings' 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."
8
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ITEM 6. SELECTED FINANCIAL DATA
The following table presents selected historical financial data of Grove
Holdings (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 HOLDINGS
---------------------------------- ---------------------------------
SEVEN MONTHS FIVE MONTHS
ENDED ENDED
APRIL 28, OCTOBER 3,
1996 1997 1998 1998 1999 2000
---------- ---------- ----------- ---------- ----------- ----------
(DOLLARS IN THOUSANDS)
Statement of operations data:
<S> <C> <C> <C> <C> <C> <C>
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 61,189 131,584 123,467
Goodwill impairment (3) -- -- -- -- -- 53,351
Income (loss) from
operations 50,620 67,891 19,822 (3,174) 16,198 (51,936)
Net income (loss) (4) 25,448 42,220 (395) (26,600) (32,059) (109,822)
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 -- 912,430 863,373 727,805
Total debt 7,443 7,265 -- 482,562 491,000 522,857
Total invested capital
(deficit) 502,554 628,492 -- 95,412 47,562 (75,920)
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, the five months ended October 3, 1998, and the 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
Grove Holdings' assets consist solely of membership interests of the Company and
capital stock of Grove Holdings Capital. Grove Holdings conducts all of its
business through the Company.
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 131,924 124,704 107,681
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 $ (51,936)
========= ========== ==========
</TABLE>
Net sales have been restated to exclude freight costs which historically had
been netted with freight revenue. The impact of restatements 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 U.S. 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 U.S. 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.
12
<PAGE>
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.
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 $8.3 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.
13
<PAGE>
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 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 $25.1 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.
14
<PAGE>
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.
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 be completed in 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.
15
<PAGE>
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 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.
16
<PAGE>
GROVE HOLDINGS CAPITAL, INC.
In connection with the Acquisition, Grove 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 Grove 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 Grove 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. Grove Holdings believes that such financial statements would not be
material to the holders of the Senior Discount Debentures.
The ability of Grove Holdings' subsidiaries to make cash distributions and loans
to Grove Holdings is significantly restricted under the terms of the Senior
Subordinated Notes, the Indenture governing the Senior Subordinated Notes and
the Bank Credit Facility.
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.
18
<PAGE>
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.
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
Grove Holdings' principal market risk exposure is changing interest rates,
primarily changes in short-term interest rates. Grove Holdings does not enter
into financial instruments for trading or speculative purposes. Grove Holdings'
policy is to manage interest rates through use of a combination of fixed and
floating rate debt.
Grove Holdings may also use derivative financial instruments to manage its
exposure to interest rate risk. A summary of Grove Holdings' 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
Senior discount debentures 88,000 16.63% 1,760
</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.
19
<PAGE>
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.
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 Grove Holdings, along with
the Report of Independent Accountants, are included on pages F-1 through F-36 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 Investors, as Managing Member, sets the terms of office of the members of
the Management Committee of Grove Holdings (the "Holdings Management
Committee"). The executive officers of Grove Holdings serve at the discretion of
the Holdings Management Committee. The following table sets forth information
concerning executive officers of Grove Holdings and the members of the Holdings
Management Committee, each of whom is also a member of the Management Committee
of Grove Investors (the "Investors 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, and Member of each
Management Committee
Stephen L. Cripe 44 Vice President and Chief Financial Officer
Keith R. Simmons 50 Vice President and Secretary
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
</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.
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.
21
<PAGE>
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. 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 Committee 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.
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.
22
<PAGE>
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. 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.
MANAGEMENT COMMITTEE SUBCOMMITTEES AND FEES
The Company Management Committee has an executive committee, compensation
committee, operating committee, finance committee, and audit/ethics committee.
The members of the Company Management Committee and the subcommittees are not
compensated for their services as such.
ITEM 11. EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION
The executive officers of Grove Holdings are not compensated for their services
as such.
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.
23
<PAGE>
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 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 Grove 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.
24
<PAGE>
MANAGEMENT OF GROVE HOLDINGS CAPITAL
Messrs. Henske and Bust are the directors of Grove Holdings Capital. In
addition, Mr. Anthony P. Scotto is also a director of Grove Holdings Capital.
Directors are not compensated in any way for acting in their capacity as such.
The board of directors of Grove Holdings Capital does not have a compensation
committee, audit committee or nominating committee.
Mr. Bust is the Chief Executive Officer of Grove Holdings Capital. Mr. Simmons
is the Vice President and Secretary of Grove Holdings Capital. Mr. Cripe is the
Vice President and Chief Financial Officer of Grove Capital. None of the
executive officers of Grove Holdings 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 Holdings
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 Holdings Capital are beneficially owned by
Grove Holdings, 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.
25
<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) *
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.
26
<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
Grove Investors under the Option Plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
OPERATING AGREEMENTS
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
and Cripe were indebted to the Company in the amounts of approximately
$650,000 and $677,000, including accrued interest, respectively.
27
<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 Grove Holdings
and the Report of Independent Accountants set forth on pages F-1 through
F-36respectively, 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.
Exhibit No. DESCRIPTION OF EXHIBIT
3.1* Second Amended and Restated Limited Liability Company Agreement of
Grove Holdings LLC ("Grove Holdings").
4.1* Indenture dated as of April 29, 1998, by and among Grove Holdings,
Grove Holdings Capital, Inc. ("Grove Holdings Capital") and the United
States Trust Company of New York.
4.2* Form of 11 5/8% Debentures due 2009.
4.3* Credit Agreement dated April 29, 1998, by and among Grove Worldwide LLC
("Grove"), Grove Capital, Inc. ("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 Holdings, Grove Holdings Capital and Chase Securities Inc. and
Donaldson, Lufkin & Jenrette Securities Corporation.
10.1* Stock and Asset Purchase Agreement, dated March 10, 1998 (the
"Acquisition Agreement"), by and among Grove and Hanson Funding (G)
Limited, Deutsche Grove Corporation, Hanson America Holdings (4) Ltd.,
Grove France SA, Kidde Industries, Inc. and Hanson Finance PLC
(collectively, the "Sellers").
10.2* Amendment to the Acquisition Agreement, dated April 29, 1998, by and
among the Grove and the Sellers.
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.
28
<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 Jeffrey
D. Bust.
10.14* Promissory Note dated October 27, 1998 by and between Grove and Stephen
L. Cripe.
10.15* Promissory Note dated October 27, 1998 by and between Grove and Stephen
L. Cripe.
10.16* Severance Agreement and General Release, dated October 6, 1999 by and
among Grove Investors LLC, Grove Worldwide LLC, and Salvatore J.
Bonanno.
10.17* Grove LLC Realization Event Plan (PSAR).
10.18* First Amendment to the Consulting Agreement dated April 29, 1998, by
and between Grove Worldwide LLC and George Group, Inc.
10.19* 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.
10.22 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.
* Incorporated herein by reference from the Registration Statement on Form
S-4 filed by Grove Holdings LLC and Grove Holdings Capital, Inc.
(Commission File Number 333-57609).
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended September 30, 2000.
29
<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 HOLDINGS 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.
SIGNATURES TITLE
/s/ Jeffry D. Bust Chairman and Chief Executive Officer and
------------------------
Jeffry D. Bust Member (Principal Executive Officer)
/s/ Stephen L. Cripe Chief Financial Officer (Principal
------------------------
Stephen L. Cripe Financial and Accounting Officer)
/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
30
<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.
31
<PAGE>
GROVE HOLDINGS LLC AND SUBSIDIARIES
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
FINANCIAL STATEMENTS
<S> <C>
Independent Auditors' Report F-2
Consolidated Balance Sheets as of October 3, 1998 and October 2, 1999 F-3
Combined Statements of Operations the year ended September 27, 1997 and the
seven months ended April 28, 1998 and Consolidated Statements of Operations
for the five months ended October 3, 1998
and year ended October 2, 1999 F-4
Combined Statements of Comprehensive Income (Loss) for the year ended September
27, 1999 and the seven months April 28, 1998 and Consolidated Statements of
Comprehensive Income (Loss) for the five
months October 3, 1998 and year ended October 2, 1999 F-5
Combined Statements of Predecessor Capital for the year ended September 27, 1997
and the seven months ended April 28, 1998 and Consolidated Statements of
Members' Equity for the five months ended October 3, 1998
and year ended October 2, 1999 F-6
Combined Statements of Cash Flows for the year ended September 27, 1997 and the
seven months ended April 28, 1998 and Consolidated Statements of Cash Flows
for the five months ended October 3, 1998
and year ended October 2, 1999 F-7
Notes to Combined and Consolidated Financial Statements F-8
FINANCIAL STATEMENT SCHEDULE
Schedule I - Condensed Financial Information of Registrant S-1
Schedule II - Valuation and Qualifying Accounts S-4
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Management Committee of
Grove Holdings LLC:
We have audited the accompanying consolidated balance sheets of Grove
Holdings 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 schedules listed under Item 14(a)(2). These
combined and consolidated financial statements and financial statement
schedules 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 schedules 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 Holdings 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
schedules, 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 HOLDINGS LLC AND SUBSIDIARIES
Consolidated Balance Sheets
October 2, 1999 and September 30, 2000
(in thousands)
<TABLE>
<CAPTION>
1999 2000
------------ ------------
ASSETS
Current assets:
<S> <C> <C>
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 14,998 14,647
------------ ------------
$ 863,373 $ 727,805
============ ============
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) 459,892 464,890
Other liabilities (notes 12 and 13) 90,127 84,854
------------ ------------
Total liabilities 815,811 803,725
------------ ------------
Member's equity (deficit):
Invested capital 115,886 116,479
Accumulated deficit (58,659) (168,481)
Accumulated other comprehensive loss (9,665) (23,918)
------------ ------------
Total member's equity (deficit) 47,562 (75,920)
------------ ------------
Commitments and contingencies (notes 2, 17, 18, and 19)
------------ ------------
$ 863,373 $ 727,805
============ ============
</TABLE>
See accompanying notes to combined and consolidated financial statements.
F-3
<PAGE>
GROVE HOLDINGS 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) 387,392 342,993 646,022 725,680
---------------- -------------- -------------- -------------
Gross profit 98,863 58,015 147,762 124,882
Selling, engineering, general
and administrative expenses 73,826 58,098 124,704 107,681
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) 16,178 (51,936)
Interest income (expense), net (note 11) 1,048 (18,535) (42,574) (50,897)
Other expense, net (9,524) (554) (148) (1,036)
---------------- -------------- -------------- -------------
Income (loss) before
income taxes 11,346 (22,263) (26,544) (103,869)
Income taxes (note 15) 11,741 4,337 5,535 6,255
---------------- -------------- -------------- -------------
Net loss before cumulative
effect of change in
accounting principle (395) (26,600) (32,079) (110,124)
Cumulative effect of change in
accounting principle (note 18) -- -- -- 302
---------------- -------------- -------------- -------------
Net loss $ (395) $ (26,600) $ (32,079) $ (109,822)
================ ============== ============== =============
</TABLE>
See accompanying notes to combined and consolidated financial statements.
F-4
<PAGE>
GROVE HOLDINGS 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) $(26,600) $(32,059) $(109,822)
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) $(21,318) $(47,006) $(124,075)
=========== =========== =========== ============
</TABLE>
See accompanying notes to combined and consolidated financial statements.
F-5
<PAGE>
GROVE HOLDINGS 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 income (7,135)
----------- --------- ----------- ------------- ---------
Balance, April 28, 1998 509,746 -- -- -- --
Elimination of predecessor capital (509,746) -- -- -- --
Initial capitalization -- 120,000 -- -- 120,000
Advances to Grove
Investors LLC (note 20) -- (3,270) -- -- (3,270)
Net loss -- -- (26,600) -- (26,600)
Other comprehensive income -- -- -- 5,282 5,282
----------- --------- ----------- ------------- ---------
Balance, October 3, 1998 -- 116,730 (26,600) 5,282 95,412
Advances to Grove
Investors LLC (note 20) -- (844) -- -- (844)
Net loss -- -- (32,059) -- (32,059)
Other comprehensive loss -- -- -- (14,947) (14,947)
----------- --------- ----------- ------------- ---------
Balance, October 2, 1999 -- 115,886 (58,659) (9,665) 47,562
Contribution from Grove
Investors LLC (note 20) -- 593 -- -- 593
Net loss -- -- (109,822) -- (109,822)
Other comprehensive loss -- -- -- (14,253) (14,253)
----------- --------- ----------- ------------- ---------
Balance, September 30, 2000 $ -- $ 116,479 $ (168,481) $ (23,918) $(75,920)
=========== ========= =========== ============= =========
</TABLE>
See accompanying notes to combined and consolidated financial statements.
F-6
<PAGE>
GROVE HOLDINGS 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) $ (26,600) $ (32,059) $ (109,822)
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 -- 790 2,069 2,105
Goodwill impairment charge -- -- -- 53,351
Accretion of interest on senior discount notes -- 2,550 6,357 6,998
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 25,963 12,866 (2,412)
---------------- ---------------- ---------------- --------------
Net cash provided by (used in) operating
activities 93,097 57,300 680 (8,344)
---------------- ---------------- ---------------- --------------
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 -- (562,723) 10,500 --
Other investing activities 2,071 1,302 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 -- 500,185 10,000 25,000
Repayments of long-term debt -- (35,200) (12,000) (2,000)
Equity investment from Grove Investors LLC -- 120,000 -- --
Change in amount advanced to Grove
Investors LLC -- (3,270) (844) 593
Deferred financing costs -- (16,608) -- --
Other financing activities (62,087) -- (1,366) (322)
---------------- ---------------- ---------------- --------------
Net cash provided by (used in)
financing activities (55,266) 566,048 (71) 25,072
---------------- ---------------- ---------------- --------------
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 HOLDINGS 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 Holdings LLC (the "Company"), through its subsidiaries, 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, owned by Grove Investors LLC ("Investors"). 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). All earnings of the Company are available for distribution
to Investors subject to restrictions contained in the Company's debt
agreements (see note 11).
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 (Continued)
<PAGE>
GROVE HOLDINGS 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 covenant 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
Issuance of Senior Discount Debentures 49,958
Equity investment by Investors 120,000
------------
$ 605,064
============
</TABLE>
<TABLE>
<S> <C>
Uses:
Acquisition price $ 583,000
Transaction costs 5,783
------------
Aggregate purchase price 588,783
Debt financing costs 16,281
------------
$ 605,064
============
</TABLE>
F-9 (Continued)
<PAGE>
GROVE HOLDINGS 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 Investors of $120,000 were
generated by Investors through the issuance of 100% of its equity in
exchange for $75,000 and net proceeds of $45,000 from the issuance of
$47,375 of 14 1/2% Senior Discount Debentures due May 2010. The
debentures require quarterly payments of interest, in cash, or at
Investors' option, in the form of additional debentures. Cash interest
payments, if any, are expected to be generated by distributions from the
Company. Such debentures have no cash interest requirement prior to
maturity.
(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.
(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>
F-10 (Continued)
<PAGE>
GROVE HOLDINGS LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
(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 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.
F-11 (Continued)
<PAGE>
GROVE HOLDINGS LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
(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.
(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.
F-12 (Continued)
<PAGE>
GROVE HOLDINGS LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
(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 and Senior
Discount Debentures 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.
(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.
F-13 (Continued)
<PAGE>
GROVE HOLDINGS LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
(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 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.
F-14 (Continued)
<PAGE>
GROVE HOLDINGS LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
(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 its aerial work platform models
manufactured. The decision, together with further rationalization of the
Company's U.S. crane products, resulted in inventory write-downs of
$12,500, which are included in costs of goods sold.
(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.
F-15 (Continued)
<PAGE>
GROVE HOLDINGS LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
(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.
(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 33,519
------------- -------------
$ 84,946 $ 83,064
============= =============
</TABLE>
F-16 (Continued)
<PAGE>
GROVE HOLDINGS LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
(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
Senior discount debentures 58,892 65,890
------------ --------------
471,892 501,890
Less current maturities 12,000 37,000
------------ --------------
Long-term debt $ 459,892 $ 464,890
============ ==============
</TABLE>
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 provided 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
receivable and inventories. 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 5-day period
ending April 23, 2001 borrowings under the Revolving Credit Facility will
be limited to $40,000 and $35,0000, 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 the Company
will obtain such modifications, if required.
F-17 (Continued)
<PAGE>
GROVE HOLDINGS LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
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.
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 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.
F-18 (Continued)
<PAGE>
GROVE HOLDINGS LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
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. 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.
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. These
restrictions could restrict the Company's subsidiaries from making
distributions necessary to service the Senior Discount Debentures. Based
on the Company's current level of operating results, these restrictions,
and those included in the Bank Credit Facility, the Company would be
prevented from making cash payments on the Senior Discount Debentures
described below.
SENIOR DISCOUNT DEBENTURES -- The Senior Discount Debentures were issued
pursuant to an Indenture dated April 29, 1998 (the "Holdings Indenture")
at a discount from their principal amount. The Senior Discount Debentures
are general unsecured obligations of the Company and its co-issuer, Grove
Holdings Capital, Inc. The Senior Discount Debentures accrete interest at
a rate of 11 5/8% per annum, compounded semi-annually, to an aggregate
principal amount of $88,000 at May 1, 2003. Thereafter, the Senior
Discount Debentures will accrue cash interest at a rate of 11 5/8% per
annum, payable semi-annually on May 1 and November 1 of each year,
commencing on November 1, 2003. The Senior Discount Debentures are
redeemable at the option of Holdings, in whole or in part, at any time
after May 1, 2003, at a declining redemption price and mature on May 1,
2009.
F-19 (Continued)
<PAGE>
GROVE HOLDINGS LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
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
Discount Debentures at 111.625% of the accreted value (as defined by the
Holdings Indenture) thereof plus liquidated damages (as defined by the
Holdings Indenture) thereon, if any, with the net proceeds of one or more
public offerings of the Company's or Investors' equity, provided that at
least 65% of the originally issued aggregate principal amount of the
Senior Discount Debentures remain outstanding thereafter.
Upon the occurrence of a change of control (as defined by the Holdings
Indenture), each holder of the Senior Discount Debentures will have the
right to require Holdings to repurchase such holders' 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.
The Holdings Indenture contains certain covenants that limit, among other
things, the ability of the Company and its subsidiaries 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 $235,000.
Aggregate annual scheduled maturities of long-term debt are as follows:
$2000 in 2001, $2,000 in 2002, $2,000 in 2003, $2,000 in 2004 and $88,000
in 2005.
F-20 (Continued)
<PAGE>
GROVE HOLDINGS LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
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 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>
Interest expense $ (263) $ (17,410) $ (38,711) $ (48,401)
Interest expense paid to Hanson (2,174) -- -- --
Accretion of interest on Senior
Discount notes -- (2,550) (6,357) (6,998)
Amortization of deferred financing
costs -- (790) (2,069) (2,105)
Interest income 3,485 2,215 4,563 6,607
-------------- -------------- --------------- ---------------
$ 1,048 $ (18,535) $ (42,574) $ (50,897)
============== ============== =============== ===============
</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.
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 9,233 11,222
----------- -----------
$ 90,127 $ 84,854
=========== ===========
</TABLE>
F-21 (Continued)
<PAGE>
GROVE HOLDINGS LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
(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-22 (Continued)
<PAGE>
GROVE HOLDINGS 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-
PENSION BENEFITS RETIREMENT 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-23 (Continued)
<PAGE>
GROVE HOLDINGS 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-24 (Continued)
<PAGE>
GROVE HOLDINGS 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-25 (Continued)
<PAGE>
GROVE HOLDINGS 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-26 (Continued)
<PAGE>
GROVE HOLDINGS 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. 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.
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-27 (Continued)
<PAGE>
GROVE HOLDINGS 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 $ (12,143) $ (33,588) $ (107,423)
Other countries (19,100) (13,184) (526) 3,554
--------------- ------------ -------------- --------------
$ 11,346 $ (25,327) $ (34,114) $ (103,869)
=============== ============ ============== ==============
</TABLE>
The provision (benefit) for income taxes consisted of the following 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-28 (Continued)
<PAGE>
GROVE HOLDINGS 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 charge of $1.6 million in fiscal 2001.
F-29 (Continued)
<PAGE>
GROVE HOLDINGS 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-30 (Continued)
<PAGE>
GROVE HOLDINGS 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-31 (Continued)
<PAGE>
GROVE HOLDINGS 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-32 (Continued)
<PAGE>
GROVE HOLDINGS 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 Investors of $3,270 and $844, respectively,
during the five months ended October 3, 1998 and year ended October 2,
1999. Such amounts included loans to the Company's executive officers to
purchase certain equity interest in Investors and transactions costs
incurred to consummate the Acquisition and related financing. Such
amounts have been accounted for as a reduction of member's equity.
Repayments from Investors to the Company were $593 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-33 (Continued)
<PAGE>
GROVE HOLDINGS 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 45,428 313,814 912,430
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 41,818 288,864 863,373
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 (86,061) (51,936)
Total assets 396,435 62,736 41,258 227,376 727,805
Capital expenditures 7,540 513 722 -- 8,775
</TABLE>
F-34 (Continued)
<PAGE>
GROVE HOLDINGS 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.
F-35 (Continued)
<PAGE>
GROVE HOLDINGS LLC AND SUBSIDIARIES
Notes to Combined and Consolidated Financial Statements
(in thousands of dollars)
October 2, 1999 and September 30, 2000
(23) GROVE HOLDINGS CAPITAL, INC.
The Company formed Grove Holdings Capital, Inc. as a direct wholly owned
subsidiary to act as a co-issuer of the Senior Discount Debentures (see
note 11). At September 30, 2000, Grove Holdings 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 Discount Debentures. For the years ended October 2, 1999 and
September 30, 2000, Grove Holdings Capital, Inc. had no income or loss
and no revenues. Grove Holdings Capital, Inc. has no subsidiaries, no
operations and is prohibited from engaging in any business activities.
(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-36 (Continued)
<PAGE>
GROVE HOLDINGS LLC AND SUBSIDIARIES SCHEDULE I
Condensed Financial Information of the Registrant
Condensed Consolidated Balance Sheets-- October 2, 1999 and September 30, 2000
<TABLE>
<CAPTION>
1999 2000
------------ --------------
<S> <C> <C>
ASSETS
Investment in subsidiaries $ 104,568 $ --
Other assets 1,886 1,670
------------ --------------
$ 106,454 $ 1,670
============ ==============
LIABILITIES AND MEMBERS' EQUITY (DEFICIT)
Long-term debt $ 58,892 $ 65,890
------------ --------------
Members' equity (deficit):
Invested capital 115,886 116,479
Accumulated deficit (58,659) (156,781)
Accumulated other comprehensive loss (9,665) (23,918)
------------ --------------
47,562 (64,220)
------------ --------------
$ 106,454 $ 1,670
============ ==============
(Continued)
Note: For purposes of this schedule, the investments are accounted for
under the equity method. The investments have not been reduced
below zero.
</TABLE>
S-1
<PAGE>
GROVE HOLDINGS LLC AND SUBSIDIARIES SCHEDULE I,CONTINUED
Condensed Financial Information of the Registrant
Condensed Consolidated Statements of Operations and Comprehensive Loss
For the five months ended October 3, 1998 and the years ended October 2,
1999 and September 30, 2000
<TABLE>
<CAPTION>
1998 1999 2000
------------- ------------- --------------
<S> <C> <C> <C>
Interest expenses $ (2,619) (6,554) (7,195)
Other expenses -- (9) (32)
Net loss of subsidiaries (23,981) (25,496) (90,895)
------------- ------------- --------------
Net loss (26,600) (32,059) (98,122)
Other comprehensive income (loss) 5,282 (14,947) (14,253)
------------- ------------- --------------
Comprehensive loss $ (21,318) (47,006) (112,375)
============= ============= ==============
(Continued)
Note: For purposes of this schedule, the investments are accounted for
under the equity method. The investments have not been reduced
below zero.
</TABLE>
S-2
<PAGE>
GROVE HOLDINGS LLC AND SUBSIDIARIES SCHEDULE I, CONTINUED
Condensed Financial Information of the Registrant
Condensed Consolidated Statement of Cash Flows
For the five months ended October 3, 1998 and the years ended October 2,
1999 and September 30, 2000
<TABLE>
<CAPTION>
1998 1999 2000
------------- ------------- -------------
<S> <C> <C> <C>
Cash flow from operating activities: $ (26,600) (32,059) (98,122)
Net loss
Adjustments to reconcile net loss to net cash provided by operating
activities:
Amortization of deferred financing costs 68 197 196
Accrued interest on Senior Discount Debentures 2,550 6,357 6,998
Net loss of subsidiaries 23,981 25,496 90,895
Other changes 3,650 853 (560)
------------- ------------- -------------
Net cash provided by operating activities 3,649 844 (593)
Cash used for investing activities-- investement in subsidiaries (168,209) -- --
------------- ------------- -------------
Net cash used in investing activities (168,209) -- --
------------- ------------- -------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 49,985 -- --
Equity investment from Grove Investors LLC 120,000 -- --
Advances to Grove Investors LLC (3,270) (844) 593
Deferred financing costs (2,155) -- --
------------- ------------- -------------
Net cash provided by financing activities 164,560 (844) 593
------------- ------------- -------------
Net change in cash and cash equivalents -- -- --
Cash and cash equivalents at beginning of period -- -- --
------------- ------------- -------------
Cash and cash equivalents at end of period $ -- -- --
============= ============= =============
</TABLE>
S-3
<PAGE>
GROVE HOLDINGS 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
</TABLE>
(a) Impact of exchange rates
(b) Write-offs
S-4
