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, 1996
---------------------------------
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
----------------------
GREAT DANE HOLDINGS INC.
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 54-0698116
- -----------------------------------------------------------------------------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
2016 North Pitcher Street, Kalamazoo, Michigan 49007
- -----------------------------------------------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (616) 343-6121
------------------------
- -----------------------------------------------------------------------------
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
----- -----
There were 1,002.083 shares of Registrant's only class of common stock
outstanding as of May 8, 1996.
<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, 1995
and March 31, 1996 . . . . . . . . . . . . . . . . . . . 2-3
Consolidated Statements of Operations for
the Three Months Ended March 31, 1995 and
March 31, 1996 . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statements of Cash Flows for
the Three Months Ended March 31, 1995 and
March 31, 1996 . . . . . . . . . . . . . . . . . . . . . 5-6
Notes to Consolidated Financial Statements . . . . . . . 7-8
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations. . . . . . 9-10
PART II OTHER INFORMATION
Item 4 Submission of Matters to a Vote of Security Holders. . . . 11
Item 6 Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 11
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
<PAGE-2>
Balance-Sheets
CONSOLIDATED BALANCE SHEETS
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
(in thousands, except per share amounts)
(unaudited)
December 31, March 31,
1995 1996
------------- -----------
ASSETS
Cash and cash equivalents $ 41,086 $ 34,163
Accounts receivable, less allowance for
doubtful accounts of $1,564 (1995)
and $1,582 (1996) 101,138 96,184
Inventories 84,686 88,792
Other current assets 26,574 37,543
---------- ----------
Total current assets 253,484 256,682
Property, plant and equipment, net 123,864 131,818
Insurance Subsidiary's investments 110,058 106,331
Cost in excess of net assets acquired,
net of accumulated amortization of $8,752
(1995) and $9,064 (1996) 41,243 40,931
Trademark, net of accumulated amortization
of $2,450 (1995) and $2,537 (1996) 10,996 10,909
Other assets 30,960 36,083
---------- ----------
Total Assets $ 570,605 $ 582,754
========== ==========
<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,
1995 1996
------------ -------------
LIABILITIES AND SHAREHOLDERS' DEFICIT:
Accounts payable $ 71,989 $ 62,236
Notes payable 3,133 ---
Income taxes payable 9,305 13,926
Accrued compensation 18,490 15,700
Accrued interest 11,049 5,087
Customer deposits 14,315 16,427
Other accrued liabilities 43,390 39,312
Current portion of long-term debt 16,260 18,958
---------- ----------
Total current liabilities 187,931 171,646
Long-term debt, excluding current portion 276,918 287,289
Insurance Subsidiary's unpaid losses and
loss adjustment expenses 78,151 78,975
Unearned insurance premiums 12,545 25,753
Deferred income taxes 1,675 1,935
Postretirement benefits other than pensions 52,766 53,208
Other noncurrent liabilities 46,930 44,635
Minority interest 1,748 2,108
---------- ----------
Total liabilities 658,664 665,549
Shareholders' deficit:
Common stock, par value $1.00:
Authorized 3,000 shares
Outstanding 1,000 (1995) 1,001.042
(1996) shares 1 1
Additional paid-in capital 14,999 15,024
Retained earnings 23,128 29,774
Unrealized appreciation on Insurance
Subsidiary's investments in certain
debt and equity securities 2,186 779
Amount paid in excess of Motors'
net assets (128,373) (128,373)
---------- ----------
Total shareholders' deficit (88,059) (82,795)
---------- ----------
Total Liabilities and
Shareholders' Deficit $ 570,605 $ 582,754
========== ==========
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,
1995 1996
---------- ----------
Revenues $ 322,393 $ 265,547
Cost of revenues (276,531) (229,135)
---------- ----------
Gross profit 45,862 36,412
Selling, general and administrative expense (23,376) (22,377)
---------- ----------
Operating profit 22,486 14,035
Interest expense (10,464) (9,424)
Interest income 2,277 2,156
Other income, net 712 909
Special credit--Note F --- 4,300
---------- ----------
Income before minority equity and
income taxes 15,011 11,976
Minority equity (413) (360)
---------- ----------
Income before income taxes 14,598 11,616
Income tax expense (6,305) (4,970)
---------- ----------
Net income $ 8,293 $ 6,646
========== ==========
Weighted average number of shares used in
per share computations 1,000 1,001
========== ==========
Net income per share $ 8,293 $ 6,639
========== ==========
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,
1995 1996
---------- ----------
Cash flows from operating activities:
Net income $ 8,293 $ 6,646
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Depreciation and amortization 5,398 4,899
Deferred income tax benefit (3,055) ---
Amortization of cost in excess of
net assets acquired 312 312
Amortization of debt discount 439 240
Gain on sale of property, plant
and equipment (182) (155)
Investment gains (80) (679)
Increase in minority equity 413 360
Other noncash charges 4,068 1,475
Changes in operating assets and
liabilities:
Accounts receivable (17,147) 4,903
Inventories (9,716) (4,106)
Other assets (6,261) (15,303)
Accounts payable 13,554 (9,753)
Income taxes 5,375 4,618
Unpaid losses and loss adjustment
expenses 1,636 824
Unearned insurance premiums 6,162 13,208
Postretirement benefits other
than pensions 299 442
Other liabilities (9,405) (14,112)
---------- ----------
Net cash flow provided by (used in)
operating activities 103 (6,181)
<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,
1995 1996
---------- ----------
Cash flows from investing activities:
Purchases of property, plant and equipment $ (13,370) $ (12,979)
Proceeds from disposal of property, plant
and equipment and other productive assets 352 281
Purchase of investments available for sale (7,697) (7,511)
Purchases of investments held to maturity --- 5
Proceeds from sale of investments available
for sale 4,411 5,298
Proceeds from maturity and redemption of
investments held to maturity 5,054 4,450
---------- ----------
Net cash flow used in investing activities (11,250) (10,456)
Cash flows from financing activities:
Proceeds from borrowings 90,822 20,172
Repayments of borrowings (74,996) (10,476)
Proceeds from issuance of common stock --- 18
---------- ----------
Net cash flow provided by financing
activities 15,826 9,714
---------- ----------
Increase (decrease) in cash and cash
equivalents 4,679 (6,923)
Beginning cash and cash equivalents 34,875 41,086
---------- ----------
Ending cash and cash equivalents $ 39,554 $ 34,163
========== ==========
See notes to consolidated financial statements.
<PAGE-7>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
MARCH 31, 1996
(unaudited)
NOTE A--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, 1996, are not necessarily indicative of the results that may
be expected for the year ending December 31, 1996. 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, 1995.
NOTE B--PRINCIPLES OF CONSOLIDATION
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").
NOTE C-INVENTORIES
Inventories are summarized below (dollars in thousands):
December 31, March 31,
1995 1996
------------ ------------
Raw materials and supplies $ 53,097 $ 53,165
Work-in-process 10,501 11,670
Finished goods 21,088 23,957
---------- ----------
$ 84,686 $ 88,792
========== ==========
NOTE D--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 E--STOCK ISSUANCE
On January 4, 1996, 1.042 shares of common stock were issued to an executive
officer of the Company in connection with an agreement between this
executive officer and the Company.
<PAGE-8>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--CONTINUED
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
(unaudited)
NOTE F--SPECIAL CREDIT
On February 8, 1989, the Boeing Company ("Boeing") filed a lawsuit naming
the Company, together with three prior subsidiaries of the Company, as
defendants in Case No. CV89-119MA, United States District Court for the
District of Oregon. On December 22, 1993, the Company entered into a
settlement with Boeing, settling all claims asserted by Boeing in the
lawsuit. Pursuant to the settlement terms, the Company agreed to pay Boeing
$12.5 million over the course of five years, $5 million of which had been
committed by certain insurance companies in the form of cash or irrevocable
letter of credit as of that date. Accordingly, a $7.5 million special
charge was recorded in 1993 to provide for the cost associated with this
legal proceeding.
Since the date of the settlement with Boeing, and as a result of agreements
negotiated with insurance companies, the total cost to the Company related
to the Boeing lawsuit has decreased to $3.2 million. The lower cost
principally related to an insurance settlement negotiated in the quarter
ended March 31, 1996. Accordingly, a special credit of $4.3 million was
recorded in the quarter ended March 31, 1996, relating to the finalization
of insurance settlements.
<PAGE-9>
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 (used in)
operations ($0.1 million and $(6.2) million for the three months ended March 31,
1995 and 1996, respectively) and proceeds from borrowings have provided
sufficient liquidity and capital resources for the Company to conduct its
operations during the first three months of 1995 and 1996.
The Company is a holding company and is, therefore, dependent on cash flow
from its operating 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 currently subject to the notification, reporting and disapproval
requirements of the Insurance Code of the State of Illinois Department of
Insurance. The operating subsidiaries' plans indicate that sufficient funds are
anticipated to be available to the Company to meet its short-term obligations.
RESULTS OF OPERATIONS
Three Months Ended March 31, 1996
Compared to Three Months Ended March 31, 1995
-------------------------------------------------
Revenues decreased $56.8 million during the three months ended March 31,
1996, as compared to the same period in 1995. The lower revenues are
principally attributed to lower Trailer Manufacturing revenues ($67.1 million)
primarily associated with lower volume in trailer sales. The volume decline
represents the effect of weakened demand for the movement of freight resulting
in decreased sales of truck trailers. Automotive Products revenues increased
$8.9 million during the three months ended March 31, 1996, as compared to the
same period in 1995. Increased revenues for the segment associated with the
production of tooling for certain customers, partially offset by lower
production of certain contract parts due partly to a strike at its major
customer, accounted for the increased revenues.
The Company's operating profit decreased $8.5 million in the 1996 period
compared to the 1995 period. This decrease is attributed to a decrease of
Trailer Manufacturing operating profits ($7.0 million) which is principally due
to lower volume of trailer sales indicated above and slightly lower margins.
The volume decline represents the effect of weakened demand for the movement of
freight resulting in decreased sales of truck trailers. The margins were
impacted by certain raw material price increases. The Automotive Products
operating profits decreased ($0.8 million) primarily due to the mix of sales
and a strike at its major customer, as well as certain raw material price in-
creases. The profit margins on tooling programs are lower than margins on
contract parts production.
<PAGE-10>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS--CONTINUED
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
On February 8, 1989, the Boeing Company ("Boeing") filed a lawsuit naming
the Company, together with three prior subsidiaries of the Company, as
defendants in Case No. CV89-119MA, United States District Court for the District
of Oregon. On December 22, 1993, the Company entered into a settlement with
Boeing, settling all claims asserted by Boeing in the lawsuit. Pursuant to the
settlement terms, the Company agreed to pay Boeing $12.5 million over the course
of five years, $5 million of which had been committed by certain insurance
companies in the form of cash or irrevocable letter of credit as of that date.
Accordingly, a $7.5 million special charge was recorded in 1993 to provide for
the cost associated with this legal proceeding.
Since the date of the settlement with Boeing, and as a result of agreements
negotiated with insurance companies, the total cost to the Company related to
the Boeing lawsuit has decreased to $3.2 million. The lower cost principally
related to an insurance settlement negotiated in the quarter ended March 31,
1996. Accordingly, a special credit of $4.3 million was recorded in the quarter
ended March 31, 1996, relating to the finalization of insurance settlements.
During the quarters ended March 31, 1996 and 1995, a $0.4 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 $6.6 million for the three months ended March 31, 1996, as
compared to $8.3 million for the comparable period in 1995. The decline in net
income is attributed to the reasons mentioned above.
<PAGE-11>
PART II
OTHER INFORMATION
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
Item 4: Submission of Matters to a Vote of Security Holders
---------------------------------------------------
By unanimous written consent dated January 16, 1996, the stockholders re-
elected David R. Markin, Martin L. Solomon, Allan R. Tessler and Wilmer J.
Thomas, Jr., to serve as directors.
Item 6: Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
10.1 Amendment, dated as of March 31, 1996, to the Employment
Agreement dated as of January 1, 1994, between Great Dane Holdings Inc. and
David R. Markin.
10.2 Third Amendment, dated as of March 31, 1996, to the Amended and
Restated Employment Agreement dated as of November 1, 1985, between Checker
Motors Corporation and David R. Markin.
27.1 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
None
<PAGE-12>
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 8, 1996