-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AJZ5vIqEJGadCS/R4d8n1XLX85msYMWFRhRoF9CrNS6MZAtMHseMi+XY755FHoPu KmnXac5Y1npDqnV9eoZwHw== 0000912057-01-001374.txt : 20010123 0000912057-01-001374.hdr.sgml : 20010123 ACCESSION NUMBER: 0000912057-01-001374 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20010116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GROVE INVESTORS LLC/PA CENTRAL INDEX KEY: 0001062485 STANDARD INDUSTRIAL CLASSIFICATION: CONSTRUCTION MACHINERY & EQUIP [3531] IRS NUMBER: 522089466 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 333-77103 FILM NUMBER: 1508347 BUSINESS ADDRESS: STREET 1: 1565 BUCHANAN TRAIL EAST P O BOX 21 STREET 2: 512-495-6400 CITY: SHADY GROVE STATE: PA ZIP: 17256 MAIL ADDRESS: STREET 1: 1565 BUCHANAN TRAIL E CITY: SHADY GROVE STATE: PA ZIP: 17256 10-K405 1 a2034062z10-k405.txt 10-K405 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: 333-77103 --------- GROVE INVESTORS LLC ------------------- (Exact name of Registrant as specified in its charter)
DELAWARE 52-2089466 -------- ---------- (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 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 GROVE INVESTORS LLC INDEX TO ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 2000
PAGE PART I Item 1. Business. 1 Item 2. Properties. 7 Item 3. Legal Proceedings. 8 Item 4. Submission of Matters to a Vote of Security Holders. 8 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. 21 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 21 PART III Item 10. Directors and Executive Officers of the Registrant. 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. 27
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 Investors LLC ("Grove Investors"), and the consolidated financial statements of Grove Investors 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 Investors Capital, Inc. ("Grove Investors Capital") are included herein. Grove Investors believes that such financial statements would not be material to holders of the Senior Debentures (as defined). As of September 30, 2000, Grove Investors Capital had nominal assets, no liabilities (other than its co-obligation under the Senior Debentures) 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 PART I ITEM 1. BUSINESS Grove Investors' principal assets consist of its membership interest of Grove Holdings LLC ("Grove Holdings") and capital stock of Grove Investors Capital. Grove Holdings' assets consist solely of membership interests of Grove Worldwide (the "Company") and capital stock of Grove Holdings Capital. Grove Investors and Grove Holdings conduct all of their 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. 1 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. Grove Investors 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 the Company are located at 1565 Buchanan Trail East, Shady Grove, Pennsylvania 17256. The telephone number of the Company's executive offices is (717) 597-8121. THE INVESTOR GROUP Grove Holdings owns all of the limited liability company interests of the Company. 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. 2 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. 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 In fiscal 2000, 72% of the Company's unit sales of mobile hydraulic cranes were derived from units shipped to North American and Latin American distributors and end users. The Company has longstanding relationships with its 45 North American and 24 Latin American distributors. Shipments to Europe comprised approximately 23% of the Company's shipments in fiscal 2000 through three Company stores, located in the U.K., Germany and France, and 42 third-party distributors. In fiscal 2000, shipments to Asia, Africa and the Middle East comprised approximately 2%, 1% and 2% of the Company's unit shipments, respectively. TRUCK-MOUNTED CRANES (NATIONAL CRANE) The Company's North American truck-mounted crane distribution network consists of 60 distributors that carry multiple product lines, the majority of which maintain rental fleets. In addition, the Company has eight distributors that focus either on limited product lines and/or market niches. Certain of the Company's "niche" distributors primarily sell to railroads and are a particular strength of the Company's customer base. END-USERS AND CUSTOMERS Mobile hydraulic cranes are primarily used by contractors engaged in industrial, commercial and public works construction, and for maintenance applications and job site material handling. National Crane's truck-mounted cranes are primarily used by contractors engaged in industrial, commercial, public works and residential construction, railroad and oil field service industries, and in maintenance applications to lift materials or personnel at the same job site or to move material to another job site or location. In addition, U.S. railroad companies and U.S. equipment rental companies use the Company's truck-mounted cranes. Mobile hydraulic cranes are also sold to the U.S. Department of Defense and other government agencies. The Company's top five customers for the fiscal years ended October 3, 1998, October 2, 1999 and September 30, 2000 accounted for approximately 24%, 20% and 17%, respectively, of the Company's whole good revenues for such periods. No one customer accounts for more than 10% of total revenue. Approximately 20% and 17% of the outstanding accounts and notes receivable balance as of October 2, 1999 and September 30, 2000, respectively, were due from these customers. DEALER FINANCING PROGRAM The Company offers certain of its customers terms of up to one year. Units sold under this program generate secured notes receivable, which the Company sells, from time to time, to third-party financial institutions. Generally, this program is used by customers to finance equipment for their rental fleets. However, the terms of the notes provide that if the customer sells the equipment prior to the maturity of the notes, the notes must be repaid immediately along with any interest accrued thereon. The Company has agreements with three major international banks to sell up to $135.0 million of notes receivable generated from sales of mobile hydraulic cranes, aerial work platforms and truck-mounted cranes under the dealer financing program, subject to certain conditions. However, the Company's Bank Credit Facility limits the aggregate sold amount of receivables outstanding under the arrangements to $110.0 million at all times. The banks purchase the notes receivable at face value on a 90% non-recourse basis. The agreements require the Company to purchase credit insurance on behalf of the third-party to insure the 90% risk assumed by the bank. The Company retains 10% of the credit risk. 4 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:
OPERATING DIVISIONS PRODUCTS PRIMARY COMPETITORS - ----------------- ------------------------- ------------------------------------------------------------------------ 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
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 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 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:
APPROXIMATE FACILITY LOCATION TYPE OF FACILITY SQUARE FOOTAGE OWNED/LEASED - --------------------------------------- ----------------------------------------- ----------------- ------------------ 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
(1) The lease for the Sunderland facilities runs 15 years from September 1, 1999 with termination clauses at five-year intervals. (2) The buildings are owned by the Company and the underlying land is leased from the Federal Republic of Germany and Friedrich Krupp AG Hoesch Krupp ("Krupp"). The lease with the Federal Republic of Germany expires December 31, 2043 and the lease with Krupp expires December 31, 2042. (3) The lease at Langenfeld, Germany runs year to year, through July 31, 2001. The Company has signed a commitment to lease new facilities upon completion of construction in the summer of 2001. (4) Includes two facilities, one of which is leased. The lease expires on November 29, 2004. To the extent any such properties are leased, the Company expects to be able to renew such leases or lease comparable facilities on terms commercially acceptable to the Company. Management believes that the Company's facilities are suitable for its operations and provide sufficient capacity to meet the Company's requirements for the foreseeable future. The obligations of the Company under the Bank Credit Facility are secured by a mortgage on certain of the Company's owned, domestic real properties. 7 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. 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 Investors. 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 Investors' 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 ITEM 6. SELECTED FINANCIAL DATA The following table presents selected historical financial data of Grove Investors (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.
PREDECESSOR INVESTORS ------------------------------------------- ------------------------------------------- SEVEN MONTHS FIVE MONTHS ENDED ENDED APRIL 28, OCTOBER 3, 1996 1997 1998 1998 1999 2000 ------------- ------------- ------------- ------------- ------------- ------------- (Dollars in thousands) Statement of operations data: Net sales (1) $ 807,229 $ 870,858 $ 486,255 $ 401,008 $ 793,784 $ 850,562 Gross profit (2) 185,079 203,273 98,863 58,015 147,782 124,882 Operating expenses 134,459 135,382 79,041 61,189 131,584 123,650 Goodwill impairment (3) - - - - - 53,351 Income (loss) from operations 50,620 67,891 19,822 (3,174) 16,198 (52,119) Net income (loss) (4) 25,448 42,220 (395) (29,664) (39,649) (118,979) Balance sheet data (at period end): Cash and cash equivalents 8,184 5,024 - 34,289 16,830 17,933 Total assets 730,158 881,496 - 915,243 867,307 731,757 Total debt 7,443 7,265 - 531,692 547,652 588,184 Total invested capital (deficit) 502,554 628,492 - 47,835 (7,910) (138,748) 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
(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 26, 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 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 Investors' principal assets consist of its membership interest of Grove Holdings and capital stock of Grove Investors Capital. Grove Holdings' assets consist solely of membership interests of the Company and capital stock of Grove Holdings Capital. Grove Investors and Grove Holdings conduct all of their 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. 10 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. 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):
FISCAL YEAR ------------------------------------- 1998 1999 2000 ------------ ----------- ---------- 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 ============ =========== ==========
(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. 11 Set forth below is certain information regarding the Company's results of operations for fiscal 1998, fiscal 1999 and fiscal 2000 (dollars in thousands).
FISCAL YEAR ------------------------------------- 1998 1999 2000 ------------ ----------- ---------- 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 131,924 124,704 107,864 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 $ (52,119) ============ =========== ==========
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. 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. 12 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 $16.8 million, or 13.5%, from $124.7 million in fiscal 1999 to $107.9 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. 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 $6.2 million from $16.2 million in fiscal 1999 to $10.0 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 $9.8 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. 13 FISCAL 1999 COMPARED TO FISCAL 1998 NET SALES. Net sales decreased $93.5 million, or 10.5%, from $887.3 million for fiscal 1998 to $793.8 million for fiscal 1999. New equipment sales decreased $94.9 million, or 13.2%, principally as the result of lower unit sales by the Grove Crane and Grove Manlift operating divisions. These declines are principally related to (i) production delays at the Company's Shady Grove manufacturing facilities, which impacted the Company's ability to take advantage of market opportunities and (ii) softer demand for certain products resulting from distributors and rental companies delaying purchasing decisions as the result of uncertainty caused by mergers and acquisitions within the Company's customer base. After-market sales for the Company, including parts and services, decreased slightly from fiscal 1998 to fiscal 1999. This decrease was due primarily to a decline in parts and service sales and used equipment sales. Other sales for the Company increased 12.3% as a result of higher sales to the U.S. government, offset to some extent by lower revenues from unit sales that were accounted for as operating leases. Net sales for the Grove Crane division declined $43.2 million, or 7.3%, from $588.3 million in fiscal 1998 to $545.1 million in fiscal 1999 on lower unit sales. The decline was almost entirely related to sales of North American customers. The impact of lower unit sales was offset to some extent by a shift in product mix to higher sales value units. Net sales for the Grove Manlift division decreased $42.2 million, or 20.1%, from $210.0 million in fiscal 1998 to $167.8 million in fiscal 1999. Unit sales of aerial work platforms were down as a result of a weaker North American market, partially offset by increases in sales to European customers. Net sales the National Crane division decreased $7.9 million, or 8.9%, from $89.2 million in fiscal 1998 to $81.3 million in fiscal 1999. Net sales to North American customers declined but were slightly offset by an increase in sales to Latin American customers. GROSS PROFIT. Gross profit, excluding the write-off of amounts assigned to inventory in excess of historical costs in fiscal 1998, decreased $36.8 million, or 19.9%, from $184.6 million in fiscal 1998 to $147.8 million in fiscal 1999, as a result of higher price concessions, lower volume, and inefficiencies caused by the start-up 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 $29.6 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. 14 INCOME TAXES. The Company's business is operated as a limited liability company organized under the laws of Delaware, as a result of which (i) Grove Worldwide LLC is not itself subject to income tax, (ii) the taxable income of the mobile hydraulic crane, aerial work platform and truck-mounted crane businesses in the United States is allocated to the equity holders of Grove Worldwide, and (iii) such equity holders are responsible for income taxes on such taxable income. The Company intends to make distributions in the form of dividends to equity holders of Grove Worldwide to enable them to meet their tax obligations with respect to income allocated to them by the Company. Income taxes expense for the five months ended October 3, 1998 and fiscal 1999 related principally to the Company's subsidiary in Waverly, Nebraska, which is incorporated as a C-corporation, and the Company's German subsidiary. GEOGRAPHIC COMPARISONS DURING THE THREE YEARS ENDED SEPTEMBER 30, 2000. Net sales to unaffiliated customers by the Company's domestic subsidiaries contributed 65% of the Company's sales in fiscal 2000. Net sales to unaffiliated customers by the Company's domestic subsidiaries increased by $13 million or 2% in fiscal 2000 as compared to fiscal 1999. The increase in net sales by the Company's domestic subsidiaries was a result of an increase in crane sales offset by a decrease in aerial work platform sales. Net sales to unaffiliated customers by the Company's foreign subsidiaries increased by $45.8 million or 18.3% in fiscal 2000 as compared to fiscal 1999. The increase in net sales by the Company's foreign subsidiaries was primarily the result of higher crane sales. Operating losses by the Company's U.K. operations of $5.7 million in fiscal 2000 partially offset operating earnings of the Company's German and French subsidiaries during the same period. Net sales to unaffiliated customers by the Company's domestic subsidiaries contributed 68% of the Company's sales in fiscal 1999 and virtually all of its income from operations. Net sales to unaffiliated customers by the Company's domestic subsidiaries decreased by $98.4 million or 15.6% in fiscal 1999 as compared to fiscal 1998. The decline in net sales by the Company's domestic subsidiaries occurred in each of the Company's product lines. Net sales to unaffiliated customers by the Company's foreign subsidiaries increased by $9.6 million or 4.0% in fiscal 1999 as compared to fiscal 1998. The increase in net sales by the Company's foreign subsidiaries was primarily the result of higher aerial work platform sales. Operating losses by the Company's U.K. operations of approximately $5.9 million in fiscal 1999 partially offset operating earnings of the Company's German and French subsidiaries during the same period. 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. 15 During fiscal 2000, the Company's operating activities used approximately $8.3 million in operating cash flow. This amount resulted primarily from a loss from operations before non-cash charges of $13.5 million offset by declines in the investment in working capital of $5.2 million. During fiscal 2000, the Company used $15.7 million in investing activities, consisting of $8.8 million for capital expenditures and $6.9 million for investment in equipment held for rent (due to the operating lease treatment relating to certain sales which are accounted for as operating leases). The cash flows used in investing activities were funded from cash resources. The Company plans to sell its Delta Manlift subsidiary in Tonneins, France. Net proceeds from the sale after payment of income taxes will be used to retire amounts outstanding under the Bank Credit Facility. The sale, which is expected to result in a gain, is expected to close during the second quarter of fiscal 2001. The Company expects that cash flows from foreign operations will be required to meet its domestic debt service requirements. Such cash flows are expected to be generated from intercompany interest expense on loans the Company has made to certain of its foreign subsidiaries. The loans have been established with amounts and interest rates to allow for repatriation without restriction or additional tax burden. However, there is no assurance that the foreign subsidiaries will generate the cash flow required to service the loans or that the laws in the foreign jurisdictions will not change to limit repatriation or increase the tax burden of repatriation. The Company has a bank credit facility (the "Bank Credit Facility"), which consists of a $200 million term loan facility ("Term Loan Facility") and a $66,250,000 revolving credit facility ("Revolving Credit Facility"). Subsequent to year end, in order to obtain modifications to certain financial covenants, the Company negotiated an amendment to the credit agreement which provided for (i) higher borrowing and facility fee rates, (ii) limitations in the amount of the revolving credit facility available for general operating purposes and (iii) a borrowing base. As amended, the Revolving Credit Facility enables the Company to obtain revolving credit loans for working capital and general corporate purposes of up to $66,250,000 subject to a borrowing base consisting of eligible accounts receivable and inventory. Effective April 1, 2001, the maximum borrowings available under the Revolving Credit Facility declines to $60 million. However, during a 14-day period ending April 16, 2001 and 5-day period ending April 23, 2001, borrowings under the Revolving Credit 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. 16 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 or Grove Investors, if such were required. GROVE INVESTORS CAPITAL, INC. In connection with the Acquisition, Grove Investors and its wholly owned subsidiary, Grove Investors Capital, a Delaware corporation, issued the Senior Debentures. Grove Investors Capital was organized as a direct wholly owned subsidiary of Grove Investors for the purpose of acting as a co-issuer of the Senior Debentures and was also a co-registrant of the Registration Statement for the Senior Debentures. This was done so that certain institutional investors to which the Senior 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 Investors, by reason of the legal investment laws of their states of organization or their charter documents, would be able to invest in the Senior Debentures. Grove Investors Capital has no subsidiaries, nominal assets, no liabilities (other than the co-obligation under the Senior Debentures) and no operations. Grove Investors Capital does not have any revenues and is prohibited from engaging in any business activities. As a result, holders of the Senior Debentures should not expect Grove Investors Capital to participate in servicing the interest and principal obligations on the Senior Debentures. No separate financial statements of Grove Investors Capital are included in this report. Grove Investors believes that such financial statements would not be material to holders of the Senior Debentures. The ability of Grove Investors' subsidiaries to make cash distributions and loans to Grove Investors is significantly restricted under the terms of the Senior Subordinated Notes, the Senior Discount Debentures, the Indenture governing the Senior Subordinated Notes, the Indenture governing the Senior Discount Debentures and the Bank Credit Facility. 17 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 economies or further strengthening of the U.S. dollar against European currencies could have a material adverse impact upon the Company. 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. 18 The largest European country which is not currently participating in the euro conversion is the United Kingdom, which, in fiscal 2000, accounted for approximately 8% of the Company's consolidated net sales. The Company is considering the potential impact which the United Kingdom's nonparticipation might have on trading activities with countries participating in the euro conversion as well as on internal United Kingdom operations. The Company does not expect the euro conversion, including the costs of implementation, to have a material adverse effect upon the Company's results of operations, financial condition or cash flow. However, the Company cannot guarantee that, with respect to the euro conversion, all problems, including long-term competitive implications of the conversion, will be foreseen and corrected, that no material disruption of the Company's business will occur, or that there will be no delays in the dates targeted by the Company for the euro conversion process. ENVIRONMENTAL MATTERS The Company generates hazardous and non-hazardous waste in the normal course of its manufacturing operations. As a result, the Company is subject to a wide range of Federal, state, local and foreign environmental laws, including CERCLA, that (i) govern activities or operations that may have adverse environmental effects, such as discharges to air and water, as well as handling and disposal practices for hazardous and nonhazardous wastes, and (ii) impose liability for the costs of cleaning up, and certain damages resulting from, sites of past spills, disposals or other releases of hazardous substances. Compliance with such laws has required, and will continue to require, expenditures by the Company on a continuing basis. The Company does not expect that these expenditures will have a material adverse effect on its financial condition or results of operations. 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 Investors' principal market risk exposure is changing interest rates, primarily changes in short-term interest rates. Grove Investors does not enter into financial instruments for trading or speculative purposes. Grove Investors' policy is to manage interest rates through use of a combination of fixed and floating rate debt. Grove Investors may also use derivative financial instruments to manage its exposure to interest rate risk. A summary of the Grove Investors' principal financial instruments which are subject to interest rate risk at September 30, 2000 is as follows (dollars in thousands):
AMOUNT OUTSTANDING AT SEPTEMBER 30, INTEREST FAIR DESCRIPTION 2000 RATE VALUE -------------- -------------- ------------- 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 11.63% 1,760 Senior debentures 65,328 14.50% 653
19 At the Company's option, loans under the Bank Credit Facility bear interest (a) in the case of loans in U.S. dollars, at the highest of (x) 1/2 of 1% in excess of the Federal Funds Effective Rate (as defined in the Bank Credit Facility), (y) 1.0% in excess of a certificate of deposit rate and (z) the bank's prime rate, plus the applicable margin (as defined in the Bank Credit Facility), or (b) in the case of all loans, the relevant Eurocurrency Rate (as defined in the Bank Credit Facility) as determined by the Lender, plus the applicable margin. At September 30, 2000, borrowings of $35 million were outstanding under the Revolving Credit Facility, bearing interest based on LIBOR plus an applicable margin of 3.0% (9.79% at September 30, 2000). The interest rate on borrowings under the Term Loan Facility at September 30, 2000 was based on LIBOR plus an applicable margin of 3.5% (10.29% at September 30, 2000). Following amendment of the Bank Credit Facility, the applicable margin on Eurocurrency Rate borrowings will be 4%, except for borrowings under the Revolving Credit Facility above $60 million where the applicable margin will be 5% and the applicable margin on all other rate based borrowings will be 3%, except for borrowings under the Revolving Credit Facility above $60 million where the applicable margin will be 4%. The average interest rate on borrowings under the Revolving Credit and Term Loan Facilities were 7.71% and 9.71%, respectively, for the years ended October 2, 1999 and September 30, 2000. The Revolving Credit Facility expires in fiscal 2005. The Term Loan Facility matures in fiscal 2006 and must be repaid in semi-annual installments in October and April of each fiscal year in an aggregate amount of (i) $2 million through fiscal 2004, (ii) $88 million during fiscal 2005 and (iii) the balance in fiscal 2006. The Senior Subordinated Notes mature in fiscal 2008. The Company has an interest rate collar to manage exposure to fluctuations in interest rates on $100.0 million of its floating rate long-term debt through September 2001. Under the agreement the Company will receive, on a $100.0 million notional amount, three month LIBOR and pay 6.5%, anytime LIBOR exceeds 6.5%, and will receive three month LIBOR and pay 5.19% anytime LIBOR is below 5.19%. The agreement effectively caps the Company's interest rate on $100.0 million of its floating rate debt at 6.5% plus the applicable margin. 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. 20 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The Combined and Consolidated Financial Statements of Grove Investors, 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. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The following table sets forth information concerning executive officers of Grove Investors and the members of the Management Committee:
Name Age Position - --------------------------- ------- ------------------------------------------------------------- Jeffry D. Bust 47 Chairman and Chief Executive Officer, and Member of the 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 the Management Committee Michael L. George 60 Member of the Management Committee Gerald Grinstein 68 Member of the Management Committee Steven B. Gruber 42 Member of the Management Committee Robert B. Henske 39 Member of the Management Committee Gerard E. Holthaus 51 Member of the Management Committee
Mr. Bust serves as Chairman and Chief Executive Officer of the Company and serves as a member of each Management Committee, positions he assumed in October 1999. From June 1998 to October 1999, he was President and Chief Operating Officer of Grove Crane, where he was responsible for the business direction of Grove Crane, including directly overseeing the manufacturing, quality, marketing, sales, product support and engineering departments at Grove Crane's Shady Grove, Pennsylvania facility, and indirectly at Wilhelmshaven, Germany and Sunderland, United Kingdom facilities. From November 1994 to June 1998, he served as President and General Manager for Manitowoc Cranes, Inc. and the Lattice Crane Group. From January 1989 to November 1994, he held the positions of Senior Vice President, Mining Equipment Division, and Vice President of Operations for Harnischfeger Corporation. He also held various management positions with FMC Corporation from June 1982 to January 1989. 21 Mr. Cripe serves as Senior Vice President and Chief Financial Officer of the Company, a position in which he has served since August 1998. Mr. Cripe is responsible for accounting and control, treasury functions, budgeting and planning and information systems oversight for the Company and its operating companies. From April 1996 to August 1998, he was Vice President -- Finance of Tenneco Automotive, Lake Forest, Illinois. From 1993 to April 1996, he was Controller for the Industrial Fibers Group of AlliedSignal. Mr. Simmons serves as Senior Vice President, General Counsel and Human Resources of the Company. He has served in this position since October 1999, and is responsible for managing the legal affairs and personnel and employment matters of Grove Worldwide and its operating companies. From May 1995 to October 1999, he was Senior Vice President, General Counsel and Business Development, responsible for managing the legal affairs of the Company, and in conjunction with the operating companies, for developing and implementing external growth initiatives. From April 1992 to May 1995, he was Senior Vice President and General Counsel for Grove Worldwide. Mr. Crandall serves as a member of each Management Committee. Mr. Crandall has been a Managing Partner of Oak Hill Capital Management, Inc. since November 1998, and the Chief Operating Officer of Keystone since October 1998. Between 1986 and October 1998, he served as Chief Financial Officer and Vice President of Keystone. Since 1991, he has served as a President and a director of Acadia MGP, Inc. Mr. Crandall is a director (or General Partner) of Bell & Howell Company, Quaker State Corporation, Specialty Foods, Inc., Washington Mutual, Inc., Integrated Orthopedics, Inc., Physician Reliance Network Inc. and Sunterra Corporation. Mr. Crandall also serves on the Board of Advisors of Oak Hill Strategic Partners, L.P., on the Investment Committees of Insurance Partners, L.P. and Brazos Fund L.P. and on the Advisory Committees of Boston Ventures Limited Partnership V and B-K Capital Partners, L.P. Mr. George serves as a member of each Management Committee. Since 1987, Mr. George has served as Chief Executive Officer and Chairman of the Board of George Group, a management consulting firm based in Dallas, Texas. 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. 22 Mr. Henske serves as a member of each Management Committee. In May 2000, Mr. Henske joined Synopsys, Inc. and currently serves as Senior Vice President and Chief Financial Officer. From January 1997 to April 2000, Mr. Henske was a Managing Partner of Oak Hill Capital Management, Inc. From January 1996 to December 1996, he was Executive Vice President, Chief Financial Officer and Board Member of American Savings Bank, F.A., a federally chartered thrift. From 1986 to December 1995, he was a business strategy and financial consultant with Bain & Company, Inc., where he last held the position of Vice President. Mr. Henske is a director of Reliant Building Products, Inc. and Williams Scotsman, Inc. Mr. Holthaus serves as a member of each Management Committee. In April 1999, Mr. Holthaus became Chairman of the Board of Williams Scotsman, Inc., and he has been its President and Chief Executive Officer. 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 Investors are not compensated for their services as such. DESCRIPTION OF MANAGEMENT OPTION PLAN In April 1998, Grove Investors 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 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 participates 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 MANAGEMENT OF GROVE INVESTORS CAPITAL Messrs. Henske and Bust are the directors of Grove Investors Capital. In addition, Mr. Anthony P. Scotto is also a director of Grove Investors Capital. Directors are not compensated in any way for acting in their capacity as such. The board of directors of Grove Investors Capital does not have a compensation committee, audit committee or nominating committee. Mr. Bust is the Chief Executive Officer of Grove Investors Capital. Mr. Simmons is the Vice President and Secretary of Grove Investors Capital. Mr. Cripe is the Vice President and Chief Financial Officer of Grove Investors Capital. None of the executive officers of Grove Investors 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 Investors 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 Investors Capital are beneficially owned by Grove Investors, 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 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:
MEMBERSHIP NAME OF BENEFICIAL OWNER INTERESTS (7) - ------------------------------------------- ------------------ 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%
* 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 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 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 Grove Investors in the amounts of approximately $650,000 and $677,000, including accrued interest, respectively. 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 Investors and the Report of Independent Accountants set forth on pages F-1 through F-36 respectively, are incorporated by reference into this Item 14 of Form 10-K by Item 8 hereof: See Index to Combined and Consolidated Financial Statements and Financial Statement Schedule on page F-1. (a) (2) Financial Statement Schedules. The following is a list of all financial statement schedules filed as part of this Report: See Index to Combined and Consolidated Financial Statements and Financial Statement Schedule on page F-1. 27 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 Investors. 3.2* Amendment No. 1, Dated as of October 27, 1998, to the Second Amended and Restated Limited Liability Company Agreement of Grove Investors. 3.3* Amendment No. 2, Dated as of March 1, 1999, to the Second Amended and Restated Limited Liability Company Agreement of Grove Investors. 3.4* Amendment No. 3, Dated as of April 7, 1999, to the Second Amended and Restated Limited Liability Company Agreement of Grove Investors. 3.5* Articles of Incorporation of Grove Investors Capital. 3.6* By-laws of Grove Investors Capital. 4.1* The Indenture dated as of April 29, 1998, by and among Grove Investors and Grove Investors Capital and the United States Trust Company of New York (the "Indenture"). 4.2* Form of 14 1/2% outstanding debentures due 2010. 4.4* The Registration Rights Agreement dated as of April 29, 1998, by and among Grove Investors and Grove Investors Capital and Donaldson, Lufkin & Jenrette Securities Corporation. 4.5* 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. 10.1* Stock and Asset Purchase Agreement, dated March 10, 1998 (the "Acquisition Agreement"), by and among Grove Worldwide LLC and Hanson Funding (G) Limited, Deutsche Grove Corporation, Hanson America Grove 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 Worldwide LLC and the Sellers. 10.3* George Group Consulting Agreement dated as of April 29, 1998 by and between Grove Worldwide LLC and George Group Inc. 10.4* Employment Agreement dated as of March 5, 1998 by and between Grove Worldwide LLC and Salvatore J. Bonanno. 10.5* Change of Control Agreement dated July 24, 1997 by and between Grove Worldwide LLC and Keith R. Simmons. 10.6* Change of Control Agreement dated July 24, 1997 by and between Grove Worldwide LLC 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 Worldwide LLC, Grove Capital, Inc. 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 Worldwide LLC and Salvatore J. Bonanno.
28
Exhibit No. Description of Exhibit - ----------- ---------------------- 10.13* Promissory Note dated June 27, 1998 by and between Grove Worldwide LLC and Salvatore J. Bonanno. 10.14* Promissory Note dated June 27, 1998 by and between Grove Worldwide LLC and Jeffrey D. Bust. 10.15* Promissory Note dated October 27, 1998 by and between Grove Worldwide LLC and Stephen L. Cripe. 10.16* Promissory Note dated October 27, 1998 by and between Grove Worldwide LLC and Stephen L. Cripe. 10.17* First Amendment dated October 22, 1999 to the Credit Agreement dated April 29, 1998, by and among Grove Worldwide LLC, Grove Capital, Inc. and Chase Bank of Texas, National Association, as administrative agent, Donaldson, Lufkin & Jenrette Securities Corporation, as documentation agent, and BankBoston, N.A., as syndication agent. 10.18* Severance Agreement and General Release, dated as of October 9, 1999, by and among Grove Investors LLC, Grove Worldwide LLC and Salvatore J. Bonanno. 10.19* Grove Investors LLC Realization Event Plan (PSAR). 10.20* First Amendment to the Consulting Agreement dated April 29, 1998, by and between Grove Worldwide LLC and George Group, Inc. 10.22 Second Amendment and Waiver, dated as of October 20, 2000, to the Credit Agreement, dated as of April 29, 1998, as amended, among Grove Worldwide LLC, Grove Capital, Inc., the several banks and other financial institutions or entities from time to time parties to the Credit Agreement and The Chase Manhattan Bank, as administrative agent. 10.23 Amendment to indenture dated as of May 11, 2000 among Grove Worldwide LLC, a Delaware limited liability company, Grove Capital, Inc., a Delaware corporation, Crane Acquisition Corp., a Delaware corporation, Crane Holding, Inc., a Delaware corporation, National Crane Corp., a Delaware corporation, Grove Finance LLC, a Delaware limited liability company and Grove U.S. LLC, a Delaware limited liability company and the United States Trust Company of New York, as trustee, to the Indenture dated as of April 29, 1998 among the issuers, the Subsidiary Guarantors and the Trustee. 10.24 Third amendment and consent, dated as of January 11, 2001, to the Credit Agreement, dated as of April 29, 1998, as amended, among Grove Worldwide LLC, Grove Capital, Inc., the several banks and other financial institutions or entities from time to time parties to this Agreement (collectively, the "Lenders"; individually, a "Lender") and THE CHASE MANHATTAN BANK, as Administrative Agent (as hereinafter defined) for the Lenders hereunder. 21.1* Subsidiaries of Grove Investors. 27.1 Financial Data Schedule.
* Incorporated herein by reference to the Registration Statement on Form S-4 filed by the Grove Investors LLC and Grove Investors Capital, Inc. (Commission Filed Number - 333-77103). (b) Reports on Form 8-K No reports on Form 8-K were filed during the quarter ended September 30, 2000. 29 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 INVESTORS 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 - ------------------------- Member (Principal Executive Officer) Jeffry D. Bust /s/ Stephen L. Cripe Chief Financial Officer (Principal Financial - ------------------------- and Accounting Officer) Stephen L. Cripe /s/ J Taylor Crandall Member - ------------------------- J Taylor Crandall /s/ Michael L. George Member - ------------------------- Michael L. George /s/ Gerald Grinstein Member - ------------------------- Gerald Grinstein /s/ Steven B. Gruber Member - ------------------------- Steven B. Gruber /s/ Robert B. Henske Member - ------------------------- Robert B. Henske /s/ Gerard E. Holthaus Member - ------------------------- Gerard E. Holthaus
30 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 GROVE INVESTORS LLC AND SUBSIDIARIES TABLE OF CONTENTS
PAGE FINANCIAL STATEMENTS 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
F-1 INDEPENDENT AUDITORS' REPORT The Management Committee of Grove Investors LLC: We have audited the accompanying consolidated balance sheets of Grove Investors LLC and subsidiaries as of October 2, 1999 and September 30, 2000 and the related consolidated statements of operations, comprehensive loss, members' 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 Investors 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 GROVE INVESTORS LLC AND SUBSIDIARIES Consolidated Balance Sheets October 2, 1999 and September 30, 2000 (in thousands)
1999 2000 ------------ ------------- ASSETS Current assets: Cash and cash equivalents $ 16,830 $ 17,933 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 21) -- 3,308 Prepaid expenses and other current assets 7,405 10,116 ------------ ------------- Total current assets 366,420 346,432 Property, plant and equipment, net (note 7) 213,731 168,696 Goodwill, net (note 8) 269,556 199,861 Other assets 17,600 16,768 ------------ ------------- $ 867,307 $ 731,757 ============ ============= LIABILITIES AND MEMBERS' 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) 87,686 84,577 ------------ ------------- Total current liabilities 194,164 218,324 Deferred revenue (note 4) 74,368 37,170 Long-term debt (notes 2, 11 and 24) 516,544 530,217 Other liabilities (notes 12 and 13) 90,141 84,794 ------------ ------------- Total liabilities 875,217 870,505 ------------ ------------- Members' equity (deficit): Invested capital 75,000 75,000 Notes receivable from members (3,932) (1,538) Accumulated deficit (69,313) (188,292) Accumulated other comprehensive loss (9,665) (23,918) ------------ ------------- Total members' equity (deficit) (7,910) (138,748) ------------ ------------- Commitments and contingencies (notes 2, 17, 18 and 19) ------------ ------------- $ 867,307 $ 731,757 ============ =============
See accompanying notes to combined and consolidated financial statements. F-3 GROVE INVESTORS 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)
PREDECESSOR COMPANY ---------------- -------------------------------------------------- APRIL 28, OCTOBER 3, OCTOBER 2, SEPTEMBER 30, 1998 1998 1999 2000 -------------- -------------- -------------- ------------- Net sales $ 486,255 $ 401,008 $ 793,784 $ 850,562 Cost of goods sold (note 6) 387,392 342,993 646,002 725,680 -------------- -------------- -------------- ------------- Gross profit 98,863 58,015 147,782 124,882 Selling, engineering, general and administrative expenses 73,826 58,098 124,704 107,864 Amortization of goodwill 5,215 3,091 6,880 7,029 Restructuring charges (note 16) -- -- -- 8,757 Goodwill impairment charge (note 8) -- -- -- 53,351 -------------- -------------- -------------- ------------- Income (loss) from operations 19,822 (3,174) 16,198 (52,119) Interest income (expense), net (note 11) 1,048 (21,579) (50,112) (59,911) Other expense, net (9,524) (574) (200) (996) -------------- -------------- -------------- ------------- Income (loss) before income taxes 11,346 (25,327) (34,114) (113,026) Income taxes (note 15) 11,741 4,337 5,535 6,255 -------------- -------------- -------------- ------------- Net loss before cumulative effect of change in accounting principle (395) (29,664) (39,649) (119,281) Cumulative effect of change in accounting principle (note 18) -- -- -- 302 -------------- -------------- -------------- ------------- Net loss $ (395) $ (29,664) $ (39,649) $ (118,979) ============== ============== ============== =============
See accompanying notes to combined and consolidated financial statements. F-4 GROVE INVESTORS 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)
PREDECESSOR COMPANY ----------- --------------------------------------- APRIL 28, OCTOBER 3, OCTOBER 2, SEPTEMBER 30, 1998 1998 1999 2000 ----------- ---------- ---------- ------------- Net loss $ (395) $ (29,664) $ (39,649) $ (118,979) 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) $ (24,382) $ (54,596) $ (133,232) =========== ========== ========== =============
See accompanying notes to combined and consolidated financial statements. F-5 GROVE INVESTORS LLC AND SUBSIDIARIES Combined Statement of Predecessor Capital for the seven months ended April 28, 1998 and Consolidated Statements of Members' Equity (Deficit) for the five months ended October 3, 1998 and years ended October 2, 1999 and September 30, 2000 (in thousands)
COMPANY -------------------------------------------------------------------------- NOTES ACCUMULATED TOTAL RECEIVABLE OTHER MEMBERS' PREDECESSOR INVESTED FROM ACCUMULATED COMPREHENSIVE EQUITY CAPITAL CAPITAL MEMBERS DEFICIT INCOME (LOSS) (DEFICIT) ------------- ------------ ------------ ------------- ------------- -------------- Balance, September 27, 1997 $ 628,492 $ -- $ -- $ -- $ -- $ -- Net loss (395) -- -- -- -- -- Net transactions with affiliates (111,216) -- -- -- -- -- Other comprehensive loss (7,135) -- -- -- -- -- ------------- ------------ ------------ ------------- ------------- -------------- Balance, April 28, 1998 509,746 -- -- -- -- -- Elimination of predecessor capital (509,746) -- -- -- -- -- Initial capitalization -- 75,000 -- -- -- 75,000 Advances to members -- -- (2,719) -- -- (2,719) Accrued interest on member notes -- -- (64) -- -- (64) Net loss -- -- -- (29,664) -- (29,664) Other comprehensive income -- -- -- -- 5,282 5,282 ------------- ------------ ------------ ------------- ------------- -------------- Balance, October 3, 1998 -- 75,000 (2,783) (29,664) 5,282 47,835 Advances to members -- -- (888) -- -- (888) Accrued interest on member notes -- -- (261) -- -- (261) Net loss -- -- -- (39,649) -- (39,649) Other comprehensive loss -- -- -- -- (14,947) (14,947) ------------- ------------ ------------ ------------- ------------- -------------- Balance, October 2, 1999 -- 75,000 (3,932) (69,313) (9,665) (7,910) Amounts received from members -- -- 2,847 -- -- 2,847 Amounts advanced to members -- -- (343) -- -- (343) Accrued interest on member notes -- -- (110) -- -- (110) Net loss -- -- -- (118,979) -- (118,979) Other comprehensive loss -- -- -- -- (14,253) (14,253) ------------- ------------ ------------ ------------- ------------- -------------- Balance, September 30, 2000 $ -- $ 75,000 $ (1,538) $ (188,292) $ (23,918) $ (138,748) ============= ============ ============ ============= ============= ==============
See accompanying notes to combined and consolidated financial statements. F-6 GROVE INVESTORS 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)
PREDECESSOR COMPANY ------------- -------------------------------------------- APRIL 28, OCTOBER 3, OCTOBER 2, SEPTEMBER 30, 1998 1998 1999 2000 ------------- ------------- ------------ ------------- Cash flows from operating activities: Net loss $ (395) $ (29,664) $ (39,649) $ (118,979) 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 -- 884 2,294 2,349 Goodwill impairment charge -- -- -- 53,351 Accretion of interest on senior discount debentures -- 2,550 6,357 6,998 Interest on senior debentures -- 2,950 7,313 8,675 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 2,554 (14,848) 8,749 Other assets and liabilities, net 8,759 25,918 12,971 (3,586) ------------- ------------- ------------ ------------- Net cash provided by (used in) operating activities 93,097 57,300 739 (9,756) ------------- ------------- ------------ ------------- 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 -- 547,560 10,000 25,000 Repayments of long-term debt -- (35,200) (12,000) (2,000) Equity investment from members -- 75,000 -- -- Change in amount advanced to members, net -- (2,720) (888) 2,504 Deferred financing costs -- (19,533) -- -- Other financing activities (62,087) -- (49) (322) ------------- ------------- ------------ ------------- Net cash provided by (used in) financing activities (55,266) 566,048 1,202 26,983 ------------- ------------- ------------ ------------- Effect of exchange rate changes on cash 217 343 (110) (473) ------------- ------------- ------------ ------------- Net change in cash and cash equivalents 4,218 34,289 (17,459) 1,103 Cash and cash equivalents, beginning of period 5,024 -- 34,289 16,830 ------------- ------------- ------------ ------------- Cash and cash equivalents, end of period $ 9,242 $ 34,289 $ 16,830 $ 17,933 ============= ============= ============ =============
See accompanying notes to combined and consolidated financial statements. F-7 GROVE INVESTORS 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 Investors LLC ("Grove" or the "Company"), through its wholly owned 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 was formed as a limited liability company in December 1997 pursuant to the provisions of the Delaware Limited Liability Company Act. The Company had no substantive operations prior to its initial capitalization and the acquisition of The Grove Companies on April 29, 1998 (see note 3). The Company issued 75,000 Class B membership interests for $75,000 to equity members in connection with the initial capitalization of the Company. During the five months ended October 3, 1998, the Company issued 3,912 Class A units to management for cash of $1,192 and notes of $2,720. During the year ended October 2, 1999, the Company issued 1,825 Class A units to management for cash of $688 and notes of $1,137. During the year ended September 30, 2000, the Company issued 1,525 Class A units to management for cash of $419 and notes of $343. Such notes are recourse obligations generally secured by the members' interest and bear interest at the prime rate (9.5% at September 30, 2000). During the year ended October 2, 1999, the Company redeemed 500 Class A units for $250 cash and the retirement of the member note receivable of $250. During the year ended September 30, 2000, the Company redeemed 2,800 Class A units in exchange for $1,700 of member notes receivable. In addition, during the year ended September 30, 2000, the Company received cash of $1,147 in repayments of member notes receivable and related interest. In connection with the issuance of the Class A units in 1998, the Company redeemed 3,912 of the Class B membership interests for their initial purchase price. Class A and Class B members have substantially identical rights and obligations. As of September 30, 2000, 3,962 Class A units and 71,038 Class B membership interests are outstanding. The Company is operated and controlled by a management committee (the "Management Committee") constituted by a majority of the Company's equity members. Equity members vote in relation to their percentage ownership. Net income of the company is allocated to equity members first to the extent of any deficit in their capital account; second, to the maximum extent possible, to cause their capital account to equal their respective percentage interest in the total members' equity of the Company; and third, in accordance with their respective percentage interest in the Company. Net losses of the Company are allocated to equity members first to the maximum extent possible, to cause their capital account to equal their respective percentage interest in the total member's equity of the Company; second, to the extent of any positive amount in their capital account; and third, in accordance with their respective percentage interest in the Company. F-8 (Continued) GROVE INVESTORS LLC AND SUBSIDIARIES Notes to Combined and Consolidated Financial Statements (in thousands of dollars) October 2, 1999 and September 30, 2000 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). Management has undertaken a number of initiatives to help improve operating results and cash flows including (i) reduction in Manlift operations, (ii) sale of Delta Manlift operations in France, (iii) restructuring of Shady Grove, Pennsylvania manufacturing operations by improving product flow and (iv) reducing the number of sales, marketing, engineering and administrative employees, principally in Shady Grove and the UK. Management believes the initiatives undertaken will enable the Company to maintain compliance with bank financial covenants as well as provide sufficient cash flow to meet the Company's obligations as they become due. However, if initiatives are not successful, or if there are unforeseen increase in working capital needs, the Company may be unable to meet bank covenants and/or 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. F-9 (Continued) GROVE INVESTORS LLC AND SUBSIDIARIES Notes to Combined and Consolidated Financial Statements (in thousands of dollars) October 2, 1999 and September 30, 2000 (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: 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 the Senior Discount Debentures 49,958 Issuance of Senior Debentures 47,375 Equity investment 75,000 ----------- $ 607,439 =========== Uses: Acquisition price $ 583,000 Transaction costs 5,783 ----------- Aggregate purchase price 588,783 Debt financing costs 18,656 ----------- $ 607,439 ===========
(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. F-10 (Continued) GROVE INVESTORS LLC AND SUBSIDIARIES Notes to Combined and Consolidated Financial Statements (in thousands of dollars) October 2, 1999 and September 30, 2000 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: 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 (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. F-11 (Continued) GROVE INVESTORS LLC AND SUBSIDIARIES Notes to Combined and Consolidated Financial Statements (in thousands of dollars) October 2, 1999 and September 30, 2000 (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. (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 members' 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. F-12 (Continued) GROVE INVESTORS LLC AND SUBSIDIARIES Notes to Combined and Consolidated Financial Statements (in thousands of dollars) October 2, 1999 and September 30, 2000 (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. (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) F-13 (Continued) GROVE INVESTORS LLC AND SUBSIDIARIES Notes to Combined and Consolidated Financial Statements (in thousands of dollars) October 2, 1999 and September 30, 2000 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, Senior Discount Debentures and Senior 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. (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%, respectively, 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. F-14 (Continued) GROVE INVESTORS LLC AND SUBSIDIARIES Notes to Combined and Consolidated Financial Statements (in thousands of dollars) October 2, 1999 and September 30, 2000 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 20, 2000 are shown as restricted cash in the accompanying consolidated balance sheet. The bank has the power to sell or pledge the notes receivable purchased at any time and the Company has no rights or obligation to repurchase of the notes receivable. Notes receivable sold under this arrangement meet the criteria for sale under SFAS No. 125 and, accordingly, are removed from the Company's balance sheet upon sale. At September 30, 2000, the Company had credit risk of $8,005 with respect to notes receivable that had been sold under the arrangement. (6) INVENTORIES Inventories consist of the following as of October 2, 1999 and September 30, 2000:
1999 2000 ------------- ------------- 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 ============= =============
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. F-15 (Continued) GROVE INVESTORS LLC AND SUBSIDIARIES Notes to Combined and Consolidated Financial Statements (in thousands of dollars) October 2, 1999 and September 30, 2000 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. This 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 cost 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:
1999 2000 ------------- ------------- 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 ============= =============
Depreciation expense (including depreciation expense on equipment held for rent) for the seven months ended April 28, 1998, the five months ended October 3, 1998 and years ended October 2, 1999 and September 30, 2000 was $11,685, $12,522, $26,578 and $29,178, respectively. (8) GOODWILL Goodwill consists of the following as of October 2, 1999 and September 30, 2000:
1999 2000 ------------- ------------- Goodwill $ 280,153 $ 214,529 Less accumulated amortization 10,597 14,668 ------------- ------------- $ 269,556 $ 199,861 ============= =============
F-16 (Continued) GROVE INVESTORS LLC AND SUBSIDIARIES Notes to Combined and Consolidated Financial Statements (in thousands of dollars) October 2, 1999 and September 30, 2000 During the fourth quarter of fiscal 2000, 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 21) 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:
1999 2000 ------------- ------------- 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 10,779 11,543 Sunderland, U.K. shut-down costs 712 -- Other 25,503 33,453 ------------- ------------- $ 87,686 $ 84,577 ============= =============
F-17 (Continued) GROVE INVESTORS 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:
1999 2000 ------------- ------------- 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 Senior debentures 56,652 65,327 ------------ ------------- 528,544 567,217 Less current maturities 12,000 37,000 ------------ ------------- Long-term debt $ 516,544 $ 530,217 ============= =============
BANK CREDIT FACILITY -- The Company has a bank credit facility (the "Bank Credit Facility"), which consists of a $200,000 term loan facility ("Term Loan Facility") and a $66,250 revolving credit facility ("Revolving Credit Facility"). Subsequent to year end, in order to obtain modifications to certain financial covenants, the Company negotiated an amendment to the credit agreement which provides for (i) higher borrowing and facility fee rates, (ii) limitations on the amount of the revolving credit facility available for general operating purposes and (iii) a borrowing base. As amended, the Revolving Credit Facility enables the Company to obtain revolving credit loans for working capital and general corporate purposes of up to $66,250, subject to eligible amounts of receivables and inventory. Effective April 1, 2001, maximum borrowings under the Revolving Credit Facility will decline from $66,250 to $60,000. However, during a 14-day period ending April 16, 2001 and 5-day period ending April 23, 2001, borrowings under the Revolving Credit Facility will be limited to $40,000 and $35,000, respectively. A portion of the Revolving Credit Facility is available for borrowings by the Company in the Eurocurrency markets of British pounds sterling, German marks, French francs and certain other currencies. The Company also pays a 0.75% fee on the unused portion of the Bank Credit Facility. The Bank Credit Facility contains various covenants that restrict the Company from taking various actions and that require the Company to achieve and maintain certain financial ratios. In addition, the modified covenants require the Company to achieve certain earnings targets on a quarterly basis through fiscal 2001, including a requirement to achieve adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA"), as defined, of $20,000 for the six months ended March 31, 2001. (SEE NOTE 24) Without the covenant modifications, the Company would not have been in compliance with certain of the financial covenants required by the Bank Credit Facility at September 30, 2000. Management has undertaken a number of initiatives to improve the Company's operating results. In the event that results do not improve, the Company may need to seek further modifications to the covenants. There can be no assurance the Company will obtain such modifications, if required. F-18 (Continued) GROVE INVESTORS 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 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-19 (Continued) GROVE INVESTORS 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, 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 and Senior 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 or Senior 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-20 (Continued) GROVE INVESTORS 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. SENIOR DEBENTURES -- The Senior Debentures were issued pursuant to an Indenture dated April 29, 1998 (the "Investors Indenture"). The Senior Debentures are general unsecured obligations of the Company and its co-issuer, Grove Investors Capital, Inc. The Senior Debentures accrue interest at a rate of 14 1/2% per annum, payable quarterly on February 1, May 1, August 1 and November 1 of each year, commencing on August 1, 1998. Interest is payable, at the option of the Company, in cash or by issuance of additional Senior Debentures. The Senior Debentures are redeemable at the option of the Company, in whole or in part, at any time after May 1, 2003, at a declining redemption price and mature on May 1, 2010. In addition, at any time prior to May 1, 2001, the Company may redeem all, but not less than all the aggregate principal amount of the Senior Debentures issued at a redemption price of 114.5% of the principal amount thereof, plus accrued and unpaid interest and liquidated damages (as defined by the Investors Indenture) thereon, if any, in each case determined as of the date of such repurchase. The Investors 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 interest, (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. F-21 (Continued) GROVE INVESTORS LLC AND SUBSIDIARIES Notes to Combined and Consolidated Financial Statements (in thousands of dollars) October 2, 1999 and September 30, 2000 The Company expects that cash flows from foreign operations will be required to meet its domestic debt service requirements. Such cash flows are expected to be generated from intercompany interest expense on loans the Company has 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 $236,000. Aggregate annual scheduled maturities of long-term debt are as follows. $2,000 in 2001, $2,000 in 2002, $2,000 in 2003, $2,000 in 2004 and $88,000 in 2005. INTEREST EXPENSE -- Interest income (expense), net consists of the following for the seven months ended April 28, 1998, the five months ended October 3, 1998 and years ended October 2, 1999 and September 30, 2000.
PREDECESSOR COMPANY -------------- --------------------------------------------------- APRIL 28, OCTOBER 3, OCTOBER 2, SEPTEMBER 30, 1998 1998 1999 2000 -------------- -------------- -------------- --------------- Interest expense $ (263) $ (20,454) $ (46,024) $ (57,110) Interest expense paid to Hanson (2,174) -- -- -- Amortization of deferred financing costs -- (790) (2,294) (2,350) Accretion of interest on senior discount debentures -- (2,550) (6,357) (6,998) Interest income 3,485 2,215 4,563 6,547 -------------- -------------- -------------- -------------- $ 1,048 $ (21,579) $ (50,112) $ (59,911) ============== ============== ============== ==============
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). F-22 (Continued) GROVE INVESTORS LLC AND SUBSIDIARIES Notes to Combined and Consolidated Financial Statements (in thousands of dollars) October 2, 1999 and September 30, 2000 (12) OTHER LIABILITIES Other liabilities consist of the following as of October 2, 1999 and September 30, 2000:
1999 2000 ----------- ----------- Accrued liability for defined benefit pension plans $ 31,198 $ 18,096 Accrued liability for postretirement benefit plan 31,696 33,023 Product liability 18,000 22,513 Other 9,247 11,162 ----------- ----------- $ 90,141 $ 84,794 =========== ===========
(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-23 (Continued) GROVE INVESTORS 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.
POST-RETIREMENT PENSION BENEFITS BENEFITS ----------------------------------------------------------- OCTOBER 2, SEPTEMBER 30, OCTOBER 2, SEPTEMBER 30, 1999 2000 1999 2000 ------------- ------------ ------------- ------------- 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 statements 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 compensation increases 4.25% 4.25% -- --
F-24 (Continued) GROVE INVESTORS 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:
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 ----------- --------- --------- --------- ----------- --------- --------- --------- 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 =========== ========= ========= ========= =========== ========= ========= =========
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-25 (Continued) GROVE INVESTORS 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.
OCTOBER 2, SEPTEMBER 30, 1999 2000 ------------- ------------- 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 compensations increases 2.25% to 3.75% 2.50% to 3.75%
F-26 (Continued) GROVE INVESTORS 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:
PREDECESSOR COMPANY -------------- ------------------------------------------------ APRIL 28, OCTOBER 3, OCTOBER 2, SEPTEMBER 30, 1998 1998 1999 2000 -------------- -------------- -------------- -------------- 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 ============== ============== ============== ==============
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 of 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-27 (Continued) GROVE INVESTORS LLC AND SUBSIDIARIES Notes to Combined and Consolidated Financial Statements (in thousands of dollars) October 2, 1999 and September 30, 2000 During fiscal 1999, the Company 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 the Company. 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-28 (Continued) GROVE INVESTORS 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:
PREDECESSOR COMPANY ------------ -------------------------------------------- APRIL 28, OCTOBER 3, OCTOBER 2, SEPTEMBER 30, 1998 1998 1999 2000 ------------ ------------ -------------- -------------- United States $ 30,446 $ (12,143) $ (33,588) $ (116,580) Other countries (19,100) (13,184) (526) 3,554 ------------ ------------ -------------- -------------- $ 11,346 $ (25,327) $ (34,114) $ (113,026) ============ ============ ============== ==============
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:
PREDECESSOR COMPANY ------------ -------------------------------------------- APRIL 28, OCTOBER 3, OCTOBER 2, SEPTEMBER 30, 1998 1998 1999 2000 ------------ ------------ -------------- -------------- 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 ============ ============ ============== ==============
F-29 (Continued) GROVE INVESTORS LLC AND SUBSIDIARIES Notes to Combined and Consolidated Financial Statements (in thousands of dollars) October 2, 1999 and September 30, 2000 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. Significant components of the Company's deferred tax liability are as follows as of October 2, 1999 and September 30, 2000:
1999 2000 ---------- ---------- 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) ========== ==========
Income taxes for the years ended October 2, 1999 and September 30, 2000, relate principally to the Company's subsidiary in Waverly, Nebraska, which is incorporated as a C-corporation, and the Company's German subsidiary. (16) RESTRUCTURING In fiscal 2000, the Company adopted and executed restructuring plans that resulted in the termination of approximately 470 employees principally in its US operations. In connection with the terminations, the Company accrued severance costs of $8,757. As of September 30, 2000, the Company has paid $4,747 and expects to pay the remainder of the amount accrued through October 2001 in accordance with separation agreements. In October and November 2000, the company terminated approximately 220 employees pursuant to the restructuring plans. The terminations will result in an additional restructuring charge of $1.6 million in fiscal 2001. F-30 (Continued) GROVE INVESTORS 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:
OPERATING CAPITAL ------------ ------------ 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 ============
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-31 (Continued) GROVE INVESTORS 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-32 (Continued) GROVE INVESTORS 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-33 (Continued) GROVE INVESTORS 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) 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. 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. F-34 (Continued) GROVE INVESTORS LLC AND SUBSIDIARIES Notes to Combined and Consolidated Financial Statements (in thousands of dollars) October 2, 1999 and September 30, 2000 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:
CORPORATE, GROVE GROVE NATIONAL ELIMINATIONS CRANE MANLIFT CRANE AND OTHER TOTAL ------------- ------------ ------------- -------------- ------------ 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 45,428 316,627 915,243 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 41,818 292,798 867,307 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 (86,244) (52,119) Total assets 396,435 62,736 41,258 231,328 731,757 Capital expenditures 7,540 513 722 -- 8,775
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. F-35 (Continued) GROVE INVESTORS LLC AND SUBSIDIARIES Notes to Combined and Consolidated Financial Statements (in thousands of dollars) October 2, 1999 and September 30, 2000 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:
PREDECESSOR COMPANY ------------ ---------------------------------------------------- APRIL 28, OCTOBER 3, OCTOBER 2, SEPTEMBER 30, 1998 1998 1999 2000 ------------ -------------- --------------- --------------- 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 ============== =============== ===============
(21) 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. (22) GROVE INVESTORS CAPITAL, INC. The Company formed Grove Investors Capital, Inc. as a direct wholly owned subsidiary to act as a co-issuer of the Senior Debentures (see note 11). At September 30, 2000, Grove Investors Capital, Inc. had one hundred dollars in cash and total assets, and no current or long-term liabilities other than its contingent co-obligation with respect to the Senior Debentures. For the years ended October 2, 1999 and September 30, 2000, Grove Investors Capital, Inc. had no income or loss and no revenues. Grove Investors Capital, Inc. has no subsidiaries, no operations and is prohibited from engaging in any business activities. (23) TRANSACTIONS WITH RELATED PARTIES 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. (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 GROVE INVESTORS LLC AND SUBSIDIARIES Condensed Financial Information of the Registrant Condensed Consolidated Balance Sheets-- October 2, 1999 and September 30, 2000
1999 2000 ------------ ------------- ASSETS Cash $ 1,332 $ 1,830 Investment in subsidiaries 47,562 -- Other assets 2,588 2,122 ------------ ------------- $ 51,482 $ 3,952 ============ ============= LIABILITIES AND MEMBERS' EQUITY (DEFICIT) Current liabilities -- accrued expenses and other current liabilities $ 2,740 $ 1,513 Long-term debt 56,652 65,327 ------------ ------------- 59,392 66,840 ------------ ------------- Members' equity (deficit): Invested capital 75,000 75,000 Notes receivable from members (3,932) (1,538) Accumulated deficit (69,313) (112,432) Accumulated other comprehensive loss (9,665) (23,918) ------------ ------------- (7,910) (62,888) ------------ ------------- $ 51,482 $ 3,952 ============ ============= NOTE: For purposes of this schedule, the investments are accounted for under the equity method. The investments have not been reduced below zero.
S-1 GROVE INVESTORS LLC AND SUBSIDIARIES 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
1998 1999 2000 ------------- ------------- ------------- Interest expenses, net $ (3,044) (7,538) (8,842) Other (20) (52) (183) Net loss of subsidiaries (26,600) (32,059) (34,094) ------------- ------------- ------------- Net loss (29,664) (39,649) (43,119) Other comprehensive income (loss) 5,282 (14,947) (14,253) ------------- ------------- ------------- Comprehensive loss $ (24,382) (54,596) (57,372) ============= ============= ============= NOTE: For purposes of this schedule, the investments are accounted for under the equity method. The investments have not been reduced below zero.
S-2 GROVE INVESTORS LLC AND SUBSIDIARIES 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
1998 1999 2000 ------------- ------------- ------------- Cash flow from operating activities: $ (29,664) (39,649) (43,119) Net loss Adjustments to reconcile net loss to net cash provided by operating activities: Amortization of deferred financing costs 94 225 244 Accrued interest on Senior Discount Debentures 2,950 7,923 8,949 Net loss of subsidiaries 26,600 32,059 34,094 Other changes 20 (505) (2,173) ------------- ------------- ------------- Net cash provided by operating activities -- 53 (2,005) Cash used for investing activities -- investment in subsidiaries (120,000) -- -- ------------- ------------- ------------- Net cash used in investing activities (120,000) -- -- ------------- ------------- ------------- Cash flows from financing activities: Proceeds from issuance of long-term debt 47,375 -- -- Equity investment from Grove Investors LLC 75,000 -- -- Deferred financing costs (2,925) -- -- Advances to Grove Investors LLC 550 1,279 2,503 ------------- ------------- ------------- Net cash provided by financing activities 120,000 1,279 2,503 ------------- ------------- ------------- Net change in cash and cash equivalents - 1,332 498 Cash and cash equivalents at beginning of period -- -- 1,332 ------------- ------------- ------------- Cash and cash equivalents at end of period $ -- 1,332 1,830 ============= ============= =============
S-3 GROVE INVESTORS LLC AND SUBSIDIARIES Valuation and Qualifying Accounts
BALANCE AT CHARGED TO CHARGED BALANCE BEGINNING COSTS AND TO OTHER DEDUCTIONS AT END OF YEAR EXPENSES ACCOUNTS (a) (b) OF YEAR ------------ ------------- -------------- ------------ ------------ Allowance for doubtful accounts (in thousands): Seven months ended April 28, 1998 $ 2,717 $ 880 $ 12 $ 146 $ 3,463 Five months ended October 3, 1998 3,463 290 121 799 3,075 Year ended October 2, 1999 3,075 552 31 563 3,095 Year ended September 30, 2000 3,095 5,519 (534) 3,023 5,057
(a) Impact of exchange rates (b) Write-offs S-4 EX-10.22 2 a2034062zex-10_22.txt EXHIBIT 10.22 Exhibit 10.22 SECOND AMENDMENT AND WAIVER, dated as of October 20, 2000 (this "AMENDMENT"), to the Credit Agreement, dated as of April 29, 1998 (as amended by the First Amendment to the Credit Agreement, dated as of October 22, 1999, the "CREDIT AGREEMENT"), among GROVE WORLDWIDE LLC, a Delaware limited liability company (the "COMPANY"), GROVE CAPITAL, INC., a Delaware corporation and a Wholly Owned Subsidiary of the Company ("GROVE CAPITAL"; the Company and Grove Capital, individually, a "BORROWER" and collectively, the "Borrowers"), 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. W I T N E S S E T H: WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to make, and have made, certain loans and other extensions of credit to the Borrowers; and WHEREAS, the Borrowers have requested, and, upon this Amendment becoming effective, the Required Lenders have agreed that certain provisions of the Credit Agreement be amended in the manner provided for in this Amendment. NOW, THEREFORE, in consideration of the premises contained herein, the parties hereto hereby agree as follows: 1. DEFINED TERMS. Terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement. 2. AMENDMENTS TO SECTION 1 OF THE CREDIT AGREEMENT. Subsection 1.1 of the Credit Agreement is hereby amended as follows: (a) by adding the following definitions in their proper alphabetical order: "ACCOUNTS": all of the accounts, instruments, documents, chattel paper and general intangibles of the Borrower or any of its Subsidiaries, whether secured or unsecured, whether now existing or hereafter created or arising, and whether or not specifically assigned to the Administrative Agent for the ratable benefit of the Lenders. "ACCOUNT DEBTOR": the Person obligated on an Account. "BILL AND HOLD": Accounts that have been invoiced but for which the related goods have not been shipped (other than Accounts for which the customer purchase order and Included Divisions' order acknowledgment and invoice acknowledge the transfer of title upon final testing and inspection of the unit up to a maximum of $1,000,000 in any one month, PROVIDED, that such Account is not more than 30 days past the invoice date). 2 "BORROWING BASE": at any date, the amount of the then most recent computation of the Borrowing Base, determined by calculating the amount equal to: (a) 85% of (i) Domestic Eligible Accounts minus (ii) the applicable Dilution Reserve at such date; PLUS (b) 50% of (i) Deutsche Grove Eligible Accounts minus (ii) the applicable Dilution Reserve; (c) 25% of Eligible Raw Materials; (d) 25% of Eligible Work-in-Process; (e) 55% of Domestic Eligible Finished Goods; (f) 25% of (i) Deutsche Grove Eligible Finished Goods minus (ii) the Reserve for Leasehold Obligations; and (g) 20% of Eligible Service Parts. Borrowing Base standards may be fixed and revised from time to time by the Administrative Agent in the Administrative Agent's Permitted Discretion with ten days prior notice to the Company. The Borrowing Base will be computed hereunder by the Company on a monthly basis based on information available to the Administrative Agent including, without limitation, the periodic reports and listings delivered to the Administrative Agent in accordance with Section 6, and a monthly Borrowing Base Certificate from a Responsible Officer of the Borrower presenting the Borrower's computation of the Borrowing Base will be periodically delivered to the Administrative Agent in accordance with Section 6.12(a). "BORROWING BASE CERTIFICATE": a certificate duly executed by a Responsible Officer substantially in the form of Exhibit M. "COMMERZBANK FACILITY": the cash credit line in the amount of DM 51,000,000 from Commerzbank (Wilhelmshaven) and Deutsche Bank to Deutsche Grove GmbH, dated September 2000. "DEUTSCHE GROVE": a division of Grove Worldwide Holdings Germany GmbH in accordance with the Borrower's current and historical classification. "DEUTSCHE GROVE ELIGIBLE ACCOUNTS": on any date of determination thereof, all Accounts of Deutsche Grove on such date, that (i) have been invoiced and represent the bona fide sale of merchandise in the ordinary course of business in connection with its trade operations and (ii) are deemed by the Administrative Agent in good faith to be eligible for inclusion in the calculation of the Borrowing Base. Without limiting the foregoing, to qualify as a Deutsche Grove Eligible Account, an Account shall indicate 3 Deutsche Grove (whether by legal or trade name) as sole payee and as sole remittance party. In determining the amount to be so included, the face amount of Accounts shall be reduced, without duplication, by (a) the aggregate amount of all cash received in respect of the Accounts but not yet applied by Deutsche Grove to reduce the amount of Accounts, (b) the amount of all actual returns, discounts, claims, credits, charges, price adjustments or other adjustments asserted or taken by Account Debtors of Deutsche Grove (to the extent the same are included in Accounts), (c) the amount of Deutsche Grove Finance Company Receivables and (d) the aggregate amount of all other reserves, limits and deductions provided for in this definition and elsewhere in this Agreement. Standards of eligibility for Accounts may be fixed and revised from time to time solely by the Administrative Agent in the Administrative Agent's Permitted Discretion with ten days prior notice by the Administrative Agent to the Borrower. In general, without limiting the foregoing, a Deutsche Grove Eligible Account must comply with all of the following requirements (unless otherwise approved from time to time in writing by the Administrative Agent): (a) all payments due on the Account have been billed and invoiced in a timely fashion and in the normal course of business; (b) no payment on any invoice is outstanding on the Account for more than 90 days after the date of invoice or is more than 60 days past due (to be reduced by the net credit balances within these categories); (c) such Account is not an extended terms account, payment plan, or single contract account which offers terms of more than 30 days from invoice date; (d) the payments due on 50% or more of all Accounts owing to Deutsche Grove by the applicable Account Debtor are less than 90 days past the date of invoice; (e) the total Accounts owing to Deutsche Grove by the applicable Account Debtor constitute 10% or less of the aggregate Accounts owing to Deutsche Grove by all Account Debtors, or if the total Accounts of the applicable Account Debtor exceed 10% of the aggregate of all Accounts owing to Deutsche Grove by all Account Debtors, the Accounts of the applicable Account Debtor up to such 10% limit shall be deemed to constitute Deutsche Grove Eligible Accounts (subject to compliance with all other applicable standards of eligibility) and the Accounts of the applicable Account Debtor exceeding such 10% limit shall be included within Deutsche Grove Eligible Accounts (subject to compliance with all other applicable standards of eligibility) only if the Accounts exceeding such 10% limit are backed or secured by credit insurance or a guarantee issued by a bank reasonably satisfactory to the Administrative Agent in all respects and such credit insurance or such guarantee has been assigned to 4 or issued in favor of, as the case may be, the Administrative Agent upon terms acceptable to the Administrative Agent in its discretion; (f) the Account (x) is free and clear of all security interests, liens, charges and encumbrances of any nature whatsoever (except for the Lien in favor of the Administrative Agent and any Lien under the Commerzbank Facility) and (y) has not been sold or factored to Commerzbank under the Commerzbank Facility; (g) the Account arose from a completed, outright and lawful sale of goods, to which title has passed to the applicable Account Debtor on an absolute sales basis, or from the rendering of services by or on behalf of Deutsche Grove; (h) the Account does not arise out of a bill and hold, sale-or-return, consignment, memo, progress billing, promotional, sample or trial basis, C.O.D. or cash in advance arrangement or is subject to any setoff, contra (any amount for which there is an offsetting liability from Deutsche Grove), offset, deduction, dispute, chargeback, credit, counterclaim, subject to retainage or holdbacks of any type or other defense arising out of the transactions represented by the Account or independently thereof; (i) the applicable Account Debtor is not any Governmental Authority, unless there has been compliance satisfactory to the Administrative Agent in all respects with the Assignment of Claims Act or similar foreign statutes; (j) the applicable Account Debtor is not an Affiliate of Deutsche Grove or any of its Subsidiaries or an employee, officer, sales representative, agent or shareholder thereof; (k) the Account Debtor must be located in the United States, France, Germany, Italy, Spain, Switzerland or the United Kingdom or in another foreign jurisdiction acceptable to the Administrative Agent, except for Accounts insured or backed by credit insurance or a letter of credit in form and substance acceptable to the Administrative Agent in all respects; (l) the Account complies with all material Requirements of Law (including without limitation, all usury laws, fair credit reporting and billing laws, fair debt collection practices and rules, and regulations relating to truth in lending and other similar matters); (m) the Account is in full force and effect and constitutes a legal, valid and binding obligation of the applicable Account Debtor enforceable in accordance with the terms thereof; (n) the Account is denominated in and provides for payment by the applicable Account Debtor in Dollars, Deutsche Marks, Euros, Pounds Sterling or other currency acceptable to the Agent; 5 (o) the Account has not been and is not required to be charged or written off as uncollectible in accordance with GAAP; (p) the Account Debtor (i) is not a creditor of Deutsche Grove, (ii) has not asserted a right of setoff against Deutsche Grove or (iii) has not disputed its liability (whether by chargeback or otherwise) or made any claim with respect to the Account or any other Account of Deutsche Grove which has not been resolved, in each case without duplication, to the extent of the amount owed by the borrower to the Account Debtor, the amount of such actual or asserted right of setoff; (q) the Account Debtor is solvent and is not the subject of any bankruptcy case or insolvency proceeding of any kind; (r) a check, promissory note, draft, trade acceptance or other instrument for the payment of money has been received, presented for payment and returned uncollected for any reason. In determining the aggregate amount of Accounts from the same Account Debtor that are unpaid more than 90 days from the date of invoice or more than 60 days from the due date pursuant to clause (b) above, there shall be excluded the amount of any net credit balances relating to Accounts with invoice dates more than 90 days prior to the date of determination or more than 60 days from the due date. "DEUTSCHE GROVE ELIGIBLE FINISHED GOODS": on any date, the Inventory Value of Finished Goods of Deutsche Grove (subject to the same standards of eligibility as set forth in the definition of "Eligible Inventory" hereunder) on such date as determined by an analysis of production reports or physical inspection of work-in-process in accordance with the current and historical classification of finished goods excluding prototypes, demonstrators, used cranes and manlifts, and rental cranes and manlifts. "DEUTSCHE GROVE FINANCE COMPANY RECEIVABLES": 10% of the value of Accounts that are less than 90 days from invoice date and owed from customers that have refinanced their receivables with finance companies that Deutsche Grove has agreed to provide residual value guarantees in excess of 10%. The Administrative Agent may adjust this percentage based on a quarterly review of a supporting documents submitted in accordance with Section 6.12. "DILUTION FACTORS": with respect to any period, the aggregate amount of all gross deductions, credit memos, returns, adjustments, allowances, bad debt write-offs and other non-cash credits to Accounts of the Included Divisions (or, for purposes of calculating the applicable Dilution Reserve in the case of Deutsche Grove, Accounts of Deutsche Grove) arising from transactions conducted in the normal course of business. "DILUTION RATIO": at any date, the amount (expressed as a percentage) equal to (a) the aggregate amount of the applicable Dilution Factors for the 12 most recently ended fiscal months DIVIDED by (b) total gross sales of the Included Divisions or Deutsche Grove, as the case may be, for the 12 most recently ended fiscal months; provided that 6 the Dilution Ratio for Deutsche Grove be fixed at the higher of 12.0% or the most recently calculated dilution ratio until such time as Deutsche Grove has provided six consecutive months of rollforward data as detailed at Exhibit M hereto that is acceptable to the Administrative Agent (at which time the Dilution Ratio shall be the amount most recently calculated). "DILUTION RESERVE": at any date the applicable Dilution Ratio multiplied by the Domestic Eligible Accounts (or, for purposes of calculating the applicable Dilution Reserve in the case of Deutsche Grove, the Deutsche Grove Eligible Accounts) on such date. "DOMESTIC ELIGIBLE ACCOUNTS": on any date of determination thereof, all Accounts of the Included Divisions on such date, that (i) have been invoiced and represent the bona fide sale of merchandise in the ordinary course of business in connection with its trade operations and (ii) are deemed by the Administrative Agent in good faith to be eligible for inclusion in the calculation of the Borrowing Base. Without limiting the foregoing, to qualify as a Domestic Eligible Account, an Account shall indicate the Included Division (whether by legal or trade name) as sole payee and as sole remittance party. In determining the amount to be so included, the face amount of Accounts shall be reduced, without duplication, by (a) the aggregate amount of all cash received in respect of the Accounts but not yet applied by the Included Divisions to reduce the amount of Accounts, (b) the amount of all actual returns, discounts, claims, credits, charges, price adjustments or other adjustments asserted or taken by Account Debtors of the Included Divisions (to the extent the same are included in Accounts), and (c) the aggregate amount of all other reserves, limits and deductions provided for in this definition and elsewhere in this Agreement. Standards of eligibility for Accounts may be fixed and revised from time to time solely by the Administrative Agent in the Administrative Agent's Permitted Discretion with ten days prior notice by the Administrative Agent to the Borrower. In general, without limiting the foregoing, a Domestic Eligible Account must comply with all of the following requirements (unless otherwise approved from time to time in writing by the Administrative Agent): (a) all payments due on the Account have been billed and invoiced in a timely fashion and in the normal course of business; (b) no payment on any invoice is outstanding on the Account for more than 90 days after the date of invoice or is more than 60 days past due (to be reduced by the net credit balances within these categories); (c) such Account is not an extended terms account which offers terms of more than 30 days from invoice date; (d) the payments due on 50% or more of all Accounts owing to the Included Divisions by the applicable Account Debtor are less than 90 days past the date of invoice; 7 (e) the total Accounts owing to the Included Divisions by the applicable Account Debtor constitute 10% or less of the aggregate Accounts owing to the Included Divisions by all Account Debtors, or if the total Accounts of the applicable Account Debtor exceed 10% of the aggregate of all Accounts owing to the Included Divisions by all Account Debtors, the Accounts of the applicable Account Debtor up to such 10% limit shall be deemed to constitute Domestic Eligible Accounts (subject to compliance with all other applicable standards of eligibility) and the Accounts of the applicable Account Debtor exceeding such 10% limit shall be included within Domestic Eligible Accounts (subject to compliance with all other applicable standards of eligibility) only if the Accounts exceeding such 10% limit are backed or secured by credit insurance or a guarantee issued by a bank reasonably satisfactory to the Administrative Agent in all respects and such credit insurance or such guarantee has been assigned to or issued in favor of, as the case may be, the Administrative Agent upon terms acceptable to the Administrative Agent in its discretion; (f) the Account is free and clear of all security interests, liens, charges and encumbrances of any nature whatsoever (except for the Lien in favor of the Administrative Agent); (g) the Account arose from a completed, outright and lawful sale of goods, to which title has passed to the applicable Account Debtor on an absolute sales basis, or from the rendering of services by or on behalf of any Included Division; (h) the Account constitutes an "account" within the meaning of the Uniform Commercial Code of the state in which such Included Division's principal offices are located; (i) the Account does not arise out of a Bill and Hold, sale-or-return, consignment, memo, progress billing, promotional, sample or trial basis, C.O.D. or cash in advance arrangement or is subject to any setoff, contra (any amount for which there is an offsetting liability from any Included Division), offset, deduction, dispute, chargeback, credit, counterclaim, subject to retainage or holdbacks of any type or other defense arising out of the transactions represented by the Account or independently thereof; (j) the applicable Account Debtor is not any authority of the United States of America, unless there has been compliance satisfactory to the Administrative Agent in all respects with the Assignment of Claims Act or similar state statutes; (k) the applicable Account Debtor is not an Affiliate of any Included Division or any of their Subsidiaries or an employee, officer, sales representative, agent or shareholder thereof; 8 (l) the Account Debtor must be located in the United States, Canada or another foreign jurisdiction acceptable to the Administrative Agent (PROVIDED, that, in the case of such other foreign jurisdiction, only 50% of the Account is eligible for inclusion as a Domestic Eligible Account providing that all of the other conditions set forth in clauses (l) through (t) of this definition have been complied with), except for Accounts insured or backed by credit insurance or a letter of credit in form and substance acceptable to the Administrative Agent in all respects; (m) the Account complies with all material Requirements of Law (including without limitation, all usury laws, fair credit reporting and billing laws, fair debt collection practices and rules, and regulations relating to truth in lending and other similar matters); (n) the Account is in full force and effect and constitutes a legal, valid and binding obligation of the applicable Account Debtor enforceable in accordance with the terms thereof; (o) the Account is denominated in and provides for payment by the applicable Account Debtor in Dollars; (p) the Account has not been and is not required to be charged or written off as uncollectible in accordance with GAAP; (q) if the Account is owing by an Account Debtor for which the applicable Included Division must have filed a "Notice of Business Activities Report" or similar report in a state or states where failure to comply with such filing of notice precludes bringing suit against the applicable Account Debtor, the applicable Included Division must have filed such requisite activities report or other similar report and otherwise be in full compliance with such Requirement of Law; (r) the Account Debtor (i) is not a creditor of any Included Division, (ii) has not asserted a right of setoff against such Included Division or (iii) has disputed its liability (whether by chargeback or otherwise) or made any claim with respect to the Account or any other Account of any Included Division which has not been resolved, in each case without duplication, to the extent of the amount owed by the borrower to the Account Debtor, the amount of such actual or asserted right of setoff, or the amount to such dispute or claim as the case may be; (s) the Account Debtor is solvent and is not the subject of any bankruptcy case or insolvency proceeding of any kind; (t) a check, promissory note, draft, trade acceptance or other instrument for the payment of money has been received, presented for payment and returned uncollected for any reason. 9 In determining the aggregate amount of Accounts from the same Account Debtor that are unpaid more than 90 days from the date of invoice or more than 60 days from the due date pursuant to clause (b) above, there shall be excluded the amount of any net credit balances relating to Accounts with invoice dates more than 90 days prior to the date of determination or more than 60 days from the due date. "DOMESTIC ELIGIBLE FINISHED GOODS": on any date, that part of Eligible Inventory consisting of Finished Goods of the Included Divisions on such date as determined by an analysis of production reports or physical inspection of work-in-process in accordance with the current and historical classification of finished goods excluding prototypes, demonstrators, used cranes and manlifts and rental cranes and manlifts. "ELIGIBLE INVENTORY": on any date, the Inventory Value of the Included Divisions and Deutsche Grove (but only (with respect to the Included Divisions) to the extent that such inventory is subject to a first priority perfected Lien in favor of the Administrative Agent for the ratable benefit of the Lenders) less, without duplication, Inventory Reserves. Standards of eligibility for inventory may be fixed and revised from time to time solely by the Administrative Agent in the Administrative Agent's Permitted Discretion with ten days prior notice by the Administrative Agent to the Borrower. In general, without limiting the foregoing, Inventory shall in no event be considered as Eligible Inventory without complying with the following requirements: (a) such inventory is in good condition, meets all standards imposed by any Governmental Authority having regulatory authority over it, is not repair or replacement parts for machinery and equipment, is not returned, defective or damaged or undergoing quality review, is not seconds or thirds or stale or obsolete or slow moving or unmerchantable, or does not otherwise conform to the representations and warranties contained in the Loan Documents; is not packaging or shipping supplies or materials and is currently usable in the manufacturing process or saleable in the normal course of business of any of the Included Divisions and Deutsche Grove; (b) such inventory is not in the possession of or control of any warehouseman, bailee, or any agent or processor for or customer of the Included Divisions, unless such warehouseman, bailee, agent, processor, or customer has subordinated any Lien it may claim therein pursuant to a written subordination agreement reasonably acceptable to Administrative Agent and Deutsche Grove (exclusive of up to $3,000,000 of Inventory in transit among any of the Included Divisions and/or Deutsche Grove); (c) such inventory must not be in transit and must be housed or stored in the United States at a location owned or leased by any of the Included Divisions and Deutsche Grove (exclusive of up to $3,000,000 of Inventory in transit among any of the Included Divisions and/or Deutsche Grove); 10 (d) if such inventory is housed or stored at a location which is leased, and not owned by any of the Included Divisions and Deutsche Grove, the owner of such leased facility shall have subordinated or waived any Lien it may claim against such inventory, whether contractual or statutory, to the Lien which the Administrative Agent holds against such inventory for the ratable benefit of the Lenders pursuant to a written subordination or waiver agreement acceptable to the Administrative Agent in all respects; (e) such inventory must be adequately insured to the reasonable satisfaction of the Administrative Agent pursuant to insurance coverage fulfilling the requirements of Section 6.5 and of the Security Documents; and (f) the Administrative Agent has not deemed such inventory ineligible because the Administrative Agent reasonably considers the value thereof to be impaired or its ability to realize such value to be insecure. "ELIGIBLE RAW MATERIALS": on any date, that part of Eligible Inventory consisting of Raw Materials of the Included Divisions on such date as shown on the Included Divisions' perpetual inventory records in accordance with their current and historical classification of raw materials excluding return to vendor or defective items, offsite inventory, paints, miscellaneous packaging and supplies, chemicals including but not limited to oil and anti-freeze, decal kits, materials issued for research and development, items under quality review and prototypes. "ELIGIBLE SERVICE PARTS": on any date, the Inventory Value of Service Parts of the Included Divisions (subject to the same standards of eligibility as set forth in the definition of "Eligible Inventory" hereunder) on such date as shown on the Included Divisions' perpetual inventory records in accordance with their current and historical classification of service parts. "ELIGIBLE WORK-IN-PROCESS": on any date, that part of Eligible Inventory consisting of Work-In-Process of the Included Divisions (subject to the same standards of eligibility as set forth in the definition of "Eligible Inventory" hereunder) on such date that constitutes work-in-process as shown on the Included Divisions' perpetual inventory records or equivalent reporting in accordance with their current and historical classification of work-in-process excluding prototypes. "FINISHED GOODS": goods to be sold by the Included Divisions or Deutsche Grove in the normal course of business. "FIRST AMENDMENT": the First Amendment, dated as of October 22, 1999, to the Agreement. "GROVE US CRANE": a division of Grove U.S. LLC in accordance with the Borrower's current and historical classification "GROVE US MANLIFT": a division of Grove U.S. LLC in accordance with the Borrower's current and historical classification. 11 "GROVE US SERVICE PARTS": a reporting division of Grove US Crane that provides aftermarket services to Grove US Crane and Grove US Manlift customers. "INACTIVE, EXCESS AND OBSOLETE INVENTORY RESERVE": the reserve calculated by the Included Divisions or Deutsche Grove for such Inventory in accordance with their current and historical accounting practices, PROVIDED, that for Grove US Crane the reserve is equal to 100% of the Inventory Value of items that are no longer in use or for which there are excess quantities on hand. "INCLUDED DIVISIONS": Grove US Crane, Grove US Manlift, Grove US Service Parts and National Crane. "INVENTORY": all Raw Materials, Work-in-Process, and Finished Goods owned by the Included Divisions in the normal course of business. "INVENTORY RESERVES": with respect to Inventory of the Included Divisions at any date, the amount equal to the sum of, without duplication, (i) the amount by which the value of the perpetual Inventory or other similar reporting on such date exceeds the value of the Inventory on the general ledger on such date, (ii) any profits or transfer price additions accrued in connection with transfer of such Inventory among the Included Divisions or among the Subsidiaries of the Borrower, (iii) any cumulative gross favorable variance capitalized to Inventory based on inventory turnover (production material, production manufacturing, purchase price variance, or other variance categories) that result when standard costs are greater than actual costs, (iv) the amount of any Inactive, Excess and Obsolete Inventory Reserve, (v) the amount of any reserve maintained for shrinkage and markdowns in accordance with their respective historical accounting practices and (vi) the amount of any accrued actual costs and expenses (such as freight duty and insurance) required to be paid by the Included Divisions in order to take possession at a facility of the company and the Included Divisions of any Inventory which is then in transit and which is included in the Borrowing Base. "INVENTORY VALUE": a dollar amount equal to the lesser of (i) the standard cost of Inventory determined on a basis consistent with GAAP and with the Included Divisions' current and historical accounting practice or (ii) the market value of such Inventory; PROVIDED, HOWEVER that (a) in the event variances under the standard cost method are capitalized, favorable variances shall be deducted from Eligible Inventory Value and unfavorable variances shall not be added to Eligible Inventory Value, and (b) in the event variances under the standard cost method are expensed, a reserve shall be determined as appropriate in order to adjust the standard cost of Eligible Inventory Value to approximate actual cost. "NATIONAL CRANE": National Crane Corporation. "PERMITTED DISCRETION": the Administrative Agent's reasonable judgment exercised in good faith and based upon its standard practice. "RAW MATERIALS": materials used or consumed in the manufacture of goods to be sold by the Included Divisions in the normal course of business. 12 "RESERVE FOR LEASEHOLD OBLIGATIONS": means an amount equal to three times Deutsche Grove's monthly rent expense (as recorded on the Borrower's financial statements for "leasehold inventory expense") for the most recently ended fiscal month for which a Borrowing Base Certificate has been delivered, in respect of all leased warehouse properties where Eligible Inventory is stored. "SECOND AMENDMENT": the Second Amendment and Waiver, dated as of October 20, 2000, to this Agreement. "SECOND AMENDMENT EFFECTIVE DATE": October 20, 2000. "SERVICE PARTS": goods used in the servicing of cranes or manlifts manufactured by an Included Division. "WORK-IN-PROCESS": materials currently under manufacture by an Included Division and to be sold in the normal course of business. (b) by deleting therefrom the definition of the following defined term and substituting in lieu thereof the following definition: "CONSOLIDATED EBITDA": for any period, Consolidated Net Income for such period PLUS, without duplication and to the extent reflected as a charge in the statement of such Consolidated Net Income for such period, the sum of (a) income tax expense and distributions to the direct and indirect members of Holdings in lieu of taxes, (b) Consolidated Interest Expense, non-cash interest expense not included in Consolidated Interest Expense, amortization or writeoff of debt discount and debt issuance costs and commissions, discounts and other fees and charges associated with Indebtedness (including the Loans), (c) depreciation and amortization expense and other non-cash charges, (d) amortization or write-off of intangibles (including goodwill) and organization costs, (e) the aggregate amount of up-front or one-time fees or expenses payable in respect of Interest Rate Protection Agreements during such period (to the extent deducted in determining Consolidated Net Income for such period), PLUS (f) for the periods of four consecutive fiscal quarters of the Company ended June 30, 2001, September 30, 2001 and December 31, 2001 (and for the purposes of Section 7.1(d) only, the periods set forth in Section 7.1(d)), direct and indirect costs of restructuring as reasonably estimated by the Company and reported to the Administrative Agent not to exceed $2,500,000 in an aggregate amount after September 1, 2000, PROVIDED, that such costs are incurred during or prior to the fiscal quarter ended March 31, 2001, PLUS (g) the amount of unrealized foreign exchange losses (net of any gains) (or MINUS the amount of unrealized foreign exchange gains (net of any losses)) MINUS, without duplication and to the extent included in the statement of such Consolidated Net Income for such period, the sum of (a) other non-cash income and (b) gains relating to a Disposition of Property described in Section 7.5(h) not to exceed $4,100,000."; (c) by amending the definition of "ASSET SALE" therein by adding after the words "clause (g)" in the parentheses in such definition the words "and (h)"; 13 (d) by amending the definition of "FOREIGN PLEDGE AGREEMENTS" therein by deleting the references to "65%" therefrom and substituting in lieu thereof the percentage "100%"; (e) by amending the definition of "CONSOLIDATED FIXED CHARGE COVERAGE RATIO" therein by adding immediately prior to the period at the end of such definition the following: (excluding, to the extent reflected therein, the amendment fee required pursuant to the terms of Section 17(a)(ii) of the Second Amendment) (f) by amending the definition of "PERMITTED ACQUISITION" therein by deleting the reference to "Amendment Effective Date" therefrom and substituting in lieu thereof the words "Second Amendment Effective Date". 3. AMENDMENTS TO SECTION 2 OF THE CREDIT AGREEMENT. (a) Subsection 2.4 of the Credit Agreement is hereby amended (1) by adding immediately prior to the period at the end of the first sentence of paragraph (a) thereof, the following: PROVIDED, FURTHER, that, no Lender shall be required to make any Revolving Credit Loan if, after giving effect to the making of such Revolving Credit Loan, the Total Revolving Extensions of Credit at such time would exceed the Borrowing Base at such time. and (2) by adding thereto the following paragraph: (d) The Borrowers hereby agree that the aggregate amount of the Revolving Extensions of Credit shall not exceed (i) an average of $40,000,000 for at least 14 consecutive days up to and including April 16, 2001 and (ii) $35,000,000 for at least six consecutive days up to and including April 23, 2001. (b) Subsection 2.6 of the Credit Agreement is hereby amended (1) by deleting the word "and" at the end of clause (i) of the proviso in paragraph (a) thereof and substituting in lieu thereof a comma and (2) by adding immediately prior to the period at the end of clause (ii) of the proviso in paragraph (a) thereof, the following: and (iii) the Borrower shall not request, and the Swing Line Lender shall not make, any Swing Line Loan to the extent that, after giving effect thereto, the Total Revolving Extensions of Credit at such time would exceed the Borrowing Base at such time. (c) Subsection 2.9 of the Credit Agreement is hereby amended by adding thereto the following paragraph: (c) The Borrowers jointly and severally agree to pay to the Administrative Agent for the account of each Lender, an exit fee equal to 1.25% of the Commitment of such Lender on the Second Amendment Effective Date, and payable on the date on which all Loans shall have been paid in full and the Commitments terminated, PROVIDED, HOWEVER, that no such fee shall be payable if such date occurs on or before September 30, 2001. 14 (d) Subsection 2.10 of the Credit Agreement is hereby amended by deleting the reference to "$1,000,000" therefrom and substituting in lieu thereof the amount "$250,000". (e) Subsection 2.12 of the Credit Agreement is hereby amended (1) by deleting the reference to "50%" from paragraph (a) thereof the substituting in lieu thereof the percentage "75%", (2) by deleting the word "and" at the end of clause (ii) of paragraph (c) thereof and substituting in lieu thereof a comma, (3) by adding immediately prior to the period at the end of paragraph (c) thereof, the following: and (iv) 100% of the Net Cash Proceeds from any Disposition of Property described in Section 7.5(h) shall be applied upon receipt as a prepayment in accordance with Section 2.12(f) without giving effect to any Reinvestment Notice or Reinvestment Event, (4) by deleting the reference to the words "PRO RATA" from paragraph (f) thereof, (5) by inserting immediately after the words "Term Loans" in the first sentence of paragraph (f) thereof, the words "in inverse order of maturity," and (6) by inserting immediately at the end of paragraph (f) thereof the following: Notwithstanding any other provision of this Credit Agreement, in the event that on or prior to March 31, 2001, an Asset Sale of any assets set forth on Schedule 2.12 hereto (collectively, the "Scheduled Assets")(each such sale collectively referred to herein as a "Scheduled Asset Sale") occurs, (a) the first $6,250,000 of such Net Cash Proceeds of such Scheduled Asset Sale shall be paid to the Administrative Agent to be held in an account (the "Retained Proceeds Account") for the benefit of the Revolving Credit Lenders, to which the Borrowers and their Subsidiaries shall have no right, title and interest, the proceeds of which shall be applied on March 31, 2001, first, to prepay the Revolving Credit Loans to reduce the aggregate outstanding Revolving Extensions of Credit to $60,000,000 and, second, to the extent that any amount remains in such account after reducing the Revolving Extensions of Credit to $60,000,000, to prepay the Term Loans in the inverse order of maturity and (b) the balance of such Net Cash Proceeds of such Scheduled Asset Sale above $6,250,000 shall be applied to prepay the Term Loans in inverse order of maturity on the date of the receipt of such Net Cash Proceeds by the Borrowers or their Subsidiaries. ; PROVIDED, that the amendments set forth in clauses (1), (4), (5) and (6) of this paragraph (e) shall only take effect upon the receipt by the Administrative Agent of counterparts of this Amendment duly executed and delivered by the Required Prepayment Lenders; PROVIDED, FURTHER, that the failure to satisfy this condition shall not prejudice the effectiveness of the other provisions of this Amendment, if otherwise effective hereunder. (f) Subsection 2.15 of the Credit Agreement is hereby amended by inserting at the end of paragraph (d) immediately before the period therein the following: "and provided further that interest shall be payable in arrears on the last day of each month 15 commencing April 30, 2001 (PROVIDED, HOWEVER, that with respect to Eurodollar Loans, interest payments will be made 30 days after the first day of the applicable Interest Period and on the last day of such Interest Period). (g) Section 2 of the Credit Agreement is hereby amended by adding thereto the following subsection: 2.27 SPECIAL CHASE REVOLVING CREDIT LOANS. (a) Notwithstanding any provision hereof to the contrary, if at any time after the Second Amendment Effective Date, the Borrowers request any Revolving Credit Loan or Letter of Credit after giving effect to which the Total Revolving Extensions of Credit exceed $64,000,000, Chase shall make a Revolving Credit Loan for its own account (a "Special Chase Revolving Credit Loan") in the amount equal to the difference between (a) the Total Revolving Extensions of Credit to be outstanding after such Revolving Credit Loan or Letter of Credit is made or issued and (b) the greater of $64,000,000 and the Total Revolving Extensions of Credit outstanding immediately prior thereto. Such Special Chase Revolving Credit Loan shall be used to fund the requested Revolving Credit Loan to the extent of the amount of such Special Chase Revolving Credit Loan if a Revolving Credit Loan has been requested or shall be used to prepay ratably the other outstanding Revolving Credit Loans (including the other outstanding Revolving Credit Loans of Chase) if a Letter of Credit has been requested. (b) So long as no Event of Default has occurred and is continuing, any prepayment of the Revolving Credit Loans shall be applied, first, to any outstanding Special Chase Revolving Credit Loan (except that any prepayment upon a Scheduled Asset Sale or with proceeds therefrom (including with any proceeds held in the Retained Proceeds Account) shall be applied ratably to the Special Chase Revolving Credit Loans and to that portion of other Revolving Credit Loans which is equal to the difference between the Total Revolving Extensions of Credit (less the Special Chase Revolving Credit Loans outstanding at such time) and $60,000,000), and any reduction in the aggregate outstanding L/C Obligations when any Special Chase Revolving Credit Loan is outstanding shall be accompanied by a borrowing of Revolving Credit Loans in an amount equal to the lesser of (x) such reduction in the aggregate outstanding L/C Obligations and (y) the outstanding Special Chase Revolving Credit Loans, with such Revolving Credit Loans to be applied to prepay the Special Chase Revolving Credit Loans. (c) No Special Chase Revolving Credit Loans shall be made after March 31, 2001 or, if earlier, any date on which the Revolving Credit Commitments are reduced to $64,000,000 or less. After the Second Amendment Effective Date, no Swing Line Loans shall be made if the effect thereof would be to increase the Total Revolving Extensions of Credit to an amount in excess of $64,000,000. The provisions of this Section 2.27 shall not become effective (and after the Second Amendment Effective Date, no Revolving Credit Loans or Letters of Credit shall be made or issued which would increase the Total Revolving Extensions of Credit 16 to an amount in excess of $64,000,000) until Chase has notified the Borrowers and the Lenders of the effectiveness of this Section. ;PROVIDED, that, the amendments set forth in this Section 4(g) shall only take effect upon the receipt by the Administrative Agent of counterparts of this Amendment duly executed and delivered by the Required Prepayment Lenders; PROVIDED, FURTHER, that the failure to satisfy this condition shall not prejudice the effectiveness of the other provisions of this Amendment, if otherwise effective hereunder. 4. AMENDMENT TO SECTION 3 OF THE CREDIT AGREEMENT. Subsection 3.1 of the Credit Agreement is hereby amended (1) by deleting the word "or" at the end of clause (i) of the proviso in the first sentence of paragraph (a) thereof and substituting in lieu thereof a comma and (2) by adding immediately prior to the period at the end of clause (ii) of the proviso in the first sentence of paragraph (a) thereof, the following: and (iii) the Total Revolving Extensions of Credit at such time would exceed the Borrowing Base at such time. 5. AMENDMENT TO SECTION 4 OF THE CREDIT AGREEMENT. Subsection 4.16 of the Credit Agreement is hereby amended by deleting the proviso at the end of clause (c) thereof in its entirety. 6. AMENDMENT TO SECTION 5 OF THE CREDIT AGREEMENT. Subsection 5.2 of the Credit Agreement is hereby amended, by adding thereto the following subsection: (c) BORROWING BASE. After giving effect to the Revolving Extensions of Credit requested to be made on any such date and the use of proceeds thereof, the aggregate amount of the outstanding Revolving Extensions of Credit at such time shall not exceed the Borrowing Base at such time. 7. AMENDMENTS TO SECTION 6 OF THE CREDIT AGREEMENT. (a) Subsection 6.1 of the Credit Agreement is hereby amended by deleting the reference to "50 days" from paragraph (c) thereof and substituting in lieu thereof the words "30 days". (b) Subsection 6.2 of the Credit Agreement is hereby amended (1) by adding immediately prior to the semi-colon at the end of paragraph (b) thereof, the following: , PROVIDED, that, in addition to the delivery of the foregoing, a Compliance Certificate for the fiscal quarter ended March 31, 2001 and containing the most current financial information available at that time for such period, shall be furnished to the Administrative Agent and each Lender (through the Administrative Agent) no later than April 20, 2001 (2) by deleting the word "and" at the end of paragraph (f) thereof, (3) by inserting immediately after paragraph (f) thereof the following new paragraphs (g) and (h): (g) weekly, the cash flow projections of the Company for each of the following 13 weeks; 17 (h) on or before February 28, 2001, a three-year business plan that includes, among other things, the Company's analysis of strategic alternatives and plans for recapitalization, refinancing and repayment of its outstanding Indebtedness; and and (4) by relettering the existing paragraph (g) thereof as paragraph (i). (c) Subsection 6.10 of the Credit Agreement is hereby amended by deleting the reference to "65%" in paragraph (c) thereof and substituting in lieu thereof the percentage "100%"; (d) Section 6 of the Credit Agreement is hereby amended by adding thereto the following subsection: 6.12 BORROWING BASE CERTIFICATE; COLLATERAL REVIEW RIGHTS; ADDITIONAL RESERVES. (a) Furnish to the Administrative Agent, as soon as available and in any event within twenty (20) days after the end of each fiscal month beginning with the month ending September 30, 2000 (or within twenty five (25) days after the end of each fiscal month occurring on or prior to November 30, 2000), (i) a Borrowing Base Certificate, signed by a Responsible Officer of the Company and showing the Borrowing Base as of the close of business on the last day of such fiscal month, and (ii) if requested by the Administrative Agent at any other time when the Administrative Agent reasonably believes that the then existing Borrowing Base Certificate is materially inaccurate, as soon as reasonably available but it in no event later than five (5) Business Days after such request, a Borrowing Base Certificate showing the Borrowing Base as of the date so requested, in each case with supporting documentation (including, without limitation, the documentation described on Schedule 1 to Exhibit M), and (iii) such other supporting documentation and additional reports with respect to the Borrowing Base as the Administrative Agent shall reasonably request. (b) At any time upon the request of the Administrative Agent or the Required Lenders through the Administrative Agent, permit the Administrative Agent or professionals (including consultants, accountants and appraisers) retained by the Administrative Agent or its professionals to conduct evaluations and appraisals of (i) the Company's practices in the computation of the Borrowing Base and (ii) the assets included in the Borrowing Base, and pay the reasonable fees (including reasonable and customary internally allocated fees of employees of the Administrative Agent) and expenses of any such representatives retained by the Administrative Agent to conduct any such evaluation or appraisal (including, without limitation, the reasonable and customary fees and expenses associated with the Administrative Agent's Collateral Agent Services Group). In connection with any collateral monitoring or review and appraisal relating to the computation of the Borrowing Base, the Company shall make such adjustments to the Borrowing Base as the Administrative Agent shall require based upon the terms of this Agreement and results of such collateral monitoring, review or appraisal. 19 (c) In the event that historical accounting practices, systems or reserves relating to the components of the Borrowing Base are modified in a manner that is adverse to the Lenders in any material respect, the Company will agree to maintain such additional reserves (for purposes of computing the Borrowing Base) in respect to the components of the Borrowing Base and make such other adjustments to its parameters for including the components of the Borrowing Base as the Administrative Agent shall require based upon such modifications. 8. AMENDMENT TO SECTION 7 OF THE CREDIT AGREEMENT. (a) Subsection 7.1 of the Credit Agreement is hereby amended by deleting the table in paragraph (a) thereof and substituting in lieu thereof the following table:
Period Senior Leverage Ratio ------ --------------------- Closing Date to 12/31/1999 0.50 to 1.0 3/31/2000 to 6/30/2000 0.45 to 1.0 9/30/2000 to 12/31/2001 0.65 to 1.0 3/31/2002 to 12/31/2002 0.50 to 1.0 3/31/2003 to 12/31/2003 0.40 to 1.0 3/31/2004 and thereafter 0.35 to 1.0
(b) Subsection 7.1 of the Credit Agreement is hereby further amended, by adding thereto the following paragraphs: (d) MINIMUM ADJUSTED CONSOLIDATED EBITDA. Permit the Consolidated EBITDA of the Company for the periods set forth below as at the last day of each such period to be less than the amount set forth below opposite such period:
Period Amount ------ ------ 6/30/2000 to 9/30/2000 $(33,000,000) 6/30/2000 to 12/31/2000 $(29,000,000) 6/30/2000 to 3/31/2001 $(11,500,000) 6/30/2000 to 6/30/2001 $9,000,000 6/30/2000 to 9/30/2001 $25,000,000 6/30/2000 to 12/31/2001 $29,000,000
, PROVIDED, HOWEVER, the Borrowers and their respective Subsidiaries shall not permit the Consolidated EBITDA of the Company for the period commencing September 30, 2000 and ending March 31, 2001 to be less than $20,000,000 as at the last day of such period and; PROVIDED, FURTHER, that in calculating consolidated EBITDA for purposes of the preceding proviso, the reserves and charges referred to in clauses (i) through (iv) of Section 15 of the Second Amendment shall be added back to Consolidated EBITDA to the extent incurred by the Borrowers or their respective Subsidiaries during the period commencing September 30, 2000 and ending March 31, 2001. 19 (e) LIMIT ON CAPITAL EXPENDITURES. Permit Capital Expenditures for the four consecutive fiscal quarters of the Company ended September 30, 2001 to exceed $14,000,000. (c) Subsection 7.4 of the Credit Agreement is hereby amended (1) by deleting the word "and" at the end of paragraph (e) thereof and (2) by adding immediately prior to the period at the end of paragraph (f) thereof, the following language: and (g) any Disposition of Property permitted pursuant to the terms of Section 7.5(h) (d) Subsection 7.5 of the Credit Agreement is hereby amended by adding immediately prior to the word "and" at the end of paragraph (g) thereof, the following language: (h) any Disposition (other than to the Company or its Subsidiaries) of Property constituting the sale of the Scheduled Assets of the Borrowers substantially consistent with that previously disclosed to the Administrative Agent, so long as it occurs prior to March 31, 2001; (e) Subsection 7.8 of the Credit Agreement is hereby amended (1) by deleting the reference to "$20,000,000" from paragraph (k) thereof and substituting in lieu thereof the amount "$10,000,000", (2) by deleting the word "and" at the end of paragraph (n) thereof and (3) by adding immediately prior to the period at the end of paragraph (o) thereof, the following language: and (p) the Company may purchase all of the capital stock of Grove France SAS from Grove Holdings France SAS for fair-market value (as determined by the management committee of the Company), so long as such purchase occurs prior to March 31, 2001 (f) Subsection 7.9 of the Credit Agreement is hereby amended by adding immediately prior to the comma at the end of paragraph (a) thereof, the following language: (provided that Grove Holdings France SAS and its Subsidiaries may repay intercompany loans made by the Company (or any of its Domestic Subsidiaries) to Grove Holdings France SAS and/or any of its Subsidiaries in connection with the sale of Grove Holdings France SAS, so long as such repayment occurs prior to March 31, 2001) (g) Section 7 of the Credit Agreement is hereby amended by adding thereto the following subsection: 7.18 LIMITATIONS ON DEPOSITS OF CASH BALANCES. Maintain Cash Equivalents or bank deposits other than with a Lender, except for (i) Cash Equivalents or bank deposits of the Borrower and its Domestic Subsidiaries up to an aggregate amount of $3,000,000 and (ii) Cash Equivalents or bank deposits of Foreign Subsidiaries. 9. AMENDMENT TO SECTION 8 OF THE CREDIT AGREEMENT. Section 8 of the Credit Agreement is hereby amended (1) by inserting the number "(i)" immediately prior to the 20 text at the beginning of paragraph (c) thereof and (2) by inserting immediately prior to the semi-colon at the end of paragraph (c) thereof, the following language: or (ii) the Borrower shall fail to deliver a Borrowing Base Certificate pursuant to Section 6.12(a) within 10 days after such Borrowing Base Certificate was due pursuant to such Section 6.12(a) 10. AMENDMENT TO ANNEX A OF THE CREDIT AGREEMENT. Annex A of the Credit Agreement is hereby amended by deleting the Pricing Grid therein and substituting in lieu thereof the Pricing Grid attached hereto as Annex A. 11. AMENDMENT TO SCHEDULE 1.1A TO THE CREDIT AGREEMENT. Schedule 1.1A to the Credit Agreement is hereby amended by deleting the Revolving Credit Commitments therein and substituting in lieu thereof the Revolving Credit Commitments attached hereto as Annex B. 12. ADDITION OF SCHEDULE 2.12 TO THE CREDIT AGREEMENT. A new Schedule 2.12 to the Credit Agreement in the form of Annex C hereto shall be added to the Credit Agreement. 13. WAIVER OF SECTION 7.1(b) OF THE CREDIT AGREEMENT. The Administrative Agent and the Lenders hereby agree to waive, for a period commencing as of September 30, 2000 and continuing up to and including December 31, 2001, the Company's compliance with the requirements of the Consolidated Fixed Charge Coverage Ratio of Section 7.1(b) of the Credit Agreement and any breach resulting from any failure to comply with such requirements. 14. NOTICE OF REDUCTION IN REVOLVING CREDIT COMMITMENTS. The Borrowers hereby give notice pursuant to the terms of Section 2.10 of the Credit Agreement (i) of a reduction in the amount of the Revolving Credit Commitments from $125,000,000 to $66,250,000 (it being understood that the Revolving Credit Commitments after giving effect to such reduction shall be as set forth in Annex B to this Amendment), such notice to take effect on the Second Amendment Effective Date, (ii) of a reduction in the amount of the Revolving Credit Commitments from $66,250,000 to $60,000,000, such notice to take effect on March 31, 2001. 15. CALCULATION OF EBITDA. The Administrative Agent and the Lenders hereby acknowledge and consent that the Company has established or taken or may establish or take reserves or charges that will affect Consolidated Net Income for the fiscal quarters of the Company ended September 30, 2000, December 31, 2000 and March 31, 2001, for the following items: (i) writedown of inventory not to exceed $23,000,000, (ii) severance charges not to exceed $10,000,000, (iii) pension expense not to exceed $5,000,000 and (iv) writedown of Accounts not to exceed $5,500,000, PROVIDED, that, to the extent that reserves surrounding inventory or Accounts exceed the actual losses realized with respect thereto, any gains from such over-reserved position shall not be utilized by the Company in its calculation of Consolidated EBITDA for the purposes of Section 7 of the Credit Agreement. 21 16. LIMITATION ON TRANSACTIONS WITH AFFILIATES. The Borrowers hereby jointly and severally agree that each of the Company and Grove Capital shall not, and shall not permit any of its respective Subsidiaries to, directly or indirectly, make any payment to any Affiliate of any thereof (other than the Company) for any management, advisory or similar services. This provision does not prohibit any intercompany payment for any management, advisory or similar services nor any equity compensation to members of the Company's management committee. 17. CONDITIONS TO EFFECTIVENESS. This Amendment shall become effective on the Second Amendment Effective Date upon satisfaction of each of the following conditions: (a) the Administrative Agent shall have received: (i) counterparts of this Amendment duly executed and delivered by the Borrowers and the Required Lenders together with a Consent to this Amendment duly executed and delivered by the Loan Parties; (ii) an amendment fee for the account of each Lender executing this Amendment and delivering its executed signature page to the Administrative Agent prior to 5:00 p.m., New York City Time, on October 24, 2000 in the amount equal to 0.5% of the sum of such Lender's aggregate outstanding extensions of credit and its unutilized Commitments (as reduced in accordance with the terms of this Amendment) as of such date; PROVIDED, HOWEVER, that in the event that holders of at least 75% of the sum of (i) the aggregate unpaid principal amount of the Term Loans and (ii) the Total Revolving Credit Commitments shall have executed and delivered this Amendment by such time, then such fee shall be payable to each Lender. (iii) certificates representing 100% of the shares of Capital Stock of each First-Tier Foreign Subsidiary (to the extent not previously provided), together with an undated stock power for such certificate executed in blank by a duly authorized officer of the pledgor thereof; and (iv) a Borrowing Base Certificate signed by a Responsible Officer of the Company and showing the Borrowing Base as of the close of business on July 1, 2000; (b) the Borrowers shall have executed and delivered to the Administrative Agent such amendments to the Guarantee and Collateral Agreement as the Administrative Agent deems necessary or advisable in order to grant to the Administrative Agent for the benefit of the Lenders a perfected first priority security interest in 100% of the Capital Stock of each First-Tier Foreign Subsidiary as provided for by the terms of this Amendment; and (c) the Company shall have entered into agreement in form and substance mutually satisfactory to the Administrative Agent and the Company relating to the retention of Policano & Manzo as ongoing financial advisor for the Lenders. 22 The Administrative Agent shall give prompt notice to the Borrowers of the satisfaction of the conditions set forth in paragraphs (a) through (c) above. 18. REPRESENTATION AND WARRANTIES. To induce the Agents and the Lenders parties hereto to enter into this Amendment, each Borrower hereby represents and warrants to the Agents and all of the Lenders as of the Second Amendment Effective Date that: (i) the unaudited consolidated balance sheet of the Company and its consolidated Subsidiaries as at June 30, 2000 and the related unaudited consolidated statements of income and of cash flows for the nine-month period ended on such date, certified by a Responsible Officer, copies of which have heretofore been furnished to each Lender, are complete and correct and present fairly the consolidated financial condition of the Company and its consolidated Subsidiaries as at such date, and the consolidated results of their operations and their consolidated cash flows for the nine-month period then ended (subject to normal year-end audit adjustments) and (ii) none of the Borrowers, nor any of their Subsidiaries are currently making any payment to any Affiliate of any thereof (other than the Company) for any management, advisory or similar services, except for intercompany payments for such services and equity compensation to members of the Company's management committee. 19. GENERAL. (a) PAYMENT OF EXPENSES. The Borrowers jointly and severally agree to pay or reimburse the Administrative Agent for all of its out-of-pocket costs and reasonable expenses incurred in connection with this Amendment, any other documents prepared in connection herewith and the transactions contemplated hereby, including, without limitation, the reasonable fees and disbursements of (x) counsel to the Administrative Agent and (y) counsel to the Lenders. (b) NO OTHER AMENDMENTS; CONFIRMATION. Except as expressly amended, modified and supplemented hereby, the provisions of the Credit Agreement and the Notes are and shall remain in full force and effect. (c) GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. (d) COUNTERPARTS. This Amendment may be executed by one or more of the parties to this Amendment on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Amendment signed by all the parties shall be lodged with each Borrower and the Administrative Agent. (e) SUCCESSORS. The execution and delivery of this Amendment by any Lender shall be binding upon each of its successors and assigns (including Transferees of its commitments and Loans in whole or in part prior to effectiveness hereof) and binding in respect of all of its Revolving Credit Commitment and Loans. 23 [This page has been intentionally left blank.] IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective proper and duly authorized officers as of the day and year first above written. GROVE WORLDWIDE LLC By: /s/ Stephen L. Cripe ---------------------------------- Name: Stephen L. Cripe Title: Senior Vice President and Chief Financial Officer GROVE CAPITAL, INC. By: /s/ Stephen L. Cripe ---------------------------------- Name: Stephen L. Cripe Title: Vice President and Chief Financial Officer THE CHASE MANHATTAN BANK, as Administrative Agent, Swing Line Lender, Issuing Lender and a Lender By: /s/ B. B. Wuthrich ---------------------------------- Name: B. B. Wuthrich Title: Vice President ARCHIMEDES FUNDING, L.L.C. By: /s/ Kurt Wegleitner ---------------------------------- Name: Kurt Wegleitner Title: Senior Vice President BALANCED HIGH-YIELD FUND I LTD. BY: BHF (USA) CAPITAL CORPORATION, acting as Attorney-in-Fact By: /s/ Dana L. Mcdougall ---------------------------------- Name: Dana L. McDougall Title: Vice President By: /s/ Aurelio Almonte ---------------------------------- Name: Aurelio Almonte Title: Associate BHF (USA) CAPITAL CORPORATION By: /s/ Dana L. Mcdougall ---------------------------------- Name: Dana L. McDougall Title: Vice President By: /s/ Aurelio Almonte ---------------------------------- Name: Aurelio Almonte Title: Associate CERES FINANCE, LTD. By: INVESCO Senior Secured Management, Inc., as Sub-Managing Agent By: /s/ Anne M. Mccarthy ---------------------------------- Name: Anne M. McCarthy Title: Authorized Signatory COMERICA BANK By: ---------------------------------- Name: Title CONTINENTAL ASSURANCE COMPANY By: /s/ Mark L. Gold ---------------------------------- Name: Mark L. Gold Title: Managing Director By: /s/ Jonathan Insull ---------------------------------- Name: Jonathan Insull Title: Senior Vice President CREDIT LYONNAIS NEW YORK BRANCH By: /s/ Michael W. Lord ---------------------------------- Name: Michael W. Lord Title: Vice President CYPRESSTREE INVESTMENT FUND, LLC BY: CYPRESSTREE INVESTMENT MANAGEMENT COMPANY, INC., its Managing Member By: /s/ Philip C. Robbins ---------------------------------- Name: Philip C. Robbins Title: Principal CYPRESSTREE INVESTMENT PARTNERS II BY: CYPRESSTREE INVESTMENT MANAGEMENT COMPANY, INC., its Managing Member By: /s/ Philip C. Robbins ---------------------------------- Name: Philip C. Robbins Title: Principal ELC (CAYMAN) LTD. By: /s/ Amos N. Beason ---------------------------------- Name: Amos N. Beason Title: Director FLEET NATIONAL BANK, Formerly known as BankBoston, N.A. By: ---------------------------------- Name: Title FLEET BUSINESS CREDIT CORPORATION By: ---------------------------------- Name: Title FREMONT INVESTMENT & LOAN By: /s/ Stephen C. Bierman ---------------------------------- Name: Stephen C. Bierman Title: Senior Vice President GENERAL ELECTRIC CAPITAL CORPORATION By: /s/ Robert Mcmahon ---------------------------------- Name: Robert McMahon Title: Senior Risk Manager HIGHLAND CRUSADER OFFSHORE PARTNERS L.P. By: /s/ James Dondero ---------------------------------- Name: James Dondero Title: President KZH CRESCENT LLC By: /s/ Kimberly Rowe ---------------------------------- Name: Kimberly Rowe Title: Authorized Agent KZH CRESCENT 2 LLC By: /s/ Kimberly Rowe ---------------------------------- Name: Kimberly Rowe Title: Authorized Agent KZH CRESCENT 3 LLC By: /s/ Kimberly Rowe ---------------------------------- Name: Kimberly Rowe Title: Authorized Agent KZH CYPRESS TREE-1 LLC By: /s/ Kimberly Rowe ---------------------------------- Name: Kimberly Rowe Title: Authorized Agent KZH PAMCO LLC By: /s/ Susan Lee ---------------------------------- Name: Susan Lee Title: Authorized Agent PAMCO CAYMAN LTD. BY: HIGHLAND CAPITAL MANAGEMENT LTD., as Collateral Manager By: /s/ James Dondero ---------------------------------- Name: James Dondero, CFA, CPA Title: President, Highland Capital Management L.P. PAM CAPITAL FUNDING LP BY: HIGHLAND CAPITAL MANAGEMENT LTD., as Collateral Manager By: /s/ James Dondero ---------------------------------- Name: James Dondero, CFA, CPA Title: President, Highland Capital Management L.P. KZH RIVERSIDE LLC By: /s/ Kimberly Rowe ---------------------------------- Name: Kimberly Rowe Title: Authorized Agent LONG DRIVE MANAGEMENT TRUST/TRI- LINKS INVESTMENT TRUST, not in its individual capacity but solely as Owner Trustee By: /s/ David A. Vanaskey, Jr. ---------------------------------- Name: David A. Vanaskey, Jr. Title: Vice President MASSACHUSETTS MUTUAL LIFE INSURANCE By: /s/ Lisa J. Yoerg ---------------------------------- Name: Lisa J. Yoerg Title: Managing Director MERRILL LYNCH, PIERCE, FENNER & SMITH, INC By: /s/ Graham Goldsmith ---------------------------------- Name: Graham Goldsmith Title: Director ML CBO IV (Cayman Ltd) By: /s/ James Dondero, ---------------------------------- Name: James Dondero, CFA, CPA Title: President, Highland Capital Management L.P. OAK HILL SECURITIES FUND, L.P. By: Oak Hill Securities GenPar, L.P. its General Partner By: Oak Hill Securities MGP, Inc. its General Partner By: /s/ Scott D. Krase ---------------------------------- Name: Scott D. Krase Title: Vice President SEQUILS I, LTD. By: /s/ Mark L. Gold ---------------------------------- Name: Mark L. Gold Title: Managing Director By: /s/ Jonathan Insull ---------------------------------- Name: Jonathan Insull Title: Senior Vice President SOCIETE GENERALE, SOUTHWEST AGENCY By: ---------------------------------- Name: Title: SOMERS CDO, LIMITED By: /s/ Lisa J. Yoerg ---------------------------------- Name: Lisa J. Yoerg Title: Managing Director U.S. BANK NATIONAL ASSOCIATION By: ---------------------------------- Name: Title: WELLS FARGO BANK, N.A. By: /s/ Dana D. Cagle ---------------------------------- Name: Dana D. Cagle Title: Vice President Each of the undersigned hereby consents to the foregoing Amendment and hereby confirms, reaffirms and restates that its obligations under or in respect of the Credit Agreement and the documents related thereto to which it is party are and shall remain in full force and effect after giving effect to the foregoing Amendment and agrees and confirms, in the case of National Crane Corporation, that it is a party to the Guarantee and Collateral Agreement as a Grantor thereunder: GROVE HOLDINGS LLC By: /s/ Stephen L. Cripe ---------------------------------- Name: Stephen L. Cripe Title: Vice President and Chief Financial Officer GROVE WORLDWIDE LLC By: /s/ Stephen L. Cripe ---------------------------------- Name: Stephen L. Cripe Title: Senior Vice President and Chief Financial Officer GROVE CAPITAL, INC. By: /s/ Stephen L. Cripe ---------------------------------- Name: Stephen L. Cripe Title: Vice President and Chief Financial Officer GROVE U.S. LLC By: /s/ Stephen L. Cripe ---------------------------------- Name: Stephen L. Cripe Title: Senior Vice President and Chief Financial Officer CRANE ACQUISITION CORPORATION By: /s/ Stephen L. Cripe ---------------------------------- Name: Stephen L. Cripe Title: Vice President and Chief Financial Officer CRANE HOLDING INC. By: /s/ Keith R. Simmons ----------------------------------- Name: Keith R. Simmons Title: Senior Vice President and Secretary GROVE FINANCE LLC By: /s/ Stephen L. Cripe ------------------------------------ Name: Stephen L. Cripe Title: Vice President and Chief Financial Officer NATIONAL CRANE CORPORATION By: /s/ Keith R. Simmons ------------------------------------ Name: Keith R. Simmons Title: Vice President and Secretary EX-10.23 3 a2034062zex-10_23.txt EXHIBIT 10.23 Exhibit 10.23 - -------------------------------------------------------------------------------- GROVE WORLDWIDE LLC, GROVE CAPITAL, INC., CERTAIN SUBSIDIARY GUARANTORS AND UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee --------- AMENDMENT TO INDENTURE Dated as of May ____, 2000 - -------------------------------------------------------------------------------- AMENDMENT TO INDENTURE AMENDMENT TO INDENTURE dated as of May 11, 2000 among Grove Worldwide LLC, a Delaware limited liability company (the "Issuer"), Grove Capital, Inc., a Delaware corporation (the "Co-Issuer" and, together with the Issuer, the "Issuers"), Crane Acquisition Corp., a Delaware corporation ("Crane Acquisition"), Crane Holding Inc., a Delaware corporation ("Crane Holding"), National Crane Corp., a Delaware corporation ("National Crane"), Grove Finance LLC, a Delaware limited liability company ("Grove Finance") and Grove U.S. LLC, a Delaware limited liability company ("Grove US" and, together with Crane Acquisition, Crane Holding, National Crane and Grove Finance, the "Subsidiary Guarantors") and the United States Trust Company of New York, as trustee (the "Trustee"), to the Indenture (the "Indenture") dated as of April 29, 1998 among the Issuers, the Subsidiary Guarantors and the Trustee. W I T N E S S E T H: WHEREAS, the Issuers and the Subsidiary Guarantors previously executed and delivered to the Trustee the Indenture providing for the issuance of certain Senior Subordinated Notes due 2008 (the "Notes") pursuant to the Indenture. WHEREAS, Section 9.01 of the Indenture, "Without Consent of Holders of Notes," provides that the Issuers, the Subsidiary Guarantors and the Trustee may amend or supplement the Indenture, the Subsidiary Guarantees or the Notes without the consent of the Holders of Notes with respect to certain matters therein identified, including to cure any ambiguity, defect or inconsistency; WHEREAS, all conditions necessary to authorize the execution and delivery of this Amendment and to make this Amendment valid and binding have been complied with or have been done or performed. NOW, THEREFORE, in consideration of the above premises, and in order to comply with the terms of Section 9.01 of the Indenture, the Issuers, Subsidiary Guarantors and Trustee agree as follows: 2 ARTICLE ONE AMENDMENTS SECTION 1.01. Article 11 of the Indenture is hereby amended by adding a new Section 11.07 at the end of Article 11: SECTION 11.07 RELEASE OF GUARANTEES FOLLOWING THE DESIGNATION OF A SUBSIDIARY GUARANTOR AS AN UNRESTRICTED SUBSIDIARY. In the event that the Company designates a Subsidiary Guarantor to be Unrestricted Subsidiary in accordance with the terms of the Indenture, then such Subsidiary Guarantor shall be released and relieved of any obligations under its Guarantee. Upon delivery to the Trustee by the Company of an Officer's Certificate to the effect of the foregoing, the Trustee shall execute any documents reasonably required in order to evidence the release of any Subsidiary Guarantor from its obligations under its Guarantee. SECTION 1.02. Section 5 of the Form of Supplemental Indenture To Be Delivered by Subsequent Subsidiary Guarantors attached as Exhibit F to the Indenture is hereby amended by adding the following new subsection (c) at end of Section 5: (c) In the event that the Company designates a Guarantor to be Unrestricted Subsidiary in accordance with the terms of the Indenture, then such Guarantor shall be released and relieved of any obligations under its Subsidiary Guarantee. Upon delivery to the Trustee by the Company of an Officer's Certificate to the effect of the foregoing, the Trustee shall execute any documents reasonably required in order to evidence the release of any Guarantor from its obligations under its Subsidiary Guarantee. ARTICLE TWO MISCELLANEOUS SECTION 2.01. All of the terms and conditions of the Indenture, as modified by this Amendment, shall remain in full force and effect. 3 SECTION 2.02. In case any provision in this Amendment shall be invalid, illegal or unenforceable, the validity, legality or enforceability of the remaining provisions of this Amendment or of the Indenture shall not in any way be affected or impaired thereby. SECTION 2.03. This Amendment shall be deemed to be a contract made under the laws of the State of New York and for all purposes shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws. SECTION 2.04. This Amendment may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but such counterparts shall together constitute but one and the same instrument. IN WITNESS WHEREOF, the Issuers, the Subsidiary Guarantors and the Trustee have caused this Amendment to be duly executed by their respective officers thereunto duly authorized as of the day and the year first above written. GROVE WORLDWIDE LLC By: /s/ JEFFRY D. BUST --------------------------------- Name: Jeffry D. Bust Title: Chairman and CEO GROVE CAPITAL, INC. By: /s/ JEFFRY D. BUST --------------------------------- Name: Jeffry D. Bust Title: Chief Executive Officer 4 CRANE ACQUISITION CORP. By: /s/ JEFFRY D. BUST --------------------------------- Name: Jeffry D. Bust Title: Chief Executive Officer CRANE HOLDING INC. By: /s/ JEFFRY D. BUST --------------------------------- Name: Jeffry D. Bust Title: Chief Executive Officer NATIONAL CRANE CORP. By: /s/ JEFFRY D. BUST --------------------------------- Name: Jeffry D. Bust Title: Chief Executive Officer GROVE FINANCE LLC By: /s/ JEFFRY D. BUST --------------------------------- Name: Jeffry D. Bust Title: Chief Executive Officer 5 GROVE U.S. LLC By: /s/ JEFFRY D. BUST --------------------------------- Name: Jeffry D. Bust Title: Chief Executive Officer UNITED STATES TRUST COMPANY OF NEW YORK, as Trustee By: /s/ JOHN GUILIANO ----------------------------- Name: John Guiliano Title: Vice President EX-10.24 4 a2034062zex-10_24.txt EXHIBIT 10.24 Exhibit 10.24 CONFORMED COPY THIRD AMENDMENT AND CONSENT, dated as of January 11, 2001 (this "AMENDMENT"), to the Credit Agreement, dated as of April 29, 1998 (as amended by the First Amendment to the Credit Agreement, dated as of October 22, 1999 and the Second Amendment to the Credit Agreement, dated as of October 20, 2000, the "CREDIT AGREEMENT"), among GROVE WORLDWIDE LLC, a Delaware limited liability company (the "COMPANY"), GROVE CAPITAL, INC., a Delaware corporation and a Wholly Owned Subsidiary of the Company ("GROVE CAPITAL"; the Company and Grove Capital, individually, a "BORROWER" and collectively, the "BORROWERS"), 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. W I T N E S S E T H: - - - - - - - - - -- WHEREAS, pursuant to the Credit Agreement, the Lenders have agreed to make, and have made, certain loans and other extensions of credit to the Borrowers; and WHEREAS, the Borrowers have requested that the Lenders enter into this Amendment in order to (a) permit HSBC International Trade Finance Limited ("HSBC"), upon the effectiveness of Amendment No. 6 to the Amended and Restated Facility Letter (as defined in the Intercreditor Agreement), made as of December 28, 2000, by and between Grove U.S. L.L.C. and HSBC, pursuant to which HSBC has agreed to extend its Dealer Receivables Financing until December 21, 2001 (the "HSBC DEALER RECEIVABLES FINANCING EXTENSION"), to recover its ultimate losses under dealer notes purchased by it after January 1, 2001 ratably with the Obligations of the Lenders under the Credit Agreement from the collateral supporting the Credit Agreement subject to the terms and conditions of the Intercreditor Agreement, and (b) amend the Credit Agreement in certain respects in connection with the HSBC Dealer Receivables Financing Extension, in each case in the manner provided for in this Amendment. NOW, THEREFORE, in consideration of the premises contained herein, the parties hereto hereby agree as follows: 1. DEFINED TERMS. Terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement and the following term shall have the following meaning: "COMMON COLLATERAL": the "Collateral" as defined in the Intercreditor Agreement. 2. AMENDMENTS TO SECTION 1 OF THE CREDIT AGREEMENT. Subsection 1.1 of the Credit Agreement is hereby amended as follows (a) by adding the following definitions in their proper alphabetical order: 2 "HSBC GUARANTEE AND COLLATERAL AGREEMENT": the Supplemental Guarantee and Collateral Agreement, dated as of January __, 2001, made by the Loan Parties in favor of HSBC International Trade Finance Limited, as the same may be amended, supplemented or otherwise modified from time to time. For purposes of this Agreement, the HSBC Guarantee and Collateral Agreement shall not be included in the definition of Security Documents. "INTERCREDITOR AGREEMENT": the Intercreditor Agreement, dated as of January 11, 2001, among The Chase Manhattan Bank, as Administrative Agent and HSBC International Trade Finance Limited, as the same may be amended, supplemented or otherwise modified from time to time. "THIRD AMENDMENT": the Third Amendment and Consent, dated as of January 10, 2001, to the Credit Agreement. "THIRD AMENDMENT EFFECTIVE DATE": the date on which all of the conditions to the effectiveness of the Third Amendment shall have been satisfied. and (b) by (1) adding immediately after the words "Administrative Agent" in paragraph (f) of the definition of "Deutsche Grove Eligible Accounts" the following: , any Lien granted or permitted pursuant to the terms of the Intercreditor Agreement or the HSBC Guarantee and Collateral Agreement (2) adding immediately after the words "Administrative Agent" in paragraph (f) of the definition of "Domestic Eligible Accounts" the following: and any Lien granted or permitted pursuant to the terms of the Intercreditor Agreement or the HSBC Guarantee and Collateral Agreement and (3) adding immediately after the words "first priority perfected Lien" in the first paragraph of the definition of "Eligible Inventory" the following: (except as provided by the Intercreditor Agreement) 3. AMENDMENTS TO SECTION 4 OF THE CREDIT AGREEMENT. Subsection 4.19 of the Credit Agreement is hereby amended by (1) adding immediately after the word "except" in the parenthetical clause at the end of paragraph (a) thereof the number "(i)", (2) adding immediately after the reference to "Section 7.3" in the parenthetical clause at the end of paragraph (a) thereof the following: and (ii) Liens granted or permitted pursuant to the terms of the Intercreditor Agreement or the HSBC Guarantee and Collateral Agreement and (3) adding immediately prior to the periods at the end of each of paragraphs (b) and (c) thereof the following: 3 (except for Liens granted or permitted pursuant to the terms of the Intercreditor Agreement or the HSBC Guarantee and Collateral Agreement) 4. AMENDMENTS TO SECTION 6 OF THE CREDIT AGREEMENT. Section 6.10 of the Credit Agreement is hereby amended by (1) adding immediately after the words "first priority Mortgage" in paragraph (b) thereof the following: (except as provided by the Intercreditor Agreement) and (2) adding immediately after each reference to "first priority security interest" in paragraph (c) thereof the following: (except as provided by the Intercreditor Agreement) 5. AMENDMENTS TO SECTION 7 OF THE CREDIT AGREEMENT. (a) Subsection 7.1 of the Credit Agreement is hereby amended by deleting the reference to "$20,000,000" from the proviso at the end of paragraph (d) thereof and substituting in lieu thereof the amount "$16,500,000". (b) Subsection 7.3 of the Credit Agreement is hereby amended (1) by deleting the word "and" at the end of paragraph (t) thereof and (2) by adding immediately prior to the period at the end of paragraph (u) thereof, the following language: ; and (v) Liens granted or permitted pursuant to the terms of the Intercreditor Agreement or the HSBC Guarantee and Collateral Agreement 6. AMENDMENTS TO THE BORROWING BASE CERTIFICATE. Exhibit M (the Borrowing Base Certificate) to the Credit Agreement is hereby amended by adding immediately after each reference to "No first priority security interest" therein the following: (except as provided by the Intercreditor Agreement) 7. AMENDMENT TO THE GUARANTEE AND COLLATERAL AGREEMENT. The Borrowers, the Lenders and the other Loan Parties (through their execution and delivery of the Consent to this Amendment) hereby agree that subsection 4.7 of the Guarantee and Collateral Agreement is amended by adding immediately prior to the period at the end of paragraph (d) thereof the following: and Liens granted or permitted pursuant to the terms of the Intercreditor Agreement or the HSBC Guarantee and Collateral Agreement 8. CONSENTS. (a) Subject to the terms hereof, the Lenders hereby consent to the execution and delivery of the Intercreditor Agreement by each party thereto, authorize the Administrative Agent to execute it on their behalf and to perform the actions described therein and consent to the execution and filing of documents and instruments related to the Lien in favor of HSBC pursuant thereto. 4 (b) The Borrowers, the Administrative Agent and the Lenders acknowledge and agree that (i) notwithstanding anything to the contrary contained in any Loan Document, the application of money, property or securities realized upon the sale, disposition or other realization by the Administrative Agent on all or any part of the Common Collateral and the exercise of all rights and remedies thereunder are subject to the provisions of the Intercreditor Agreement, together with the other matters covered thereby and (ii) the representations, warranties and covenants made by the Loan Parties in the Loan Documents are deemed modified to the extent necessary to conform such representations, warranties and covenants with the requirements of the Intercreditor Agreement. 9. CONDITIONS TO EFFECTIVENESS. This Amendment shall become effective on the Third Amendment Effective Date upon satisfaction of each of the following conditions: (a) the Administrative Agent shall have received: (i) counterparts of this Amendment duly executed and delivered by the Borrowers and the Required Lenders together with a Consent to this Amendment duly executed and delivered by the Loan Parties; (ii) counterparts of the Intercreditor Agreement in substantially the form attached hereto as Exhibit A duly executed and delivered by each party thereto; and (b) HSBC shall have executed and delivered the HSBC Dealer Receivables Financing Extension on a basis that maintains the aggregate financing available under the HSBC Dealer Receivables Financing at $60,000,000 or more up to and including June 30, 2001 and at $50,000,000 or more from June 30, 2001 up to and including December 31, 2001 and on terms not more restrictive that those currently applicable thereto. The Administrative Agent shall give prompt notice to the Borrowers, HSBC and the Lenders of the satisfaction of the conditions set forth in paragraphs (a) and (b) above. 10. REPRESENTATION AND WARRANTIES. To induce the Agents and the Lenders parties hereto to enter into this Amendment, each Borrower hereby represents and warrants to the Agents and all of the Lenders as of the Third Amendment Effective Date that the representations and warranties made by the Borrowers in the Loan Documents are true and correct in all material respects before and after giving effect to the effectiveness of this Amendment, as if made on and as of the Third Amendment Effective Date, except to the extent that such representations and warranties relate to a specific earlier date, in which case the Borrower confirms, reaffirms and restates such representations and warranties as of such specific date. 11. GENERAL. (a) PAYMENT OF EXPENSES. The Borrowers jointly and severally agree to pay or reimburse the Administrative Agent for all of its out-of-pocket costs and reasonable expenses incurred in connection with this Amendment, any other documents prepared in connection herewith (including, without limitation, the Intercreditor Agreement) and the transactions contemplated hereby, including, without limitation, the 5 reasonable fees and disbursements of (x) counsel to the Administrative Agent and (y) counsel to the Lenders. (b) NO OTHER AMENDMENTS; CONFIRMATION. Except as expressly amended, modified and supplemented hereby, the provisions of the Credit Agreement and the Notes are and shall remain in full force and effect. (c) GOVERNING LAW. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. (d) COUNTERPARTS. This Amendment may be executed by one or more of the parties to this Amendment on any number of separate counterparts, and all of said counterparts taken together shall be deemed to constitute one and the same instrument. A set of the copies of this Amendment signed by all the parties shall be lodged with each Borrower and the Administrative Agent. (e) SUCCESSORS. The execution and delivery of this Amendment by any Lender shall be binding upon each of its successors and assigns (including Transferees of its commitments and Loans in whole or in part prior to effectiveness hereof) and binding in respect of all of its Revolving Credit Commitment and Loans. [This page has been intentionally left blank.] IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be duly executed and delivered by their respective proper and duly authorized officers as of the day and year first above written. GROVE WORLDWIDE LLC By: /s/ Stephen L. Cripe ---------------------------------------- Name: Stephen L. Cripe Title: Senior Vice President and Chief Financial Officer GROVE CAPITAL, INC. By: /s/ Stephen L. Cripe ---------------------------------------- Name: Stephen L. Cripe Title: Senior Vice President and Chief Financial Officer THE CHASE MANHATTAN BANK, as Administrative Agent, Swing Line Lender, Issuing Lender and a Lender By: /s/ B. B Wuthrich ---------------------------------------- Name: B. B. Wuthrich Title: Vice President ARCHIMEDES FUNDING, L.L.C. By: /s/ David H. Scheiber ---------------------------------------- Name: David H. Scheiber Title: Vice President BALANCED HIGH-YIELD FUND I LTD. BY: BHF (USA) CAPITAL CORPORATION, acting as Attorney-in-Fact By: ---------------------------------------- Name: Title: BHF (USA) CAPITAL CORPORATION By: ---------------------------------------- Name: Title: CERES FINANCE, LTD. By: ---------------------------------------- Name: Title: COMERICA BANK By: ---------------------------------------- Name: Title: CONTINENTAL ASSURANCE COMPANY SEPARATE ACCOUNT (E) By: TCW Asset Management Company, as Attorney-in-Fact By: /s/ Mark L. Gold ---------------------------------------- Name: Mark L. Gold Title: Managing Director By: /s/ Johnathan Insull ---------------------------------------- Name: Johnathan Insull Title: Senior Vice President CREDIT LYONNAIS NEW YORK BRANCH By: ---------------------------------------- Name: Title: CYPRESSTREE INVESTMENT FUND, LLC BY: CYPRESSTREE INVESTMENT MANAGEMENT COMPANY, INC., its Managing Member By: ---------------------------------------- Name: Title: CYPRESSTREE INVESTMENT PARTNERS II BY: CYPRESSTREE INVESTMENT MANAGEMENT COMPANY, INC., its Managing Member By: ---------------------------------------- Name: Title: ELC (CAYMAN) LTD. By: /s/ E.A. Kratzman ---------------------------------------- Name: E.A. Kratzman, III Title: Managing Director FLEET NATIONAL BANK, Formerly known as BankBoston, N.A. By: ---------------------------------------- Name: Title: FLEET BUSINESS CREDIT CORPORATION By: ---------------------------------------- Name: Title: FREMONT INVESTMENT & LOAN By: /s/ Steven C. Bierman ---------------------------------------- Name: Steven C. Bierman Title: Senior Vice President and General Manager, Syndicated Loan Group GENERAL ELECTRIC CAPITAL CORPORATION By: ---------------------------------------- Name: Title: HIGHLAND CRUSADER OFFSHORE PARTNERS L.P. By: /s/ Todd Travers ---------------------------------------- Name: Todd Travers Title: Senior Portfolio Manager KZH CRESCENT LLC By: /s/ Kimberly Rowe ---------------------------------------- Name: Kimberly Rowe Title: Authorized Agent KZH CRESCENT 2 LLC By: /s/ Kimberly Rowe ---------------------------------------- Name: Kimberly Rowe Title: Authorized Agent KZH CRESCENT 3 LLC By: /s/ Kimberly Rowe ---------------------------------------- Name: Kimberly Rowe Title: Authorized Agent KZH CYPRESS TREE-1 LLC By: /s/ Kimberly Rowe ---------------------------------------- Name: Kimberly Rowe Title: Authorized Agent KZH PAMCO LLC By: /s/ Kimberly Rowe ---------------------------------------- Name: Kimberly Rowe Title: Authorized Agent PAMCO CAYMAN LTD. BY: HIGHLAND CAPITAL MANAGEMENT, L.P., as Collateral Manager By: /s/ Todd Travers ---------------------------------------- Name: Todd Travers Title: Senior Portfolio Manager PAM CAPITAL FUNDING LP BY: HIGHLAND CAPITAL MANAGEMENT, L.P., as Collateral Manager By: /s/ Todd Travers ---------------------------------------- Name: Todd Travers Title: Senior Portfolio Manager KZH RIVERSIDE LLC By: /s/ Kimberly Rowe ---------------------------------------- Name: Kimberly Rowe Title: Authorized Agent LONG DRIVE MANAGEMENT TRUST/TRI-LINKS INVESTMENT TRUST, BY: WILMINGTON TRUST COMPANY, as Owner Trustee By: /s/ David A. Vanaskey, Jr. ---------------------------------------- Name: David A. Vanaskey, Jr. Title: Vice President MASSACHUSETTS MUTUAL LIFE INSURANCE By: /s/ Lisa J. Yoerg ---------------------------------------- Name: Lisa J. Yoerg Title: Managing Director MERRILL LYNCH, PIERCE, FENNER & SMITH, INC By: ---------------------------------------- Name: Title: ML CBO IV (Cayman Ltd) BY: HIGHLAND CAPITAL MANAGEMENT, L.P., as Collateral Manager By: /s/ Todd Travers ---------------------------------------- Name: Todd Travers Title: Senior Portfolio Manager OAK HILL SECURITIES FUND, L.P. By: Oak Hill Securities Gen Par, L.P, its General Partner By: Oak Hill Securities MGP, Inc., its General Partner By: /s/ SCOTT D. KRASE ---------------------------------------- Name: Scott D. Krase Title: Vice President SEQUILS I, LTD By: TCW Advisors, Inc. as its Collateral Manager By: /s/ Mark L. Gold ---------------------------------------- Name: Mark L. Gold Title: Managing Director By: /s/ Johnathan Insull ---------------------------------------- Name: Johnathan Insull Title: Senior Vice President SOCIETE GENERALE, SOUTHWEST AGENCY By: ---------------------------------------- Name: Title: SOMERS CDO, LIMITED By: /s/ Lisa J. Yoerg ---------------------------------------- Name: Lisa J. Yoerg Title: Managing Director TRUST COMPANY OF THE WEST By: ---------------------------------------- Name: Title: U.S. BANK NATIONAL ASSOCIATION By: ---------------------------------------- Name: Title: WELLS FARGO BANK, N.A. By: ---------------------------------------- Name: Title: Each of the undersigned hereby consents to the foregoing Amendment and hereby confirms, reaffirms and restates that its obligations under or in respect of the Credit Agreement and the documents related thereto to which it is party are and shall remain in full force and effect after giving effect to the foregoing Amendment and agrees and confirms, in the case of National Crane Corporation, that it is a party to the Guarantee and Collateral Agreement as a Grantor thereunder: GROVE HOLDINGS LLC By: /s/ Stephen L. Cripe ---------------------------------------- Name: Stephen L. Cripe Title: Vice President and Chief Financial Officer GROVE WORLDWIDE LLC By: /s/ Stephen L. Cripe ---------------------------------------- Name: Stephen L. Cripe Title: Senior Vice President and Chief Financial Officer GROVE CAPITAL, INC. By: /s/ Stephen L. Cripe ---------------------------------------- Name: Stephen L. Cripe Title: Vice President and Chief Financial Officer GROVE U.S. LLC By: /s/ Stephen L. Cripe ---------------------------------------- Name: Stephen L. Cripe Title: Senior Vice President and Chief Financial Officer CRANE ACQUISITION CORPORATION By: /s/ Stephen L. Cripe ---------------------------------------- Name: Stephen L. Cripe Title: Vice President and Chief Financial Officer CRANE HOLDING INC. By: /s/ Keith R. Simmons ---------------------------------------- Name: Keith R. Simmons Title: Senior Vice President and Secretary GROVE FINANCE LLC By: /s/ Stephen L. Cripe ---------------------------------------- Name: Stephen L. Cripe Title: Vice President and Chief Financial Officer NATIONAL CRANE CORPORATION By: /s/ Keith R. Simmons ---------------------------------------- Name: Keith R. Simmons Title: Senior Vice President and Secretary EX-27.1 5 a2034062zex-27_1.txt FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 2000 AND THE CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR ENDED SEPTEMBER 30, 2000 OF GROVE INVESTORS LLC AND SUBSIDIARIES, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 12-MOS SEP-30-2000 OCT-03-1999 SEP-30-2000 17,933 0 143,263 5,057 175,181 346,432 208,128 39,432 731,757 218,324 356,217 0 0 0 (138,748) 731,757 850,562 850,562 725,680 170,681 996 0 59,911 (113,026) 6,255 (119,281) 0 0 302 (118,979) 0 0
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