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 September 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 November 10, 1995.
<PAGE-1>
INDEX
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
Page Number
-----------
PART I FINANCIAL INFORMATION
Item 1 Consolidated Financial Statements (Unaudited):
Consolidated Balance Sheets at December 31, 1994
and September 30, 1995 . . . . . . . . . . . . . . . . . 2-3
Consolidated Statements of Operations for
the Three Months Ended September 30, 1994 and
September 30, 1995 . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Operations for
the Nine Months Ended September 30, 1994 and
September 30, 1995 . . . . . . . . . . . . . . . . . . . .5
Consolidated Statements of Cash Flows for
the Nine Months Ended September 30, 1994 and
September 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 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, September 30,
1994 1995
------------- -----------
ASSETS
Cash and cash equivalents $ 34,875 $ 38,269
Accounts receivable, less allowance for
doubtful accounts of $1,342 (1994) and
$1,534 (1995) 90,076 104,724
Inventories 96,580 126,432
Other current assets 19,729 26,698
---------- ----------
Total current assets 241,260 296,123
Property, plant and equipment, net 113,948 126,358
Insurance Subsidiary's investments 91,094 104,258
Cost in excess of net assets acquired,
net of accumulated amortization of $7,502
(1994) and $8,439 (1995) 42,493 41,556
Trademark, net of accumulated amortization
of $2,100 (1994) and $2,362 (1995) 11,346 11,084
Other assets 21,910 27,451
---------- ----------
Total Assets $ 522,051 $ 606,830
========== ==========
<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, September 30,
1994 1995
------------ -------------
LIABILITIES AND SHAREHOLDERS' DEFICIT:
Accounts payable $ 80,863 $ 85,359
Notes payable 5,000 ---
Income taxes payable 12,663 9,098
Accrued compensation 17,955 21,379
Accrued interest 11,802 5,615
Customer deposits 14,113 10,377
Other accrued liabilities 36,402 41,864
Current portion of long-term debt 13,613 16,168
---------- ----------
Total current liabilities 192,411 189,860
Long-term debt, excluding current portion:
Shareholders 30,000 ---
Other 244,652 320,342
---------- ----------
274,652 320,342
Insurance Subsidiary's unpaid losses and
loss adjustment expenses 69,318 76,165
Unearned insurance premiums 12,203 15,342
Deferred income taxes 2,750 3,624
Postretirement benefits other than pensions 51,061 52,306
Other noncurrent liabilities 46,372 47,044
Minority interest 586 1,602
---------- ----------
Total liabilities 649,353 706,285
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) 12,694
Unrealized appreciation (depreciation) on
Insurance Subsidiary's investments in
certain debt and equity securities (2,060) 1,224
Notes receivable from shareholders (625) ---
Amount paid in excess of Checker's
net assets (127,748) (128,373)
---------- ----------
Total shareholders' deficit (127,302) (99,455)
---------- ----------
Total Liabilities and
Shareholders' Deficit $ 522,051 $ 606,830
========== ==========
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 September 30,
1994 1995
---------- ----------
Revenues $ 256,679 $ 295,799
Cost of revenues (217,184) (252,851)
---------- ----------
Gross profit 39,495 42,948
Selling, general and administrative expense (26,683) (22,576)
---------- ----------
Operating profit 12,812 20,372
Interest expense (10,221) (11,036)
Interest income 1,813 2,112
Other income, net 13 572
---------- ----------
Income before minority equity and
income taxes 4,417 12,020
Minority equity (217) (274)
---------- ----------
Income before income taxes 4,200 11,746
Income tax expense (1,890) (5,050)
---------- ----------
Net income $ 2,310 $ 6,696
========== ==========
Weighted average number of shares used in
per share computations--Note A 1,000 1,000
========== ==========
Net income per share--Note A $ 2,310 $ 6,696
========== ==========
See notes to consolidated financial statements.
<PAGE-5>
Statements of Operations--9 Months
CONSOLIDATED STATEMENTS OF OPERATIONS
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
(in thousands, except share and per share amounts)
(unaudited)
Nine Months Ended September 30,
1994 1995
---------- ----------
Revenues $ 805,981 $ 947,719
Cost of revenues (680,672) (810,761)
---------- ----------
Gross profit 125,309 136,958
Selling, general and administrative expense (69,400) (68,934)
---------- ----------
Operating profit 55,909 68,024
Interest expense (30,414) (32,340)
Interest income 5,214 6,664
Other income, net 779 1,758
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Income before minority equity and
income taxes 31,488 44,106
Minority equity (420) (1,016)
---------- ----------
Income before income taxes 31,068 43,090
Income tax expense (13,981) (18,526)
---------- ----------
Net income $ 17,087 $ 24,564
========== ==========
Weighted average number of shares used in
per share computations--Note A 1,000 1,000
========== ==========
Net income per share--Note A $ 17,087 $ 24,564
========== ==========
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)
Nine Months Ended September 30,
1994 1995
---------- ----------
Cash flows from operating activities:
Net income $ 17,087 $ 24,564
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 16,962 16,957
Deferred income tax benefit (6,381) (2,205)
Amortization of cost in excess of
net assets acquired 937 937
Amortization of debt discount 1,175 1,365
Gain on sale of property,
plant and equipment (483) (416)
Investment gains (265) (182)
Increase in minority equity 420 1,016
Other noncash charges 7,186 7,873
Changes in operating assets and
liabilities:
Accounts receivable (25,124) (14,874)
Finance lease receivables 1,484 ---
Inventories (6,557) (29,852)
Insurance Subsidiary's reinsurance
receivable 3,176 (541)
Other assets (2,096) (12,290)
Accounts payable 5,832 6,107
Income taxes 3,060 (3,564)
Unpaid losses and loss adjustment
expenses (1,502) 6,847
Unearned insurance premiums 4,249 3,139
Postretirement benefits other
than pensions 1,094 1,245
Other liabilities 2,012 (8,887)
---------- ----------
Net cash flow provided by (used in)
operating activities 22,266 (2,761)
<PAGE-7>
Statements of Cash Flows--Continued
CONSOLIDATED STATEMENTS OF CASH FLOWS--CONTINUED
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
(in thousands)
(unaudited)
Nine Months Ended September 30,
1994 1995
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Cash flows from investing activities:
Purchases of property, plant and equipment $ (13,891) $ (29,871)
Proceeds from disposal of property, plant
and equipment and other productive assets 1,493 921
Purchases of investments available for sale (7,420) (21,778)
Purchases of investments held to maturity (6,776) (582)
Proceeds from sale of investments available
for sale 2,383 6,558
Proceeds from maturity or redemption of
investments held to maturity 11,660 7,959
Other 409 1,069
---------- ----------
Net cash flow used in investing activities (12,142) (35,724)
Cash flows from financing activities:
Proceeds from borrowings --- 124,450
Repayments of borrowings (15,718) (82,571)
Return of limited partner's capital (713) ---
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Net cash flow provided by (used in)
financing activities (16,431) 41,879
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Increase (decrease) in cash and
cash equivalents (6,307) 3,394
Beginning cash and cash equivalents 40,078 34,875
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Ending cash and cash equivalents $ 33,771 $ 38,269
========== ==========
See notes to consolidated financial statements.
<PAGE-8>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
SEPTEMBER 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 nine months
ended September 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, September 30,
1994 1995
-------------- --------------
Raw materials and supplies $ 60,998 $ 69,448
Work-in-process 15,877 20,396
Finished goods 19,705 36,588
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$ 96,580 $ 126,432
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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, 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 1.00% (subject to increase or reduction of
0.25% upon the occurrence of certain events) or a selected Eurodollar
contract rate plus 2.75% (subject to increase or reduction of 0.25% 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 additions to and sales of Motors' fixed assets and limits additional
borrowings by Motors.
In February 1995, Great Dane amended its bank 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 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.
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 3.125 shares of common stock, exercisable equally over
three years, subject to completion of an initial public offering ("IPO"), at
an exercise price of $16,800 per share. During the quarter ended September
30, 1995, the plan was amended to, among other things, delete the IPO
requirement, as well as to restrict the transferability of shares purchased
through the plan by giving the Company the right of first refusal with
respect to shares proposed to be transferred.
<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 nine 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
increasing 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.
In October 1995, the Company repurchased $10 million face value of the
12-3/4% Senior Subordinated Debentures due 2001 at 94% of face value, thereby
satisfying a portion of $18 million sinking fund payment required in 1997.
The higher level of capital expenditures in the first nine months of 1995
as compared to the comparable period in 1994 results principally from capital
expenditures associated with a new Truck Trailer manufacturing facility in Terre
Haute, Indiana, which began operations in the second quarter of 1995.
RESULTS OF OPERATIONS
Three Months Ended September 30, 1995
Compared to Three Months Ended September 30, 1994
-------------------------------------------------
Revenues increased $39.1 million during the three months ended September
30, 1995, as compared to the same period of 1994. The higher revenues are
principally attributed to higher Trailer Manufacturing revenues ($22.4 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 $14.0 million during the
<PAGE-12>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--CONTINUED
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
three months ended September 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 increased $7.6 million in the 1995 period
compared to the 1994 period. This increase is attributed to an increase of
Trailer Manufacturing operating profits ($1.6 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 ($1.7 million) principally due to higher
sales. Operating profits were further improved by lower corporate selling,
general and administrative expenses ($3.7 million). The lower corporate
expenses are related to the $3.5 million charge in the three months ended
September 30, 1994, for the failed debt refinancing, with no similar charge in
the 1995 period.
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 $6.7 million for the three months ended September 30, 1995,
as compared to $2.3 million for the comparable period in 1994. The improvement
in net income is attributed to the reasons mentioned above.
Nine Months Ended September 30, 1995
Compared to Nine Months Ended September 30, 1994
-------------------------------------------------
Revenues increased $141.7 million during the nine months ended September
30, 1995, as compared to the same period of 1994. The higher revenues are
principally attributed to higher Trailer Manufacturing revenues ($101.6
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 $32.5
million during the nine months ended September 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 increased $12.1 million in the 1995 period
compared to the 1994 period. This increase is attributed to an increase of
Trailer Manufacturing operating profits ($4.4 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 material and manufacturing costs and certain costs
associated with the start-up of the new manufacturing facility. The Automotive
Products operating profits increased ($5.2 million) principally due to higher
sales. Operating profits were further improved by lower corporate selling,
general and administrative expenses ($1.7 million). Corporate costs include
<PAGE-13>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--CONTINUED
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
$3.5 million costs associated with the failed refinancing in the nine months
ended September 30, 1994. In the similar period of 1995, only $1.0 million of
such costs were incurred.
During the nine months ended September 30, 1995, a $1.0 million charge was
recorded, compared to a $0.4 million charge in the comparable period in 1994,
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 $24.6 million for the nine months ended September 30, 1995,
as compared to $17.1 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 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
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10.1 First Amendment, dated as of September 22, 1995, to Loan
Agreement dated as of January 26, 1995, among Checker Motors
Corporation, Yellow Cab Company, Chicago AutoWerks Inc., CMC
Kalamazoo Inc., South Charleston Stamping & Manufacturing Company
and NBD Bank, as Agent.
10.2 Option Agreement dated as of January 17, 1995, between the
Registrant and Jay H. Harris.
10.3 Amendment dated as of September 11, 1995, to Option Agreement
dated as of January 17, 1995, between the Registrant and Jay H.
Harris.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K
-------------------
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.
------------------------------
(Registrant)
/s/ Marlan R. Smith
----------------------------------------
Marlan R. Smith
Treasurer
(Principal Financial Officer and
Principal Accounting Officer)
Date: November 10, 1995