FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the period ended March 31, 1995
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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 1-5599
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GREAT DANE HOLDINGS INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 54-0698116
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(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
2016 North Pitcher Street, Kalamazoo, Michigan 49007
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (616) 343-6121
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Indicate by check mark whether Registrant (1) 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 Registrant was required to
file such reports), and (2) has been subject to such filing requirements for the
past 90 days. Yes X No
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There were 16,800,000 shares of Registrant's only class of common stock
outstanding as of May 9, 1995.
<PAGE-1>
INDEX
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
Page Number
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PART I FINANCIAL INFORMATION
Item 1 Consolidated Financial Statements (Unaudited):
Consolidated Balance Sheets at December 31, 1994
and March 31, 1995 . . . . . . . . . . . . . . . . . . . 2-3
Consolidated Statements of Operations for
the Three Months Ended March 31, 1994 and
March 31, 1995 . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for
the Three Months Ended March 31, 1994 and
March 31, 1995 . . . . . . . . . . . . . . . . . . . . . 5-6
Notes to Consolidated Financial Statements . . . . . . . 7-9
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . 10-11
PART II OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders. . . .12
Item 5 Other Information. . . . . . . . . . . . . . . . . . . . .12
Item 6 Exhibits and Reports on Form 8-K . . . . . . . . . . . . .13
SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
<PAGE-2>
Balance-Sheets
CONSOLIDATED BALANCE SHEETS
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
(in thousands, except per share amounts)
(unaudited)
December 31, March 31,
1994 1995
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ASSETS
Cash and cash equivalents $ 34,875 $ 39,554
Accounts receivable, less allowance for
doubtful accounts of $1,342 (1994)
$1,562 (1995) 90,076 107,146
Inventories 96,580 106,315
Other current assets 19,729 19,948
---------- ----------
Total current assets 241,260 272,963
Property, plant and equipment, net 113,948 121,750
Insurance Subsidiary's investments 91,094 91,622
Cost in excess of net assets acquired,
net of accumulated amortization of $7,502
(1994) and $7,814 (1995) 42,493 42,181
Trademark, net of accumulated amortization
of $2,100 (1994) and $2,187 (1995) 11,346 11,259
Other assets 21,910 27,569
---------- ----------
Total Assets $ 522,051 $ 567,344
========== ==========
<PAGE-3>
Balance-Sheets--Continued
CONSOLIDATED BALANCE SHEETS--CONTINUED
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
(in thousands, except per share amounts)
(unaudited)
December 31, March 31,
1994 1995
------------ -------------
LIABILITIES AND SHAREHOLDERS' DEFICIT:
Accounts payable $ 80,863 $ 92,806
Notes payable 5,000 ---
Income taxes payable 12,663 18,037
Accrued compensation 17,955 18,167
Accrued interest 11,802 6,079
Customer deposits 14,113 8,677
Other accrued liabilities 36,402 39,718
Current portion of long-term debt 13,613 14,111
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Total current liabilities 192,411 197,595
Long-term debt, excluding current portion:
Shareholders 30,000 ---
Other 244,652 295,420
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274,652 295,420
Insurance Subsidiary's unpaid losses and
loss adjustment expenses 69,318 70,954
Unearned insurance premiums 12,203 18,365
Deferred income taxes 2,750 438
Postretirement benefits other than pensions 51,061 51,360
Other noncurrent liabilities 46,372 49,849
Minority interest 586 999
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Total liabilities 649,353 684,980
Shareholders' deficit--Note A:
Common stock, par value $0.01:
Authorized 50,000 shares
Outstanding 16,800 shares 168 168
Additional paid-in capital 14,832 14,832
Retained-earnings deficit (11,869) (3,577)
Unrealized appreciation (depreciation) on
Insurance Subsidiary's investments in
certain debt and equity securities (2,060) (686)
Notes receivable from shareholders (625) ---
Amount paid in excess of Checker's
net assets (127,748) (128,373)
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Total shareholders' deficit (127,302) (117,636)
---------- ----------
Total Liabilities and
Shareholders' Deficit $ 522,051 $ 567,344
========== ==========
See notes to consolidated financial statements.
<PAGE-4>
Statements of Operations--3 Months
CONSOLIDATED STATEMENTS OF OPERATIONS
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
(in thousands, except per share amounts)
(unaudited)
Three Months Ended March 31,
1994 1995
---------- ----------
Revenues $ 271,680 $ 322,393
Cost of revenues (230,835) (276,531)
---------- ----------
Gross profit 40,845 45,862
Selling, general and administrative expense (21,454) (23,376)
---------- ----------
Operating profit 19,391 22,486
Interest expense (10,044) (10,464)
Interest income 1,660 2,277
Other income, net 604 712
---------- ----------
Income before minority equity and
income taxes 11,611 15,011
Minority equity --- (413)
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Income before income taxes 11,611 14,598
Income tax expense (5,225) (6,305)
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Net income $ 6,386 $ 8,293
========== ==========
Weighted average number of shares used in
per share computations--Note A 16,800 16,800
========== ==========
Net income per share--Note A $ 0.38 $ 0.49
========== ==========
See notes to consolidated financial statements.
<PAGE-5>
Statements of Cash Flows
CONSOLIDATED STATEMENTS OF CASH FLOWS
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
(in thousands)
(unaudited)
Three Months Ended March 31,
1994 1995
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Cash flows from operating activities:
Net income $ 6,386 $ 8,293
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 5,631 5,398
Deferred income tax benefit (581) (3,055)
Amortization of cost in excess of
net assets acquired 313 312
Amortization of debt discount 393 439
Gain on sale of property, plant
and equipment --- (182)
Investment gains (274) (80)
Increase in minority equity --- 413
Other noncash charges 2,626 4,068
Changes in operating assets and
liabilities:
Accounts receivable (25,281) (17,147)
Inventories 8,052 (9,735)
Other assets (1,176) (6,242)
Accounts payable 56 13,554
Income taxes 5,840 5,375
Unpaid losses and loss adjustment
expenses 897 1,636
Unearned insurance premiums 6,692 6,162
Postretirement benefits other
than pensions 403 299
Other liabilities (7,791) (9,405)
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Net cash flow provided by operating
activities 2,186 103
<PAGE-6>
Statements of Cash Flows--Continued
CONSOLIDATED STATEMENTS OF CASH FLOWS--CONTINUED
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
(in thousands)
(unaudited)
Three Months Ended March 31,
1994 1995
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Cash flows from investing activities:
Purchases of property, plant and equipment $ (6,903) $ (13,370)
Proceeds from disposal of property, plant
and equipment and other productive assets 516 352
Purchase of investments available for sale (3,901) (7,697)
Purchases of investments held to maturity (2,793) ---
Proceeds from sale of investments available
for sale 346 4,411
Proceeds from maturity or redemption of
investments held to maturity 7,723 5,054
Other 143 ---
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Net cash flow used in investing activities (4,869) (11,250)
Cash flows from financing activities:
Proceeds from borrowings --- 90,822
Repayments of borrowings (4,553) (74,996)
Return of limited partner's capital (234) ---
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Net cash flow provided by (used in)
financing activities (4,787) 15,826
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Increase (decrease) in cash and cash
equivalents (7,470) 4,679
Beginning cash and cash equivalents 40,078 34,875
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Ending cash and cash equivalents $ 32,608 $ 39,554
========== ==========
See notes to consolidated financial statements.
<PAGE-7>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
MARCH 31, 1995
(unaudited)
NOTE A--ORGANIZATION AND PRINCIPLES OF CONSOLIDATION
On March 27, 1995, in anticipation of an initial public offering ("IPO") the
Company filed an amendment to its Certificate of Incorporation increasing
the number of authorized shares of common stock to 50 million, reducing the
par value to $0.01 per common share and splitting the shares 16,800 to 1.
This resolution also authorized 5 million shares of $1 par value preferred
stock. All share and per share data and affected amounts have been adjusted
to reflect these changes as though they had occurred at the beginning of the
earliest period presented.
The consolidated financial statements include the accounts of Great Dane
Holdings Inc. and its subsidiaries, including Great Dane Trailers, Inc.
(Great Dane) and Checker Motors Corporation ("Motors") and Motors' wholly-
owned subsidiaries, including American Country Insurance Company ("Insurance
Subsidiary" or "Country").
NOTE B--BASIS OF PRESENTATION
The accompanying consolidated financial statements of the Company have been
prepared in accordance with generally accepted accounting principles for
interim financial information, the instructions to Form 10-Q and Rule 10-01
of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In Management's opinion, all adjustments
(consisting of normal recurring accruals) considered necessary for a fair
presentation have been included. Operating results for the three months
ended March 31, 1995, are not necessarily indicative of the results that may
be expected for the year ending December 31, 1995. For further information,
refer to the audited consolidated financial statements and footnotes thereto
included in the Company's annual report on Form 10-K for the year ended
December 31, 1994.
NOTE C-INVENTORIES
Inventories are summarized below (dollars in thousands):
December 31, March 31,
1994 1995
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Raw materials and supplies $ 60,998 $ 63,711
Work-in-process 15,877 17,453
Finished goods 19,705 25,151
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$ 96,580 $ 106,315
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<PAGE-8>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
(unaudited)
NOTE D--BORROWINGS
In January 1995, Motors and its subsidiaries finalized a refinancing with a
bank whereby Motors entered into a loan agreement providing for a $45
million term loan and a $20 million revolving credit facility. The funds
from the term loan were used to repay approximately $27 million of bank debt
including the Partnership term loan, the equipment term loan and the notes
payable to the bank, provide $15 million to the Company to retire a portion
of certain notes outstanding to the Company's shareholders and pay fees and
expenses. Availability under the revolving credit facility is based on the
amount of eligible trade accounts receivable and inventory and may be used
for working capital needs, as well as for other general corporate purposes.
The new term loan requires twenty quarterly principal payments of
approximately $2.3 million, commencing June 30, 1995, plus interest at
either the bank's prime rate plus 1.25% (subject to reductions of up to 0.5%
upon the occurrence of certain events) or a selected Eurodollar contract
rate plus 3% (subject to reductions of up to 0.5% upon the occurrence of
certain events). The new term loan is secured by substantially all of
Motors' assets including the stock of its subsidiaries. The new term loan
agreement requires Motors to, among other things, comply with certain
financial covenants, limits addition to and sales of Motors' fixed assets
and limits additional borrowings by Motors.
In February 1995, Great Dane amended its loan and security agreement.
Pursuant to the amended agreement, the Lenders have loaned $28 million as a
term loan and have agreed to provide, at any given time, up to $150 million
(less amounts then outstanding as a term loan) as a revolving credit
facility (subject to availability based on the amount of eligible trade
accounts receivable and inventory) to be used as working capital by Great
Dane and for other general corporate purposes. The initial term loan
proceeds, which were drawn immediately upon closing, were used, together
with drawings under the revolver, to repay approximately $17 million of bank
debt, provide $15 million to the Company to retire the balance of the
shareholder notes and pay fees and expenses. The term loan requires monthly
principal payments of $0.3 million plus interest on the unpaid principal
amount of the loan in arrears at a rate equal to 1% above the prime rate of
interest charged from time to time by Bank of America or a rate equal to
2.5% above a selected Eurodollar contract rate with the unpaid principal
balance due five years after the closing date. The loans are secured by
substantially all of the assets of Great Dane and its subsidiaries. The
Agreement requires Great Dane to, among other things, comply with certain
financial covenants, and limits the amounts of loans and transfers to the
Company, limits additions to and sales of Great Dane's fixed assets and
limits additional Great Dane borrowings.
NOTE E--INCOME TAXES
The Company's estimated effective tax rate differs from the statutory rate
because of state income taxes as well as the impact of the reporting of
certain income and expense items in the financial statements which are not
taxable or deductible for income tax purposes.
<PAGE-9>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
(unaudited)
NOTE F--STOCK OPTIONS
During the quarter ended March 31, 1995, the Board of Directors adopted an
option plan for an executive officer of the Company and granted him an
option to purchase 52,500 shares of common stock, subject to completion of
an IPO, at an exercise price of $1.00 per share. Further, during the
quarter, the Board of Directors also adopted, subject to the completion of
an IPO and subject to approval by the Compensation Committee and by the
stockholders, the 1994 Option Plan and the Outside Directors Option Plan.
<PAGE-10>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Available cash and cash equivalents, cash flow generated from operations
($2.2 million and $0.1 million for the three months ended March 31, 1994 and
1995, respectively), proceeds from borrowings and proceeds from disposal of
assets have provided sufficient liquidity and capital resources for the Company
to conduct its operations during the first three months of 1994 and 1995.
In January and February 1995, the Company's subsidiaries refinanced their
indebtedness to banks (see Note D). These refinancings had the effect of
improving liquidity by increasing funds available to the subsidiaries in the
form of higher line of credit availability and providing additional funds under
term loan arrangements. Certain funds from these refinancings were made
available to the Company and the notes payable to shareholders were repaid with
these funds.
On November 23, 1994, the Company filed a registration statement on Form
S-1 with the Securities and Exchange Commission in connection with an IPO of the
Company's common stock. On April 7, 1995, the Company announced that it was
withdrawing the IPO and would not complete the transaction. Certain costs were
incurred in connection with the IPO. Because the IPO was not completed, these
costs, which totaled approximately $1.0 million (pre-tax), have been charged to
income in the quarter ended March 31, 1995.
The Company is a holding company and is, therefore, dependent on cash flow
from its subsidiaries in order to meet its obligations. The Company's operating
subsidiaries are required, pursuant to financing agreements with third parties,
to meet certain covenants, which may have the effect of limiting cash available
to the Company. Further, the payment of dividends by the Insurance Subsidiary
is limited by regulation to net income unless the prior approval of the Illinois
Insurance Department is received. The operating subsidiaries' plans indicate
that sufficient funds are anticipated to be available to the Company to meet its
short-term obligations.
Purchases of property, plant and equipment have averaged approximately
$18.6 million per year over the past three years and have been funded
principally by cash flow generated from operations as well as proceeds from
disposal of assets. Purchases of property, plant and equipment for 1995 are
anticipated to be approximately $41.3 million and are expected to be funded
principally by cash flow generated from operations and borrowings. The higher
level of capital expenditures in the first quarter of 1995 as compared to the
comparable period in 1994 results from replacement of vehicles in the Vehicular
operations and capital expenditures associated with a new Truck Trailer
manufacturing facility in Terre Haute, Indiana, which is anticipated to begin
operations in the second quarter of 1995.
<PAGE-11>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--CONTINUED
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
General Motors Corporation ("GM"), a major customer of the Company's
automotive products segment, is resorting to many measures, including obtaining
significant price reductions from its suppliers, in an effort to reduce its
operating costs. Automotive products segment management believes that it has
adequately provided in its financial plans for any price reductions which may
result from its current discussions with GM. However, price reductions in
excess of those anticipated could have a material adverse effect on the
automotive products operations.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1995
Compared to Three Months Ended March 31, 1994
-------------------------------------------------
Revenues increased $50.7 million during the three months ended March 31,
1995, as compared to the same period of 1994. The higher revenues are
principally attributed to higher Trailer Manufacturing revenues ($35.4 million),
primarily associated with higher volume of trailer sales and higher selling
prices within the segment, and partly offset by lower container and chassis
sales. Automotive Products revenues increased $12.3 million during the three
months ended March 31, 1995, as compared to the same period in 1994. General
increases in volume to accommodate automotive customers' demands, increased
revenues from additional jobs and increases in revenues associated with the
production of tooling for certain customers were the principal reasons for the
revenue increases.
The Company's operating profit (gross profit less selling, general and
administrative expenses) increased $3.1 million in the 1995 period compared to
the 1994 period. This increase is attributed to an increase of Trailer
Manufacturing operating profits ($0.4 million) which is principally due to
higher volume of sales indicated above and partly offset by lower margins. The
Truck Trailer manufacturing margins were lower as a result of a change in
product mix, higher manufacturing costs and certain costs associated with the
start-up of the new manufacturing facility. The Automotive Products operating
profits increased ($2.8 million) principally due to higher sales. Increases in
operating profits were offset by higher selling, general and administrative
expenses due to the costs associated with the withdrawn IPO ($1.0 million).
During the quarter ended March 31, 1995, a $0.4 million charge was recorded
to reflect minority equity in South Charleston Stamping & Manufacturing Company
("SCSM"), a subsidiary of Checker. No minority equity in SCSM was recorded in
the 1994 three-month period because of SCSM's shareholders' deficit.
Income tax expense is higher for financial statement purposes than would
be computed if the statutory rate were used because of state income taxes and
the impact of the reporting of certain income and expense items in the financial
statements which are not taxable or deductible for income tax purposes.
Net income was $8.3 million for the three months ended March 31, 1995, as
compared to $6.4 million for the comparable period in 1994. The improvement in
net income is attributed to the reasons mentioned above.
<PAGE-12>
PART II
OTHER INFORMATION
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
Item 4: Submission of Matters to a Vote of Security Holders
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On January 12, 1995, January 18, 1995, and March 23, 1995, the shareholders
of the Registrant, by unanimous written consent, took the following actions:
1. Approval of an amendment of the Certificate of Incorporation of
the Registrant, in connection with the proposed IPO, to:
a. Increase the number of shares of capital stock of the
Registrant to 55,000,000, consisting of 5,000,000 shares of preferred
stock, par value $1.00 per share, and 50,000,000 shares of common
stock, par value $0.01 per share (the "Common Stock"), and to
authorize the Board of Directors to issue the preferred shares and to
fix the number of shares of any series and the designations, powers,
preferences and rights and the qualifications, limitations and
restrictions of such series; and
b. Change each share of common stock outstanding immediately
prior to the amendment of the Certificate of Incorporation into
16,800 shares of Common Stock.
2. Ratification of the Board's adoption of certain stock option
plans in connection with the proposed IPO.
3. Ratification of Great Dane Trailers, Inc.'s ("Great Dane")
Amended and Restated Loan Agreement, approval of an agreement which, among
other things, restricts in connection therewith the Registrant's ability
to sell or otherwise dispose of the stock of Great Dane, and authorization
of borrowings thereunder to redeem or service the Registrant's debt and
pay the Registrant's expenses.
Item 5: Other Information
-----------------
On April 5, 1995, the Registrant's Amended Registration Statement on Form
S-1, registering the sale of 4,000,000 shares of common stock, par value $0.01
per share, at an estimated initial public offering price of $11.00 per share,
was declared effective. The proceeds of the offering were intended to be used
to redeem a portion of the Registrant's 12-3/4% Senior Subordinated Debentures
due 2001. The Registrant was subsequently advised by the underwriters that the
offering cannot be completed. The Registrant will be reviewing its options.
<PAGE-13>
PART II
OTHER INFORMATION--CONTINUED
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
Item 6: Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
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3.1 Composite Certificate of Incorporation of the Registrant
reflecting all amendments to date.
27.1 Financial Data Schedule
99.1 Retirement Plan for Great Dane Trailers, Inc., effective as of
January 1, 1989.
99.2 Checker Motors Pension Plan, amended and restated, effective
January 1, 1987.
99.3 Composite Checker Employees' 401(k) Retirement Benefit Plan,
reflecting all amendments to date.
(b) Reports on Form 8-K
-------------------
None
<PAGE-14>
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
GREAT DANE HOLDINGS INC.
------------------------------
(Registrant)
/s/ Marlan R. Smith
----------------------------------------
Marlan R. Smith
Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Date: May 9, 1995