<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the quarterly period ended MARCH 31, 1997
Commission File No. 333-08871
MCII HOLDINGS (USA), INC.
(Exact name of registrant as specified in its charter)
Delaware 86-0830781
(State or other jurisdiction of (I.R.S. Employer Identification No.)
(incorporation or organization)
10 East Golf Road, Des Plaines, Illinois 60016
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 299-9900
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
----- -----
The number of shares outstanding of the registrant's Common Stock: 1,000
shares as of April 30, 1997.
REDUCED DISCLOSURE FORMAT
The registrant meets the conditions set forth in General Instruction
H(1)(a) and (b) of Form 10-Q and is therefore filing this Form with the reduced
disclosure format.
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INDEX
MCII HOLDINGS (USA), INC.
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements 1
Item 2. Management's Narrative Analysis
of the Results of Operations 8
Item 3. Quantitative and Qualitative
Disclosures About Market Risk Omitted
PART II. OTHER INFORMATION
Item 1. Legal Proceedings None
Item 2. Changes in Securities Omitted
Item 3. Defaults Upon Senior Securities Omitted
Item 4. Submission of Matters to a Vote
of Security Holders Omitted
Item 5. Other Information None
Item 6. Exhibits and Reports on Form 8-K 9
Signatures 10
</TABLE>
Some information included in this Report on Form 10-Q may constitute
forward-looking statements that involve a number of risks and uncertainties.
From time to time, information provided by MCII Holdings (USA), Inc. or
statements made by its employees may contain other forward-looking statements.
Factors that could cause actual results to differ materially from the
forward-looking statements include, but are not limited to: general economic
conditions including inflation, interest rate fluctuations, trade restrictions,
and general debt levels; competitive factors including price pressures,
technological developments, and products offered by competitors; inventory
risks due to changes in market demand or business strategies; and changes in
effective tax rates. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date made. MCII
Holdings (USA), Inc. undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events, or otherwise.
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MCII HOLDINGS (USA), INC.
(A WHOLLY OWNED SUBSIDIARY OF CONSORCIO G GRUPO DINA, S.A. DE C.V.)
UNAUDITED STATEMENT OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------
(000 omitted) 1997 1996
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues:
Sales $ 177,483 $ 142,710
Finance income 1,352 1,475
----------- -----------
178,835 144,185
----------- -----------
Operating costs and expenses
Cost of sales (exclusive of items shown separately below) 137,522 112,349
Depreciation and amortization 4,346 4,423
Interest expense, finance operations 614 690
Research and development expenses 1,800 1,934
Selling, general and administrative expenses 14,961 16,926
----------- -----------
159,243 136,322
----------- -----------
Operating Income 19,592 7,863
----------- -----------
Other income and (expense):
Interest (expense) (6,420) (3,987)
Other income 275 1,350
Gain (loss) on equity investments 1,468 44
----------- -----------
(4,677) (2,593)
----------- -----------
Income before income taxes 14,915 5,270
Income taxes 6,591 1,998
----------- -----------
Net Income $ 8,324 $ 3,272
=========== ===========
</TABLE>
1
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MCII HOLDINGS (USA), INC.
(A WHOLLY OWNED SUBSIDIARY OF CONSORCIO G GRUPO DINA, S.A. DE C.V.)
UNAUDITED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
March 31, December 31,
(000 omitted) 1997 1996
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ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 9,127 $ 9,287
Trade and other accounts receivable 82,197 53,760
Current portion of notes receivable 3,945 4,615
Inventories 192,685 192,928
Deferred income taxes 12,351 12,308
Other current assets 24,428 3,589
--------- ---------
Total Current Assets 324,733 276,487
Property, plant, and equipment 114,346 90,929
Notes receivable 31,308 27,574
Deferred income taxes 18,762 30,119
Intangible assets 234,589 236,954
Other assets 25,218 9,609
--------- ---------
Total Assets $ 748,956 $ 671,672
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities
Bank overdrafts $ 10,243 $ 2,656
Accounts payable 50,358 42,532
Accrued compensation and other benefits 9,016 11,641
Accrued warranties 10,097 9,543
Accrued income taxes 6,134 6,713
Insurance reserves 4,784 5,325
Other current liabilities 40,890 20,428
Current portion of long-term debt 3,353 148
--------- ---------
Total Current Liabilities 134,875 98,986
Long-term debt 247,713 210,520
Pensions and other benefits 12,389 11,550
Net liabilities of discontinued operations 2,883 89
Other deferred items and insurance reserves 17,084 17,785
Deferred income taxes 590 6,073
Commitments and contingent liabilities - -
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Total Liabiliites 415,534 345,003
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Stockholder's Equity:
Common stock and additional capital 428,620 424,302
Accumulated deficit (13,130) (22,307)
Unfunded pension loss, net (423) (423)
Cumulative translation adjustments (81,645) (74,903)
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Total Stockholder's Equity 333,422 326,669
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Total Liabilities and Stockholder's Equity $ 748,956 $ 671,672
========= =========
</TABLE>
2
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MCII HOLDINGS (USA), INC.
(A WHOLLY OWNED SUBSIDIARY OF CONSORCIO G GRUPO DINA, S.A. DE C.V.)
UNAUDITED STATEMENT OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------
(000 omitted) 1997 1996
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<S> <C> <C>
Cash Flows Provided (Used) By Operating Activities:
Net Income $ 8,324 $ 3,272
Adjustments to reconcile net income to net cash
provided (used) by operations:
Depreciation and amortization 4,493 4,442
Deferred income taxes 6,200 (2,070)
Gain on sale of property and notes receivable (374) (233)
Other noncash items, net (1,512) 731
Change in operating assets and liabilities, net (24,209) (18,092)
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NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (7,078) (11,950)
--------- ---------
Cash Flows Provided (Used) By Investing Activities:
Capital expenditures (18,699) (2,450)
Investments in assets held for lease (8,271) (8,852)
Proceed from sale of property and assets held for lease 516 778
Investment in notes receivable (10,247) (9,866)
Collections of notes receivable 1,451 1,248
Proceeds from sale of notes receivable 5,429 915
Acquired businesses or equity investments, net (10,247) -
Discontinued operations, net changes 2,794 108
--------- ---------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (37,274) (18,119)
--------- ---------
Cash Flows Provided (Used) By Financing Activities:
Net change in bank overdrafts 7,587 4,157
Net change in bank credit facilities 32,615 -
Additional long-term borrowings 7,783 -
Termination of interest rate swap position - 2,805
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NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 47,985 6,962
--------- ---------
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS (3,793) 1,622
--------- ---------
NET INCREASE (DECREASE) IN CASH (160) (21,485)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 9,287 30,670
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CASH AND CASH EQUIVALENTS AT END OF YEAR $ 9,127 $ 9,185
========= =========
</TABLE>
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MCII HOLDINGS (USA), INC.
(A WHOLLY OWNED SUBSIDIARY OF CONSORCIO G GRUPO DINA, S.A. DE C.V.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1 - Unaudited Interim Financial Statements
This report updates MCII Holdings (USA), Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1996, in accordance with the instructions to
Form 10-Q. It is presumed that the reader has read the Annual Report on Form
10-K.
The accompanying financial statements are unaudited, but have been
prepared in accordance with generally accepted accounting principles for
interim financial information and in accordance with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. In the opinion of management, all
adjustments (consisting only of normal recurring adjustments) considered
necessary for a fair presentation have been included. The interim financial
statements contained herein do not include all of the footnotes and other
information required by generally accepted accounting principles for complete
financial statements, as provided at year end.
The reader is reminded that the results of operations for interim periods
are not necessarily indicative of the results for the complete fiscal year.
Note 2 - Principles of Consolidation and Presentation
The Company is a wholly owned subsidiary of Consorcio G Grupo Dina, S.A.
de C.V. ("Grupo Dina"), a Mexican Corporation. These unaudited financial
statements present the accounts of MCII Holdings (USA), Inc. and its
subsidiaries (the "Company" or "MCII Holdings"). The Company's principal
operating subsidiaries are Motor Coach Industries International, Inc.,
Transportation Manufacturing Operations, Inc., Motor Coach Industries, Inc.
("MCI-U.S.), Motor Coach Industries Limited ("MCI-Canada"), Hausman Bus Sales,
Inc. ("Hausman"), Universal Coach Parts, Inc. ("UCP"), and Dina Autobuses S.A.
de C.V. ("Autobuses").
On January 31, 1997, The Company acquired from Grupo Dina, its parent
company, 99.99% of the shares of Autobuses as a contribution of capital. This
acquisition represents a combination of entities under common control and has
been accounted for on an "as-if" pooling-of-interest basis, with the
accompanying financial statements restated for all periods presented.
All significant intercompany balances and transactions have been
eliminated on consolidation. Prior period amounts include all
reclassifications necessary to conform to current presentations.
4
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Note 3 - Revenues and Operating Income, Supplementary Information
<TABLE>
<CAPTION>
Three Months Ended
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March 31, March 31,
1997 1996
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(000's omitted)
<S> <C> <C>
Revenues:
Sales:
Coach Manufacturing and Support:
United States $ 101,098 $ 94,117
Canada 16,912 7,592
Mexico 7,821 1,779
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125,831 103,488
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Replacement Parts:
United States 43,343 31,488
Canada 7,463 7,397
Mexico 846 337
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51,652 39,222
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177,483 142,710
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Finance Income 1,352 1,475
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$ 178,835 $ 144,185
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Operating Income:
Coach Manufacturing and Support:
United States $ 9,201 $ 2,973
Canada 1,329 591
Mexico 2,116 (205)
--------- ---------
12,646 3,359
--------- ---------
Replacement Parts:
United States 5,288 3,298
Canada 1,270 940
Mexico 70 (19)
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6,628 4,219
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19,274 7,578
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Finance Income 318 285
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$ 19,592 $ 7,863
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</TABLE>
Note 4 - Inventories
Inventories consisted of the following:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
-------------- --------------
(000's omitted)
<S> <C> <C>
Raw material $ 45,093 $ 49,411
Work in process 38,048 33,945
Finished goods 126,219 130,676
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209,360 214,032
Inventory reserves (16,675) (21,104)
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$ 192,685 $ 192,928
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</TABLE>
5
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Note 5 - Debt
<TABLE>
<CAPTION>
Debt consisted of the following:
<S> <C> <C>
March 31, December 31,
1997 1996
---- ----
(000's omitted)
Bank overdrafts $ 10,243 $ 2,656
Current portion of long-term debt 3,353 148
-------- --------
13,596 2,804
-------- --------
Term notes payable 125,000 125,000
Borrowings under bank credit facility 113,000 85,000
Mexican lease financing 7,783 -
Canadian revolving credit facility 4,615 -
Note payable 668 668
-------- --------
251,066 210,668
Current portion of long-term debt (3,353) (148)
-------- --------
247,713 210,520
-------- --------
$261,309 $213,324
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</TABLE>
The Mexican financing was undertaken in conjunction with Autobuses'
investment in a bus leasing company and was offset by the acquisition of over
200 buses on lease (shown as capital expenditures in the first quarter of
1997).
Canadian revolving credit loans are made available to a subsidiary of the
Company under an agreement which provided a credit facility of Cdn$10.0 million
(equivalent to $7.2 million) and expired on January 31, 1997. This agreement
was extended while a replacement credit facility of Cdn$19.0 million
(equivalent to $13.7 million) was being finalized.
6
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Note 6 - Cash Flow Effect of Change in Operating Assets and Liabilities
Change in operating assets and liabilities consisted of:
<TABLE>
<CAPTION>
Three Months Ended
------------------
March 31, March 31,
1997 1996
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(000's omitted)
<S> <C> <C>
Decrease (Increase) in Operating Assets:
Receivables $ (36,771) $ (14,652)
Inventories (618) (3,062)
Other operating assets (9,951) 865
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(47,340) (16,849)
---------- ----------
Increase (Decrease) in Operating Liabilities:
Accounts payable 10,457 4,394
Accrued income taxes (1,060) (6,378)
Other operating liabilities 13,734 741
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23,131 (1,243)
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Net Cash Flow Effect $ (24,209) $ (18,092)
---------- ----------
</TABLE>
The first quarter increase in receivables is in large part a seasonal
matter as sales volume increased in anticipation of the touring season. The
receivables increase in 1997 was also affected by increased sales activity and
a limited granting of more liberal credit terms.
Note 7 - Related Party Transactions
The Company provides for allocable management and administrative expenses
incurred by Grupo Dina. In the first quarter of 1997, the provision for such
expenses was $ 0.5 million. The amounts due to Grupo Dina for such expenses at
March 31, 1997 and December 31, 1996 were $0.7 million and $1.0 million,
respectively.
During the first quarters of 1997 and 1996 the Company purchased from
Grupo Dina, in the ordinary course of business, $1.6 million and $0.8 million,
respectively, in goods and services.
7
<PAGE> 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
COMPARISON OF FIRST QUARTER 1997 TO FIRST QUARTER 1996
General. Revenues for the quarter ended March 31, 1997 were $178.8
million, an increase of 24.0% from $144.2 million in 1996. The increase was
due to increases in both the coach manufacturing and support segment and the
replacement parts segment. The overall gross margin, defined as sales less
cost of sales (exclusive of depreciation and amortization), as a percentage of
sales increased to 23.1% compared with 22.1% for the first quarter of 1996.
Operating income was $19.6 million in the first quarter of 1997 compared
with $7.9 million in 1996. The increase was primarily attributable to
increased revenues, a higher gross margin percentage and lower selling,
general, and administrative expenses, partially offset by increased interest
expense.
Net income was $8.3 million in 1997, compared with $3.3 million in the
first quarter of 1996.
Coach Manufacturing and Support. Coach manufacturing and support revenues
for the first quarter of 1997 increased 21.6% to $125.8 million, reflecting
sales of 506 new units (302 MCIs and 204 Viaggios), compared with $103.5
million for the same period of 1996 which included sales of 307 new units (258
MCIs and 49 Viaggios). In addition to the units sold, deliveries to customers
under operating leases with the Company were 24 units in 1997 and 21 units in
1996. Taking these units into account, new coach deliveries increased 61.6%
from 328 in 1996 to 530 units in 1997.
Operating income was $12.6 million for the first quarter of 1997, compared
with $3.4 million in the same period of 1996. The improved first quarter
results were due to increased sales volume, better control of costs and
expenses, and the nonrecurrance of a $1.3 million restructuring charge
recorded in the first quarter of 1996.
Order backlog for the United States and Canada as of March 31, 1997 was
632 units, which included 83 units for Greyhound Lines Inc.("GLI"), compared
with 677 units at March 31, 1996, which included 226 units for GLI. The order
backlog for customers other than GLI of 549 units represented an increase of
21.7% compared with the 451 unit non-GLI backlog a year ago.
Replacement Parts. Replacement parts' revenues were $51.7 million in
the first quarter of 1997 compared with $39.2 million in 1996. The 31.9%
increase was due in part to additional sales generated through the acquisition
of the assets of the Flxible Corporation, as well as increased sales in both
the coach and transit product lines due to increased sales promotion programs.
Operating income was $6.6 million for the first quarter of 1997, compared
with $4.2 million in the same period of 1996. The improved first quarter
results were due mainly to increased sales volume.
Interest Expense. In the first quarter of 1997, interest expense
increased to $6.4 million from $4.0 million in 1996. The increase reflects a
higher average debt balance during the quarter.
Income Taxes. The Company's effective income tax rates in the first
quarter of 1997 and 1996, excluding non-deductible goodwill amortization, were
41.2% and 31.4% respectively.
8
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PART II. - OTHER INFORMATION
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
The Company filed a current report on Form 8-K on
February 18, 1997, reporting an event under Item 2 and
Item 7 on Form 8-K.
9
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SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this 10-Q to be signed on its behalf by the
undersigned, thereunto duly authorized.
MCII HOLDINGS (USA), INC.
(Registrant)
May 20, 1997 By /s/ Robert M. Popowich
----------------------------
Robert M. Popowich
Chief Financial Officer
(Principal Financial Officer
and Authorized Officer)
10
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 9,127
<SECURITIES> 0
<RECEIVABLES> 83,950
<ALLOWANCES> (1,753)
<INVENTORY> 192,685
<CURRENT-ASSETS> 324,733
<PP&E> 137,679
<DEPRECIATION> (23,333)
<TOTAL-ASSETS> 748,956
<CURRENT-LIABILITIES> 134,875
<BONDS> 247,713
0
0
<COMMON> 428,620
<OTHER-SE> (95,198)
<TOTAL-LIABILITY-AND-EQUITY> 748,956
<SALES> 177,483
<TOTAL-REVENUES> 178,835
<CGS> 137,522
<TOTAL-COSTS> 159,243
<OTHER-EXPENSES> (1,743)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,420
<INCOME-PRETAX> 14,915
<INCOME-TAX> 6,591
<INCOME-CONTINUING> 8,324
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,324
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
