FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(MARK ONE)
|X| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 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 ________
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Commission File Number 333-57611
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GROVE WORLDWIDE LLC
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation or organization)
----
23-2955766
(I.R.S. Employer
Identification Number)
----
1565 Buchanan Trail East
Shady Grove, Pennsylvania 17256
(717) 597-8121
(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)
----
Indicate by check mark whether the registrant (1) has filed all the reports
required to be filed by section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past ninety days. Yes |X| No |_|
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes |_| No |_|
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date. None.
Grove Worldwide LLC
Index to Quarterly Report on Form 10-Q
For the Quarterly Period Ended December 30, 2000
Page
----
Part I
Item 1 Financial statements
Condensed Consolidated Balance Sheets as of
September 30, 2000 and December 30, 2000 .................. 1
Condensed Consolidated Statements of
Operations for the three months ended January
1, 2000 and December 30,
2000 ...................................................... 2
Condensed Consolidated Statements of
Comprehensive Loss for the three months ended
January 1, 2000 and December 30,
2000 ...................................................... 3
Condensed Consolidated Statements of Cash
Flows for the three months ended January 1,
2000 and December 30, 2000 ................................ 4
Notes to Condensed Consolidated Financial
Statements ................................................ 5
Item 2 Management's discussion and analysis of financial
condition and results of operations ............................. 15
Item 3 Quantitative and qualitative disclosures about market
risk ............................................................ 19
Part II
Item 1 Legal proceedings ............................................... 20
Item 2 Changes in securities ........................................... 20
Item 3 Defaults upon senior securities ................................. 20
Item 4 Submission of matters to a vote of security holders ............. 20
Item 5 Other information ............................................... 20
Item 6 Exhibits and reports on form 8-K ................................ 20
Signatures ...................................................... 21
i
Unless otherwise noted, the "Company" or "Grove" refers to Grove Worldwide LLC
and its subsidiaries. The Company's fiscal year ends on the Saturday closest to
the last day of September. References to the (i) three months ended January 1,
2000 means the period from October 3, 1999 to January 1, 2000; (ii) three months
ended December 30, 2000 means the period from October 1, 2000 to December 30,
2000; References to historical financial information are to the historical
combined and consolidated financial statements of the Company. See "Item 2,
Management's Discussion and Analysis of Financial Condition and Results of
Operations."
No separate financial statements of the subsidiary guarantors (as defined) and
Grove Capital, Inc. ("Grove Capital") are included herein. The Company considers
that such financial statements would not be material to investors because: (i)
this report does include, in the notes to the consolidated financial statements
of the Company, supplemental financial information, setting forth on a
consolidated basis, balance sheets, statements of operations and cash flows
information for the subsidiary guarantors, the subsidiaries of the Company that
are not guarantors (the "non-guarantor subsidiaries") and the Company; and (ii)
the above-mentioned note provides sufficient detail to allow investors to
determine the nature of the assets held by, and the operations and cash flows of
the subsidiary guarantors and Grove Capital.
ii
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 through April 30,
2001, a period during which the Company's need for working capital is
projected to be the greatest. Management believes the Company should be
able to comply with its existing bank financial covenants and should have
sufficient cash flow to meet the Company's obligations as they become due.
If the Company is unable to sufficiently reduce working capital, the
Company would not be able to reduce total outstanding borrowings and
letters of credit below $40 million for the 14-day period ending April 16,
2001 and to below $35 million for the 5-day period ending April 23, 2001,
as required by the Bank Credit Facility. If the Company were unable to
comply with the covenants in the Bank Credit Facility, in order to avoid
default it would be required to obtain additional modifications to its
Bank Credit Facility and/or additional sources of funding. There can be no
assurance that, if needed, such modification would be agreed to by the
bank credit facility lenders or such funding would be available;
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 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 assurance and completeness of
these forward-looking statements. Any forward-looking statements contained
herein speak solely as of the date on which such statements are made, and the
Company undertakes no obligation to update any forward-looking statements to
reflect events or circumstances after the date on which such statements were
made or to reflect the occurrence of unanticipated events.
iii
PART I
Item 1. Financial Statements
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(Unaudited and in thousands)
September 30, December 30,
2000* 2000
------------- ------------
Assets
Current assets:
Cash and cash equivalents $ 16,102 $ 5,593
Cash restricted as to use 1,688 2,939
Trade receivables, net 131,405 105,509
Notes receivable 6,801 2,835
Inventories 175,181 192,004
Net assets of subsidiary held for sale 3,308 --
Prepaid expenses and other current assets 10,116 12,615
--------- ---------
Total current assets 344,601 321,495
Property, plant and equipment, net 168,696 167,512
Goodwill, net 199,861 202,941
Other assets 12,977 13,324
--------- ---------
$ 726,135 $ 705,272
========= =========
Liabilities and Member's Equity
Current liabilities:
Current maturities of long-term debt $ 37,000 $ 37,100
Short-term borrowings 20,967 21,118
Accounts payable 75,780 63,490
Accrued expenses and other current liabilities 83,064 87,274
--------- ---------
Total current liabilities 216,811 208,982
Deferred revenue 37,170 34,413
Long-term debt 399,000 398,000
Other liabilities 84,865 84,190
--------- ---------
Total liabilities 737,846 725,585
--------- ---------
Member's equity:
Invested capital 164,289 164,289
Accumulated deficit (152,082) (166,527)
Accumulated other comprehensive loss (23,918) (18,075)
--------- ---------
Total member's equity (11,711) (20,313)
--------- ---------
$ 726,135 $ 705,272
========= =========
See accompanying notes to condensed consolidated financial statements.
* Amounts have been derived from the Company's audited consolidated balance
sheet.
1
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
For the three months ended January 1, 2000 and December 30, 2000
(unaudited and in thousands)
Three Months Ended
January 1, December 30,
2000 2000
---------- ------------
Net sales $ 185,361 $ 173,384
Cost of goods sold 155,487 149,204
--------- ---------
Gross profit 29,874 24,180
Selling, engineering, general
and administrative expenses 27,902 21,755
Amortization of goodwill 1,771 1,399
Restructuring charges 4,978 1,632
--------- ---------
Loss from operations (4,777) (606)
Interest expense, net (9,941) (13,732)
Other income (expense), net (116) 493
--------- ---------
Loss before
income taxes (14,834) (13,845)
Income taxes 462 600
--------- ---------
Loss before cumulative
effect of change in
accounting principle (15,296) (14,445)
Cumulative effect of
a change in accounting
principle (note 8) 302 --
--------- ---------
Net loss $ (14,994) $ (14,445)
========= =========
See accompanying notes to condensed consolidated financial statements.
2
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Condensed Consolidated Statements of Comprehensive Loss
For the three months ended January 1, 2000 and December 30, 2000
(unaudited and in thousands)
Three Months Ended
January 1, December 30,
2000 2000
---------- ------------
Net loss $(14,994) $(14,445)
Recognition of loss on cash flow
hedges of forecasted foreign
currency transactions through
charge to earnings -- 992
Change in foreign currency translation
adjustment (1,275) 4,851
-------- --------
Comprehensive loss $(16,269) $ (8,602)
======== ========
See accompanying notes to condensed consolidated financial statements.
3
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
For the three months ended January 1, 2000 and December 30, 2000
(unaudited and in thousands)
Three Months Ended
January 1, December 30,
2000 2000
---------- ------------
Cash flows from operating activities:
Net loss $(14,994) $(14,445)
Adjustments to reconcile to net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization 5,043 5,060
Depreciation of equipment held for rent 3,319 975
Amortization of deferred financing costs 622 429
Loss on sales of property, plant
and equipment 13 13
Deferred income tax expense (benefit) (132) 45
Changes in operating assets and liabilities:
Trade receivables, net 19,437 29,883
Notes receivable 4,251 3,966
Inventories (2,307) (10,954)
Trade accounts payable 7,186 (15,659)
Other assets and liabilities, net (10,428) (5,374)
-------- --------
Net cash provided by (used in) operating activities 12,010 (6,061)
-------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (1,321) (2,134)
Investment in equipment held for rent (714) (1,600)
-------- --------
Net cash used in investing activities (2,035) (3,734)
-------- --------
Cash flows from financing activities:
Net short-term borrowings (repayments) (3,566) 151
Borrowings (repayments) of long-term debt,net 14,000 (900)
Other 22 --
-------- --------
Net cash provided by (used in) financing activities 10,456 (749)
-------- --------
Effect of exchange rate changes on cash (184) 35
-------- --------
Net change in cash and cash equivalents 20,247 (10,509)
Cash and cash equivalents, beginning of period 16,864 16,102
-------- --------
Cash and cash equivalents, end of period $ 37,111 $ 5,593
======== ========
See accompanying notes to condensed consolidated financial statements.
4
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands)
================================================================================
(1) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly, these financial
statements do not include all the information and notes required by
generally accepted accounting principles for complete financial
statements. In the opinion of management, the unaudited consolidated
financial statements include all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation of the
financial position and results of operations.
The Company is a sole member limited liability company formed pursuant to
the provisions of the Delaware Limited Liability Company Act. Grove
Holdings LLC ("Holdings") is the sole member of the Company. All earnings
of the Company are available for distribution to Holdings subject to
restrictions contained in the Company's debt agreements. Holdings is a
sole member limited liability company that is owned by Grove Investors LLC
("Investors").
Interim results for the three-month period ended December 30, 2000 are not
necessarily indicative of the results that may be expected for a full
fiscal year. For further information, refer to the consolidated financial
statements and notes for the year ended September 30, 2000.
(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. The Company 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.
Management has completed a number of initiatives to help improve operating
results and cash flows including (i) reduction in Manlift operations, (ii)
restructuring of Shady Grove, Pennsylvania manufacturing operations by
improving product flow and (iii) reducing the number of sales, marketing,
engineering and administrative employees, principally in Shady Grove and
the UK.
Management believes the Company should be able to comply with its existing
bank financial covenants and should have sufficient cash flow to meet the
Company's obligations as they become due. However, Management is
continuing to review the Company's cash flow requirements particularly
projected working capital reductions but there can be no assurance that
management's assumptions as to such reductions will be met. If the Company
is unable to sufficiently reduce working capital, the Company will not be
able to reduce total outstanding borrowings and letters of credit below
$40 million for the 14-day period ending April 16, 2001 and to below $35
million for the 5-day period ending April 23, 2001, as required by the
Bank Credit Facility. If the Company were unable to comply with the
covenants in the Bank Credit Facility, in order to avoid default, it would
be required to obtain additional modifications to its Bank Credit Facility
and/or additional sources of funding. There can be no assurance that, if
needed, such modifications would be agreed to by the Bank Credit Facility
Lenders or such funding, if needed, would be available.
5
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands)
================================================================================
(3) Inventory
Inventories consist of the following as of September 30, 2000 and December
30, 2000:
September 30, December 30,
2000 2000
---- ----
Raw materials $ 60,367 $ 63,347
Work in process 51,524 42,447
Finished goods 63,290 86,210
-------- --------
$175,181 $192,004
======== ========
Inventories are valued at the lower of cost or market, as determined
primarily under the first-in, first-out method.
(4) Income Taxes
A significant portion of the Company's business is operated as a limited
liability company organized under the laws of Delaware. Accordingly,
earnings of the Company's U.S. mobile hydraulic crane and aerial work
platform businesses, as well as, earnings from its foreign subsidiaries
will not be directly subject to U.S. income taxes. Such taxable income
will be allocated to the equity holders of Investors and they will be
responsible for U.S. income taxes on such taxable income. The Company
intends to make distributions, in the form of dividends, to enable the
equity holders of Investors to meet their tax obligations with respect to
income allocated to them by the Company. No distributions were made for
taxes in the year ended September 30, 2000 or the three months ended
December 30, 2000.
The difference between the Company's reported tax provision for the three
months ended December 30, 2000 and the tax provision computed based on
U.S. statutory rates is primarily attributed to the Company's structure as
a limited liability company.
(5) Restructuring
During the three months ended December 30, 2000, the Company adopted and
executed a restructuring plan that resulted in the termination of
approximately 220 employees principally in its US operations. In
connection with the terminations, the Company accrued severance costs of
$1,632. During the three months ended December 30, 2000 the Company paid
severance costs of $1,800 related to these terminations and to termination
agreements consummated in fiscal 2000. As of December 30, 2000 the Company
has remaining severance obligations of $3,200, which it expects to pay
through April 2002.
(6) Accumulated Other Comprehensive Loss
6
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands)
================================================================================
Accumulated other comprehensive loss as of September 30, 2000 and December
30, 2000 consists of the following:
September 30, December 30,
2000 2000
---- ----
Foreign currency translation adjustment ($22,666) ($17,815)
Unrealized net losses on cash flow
hedges of foreign currency transactions (992) --
Minimum pension liability (260) (260)
-------- --------
($23,918) ($18,075)
======== ========
(7) Segment Information
The Company is an international designer, manufacturer and marketer of a
comprehensive line of mobile hydraulic cranes, aerial work platforms and
truck-mounted cranes. The Company markets its products through two
operating divisions; Grove Crane and National Crane. Grove Crane
manufactures mobile hydraulic cranes in its Shady Grove, Pennsylvania and
Wilhelmshaven, Germany manufacturing facilities. National Crane
manufactures truck-mounted cranes in its Waverly, Nebraska manufacturing
facility. Information for each of the Company's operating division's
follows:
Corporate,
Grove Grove National eliminations,
Crane Manlift Crane and other Total
----- ------- ----- --------- -----
As of and for the three months
ended December 30, 2000
Net sales $ 157,361 $ -- $ 16,267 $ (244) $ 173,384
Depreciation and amortization 3,402 -- 259 1,399 5,060
Income (loss) from operations 4,729 -- 934 (6,269) (606)
Total assets 448,524 -- 38,390 218,358 705,272
Capital expenditures 2,113 -- 21 -- 2,134
As of and for the nine months
ended January 1, 2000
Net sales $ 130,237 $ 35,098 $ 20,000 $ 26 $ 185,361
Depreciation and amortization 2,925 82 265 1,771 5,043
Income (loss) from operations 6,916 (1,766) 1,986 (11,913) (4,777)
Total assets 455,170 59,083 38,471 295,451 848,175
Capital expenditures 837 182 302 -- 1,321
The Grove Manlift segment has been eliminated in connection with the
reduction of Manlift operations that occurred in the fourth quarter of
fiscal 2000. Corporate, eliminations and other consist principally of
corporate expenses, and assets, including the restructuring charge,
goodwill and intercompany eliminations. Depreciation and amortization
excludes depreciation of equipment held for rent.
(8) Derivative Financial Instruments
7
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands)
================================================================================
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
net impact of adoption SFAS 133 of $302 was presented as the cumulative
effect of a change in accounting principle in the condensed consolidated
statements of operations. A summary of the Company's hedging strategies
and outstanding derivative instruments are as follows:
Interest Rate Risk
The Company assesses interest rate cash flow risk by monitoring changes in
interest rate exposure that may adversely impact expected future cash
flows and by evaluating hedging opportunities. At December 30, 2000, the
Company had approximately $210 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 September 30, 2000 and December 30, 2000 was $203 and $8, respectively.
Management has concluded that the interest rate collar did not qualify as
an effective hedge for accounting purposes as of September 30, 2000 and
December 30, 2000. Accordingly, the Company has recognized $195 as other
expense in the condensed consolidated statement of operations for the
three months ended December 30, 2000.
Foreign Currency Risk
The Company has foreign operations in the U.K., France, Germany and
Australia. Therefore its earnings, cash flows and financial position are
exposed to foreign currency risk. In addition, the U.S. company regularly
purchases mobile hydraulic cranes from its German factory to meet the
demand of its U.S. customers. In order to protect profit margins the
Company will purchase forward currency contracts and options to hedge
future Deutsche mark payment obligations.
At July 1, 2000 the Company had $3.5 million in an outstanding forward
contract to purchase Deutsche marks with gross unrealized losses of $0.5
million. The contract will settle in January 2001 and has been marked to
market and included in the determination of cost of goods sold for the
three months ended December 30, 2000 in accordance with FAS 133, as
amended.
Currently the Company is not hedging any other foreign currency exposures
but it may do so in the future.
(9) Net Assets of Subsidiary Held for Sale
In late January 2001, after reviewing a number of strategic alternatives,
management has made the decision to organize its European AWP business in
France around the Delta
8
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands)
================================================================================
Manlift business. As such, we now expect to invest resources in the growth
and profitability of Delta Manlift as the company goes forward. The
subsidiary is therefore no longer presented as an asset held for sale in
the accompanying balance sheet.
(10) Supplemental Condensed Combined Financial Information
The Company's payment obligations under the Notes are guaranteed by all of
the Company's wholly-owned domestic subsidiaries other than Grove Capital,
Inc. (the "Subsidiary Guarantors"). Such guarantees are full,
unconditional and joint and several. Separate financial statements of the
Subsidiary Guarantors are not presented because the Company's management
has determined that they would not be material to investors. The ability
of the Company's subsidiaries to make cash distributions and loans to the
Company and the Subsidiary Guarantors is not significantly restricted
under the terms of the Company's debt obligations. The following
supplemental financial information sets forth, on a combined basis,
balance sheets, statements of operations and statements of cash flows
information for the Subsidiary Guarantors, the Company's non-guarantor
subsidiaries and for the Company. Information with respect to the Company
is related to Grove Worldwide LLC and Grove Capital, Inc. on a combined
basis.
9
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands)
================================================================================
Condensed Consolidating Balance Sheet at December 30, 2000
Subsidiary Other Consolidated
Company guarantors subsidiaries Eliminations totals
------- ---------- ------------ ------------ ------
Assets
Current assets:
Cash and cash equivalents $ 92 $ (406) $ 5,907 $ -- $ 5,593
Cash restricted as to use -- 2,939 -- -- 2,939
Trade receivables, net -- 37,359 68,150 -- 105,509
Notes receivable -- 2,835 -- -- 2,835
Inventories -- 112,319 79,685 -- 192,004
Prepaid expenses and
other current assets 208 4,073 8,334 -- 12,615
--------- --------- --------- --------- ---------
Total current assets 300 159,119 162,076 -- 321,495
Property, plant and
equipment, net -- 105,185 62,327 -- 167,512
Goodwill, net -- 188,766 14,175 -- 202,941
Investment and due
from subsidiaries 703,304 246,627 36,436 (986,367) --
Other assets 9,740 3,201 383 -- 13,324
--------- --------- --------- --------- ---------
$ 713,344 $ 702,898 $ 275,397 $(986,367) $ 705,272
========= ========= ========= ========= =========
Liabilities and Member's Equity
Current liabilities:
Current maturities
of long-term debt $ 37,100 $ -- $ -- $ -- $ 37,100
Short-term borrowings -- 7,147 13,971 -- 21,118
Accounts payable -- 24,948 38,542 -- 63,490
Accrued expenses and
other current liabilities 4,176 31,944 51,154 -- 87,274
--------- --------- --------- --------- ---------
Total current liabilities 41,276 64,039 103,667 -- 208,982
Deferred revenue -- -- 34,413 -- 34,413
Long-term debt 398,000 -- -- -- 398,000
Due to subsidiaries 191,508 536,164 148,027 (875,699) --
Other liabilities 100 69,967 14,123 -- 84,190
--------- --------- --------- --------- ---------
Total liabilities 630,884 670,170 300,230 (875,699) 725,585
--------- --------- --------- --------- ---------
Member's equity:
Invested capital 164,289 92,891 17,777 (110,668) 164,289
Accumulated deficit (81,829) (60,163) (24,535) -- (166,527)
Accumulated other
comprehensive loss -- -- (18,075) -- (18,075)
--------- --------- --------- --------- ---------
Total member's equity 82,460 32,728 (24,833) (110,668) (20,313)
--------- --------- --------- --------- ---------
$ 713,344 $ 702,898 $ 275,397 $(986,367) $ 705,272
========= ========= ========= ========= =========
10
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands)
================================================================================
Condensed Consolidating Statement of Operations and Comprehensive Loss for
the three months ended January 1, 2000
Subsidiary Other Consolidated
Company guarantors subsidiaries Eliminations totals
------- ---------- ------------ ------------ ------
Net sales $ -- $ 140,289 $ 78,948 $ (33,876) $ 185,361
Cost of goods sold -- 122,590 66,773 (33,876) 155,487
--------- --------- --------- --------- ---------
Gross profit -- 17,699 12,175 -- 29,874
Selling, engineering,
general and
administrative expenses 7,041 11,131 9,730 -- 27,902
Amortization of goodwill -- 1,468 303 -- 1,771
Restructuring charges 4,978 -- -- -- 4,978
--------- --------- --------- --------- ---------
Income (loss)
from operations (12,019) 5,100 2,142 -- (4,777)
Interest income (expense), net 982 (9,290) (1,633) -- (9,941)
Other income (expense), net 309 86 (511) -- (116)
--------- --------- --------- --------- ---------
Loss before income taxes (10,728) (4,104) (2) -- (14,834)
Income taxes -- 321 141 -- 462
--------- --------- --------- --------- ---------
Loss before cumulative effect
of change in accounting
principle (10,728) (4,425) (143) -- (15,296)
Cumulative effect of a change
in accounting principle 302 -- -- -- 302
--------- --------- --------- --------- ---------
Net loss (10,426) (4,425) (143) -- (14,994)
Other comprehensive loss (1,275) -- -- -- (1,275)
--------- --------- --------- --------- ---------
Comprehensive loss $ (11,701) $ (4,425) $ (143) $ -- $ (16,269)
========= ========= ========= ========= =========
11
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands)
================================================================================
Condensed Consolidating Statement of Operations and Comprehensive Loss for
the three months ended December 30, 2000
Subsidiary Other Consolidated
Company guarantors subsidiaries Eliminations totals
------- ---------- ------------ ------------ ------
Net sales $ -- $ 113,399 $ 81,576 $ (21,591) $ 173,384
Cost of goods sold -- 101,108 69,687 (21,591) 149,204
--------- --------- --------- --------- ---------
Gross profit -- 12,291 11,889 -- 24,180
Selling, engineering,
general and
administrative expenses 4,278 7,743 9,734 -- 21,755
Amortization of goodwill -- 1,149 250 -- 1,399
Restructuring charges 1,632 -- -- -- 1,632
--------- --------- --------- --------- ---------
Income (loss)
from operations (5,910) 3,399 1,905 -- (606)
Interest income (expense), net (380) (11,191) (2,161) -- (13,732)
Other income (expense), net (37) 97 433 -- 493
--------- --------- --------- --------- ---------
Loss before income taxes (6,327) (7,695) 177 -- (13,845)
Income taxes -- 253 347 -- 600
--------- --------- --------- --------- ---------
Net loss (6,327) (7,948) (170) -- (14,445)
Other comprehensive loss -- 992 4,851 -- 5,843
--------- --------- --------- --------- ---------
Comprehensive loss $ (6,327) $ (6,956) $ 4,681 $ -- $ (8,602)
========= ========= ========= ========= =========
12
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands)
================================================================================
Condensed Consolidating Statement of Cash Flows for the three months ended
January 1, 2000
Subsidiary Other Consolidated
Company guarantors subsidiaries totals
------- ---------- ------------ ------
Operating activities
Net cash provided by (used in)
operating activities $ (7,025) $ 10,488 $ 8,547 $ 12,010
-------- -------- -------- --------
Investing activities
Capital expenditures -- (597) (724) (1,321)
Investment in equipment
held for rent -- -- (714) (714)
-------- -------- -------- --------
Net cash used in
investing activities -- (597) (1,438) (2,035)
-------- -------- -------- --------
Financing activities
Net proceeds from
short-term borrowings -- -- (3,566) (3,566)
Borrowings of
long-term debt 14,000 -- -- 14,000
Other 22 -- -- 22
-------- -------- -------- --------
Net cash provided by (used in)
financing activities 14,022 -- (3,566) 10,456
-------- -------- -------- --------
Effect of exchange rate
changes on cash -- -- (184) (184)
-------- -------- -------- --------
Net change in cash
and cash equivalents 6,997 9,891 3,359 20,247
Cash and cash equivalents,
beginning of period 8,667 4,209 3,988 16,864
-------- -------- -------- --------
Cash and cash equivalents,
end of period $ 15,664 $ 14,100 $ 7,347 $ 37,111
======== ======== ======== ========
13
GROVE WORLDWIDE LLC AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited and in thousands)
================================================================================
Condensed Consolidating Statement of Cash Flows for the three months ended
December 30, 2000
Subsidiary Other Consolidated
Company guarantors subsidiaries totals
------- ---------- ------------ ------
Operating activities
Net cash provided by (used in)
operating activities $(14,601) $ 4,848 $ 3,692 $ (6,061)
-------- -------- -------- --------
Investing activities
Capital expenditures -- (656) (1,478) (2,134)
Investment in equipment
held for rent -- -- (1,600) (1,600)
-------- -------- -------- --------
Net cash used in
investing activities -- (656) (3,078) (3,734)
-------- -------- -------- --------
Financing activities
Net proceeds from
short-term borrowings -- -- 151 151
Repayments of
long-term debt (900) -- -- (900)
-------- -------- -------- --------
Net cash provided by
financing activities (900) -- 151 (749)
-------- -------- -------- --------
Effect of exchange rate
changes on cash -- -- 35 35
-------- -------- -------- --------
Net change in cash
and cash equivalents (15,501) 4,192 800 (10,509)
Cash and cash equivalents,
beginning of period 15,593 (4,598) 5,107 16,102
-------- -------- -------- --------
Cash and cash equivalents,
end of period $ 92 $ (406) $ 5,907 $ 5,593
======== ======== ======== ========
14
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with the more detailed
information and the historical consolidated financial statements included
elsewhere in this report.
Overview
The Company generates most of its net sales from the manufacture and sale of new
mobile hydraulic cranes, aerial work platforms and truck-mounted cranes. The
Company markets its products through two operating divisions; Grove Crane and
National Crane. Grove Crane manufactures mobile hydraulic cranes in its Shady
Grove, Pennsylvania and Wilhelmshaven, Germany manufacturing facilities.
National Crane manufactures truck-mounted cranes in its Waverly, Nebraska
manufacturing facility. The Company also generates a portion of its net sales
from after-market sales (parts and service) of the products it manufactures.
Sales of used equipment are not material and are generally limited to trade-ins
on new equipment through Company-owned distributors in France, Germany, and the
United Kingdom.
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.
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 completed a number of initiatives to help improve operating
results and cash flows including: (i) reduction of Manlift operations, (ii)
restructuring Shady Grove, Pennsylvania manufacturing operations by improving
product flow and (iii) 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.
15
The following is a summary of net sales for the periods indicated (dollars in
millions).
Three months ended
------------------
January 1, December 30,
2000 2000
-------- --------
New equipment sold $ 148.1 $ 124.8
After-market 21.9 22.3
Other 15.4 26.3
-------- --------
Net sales $ 185.4 $ 173.4
======== ========
Results of Operations
Three months ended December 30, 2000 (the "fiscal 2001 three months") compared
to the three months ended January 1, 2000 (the "fiscal 2000 three months")
Net Sales. Net sales decreased $12.0 million, or 6.5%, to $173.4 million for the
fiscal 2001 three months from $185.4 million for the fiscal 2000 three months.
The decrease in net sales is principally the result of decreased unit sales in
the Crane and National Crane segments.
Net sales for the Grove Crane division include $25.5 million from the remaining
Manlift business. Sales for Grove Crane, excluding the remaining Manlift
business, decreased $1.7 million, or 1.3%, to $131.9 million for the fiscal 2001
three months from $130.2 million for the fiscal 2000 three months. The decrease
in net sales is primarily the result of lower unit sales. Net sales decreased in
both North American and European.
Net sales for the National Crane division decreased $3.7 million, or 18.5%, to
$16.3 million for the fiscal 2001 three months from $20.0 million for the fiscal
2000 three months. Net sales decreased as the result of lower unit sales and
decreased demand for higher priced models.
After-market sales did not significantly change in the fiscal 2001 three months
from the fiscal 2000 three months. An increase in net sales in North American
was offset by a decrease in Europe.
Other sales increased by $10.9 million to $26.3 million in the fiscal 2001 three
months from $15.4 million in the fiscal 2000 three months. The increase was
primarily due to higher government and used equipment sales volumes.
Gross Profit. Gross profit decreased $5.7 million, or 19.1%, to $24.2 million in
the fiscal 2001 three months from $29.9 million in the fiscal 2000 three months.
The decrease in gross profit was attributable primarily to a decline in Crane
and National volumes offset by improved manufacturing efficiencies in the
Company's US operation. Gross profit as a percent of sales decreased to 14.0% in
the fiscal 2001 three months from 16.1% in the fiscal 2000 three months
primarily as the result of an unfavorable mix of products sold.
Selling, Engineering, General and Administrative Expenses. Selling, engineering,
general and administrative expenses ("SG&A") decreased $6.1 million, or 21.9%,
to $21.8 million in the fiscal 2001 three months from $27.9 million in the
fiscal 2000 three months. SG&A for the fiscal 2000 three months includes
approximately $0.9 million of consulting fees paid to the George Group in
connection with the completion of their activities. As a percentage of net
sales, SG&A was 12.6% in the fiscal 2001 three months and 15.0% in the fiscal
2000 three months.
Restructuring charges. During the fiscal 2001 three months, the Company adopted
and executed a restructuring plan that resulted in the termination of
approximately 220 employees principally in
16
its US operations. In connection with the terminations, the Company accrued
severance costs of $1.6 million. During the three months ended December 30, 2000
the Company paid severance costs of $1.8 million related to these terminations
and to termination agreements consummated in fiscal 2000. As of December 30,
2000 the Company has remaining severance obligations of $3.2 million, which it
expects to pay through April 2002.
Interest expense. Interest expense increased $3.8 million to $13.7 million for
the fiscal 2001 three months from $9.9 million in the fiscal 2000 three months
primarily as the result of higher borrowings on the Company's line of credit and
higher rates on those borrowings.
Backlog. The Company's backlog consists of firm orders for new equipment and
replacement parts. Total backlog as of January 13, 2001 was approximately $134.5
million compared with total backlog as of January 15, 2000 of approximately
$204.5 million. Substantially all of the Company's backlog orders are expected
to be filled within one year, although there can be no assurance that all such
backlog orders will be filled within that time period. Parts orders are
generally filled on an as-ordered basis.
Liquidity and Capital Resources
The Company's business is working capital-intensive, requiring significant
investments in receivables and inventory. In addition, the Company requires
capital for replacement and improvements of existing plant, equipment and
processes. During the three months ended December 30, 2000, the Company used
approximately $6.1 million of cash in operating activities primarily as a result
of a net loss after non-cash items.
During the fiscal 2000 nine months the Company made $1.0 million of payments on
its term loan, borrowed $0.1 million of the revolving line of credit and
obtained $0.2 million from short-term borrowings. Capital expenditures were $2.1
million for the fiscal 2000 three months and are expected to be approximately
$10.5 million for fiscal 2001.
During the year 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. 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 $16.5 million for the six
months ended March 31, 2001. Adjusted EBITDA, as defined, for the three months
ended December 30, 2000 was $6.6 million.
As of December 30, 2000, the Company had borrowings of $35.1 million and letters
of credit of $5.3 million outstanding under its $66.25 bank revolving credit
facility. Based upon eligible amounts of receivables and inventory at December
30, 2000, the Company had available additional borrowings of $19.8 million.
Effective April 1, 2001 the maximum amount available under the facility will
decline from $66.25 to $60.0 million. During the 14-day period ending April 16,
2001 and the 5-day period ending April 23, 2001, borrowings and outstanding
letters of credit under the revolving credit facility will be limited to $40
million and $35 million respectively.
17
Management believes the Company should be able to comply with its existing bank
financial covenants and should have sufficient cash flow to meet the Company's
obligations as they become due. However, Management is continuing to review the
Company's cash flow requirements particularly projected working capital
reductions. If the Company is unable to sufficiently reduce working capital, the
Company will not be able to reduce total outstanding borrowings and letters of
credit below $40 million for the 14-day period ending April 16, 2001 and to
below $35 million for the 5-day period ending April 23, 2001, as required by the
Bank Credit Facility. If the Company were unable to comply with the covenants in
the Bank Credit Facility, in order to avoid default it would be required to
obtain additional modifications to its Bank Credit Facility and/or additional
sources of funding. There can be no assurance, if needed, that such
modifications would be agreed to by the Bank Credit Facility Lenders or such
funding, would be available.
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.
Certain Subsidiaries of the Company
Grove Capital, a Delaware corporation, was organized as a direct wholly owned
subsidiary of the Company for the purpose of acting as a co-issuer of the Senior
Subordinated Notes and was also a co-registrant of the Registration Statement
for the Senior Subordinated Notes relating to the acquisition of The Grove
Companies from Hanson Funding (G) PLC and certain of its subsidiaries in April
1998. This was done so that certain institutional investors to which the Senior
Subordinated Notes were marketed that might otherwise have been restricted in
their ability to purchase debt securities issued by a limited liability company,
such as the Company, by reason of the legal investment laws of their states of
organization or their charter documents, would be able to invest in the Senior
Subordinated Notes. Grove Capital has no subsidiaries, nominal assets, no
liabilities (other than the co-obligation under the Senior Subordinated Notes)
and no operations. Grove Capital does not have any revenues and is prohibited
from engaging in any business activities. As a result, holders of the Senior
Subordinated Notes should not expect Grove Capital to participate in servicing
the interest and principal obligations on the Senior Subordinated Notes.
The payment obligations of the Company and Grove Capital under the Senior
Subordinated Notes are fully and unconditionally guaranteed on a joint and
several basis by the Subsidiary Guarantors (the "Subsidiary Guarantees'), all of
which are wholly owned. The Subsidiary Guarantors are Grove U.S. LLC, a Delaware
limited liability company, Grove Finance LLC, a Delaware limited liability
company, Crane Acquisition Corp., a Delaware corporation, Crane Holding Inc., a
Delaware corporation, and National Crane Corporation, a Delaware corporation.
Grove U.S. LLC and National Crane Corporation are the Company's domestic
operating subsidiaries and together hold substantially all of the Company's
domestic assets. The remaining subsidiaries of the Company, which are foreign
subsidiaries, have not issued, and are not expected to issue, Subsidiary
Guarantees.
No separate financial statements of the Subsidiary Guarantors and Grove Capital
are included in this report. The Company considers that such financial
statements would not be material to investors because: (i) this report does
include, in the notes to the combined and consolidated financial statements of
the Company, supplemental financial information, setting forth on a consolidated
basis, balance sheets, statements of operations and cash flows information for
the Subsidiary Guarantors, the Non-Guarantor Subsidiaries and the Company; and
(ii) the above-
18
mentioned note provides sufficient detail to allow investors to determine the
nature of the assets held by, and the operations and cash flows of the
Subsidiary Guarantors and Grove Capital.
The ability of the Company's subsidiaries to make cash distributions and loans
to the Company and the Subsidiary Guarantors is not significantly restricted
under the terms of the Senior Subordinated Notes, the Indenture governing the
Senior Subordinated Notes or the Bank Credit Facility. The obligations of each
Subsidiary Guarantor under its Subsidiary Guarantee are limited so as not to
constitute a fraudulent conveyance under applicable law. For more information
regarding the assets, liabilities, revenues and cash flows of the Subsidiary
Guarantors and the Company's non-guarantor subsidiaries, see note 10 of Notes to
the Condensed Consolidated Financial Statements of the Company.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's principal market risk exposure is changing interest rates,
primarily changes in short-term interest rates. The Company does not enter into
financial instruments for trading or speculative purposes. The Company's policy
is to manage interest rates through use of a combination of fixed and floating
rate debt. The Company may also use derivative financial instruments to manage
its exposure to interest rate risk.
As of July 1, 2000, $210.0 million of the Company's long-term debt, which is
outstanding under its bank term facility, bears interest at LIBOR plus 4.0%
(10.2%). In addition the Company has $225.0 million of Senior Subordinated Notes
outstanding bearing interest at a fixed rate of 9.25%.
The Company has an interest rate collar to manage exposure to fluctuations in
interest rates on $100.0 million of its floating rate long-term debt through
September 2001. Under the agreement, the Company will receive on a $100.0
million notational amount, three month LIBOR and pay 6.5% anytime LIBOR exceeds
6.5%, and will receive three month LIBOR and pay 5.19% anytime LIBOR is below
5.19%. The agreement effectively caps the Company's exposure on $100.0 million
of its floating rate debt at 6.5% plus an applicable margin as detailed in the
Company's bank credit facility.
Movement in foreign currency exchange rates creates risk to the Company's
operations to the extent of sales made and costs incurred in foreign currencies.
The major foreign currencies, among others, in which the Company does business,
are the British pound sterling, German mark and French franc. In addition,
changes in currency exchange rates can affect the competitiveness of the
Company's products and could result in management reconsidering pricing
strategies to maintain market share. Specifically, the Company is most sensitive
to changes in the German mark relative to the dollar. During the past three
fiscal years, currency fluctuations have not had a significant impact on the
Company's results of operations.
In order to manage currency risk, the Company's practice is to contract for
purchases and sales of goods and services in the functional currency of the
Company's subsidiary executing the transaction. To the extent purchases or sales
are in currencies other than the functional currency of the subsidiary, the
Company will generally purchase forward contracts to hedge firm purchase and
sales commitments. As of December 30, 2000, the Company was party to one such
contract with an aggregate value of $3.5 million. This forward contract matures
in January 2001. The Company has not taken any action at this time to hedge its
net investment in foreign subsidiaries but may do so in the future.
The Company does not have any commodity contracts.
19
PART II
Item 1. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings that have arisen in the
normal course of its operations. The outcome of these legal proceedings is
unlikely to have a material adverse effect on the Company. The Company is also
subject to product liability claims for which it believes it has adequate
insurance.
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
Item 5. OTHER INFORMATION
Not applicable
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit No. Description of Exhibit
27.1* Financial Data Schedule.
- ----------
* Filed Herewith.
(b) Reports on Form 8-K
Date of report Item reported
October 31, 2000 Item 5. (Second Amendment and Waiver to the
Credit Agreement)
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GROVE WORLDWIDE LLC
Date: February 13, 2001 By /s/ Stephen L. Cripe
------------------------------------------
Stephen L. Cripe
Chief Financial Officer
(Principal Financial and Accounting Officer)
21