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 June 30, 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 1,000 shares of Registrant's only class of common stock outstanding
as of August 7, 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 June 30, 1995. . . . . . . . . . . . . . . . . . . . 2-3
Consolidated Statements of Operations for
the Three Months Ended June 30, 1994 and
June 30, 1995. . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Operations for
the Six Months Ended June 30, 1994 and
June 30, 1995. . . . . . . . . . . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 1994 and
June 30, 1995. . . . . . . . . . . . . . . . . . . . . . 6-7
Notes to Consolidated Financial Statements . . . . . . .8-10
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . 11-13
PART II OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders. . . .14
Item 6 Exhibits and Reports on Form 8-K . . . . . . . . . . . . .14
SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .15
<PAGE-2>
Balance-Sheets
CONSOLIDATED BALANCE SHEETS
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
(in thousands, except share and per share amounts)
(unaudited)
December 31, June 30,
1994 1995
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ASSETS
Cash and cash equivalents $ 34,875 $ 39,890
Accounts receivable, less allowance for
doubtful accounts of $1,342 (1994)
$1,921 (1995) 90,076 133,465
Inventories 96,580 115,649
Other current assets 19,729 17,611
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Total current assets 241,260 306,615
Property, plant and equipment, net 113,948 127,162
Insurance Subsidiary's investments 91,094 98,394
Cost in excess of net assets acquired,
net of accumulated amortization of $7,502
(1994) and $8,127 (1995) 42,493 41,868
Trademark, net of accumulated amortization
of $2,100 (1994) and $2,275 (1995) 11,346 11,171
Other assets 21,910 27,047
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Total Assets $ 522,051 $ 612,257
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<PAGE-3>
Balance-Sheets--Continued
CONSOLIDATED BALANCE SHEETS--CONTINUED
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
(in thousands, except share and per share amounts)
(unaudited)
December 31, June 30,
1994 1995
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LIABILITIES AND SHAREHOLDERS' DEFICIT:
Accounts payable $ 80,863 $ 97,935
Notes payable 5,000 ---
Income taxes payable 12,663 9,896
Accrued compensation 17,955 19,569
Accrued interest 11,802 12,278
Customer deposits 14,113 7,150
Other accrued liabilities 36,402 41,754
Current portion of long-term debt 13,613 16,117
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Total current liabilities 192,411 204,699
Long-term debt, excluding current portion:
Shareholders 30,000 ---
Other 244,652 319,193
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274,652 319,193
Insurance Subsidiary's unpaid losses and
loss adjustment expenses 69,318 72,901
Unearned insurance premiums 12,203 17,390
Deferred income taxes 2,750 2,064
Postretirement benefits other than pensions 51,061 51,785
Other noncurrent liabilities 46,372 49,378
Minority interest 586 1,328
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Total liabilities 649,353 718,738
Shareholders' deficit--Note A:
Common stock, par value $1.00:
Authorized 3,000 shares
Outstanding 1,000 shares 1 1
Additional paid-in capital 14,999 14,999
Retained earnings (deficit) (11,869) 5,998
Unrealized appreciation (depreciation) on
Insurance Subsidiary's investments in
certain debt and equity securities (2,060) 894
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) (106,481)
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Total Liabilities and
Shareholders' Deficit $ 522,051 $ 612,257
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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 share and per share amounts)
(unaudited)
Three Months Ended June 30,
1994 1995
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Revenues $ 277,622 $ 329,527
Cost of revenues (232,653) (281,379)
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Gross profit 44,969 48,148
Selling, general and administrative expense (21,263) (22,982)
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Operating profit 23,706 25,166
Interest expense (10,149) (10,840)
Interest income 1,741 2,275
Other income, net 162 474
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Income before minority equity and
income taxes 15,460 17,075
Minority equity (203) (329)
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Income before income taxes 15,257 16,746
Income tax expense (6,866) (7,171)
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Net income $ 8,391 $ 9,575
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Weighted average number of shares used in
per share computations--Note A 1,000 1,000
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Net income per share--Note A $ 8,391 $ 9,575
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See notes to consolidated financial statements.
<PAGE-5>
Statements of Operations--6 Months
CONSOLIDATED STATEMENTS OF OPERATIONS
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
(in thousands, except share and per share amounts)
(unaudited)
Six Months Ended June 30,
1994 1995
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Revenues $ 549,302 $ 651,920
Cost of revenues (463,488) (557,910)
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Gross profit 85,814 94,010
Selling, general and administrative expense (42,717) (46,358)
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Operating profit 43,097 47,652
Interest expense (20,193) (21,304)
Interest income 3,401 4,552
Other income, net 766 1,186
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Income before minority equity and
income taxes 27,071 32,086
Minority equity (203) (742)
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Income before income taxes 26,868 31,344
Income tax expense (12,091) (13,476)
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Net income $ 14,777 $ 17,868
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Weighted average number of shares used in
per share computations--Note A 1,000 1,000
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Net income per share--Note A $ 14,777 $ 17,868
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See notes to consolidated financial statements.
<PAGE-6>
Statements of Cash Flows
CONSOLIDATED STATEMENTS OF CASH FLOWS
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
(in thousands)
(unaudited)
Six Months Ended June 30,
1994 1995
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Cash flows from operating activities:
Net income $ 14,777 $ 17,868
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 11,319 11,122
Deferred income tax benefit (1,343) (1,604)
Amortization of cost in excess of
net assets acquired 625 625
Amortization of debt discount 768 893
Gain on sale of property,
plant and equipment (405) (335)
Investment gains (275) (116)
Increase in minority equity --- 742
Other noncash charges 4,737 5,760
Changes in operating assets and
liabilities:
Accounts receivable (15,006) (43,540)
Finance lease receivables 1,359 ---
Inventories 9,186 (19,069)
Insurance Subsidiary's reinsurance
receivable 3,755 (68)
Other assets (623) (4,128)
Accounts payable 531 18,683
Income taxes 3,291 (2,766)
Unpaid losses and loss adjustment
expenses (3,330) 3,583
Unearned insurance premiums 5,468 5,187
Postretirement benefits other
than pensions 903 724
Other liabilities 979 (3,212)
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Net cash flow provided by (used in)
operating activities 36,716 (9,651)
<PAGE-7>
Statements of Cash Flows--Continued
CONSOLIDATED STATEMENTS OF CASH FLOWS--CONTINUED
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
(in thousands)
(unaudited)
Six Months Ended June 30,
1994 1995
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Cash flows from investing activities:
Purchases of property, plant and equipment $ (11,573) $ (24,656)
Proceeds from disposal of property, plant
and equipment and other productive assets 1,199 656
Purchases of investments available for sale (5,032) (14,592)
Purchases of investments held to maturity (6,995) (336)
Proceeds from sale of investments available
for sale 1,983 5,474
Proceeds from maturity or redemption of
investments held to maturity 10,282 6,901
Other 143 69
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Net cash flow used in investing activities (9,993) (26,484)
Cash flows from financing activities:
Proceeds from borrowings --- 119,694
Repayments of borrowings (24,633) (78,543)
Return of limited partner's capital (472) ---
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Net cash flow provided by (used in)
financing activities (25,105) 41,151
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Increase in cash and cash equivalents 1,618 5,016
Beginning cash and cash equivalents 40,078 34,874
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Ending cash and cash equivalents $ 41,696 $ 39,890
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See notes to consolidated financial statements.
<PAGE-8>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
JUNE 30, 1995
(unaudited)
NOTE A--ORGANIZATION AND PRINCIPLES OF CONSOLIDATION
On May 31, 1995, the Company's shareholders approved an amendment to the
Certificate of Incorporation reducing the number of authorized shares of
capital stock to three thousand shares of common stock, par value $1.00 per
share. Upon filing the amendment, the Company also effectuated a 1 for
16,800 reverse stock split. 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 six months ended
June 30, 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, June 30,
1994 1995
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Raw materials and supplies $ 60,998 $ 68,703
Work-in-process 15,877 18,845
Finished goods 19,705 28,101
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$ 96,580 $ 115,649
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<PAGE-9>
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 (a) to repay approximately $27 million of bank
debt including a term loan to Checker Motors Co., L.P., an equipment term
loan and the notes payable to the bank; (b) to provide $15 million to the
Company to retire a portion of certain notes outstanding to the Company's
shareholders; and (c) to 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 the
assets of Motors' and its subsidiaries including the stock of Motors'
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, (a) to repay approximately $17 million of
bank debt; (b) to provide $15 million to the Company to retire the balance
of the shareholder notes; and (c) to pay fees and expenses. In June 1995,
upon receipt of certain collateral appraisals, the lenders loaned Great Dane
an additional $10 million under the term loan. These term loan proceeds
were utilized to reduce amounts outstanding under the revolving credit
facility. The term loan requires monthly principal payments of
approximately $0.5 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.
<PAGE-10>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
(unaudited)
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-11>
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
and proceeds from borrowings have provided sufficient liquidity and capital
resources for the Company to conduct its operations during the first six months
of 1994 and 1995.
In 1995, the Company's subsidiaries refinanced their indebtedness to banks
(see Note D). These refinancings had the effect of improving liquidity by in-
creasing funds available to the subsidiaries in the form of higher line of
credit availability and providing additional funds under term loan arrange-
ments. 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. On June 28, 1995, the Company
deregistered the unsold securities.
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 $31.0 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 six months of 1995 as compared to the
comparable period in 1994 results principally from replacement of vehicles in
the Vehicular operations and capital expenditures associated with a new Truck
Trailer manufacturing facility in Terre Haute, Indiana, which began operations
in the second quarter of 1995.
<PAGE-12>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--CONTINUED
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
RESULTS OF OPERATIONS
Three Months Ended June 30, 1995
Compared to Three Months Ended June 30, 1994
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Revenues increased $51.9 million during the three months ended June 30,
1995, as compared to the same period of 1994. The higher revenues are
principally attributed to higher Trailer Manufacturing revenues ($43.9 million),
primarily associated with higher volume of trailer sales and higher selling
prices within the segment, and partly offset by lower volume of container and
chassis sales. Automotive Products revenues increased $6.3 million during the
three months ended June 30, 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 $1.5 million in the 1995 period compared to
the 1994 period. This increase is attributed to an increase of Trailer
Manufacturing operating profits ($2.3 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 material and manufacturing costs and certain costs
associated with the start-up of the new manufacturing facility. The Automotive
Products operating profits increased ($0.6 million) principally due to higher
sales. Increases in operating profits were partially offset by higher corporate
selling, general and administrative expenses ($1.0 million).
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 $9.6 million for the three months ended June 30, 1995, as
compared to $8.4 million for the comparable period in 1994. The improvement in
net income is attributed to the reasons mentioned above.
Six Months Ended June 30, 1995
Compared to Six Months Ended June 30, 1994
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Revenues increased $102.6 million during the six months ended June 30,
1995, as compared to the same period of 1994. The higher revenues are
principally attributed to higher Trailer Manufacturing revenues ($79.2 million),
primarily associated with higher volume of trailer sales and higher selling
prices within the segment, and partly offset by lower volume of container and
chassis sales. Automotive Products revenues increased $18.5 million during the
six months ended June 30, 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.
<PAGE-13>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--CONTINUED
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
The Company's operating profit increased $4.6 million in the 1995 period
compared to the 1994 period. This increase is attributed to an increase of
Trailer Manufacturing operating profits ($2.8 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 material and manufacturing costs and certain costs
associated with the start-up of the new manufacturing facility. The Automotive
Products operating profits increased ($3.4 million) principally due to higher
sales. Increases in operating profits were offset by higher corporate selling,
general and administrative expenses as well as the costs associated with the
withdrawn IPO.
During the six months ended June 30, 1995, a $0.7 million charge was
recorded to reflect minority equity in South Charleston Stamping & Manufacturing
Company ("SCSM"), a subsidiary of Checker.
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 $17.9 million for the six months ended June 30, 1995, as
compared to $14.8 million for the comparable period in 1994. The improvement
in net income is attributed to the reasons mentioned above.
<PAGE-14>
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 May 31, 1995, the shareholders of the Registrant, by unanimous written
consent, approved an amendment to the Certificate of Incorporation of the
Registrant pursuant to which the number of shares of the Registrant's capital
stock was reduced to 3,000 shares of common stock, par value $1.00 per share
(the "Common Stock"). Each share of common stock, par value $0.01 per share,
outstanding immediately prior to the amendment was changed into 1/16,800 of a
share of Common Stock.
Item 6. Exhibits and Reports on Form 8-K
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(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.
(b) Reports on Form 8-K
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None
<PAGE-15>
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.
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(Registrant)
/s/ Marlan R. Smith
----------------------------------------
Marlan R. Smith
Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Date: August 7, 1995