<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 JUNE 30, 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.
<PAGE> 2
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 9
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 12
Signatures 13
</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.
<PAGE> 3
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 Six Months Ended
June 30, June 30,
-------------------- --------------------
(000 omitted) 1997 1996 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues:
Sales $188,966 $178,103 $366,449 $320,813
Finance income 1,224 2,254 2,576 3,729
-------- -------- -------- --------
190,190 180,357 369,025 324,542
-------- -------- -------- --------
Operating costs and expenses:
Cost of sales (exclusive of items shown separately below) 145,360 135,678 282,882 248,027
Depreciation and amortization 5,419 4,646 9,765 9,069
Interest expense, finance operations 637 925 1,251 1,615
Research and development expenses 1,695 1,490 3,495 3,424
Selling, general and administrative expenses 15,529 15,794 30,490 32,720
-------- -------- -------- --------
168,640 158,533 327,883 294,855
-------- -------- -------- --------
Operating Income 21,550 21,824 41,142 29,687
-------- -------- -------- --------
Other income and (expense):
Interest (expense) (6,391) (4,068) (11,343) (8,011)
Other income 1,063 301 1,338 1,651
-------- -------- -------- --------
(5,328) (3,767) (10,005) (6,360)
-------- -------- -------- --------
Income before income taxes 16,222 18,057 31,137 23,327
Income taxes 7,881 8,097 14,472 10,095
-------- -------- -------- --------
Income from Continuing Operations 8,341 9,960 16,665 13,232
Discontinued operations:
(Loss) on disposal of transit manufacturing, net - (5,000) - (5,000)
-------- -------- -------- --------
Net Income $ 8,341 $ 4,960 $ 16,665 $ 8,232
======== ======== ======== ========
</TABLE>
1
<PAGE> 4
MCII HOLDINGS (USA), INC.
(A WHOLLY OWNED SUBSIDIARY OF CONSORCIO G GRUPO DINA, S.A. DE C.V.)
UNAUDITED CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 30, December 31,
(000 omitted) 1997 1996
- ----------------------------------------------------------------------------------------------------------------
ASSETS
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 37,135 $ 9,403
Trade and other accounts receivable 78,661 53,170
Current portion of notes receivable 6,291 4,615
Inventories 221,416 190,818
Deferred income taxes 11,194 12,308
Other current assets 11,004 4,067
-------- --------
Total Current Assets 365,701 274,381
Property, plant, and equipment 111,341 91,818
Notes receivable 40,181 27,574
Investments 10,222 -
Deferred income taxes 1,680 8,208
Intangible assets 233,217 236,954
Other assets 14,563 10,506
-------- --------
Total Assets $776,905 $649,441
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current Liabilities:
Bank overdrafts $ 19,102 2,656
Accounts payable 46,342 39,901
Accrued compensation and other benefits 10,003 11,641
Accrued warranties 10,474 9,543
Accrued income taxes 7,508 6,269
Insurance reserves 5,919 5,325
Other current liabilities 26,663 20,825
Current debt 51,167 148
-------- --------
Total Current Liabilities 177,178 96,308
Long-term debt 243,814 210,520
Pensions and other benefits 12,912 11,858
Net liabilities of discontinued operations 2,921 89
Other deferred items and insurance reserves 16,424 17,785
Deferred income taxes 6,214 6,073
Due to parent company 405 -
Commitments and contingent liabilities - -
-------- --------
Total Liabilities 459,868 342,633
-------- --------
Stockholder's Equity:
Common stock and additional capital 428,620 428,620
Accumulated deficit (34,372) (45,037)
Unfunded pension loss, net (423) (423)
Cumulative translation adjustments (76,788) (76,352)
-------- --------
Total Stockholder's Equity 317,037 306,808
-------- --------
Total Liabilities and Stockholder's Equity $776,905 $649,441
======== ========
</TABLE>
2
<PAGE> 5
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>
Six Months Ended June 30,
-----------------------------
(000 omitted) 1997 1996
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cash Flows Provided (Used) By Operating Activities:
Net Income $ 16,665 $ 8,282
Adjustments to reconcile net income to net cash
provided (used) by operations:
Depreciation and amortization 9,765 9,069
Deferred income taxes 2,658 1,368
Discontinued operations - 5,000
Gain on sale of property and notes receivable (402) (653)
Other noncash items, net (2,126) 294
Change in operating assets and liabilities (56,732) 9,507
-------- --------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (30,172) 32,867
-------- --------
Cash Flows Provided (Used) By Investing Activities:
Capital expenditures (19,597) (4,246)
Investments in assets held for lease (12,815) (29,499)
Proceed from sale of property and assets held for lease 6,168 132
Investment in notes receivable (20,321) (18,095)
Collections of notes receivable 3,426 3,214
Proceeds from sale of notes receivable 2,518 7,501
Investment in affiliate (10,222) -
Proceeds from sale of business - 1,304
Discontinued operations, net changes 2,832 5,662
-------- --------
NET CASH PROVIDED (USED) BY INVESTING ACTIVITIES (48,011) (34,027)
-------- --------
Cash Flows Provided (Used) By Financing Activities:
Net change in bank overdrafts 16,446 5,942
Net change in bank credit facilities 37,673 (22,000)
Additional short-term borrowings 46,491 -
Payment of long-term borrowings (74) (74)
Termination of interest rate swap position - 2,805
Parent company debt 10,795 0
Contribution of capital 0 1,340
Dividends paid to parent company (6,000) -
-------- --------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES 105,331 (11,987)
-------- --------
FOREIGN CURRENCY TRANSLATION ADJUSTMENTS 584 (8,494)
-------- --------
NET INCREASE (DECREASE) IN CASH 27,732 (21,641)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 9,403 30,675
-------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 37,135 $ 9,034
======== ========
</TABLE>
3
<PAGE> 6
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
<PAGE> 7
Note 3 - Revenues and Operating Income, Supplementary Information
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
---------------------- ----------------------
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
New Coach Sales:
MCI 331 326 632 585
Autobuses
United States 32 53 63 70
Other 113 6 335 16
Used Coach Sales 141 164 265 299
Revenues (000's omitted):
Sales:
Coach Manufacturing and Support:
MCI $102,711 $104,687 $198,134 $184,897
Autobuses 23,750 17,365 40,495 27,268
Used Coach 11,720 14,810 25,383 28,185
---------- ---------- ---------- ----------
138,181 136,862 264,032 240,350
Replacement Parts 50,785 41,241 102,437 80,463
---------- ---------- ---------- ----------
188,966 178,103 366,449 320,813
Finance Income 1,224 2,254 2,576 3,729
---------- ---------- ---------- ----------
$190,190 $180,357 $369,025 $324,542
---------- ---------- ---------- ----------
Operating Income (000's omitted):
Coach Manufacturing and Support:
MCI $14,701 $13,195 $23,948 $16,615
Autobuses (1,094) 2,303 876 2,216
Used Coach 282 808 1,711 834
---------- ---------- ---------- ----------
13,889 16,306 26,535 19,665
Replacement Parts 7,536 4,652 14,164 8,871
---------- ---------- ---------- ----------
21,425 20,958 40,699 28,536
Finance Income 125 866 443 1,151
---------- ---------- ---------- ----------
$21,550 $21,824 $41,142 $29,687
---------- ---------- ---------- ----------
</TABLE>
5
<PAGE> 8
Note 4 - Inventories
<TABLE>
<CAPTION>
Inventories consisted of the following:
June 30, December 31,
1997 1996
-------- -----------
(000's omitted)
<S> <C> <C>
Raw materials $ 56,074 $ 47,397
Work in process 46,095 33,860
Finished goods 132,579 128,912
-------- --------
234,748 210,169
Inventory reserves (13,332) (19,351)
-------- --------
$221,416 $190,818
-------- --------
Note 5 - Debt
Debt consisted of the following:
June 30, December 31,
1997 1996
-------- -----------
(000's omitted)
<S> <C> <C>
Pre-export notes $ 30,000 $ -
Investment purchase note 9,919 -
Lease financing loans 6,572 -
Current portion of long-term debt 4,676 148
-------- --------
51,167 148
-------- --------
Term notes payable 125,000 125,000
Borrowings under bank credit facility 117,000 85,000
Canadian revolving credit facility 5,896 -
Note payable 594 668
-------- --------
248,490 210,668
Current portion of long-term debt (4,676) (148)
-------- --------
243,814 210,520
-------- --------
$294,981 $210,668
-------- --------
</TABLE>
On May 28, 1997, an indirect subsidiary of the Company issued $30.0
million in short-term notes, maturing on November 26, 1997, to be used to
finance the manufacture of motor coaches by Autobuses for export to the United
States.
Autobuses issued a note of approximately $10 million to the Gomez Flores
family in exchange for a minority interest in Arrendadora Financiera Dina ("AF
Dina"). The Gomez Flores family controls Empresarial G, S.A. de C.V.
("Empresarial G") which owns a controlling interest in Grupo Dina. AF Dina is
a leasing company which provides financing in connection with sales of Grupo
Dina products (primarily in Mexico). At June 30, 1997, AF Dina had provided
Autobuses with intercompany financing of $10.8 million used in conjunction with
its urban bus leasing program. Autobuses has also received $6.6 million in
outside financing in conjunction with its urban bus leasing program.
6
<PAGE> 9
Canadian revolving credit loans were 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 by a replacement credit facility of Cdn$19.0 million (equivalent
to $13.8 million). At June 30, 1997, borrowings under this facility amounted
to $5.8 million, of which $4.5 million was classified as current.
Note 6 - Cash Flow Effect of Change in Operating Assets and Liabilities
Change in operating assets and liabilities consisted of:
<TABLE>
<CAPTION>
Six Months Ended
--------------------------------
June 30, June 30,
1997 1996
---- ----
(000's omitted)
<S> <C> <C>
Decrease (Increase) in Operating Assets:
Receivables $(25,220) $(10,545)
Inventories (29,958) 2,584
Other operating assets (5,727) 4,130
-------- --------
(60,905) (3,831)
-------- --------
Increase (Decrease) in Operating Liabilities:
Accounts payable 6,441 14,146
Accrued income taxes 940 (5,242)
Other operating liabilities (3,208) 4,434
-------- --------
4,173 13,338
-------- --------
Net Cash Flow Effect $(56,732) $9,507
-------- --------
</TABLE>
The receivables increase in 1997 was affected by normal seasonal factors,
plus limited granting of more liberal credit terms and accommodations to
customers inconvenienced by flood conditions. The 1997 inventory increase was
also affected by production and delivery delays caused by the threat of
flooding along the Red River.
Note 7 - Related Party Transactions
The Company provides for allocable management and administrative expenses
incurred by Grupo Dina. In the first six months of 1997, the provision for
such expenses was $1.5 million. The amounts due to Grupo Dina for such
expenses at June 30, 1997 and December 31, 1996 were $1.7
million and $1.0 million, respectively.
During the first six months of 1997 and 1996 the Company's United States
and Canadian operations purchased from Grupo Dina, in the ordinary course of
business, $6.2 million and $1.1 million, respectively, in goods and services.
Also see Note 5 - Debt.
7
<PAGE> 10
Note 8 - Commitments and Contingent Liabilities
The Company's Canadian income tax returns for 1982 through 1992 are
currently under review by Revenue Canada. Authorities have proposed imputing
additional income relating to transactions with a U. S. based subsidiary of the
Company. A formal reassessment has been issued by Revenue Canada on the 1985
return and the Company has filed a notice of objection to such reassessment.
In the event of an adverse judgment, the additional income taxes for 1982
through 1992 could amount to up to $26 million plus interest of approximately
$43 million, both before recoveries of U. S. Federal income taxes which may be
available to offset a portion of any additional taxes paid to Canada. Based on
its review of current relevant information, including the advice of outside
counsel, the Company is of the opinion that Revenue Canada's arguments for the
1982 through 1992 period are without merit and that any liability from this
matter will not be material to its financial condition or results of
operations.
The Company may be subject to potential reassessments for the years
subsequent to 1992 on the same basis which could result in additional income
taxes and interest for those years. However, the Company believes that any
additional taxes paid to Canada would be substantially offset by recovery of
taxes paid in the United States.
8
<PAGE> 11
ITEM 2. MANAGEMENT'S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
HIGHLIGHTS
Flooding along the Red River threatened the Company's plants in
Pembina, North Dakota and Winnipeg, Manitoba and forced their temporary closure
during the second quarter of 1997. Neither location was damaged, but
production and deliveries were disrupted for four weeks and delivery of
approximately 120 units was delayed. The production and delivery delays
experienced due to the flood are expected to be recovered in the second half of
the year.
Mexican gross domestic product grew by 8.8% in the second quarter of 1997,
compared with last year's second quarter, following an increase of 5.1% in the
first quarter. Gains in the second half of 1996 are likely to slow the
comparative growth shown in the second half of 1997, but year-to-year growth is
expected to be good.
COMPARISON OF SECOND QUARTER 1997 TO SECOND QUARTER 1996
General. Revenues for the quarter ended June 30, 1997 were $190.2
million, an increase of 5% compared with revenues of $180.4 million in the
second quarter of 1996. Sales of replacement parts and Autobuses increased 23%
and 37%, respectively, while Used Coach and MCI sales were down 21% and 2%,
respectively.
The overall gross margin, defined as revenues less cost of sales
(exclusive of depreciation and amortization) and interest expense of finance
operations, as a percentage of sales was 23.2% in the second quarter of 1997,
compared with 24.2% in 1996. The decline was attributable to Autobuses where
sales in the United States declined in volume and profitability.
Operating income was $21.6 million in 1997, compared with $21.8 million in
1996. The benefits of higher sales volume were offset by the less profitable
mix of sales. Research and development expenses increase by $ 0.2 million as
MCI continued work to introduce new models. Selling, general and
administrative expenses decreased $0.3 million.
Income from continuing operations was $8.3 million in the 1997 second
quarter, compared with $10.0 million in the 1996 second quarter. Higher debt
levels caused a $2.3 million increase in interest expense which was partially
offset by a $0.8 million increase in other income. Last year's second quarter
included an additional provision for discontinued operations of $5.0 million,
net of taxes, which reduced 1996's second quarter net income to $5.0 million,
compared with net income of $8.3 million in the second quarter of 1997.
MCI. MCI had second quarter 1997 revenues of $102.7 million, a decrease
of 2% compared with revenues of $104.7 million in the second quarter of 1996.
The threat of flooding along the Red River disrupted production and deliveries
in the 1997 second quarter which resulted in the noted decline.
Gross margins improved to 22.4% in the 1997 second quarter, compared with
20.4% last year, as a result of continuing efforts to control and reduce costs.
Operating income increased to $14.7 million in 1997, compared with $13.2
million in 1996, due to the increase in margins.
9
<PAGE> 12
Autobuses. Autobuses' sales increased 37% to $23.8 million in 1997,
compared with $17.4 million in 1996. Sales in Mexico showed significant
improvement, reaching 113 units in 1997 from 6 units in 1996, including the
sale of 79 urban buses. This restricted unit availability in the United States
where unit sales declined to 32 units from 53 units last year.
Gross margins declined to 13.8% in the second quarter of 1997 from
32.5% in 1996, mainly due to lower profitability on sales in the United States
and an unfavorable mix of lower margin urban buses. The second quarter of 1997
experienced an operating loss of $1.1 million, compared with an operating
income of $2.3 million in 1996.
Used Coach. Used Coach revenues in the second quarter of 1997 were $11.7
million, a decrease of 21% compared with revenues 0f $14.8 million last year.
The decline was indirectly related to the flood conditions which limited MCI
production and deliveries. Used coaches were offered to inconvenienced
customers as temporary leases at terms favorable to the customer. This
temporary lease program has limited the availability of used coaches for sale.
Gross margins improved to 40.8% in 1997, compared with 39.4% last year,
but the decrease in sales resulted in an operating income decline to $0.3
million in 1997, compared with $0.8 million in 1996.
Replacement Parts. Replacement parts' revenues increased 23% to $50.8
million in 1997, compared with $41.2 million in 1996, largely due to the
addition of the "Flxible" replacement parts business. Gross margins were 22.5%
in the 1997 quarter, a modest improvement from 21.4% in 1996. Operating income
increased 62% to $7.5 million in 1997, compared with $4.7 million, as a result
of higher sales, increased gross margins, and a $0.3 million decrease in
operating costs.
COMPARISON OF THE FIRST SIX MONTHS 1997 TO THE FIRST SIX MONTHS 1996
General. Revenues for the six months ended June 30, 1997 were $369.0
million, an increase of 14% compared with revenues of $324.5 million in the
first six months of 1996. Sales increases were reported in all business areas,
except Used Coaches.
The overall gross margin, defined as sales less cost of sales (exclusive
of depreciation and amortization), as a percentage of sales was 23.0% in the
first six months of 1997, nearly unchanged from 23.1% in 1996.
Operating income was $41.1 million in 1997, an increase of 39% compared
with $29.7 million in 1996. This was the result of higher revenues.
Income from continuing operations was $16.7 million in the first six
months 1997, compared with $13.2 million in the 1996. Higher debt levels
caused a $3.3 million increase in interest expense and effective tax rates
increased to 46.5% in 1997 from 43.3% in 1996. Last year's first six months
included an additional provision of discontinued operations of $5.0 million,
net of taxes, which reduced 1996's first six months' net income to $8.2
million, compared with net income of $16.7 million in the first six months of
1997.
10
<PAGE> 13
MCI. MCI's revenues increased 7% in the first six months of 1997 to
$198.1 million, compared with revenues of $184.9 million in 1996. This was
due to a strong first quarter 1997 as the second quarter was negatively
affected by flooding along the Red River.
Gross margins improved to 21.2% in the 1997, compared with 19.2% last
year, as a result of continuing efforts to control and reduce costs. Operating
income increased 44% to $23.9 million in 1997, compared with $16.6 million in
1996, due to higher sales and increased margins.
Order backlog for MCI at June 30, 1997 was 658 units, which included 147
units for Greyhound Lines.
Autobuses. Autobuses' revenues increased 49% to $40.5 million in the
first six months of 1997, compared with $27.3 million in the 1996 period.
Sales in Mexico showed significant improvement, reaching 335 units in 1997 from
16 units in 1996, including 240 low margin urban buses. Unit sales in the
United States declined to 63 units from 70 units last year.
Gross margins declined to 19.7% in the first six months of 1997 from
33.0% in 1996. Operating income decreased 60% to $0.9 million in the first six
months of 1997, compared with operating income of $2.2 million in 1996. This
was essentially due to the decline in gross margins.
Used Coach. Used Coach revenues decreased 10% in the first six months of
1997 to $25.4 million, compared with revenues of $28.2 million in 1996. The
decline was largely due to a temporary leasing program to MCI customers
inconvenienced by the flood related delays in production and deliveries which
limited availability of used buses for sale.
Gross margins improved to 39.8% in 1997, compared with 37.1% last year.
Operating income increased 105% to $1.7 million in 1997, compared with $0.8
million in 1996, due to improved gross margins and a $1.2 million reduction in
operating expenses.
Replacement Parts. Replacement parts' revenues increased 27% to $102.4
million in the first six months of 1997, compared with $80.5 million in 1996,
largely due to the addition of the "Flxible" replacement parts business. Gross
margins were 22.0% in the 1997, a modest improvement from 21.6% in 1996.
Operating income increased 60% to $14.2 million in 1997, compared with $8.9
million in 1996, as a result of higher sales and increased gross margins.
Finance Income. Finance income in the first six months of 1997 was $0.4
million, compared with $1.2 million in 1996. This was essentially the result
of decreased lease income which was not offset be a corresponding decline in
interest expense.
11
<PAGE> 14
PART II. - OTHER INFORMATION
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
12
<PAGE> 15
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)
August __, 1997 By /s/ Robert M. Popowich
----------------------------
Robert M. Popowich
Chief Financial Officer
(Principal Financial Officer
and Authorized Officer)
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 37,135
<SECURITIES> 0
<RECEIVABLES> 80,482
<ALLOWANCES> (1,821)
<INVENTORY> 221,416
<CURRENT-ASSETS> 365,701
<PP&E> 136,658
<DEPRECIATION> (25,317)
<TOTAL-ASSETS> 776,905
<CURRENT-LIABILITIES> 177,178
<BONDS> 243,814
0
0
<COMMON> 428,620
<OTHER-SE> 111,583
<TOTAL-LIABILITY-AND-EQUITY> 776,905
<SALES> 366,449
<TOTAL-REVENUES> 369,025
<CGS> 282,882
<TOTAL-COSTS> 327,883
<OTHER-EXPENSES> (1,338)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 11,343
<INCOME-PRETAX> 31,137
<INCOME-TAX> 14,472
<INCOME-CONTINUING> 16,665
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,665
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
