<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 27, 1995
REGISTRATION NO. 33-56595
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
--------------
GREAT DANE HOLDINGS INC.
(Exact name of Registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 3715 54-0698116
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Code Number) Identification No.)
incorporation or
reorganization)
</TABLE>
2016 NORTH PITCHER STREET
KALAMAZOO, MICHIGAN 49007
(616) 343-6121
(Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)
DAVID R. MARKIN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
GREAT DANE HOLDINGS INC.
2016 NORTH PITCHER STREET
KALAMAZOO, MICHIGAN 49007
(616) 343-6121
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
--------------
THE COMMISSION IS REQUESTED TO SEND COPIES OF ALL COMMUNICATIONS TO:
<TABLE>
<S> <C>
Paulette Kendler, Esq. Valerie Ford Jacob, Esq.
Hutton Ingram Yuzek Gainen Carroll & Fried, Frank, Harris, Shriver & Jacobson
Bertolotti One New York Plaza
250 Park Avenue New York, New York 10004
New York, New York 10177 (212) 859-8000
(212) 907-9650
</TABLE>
--------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
--------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
GREAT DANE HOLDINGS INC.
FORM S-1 CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
REGISTRATION STATEMENT ITEM AND HEADING LOCATION IN PROSPECTUS
- ------------------------------------------------------------- --------------------------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside
Front Cover Page of Prospectus................... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus....................................... Inside Front Cover and Outside Back Cover Pages;
Available Information
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................ Prospectus Summary; Risk Factors
4. Use of Proceeds................................... Prospectus Summary; Use of Proceeds; Capitalization
5. Determination of Offering Price................... Risk Factors; Underwriting
6. Dilution.......................................... Risk Factors; Dilution
7. Selling Security Holders.......................... Not Applicable
8. Plan of Distribution.............................. Outside Front Cover Page; Underwriting
9. Description of Securities to be Registered........ Description of Capital Stock
10. Interests of Named Experts and Counsel............ Not Applicable
11. Information with Respect to the Registrant........ Outside Front Cover Page; Prospectus Summary; Risk
Factors; Dilution; Selected Consolidated Financial
Data; Management's Discussion and Analysis of Financial
Condition and Results of Operations; Shares Eligible
for Future Sale; Business; Management; Compensation
Committee Interlocks and Insider Participation; Certain
Relationships and Related Transactions; Ownership of
Common Stock; Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities... Not Applicable
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION
FEBRUARY 27, 1995
5,700,000 SHARES
GREAT DANE HOLDINGS INC.
COMMON STOCK
-----------
All of the shares of common stock, $.01 par value per share, offered hereby
(the "Common Stock") are being sold by Great Dane Holdings Inc. ("Holdings" or
the "Company"). Prior to this offering, there has been no public market for the
Common Stock of the Company. It is currently estimated that the initial public
offering price will be between $12.00 and $14.00 per share. See "Underwriting"
for the factors to be considered in determining the initial public offering
price. The Common Stock has been approved for quotation, upon official notice of
issuance, on the Nasdaq Stock Market (National Market) under the symbol "DANE."
--------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS."
--------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE COMMISSIONER OF INSURANCE OF THE STATE OF NORTH CAROLINA HAS NOT APPROVED
OR DISAPPROVED THIS OFFERING NOR HAS THE COMMISSIONER PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
<TABLE>
<CAPTION>
PRICE UNDERWRITING PROCEEDS
TO DISCOUNTS AND TO
PUBLIC COMMISSIONS COMPANY(1)
<S> <C> <C> <C>
Per Share................................. $ $ $
Total(2).................................. $ $ $
<FN>
(1) Before deducting offering expenses payable by the Company estimated at
$ .
(2) The Company has granted the Underwriters a 30-day option to purchase up to
855,000 additional shares of Common Stock solely to cover over-allotments,
if any. To the extent that the option is exercised, the Underwriters will
offer the additional shares to the public at the Price to Public shown
above. If the option is exercised in full, the total Price to Public,
Underwriting Discounts and Commissions and Proceeds to Company will be
$ , $ and $ , respectively. See "Underwriting."
</TABLE>
--------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if delivered to and accepted by them, and subject to
the right of the Underwriters to reject any order in whole or in part. It is
expected that delivery of the shares of Common Stock will be made at the offices
of Alex. Brown & Sons Incorporated, Baltimore, Maryland, on or about
, 1995.
ALEX. BROWN & SONS SMITH BARNEY INC.
INCORPORATED
The date of this Prospectus is , 1995.
<PAGE>
[INSIDE FRONT COVER]
[PHOTOGRAPH OF A CUSTOMIZED
REFRIGERATED VAN] [PHOTOGRAPH OF A FREIGHT VAN]
GREAT DANE'S MULTI-TEMP,
CUSTOMIZED REFRIGERATED VANS GREAT DANE'S FREIGHT VANS ARE
ARE WIDELY USED IN FOOD LIGHTWEIGHT, HIGH CUBE AND
SERVICE DELIVERY. DURABLE.
[GREAT DANE LOGO]
[PHOTOGRAPH OF A LOCOMOTIVE
PULLING DOUBLE STACKED
[PHOTOGRAPH OF A PLATFORM INTERMODAL CONTAINERS ON RAIL
TRAILER] CARS]
GREAT DANE UTILIZES ITS
GREAT DANE'S PLATFORM TRAILERS ENGINEERING EXPERTISE TO
ARE USED FOR HAULING BUILDING DESIGN INTERMODAL CONTAINERS
MATERIALS, COILED STEEL AND THAT MEET THE SPECIFIC
HEAVY MACHINERY. REQUIREMENTS OF ITS CUSTOMERS.
The Company intends to furnish its stockholders with annual reports
containing audited financial statements and an opinion thereon expressed by
independent auditors and with quarterly reports containing unaudited financial
information for each of the first three quarters of each fiscal year.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
TRANSACTIONS MAY BE EFFECTED IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN
THIS PROSPECTUS. EXCEPT AS OTHERWISE INDICATED, INFORMATION CONTAINED IN THIS
PROSPECTUS GIVES EFFECT TO (I) THE REINCORPORATION OF HOLDINGS (FORMERLY
INTERNATIONAL CONTROLS CORP.) IN DELAWARE IN OCTOBER 1994 AND (II) A 16,800 FOR
1 STOCK SPLIT OF HOLDINGS' COMMON STOCK (THE "COMMON STOCK") WHICH WILL OCCUR
PRIOR TO COMMENCEMENT OF THIS OFFERING. UNLESS THE CONTEXT OTHERWISE REQUIRES,
(A) REFERENCES IN THIS PROSPECTUS TO THE COMPANY ARE TO GREAT DANE HOLDINGS INC.
(AND ITS PREDECESSOR, INTERNATIONAL CONTROLS CORP.) AND ITS CONSOLIDATED
SUBSIDIARIES AND (B) REFERENCES IN THIS PROSPECTUS TO HOLDINGS ARE TO GREAT DANE
HOLDINGS INC. (AND ITS PREDECESSOR, INTERNATIONAL CONTROLS CORP.). UNLESS
OTHERWISE SPECIFIED, THE INFORMATION SET FORTH IN THIS PROSPECTUS ASSUMES NO
EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION (THE "OVER-ALLOTMENT
OPTION").
THE COMPANY
OVERVIEW
Through Great Dane Trailers, Inc. ("Great Dane"), the Company is one of the
largest manufacturers of truck trailers and intermodal containers and chassis in
the United States. In addition, through Checker Motors Corporation's ("Motors")
subsidiaries, CMC Kalamazoo Inc. ("CMC") and South Charleston Stamping &
Manufacturing Company ("SCSM"), the Company is one of the leading independent
manufacturers of sheet metal stampings for automotive components and
subassemblies for sale to North American original equipment manufacturers
("OEMs"). For the year ended December 31, 1994, these two principal lines of
business accounted for approximately 93% of the Company's revenues and 93% of
the Company's total segment operating profit (segment gross profit less selling,
general and administrative expenses). The Company's other operations consist of
its vehicular operations, primarily Yellow Cab Company ("Yellow Cab"), which is
currently the largest owner of taxicabs and provider of taxi-related services in
Chicago, Illinois, and its insurance operations, American Country Insurance
Company ("Country"), which underwrites property and casualty insurance.
The Company's objective is to expand its transportation related
manufacturing businesses, Great Dane, CMC and SCSM, primarily through internal
growth. In addition, the Company will consider strategic acquisitions, should
opportunities arise. The Company will also focus on reducing its aggregate
indebtedness and believes that Yellow Cab and Country provide a consistent
source of cash flow for debt repayment.
TRAILER MANUFACTURING
Great Dane designs, manufactures and distributes a full line of truck
trailers (including dry freight vans, refrigerated trailers ("reefers") and
platform trailers) and intermodal containers and chassis. In 1994, Great Dane
was one of the largest manufacturers of truck trailers in the United States,
accounting for approximately 13.0% of the new truck trailer market, including
11.5% of the new van market, 11.5% of the new platform trailer market and 38.4%
of the new reefer market. Great Dane is also one of the leading producers of
domestic intermodal containers and chassis, with a market share of 18.8% in
1994.
In 1991, Great Dane assembled a new senior management team and initiated a
strategic plan designed to improve its competitive position by (i) reducing
operating costs; (ii) increasing manufacturing efficiencies and flexibility;
(iii) developing new products; and (iv) expanding its large order customer base.
Accordingly, Great Dane reduced overhead, reconfigured plants to increase
capacity, re-designed assembly lines to improve efficiencies, re-engineered
certain products to reduce material and manufacturing costs, initiated new
product development programs and began to develop relationships with large order
customers including J.B. Hunt Transport ("J.B. Hunt") and XTRA Corporation. From
1991 to 1994, Great Dane's revenues increased from $400.2 million to $859.1
million and segment operating profit increased from $7.1 million to $58.6
million. In addition, Great Dane's operating profit margin increased from 1.8%
in 1991 to 6.8% in 1994.
3
<PAGE>
Great Dane believes that these initiatives combined with its strong brand
name and reputation for manufacturing high quality products have positioned it
for continued growth. The key elements of its growth strategy are as follows:
- PRODUCT INNOVATION. Great Dane's engineering and flexible
manufacturing expertise enable it to produce higher-margin, custom-designed
products rapidly and efficiently while incorporating distinctive features
through computer aided design technologies. Recent product innovations marketed
by Great Dane include its proprietary, lightweight Thermacube van and reefer,
and unique intermodal containers and chassis which initiated Great Dane's entry
into the growing intermodal market. New products planned for introduction during
1995 include a proprietary, ultra-lightweight flatbed trailer and a new reefer
product which incorporates a unique floor design.
- INCREASE MARKET SHARE WITH LARGE ORDER FLEET CUSTOMERS. Great Dane is
actively seeking to increase its sales to large order fleet customers which
accounted, during 1993, for approximately 43% of total U.S. van trailer
purchases. The Company believes that these customers are the fastest growing
segment of the industry and estimates that its share of fleet orders
approximated 10% during 1993. The balance of the U.S. van trailer market
consists of small and medium sized customers (approximately 30%) and leasing
companies (approximately 27%) where Great Dane estimates it had, during 1993, a
27% and 17% market share, respectively. In order to increase its market share
with large order fleet customers, Great Dane has acquired the property and
buildings in Terre Haute, Indiana for a 500,000 square foot manufacturing and
product distribution facility, a portion of which will be equipped during 1995
with two high speed, more cost efficient assembly lines dedicated to high
volume, standard specification fleet orders.
- STRONG NATIONAL DISTRIBUTION NETWORK. The Company believes that Great
Dane's distribution network, which consists of 17 Company-owned branches and 51
independent dealers, is the largest marketing organization in the North American
trailer industry. This network provides Great Dane with a competitive advantage
in marketing its new and used trailer products and providing higher-margin
aftermarket parts and services. Great Dane believes that its parts and services
business will provide earnings growth in the coming years due to the increasing
size of the Great Dane and U.S. trailer fleets.
- INTERMODAL TRANSPORTATION. In 1992, Great Dane entered the intermodal
transportation market by developing, in conjunction with a leading truckload
carrier, a unique line of intermodal containers and matching ultra-lightweight
chassis. These containers and chassis enable its customer to utilize double
stack rail intermodal service to haul freight loads of similar size and weight
to those it carries with conventional over-the-road trailers. Great Dane's
strategy is to utilize its engineering expertise to design intermodal products
that meet the specific requirements of its customers. Great Dane has also
improved its market responsiveness by adapting certain assembly lines to produce
both trailers and containers.
AUTOMOTIVE PRODUCTS OPERATIONS
Through CMC and SCSM, the Company develops, designs, engineers and
manufactures a broad range of sheet metal automotive components and
subassemblies, including tailgates, fenders, doors, roofs and hoods for sale to
North American OEMs. The majority of the Company's automotive segment revenues
are derived from complex, value-added products, primarily assemblies containing
multiple stamped parts and various welded or fastened components.
The automotive supplier industry is experiencing consolidation as OEMs are
increasingly requiring suppliers to meet more stringent quality standards and to
possess certain full-service capabilities including design, engineering and
project management support. The Company's principal objective is to capitalize
on this trend as follows:
- HIGH GROWTH LIGHT TRUCK/SPORT UTILITY VEHICLE FOCUS. CMC and SCSM
focus on supplying components for light trucks, minivans and sport utility
vehicles due to their high growth rate and long model lives. From 1983 to 1993,
light truck/sport utility vehicles were the fastest growing segment of the
automotive market with a 7.3% compound annual growth rate. The Company currently
supplies parts on
4
<PAGE>
the following light truck/sport utility and minivan vehicles: Suburban,
Tahoe/Yukon, Crew Cab, M Van (Astro and Safari), CK Pickup Truck and CK Sport
Side Pickup. In addition, in 1994, the Company was awarded an eight-year
contract by Mercedes-Benz to produce the majority of the stamping components for
its new sport utility vehicle.
- FULL-SERVICE CAPABILITIES. CMC and SCSM provide a full complement of
services, including design, engineering and manufacturing, which enables them to
play an integral role in the development and execution of product programs for
their customers. CMC and SCSM work with their customers throughout the product
development process and, in some cases, locate employees on site at their
customers' facilities in order to design, engineer and manufacture high quality
products at the lowest possible cost. The Company believes that this close
coordination with its customers allows it to identify business opportunities and
react to customer needs in the early stages of vehicle design and, therefore,
maintain and increase its volume with its customers.
- HIGH QUALITY PRODUCTS. The Company believes SCSM is one of the premier
stamping facilities in the U.S. This is exemplified by SCSM's receipt of
numerous quality awards including the General Motors Mark of Excellence and the
General Motors QSP (quality, service, price) award for being General Motors'
1993 worldwide Supplier of the Year for major metal stampings. SCSM has also
been qualified to produce components which comply with the ISO 9000
international standard. The Company believes that these awards are a critical
factor in securing additional business from OEMs.
- EXPANDING CUSTOMER BASE. CMC and SCSM have developed strong
relationships with their customers based on their long history of supplying high
quality products and their full-service capabilities. The Company's objectives
are to increase volume with existing customers and develop relationships with
new customers. In the last year, the Company's automotive segment has expanded
its business with existing customers including General Motors Corporation
("GM"), Freightliner Corp., Saturn Corporation and Ford Motor Co., and has
secured business with two new customers, Mercedes-Benz and Toyota.
- FOCUS ON HIGHER-MARGIN/VALUE-ADDED PRODUCTS. CMC and SCSM strive to
compete in markets where they can achieve greater profitability by providing
complex, value-added products, primarily assemblies containing multiple stamped
parts and various welded or fastened components. Unlike many of their
competitors, CMC and SCSM presently have the equipment to supply complete
assemblies including large stampings and related assembly parts. As an example,
SCSM currently supplies the sliding door, which is composed of several stampings
and fasteners, for the GM Astro and Safari Vans. The majority of the automotive
segment's revenues are derived from such assemblies.
OTHER OPERATIONS
Yellow Cab is the largest taxicab fleet owner in the City of Chicago
("Chicago") and, as of January 1, 1995, owned 2,271 or 41% of the 5,500 taxicab
licenses ("licenses"or "medallions") available in Chicago. Yellow Cab's primary
business is the leasing of its medallions and vehicles to independent taxi
operators. The Company also provides a variety of other services to taxi drivers
and non-affiliated medallion holders, including insurance coverage through
Country and repair and maintenance services.
Country underwrites property and casualty insurance, including taxicab
insurance, workers' compensation and other commercial and personal lines. During
1994, 75% of Country's total premium revenue was attributable to non-affiliated
property/casualty lines, primarily workers' compensation, commercial automobile
and commercial multiple peril. The remainder of Country's premium revenues was
attributable to affiliated taxi liability and collision insurance in the State
of Illinois and workers' compensation insurance in the States of Illinois and
Michigan. Country is currently rated "A" by A.M. Best.
Holdings was reincorporated in Delaware in 1994. Holdings currently
maintains its principal executive offices at CMC's facility at 2016 North
Pitcher Street, Kalamazoo, Michigan 49007 and its phone number is (616)
343-6121.
5
<PAGE>
RECENT DEVELOPMENTS
The Company's subsidiaries have recently refinanced their credit facilities
(the "Refinancing"). In January 1995, Motors and its subsidiaries entered into a
new loan agreement consisting of a $45 million five-year term loan and a $20
million revolving credit facility, subject to availability. In February 1995,
Great Dane amended its loan and security agreement by entering into a credit
facility of up to $150 million, subject to availability. Proceeds from the
Refinancing were used to refinance subsidiary indebtedness and to retire the $30
million aggregate principal amount of debt outstanding to the Company's
shareholders (the "Note Repayment"). See "Management's Discussion and Analysis
of Financial Condition and Results of Operations" and Note O of Notes to
Consolidated Financial Statements -- December 31, 1994. In December 1994, the
Company redeemed, for $37 million, the minority interest in a subsidiary
partnership (previously held by Executive Life Insurance Company). Subsequent to
the redemption, the subsidiary partnership, Checker Motors Co., L.P. ("Checker
L.P." or the "Partnership"), was dissolved, and its operations are now conducted
by CMC, Yellow Cab, Chicago AutoWerks, Inc. ("AutoWerks") and Country, each of
which is a wholly-owned subsidiary of Motors.
RISK FACTORS
The Common Stock offered hereby involves a high degree of risk. See "Risk
Factors."
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company........................... 5,700,000 shares
Common Stock to be outstanding after the Offering............. 22,500,000 shares (1)
Use of Proceeds............................................... To redeem a portion of the
Company's 12 3/4% Senior
Subordinated Debentures due
2001 (the "12 3/4%
Debentures")
Proposed Nasdaq Stock Market (National Market) Symbol......... DANE
<FN>
- --------------
(1) Does not include an aggregate of 1,792,500 shares of Common Stock reserved
for issuance under the Company's 1994 Stock Option Plan, its Outside
Directors Option Plan and an option granted to an executive officer. See
"Management -- Compensation Pursuant to Plans" and " -- Employment
Agreements."
</TABLE>
6
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The summary consolidated financial information set forth below is derived
from the consolidated financial statements of the Company for the five years
ended December 31, 1994, which have been audited by Ernst & Young LLP,
independent auditors.The following summary information should be read in
conjunction with the Company's Consolidated Financial Statements and Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------
1990 1991 1992 1993 1994
--------- --------- --------- --------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues:
Trailer Manufacturing............ $ 491,532 $ 400,196 $536,336 $ 711,862 $859,089
Automotive Products.............. 133,401 84,401 112,631 127,925 157,568
Other Operations................. 68,278 70,669 67,766 69,539 79,820
--------- --------- --------- --------- ---------
Total Revenues..................... $ 693,211 $ 555,266 $716,733 $ 909,326 $1,096,477
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Segment Operating Profit (Loss):
(1)
Trailer Manufacturing............ $ 13,109(2) $ 7,059 $ 17,590 $ 32,381 $ 58,619
Automotive Products.............. 9,669 (4,237) 11,622 15,306 19,652
Other Operations (3)............. 8,771 4,267 4,170 4,304 5,908
--------- --------- --------- --------- ---------
Total Segment Operating Profit..... 31,549 7,089 33,382 51,991 84,179
Corporate Expenses................. (8,115) (4,398) (4,396) (4,646) (8,534)(4)
Interest Expense................... (61,596) (47,425) (42,726) (41,614) (40,165)
Interest Income.................... 14,696 11,634 8,895 7,396 7,101
Other Income (Expense)............. (941) (1,078) (2,023) 3,494 1,002
Special Charge (5)................. -- -- -- (7,500) --
--------- --------- --------- --------- ---------
Income (Loss) Before Minority
Equity, Income Taxes,
Extraordinary Items and Accounting
Changes........................... (24,407) (34,178) (6,868) 9,121 43,583
Minority Equity.................... (2,296) 1,931 -- -- (586)
Income Tax Benefit (Expense)....... 6,429 5,241 (687) (5,757) (18,649)
--------- --------- --------- --------- ---------
Income (Loss) Before Extraordinary
Items and Accounting Changes...... (20,274) (27,006) (7,555) 3,364 24,348
Extraordinary Items (6)............ 27,749 31,188 -- -- --
Accounting Changes (7)............. -- -- -- (46,626) --
--------- --------- --------- --------- ---------
Net Income (Loss).................. $ 7,475 $ 4,182 $ (7,555) $ (43,262) $ 24,348
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Income (Loss) Per Share (8):
Before Extraordinary Items and
Accounting Changes.............. $ (1.21) $ (1.61) $ (.45) $ .20 $ 1.45
Net Income (Loss) Per Share...... $ .45 $ .25 $ (.45) $ (2.58) $ 1.45
<CAPTION>
DECEMBER 31, 1994
---------------------
AS
ACTUAL ADJUSTED(9)
--------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total Assets.......................................................... $ 522,051 $520,159
Total Debt............................................................ 293,265 235,478
Shareholders' Deficit................................................. (127,302) (65,322)
<FN>
- ------------------
(1) Segment operating profit (loss) is segment gross profit (loss) less
segment selling, general and administrative expenses.
(2) After deducting $7,500 of plant restructuring costs.
(FOOTNOTES CONTINUED ON THE NEXT PAGE)
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
(3) Segment operating profit (loss) for other operations does not include the
insurance operations' portfolio interest income.
(4) Corporate expenses for the year ended December 31, 1994 includes $3.5
million of expenses related to the Company's debt refinancing which was
not completed. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
(5) Represents cost to the Company of the settlement of certain litigation
with the Boeing Company. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and Note G to Notes to
Consolidated Financial Statements -- December 31, 1994.
(6) Extraordinary items in all years relate to the gains on the repurchase of
indebtedness.
(7) The accounting changes represent the cumulative effect of changes in
accounting principles as a result of the adoption, as of January 1, 1993,
of the provisions of Statement of Financial Accounting Standards ("SFAS")
No. 106, "Employers Accounting for Postretirement Benefits Other Than
Pensions," and SFAS No. 109, "Accounting for Income Taxes." See Notes H
and J to Notes to Consolidated Financial Statements -- December 31, 1994.
(8) The per share information is computed by dividing the respective income
(loss) by the weighted average number of common shares outstanding
(16,800,000 for all periods, after giving effect to the 16,800 to 1 stock
split to be effected prior to the commencement of this Offering). The
stock options were not taken into account because the exercise of stock
options would not be materially dilutive.
(9) Adjusted to reflect (i) the sale of the 5,700,000 shares of Common Stock
offered hereby by the Company (at an assumed initial public offering price
of $13 per share) and the application of the estimated net proceeds as
described in "Use of Proceeds," (ii) the Refinancing and (iii) the Note
Repayment. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
</TABLE>
8
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the shares
of Common Stock offered by this Prospectus.
CYCLICAL BUSINESS
The truck trailer industry is dependent on the trucking industry in general
and the automotive parts industry is dependent on the automotive industry. Poor
economic conditions in either industry could have a material adverse effect on
the Company. In addition to dependence on general economic conditions, sales of
new truck trailers have historically been subject to cyclical variations based
on a five to seven-year replacement cycle. The poor economic conditions in the
United States in 1990 and 1991 had an adverse effect on demand for the Company's
products. Although sales have rebounded, there can be no assurance that such
growth will continue.
PRIOR LOSSES AND SUBSTANTIAL LEVERAGE
The Company incurred losses before extraordinary items and accounting
changes of approximately $20.3 million, $27.0 million and $7.6 million in 1990,
1991 and 1992, respectively. Although the Company had net income for the year
ended December 31, 1994, and had income before extraordinary items and
accounting changes for the year ended December 31, 1993, there can be no
assurance that the Company will not sustain losses in the future. See
"Management's Discussion and Analysis of Financial Condition and the Results of
Operations."
The Company currently is and, following the completion of this Offering,
will continue to be substantially leveraged. After giving effect to (i) this
Offering and the application of the net proceeds therefrom at an assumed initial
public offering price of $13.00 per share, (ii) the Refinancing and (iii) the
Note Repayment, the Company's consolidated indebtedness would have been
approximately $235.5 million at December 31, 1994. See "Use of Proceeds,"
"Capitalization," and "Selected Consolidated Financial Data."
The degree to which the Company is leveraged could have important
consequences to holders of the Common Stock, including, but not limited to, the
following: (i) the Company's ability to obtain additional financing for working
capital, capital expenditures, acquisitions, general corporate purposes,
refinancing of indebtedness or other purposes may be impaired, thereby limiting
its ability to grow; (ii) a substantial portion of the Company's cash flow from
operations must be dedicated to the payment of the principal of and interest on
its indebtedness, thereby reducing the funds available to the Company for its
operations; (iii) the Company is more highly leveraged than certain of its
competitors, which may place the Company at a competitive disadvantage; (iv)
certain of the Company's borrowings are at variable rates of interest, which
could result in higher interest expense in the event of increases in interest
rates; and (v) the Company's high degree of leverage may make it more vulnerable
to economic downturns and may limit its ability to withstand competitive
pressures.
COMPETITION
The Company's primary businesses, truck trailer manufacturing and automotive
products manufacturing, are highly competitive. The Company competes with other
truck trailer manufacturers and automotive stamping companies of varying sizes
(including the in-house capabilities of certain automotive manufacturers), some
of which have greater financial resources than the Company. In addition,
barriers to entry in the truck trailer manufacturing industry are low and,
therefore, it is possible that additional competitors could enter the market at
any time. Great Dane is, and believes that several of its competitors are, in
the process of adding manufacturing capacity, which may have an adverse effect
on order backlog and pricing throughout the industry. Although Great Dane is
presently one of the largest manufacturers in the truck trailer industry, there
can be no assurance that it will be able to maintain or increase its market
share.
9
<PAGE>
RELIANCE ON MAJOR CUSTOMERS
The Company's automotive products operations rely heavily on sales to GM.
For the year ended December 31, 1994, sales to GM accounted for approximately
93% of the automotive products operations' revenues and approximately 13% of the
Company's total revenues. Suppliers of automotive products have experienced
increased pricing pressure from OEMs which are taking aggressive measures to
reduce their operating costs, including significant price reductions from
suppliers. Although opportunities for new business may arise for the automotive
segment as a result of GM's pressure on other suppliers, future earnings of this
segment of the Company's business may be materially adversely affected by the
price reductions required or requested by GM, by decisions by GM to utilize its
own facilities to manufacture these products or by work stoppages at GM plants.
Although GM provides 13 week forecasts of its purchasing requirements, changes
in its production may result in changes to these requirements. In addition,
although the automotive segment is attempting to diversify its customer base,
there can be no assurance that it will be able to reduce its reliance on GM in
the foreseeable future.
Great Dane entered the intermodal container manufacturing business in
reliance on a large order from J.B. Hunt. There can be no assurance that Great
Dane will be able to attract other substantial customers for these products. For
the year ended December 31, 1994, J.B. Hunt accounted for approximately 10% of
Great Dane's revenues.
GOVERNMENT REGULATION OF TRUCK TRAILERS
The federal and state governments regulate certain safety features
incorporated in the design of truck trailers. Changes or anticipation of changes
in these regulations can have a material impact on the cost of manufacturing
truck trailers and on the purchasing policies of Great Dane's customers. These
factors may adversely affect the financial condition of the Company.
ENVIRONMENTAL MATTERS
The Company's operations are subject to numerous federal, state and local
laws and regulations pertaining to the discharge of materials into the
environment. The Company has taken steps related to such matters in order to
minimize the risks to the environment from potentially harmful aspects of its
operations. From time to time, the Company has incurred expenses to improve its
facilities in accordance with applicable laws and may be required to do so again
in the future. Certain of Great Dane's manufacturing processes formerly involved
the emission of chlorofluorocarbons, but Great Dane has changed those processes
to comply with new regulations.
The Company also remains obligated to indemnify purchasers of certain of its
prior subsidiaries and purchasers of properties sold by prior subsidiaries for
environmental contamination, if any, of properties owned by such subsidiaries.
The Company's expenditures related to the foregoing environmental matters and
indemnification obligations have not had, and the Company does not currently
anticipate that such expenditures will have, a material adverse effect on the
Company's financial condition, although there can be no assurance that this will
remain the case.
IMPACT OF CITY REGULATION AND EXPIRATION OF ANNUAL LIMIT ON NEW MEDALLION
ISSUANCE
Chicago regulates Yellow Cab's operations through maintenance, lease rate,
insurance and inspection requirements, as well as through taxes, license fees
and other means. In 1993, Chicago gave the Commissioner of Consumer Services
broad powers to set maximum lease rates, which, in certain instances, have been
set at lower rates than those currently charged by Yellow Cab. Although Yellow
Cab has filed a petition for higher rates than those set by the Commissioner and
is allowed to continue charging its current rates pending action on its
petition, there can be no assurance that it will be successful or that in the
future it will be able to pass through any increased costs by lease rate
increases or other means.
The agreement between Yellow Cab and Chicago, pursuant to which increases in
the total number of outstanding medallions in Chicago are limited to a maximum
of 100 annually, expires on December 31, 1997. There can be no assurance as to
how many medallions Chicago will issue after the expiration of the agreement,
nor as to the effect, if any, on the Company, of such issuance, including the
effect on
10
<PAGE>
medallion values. Although Yellow Cab has sold medallions during the past year
at selling prices of approximately $38,000 per medallion, there can be no
assurance that such values will continue to prevail in the market, especially
after December 31, 1997. See "Business -- Other Operations -- Vehicular -- The
Medallions" and "-- Regulatory Issues."
CONTROL OF THE COMPANY
Upon consummation of this Offering, the four current stockholders of
Holdings will own 74.7% of the outstanding Common Stock (71.9% if the
Over-Allotment Option is exercised in full). Therefore, these stockholders,
acting together, effectively will have control of the Company and will have
sufficient voting power to determine the outcome of any corporate transaction or
other matter requiring stockholder approval, including, among other things, the
election of directors. See "Ownership of Common Stock."
NO PRIOR PUBLIC MARKET; DETERMINATION OF OFFERING PRICE
Prior to this Offering, there has been no public market for the Common
Stock. Although the Common Stock has been approved for quotation on the Nasdaq
Stock Market (National Market), subject to official notice of issuance, there
can be no assurance that an active trading market will develop or be sustained
after this Offering or that the market price for the Common Stock will not
decline below the initial public offering price. The initial public offering
price of the Common Stock will be determined solely by negotiations between the
Company and the Underwriters and may not bear any relationship to the market
price for the Common Stock following this Offering. See "Underwriting" for a
discussion of factors to be considered in determining the initial public
offering price.
DILUTION
Purchasers of the Common Stock offered hereby will experience an immediate
and substantial dilution of $18.64 in net tangible book value per share of
Common Stock from the initial public offering price (at an assumed initial
public offering price of $13.00 per share).
SHARES ELIGIBLE FOR FUTURE SALE
Currently, all of the outstanding capital stock of the Company is owned by
four persons. Upon completion of this Offering, 22,500,000 shares of Common
Stock will be issued and outstanding, 16,800,000 of which will be owned by these
four persons. The Company and these stockholders have each agreed not to offer,
sell, contract to sell, or otherwise dispose of any shares of Common Stock for a
period of 180 days after the date of this Prospectus (other than shares acquired
in this Offering) without the prior written consent of the Representatives of
the Underwriters. After expiration of that time period, shares owned by such
stockholders may only be sold pursuant to an effective registration statement in
compliance with the Securities Act of 1933, as amended (the "Securities Act"),
or an applicable exemption from the registration requirements thereunder. The
Company has also (i) adopted a stock option plan for key employees and directors
(the "1994 Option Plan"), subject to stockholder approval and approval of the
Compensation Committee of the Board of Directors (the "Compensation Committee"),
(ii) adopted a stock option plan for its independent directors who will serve on
the Board of Directors after the consummation of this Offering (the "Outside
Directors Option Plan") and (iii) granted an option to Jay H. Harris, the
Executive Vice President and Chief Operating Officer of the Company (the "Harris
Option"). A total of 1,792,500 shares of common stock have been reserved for
issuance upon exercise of options. See "Management -- Compensation Pursuant to
Plans" and "-- Employment Agreements ." No prediction can be made as to the
effect, if any, that future sales of shares of Common Stock, or the availability
of shares of Common Stock for future sales, will have on the market price of the
Common Stock prevailing from time to time. Sales of substantial amounts of
Common Stock (including shares issued upon the exercise of stock options to be
granted under the 1994 Option Plan, the Outside Directors Option Plan and the
Harris Option), or the perception that such sales could occur, could adversely
affect prevailing market prices for the Common Stock. See "Shares Eligible for
Future Sale."
11
<PAGE>
FUTURE COMPENSATION EXPENSE
The options granted (subject to certain conditions) to employees pursuant to
the 1994 Option Plan and the Harris Option were granted at less than fair market
value. See "Management -- Compensation Pursuant to Plans" and " --Employment
Agreements." Therefore, the Company will recognize compensation expense in the
period in which all conditions to the grants of the options have been satisfied.
With respect to the Harris Option, this is expected to result in a charge to net
income of approximately $0.4 million in the first or second quarter of 1995
(assuming a fair market value of $13 per share of Common Stock). With respect to
options granted pursuant to the 1994 Option Plan, this is expected to result in
a charge to net income of approximately $0.7 million at the time of approval of
the plan by the stockholders of the Company (assuming a fair market value of $13
per share of Common Stock at that time).
USE OF PROCEEDS
The net proceeds to be received by the Company from the sale of the
5,700,000 shares of Common Stock offered hereby are estimated to be
approximately $66.7 million, assuming an initial public offering price of $13.00
per share, and after deducting an estimated $7.4 million in offering expenses
and underwriting discounts and commissions payable by the Company estimated to
be incurred in connection with the Offering. The Company intends to use all of
the net proceeds of this Offering to redeem 12 3/4% Debentures. The Company
intends, promptly after consummation of this Offering, to issue a notice of
redemption with respect thereto. The funds required for the redemption will be
held in escrow until the requisite 30-day redemption notice period has expired
(during which time interest will continue to accrue) and payment can be made.
Interest on the 12 3/4% Debentures for such period is expected to be
approximately $0.4 million, net of estimated interest earnings from the escrow
account. The net proceeds from the exercise of the Over-Allotment Option would
be used for general corporate purposes which may include the repurchase of
additional 12 3/4% Debentures pursuant to the redemption described above or
subsequently in privately negotiated transactions and/or open market purchases.
DIVIDEND POLICY
The Company intends to retain any future earnings to provide funds for the
operation and expansion of its business and does not anticipate paying any cash
dividends in the foreseeable future. As a holding company, the ability of
Holdings to pay dividends is dependent upon the receipt of dividends or other
payments from its subsidiaries. Although the subsidiaries are not prohibited by
the terms of their bank loans from paying dividends to Holdings, their
continuing ability to access lines of credit thereunder is conditioned on
meeting certain financial covenants. Payments of substantial dividends could
result in a violation of those covenants. The payment of dividends by Holdings
is also subject to certain restrictions under the indenture pursuant to which
the 12 3/4% Debentures were issued. Subject to such restrictions, any
determination to pay dividends in the future will be at the discretion of
Holdings' Board of Directors and will be dependent upon the Company's results of
operations, financial condition, contractual restrictions, and other facts
deemed relevant at that time by Holdings' Board of Directors.
12
<PAGE>
CAPITALIZATION
The following table sets forth the unaudited consolidated capitalization of
Holdings and its subsidiaries as of December 31, 1994, and as adjusted to give
effect to (i) the Refinancing, (ii) the Note Repayment in February of 1995 and
(iii) the sale by Holdings of the 5,700,000 shares of Common Stock offered
hereby (assuming an initial public offering price of $13.00 per share and after
deduction of underwriting commissions and discounts and the estimated expenses
of this Offering) and the application of the estimated net proceeds as described
in "Use of Proceeds." The table should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Company's Consolidated Financial Statements and Notes thereto appearing
elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1994
--------------------------
HISTORICAL AS ADJUSTED
------------ ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Debt (including current maturities):
Subsidiary Debt.................................................................. $85,938 $119,938(1)
Shareholders' Notes.............................................................. 30,000 0 (2)
12 3/4% Senior Subordinated Debentures (net of unamortized discount)............. 122,315 60,528
14 1/2% Subordinated Discount Debentures (net of unamortized discount)........... 55,012 55,012
------------ ------------
Total Debt..................................................................... 293,265 235,478
Minority Interest.................................................................. 586 586
Shareholders' Deficit:
Common Stock, par value $0.01.................................................... 168 225
Additional paid-in capital....................................................... 14,832 81,475
Retained earnings deficit........................................................ (11,869) (16,589 )(3)
Notes receivable from shareholders............................................... (625) 0 (4)
Amounts paid in excess of Motors' net assets..................................... (127,748) (128,373 )(4)
Unrealized depreciation on Insurance Subsidiary's investments in certain debt and
equity securities............................................................... (2,060) (2,060)
------------ ------------
Total Shareholders' Deficit.................................................... (127,302) (65,322)
------------ ------------
Total Capitalization......................................................... $166,549 $170,742
------------ ------------
------------ ------------
<FN>
- --------------
(1) The increase in subsidiary debt resulted from the Refinancing which
occurred in January and February of 1995. Proceeds of the Refinancing were
used to repay existing debt, fund the Note Repayment and pay fees and
expenses.
(2) Reflects the Note Repayment which occurred in February of 1995.
(3) The increase in retained earnings deficit results from an extraordinary
charge to earnings from:
</TABLE>
<TABLE>
<S> <C>
(a) Write off of debt discount on repurchased 12 3/4% Debentures.......... $ (4,913)
(b) Premium paid on repurchase of 12 3/4% Debentures...................... (1,414)
(c) Write off of unamortized debt issue costs; and........................ (935)
(d) Tax effect of above adjustments....................................... 2,542
---------
Increase in historical retained earnings deficit........................... $ (4,720)
---------
---------
</TABLE>
(4)
____ The notes receivable from shareholders represented amounts payable, on
demand, to Motors solely to enable Motors to meet certain net worth
requirements in its capacity as general partner of Checker L.P. when
Checker L.P. was formed. The notes receivable were included in Motors' net
assets when the determination of the amount paid in excess of Motors' net
assets was made. With the liquidation of Checker L.P. in 1995, the notes
were cancelled. Accordingly, an adjustment to the amount paid in excess of
Motors' net assets has been made.
13
<PAGE>
DILUTION
The deficit in net tangible book value of the Company at December 31, 1994
was ($185.8) million or ($11.06) per share of Common Stock. The deficit in net
tangible book value represents the excess of the Company's total liabilities
over its total tangible assets, divided by the number of outstanding shares of
Common Stock. After giving effect to (i) the Refinancing, (ii) the Note
Repayment and (iii) the sale of the 5,700,000 shares of Common Stock being
offered hereby (assuming a public offering price of $13.00 per share and after
deduction of the underwriting discounts and commissions and estimated expenses
of this Offering) and the application of the estimated net proceeds therefrom,
the pro forma deficit in net tangible book value at December 31, 1994 would have
been $(126.9) million or $(5.64) per share. This represents an immediate
decrease of $5.42 in the deficit in net tangible book value per share to the
current stockholders and immediate dilution of $18.64 per share to persons
purchasing the shares offered hereby. The following table illustrates the per
share dilution with respect to a new investor's purchase of a share of Common
Stock on a pro forma basis at December 31, 1994.
<TABLE>
<S> <C> <C>
Assumed initial public offering price
per share.............................. $ 13.00
Deficit in net tangible book value per
share before this Offering........... $ (11.06)
Decrease per share in the deficit in
net tangible book value attributable
to new investors..................... $ 5.42
Pro forma deficit in net tangible book
value per share after this Offering.... (5.64)
Dilution per share to new investors..... $ 18.64
</TABLE>
14
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table presents selected consolidated financial data derived
from the consolidated financial statements of Great Dane Holdings Inc. and
subsidiaries for the five years ended December 31, 1994, which have been audited
by Ernst & Young LLP, independent auditors. The following financial data should
be read in conjunction with the Consolidated Financial Statements and Notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------------------------
1990 1991 1992 1993 1994
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues.................................................... $ 693,211 $ 555,266 $ 716,733 $ 909,326 $1,096,477
Cost of Revenues............................................ 584,680 480,543 610,870 778,805 929,232
---------- ---------- ---------- ---------- ----------
Gross Profit................................................ 108,531 74,723 105,863 130,521 167,245
Selling, General and Administrative Expense................. 77,597 72,032 76,877 83,176 91,600(1)
Plant Restructuring Costs................................... 7,500 -- -- -- --
---------- ---------- ---------- ---------- ----------
Income from Operations...................................... 23,434 2,691 28,986 47,345 75,645
Interest Expense............................................ (61,596) (47,425) (42,726) (41,614) (40,165)
Interest Income............................................. 14,696 11,634 8,895 7,396 7,101
Other Income (Expense)...................................... (941) (1,078) (2,023) 3,494 1,002
Special Charge (2).......................................... -- -- -- (7,500) --
---------- ---------- ---------- ---------- ----------
Income (Loss) Before Minority Equity, Income Taxes,
Extraordinary Items and Accounting Changes................. (24,407) (34,178) (6,868) 9,121 43,583
Minority Equity............................................. (2,296) 1,931 -- -- (586)
Income Tax Benefit (Expense)................................ 6,429 5,241 (687) (5,757) (18,649)
---------- ---------- ---------- ---------- ----------
Income (Loss) Before Extraordinary Items and Accounting
Changes.................................................... (20,274) (27,006) (7,555) 3,364 24,348
Extraordinary Items (3)..................................... 27,749 31,188 -- -- --
Accounting Changes (4)...................................... -- -- -- (46,626) --
---------- ---------- ---------- ---------- ----------
Net Income (Loss)........................................... $ 7,475 $ 4,182 $ (7,555) $ (43,262) $ 24,348
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Income (Loss) Per Share (5):
Before extraordinary items and accounting changes......... $ (1.21) $ (1.61) $ (.45) $ .20 $ 1.45
Net income (loss) per share............................... $ .45 $ .25 $ (.45) $ (2.58) $ 1.45
<CAPTION>
DECEMBER 31,
----------------------------------------------------------
1990 1991 1992 1993 1994
---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total Assets................................................ $ 537,677 $ 481,305 $ 493,763 $ 517,336 $522,051
Total Debt.................................................. 376,692 316,324 310,368 296,273 293,265
Shareholders' Deficit....................................... (104,745) (98,374) (106,296) (149,517) (127,302)
<FN>
- ------------------
(1) Selling, general and administrative expenses for the year ended December 31,
1994 includes $3.5 million of expenses related to the Company's debt
refinancing which was not completed. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
(2) Represents cost to the Company of the settlement of certain litigation with
the Boeing Company. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and Note G to Notes to Consolidated
Financial Statements -- December 31, 1994.
(3) Extraordinary items in all years relate to the gains on the repurchase of
indebtedness.
(4) The accounting changes represent the cumulative effect of changes in
accounting principles as a result of the adoption, as of January 1, 1993, of
the provisions of Statement of Financial Accounting Standards ("SFAS") No.
106, "Employers Accounting for Postretirement Benefits Other Than Pensions,"
and SFAS No. 109, "Accounting for Income Taxes." See Notes H and J to Notes
to Consolidated Financial Statements -- December 31, 1994.
(5) The per share information is computed by dividing the respective income
(loss) by the weighted average number of common shares outstanding
(16,800,000 for all periods, after giving effect to the 16,800 to 1 stock
split to be effected prior to the commencement of this Offering). The stock
options were not taken into account because the exercise of stock options
would not be materially dilutive.
</TABLE>
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
1994 COMPARED TO 1993:
Revenues increased $187.2 million and gross profit increased $36.7 million
during the year ended December 31, 1994, as compared to the same period of 1993.
The higher revenues are principally attributed to higher Trailer Manufacturing
revenues ($147.2 million), primarily associated with a higher volume of sales
within the segment. Automotive Products revenues increased $29.6 million during
the year ended December 31, 1994, as compared to the same period in 1993.
General increases in volumes to accommodate automotive customers' demands and
additional jobs were the principal reasons for the revenue increases.
The Company's operating profit (gross profit less selling, general and
administrative expenses) increased $28.3 million in 1994 compared to 1993. This
increase is attributed to an increase of Trailer Manufacturing operating profits
($26.2 million) which is principally due to higher volumes of sales and higher
margins, and an increase of Automotive Products operating profits ($4.3 million)
principally due to higher sales and higher margins. These increases in operating
profits were offset by higher corporate costs due principally to the refinancing
which was not completed ($3.5 million).
Sales, general and administrative ("SG&A") expenses were $8.4 million higher
in 1994 as compared to 1993, but as a percentage of sales, SG&A was 0.8
percentage points lower in 1994 as compared to 1993.
During the year ended December 31, 1994, a $0.6 million charge was recorded
to reflect a minority equity in SCSM.
Income tax expense is higher for financial statement purposes than would be
computed if the statutory rate were used 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.
Net income was $24.3 million for the year ended December 31, 1994, as
compared to a $43.3 million net loss for the prior year. The improvement in net
income is attributed to the reasons mentioned above, as well as a one-time
charge ($46.6 million) incurred for the implementation of SFAS Nos. 106 and 109
which was recorded in the first quarter of 1993.
1993 COMPARED TO 1992:
During 1993, revenues increased $192.6 million and gross profit increased
$24.7 million as compared to 1992. The Truck Trailer Manufacturing and the
Automotive Products segment operations benefited from increased demand for their
products. Truck Trailer Manufacturing revenues increased by $175.5 million as
compared to 1992, primarily due to the sale of containers and chassis which were
introduced in late 1992 and sold principally to one customer, and a higher
volume of truck trailer sales. Automotive Products revenues increased $15.3
million as compared to 1992. Increased production of the General Motors Blazer
and Suburban models and crew cab products and other general increases in volumes
to accommodate automotive customers' demands are the principle reasons for the
increase. Vehicular Operations revenues increased $1.5 million in 1993 as
compared to 1992. The increase was attributed to lease rate increases obtained
in 1993 to cover certain Vehicular Operations cost increases. The revenue
increase was somewhat offset by the impact of tendering medallions to the City
of Chicago.
The factors impacting sales, as discussed previously, had the effect of
increasing the Company's 1993 operating profit by $18.4 million as compared to
1992. Truck Trailer Manufacturing operating profit increased by $14.8 million as
compared to 1992. This increase is principally due to higher volumes, partly
offset by SG&A expenses. Higher volumes were also the principal reason for an
increase of $3.7 million of Automotive Products operating profits as compared to
1992.
16
<PAGE>
SG&A expenses were $6.3 million higher in 1993 as compared to 1992, but as a
percentage of sales, SG&A expense is 1.6 percentage points lower in 1993 as
compared to 1992.
Other expenses decreased $5.5 million in 1993 as compared to 1992. The
decrease in expense resulted primarily from $1.4 million income from the
settlement of a dispute in 1993 and $2.8 million income from sales of taxi
medallions in 1993.
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. CV89-199MA, United States District Court for the District
of Oregon. In that lawsuit, Boeing sought damages and declaratory relief for
past and future costs resulting from alleged groundwater contamination at a
location in Gresham, Oregon, where the three prior subsidiaries of the Company
formerly conducted business operations. 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 will pay Boeing $12.5
million over the course of five years, at least $5 million of which has been
committed by certain insurance carriers in the form of cash or irrevocable
letters of credit. Accordingly, the Company recorded a $7.5 million special
charge during 1993 to provide for the cost associated with this legal
proceeding. In accordance with the settlement agreement, Boeing's claims against
the Company and the three former subsidiaries have been dismissed and Boeing has
released and indemnified the Company with respect to certain claims.
Net loss was $43.3 million for the year ended December 31, 1993, as compared
to a $7.6 million net loss for the year ended December 31, 1992. The
fluctuations in net loss between the years are attributed to the reasons
discussed above, as well as the one-time charge ($46.6 million) incurred for the
implementation of SFAS Nos. 106 and 109 which was recorded in 1993.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Available cash and cash equivalents, cash flow generated from operations
($25.2 million, $30.7 million and $56.4 million for the years ended December 31,
1992, 1993 and 1994, respectively), proceeds from borrowings and proceeds from
disposal of assets have provided sufficient liquidity and capital resources for
the Company to conduct its operations during each of these years.
From the time that present management assumed control of the Company in
January 1989, it has been continually reassessing the Company's financial
condition and prospects. The Company was hampered in its efforts to achieve a
refinancing of its debt in recent years, in part because of litigation with the
Boeing Company which was settled in December 1993 and in part because of
litigation with the Conservator of Executive Life Insurance Company ("ELIC"), a
limited partner in the Partnership. A settlement with ELIC, agreed to in
principle in early 1994, was consummated in December 1994. See "Business --
Legal Proceedings -- Executive Life Litigation."
In February 1994, the Company filed a Registration Statement on Form S-1
with the Securities and Exchange Commission in connection with an overall
refinancing of the Company's outstanding indebtedness. On August 10, 1994, the
Company announced that, due to market conditions, it had postponed the proposed
refinancing and would not complete the transaction on the terms described in its
registration statement. Certain costs were incurred in connection with the
refinancing efforts which would have been capitalized and amortized over the
life of the new loans. Because this refinancing was not completed, those costs,
which totaled approximately $3.5 million (pre-tax), were expensed against income
in the quarter ended September 30, 1994.
On November 23, 1994, the Company filed a Registration Statement on Form S-1
with the Securities and Exchange Commission in connection with this Offering.
The Company is registering 6,555,000 shares of common stock (including 855,000
shares which the underwriters have the right to purchase to cover
over-allotments) (in each case, giving effect to a 16,800 to 1 split of the
common stock to be effected prior to consummation of this Offering). It is
currently estimated that the initial public offering price will be between $12
and $14 per share. All of the net proceeds are intended to be used to redeem
12 3/4% Senior Subordinated Debentures due 2001. If successfully completed, the
principal effect of this Offering
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will be to reduce the cash flow necessary from its subsidiaries to meet the
Company's obligations. Any excess proceeds from this Offering as a result of the
sale of the over-allotment will be utilized to retire additional debentures or
for working capital.
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. The operating subsidiaries' plans indicate that sufficient funds
are anticipated to be available to the Company to meet its short-term
obligations.
In December 1994, the Company purchased ELIC's interest in the Partnership
for $37 million. $30 million of this payment was provided by a subsidiary
through borrowings on its revolving credit facility and the balance was paid
from available cash.
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 to repay approximately $27 million of bank debt, including the
Partnership term loan, the equipment term loan and the notes payable to the
bank, provide $15 million to the Company to retire a portion of certain notes
outstanding to the Company's shareholders and 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 general corporate purposes. The new term loan
requires twenty quarterly principal payments of approximately $2.3 million,
commencing June 30, 1995, plus interest at either the bank's prime rate plus
1.25% (subject to reductions of up to 0.5% upon the occurrence of certain
events) or a selected Eurodollar contract rate plus 300 basis points (subject to
reductions of up to 50 basis points upon the occurrence of certain events). The
same interest rates are applicable to the revolving credit facility. The new
loan is secured by substantially all of Motors' assets including the stock of
Country. The new 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 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 general corporate
purposes. The term loan is subject to further increases as final collateral
appraisals are completed and as equipment for the new facility in Terre Haute,
Indiana is purchased. The Company believes that the term loan will be increased
to between $33 million and $38 million. The initial term loan proceeds, which
were drawn immediately upon closing, were used, together with drawings under the
revolver, to repay approximately $17 million of bank debt, provide $15 million
to the Company to retire the balance of the shareholder notes and pay fees and
expenses. The term loan requires monthly principal payments of $0.3 million plus
interest on the unpaid principal amount of the loan in arrears at a rate equal
to 1% above the prime rate of interest charged from time to time by Bank of
America or a rate equal to 2.5% above a selected Eurodollar contract rate with
the unpaid principal balance due five years after the closing date. The same
interest rates are applicable to the revolving credit facility. The loans are
secured by substantially all of the assets of Great Dane and its subsidiaries.
The loan agreement requires Great Dane to, among other things, comply with
certain financial covenants, limits the amount of loans and transfers to the
Company, limits additions to and sales of Great Dane's fixed assets and limits
additional Great Dane borrowings.
The refinancing of the Motors and Great Dane bank debt, as well as the
expansion of each of these entities' availabilities under their respective
credit facilities, improves the Company's liquidity.
Effective January 1, 1994, the Company adopted the provisions of SFAS No.
115, "Accounting for Certain Investments in Debt and Equity Securities." In
accordance with this statement, prior period financial statements have not been
restated to reflect the change in accounting principle. The opening balance of
shareholders' deficit was decreased by $1.4 million (net of $0.8 million in
deferred income
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taxes) to reflect the net unrealized holding gains on securities classified as
available-for-sale previously carried at amortized cost or lower of cost or
market. The adoption of this SFAS has not adversely affected liquidity and
capital resources.
Purchases of property, plant and equipment have averaged approximately $18.6
million per year over the past three years and have been funded principally by
cash flow generated from operations, as well as proceeds from disposal of
assets. Purchases of property, plant and equipment for 1995 are anticipated to
be approximately $38.3 million and are expected to be funded principally by cash
flow generated from operations and borrowings.
General Motors Corporation ("GM"), a major customer of the Company's
automotive products segment, is resorting to many measures, including obtaining
significant price reductions from its suppliers, in an effort to reduce its
operating costs. Automotive products segment management believes that it has
adequately provided in its financial plans for any price reductions which may
result from its current discussions with GM. However, price reductions in excess
of those anticipated could have a material adverse effect on the automotive
products operations.
IMPACT OF INFLATION
Recently, due to competitive market conditions, the Company has been unable
to factor all cost increases into selling prices for its products and services.
The Company does not believe that the impact of inflation affects the Company
any more than it affects the Company's competitors.
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BUSINESS
GENERAL
Through Great Dane, the Company is the one of the largest manufacturers of
truck trailers and intermodal containers and chassis in the United States. In
addition, through Motors' subsidiaries, CMC and SCSM, the Company is one of the
leading independent manufacturers of sheet metal stampings for automotive
components and subassemblies for sale to North American OEMs. For the year ended
December 31, 1994, these two principal lines of business accounted for
approximately 93% of the Company's revenues and 93% of the Company's total
segment operating profit. The Company's other operations consist of its
vehicular operations, primarily Yellow Cab, which is currently the largest owner
of taxicabs and provider of taxi-related services in Chicago, Illinois and its
insurance operations, Country, which underwrites property and casualty
insurance.
The Company's objective is to expand its transportation related
manufacturing businesses, Great Dane, CMC and SCSM, primarily through internal
growth. In addition, the Company will consider strategic acquisitions, should
opportunities arise. The Company will also focus on reducing its aggregate
indebtedness and believes that Yellow Cab and Country provide a consistent
source of cash flow for debt repayment.
TRAILER MANUFACTURING OPERATIONS
OVERVIEW
Great Dane designs, manufactures and distributes a full line of truck
trailers (including dry freight vans, refrigerated trailers and platform
trailers) and domestic intermodal containers and chassis. In 1994, Great Dane
was one of the largest manufacturers of truck trailers in the United States,
accounting for approximately 13.0% of the new truck trailer market, including
11.5% of the new van market, 11.5% of the new platform trailer market and 38.4%
of the new reefer market. Great Dane is also one of the leading producers of
intermodal containers and chassis, with a market share of 18.8% in 1994. For the
year ended December 31, 1994, Great Dane generated approximately 78% of the
Company's revenues and 70% of the Company's total segment operating profit.
INDUSTRY OVERVIEW
The new truck trailer industry, with estimated annual revenues for 1994 of
approximately $3.8 billion, is cyclical and competitive and closely tied to
overall economic conditions as well as to regulatory changes. In addition, new
truck trailers have traditionally had a five to seven-year replacement cycle. In
1990 and 1991, the industry experienced a severe downturn due to the recession
in the United States. The industry recovered during the period from 1992 through
1994 due in large part to the general improvement in the U.S. economy, the
replacement of a large number of truck trailers sold in the mid-1980's and, to a
lesser extent, new regulations in certain states permitting longer truck
lengths.
The national truck trailer market is highly fragmented, with approximately
180 companies operating in the truck trailer manufacturing industry. In 1994,
the two largest companies, Great Dane and Wabash National Corporation,
accounted, based on registrations, for approximately 24% of the market and the
ten largest companies accounted for approximately 66% of sales. The basis of
competition in the truck trailer industry is product quality and durability,
price, flexibility in design and engineering, warranties, service and
relationships. Due in large part to the quality of its products and its strong
distribution system, the Company believes that Great Dane has built sustainable
competitive advantages in each of these important areas.
Recently, the transportation industry has increased its use of intermodal
containers and chassis. Since 1988, intermodal container traffic has grown by a
compounded annual growth rate of approximately 11%. "Intermodal" refers to the
transition from one mode of transportation to another and, as used in this
Prospectus, refers to the transition from rail to road. "Intermodal containers,"
as used in this Prospectus, refers to containers which are designed to travel
principally on rail, and which, when removed from the rail car, can be placed on
a chassis for transportation by truck to and from a rail yard.
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BUSINESS STRATEGIES
In 1991, Great Dane assembled a new senior management team and initiated a
strategic plan designed to improve its competitive position by (i) reducing
operating costs; (ii) increasing manufacturing efficiencies and flexibility;
(iii) developing new products; and (iv) expanding its large order customer base.
Accordingly, Great Dane reduced overhead, reconfigured plants to increase
capacity, re-designed assembly lines to improve efficiencies, re-engineered
certain products to reduce material and manufacturing costs, initiated new
product development programs and began to develop relationships with large order
customers, including J.B. Hunt and XTRA Corporation. From 1991 to 1994, Great
Dane's revenues increased from $400.2 million to $859.1 million and segment
operating profit increased from $7.1 million to $58.6 million. In addition,
Great Dane's operating profit margin increased from 1.8% in 1991 to 6.8% for
1994.
Great Dane believes that these initiatives combined with its strong brand
name and reputation for manufacturing high quality products have positioned it
for continued growth. The key elements of its growth strategy are as follows:
- PRODUCT INNOVATION. Great Dane emphasizes the production of
custom-designed and proprietary products which generally produce higher
margins than standard products. Great Dane's engineering and flexible
manufacturing expertise enable it to produce custom-designed products
rapidly and efficiently while incorporating distinctive features through
computer aided design technologies. Recent product innovations marketed by
Great Dane include its proprietary, lightweight Thermacube van and reefer
which utilize a high density foam technology that yields superior cargo
space, strength, and thermal properties, and unique intermodal containers
and chassis which initiated Great Dane's entry into the growing intermodal
market. New products planned for introduction during 1995 include a
proprietary, ultra-lightweight flatbed trailer which employs a new
technology that uses foam plus minimal amounts of steel (instead of
aluminum), and a new reefer product which incorporates a unique floor
design that offers superior thermal efficiencies, longevity and cargo
space.
- INCREASE MARKET SHARE WITH LARGE ORDER FLEET CUSTOMERS. Great Dane is
actively seeking to increase its sales to large order fleet customers
which accounted, during 1993, for approximately 43% of total U.S. van
trailer purchases. The Company believes that these customers are the
fastest growing segment of the industry and estimates that its share of
fleet orders approximated 10% during 1993. The balance of the U.S. van
trailer market consists of small and medium sized customers (approximately
30%) and leasing companies (approximately 27%) where Great Dane estimates
it had, during 1993, a 27% and 17% market share, respectively. In order to
increase its market share with large order fleet customers, Great Dane has
acquired the property and buildings in Terre Haute, Indiana for a 500,000
square foot manufacturing and product distribution facility, a portion of
which will be equipped during 1995 with two high speed, more cost
efficient assembly lines dedicated to high volume, standard specification
fleet orders. This new manufacturing facility will be located near the
existing Brazil, Indiana plant and Great Dane expects to utilize its
Brazil, Indiana management team to help contain overhead expenses.
- STRONG NATIONAL DISTRIBUTION NETWORK. The Company believes that Great
Dane's distribution network, which consists of 17 Company-owned branches
and 51 independent dealers, is the largest marketing organization in the
North American trailer industry. This network provides Great Dane with a
competitive advantage in marketing its new and used trailer products and
providing higher-margin aftermarket parts and services. Great Dane
believes that its parts and services business will provide earnings growth
in the coming years due to the increasing size of the Great Dane and U.S.
trailer fleets.
- INTERMODAL TRANSPORTATION. In 1992, Great Dane entered the intermodal
transportation market by developing, in conjunction with a leading
truckload carrier, a unique line of intermodal containers and matching
ultra-lightweight chassis. These containers and chassis enable its
customers to utilize double stack rail intermodal service to haul freight
loads of similar size and weight to
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those it carries with conventional over-the-road trailers. Great Dane's
strategy is to utilize its engineering expertise to design intermodal
products that meet the specific requirements of its customers. Great Dane
has also improved its market responsiveness by adapting certain assembly
lines to produce both trailers and containers.
PRODUCTS
GENERAL. Great Dane's principal products include vans, reefers, platform
trailers and intermodal containers and chassis. During 1994, the sale of these
products accounted for approximately 83% of Great Dane's revenues. Great Dane's
trailers and intermodal containers are manufactured in sizes ranging from 28 to
57 feet. Great Dane offers 11 versions of its various trailers and sells
virtually all of these versions on a regular basis. In addition to this standard
line of products, its flexible assembly operations enable Great Dane to
customize products for its customers at premium prices.
Set forth below is a description of Great Dane's share of the market for its
principal products during 1994. All figures are based on estimated shipments.
<TABLE>
<CAPTION>
GREAT DANE INDUSTRY GREAT DANE
PRODUCT TYPE UNIT SALES UNIT SALES(1) SHARE
- ------------------------------------------------------------- ----------- ------------- ---------------
<S> <C> <C> <C>
Vans......................................................... 17,449 151,280 11.5%
Reefers...................................................... 9,576 24,950 38.4%
Platform Trailers............................................ 2,431 21,080 11.5%
Intermodal Containers and Chassis............................ 8,910 47,330 18.8%
<FN>
- --------------
(1) Source: The WEFA Group, January 1995.
</TABLE>
VANS. Vans are used primarily for the transportation of dry freight. Great
Dane believes that it offers the greatest variety of vans in the industry with
four primary styles: sheet and post, aluminum plate, ThermaCube and Fiberglass
Reinforced Plastic Plywood. Great Dane sells vans primarily to for-hire
truckload carriers, private carriers and leasing companies.
Great Dane's highest volume van product is the sheet and post van. These
trailers haul general non-refrigerated freight. Great Dane's models offer custom
design features in order to improve their appearance, durability and resale
value when compared to certain competitors' models.
Great Dane's aluminum plate vans were developed in late 1991. These vans,
considered to be a premium product, utilize thicker and more durable sidewalls
than sheet and post vans and offer significantly more interior space since they
are constructed without interior liners.
Great Dane's ThermaCube van was developed and brought to market in late
1990. The ThermaCube van currently uses a technology licensed to Great Dane by
Graaff KG ("Graaff"), a German limited partnership. The ThermaCube process
involves injecting high density foam between two thin skins of aluminum or other
suitable material and bonding them into a single panel. ThermaCube vans are
lightweight and offer superior width, space, strength and thermal properties.
Since it has paid the maximum royalty due under its agreement with Graaff, Great
Dane's current and future usage of this technology for trailers is royalty free.
Fiberglass Reinforced Plastic Plywood vans account for a small percentage of
Great Dane's van sales. They offer increased inside width but are 300 pounds
heavier than sheet and post vans. These vans are very durable and therefore are
used predominantly in large metropolitan areas.
REEFERS. Great Dane's reefers are specialized products that command premium
pricing. The Company believes that it is one of the largest supplier of reefers
in the industry (with an estimated 38.4% share in 1994) and the only company to
offer more than one type of reefer. Great Dane currently sells three types of
reefers: Classic (either aluminum or stainless steel), Superseal and ThermaCube.
The refrigeration cooling units are not manufactured by Great Dane.
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The Classic reefer, essentially a sheet and post reefer, is particularly
suitable for the food distribution market because it has been engineered to
accept numerous structural modifications such as side doors and
multi-temperature refrigeration compartments. Classic reefers are sold primarily
to private carriers and truck leasing companies.
The Superseal reefer is Great Dane's lightweight, lower-priced model. This
product offers fewer options than the Classic reefer but is most popular with
for-hire carriers. Since its purchase by Great Dane in 1988, its market share
has steadily increased due to product improvements and the use of Great Dane's
national distribution network.
Great Dane believes that its proprietary ThermaCube reefer is the most
efficient and technologically advanced reefer in the industry. It offers large
cubic capacity and inside width, side wall strength and superior thermal
properties. It is currently the flagship of two of the largest reefer carriers
in the U.S. and it is gaining popularity among medium-sized carriers.
PLATFORM TRAILERS. Platform trailers are flatbeds or open deck trailers.
Great Dane offers a full line of platform trailers, consisting of drop frame,
extendible, curtainside and straight frame trailers. Drop frame flatbeds are
designed for heavy duty hauling where low deck heights are required. Extendible
flatbeds are used for self-supporting loads (e.g., pre-stressed concrete).
Curtainside flatbeds are used where side loading and cover is required. The
primary customers for Great Dane's platform trailers are for-hire material
haulers, which would include steel haulers, pre-stressed concrete carriers and
builders. Great Dane is developing and testing a new line of ultra-lightweight
flatbeds intended to increase substantially its market share.
INTERMODAL CONTAINERS AND CHASSIS. In conjunction with the growth of
intermodal container transportation, Great Dane's engineers developed a
specialized container (which can be double stacked during rail transport) and
chassis that allow a trucking company to haul containerized loads which are
similar in size and weight to those carried on conventional over the road
trailers. These containers use either aluminum plate or the ThermaCube
technology, which is Great Dane's composite wall construction, to offer greater
inside width, higher cubic capacity and greater strength than can be obtained by
conventional sheet and post construction. Further, these containers are 500 to
1,000 pounds lighter and the chassis are 1,000 to 1,500 pounds lighter than
products now in use with similar carrying capacities. The Company believes that
it is one of the two largest U.S. manufacturers of intermodal containers and
chassis and the only domestic producer of reefer containers.
SERVICES
GENERAL. Great Dane's business includes aftermarket parts and accessories
sales, used trailer sales and retail services (including repair and maintenance)
which enable it to be a full-service provider. The parts and service operations
have historically been a stable source of higher margin business.
AFTERMARKET PARTS AND ACCESSORIES SALES. Sales of replacement parts and
accessories are an important source of higher margin revenues for Great Dane,
and provide a value-added service which attracts and maintains Great Dane's
customer base. Parts and accessories are marketed through 51 full-line dealers,
17 parts-only dealers and 17 Great Dane-owned branch operations. Dealers and
branches sell parts either over-the-counter or through their respective retail
services.
USED TRAILERS. To be competitive in the sale of new trailers, it is often
necessary to accept used trailers in trade. Great Dane's larger retail branches
employ individuals who are responsible for trade-in appraisals and selling used
trailers. Great Dane believes that its nationwide distribution system provides
it with superior used trailer marketing capabilities.
RETAIL SERVICES. Great Dane owns and operates 17 full-service retail
branches, which provide repair and maintenance services. These retail branches
also provide warranty support to Great Dane's customers.
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The chart below sets forth the percentage of Great Dane's total sales and
gross profit represented by each product or service category.
<TABLE>
<CAPTION>
% OF % OF
SALES GROSS PROFITS
-------------------- --------------------
PRODUCT OR SERVICE CATEGORY 1993 1994 1993 1994
- ------------------------------------------------------------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
New Truck Trailers and Containers and Chassis............................ 82.5 82.7 63.5 68.9
Parts Sales.............................................................. 9.3 8.6 23.0 19.1
Used Trailers............................................................ 6.0 6.7 3.7 3.3
Retail Services.......................................................... 2.2 2.0 9.8 8.7
</TABLE>
BACKLOG
At December 31, 1994, Great Dane's backlog totalled $515 million and
consisted of approximately $465 million of trailer orders and $50 million of
container and chassis orders. At December 31, 1993, Great Dane's backlog
totalled $365 million and consisted of approximately $295 million of trailer
orders and approximately $70 million of container and chassis orders, while at
December 31, 1992, the backlog totalled $255 million and consisted of
approximately $134 million of trailer orders and approximately $121 million of
container and chassis orders.
MARKETING, DISTRIBUTION AND SALES
Great Dane believes it has the largest marketing organization in the United
States trailer industry. Sales and comprehensive support service functions are
implemented through 17 Company-owned branches (accounting for 50% of unit sales
excluding J.B. Hunt), 51 independent dealers throughout the United States,
Canada and Mexico (accounting for 50% of unit sales excluding J.B. Hunt), and 17
parts-only dealers. Great Dane's nationwide distribution system enables it to
reach a diversified customer base consisting of: for-hire carriers (such as J.B.
Hunt, Direct Transit, KLLM and Landair), private carriers (such as Pepsico,
Burger King, Publix, Winn Dixie and Food Lion) and leasing companies (such as
Ryder, Penske, Rollins, XTRA and Ruan). Except for J.B. Hunt, no customer
accounted for more than 5% of total revenues in 1994. The vast majority of Great
Dane's sales are made through its distribution system.
Great Dane's sales force includes approximately 119 sales representatives in
dealerships and 51 sales representatives in its branches. The Company's sales
force is given incentives to meet revenue and/or profitability targets.
Under an agreement with Associates Corporation of North America
("Associates"), Great Dane has agreed to refer to Associates, until the last
quarter of 1996, those of Great Dane's customers who request financing and Great
Dane has guaranteed 50% of Associates' losses (to a potential maximum of $1.25
million each year) if a trailer is repossessed. Great Dane has not experienced
any material losses under this agreement.
Great Dane provides five year warranties to its customers and estimates its
warranty costs are only 1.1% of its sale price.
MANUFACTURING AND OPERATIONS
MANUFACTURING. Great Dane has four manufacturing facilities, located in
Savannah, Georgia; Memphis, Tennessee; Wayne, Nebraska; and Brazil, Indiana and
has acquired property and buildings for an additional manufacturing facility in
Terre Haute, Indiana. The Company expects that the Terre Haute facility will
become operational during 1995 and will increase Great Dane's production
capacity by approximately 24% by the end of 1995. Certain of Great Dane's
manufacturing operations include flexible assembly lines that allow Great Dane
to customize its products in a cost-efficient manner.
Great Dane exercises strict quality control by screening suppliers and
conducting inspections throughout the production process. Great Dane is
currently implementing a total quality management program that endorses employee
involvement, empowerment and continuous cost improvement.
RESEARCH AND DEVELOPMENT. Great Dane currently employs a corporate
engineering department with 35 employees, which is higher than the industry
average. Great Dane makes extensive use of
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<PAGE>
computer-aided design ("CAD") technology to support production engineering.
Great Dane's use of CAD technology accelerates the development of product
innovations and manufacturing efficiencies. Great Dane's new products must meet
strict quality and durability standards and must pass strenuous road test
procedures. Great Dane believes that it is the only trailer manufacturer with
on-site road simulation testing capability.
Great Dane has developed a new proprietary floor for its ThermaCube and
certain Classic reefers which will eliminate wood components, thereby increasing
the life of the floor, increasing the capacity of the reefer, simplifying the
manufacturing process and reducing the cost to manufacture the reefer. The
warranty on the new floor will be seven years. Great Dane is also developing and
testing a new line of ultra-lightweight flatbeds intended to increase its market
share.
SUPPLIES AND RAW MATERIALS. Purchased materials represent approximately 80%
of direct cost of goods sold and are purchased on a centralized basis in order
to achieve economies of scale. Great Dane purchases a variety of raw materials
and sub-assemblies from various vendors with short-term contracts. Aluminum,
wood, tires and steel account for a significant portion of materials costs.
Great Dane has not experienced major shortages in these materials, but prices
may fluctuate. However, Great Dane attempts to minimize purchased material price
fluctuations by utilizing just-in-time inventory systems, thereby coordinating
the purchase of certain materials with customer orders.
ENVIRONMENTAL. Certain of Great Dane's manufacturing processes involve the
emission of chlorofluorocarbons, but Great Dane has changed those processes to
comply with new regulations and does not believe that this change will have a
material adverse effect on its operations. The manufacturing process generates
nominal volumes of waste materials, which are disposed of in accordance with
applicable regulations.
Great Dane is involved in a small number of environmental matters.
Management believes that the expenses associated with Great Dane's involvement
are not material in the aggregate.
PATENTS, LICENSES AND TRADEMARKS
The Company believes its "Great Dane" trademark, which identifies all of its
products, to be of value and to contribute significantly to the wide acceptance
of its products.
AUTOMOTIVE PRODUCTS OPERATIONS
OVERVIEW
Through Motors' subsidiaries, CMC and SCSM, the Company develops, designs,
engineers and manufactures a broad range of sheet metal automotive components
and subassemblies, including tailgates, fenders, doors, roofs and hoods for sale
to North American OEMs. The majority of the Company's automotive segment
revenues are derived from complex, value-added products, primarily assemblies
containing multiple stamped parts and various welded or fastened components. For
the year ended December 31, 1994, these operations generated approximately 14%
of the Company's revenues and 23% of the Company's total segment operating
profit.
INDUSTRY OVERVIEW
The North American automotive parts industry is composed of two distinct
sectors, the original equipment market and the automotive aftermarket.
Substantially all of the Company's automotive segment's sales are to the
original equipment market. Industry factors which affect the automotive
segment's current and future competitiveness, growth and performance include,
among others, trends in the automotive market and policies of OEMs with respect
to suppliers.
The overall market for new cars and light trucks in the United States and
Canada is large and cyclical, with a trend line annual growth of 2.3% from 1983
to 1993. While the trend line demand for cars has remained relatively flat over
this period, demand for minivan, sport utility vehicles and light trucks has
grown at a compound annual growth rate of 7.3% over this period. The Company
believes it is well positioned as a supplier of sheet metal components and
subassemblies to the OEMs in this high-growth market segment.
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<PAGE>
Because of ever-increasing global competition, OEMs are continually
upgrading their supplier policies. The criteria for selection include not only
cost, quality and responsiveness, but also certain full-service capabilities
including design, engineering and project management support. OEMs have
developed rigorous programs for evaluating and rating suppliers. Suppliers that
obtain superior ratings are considered for sourcing new business; those that do
not may continue their existing contracts but normally do not receive additional
business. These criteria can best be satisfied by full-service suppliers with
sufficient size and financial resources to meet such demands. For full-service
suppliers such as CMC and SCSM, the new environment provides an opportunity to
grow by obtaining business previously provided by other suppliers and by
acquiring suppliers that further enhance product, manufacturing and service
capabilities.
BUSINESS STRATEGY
The automotive supplier industry is experiencing consolidation as OEMs are
increasingly requiring suppliers to meet more stringent quality standards and to
possess certain full-service capabilities including design, engineering and
project management support. The Company's principal objective is to capitalize
on this trend as follows:
- HIGH GROWTH LIGHT TRUCK/SPORT UTILITY VEHICLE FOCUS. CMC and SCSM focus
on supplying components for light trucks, minivans and sport utility vehicles
due to their high growth rate and long model lives. From 1983 to 1993, light
truck/sport utility vehicles were the fastest growing segment of the automotive
market with a 7.3% compound annual growth rate. The Company currently supplies
parts on the following light truck/sport utility and minivan vehicles: Suburban,
Tahoe/Yukon, Crew Cab, M Van (Astro and Safari), CK Pickup Truck and CK
Sportside Pickup. In addition, during 1994, SCSM was awarded an eight-year
contract by Mercedes-Benz to produce the majority of the stamping components for
its new sport utility vehicle.
- FULL-SERVICE CAPABILITIES. CMC and SCSM provide a full complement of
services, including design, engineering and manufacturing, which enables them to
play an integral role in the development and execution of product programs for
their customers. CMC and SCSM work with their customers throughout the product
development process and, in some cases, locate employees on site at their
customers' facilities in order to design, engineer and manufacture high quality
products at the lowest possible cost. The Company believes that this close
coordination with its customers allows it to identify business opportunities and
react to customer needs in the early stages of vehicle design and, therefore,
maintain and increase its volume with its customers.
- HIGH QUALITY PRODUCTS. The Company believes SCSM is one of the premier
stamping facilities in the U.S. This is exemplified by SCSM's receipt of
numerous quality awards including the GM Mark of Excellence and the GM QSP
(quality, service, price) award for being GM's 1993 worldwide Supplier of the
Year for major metal stampings. SCSM has also been qualified to produce
components which comply with the ISO 9000 international standard. The Company
believes that these awards are a critical factor in securing additional business
from OEMs.
- EXPANDING CUSTOMER BASE. CMC and SCSM have developed strong relationships
with their customers based on their long history of supplying high quality
products and full-service capabilities. The Company's objectives are to increase
volume with its existing customers and develop relationships with new customers.
In the last year, the Company's automotive segment has expanded its business
with existing customers including GM, Freightliner Corp., Saturn Corporation and
Ford Motor Co., and has secured business with two new customers, Mercedes-Benz
and Toyota.
- FOCUS ON HIGHER-MARGIN/VALUE-ADDED PRODUCTS. CMC and SCSM strive to
compete in markets where they can achieve greater profitability by providing
complex, value-added products, primarily assemblies containing multiple stamped
parts and various welded or fastened components. Unlike many of their
competitors, CMC and SCSM presently have the equipment to supply complete
assemblies
26
<PAGE>
including large stampings and related assembly parts. As an example, SCSM
currently supplies the sliding door, which is composed of several stampings and
fasteners, on the GM Astro and Safari Vans. The majority of the automotive
segment's revenues are derived from such assemblies.
MANUFACTURING
Unlike certain of its smaller competitors, the Company's automotive products
group has the equipment and versatility to produce a wide variety of automotive
stamping products, carrying out substantially all phases of a project. SCSM
produces approximately 150 products at its over 900,000 square foot modernized
facility. Its principal products include tailgate and liftgate assemblies, door
assemblies, hood assemblies, fender assemblies, wheelhouses, pillars, back
panels, floor panels, deck lids, body side panels, roof outer panels and related
parts. SCSM currently processes 9,000 tons of steel per month for 325 part
numbers and currently ships between 30,000 and 35,000 pieces per day to its
customers from 600 dies. Volume fluctuations at SCSM are managed by use of
overtime and temporary manpower. Management is pursuing new long-term
commitments to utilize SCSM's available capacity.
The major portion of tooling design, build and prototype for SCSM is
performed by selected suppliers under close supervision. Die maintenance and
engineering changes are completed in SCSM's own 60,000 square foot die room
which houses approximately 60 tool and die makers. The tool room handles all die
maintenance and engineering changes in-house, including all serious die trouble
such as major breaks.
CMC also fabricates and assembles automotive products for those jobs whose
end product must be delivered in the surrounding Midwest region, since
transportation is a growing cost in this industry.
MARKETING AND CUSTOMERS
The automotive segment focuses on the higher-growth light truck, sport
utility vehicle and van segments of the market and currently supplies products
primarily for GM. At the present time, the Company is supplying parts on the
following GM vehicles, among others: Suburban, Tahoe/Yukon, Crew Cab, M Van
(Astro and Safari), full-size G Van, CK Pickup Truck, CK Sport Side Pickup, C
Car and H Car. The automotive segment also supplies parts for GM's service
organization.
The Company is also currently supplying parts to Freightliner Corp. (Class 6
and 7 Truck), Saturn Corporation (station wagon), Ford Motor Co. (Cougar) and
Toyota (Camry and Avalon). In addition, the automotive segment signed a contract
in March 1994 with Mercedes-Benz to produce the majority of the stamped parts
for its new sport utility vehicle for which production is expected to begin in
1997. Mercedes-Benz is providing the funding necessary for the tooling to
produce these parts. Although the Company expects these new customers to help
expand the automotive segment's business, they are not expected to reduce
significantly its substantial reliance on GM.
Shipments of customer orders from both CMC and SCSM are made on a daily or
weekly basis as required by the customer. GM provides an estimated 13-week
shipping forecast which is used for material and fabrication planning purposes.
Nevertheless, changes in production by the customer may be reflected in
increases or decreases of these forecasts.
CMC and SCSM are committed to customer satisfaction by producing parts and
providing the necessary support systems to assure conformity to customer
requirements. As evidence of success in these areas, SCSM has been awarded GM's
"Mark of Excellence" Award, and the GM Q.S.P. (quality, service, price) award
for being GM's 1993 worldwide Supplier of the Year for major sheet metal
stampings. In addition, SCSM has been awarded ISO 9000 Certification by the
International Standards Organization (ISO 9002) and CMC and SCSM have each begun
the process necessary to obtain the QS 9000 Certification.
27
<PAGE>
OTHER OPERATIONS
VEHICULAR
OVERVIEW
For the year ended December 31, 1994, the vehicular operations generated
approximately 4% of the Company's revenues and 8% of the Company's total segment
operating profit. Yellow Cab is the largest taxicab fleet owner in Chicago and
as of January 1, 1995, owned 2,271 or 41% of the 5,500 medallions available in
Chicago. Yellow Cab's primary business is the leasing of its medallions and
vehicles to independent taxi operators through two programs: the owner-operator
program and the daily lease program. The Company also provides a variety of
other services to taxi drivers and non-affiliated medallion holders, including
insurance coverage through Country and repair and maintenance services through
AutoWerks.
THE OWNER-OPERATOR AND DAILY LEASE PROGRAMS
Pursuant to Yellow Cab's owner-operator program, an independent,
non-employee taxi operator leases from Yellow Cab a license and vehicle, with an
option to purchase the vehicle beginning at the end of the second year. During
the lease term (generally five years), Yellow Cab receives a weekly lease
payment for the vehicle as well as a weekly fee to cover the use of Yellow Cab's
license and other services provided by Yellow Cab and its affiliates, including
use of its colors and tradename, liability insurance coverage, radio dispatch,
repair and maintenance. Most operators also purchase the required collision
insurance from Country. See "Business -- Other Operations -- Insurance." As of
January 1, 1995, approximately 62% of the Company's medallions were leased under
the owner-operator program. The daily lease program, which allows drivers to
lease a medallion and a vehicle for 12 hours, 24 hours, or for a weekend, has
been used largely as a source and training operation for new owner-operators.
MAINTENANCE, REPAIR AND PARTS SALES
AutoWerks provides preventive and other maintenance services, primarily to
Yellow Cab and non-affiliated taxi drivers, and also, as a licensed full-line
auto repair shop, to the public. AutoWerks maintains a body shop at which major
repairs can be made. As an authorized Chevrolet and Ford warrantor, AutoWerks
also repairs those manufacturers' vehicles that are under warranty and invoices
the manufacturers directly.
AutoWerks serves the dispatching needs of Yellow Cab and non-affiliated
drivers, maintains the radios in their taxicabs and supplies the emergency radio
services they require. AutoWerks also sells automotive parts.
THE MEDALLIONS
As of January 1, 1995, Yellow Cab owned 2,271 of the 5,500 medallions
available in Chicago. In order to retain these licenses, the Company must comply
with the regulations of Chapter 9-112 of the Municipal Code of Chicago
(governing public passenger vehicles), including the payment of annual taxicab
license fees, currently $500 per vehicle.
Pursuant to a 1988 agreement with Chicago to settle various lawsuits, Yellow
Cab is required to relinquish to Chicago and not renew 100 taxicab licenses on
January 1 of each year through 1997 (the "Agreement"). In addition, the
Agreement limits to 100 per year the number of new licenses that Chicago may add
to the total outstanding through 1997, bringing the total number of available
licenses to a maximum of 5,700 on December 31, 1997. At the required surrender
rate, assuming no additional medallions are sold by Yellow Cab, Yellow Cab would
hold 2,071 medallions after January 1, 1997, or approximately 36% of the maximum
number of medallions to be outstanding during 1997. There is currently no limit,
however, on the number of medallions Chicago may issue after December 31, 1997.
Under the Agreement, no person other than Motors and its affiliated companies
can own more than 25% of the licenses in Chicago.
The scheduled decline in the number of licenses allowed to be held by Yellow
Cab pursuant to the Agreement has had, and will continue to have, a negative
effect on the revenue-generating capability of
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<PAGE>
the taxi leasing operations. Although Yellow Cab has been able to offset these
declines to some extent through increases in the average lease rates charged to
its customers, in December 1993, Chicago passed an ordinance which gives the
Commissioner of Consumer Services broad powers to set maximum lease rates. See
"-- Regulatory Issues." The Company has also sought to increase its vehicular
operations' revenues by offering ancillary services to the increasing number of
unaffiliated taxi drivers through AutoWerks. At the same time, as the number of
medallions held by Yellow Cab declines, Yellow Cab will require fewer new
vehicles to support its taxi leasing operations and, consequently, decreased
capital spending.
The Agreement has also had the effect of allowing the Company to sell
licenses in the open market for the first time since 1982. In 1993 and 1994, the
Company sold 73 and 4 medallions, respectively, at an average price of $38,000
each, a historical high. There can be no assurance that such values will
continue to prevail in the market, especially after December 31, 1997. Although
the value of Yellow Cab's fleet of vehicles is reflected on the Company's
balance sheet, the significant value of its medallions is not.
LIABILITY INSURANCE
Yellow Cab currently maintains liability insurance coverage for losses of up
to $350,000 per occurrence as well as an "excess layer" of coverage for losses
over $600,000 and up to $29,000,000. The initial $350,000 layer of insurance is
issued by Country. See "Business -- Other Operations -- Insurance." During
several periods in the past, Yellow Cab did not maintain the level of coverage
that Yellow Cab currently maintains. As a result, there were, as of December 31,
1994, outstanding claims against Yellow Cab for which it is not fully covered by
third-party insurance. As of that date, Yellow Cab maintained balance sheet
reserves totalling approximately $2,175,000 for these claims. Management
believes that these reserves will be sufficient to cover its outstanding claims.
REGULATORY ISSUES
Yellow Cab's operations are regulated extensively by the Department of
Consumer Services of Chicago which regulates Chicago taxicab operations with
regard to certain matters including, among others, vehicle maintenance,
insurance and inspections. The City Council of Chicago has authority for setting
taxicab rates of fare. Effective December 1, 1993, lessors had the right to
increase, until May 1, 1994, the rates paid by lessee drivers by not more than
2.8% of the lease rate in effect on December 1, 1993. After May 1, 1994, lessors
may not charge more than the rates prescribed by the Commissioner (which, in
certain categories, are less than the rates currently charged by Yellow Cab)
without the consent of the City of Chicago. The rates in effect on May 1, 1994,
including the 2.8% increase, may remain in effect pending a petition and appeal
for a higher rate. Yellow Cab increased its rates by the maximum allowed 2.8%
prior to May 1, 1994 and has filed, in a timely manner, a petition to increase
its rates still further. Yellow Cab intends to pursue that proposal to final
hearing.
INSURANCE
For the year ended December 31, 1994, Country generated approximately 3% of
the Company's revenues and an aggregate of $4.6 million of pre-tax income
(comprising approximately $0.9 million of segment operating loss and
approximately $5.5 million of portfolio interest income). Country is currently
rated "A" by A.M. Best.
All policies which Country writes for affiliated taxicabs are reinsured for
amounts above $350,000; non-affiliated taxicab policies carry a maximum limit of
$350,000. Limousine and other commercial and personal policies which, until
December 31, 1994, were reinsured for amounts in excess of $150,000, are
currently reinsured for amounts in excess of $250,000. In addition, Country
makes collision insurance available to licensees and owner-operators at premium
rates which are comparable to the rates charged by competitors for equivalent
coverage. Country also writes full lines of commercial and personal property and
casualty insurance for risks located in Chicago and the surrounding metropolitan
area.
Country is domiciled in the State of Illinois and is a licensed carrier in
Michigan as well as being admitted as an excess and surplus lines carrier in 33
other states. Country has commenced expansion of
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<PAGE>
its business in Southern Illinois by contracting with established agencies in
Peoria, Decatur and Champaign, Illinois and intends to emphasize personal lines
of insurance, such as homeowners and commercial multiple peril and automobile
liability and physical damage. Country is also applying for licenses in other
states, such as Wisconsin, Indiana and Iowa. To the best of management's
knowledge, Country is in compliance with all applicable statutory requirements
and regulations.
INFORMATION CONCERNING BUSINESS SEGMENTS
Certain financial data with respect to the Company's business segments
appear in Note L of Notes to Consolidated Financial Statements -- December 31,
1994 and are incorporated herein by reference.
EMPLOYEES AND LABOR RELATIONS
As of December 31, 1994, the Company had a total of 5,784 employees. The
table below details the number of persons employed as of that date in each of
the Company's business segments:
<TABLE>
<CAPTION>
ADMINISTRATIVE
HOURLY AND EXECUTIVE
--------- -----------------
<S> <C> <C>
Trailer Manufacturing Operations........................................... 3,756 571
Automotive Products Operations............................................. 888 163
Other Operations........................................................... 231 175
</TABLE>
Approximately 315 employees in the Company's trailer manufacturing
operations, 322 in the Company's automotive products operations, and 60 in the
Company's vehicular operations are covered by collective bargaining agreements.
During 1993, Motors entered into a new contract with the Allied Industrial
Workers of America, AFL-CIO, Local 682 in Kalamazoo, Michigan, currently known
as Local Union No. 7682 of The United Paperworkers International Union, AFL-CIO,
which expires in May 1996. Yellow Cab is party to a contract with D.U.O.C. Local
777, a division of National Production Workers of Chicago and Vicinity, Local
777, which expires in November 1995. During 1993, Great Dane Trailers Tennessee,
Inc., a subsidiary of Great Dane, negotiated a new contract (expiring in January
1996) with Talbot Lodge No. 61 of the International Association of Machinists
and Aerospace Workers. In general, the Company believes its relationship with
its employees to be satisfactory. Although there have been attempts to unionize
various of the Company's divisions in the past few years, including SCSM and the
Great Dane plant in Brazil, Indiana, such attempts have, to date, been
unsuccessful.
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<PAGE>
PROPERTIES
Holdings currently maintains its principal executive offices at CMC's
facility in Kalamazoo, Michigan.
The location and general description of the principal properties owned or
leased by the Company are as follows:
<TABLE>
<CAPTION>
OWNED OR LEASED;
AREA/FACILITY IF LEASED,
LOCATION TYPE OF FACILITY SQUARE FOOTAGE EXPIRATION YEAR
- ------------------------------ ------------------------------- ---------------------------- ------------------
<S> <C> <C> <C>
TRAILER MANUFACTURING
OPERATIONS:
Savannah, Georgia............. Manufacturing Plant and Office 61 acres/471,000 sq. ft. Owned
Brazil, Indiana............... Manufacturing Plant and Office 80 acres/564,000 sq. ft. Owned
Memphis, Tennessee............ Manufacturing Plant 8 acres/107,000 sq. ft. Leased; 2003
3.5 acres/13,000 sq. ft. Owned
Wayne, Nebraska............... Manufacturing Plant and Office 35 acres/197,000 sq. ft. Owned
Terre Haute, Indiana.......... Manufacturing Plant and Parts 113 acres/500,000 sq. ft. Owned
Distribution Center
(approximately 250,000 sq. ft.
currently under development)
14 Locations in 10 States..... Sales and Service Branches 98 acres/303,000 sq. ft. Owned
18 Locations in 12 States..... Sales and Service Branches 36 acres/238,000 sq. ft. Leased; 1995 to
2015
AUTOMOTIVE PRODUCTS
OPERATIONS:
Kalamazoo, Michigan........... Manufacturing Plant and Office 71 acres/750,000 sq. ft. Owned
South Charleston,
West Virginia................ Manufacturing Plant and Office 922,000 sq. ft. Leased; 2028
OTHER OPERATIONS:
VEHICULAR
Chicago, Illinois
(15 Locations)............... Garages, Parking Lots and 735,000 sq. ft. 14 Owned; 1
Offices Leased; 2012
INSURANCE
Chicago, Illinois
(3 Locations)................ Offices/Storage Facility 39,332 sq. ft. Leased; 1995 to
2002
</TABLE>
The principal facilities owned by the Company are considered by the Company
to be well maintained, in good condition and suitable for their intended use.
LEGAL PROCEEDINGS
EXECUTIVE LIFE LITIGATION
By order of the Superior Court of Los Angeles County (the "California
Court"), on April 11, 1991, Case No. B5-006-912 (the "California Order"), the
California State Insurance Commissioner was appointed Conservator for ELIC, a
limited partner in the Partnership. By letter dated May 20, 1991, Motors and the
Partnership advised ELIC and the Conservator that the appointment of the
Conservator pursuant to the California Order constituted an "Event of Default"
under the Partnership Agreement, and that,
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<PAGE>
therefore, ELIC's rights under the Partnership Agreement and interest in the
Partnership were altered. More specifically, Motors and the Partnership asserted
that ELIC's rights, as of April 11, 1991, were limited to the right to receive a
payout of its capital account, calculated as of that date, in quarterly
installments over approximately a 23-year period. On June 28, 1991, the
Conservator notified Motors and the Partnership that he did not accept that
position set forth in the May 20 letter and that, in his view, ELIC's status as
a limited partner had not been altered. In March 1992, Motors and the
Partnership were added as parties to the Order which sought damages from them in
an unspecified amount for, among other things, their alleged "forfeiture" of
ELIC's interest, breach of fiduciary duties, interference with the
conservatorship proceedings and waste of conservatorship assets. In this
litigation, each of Motors, the Partnership and the Conservator was also
seeking, among other things, a declaration of its rights under the Partnership
Agreement.
On May 26, 1994, the California Court approved a settlement of this
litigation. Pursuant to the Settlement Agreement, on December 22, 1994, Motors
redeemed ELIC's interest in the Partnership for $37.0 million (the "Minority
Interest Redemption") and the litigation was thereafter dismissed with
prejudice. Under certain circumstances, if all or substantially all of the
assets of the Partnership are sold within five years of the consummation of the
Minority Interest Redemption, ELIC may be entitled to receive a payment equal to
the positive difference, if any, between (x) the distribution ELIC would have
received upon liquidation of the Partnership as a result of such transaction,
calculated in accordance with the provisions of the Partnership Agreement as if
it had continued to hold its partnership interest, and (y) the future value of
$37.0 million calculated at 15% per annum from the date of the Minority Interest
Redemption to the date of such transaction. The Company has guaranteed the
obligations of its subsidiaries under the Settlement Agreement.
CERTAIN ENVIRONMENTAL MATTERS
Within the past five years, Great Dane and Motors have entered into certain
consent decrees with federal and state governments relating to the cleanup of
waste materials. The aggregate obligations of Great Dane and Motors pursuant to
these consent decrees are not material.
In May 1988, Holdings sold all of the stock of its subsidiaries, Datron
Systems, Inc. and All American Industries, Inc., and in connection therewith
agreed to indemnify the purchaser for, among other things, certain potential
environmental liabilities. The purchaser has put Holdings on notice of certain
alleged environmental and other matters for which it intends to seek
indemnification as costs are incurred. Holdings does not believe that its
obligations, if any, to pay these claims will be material.
Yellow Cab owns fourteen parcels of real estate, all situated in Chicago.
Some of these sites have previously been used for the storage and servicing of
taxicabs and some of the sites continue to be so used. These sites, therefore,
involve gasoline and oil underground storage tanks which may create a hazardous
waste product if the tanks on any parcel now leak or have in the past leaked.
Yellow Cab has registered in accordance with law all of its underground
tanks with the Office of the State Fire Marshall for the State of Illinois and
has secured site assessments from environmental engineers and consultants
concerning the nature and extent of any hazardous discharge. Under the Illinois
Underground Storage Tank Fund Law, virtually all clean-up costs associated with
leaking tanks are covered by a guaranty fund, which is administered by the
Illinois Environmental Protection Agency and reimburses these costs except for
the first $10,000 per site. Even assuming reimbursement is denied or unavailable
from this guaranty fund, the Company believes that the liability for clean-up
expenses on sites which have not already been cleaned up will not be material.
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<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the name, age and principal position of each
of the executive officers and directors of the Company as of December 31, 1994
and each of those persons who has been elected a director, effective upon
consummation of this Offering:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------- --- ------------------------------------------------------
<S> <C> <C>
David R. Markin.............................. 64 President, Chief Executive Officer and Director of
Holdings
Allan R. Tessler............................. 58 Chairman of the Board of Holdings
Martin L. Solomon............................ 58 Vice Chairman and Secretary of Holdings
Wilmer J. Thomas, Jr......................... 68 Vice Chairman of Holdings
Jay H. Harris................................ 58 Executive Vice President and Chief Operating Officer
of Holdings
Marlan R. Smith.............................. 51 Treasurer of Holdings
Kevin J. Hanley.............................. 39 Controller of Holdings
Willard R. Hildebrand........................ 55 President and Chief Executive Officer of Great Dane
Larry D. Temple.............................. 48 Group Vice President of Motors
John T. Wise................................. 49 President of SCSM
Jeffrey M. Feldman........................... 44 President of Yellow Cab
Miles Berger................................. 64 Director upon Consummation of this Offering
Leonard Gubar................................ 57 Director upon Consummation of this Offering
Alan Hirschfield............................. 59 Director upon Consummation of this Offering
</TABLE>
BIOGRAPHICAL INFORMATION
David R. Markin, President and Chief Executive Officer of Holdings since
January 11, 1989, has been President and Chief Executive Officer of Motors since
1970. Mr. Markin serves on the Boards of Directors of Jackpot Enterprises, Inc.,
an operator of gaming machines, Enhance Financial Services Group Inc., a
reinsurance company, and Data Broadcasting Corporation, a provider of market
data services to the investment community.
Allan R. Tessler, Chairman of the Board of Holdings since January 11, 1989,
is also Chairman of the Boards of Directors of International Financial Group,
Inc., a merchant banking firm ("IFG"), Enhance Financial Services Group Inc., a
reinsurance company, Allis-Chalmers Corporation, a manufacturer of miscellaneous
fabricated textile products ("Allis-Chalmers"), and Jackpot Enterprises, Inc.,
an operator of gaming machines, and has been Chief Executive Officer of IFG
since 1987 and of Allis-Chalmers since 1994. Mr. Tessler serves on the Board of
Directors of The Limited, Inc., a manufacturer and retailer of apparel. From
December 1991 through September 1993, Mr. Tessler was Chairman of the Board and
Chief Executive Officer of Ameriscribe Corporation, a national provider of
facilities management services. Mr. Tessler is also an attorney and from 1976
through 1988, he was a member of the Executive Committee of the law firm of Shea
& Gould; from 1989 through March 1, 1993, he was of counsel to that firm.
Beginning in 1990, Mr. Tessler and Mr. Hirschfield were retained by
Infotechnology, Inc. and Financial News Network Inc. ("FNN") as a restructuring
team and to serve as Co-Chief Executive Officers during the restructuring of
those companies. As part of the plan implemented by the restructuring team,
those companies were placed in bankruptcy. FNN emerged from bankruptcy in 1992
as Data Broadcasting Corporation, a provider of market data services to the
investment community. Mr. Tessler continues to serve, with Mr. Hirschfield, as
Co-Chairman of the Board and Co-Chief Executive Officer of the restructured
company.
Martin L. Solomon, Vice Chairman and Secretary of Holdings since January 11,
1989, is a private investor and also serves as general partner in a variety of
investment partnerships managed by Wexford Capital Corporation. Mr. Solomon was
employed as a securities and portfolio analyst at Steinhardt Partners, an
investment firm, from 1985 through 1987. From 1988 through September 1990, he
was the Managing Partner and Director at Value Equity Associates I, Limited
Partnership, an investment firm. Mr. Solomon serves on the Board of Directors of
XTRA Corporation, a truck leasing company.
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<PAGE>
Wilmer J. Thomas, Jr., Vice Chairman of Holdings since January 11, 1989, is
a private investor. Mr. Thomas served as Treasurer of Holdings from January 1989
to January 1994. Mr. Thomas serves on the Boards of Directors of Moore Medical
Corp., a pharmaceutical and surgical supply company and Oak Hills Sportswear
Corp., a clothing company.
Jay H. Harris has been Executive Vice President and Chief Operating Officer
of Holdings for more than the past five years and a Vice President of Motors
since May 1991. Mr. Harris was a director of Holdings from 1978 until January
11, 1989.
Marlan R. Smith has been Treasurer of Holdings since January 1994 and Vice
President and Treasurer of Motors since March 1988. Prior to being elected
Treasurer of Holdings, he served as Assistant Treasurer since January 1989.
Kevin J. Hanley has been Controller of Holdings since January 1994 and
Secretary and Controller of Motors since December 1989.
Willard R. Hildebrand was elected as President and Chief Executive Officer
of Great Dane effective January 1, 1992. Mr. Hildebrand had served as President
and Chief Operating Officer of Fiatallis North America, Inc., a manufacturer of
heavy construction and agricultural equipment, for more than five years prior
thereto.
Larry D. Temple has been Group Vice President of Motors since September
1989. Mr. Temple served as Vice President of Manufacturing from 1988 to 1989.
John T. Wise has been President of SCSM since July 31, 1992. He was Vice
President -- General Manager from 1989 to 1992, and prior thereto served as
Plant Manager.
Jeffrey M. Feldman has been President of Yellow Cab since 1983 and Vice
President of Motors since January 1988.
Miles Berger has been elected to become a director, effective upon the
consummation of this Offering. Mr. Berger has been with Heitman Financial Ltd.,
a real estate investment and financial services firm, since 1968. Mr. Berger is
also a director of Innkeeper's U.S.A., a real estate investment trust which
operates hotels in Florida, New York and Pennsylvania, Chairman of the Boards of
Directors of Berger Financial Services and Midtown Bank and Trust Company and
Vice Chairman of Columbia National Bank of Chicago.
Leonard Gubar has been elected to become a director, effective upon
consummation of this Offering. Mr. Gubar is a partner in the law firm of Reid &
Priest and was a member of the law firm of Spengler Carlson Gubar Brodsky &
Frischling from 1969 until he joined Reid & Priest in August 1992. Mr. Gubar
currently serves as director of Warner Insurance Services, Inc., a provider of
automobile insurance services to the insurance industry, and of Career Horizons,
Inc., a provider of temporary personnel services.
Alan Hirschfield has been elected to become a director, effective upon
consummation of this Offering. From January 1990 to November 1990, Mr.
Hirschfield served as a managing director of Wertheim Schroder, Inc., an
investment banking firm. From 1985 to October 1990, he was a private investor
and a consultant to the entertainment and media industries. Messrs. Hirschfield
and Tessler were retained by Infotechnology, Inc. and Financial News Network
Inc. as a restructuring team and to serve as Co-Chief Executive Officers during
the restructuring of those companies. As mentioned above, those companies were
placed in bankruptcy, from which they emerged in 1992 as Data Broadcasting
Corporation and Mr. Hirschfield continues to serve, with Mr. Tessler, as
Co-Chairman of the Board and Co-Chief Executive Officer of the restructured
company. Mr. Hirschfield also serves on the Board of Directors of Cantel
Industries, Inc., a manufacturer and distributor of scientific and consumer
products in Canada, since January 1988.
34
<PAGE>
BOARD OF DIRECTORS; COMMITTEES
All directors of Holdings hold office until the next annual meeting of
stockholders of Holdings or until their successors are duly elected and
qualified. Officers are elected annually by the Board of Directors of Holdings
and hold office until their successors are duly elected and qualified.
Holdings has undertaken to add three independent directors to its Board of
Directors, as described above, and has elected Messrs. Berger, Gubar and
Hirschfield to serve as such, effective upon consummation of this Offering. In
connection with this undertaking, the Board will increase the number of
directors from four to seven. The Board of Directors has created an Audit
Committee and a Compensation Committee. When the independent directors take
office, a majority of the Audit Committee will be composed of independent
directors and will be charged with reviewing the Company's annual audit and
meeting with the Company's independent auditors to review the Company's internal
controls and financial management practices. If the 1994 Option Plan is approved
by both the Compensation Committee and the stockholders of Holdings, the
Compensation Committee, which will also be composed exclusively of the
independent directors, will administer the 1994 Option Plan. See "--
Compensation Pursuant to Plans."
The directors did not receive any fees for their services as directors in
1993. See "-- Compensation Committee Interlocks and Insider Participation." Upon
consummation of this Offering, each of Holdings' directors will receive an
annual director's fee of $30,000, plus reimbursement of expenses incurred in
attending meetings.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Prior to the consummation of this Offering, the Company has had no separate
compensation committee or other committee providing equivalent functions. Each
of Messrs. Markin, Solomon, Tessler and Thomas is an executive officer of
Holdings and participates, as a director, in the deliberations concerning
executive officer compensation. During 1994, Mr. Markin served on the
compensation committee of Enhance Financial Services Group Inc. and Data
Broadcasting Corporation and Mr. Tessler served as an executive officer of each
of these companies.
As of December 31, 1994, Country holds $0.9 million principal amount of 7%
Notes due December 1, 1996, issued by Enhance Financial Services Group Inc. Mr.
Markin is a director of and served on the compensation committee of that
company.
During 1994, 1993 and 1992, the Company used, on a month-to-month basis, an
airplane owned by a corporation of which Mr. Tessler is the sole shareholder.
The Company paid $60,000 per month for such use during 1992 and 1993 and $90,000
per month for such use during 1994.
Each of Messrs. Markin, Solomon, Tessler and Thomas provides consulting
services to Yellow Cab and each received for such services (commencing in
January 1988) $10,000 per month. Messrs. Solomon, Tessler and Thomas also
provide consulting services (a) to Motors for which they each received monthly
fees of $5,000 (commencing in January 1988) and (b) to Country for which they
each received monthly fees of approximately $18,300 in each of 1994, 1993 and
1992. Mr. Markin serves as a consultant to AutoWerks, for which he received
monthly fees of approximately $1,200 (commencing in January 1988), and to
Country, for which he received monthly fees of approximately $4,600. Upon
consummation of this Offering, these fees will be reduced to an aggregate fee of
$50,000 per year for each of Messrs. Markin, Solomon, Tessler and Thomas, in
payment for consulting services to Country.
On September 24, 1992, American Country Financial Services Corp. ("AFSC"), a
subsidiary of Country, purchased from The Mid City National Bank of Chicago the
promissory note dated July 30, 1992, made by Checker Services, Inc., formerly
King Cars, Inc. ("Services"), in the principal amount of $381,500 plus accrued
interest in the amount of $3,560. The note, which was renewed several times, had
outstanding principal and accrued interest as of September 30, 1994, of
approximately $430,000 and matured in December 1994. Until October 1994, when
Checker Taxi Association purchased 45% of Services for $250,500 (which amount
was used by Services to pay accrued interest and to reduce the principal amount
of the note), Services was owned by Messrs. Markin, Solomon, Tessler, Thomas and
Feldman. The balance of the note (except for $57,300 which was forgiven) was
paid prior to December 31, 1994. Services is a party to an agreement dated
December 15, 1992 with Yellow Cab pursuant to
35
<PAGE>
which Yellow Cab purchases from Services display frames for installation in its
taxicabs and Services furnishes Yellow Cab advertising copy for insertion into
the frames. Services receives such advertising copy as an agent in Chicago for
an unrelated company which is in the business of selling and arranging for local
and national advertising. Of the revenues generated from such advertising, 30%
will be retained by Services and the balance will be delivered to Yellow Cab
until such time as Yellow Cab has recovered costs advanced by it for the
installation of advertising frames in 500 of its taxicabs (approximately
$78,000). The Company has been advised that the terms to Yellow Cab are the same
or more favorable than those offered by Services to unrelated third parties.
Each of Messrs. Markin, Solomon, Tessler and Thomas received from Holdings
interest payments of $790,428 in 1994, $704,795 in 1993 and $733,356 in 1992,
pursuant to the terms of the senior notes held by them (see Note F of the Notes
to Consolidated Financial Statements -- December 31, 1994).
During 1992 and until March 1, 1993, Mr. Tessler was of counsel to Shea &
Gould, a law firm retained by the Company for certain matters.
Frances Tessler, the wife of Allan R. Tessler, is employed by Smith Barney
Inc. as a financial consultant. Smith Barney Inc. is one of the Underwriters for
this Offering and also executes trades for Country's investment portfolio.
During 1994, 1993 and 1992, Mrs. Tessler received for her investment advisory
services to the Company approximately $36,500, $78,000 and $69,000,
respectively, of the commissions paid by the Company to Smith Barney Inc. for
such services.
Jeffrey M. Feldman is the nephew of David R. Markin.
COMPENSATION
The following table sets forth the 1994 annual compensation for the Chief
Executive Officer of Holdings and the six highest paid executive officers of
Holdings, other than the Chief Executive Officer, whose total annual salary and
bonus exceeded $100,000, as well as the total compensation paid to each
individual for the two previous fiscal years:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION COMPENSATION
- -------------------------------------------- --------- ------------- ----------- -------------- --------------
<S> <C> <C> <C> <C> <C>
David R. Markin............................. 1994 $ 1,230,000 $ 300,000 $ 247,007(1) $ 1,500(5)
President, Chief Executive Officer 1993 1,230,000 250,000 246,519(1) 2,249(5)
and Director 1992 1,230,000 150,000 239,594(1) 2,182(5)
Jay H. Harris............................... 1994 431,250 250,000 0 1,500(5)
Executive Vice President and Chief 1993 350,000 250,000 0 2,249(5)
Operating Officer 1992 326,016 125,000 0 2,182(5)
Willard R. Hildebrand....................... 1994 287,725 225,000 15,463(2) 0
President and Chief Executive Officer 1993 203,500 150,000 7,304(2) 0
of Great Dane 1992 190,175 105,000 4,133(2) 106,368(6)
Jeffrey M. Feldman.......................... 1994 220,500 150,000 86,263(3) 1,500(5)
President of Yellow Cab 1993 210,000 150,000 85,008(3) 2,249(5)
1992 186,667 150,000 77,755(3) 2,182(5)
Martin L. Solomon........................... 1994 0 0 400,000(4) 0
Vice Chairman and Secretary 1993 0 0 400,000(4) 0
1992 0 0 400,000(4) 0
Allan R. Tessler............................ 1994 0 0 400,000(4) 0
Chairman of the Board 1993 0 0 400,000(4) 0
1992 0 0 400,000(4) 0
Wilmer J. Thomas, Jr........................ 1994 0 0 400,000(4) 0
Vice Chairman 1993 0 0 400,000(4) 0
1992 0 0 400,000(4) 0
</TABLE>
36
<PAGE>
<TABLE>
<S> <C>
<FN>
- --------------
(1) Other compensation for Mr. Markin includes:
1992 1993 1994
--------- --------- ---------
Consulting fees......................... $ 190,000 $ 190,000 $ 190,000
Life insurance.......................... 37,023 41,027 41,710
Automobile.............................. 5,100 8,125 9,750
Club dues............................... 7,471 7,367 5,547
--------- --------- ---------
$ 239,594 $ 246,519 $ 247,007
--------- --------- ---------
--------- --------- ---------
Effective upon consummation of this Offering, consulting fees paid to Mr.
Markin will be reduced
to a fee of $50,000 per year in payment for consulting services to
Country. See "--Compensation Committee Interlocks and Insider
Participation."
(2) Other compensation for Mr. Hildebrand includes:
1992 1993 1994
--------- --------- ---------
Life insurance.......................... $ 806 $ 1,560 $ 3,474
Automobile.............................. 927 2,324 3,316
Club dues............................... 2,400 3,420 5,887
Other................................... 0 0 2,786
--------- --------- ---------
$ 4,133 $ 7,304 $ 15,463
--------- --------- ---------
--------- --------- ---------
(3) Other compensation for Mr. Feldman includes:
1992 1993 1994
--------- --------- ---------
Consulting fees......................... $ 57,000 $ 57,000 $ 59,000
Life insurance.......................... 10,739 11,253 11,973
Automobile.............................. 1,537 1,748 4,335
Club dues............................... 8,479 15,007 10,955
--------- --------- ---------
$ 77,755 $ 85,008 $ 86,263
--------- --------- ---------
--------- --------- ---------
(4) Consulting fees. Effective upon consummation of this Offering, consulting
fees paid to each of Messrs. Solomon, Tessler and Thomas will be reduced to
a fee of $50,000 per year in payment for consulting services to Country. See
"-- Compensation Committee Interlocks and Insider Participation."
(5) Matching contributions under the Motors 401(k) plan.
(6) Relocation expenses.
</TABLE>
EMPLOYMENT AGREEMENTS
Motors, as successor to the Partnership, is party to an Amended and Restated
Employment Agreement dated as of November 1, 1985, as further amended, with
David R. Markin pursuant to which Mr. Markin is to serve as President, Chief
Executive Officer and Chief Operating Officer of Motors until April 30, 1996,
subject to extension (the "Termination Date"), at a minimum salary of $600,000
per annum, together with the payment of certain insurance premiums, the value of
which have been included in the Summary Compensation Table above. The
beneficiaries of these insurance policies are designated by Mr. Markin. Mr.
Markin continues to be eligible to participate in profit sharing, pension or
other bonus plans of Motors. Pursuant to the Amended and Restated Employment
Agreement, in the event of Mr. Markin's death, Motors shall pay Mr. Markin's
estate the compensation which would otherwise be payable to him for the period
ending on the last day of the month in which death occurs. In addition, Motors
shall pay to Mr. Markin's beneficiaries deferred compensation from the date of
his death through the Termination Date in an annual amount equal to one-third of
his base salary at the date of his death. In the event of termination of the
Amended and Restated Employment Agreement for any reason other than cause,
disability or death, Mr. Markin shall continue to serve as a consultant to
Motors for a period of five years, for which he shall receive additional
compensation in the amount of $50,000 per annum. Motors has agreed to indemnify
Mr. Markin from certain liabilities arising out of his service to
37
<PAGE>
Motors, except for liabilities resulting from his gross negligence or willful
misconduct. Effective January 1, 1994, Mr. Markin and Holdings memorialized in
writing their agreement, pursuant to which Mr. Markin has also been compensated
by Holdings since January 11, 1989, on substantially the same terms as are set
forth above.
Holdings entered into an employment agreement as of July 1, 1992, with Jay
H. Harris pursuant to which Mr. Harris serves as Executive Vice President and
Chief Operating Officer of Holdings until June 30, 1995, subject to extension or
earlier termination, at a minimum salary of $350,000 per annum, an incentive
bonus to be determined by the Board of Directors, and such other fringe benefits
and plans as are available to other executives of Holdings. Upon the happening
of certain events, including a change in control (as defined therein) of
Holdings or retirement after June 30, 1994, Mr. Harris is entitled to
compensation in an amount equal to the greater of (a) five percent of the
increase in the Company's retained earnings, subject to certain adjustments,
during the period commencing on March 31, 1992, and ending on the last day of
the month preceding the event which triggers the payment (the "Termination
Payment") and (b) 2.99 times his then base salary. If Mr. Harris were to die or
become disabled, he or his estate would receive the greater of (a) one year's
base compensation or (b) the Termination Payment. Payments in either case would
be made over a period of time, the length of which would be dependent on the
amount due to Mr. Harris. Mr. Harris has agreed to serve as a consultant to the
Company during the first year after termination for no compensation beyond his
expenses incurred in connection with rendering such services. Holdings has
agreed to indemnify Mr. Harris for certain liabilities to the full extent
allowed by law. Motors has guaranteed Holdings' obligations. Mr. Harris' current
annual salary is $500,000.
Holdings has also entered into an option agreement with Mr. Harris, pursuant
to which Mr. Harris was granted an option to purchase an aggregate of 52,500
shares of Common Stock at an exercise price of $1.00 per share. The options
granted to Mr. Harris will become exercisable in three equal installments on
each of the date of the consummation of this Offering and the first two
anniversaries thereafter. The Harris Option terminates on the earlier of (i)
January 17, 2005 and (ii) the termination of Mr. Harris' employment with the
Company; provided, however, that any portion of the option which is exercisable
on the date of such termination (other than termination for cause) will remain
exercisable for a period of three months. Mr. Harris also has certain piggyback
registration rights under the Harris Option.
Yellow Cab, as assignee of Motors, is party to an Amended and Restated
Employment Agreement dated as of June 1, 1992, with Jeffrey Feldman pursuant to
which Mr. Feldman serves as President of Yellow Cab until February 1, 1996,
subject to extension (the "Termination Date"), at a minimum salary of $200,000
per annum, together with the payment of certain insurance premiums, the value of
which have been included in the Summary Compensation Table above. The
beneficiaries of these insurance policies are designated by Mr. Feldman. Mr.
Feldman is eligible to participate in profit sharing, pension or other bonus
plans implemented by Yellow Cab or Motors. Pursuant to the Amended and Restated
Employment Agreement, in the event of Mr. Feldman's death, Yellow Cab shall pay
Mr. Feldman's estate the amount of compensation which would otherwise be payable
to him for the period ending on the last day of the month in which death occurs.
In addition, Yellow Cab shall pay to Mr. Feldman's estate deferred compensation
from the date of his death to the Termination Date in an annual amount equal to
one-third of his base salary at the date of his death. In the event of the
termination of the Amended and Restated Employment for any reason other than
cause, disability or death, Mr. Feldman shall continue to serve as a consultant
to Yellow Cab for a period of five years (if terminated by Mr. Feldman) or seven
years (if terminated by Yellow Cab), for which he shall receive compensation in
the amount of $75,000 per annum. Yellow Cab has agreed to indemnify Mr. Feldman
from certain liabilities, except for those resulting from his gross negligence
or willful misconduct. Mr. Feldman's annual salary for 1995 is $231,000.
COMPENSATION PURSUANT TO PLANS
GREAT DANE PENSION AND EXCESS BENEFIT PLANS
Great Dane has in effect a defined benefit employee pension plan entitled
Retirement Plan For Great Dane Trailers, Inc. (the "Retirement Plan") covering
substantially all of its employees. Pension benefits
38
<PAGE>
are subject to limitations imposed by the Internal Revenue Code of 1986, as
amended (the "Code") and the Employee Retirement Income Security Act of 1974, as
amended, with respect to the annual amount of benefits provided by employer
contributions. Effective January 1, 1994, Great Dane adopted the Supplemental
Retirement Income Plan (the "Great Dane Excess Benefit Plan") for officers of
Holdings who are participants in the Checker Motors Pension Plan and officers of
Great Dane, in each case whose annual compensation exceeds $150,000. The Great
Dane Excess Benefit Plan provides benefits which cannot be provided under the
Retirement Plan because of the $150,000 compensation limit under the Code.
Considered compensation under the Great Dane Excess Benefit Plan is limited to
$235,840 (adjusted for inflation) per year. The benefits under the Great Dane
Excess Benefit Plan are not funded and will be paid from Great Dane's general
assets.
Effective as of July 1, 1988, the assets and the liabilities attributable to
active and former employees under the Amended and Restated International
Controls Corp. Pension Plan as of June 30, 1988 were transferred to the
Retirement Plan and Holdings adopted the Retirement Plan for the benefit of its
employees. With respect to benefits accruing after June 30, 1984, to a
participant who was a participant under the Amended and Restated International
Controls Corp. Pension Plan as of June 30, 1988, the following table shows the
estimated annual benefits payable upon retirement at age 65 under the plan to
specified average annual compensation and years of benefit service
classifications. The following amounts would be reduced by a Social Security
offset:
<TABLE>
<CAPTION>
YEARS OF BENEFIT SERVICE
-----------------------------------------------------------
AVERAGE ANNUAL COMPENSATION 1 5 10 15 20
- ---------------------------------------------------- --------- --------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$100,000............................................ $ 2,000 $ 10,000 $ 20,000 $ 30,000 $ 40,000
150,000............................................ 3,000 15,000 30,000 45,000 60,000
200,000............................................ 4,000 20,000 40,000 60,000 80,000
250,000............................................ 5,000 25,000 50,000 75,000 100,000
300,000............................................ 5,000 25,000 60,000 90,000 115,641*
400,000............................................ 5,000 25,000 80,000 118,800* 118,800*
500,000............................................ 5,000 25,000 100,000 118,800* 118,800*
<FN>
- --------------
*Maximum permitted in 1994
</TABLE>
For Mr. Hildebrand, the following are credited years of service under the
Retirement Plan and 1994 salary covered by the Retirement Plan:
<TABLE>
<CAPTION>
CREDITED YEARS OF EXPECTED CREDITED YEARS OF 1994 SALARY COVERED
SERVICE SERVICE AT 65 BY RETIREMENT PLAN
--------------------- ----------------------------- --------------------
<S> <C> <C> <C>
Willard R. Hildebrand....... 4 14 $ 150,000
</TABLE>
Mr. Harris has an aggregate of 24 years of benefit service under the
Retirement Plan (8 years) and the Amended and Restated International Controls
Corp. Pension Plan (16 years) and will receive benefits of approximately $74,000
per year at age 65.
MOTORS PENSION AND EXCESS BENEFIT PLANS
Motors maintains a defined benefit employee pension plan entitled Checker
Motors Pension Plan (the "Pension Plan") covering substantially all of its
non-union employees, and, effective January 1, 1992, the employees of Holdings.
Motors, as successor in interest to Checker L.P., also maintains the Checker
Motors Co., L.P. Excess Benefit Retirement Plan (the "Checker L.P. Excess
Benefit Plan"). The Checker L.P. Excess Benefit Plan provides benefits which
cannot be provided under the Pension Plan because of the $150,000 compensation
limit under the Internal Revenue Code of 1986, as amended (the "Code"). At the
present time, David R. Markin and Jeffrey M. Feldman are the only individuals
named above who would receive benefits under the Checker L.P. Excess Benefit
Plan. Considered compensation under the Checker L.P. Excess Benefit Plan is
limited to $300,000. The benefits under the Checker L.P. Excess Benefit Plan are
not funded and will be paid from Motors' general assets.
39
<PAGE>
Set forth below are the estimated annual benefits for participants in the
Pension Plan (including benefits payable under the Checker L.P. Excess Benefit
Plan) who have been employed by Checker L.P. and its predecessors for the
indicated number of years prior to retirement, assuming retirement at age 65 in
1994:
<TABLE>
<CAPTION>
AVERAGE COMPENSATION (AS DEFINED IN PLAN) ESTIMATED ANNUAL BENEFITS FOR YEARS OF SERVICE INDICATED
- ------------------------------------------------------------ --------------------------------------------------------------
10 20 30 40 50
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$100,000.................................................... $13,864 $28,670 $ 46,938 $ 66,073 $ 75,784
150,000.................................................... 21,364 46,170 74,438 103,573 118,284
200,000.................................................... 28,864 63,670 101,938 141,073 160,784
250,000.................................................... 36,364 81,170 129,438 178,573 203,284
300,000.................................................... 43,864 98,670 156,938 216,073 245,784
400,000.................................................... 43,864 98,670 156,938 216,073 245,784
500,000.................................................... 43,864 98,670 156,938 216,073 245,784
</TABLE>
The above benefit projections were prepared on the assumption that the
participant made participant contributions to the Pension Plan for all years in
which he was eligible to contribute, and that Social Security covered
compensation is $1,893. The benefit projection would be reduced by a Social
Security offset.
For those executive officers named above, the following are credited years
of service under the Pension and Excess Benefit Plans and 1994 salary covered by
the Pension Plan:
<TABLE>
<CAPTION>
CREDITED YEARS EXPECTED CREDITED YEARS 1994 SALARY COVERED
OF SERVICE OF SERVICE AT 65 BY PENSION PLAN
--------------- ----------------------- --------------------
<S> <C> <C> <C>
David R. Markin......................... 40 41 $150,000
Jay H. Harris........................... 3 10 150,000
Jeffrey M. Feldman...................... 16 37 150,000
</TABLE>
SALARY CONTINUATION PLAN
Motors entered into Stated Benefit Salary Continuation Agreements (the
"Agreements") with certain officers and employees (the "Salary Plan") pursuant
to which such participants will receive benefits upon attaining age 65 (or their
beneficiaries will receive benefits upon their death prior to or within 120
months after such executives or employees attain age 65).
For those executive officers named above, the following table sets forth the
benefits payable pursuant to the Salary Plan:
<TABLE>
<CAPTION>
ANNUAL SURVIVOR
BENEFIT PAYABLE TOTAL
ANNUAL BENEFIT TOTAL BENEFIT UPON DEATH PRIOR SURVIVORSHIP
PAYABLE UPON PAYABLE OVER TO ATTAINING AGE BENEFIT PAYABLE
ATTAINING AGE 65 TEN YEARS 65 OVER THREE YEARS
---------------- -------------- ---------------- -----------------
<S> <C> <C> <C> <C>
David R. Markin......................... $ 240,000 $ 2,400,000 $ 368,000 $ 1,104,000
Jeffrey M. Feldman...................... 19,950 199,500 79,800 239,400
</TABLE>
STOCK OPTION PLANS
1994 OPTION PLAN. On November 16, 1994, the Board of Directors adopted the
1994 Option Plan, subject to approval by the Compensation Committee (the
composition of which committee is described below) and by the stockholders at
the first annual meeting of stockholders after the consummation of this
Offering. The 1994 Option Plan provides for the granting of incentive stock
options within the meaning of Section 422 of the Code to employees of the
Company and for the granting of nonstatutory stock options and stock
appreciation rights ("Rights") to employees, consultants, non-employee directors
and other persons providing goods or services to the Company. Under the 1994
Option Plan, a total of 1,680,000 shares of Common Stock have been reserved for
issuance. The maximum number of shares of Common Stock with respect to which
options or Rights may be granted during the life of the 1994 Option Plan to any
employee cannot exceed 400,000. On January 25, 1995, the Board of Directors
granted nonstatutory options under the 1994 Option Plan to certain employees to
purchase an aggregate of
40
<PAGE>
174,500 shares of Common Stock at 50% of the initial public offering price for
this Offering. The grants are subject to the consummation of this Offering,
approval of the 1994 Option Plan by the Compensation Committee and the
stockholders and ratification of the grants by the Compensation Committee. The
options will be exercisable for a period of five years commencing one year after
the date on which this Offering is consummated.
The 1994 Option Plan will be administered by the Compensation Committee
which, when constituted, will consist of persons who are "disinterested persons"
within the meaning of Rule 16(b) promulgated under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"). The Compensation Committee will have
the power, subject to the terms of the 1994 Option Plan, to determine the
recipients and terms of any options or Rights granted, including the exercise
price, number of shares subject to the option or Rights and the exercisability
thereof. Options and Rights granted under the 1994 Option Plan may not be
transferred except by will or the laws of descent and distribution and, during
the lifetime of the optionee, may be exercised only by such optionee or such
optionee's guardian or legal representative. If an optionee's employment or
other relationship with the Company terminates for any reason, the employee's
options and Rights shall immediately terminate, except that: (i) upon
termination of employment due to disability or retirement, an optionee may
generally exercise options or Rights that have not expired on such date for a
period of two years after the date of termination of employment; and (ii) upon
termination of employment as a result of death, or in the event of the
employee's death within the periods described in (i), above, an optionee's legal
representative may generally exercise options or Rights that have not expired on
such date for a period of 12 months after the date of death. Options granted to
non-employee directors, consultants and other persons providing goods and
services to the Company will be subject to such terms as the Compensation
Committee shall determine.
The exercise price of all incentive stock options granted under the 1994
Option Plan must be at least equal to the fair market value of the shares of
Common Stock subject to the option on the date the option is granted. The
exercise price of all nonstatutory stock options granted under the 1994 Option
Plan is to be determined by the Compensation Committee but cannot be less than
the minimum required to comply with any applicable law, rule or regulation. The
term of options granted under the 1994 Option Plan may not exceed 10 years.
Notwithstanding the above, incentive stock options granted to an employee that
owns more than 10% of the voting power of all classes of stock of the Company
must have an exercise price at least equal to 110% of the fair market value of
the stock subject to the option on the date the option is granted and must have
a term that does not exceed five years. Options may be exercised either in cash
or with Common Stock having a fair market value equal to the exercise price of
the option on the date the option is exercised.
Each option and Right granted under the 1994 Option Plan is exercisable in
whole or in part at any time, or from time to time, as determined by the
Compensation Committee, provided that the election to exercise an option or a
Right is made in accordance with applicable federal and state laws and
regulations, and, unless the optionee dies or becomes disabled, the option or
Right cannot be exercised during the first six months of the option period. An
option is vested and becomes immediately exercisable if: any person within the
meaning of Sections 13(d) and 14(d) of the Exchange Act, other than the Company
or the current stockholders of the Company, becomes the beneficial owner, within
the meaning of Rule 13d-3 of the Exchange Act, of 75% or more of the Company's
outstanding voting securities, unless such ownership has been approved by the
Board of Directors of the Company; the first day on which shares of Common Stock
are purchased pursuant to a tender offer or exchange offer, unless the offer is
made by the Company or approved by its Board of Directors; the stockholders of
the Company have approved an agreement to merge or consolidate with or into
another corporation (and the Company is not the survivor of the merger or
consolidation), or an agreement to sell or otherwise dispose of all or
substantially all of the Company's assets (which includes a plan of
liquidation), unless the Board of Directors has resolved that options do not
automatically vest; or during any period of two consecutive years, individuals
who at the beginning of the period constituted a majority of the Board of
Directors cease to constitute a majority thereof, unless the election or the
nomination for the election by the
41
<PAGE>
Company's stockholders of each new director was approved by a vote of at least a
majority of the directors then still in office who were directors at the
beginning of the period. In addition, the Compensation Committee has the
authority at any time or from time to time to accelerate the vesting of any
individual option and to permit any option not yet exercisable to become
immediately exercisable.
Unless terminated sooner, the 1994 Option Plan will terminate 10 years from
the Effective Date. The Board of Directors has authority to amend or terminate
the 1994 Option Plan, provided no such action may impair the rights of the
holder of any outstanding option or Rights.
No Right can be exercised by an optionee unless the Company has been subject
to the reporting requirements of Section 12 of the Exchange Act for at least one
year prior to the date of exercise and has filed all reports and statements
required to be filed during that period, and the Company on a regular basis
releases for publication quarterly and annual summary statements of sales and
earnings. No Common Stock can be delivered by the Company pursuant to the
exercise of an option or a Right until qualified for delivery under applicable
securities laws and regulations, as determined by the Compensation Committee,
until the Common Stock is listed on each securities exchange on which the Common
Stock may then be listed, and until the exercise price of the option is received
by the Company either in cash or in Common Stock.
OUTSIDE DIRECTORS OPTION PLAN. The Outside Directors Option Plan provides
for the grant of options to acquire Common Stock to directors of the Company who
have no employment or consulting relationship with the Company (the "Outside
Directors"). A total of 60,000 shares of Common Stock are reserved for issuance
under the Outside Directors Option Plan.
Under the Outside Directors Option Plan, each individual who is an Outside
Director of the Company on June 30 of any year beginning on June 30, 1995
(whether or not such person is currently an Outside Director) is automatically
granted an option on June 30 of each such year at a price equal to the fair
market value of the Common Stock on the date of grant. Fair market value on the
date of grant is the closing trading price, as reported in The Wall Street
Journal, on the day preceding the date of grant. Such options will become
exercisable one year after the date of grant (subject to certain acceleration
events) and will be exercisable for a period of ten years from the date of
grant, unless such Outside Director ceases to be a member of the Board of
Directors of the Company, in which case (a) all options which are not then
exercisable shall expire and (b) those options which are then exercisable shall
remain exercisable for a period of one year.
The Company has also granted an option to purchase an aggregate of 52,500
shares of Common Stock to Jay H. Harris. See "Management -- Employment
Agreements."
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Management -- Compensation Committee Interlocks and Insider
Participation."
42
<PAGE>
OWNERSHIP OF COMMON STOCK
The following table sets forth information, immediately prior to and
immediately after completion of this Offering, regarding the beneficial
ownership of the Common Stock of Holdings.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
OF COMMON STOCK PRIOR OF COMMON STOCK
TO OFFERING AFTER OFFERING
--------------------- --------------------
NUMBER OF NUMBER OF
NAME SHARES PERCENT SHARES PERCENT
- ------------------------------ ---------- --------- ---------- --------
<S> <C> <C> <C> <C>
David R. Markin............... 5,460,000 32.5 5,460,000 24.2
Martin L. Solomon............. 3,780,000 22.5 3,780,000 16.8
Allan R. Tessler.............. 3,780,000 22.5 3,780,000 16.8
Wilmer J. Thomas, Jr.......... 3,780,000 22.5 3,780,000 16.8
Jay H. Harris................. 0 0 17,500 (1) *
---------- --------- ---------- ---
16,800,000 100.0 16,817,500(1) 74.7
---------- --------- ---------- ---
---------- --------- ---------- ---
<FN>
- --------------
* Less than one percent.
(1) Includes 17,500 shares of Common Stock which Mr. Harris has the right to
acquire, upon consummation of this Offering, through the exercise of stock
options. See "Management -- Employment Agreements."
</TABLE>
The address of each of these stockholders is c/o Great Dane Holdings Inc.,
2016 North Pitcher Street, Kalamazoo, Michigan 49007.
DESCRIPTION OF CAPITAL STOCK
Upon completion of this Offering, the authorized capital stock of Holdings
will consist of 50,000,000 shares of Common Stock, par value $.01 per share, and
5,000,000 shares of Preferred Stock, par value $1.00 per share. There will be
22,500,000 shares of Common Stock outstanding (23,355,000 if the Over-Allotment
Option is exercised in full).
PREFERRED STOCK
As of October 19, 1994, the date of Holdings' reincorporation in Delaware,
Holdings was not authorized to issue shares of Preferred Stock. Prior to
commencement of this Offering, Holdings' Certificate of Incorporation will be
amended to authorize the issuance of up to 5,000,000 shares of Preferred Stock.
Although Holdings has no present plans to issue such shares, Holdings'
Certificate of Incorporation will provide that Holdings may issue shares of
Preferred Stock in one or more series. The Board of Directors will be authorized
to establish from time to time the number of shares to be included in any such
series, to fix or alter the rights, preferences and privileges of the shares of
each wholly unissued series and any restrictions thereon, and to increase or
decrease the number of shares of any such series without any further vote or
action by the stockholders of Holdings. The Board of Directors may authorize and
issue Preferred Stock with voting or conversion rights that could adversely
affect the voting power or other rights of the holders of Common Stock. In
addition, the issuance of Preferred Stock could have the effect of delaying,
deferring or preventing a change in control of Holdings.
COMMON STOCK
As of October 19, 1994, the date of Holdings' reincorporation in Delaware,
there were 1,000 shares of Common Stock, par value $1.00 per share, outstanding.
Prior to commencement of this Offering, Holdings' Certificate of Incorporation
will be amended to authorize the issuance of up to 50,000,000 shares of Common
Stock, par value $.01 per share, and the shares currently outstanding will be
split 16,800 for 1 and converted into an aggregate of 16,800,000 shares of
Common Stock, par value $.01 per share. Upon completion of this Offering, the
holders of outstanding shares of Common Stock are entitled to receive dividends
out of assets legally available therefor at such times and in such amounts as
the Board of Directors may, from time to time, determine. Holdings has not paid
cash dividends on its capital
43
<PAGE>
stock in recent years and does not intend to pay cash dividends on the Common
Stock in the foreseeable future. See "Dividend Policy." Each stockholder is
entitled to one vote for each share of Common Stock held by such stockholder.
Holdings' Certificate of Incorporation does not provide for cumulative voting.
The Common Stock is not entitled to preemptive rights and is not subject to
redemption. Upon liquidation, dissolution or winding up of Holdings, the assets
legally available for distribution to stockholders are distributable ratably
among the holders of the Common Stock outstanding at that time after payment of
liquidation preferences, if any, on any outstanding Preferred Stock. Each
outstanding share of Common Stock is fully paid and non-assessable and the
shares of Common Stock to be issued on completion of this Offering will be fully
paid and non-assessable.
CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION
INDEMNIFICATION. The Certificate of Incorporation provides that directors
and officers of the Company will be indemnified by the Company to the full
extent then permitted by Delaware law, against all expenses and liabilities
incurred in connection with service for or on behalf of the Company. The
Certificate of Incorporation also provides that the right of directors and
officers to indemnification is not exclusive of any other right now possessed or
hereafter acquired under any statute, agreement or otherwise. Holdings has also
entered into indemnification agreements with its directors and its executive
officers. There is no pending litigation or proceeding involving a director,
officer, employee or other agent of the Company as to which indemnification is
being sought, and the Company is not aware of any pending or threatened
litigation that may result in claims for indemnification by a director, officer,
employee or other agent.
LIMITATION OF LIABILITY. In addition, the Certificate of Incorporation
provides that directors of Holdings will not be personally liable for monetary
damages to Holdings or its stockholders for certain breaches of their fiduciary
duty as directors, unless they violated their duty of loyalty to Holdings or its
stockholders, acted in bad faith, authorized illegal dividends or redemptions or
derived an improper personal benefit from their action as directors. This
provision would have no effect on the availability of equitable remedies or
non-monetary relief, such as an injunction or rescission for breach of the duty
of care. In addition, the provision applies only to claims against a director
arising out of his role as a director and not in any other capacity (such as an
officer or employee of the Company). Further, liability of a director for
violations of the federal securities laws will not be limited by this provision.
Directors will, however, no longer be liable for monetary damages arising from
decisions involving violations of the duty of care which could be deemed grossly
negligent.
STATUTORY BUSINESS COMBINATION PROVISION
Holdings is subject to the provisions of Section 203 of the Delaware General
Corporation Law ("Section 203"). Section 203 provides, with certain exceptions,
that a Delaware corporation may not engage in any of a broad range of business
combinations with a person or affiliate, or associate of such person, who is an
"interested stockholder" for a period of three years from the date that such
person became an interested stockholder unless: (i) the transaction resulting in
a person becoming an interested stockholder, or the business combination, is
approved by the board of directors of the corporation before the person become
an interested stockholder; (ii) the interested stockholder acquired 85% or more
of the outstanding voting stock of the corporation in the same transaction that
makes it an interested stockholder (excluding shares owned by persons who are
both officers and directors of the corporation, and shares held by certain
employee stock ownership plans); or (iii) on or after the date the person
becomes an interested stockholder, the business combination is approved by the
board of directors and by the holders of at least 66 2/3% of the corporation's
outstanding voting stock, excluding shares owned by the interested stockholder,
at an annual or special meeting. Under Section 203, an "interested stockholder"
is defined as any person that is (i) the owner of 15% or more of the outstanding
voting stock of the corporation or (ii) an affiliate or associate of the
corporation and was the owner of 15% or more of the outstanding voting stock of
the corporation at any time within the three year period immediately prior to
the date on which it is sought to be determined whether such person is an
interested stockholder.
44
<PAGE>
A corporation may, at its option, exclude itself from the coverage of
Section 203 by amending its certificate of incorporation or bylaws by action or
its stockholders to exempt itself from coverage, provided that such bylaws or
charter amendment may not become effective until 12 months after the date it is
adopted. Holdings has not adopted such an amendment to its Certificate of
Incorporation or Bylaws.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is American Stock
Transfer & Trust Company, New York, New York.
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has been no public market for the Common
Stock. Sales of a substantial number of shares in the public market could
adversely affect the market price of the Common Stock and may make it more
difficult for the Company to sell equity securities in the future at a time and
price which it deems appropriate.
Upon completion of this Offering, Holdings will have 22,500,000 shares of
Common Stock outstanding (23,355,000 if the Over-Allotment Option is exercised),
and an additional 1,792,500 shares reserved for issuance upon the exercise of
options which have been or may be granted under the 1994 Option Plan, the
Outside Directors Option Plan and the Harris Option. Of these shares of Common
Stock, the 5,700,000 shares of Common Stock offered hereby will be freely
transferable without restriction or further registration under the Securities
Act of 1933, as amended (the "Securities Act"), except that any shares purchased
by affiliates of the Company will be subject to the limitations of Rule 144
under the Securities Act. The remaining 16,800,000 shares of Common Stock and
the 1,792,500 shares of Common Stock issuable upon exercise of options available
for grant under the 1994 Option Plan, the Outside Directors Option Plan and the
Harris Option will be "restricted securities" within the meaning of Rule 144 and
may be sold only pursuant to an effective registration statement or an
applicable exemption from the registration requirements of the Securities Act,
including Rule 144 thereunder.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including a person who may be deemed to be an
"affiliate" of Holdings as that term is defined under the Securities Act, is
entitled to sell, within any three-month period, a number of restricted shares
as to which at least two years have elapsed from the later of the acquisition of
such shares from Holdings or an affiliate of Holdings in an amount that does not
exceed the greater of (i) one percent of the then outstanding shares of Common
Stock (225,000 shares based upon 22,500,000 shares to be outstanding immediately
after this Offering), or (ii) if the Common Stock is quoted on the Nasdaq Stock
Market (National Market) or a stock exchange, the average weekly trading volume
of the Common Stock during the four calendar weeks preceding such sale. Sales
under Rule 144 are also subject to certain requirements as to the manner of
sale, notice, and the availability of current public information about the
Company. However, a person who is not deemed to have been an affiliate of
Holdings during the 90 days preceding a sale by such person and who has
beneficially owned shares as to which at least three years have elapsed from the
later of the acquisition of such shares from Holdings or an affiliate of
Holdings is entitled to sell them without regard to the volume, manner of sale,
or notice requirements of Rule 144. Certain of the restricted shares may also be
sold in reliance on Rule 144A, which allows sales to certain institutional
investors.
In addition, the Company intends to register all shares of Common Stock
which underly options granted under the 1994 Option Plan, the Outside Directors
Option Plan and the Harris Option. Such shares will, therefore, upon such
registration and subject to certain restrictions relating to affiliates of the
Company, be freely tradeable. Holdings and its four current stockholders holding
an aggregate of 16,800,000 shares of Common Stock following this Offering have
agreed not to offer, sell, or otherwise dispose of any shares upon completion of
this Offering for a period of 180 days from the date of this Prospectus, without
the prior written consent of the Representatives of the Underwriters. See
"Underwriting."
45
<PAGE>
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the
Underwriters named below (the "Underwriters"), through their Representatives,
Alex. Brown & Sons Incorporated and Smith Barney Inc., have severally agreed to
purchase from Holdings the following respective number of shares of Common Stock
at the public offering price less the underwriting discounts and commissions set
forth on the cover page of this Prospectus:
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- --------------------------------------------------------------------------------- -----------
<S> <C>
Alex. Brown & Sons Incorporated..................................................
Smith Barney Inc.................................................................
-----------
Total........................................................................ 5,700,000
-----------
-----------
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to certain conditions precedent and that the Underwriters will
purchase all shares of the Common Stock offered hereby if any of such shares are
purchased.
Holdings has been advised by the Representatives of the Underwriters that
the Underwriters propose to offer the shares of Common Stock to the public at
the public offering price set forth on the cover page of this Prospectus and to
certain dealers at such price less a concession not in excess of $. per share.
The Underwriters may allow, and such dealers may reallow, a concession not in
excess of $. per share to certain other dealers. After commencement of the
initial public offering, the offering price and other selling terms may be
changed by the Representatives of the Underwriters.
Holdings has granted to the Underwriters an option, exercisable not later
than 30 days after the date of this Prospectus, to purchase up to 855,000
additional shares of Common Stock at the initial public offering price less the
underwriting discounts and commissions set forth on the cover page of this
Prospectus. To the extent that the Underwriters exercise such option, each of
the Underwriters will have a firm commitment to purchase approximately the same
percentage thereof that the number of shares of Common Stock to be purchased by
it shown in the above table bears to 855,000 and Holdings will be obligated,
pursuant to the option, to sell such shares to the Underwriters. The
Underwriters may exercise such option only to cover over-allotments made in
connection with the sale of Common Stock offered hereby. If purchased, the
Underwriters will offer such additional shares on the same terms as those on
which the 5,700,000 shares are being offered.
Smith Barney Inc. executes trades for Country's investment portfolio for
which it receives customary compensation.
Holdings has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act.
The Company and its four current stockholders have agreed not to offer, sell
or otherwise dispose of any shares of Common Stock for a period of 180 days
after the date of this Prospectus without the prior written consent of the
Representatives of the Underwriters.
There are restrictions on the offer and sale of Common Stock offered hereby
in the United Kingdom. All applicable provisions of the Financial Services Act
of 1986 and the Companies Act of 1985 with respect to anything done by any
person in relation to the Common Stock in, from or otherwise involving the
United Kingdom must be complied with.
Prior to this Offering, there has been no public market for the Common
Stock. Consequently, the initial price to the public for the Common Stock will
be determined through negotiations between the Company and the Representatives
of the Underwriters. Among the factors to be considered in such negotiations
will be prevailing market conditions, the results of operations of the Company
in recent periods, the market capitalizations and stages of development of other
companies which the Company and the Representatives of the Underwriters believe
to be comparable to the Company, estimates of the business potential of the
Company, the present state of the Company's development and other factors deemed
relevant.
46
<PAGE>
LEGAL MATTERS
The validity of the Common Stock offered hereby and certain legal matters
will be passed upon for the Company by Hutton Ingram Yuzek Gainen Carroll &
Bertolotti, New York, New York. Certain legal matters in connection with this
Offering will be passed upon for the Underwriters by Fried, Frank, Harris,
Shriver & Jacobson (a partnership including professional corporations), New
York, New York.
EXPERTS
The consolidated financial statements of the Company as of December 31, 1993
and 1994, and for each of the three years in the period ended December 31, 1994,
appearing in this Prospectus and Registration Statement have been audited by
Ernst & Young LLP, independent auditors, as set forth in their reports thereon
appearing elsewhere herein and in the Registration Statement, and are included
in reliance upon such reports given upon the authority of such firm as experts
in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement on Form S-1 (together with all amendments
and exhibits thereto, the "Registration Statement") under the Securities Act,
with respect to the Common Stock offered hereby. This Prospectus does not
contain all of the information set forth in the Registration Statement, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission. Statements made in this Prospectus as to the contents of any
contract, agreement or other document are not necessarily complete; with respect
to each such contract, agreement or other document filed as an exhibit to the
Registration Statement, reference is made to the exhibit for a more complete
description of the matters involved, and each such statement shall be deemed
qualified in its entirety by this reference.
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and
regulations promulgated thereunder, and in accordance therewith files reports,
proxy statements (if required) and other information with the Commission. Such
reports, proxy statements and other information, including the Registration
Statement, may be inspected and copied (at prescribed rates) at the public
reference facilities maintained by the Commission at 450 Fifth Street, N.W.,
Room 1024, Washington, D.C. 20549 and at the Commission's Regional Offices
located at Suite 1400, Northwestern Atrium Center, 500 West Madison Street,
Chicago, Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New
York 10048. The Company's 12 3/4% Debentures and Subordinated Discount
Debentures due January 1, 2006 are listed on the American Stock Exchange.
Reports, proxy statements, and other information can also be inspected at the
office of the American Stock Exchange, 86 Trinity Place, New York, New York
10006-1881.
47
<PAGE>
INDEX TO FINANCIAL STATEMENTS
COVERED BY REPORT OF INDEPENDENT AUDITORS
The following consolidated financial statements of Great Dane Holdings Inc.
and subsidiaries are submitted herewith in response to Item 8:
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
- -- Report of Independent Auditors............................................................. F-2
- -- Consolidated Balance Sheets as of December 31, 1993 and 1994............................... F-3
- -- Consolidated Statements of Shareholders' Deficit for the Years Ended December 31, 1992,
1993 and 1994............................................................................. F-4
- -- Consolidated Statements of Operations for the Years Ended December 31, 1992, 1993 and
1994...................................................................................... F-5
- -- Consolidated Statements of Cash Flows for the Years Ended December 31, 1992, 1993 and
1994...................................................................................... F-6
- -- Notes to Consolidated Financial Statements -- December 31, 1994............................ F-7
</TABLE>
F-1
<PAGE>
The following report is in the form that will be signed upon the completion
of the 16,800 to 1 stock split as described in Note A to the consolidated
financial statements.
ERNST & YOUNG LLP
Kalamazoo, Michigan
February 24, 1995
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Great Dane Holdings Inc.
We have audited the accompanying consolidated balance sheets of Great Dane
Holdings Inc. and subsidiaries as of December 31, 1993 and 1994, and the related
consolidated statements of operations, shareholders' deficit and cash flows for
each of the three years in the period ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Great Dane Holdings Inc. and subsidiaries at December 31, 1993 and 1994, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles.
Kalamazoo, Michigan
February 14, 1995
F-2
<PAGE>
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1993 1994
--------- ---------
<S> <C> <C>
Cash and cash equivalents................................................... $ 40,078 $ 34,875
Accounts receivable, less allowance for doubtful accounts of $748 (1993)
and $1,342 (1994) (Note F)................................................. 75,701 90,076
Inventories (Notes C and F)................................................. 94,112 96,580
Other current assets........................................................ 11,823 19,729
--------- ---------
TOTAL CURRENT ASSETS.................................................... 221,714 241,260
Property, plant and equipment, net (Notes D, F and G)....................... 122,355 113,948
Insurance Subsidiary's investments (Note E)................................. 90,838 91,094
Cost in excess of net assets acquired, net of accumulated amortization of
$6,252 (1993) and $7,502 (1994)............................................ 43,743 42,493
Trademark, net of accumulated amortization of $1,750 (1993) and $2,100
(1994)..................................................................... 11,696 11,346
Other assets................................................................ 26,990 21,910
--------- ---------
TOTAL ASSETS............................................................ $ 517,336 $ 522,051
--------- ---------
--------- ---------
</TABLE>
LIABILITIES AND SHAREHOLDERS' DEFICIT:
<TABLE>
<S> <C> <C>
Accounts payable............................................................ $ 77,876 $ 80,863
Notes payable (Note F)...................................................... 5,000 5,000
Income taxes payable (Note J)............................................... 7,726 12,663
Accrued compensation........................................................ 15,838 17,955
Accrued interest............................................................ 11,746 11,802
Customer deposits........................................................... 730 14,113
Other accrued liabilities................................................... 37,341 36,402
Current portion of long-term debt........................................... 14,321 13,613
--------- ---------
TOTAL CURRENT LIABILITIES............................................... 170,578 192,411
Long-term debt, excluding current portion (Note F):
Shareholders.............................................................. 30,000 30,000
Other..................................................................... 246,952 244,652
--------- ---------
276,952 274,652
Insurance Subsidiary's unpaid losses and loss adjustment expenses........... 71,179 69,318
Unearned insurance premiums................................................. 9,547 12,203
Deferred income taxes....................................................... 9,803 2,750
Postretirement benefits other than pensions (Note H)........................ 49,609 51,061
Other noncurrent liabilities................................................ 39,053 46,372
Minority interest (Notes G and I)........................................... 40,132 586
--------- ---------
TOTAL LIABILITIES....................................................... 666,853 649,353
Shareholders' deficit (Notes A, E and F):
Common stock, par value $.01:
Authorized 50,000,000 shares
Outstanding 16,800,000 shares........................................... 168 168
Additional paid-in capital................................................ 14,832 14,832
Retained earnings (deficit)............................................... (36,217) (11,869)
Unrealized appreciation (depreciation) on Insurance Subsidiary's
investments in certain debt and equity securities........................ 73 (2,060)
Notes receivable from shareholders........................................ (625) (625)
Amount paid in excess of Motor's net assets............................... (127,748) (127,748)
--------- ---------
TOTAL SHAREHOLDERS' DEFICIT............................................. (149,517) (127,302)
Commitments and contingencies (Note G)......................................
--------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT............................. $ 517,336 $ 522,051
--------- ---------
--------- ---------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' DEFICIT
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
UNREALIZED
APPRECIATION
(DEPRECIATION) AMOUNT PAID
ADDITIONAL ON INVESTMENTS NOTES IN EXCESS OF
COMMON PAID-IN RETAINED IN CERTAIN RECEIVABLE MOTOR'S NET
STOCK CAPITAL EARNINGS SECURITIES FROM ASSETS (NOTE
(NOTE A) (NOTE A) (DEFICIT) (NOTE E) SHAREHOLDERS A)
----------- ----------- ---------- --------------- ----------------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT JANUARY 1, 1992.......... $ 168 $ 14,832 $ 14,600 $ 399 $ (625) $ (127,748)
Unrealized depreciation on investment
in equity securities................ -- -- -- (367) -- --
Net loss............................. -- -- (7,555) -- -- --
----- ----------- ---------- ------- ------ ------------
BALANCES AT DECEMBER 31, 1992........ $ 168 $ 14,832 7,045 32 (625) (127,748)
Unrealized appreciation on investment
in equity securities................ -- -- -- 41 -- --
Net loss............................. -- -- (43,262) -- -- --
----- ----------- ---------- ------- ------ ------------
BALANCES AT DECEMBER 31, 1993........ $ 168 $ 14,832 (36,217) 73 (625) (127,748)
Unrealized depreciation on investment
in certain debt and equity
securities.......................... -- -- -- (2,133) -- --
Net income........................... -- -- 24,348 -- -- --
----- ----------- ---------- ------- ------ ------------
BALANCES AT DECEMBER 31, 1994........ $ 168 $ 14,832 $ (11,869) $ (2,060) $ (625) $ (127,748)
----- ----------- ---------- ------- ------ ------------
----- ----------- ---------- ------- ------ ------------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------------
1992 1993 1994
------------ ------------ ------------
<S> <C> <C> <C>
REVENUES:
Trailer manufacturing and distribution................................ $ 536,336 $ 711,862 $ 859,089
Automotive products manufacturing..................................... 112,631 127,925 157,568
Vehicular operations including rental income of $37,382 (1992);
$38,360 (1993) and $38,712 (1994).................................... 40,580 42,103 43,653
Insurance premiums earned............................................. 27,186 27,436 36,167
------------ ------------ ------------
Total revenues...................................................... 716,733 909,326 1,096,477
COST OF REVENUES:
Cost of sales......................................................... (561,546) (728,471) (870,656)
Cost of vehicular operations.......................................... (30,120) (30,916) (32,066)
Cost of insurance operations.......................................... (19,204) (19,418) (26,510)
------------ ------------ ------------
Total cost of revenues.............................................. (610,870) (778,805) (929,232)
------------ ------------ ------------
GROSS PROFIT............................................................ 105,863 130,521 167,245
Selling, general and administrative expense............................. (76,877) (83,176) (91,600)
Interest expense........................................................ (42,726) (41,614) (40,165)
Interest income......................................................... 8,895 7,396 7,101
Other income (expense), net............................................. (2,023) 3,494 1,002
Special charge -- Note G................................................ -- (7,500) --
------------ ------------ ------------
INCOME (LOSS) BEFORE MINORITY EQUITY, INCOME TAXES, AND ACCOUNTING
CHANGES................................................................ (6,868) 9,121 43,583
Minority equity (Notes B and I)......................................... -- -- (586)
------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES AND ACCOUNTING CHANGES................ (6,868) 9,121 42,997
Income tax expense (Note J)............................................. (687) (5,757) (18,649)
------------ ------------ ------------
INCOME (LOSS) BEFORE ACCOUNTING CHANGES................................. (7,555) 3,364 24,348
Accounting changes (Notes H and J)...................................... -- (46,626) --
------------ ------------ ------------
Net income (loss)....................................................... $ (7,555) $ (43,262) $ 24,348
------------ ------------ ------------
------------ ------------ ------------
Weighted average number of shares used in per share computations (Note
A)..................................................................... 16,800 16,800 16,800
------------ ------------ ------------
------------ ------------ ------------
INCOME (LOSS) PER SHARE:
Income (loss) before accounting changes............................... $ (.45) $ .20 $ 1.45
Accounting changes.................................................... -- (2.78) --
------------ ------------ ------------
Net income (loss) per share......................................... $ (.45) $ (2.58) $ 1.45
------------ ------------ ------------
------------ ------------ ------------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1992 1993 1994
---------- ---------- ----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)......................................................... $ (7,555) $ (43,262) $ 24,348
Adjustment to reconcile net income (loss) to net cash provided by
operating activities:
Accounting changes...................................................... -- 46,626 --
Depreciation and amortization........................................... 21,054 23,295 22,594
Deferred income tax benefit............................................. (4,311) (8,512) (9,044)
Amortization of cost in excess of net assets acquired................... 1,250 1,250 1,250
Amortization of debt discount........................................... 1,181 1,372 1,595
(Gain) loss on sale of property, plant and equipment.................... 217 207 (376)
Investment gains........................................................ (690) (1,079) (276)
Increase in minority equity............................................. -- -- 586
Other noncash charges................................................... 6,386 7,562 10,203
Changes in operating assets and liabilities:
Accounts receivable................................................... (12,788) (11,970) (15,140)
Finance lease receivables............................................. 5,131 4,408 1,511
Inventories........................................................... (7,820) (22,251) (2,468)
Other assets.......................................................... (5,634) 679 (2,463)
Accounts payable...................................................... 8,281 21,193 2,987
Income taxes.......................................................... 4,489 824 6,037
Unpaid losses and loss adjustment expenses............................ 5,046 (4,601) (1,861)
Unearned insurance premiums........................................... 4,673 (917) 2,656
Postretirement benefits other than pension............................ -- 4,497 1,452
Other liabilities..................................................... 6,288 11,359 12,760
---------- ---------- ----------
NET CASH FLOW PROVIDED BY OPERATING ACTIVITIES.............................. 25,198 30,680 56,351
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment................................ (17,549) (20,006) (18,209)
Proceeds from disposal of property, plant and equipment and other
productive assets........................................................ 2,783 2,599 1,979
Purchase of investments available for sale................................ -- -- (10,124)
Purchase of investments held to maturity.................................. (32,190) (64,052) (13,220)
Proceeds from sale of investments available for sale...................... -- -- 2,769
Proceeds from maturity and redemption of investments held to maturity..... 31,617 65,019 17,567
---------- ---------- ----------
NET CASH FLOW USED IN INVESTING ACTIVITIES.................................. (15,339) (16,440) (19,238)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowings.................................................. 32,090 2,500 10,069
Repayments of borrowings.................................................. (39,772) (17,967) (14,672)
Return of limited partner's capital....................................... (1,035) (894) (37,713)
---------- ---------- ----------
NET CASH FLOW USED IN FINANCING ACTIVITIES.................................. (8,717) (16,361) (42,316)
---------- ---------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................ 1,142 (2,121) (5,203)
Beginning cash and cash equivalents......................................... 41,057 42,199 40,078
---------- ---------- ----------
ENDING CASH AND CASH EQUIVALENTS............................................ $ 42,199 $ 40,078 $ 34,875
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
NOTE A -- ORGANIZATION
On October 19, 1994, International Controls Corp. ("ICC") changed its name
and its jurisdiction of incorporation through a merger into its wholly-owned
subsidiary, Great Dane Holdings Inc. (the "Company"), a Delaware corporation.
Each of the outstanding shares of common stock of ICC was converted into a pro
rata portion of 1,000 shares of common stock, $1 par value per share, of the
Company. As a result of the above, the Company has 3,000 shares of $1 par value
common stock authorized and 1,000 shares issued and outstanding. On November 16,
1994, the Company's Board of Directors approved a resolution, subject to
shareholder approval, to be effective prior to the consummation of an initial
public offering, increasing the number of authorized shares of common stock to
50 million, reducing the par value to $0.01 per common share and splitting the
shares 16,800 for 1. This resolution also authorized 5 million shares of $1 par
value preferred stock. 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 Company has two operating subsidiaries, Great Dane Trailers, Inc.
("Great Dane") and Checker Motors Corporation ("Motors"). During 1989, the
Company purchased all of the common stock of Motors, the general partner of
Checker Motors Co., L.P. (the "Partnership"), a Delaware limited partnership
(the "Motors acquisition").
Immediately after the Motors acquisition, substantially all of Motors'
former shareholders purchased, through Checker Holding Corp. ("Holding"), all of
the outstanding common stock of the Company (the "Holding buyout"). Holding was
created solely for the purpose of acquiring the stock of the Company and was
subsequently merged into the Company. The Holding buyout has been accounted for
as if Motors acquired the Company (a "reverse acquisition"), since there was no
significant change in control of Motors.
Under generally accepted accounting principles for reverse acquisitions, the
net assets of Motors acquired in the Motors acquisition cannot be revalued to
estimated fair value. Accordingly, the $127.7 million excess of the amount paid
over the historical book value of Motors' net assets has been accounted for as a
separate component reducing shareholders' equity and is not subject to
amortization. The fair value of Motors' net assets, as estimated by management,
is significantly greater than historical book value, but no appraisal of fair
value is available.
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include
the accounts of Great Dane Holdings Inc. and its subsidiaries, including the
Partnership and the Partnership's wholly-owned subsidiaries, including American
Country Insurance Company ("Insurance Subsidiary"). All significant intercompany
accounts and transactions have been eliminated.
CASH EQUIVALENTS: The Company considers all highly liquid investments,
other than Insurance Subsidiary investments, with a maturity of three months or
less when purchased to be cash equivalents.
INVENTORIES: Inventories are stated at the lower of cost or market. The
cost of inventories is determined principally on the last-in, first-out ("LIFO")
method.
PROPERTY, PLANT AND EQUIPMENT: Property, plant and equipment are stated at
cost. Depreciation is provided based on the assets' estimated useful lives,
principally by the straight-line method.
Estimated depreciable lives are as follows:
<TABLE>
<S> <C>
Buildings...................................................... 10-40 years
Transportation equipment....................................... 2-6 years
Machinery, equipment, furniture and fixtures................... 3-12 years
</TABLE>
F-7
<PAGE>
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE B -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE ASSETS: Intangible assets, principally cost in excess of net
assets acquired and a trademark, are being amortized on the straight-line basis
over periods of 5 to 40 years.
CUSTOMER DEPOSITS: Substantially all customer deposits represent advanced
payments from a customer in connection with tooling production for this
customer.
MINORITY INTEREST: Minority interest represents the limited partner's
allocable share of the Partnership's net assets (see Notes G and I) and the
share of net assets of South Charleston Stamping & Manufacturing Company
("SCSM") allocable to the minority interest holder.
REVENUE RECOGNITION: Revenues from sales of trailers that are manufactured
in response to customers' orders are recorded when such products are completed
and invoiced. Rental income from vehicle leases is recognized as earned.
Vehicles are generally leased on a daily or weekly basis to unaffiliated
operators. Insurance Subsidiary premiums are recognized as income ratably over
the period covered by the policies. Unearned premium reserves are calculated on
the monthly pro-rata basis. Realized gains and losses on investments are
determined on a specific identification basis and are included in the
determination of net income.
DEBT ISSUE EXPENSE: Expenses incurred in connection with the issuance of
debt are capitalized and amortized as interest expense over the life of the
debt.
LOSSES AND LOSS ADJUSTMENT EXPENSES: The Insurance Subsidiary's liability
for unpaid losses and loss adjustment expenses represents an estimate of the
ultimate net costs of all losses which are unpaid at the balance sheet dates,
and is determined using case-basis evaluations and statistical analysis. These
estimates are continually reviewed and any adjustments which become necessary
are included in current operations. Since the liability is based on estimates,
the ultimate settlement of losses and the related loss adjustment expenses may
vary from the amounts included in the consolidated financial statements.
RECLASSIFICATION:__Certain 1993 amounts have been reclassified to conform to
the 1994 classification.
NOTE C -- INVENTORIES
Inventories are summarized below (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1993 1994
--------- ---------
<S> <C> <C>
Raw materials................................................................. $ 53,105 $ 60,998
Work-in-process............................................................... 10,956 15,877
Finished goods................................................................ 30,051 19,705
--------- ---------
$ 94,112 $ 96,580
--------- ---------
--------- ---------
</TABLE>
Inventories would not differ materially if the first-in, first-out costing
method were used for inventories costed by the LIFO method.
F-8
<PAGE>
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE D -- PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are summarized below (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------
1993 1994
----------- ------------
<S> <C> <C>
Land and buildings........................................................ $ 54,167 $ 56,430
Transportation equipment.................................................. 32,830 31,597
Machinery, equipment, furniture and fixtures.............................. 125,067 129,085
----------- ------------
212,064 217,112
Less accumulated depreciation and amortization............................ (89,709) (103,164)
----------- ------------
$ 122,355 $ 113,948
----------- ------------
----------- ------------
</TABLE>
NOTE E -- INVESTMENTS
Effective January 1, 1994, the Company adopted the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain
Investments in Debt and Equity Securities." In accordance with this statement,
prior period financial statements have not been restated to reflect the change
in accounting principle. The opening balance of shareholders' deficit was
decreased by $1.4 million (net of $0.8 million in deferred income taxes) to
reflect the net unrealized holding gains on securities classified as
available-for-sale previously carried at amortized cost or lower of cost or
market.
Insurance company management evaluated the investment portfolio and, based
on the Insurance Subsidiary's ability and intent, has classified securities
between the held-to-maturity and available-for-sale categories. Held-to-maturity
securities are stated at amortized cost. Debt securities not classified as held-
to-maturity and marketable equity securities are classified as
available-for-sale. Available-for-sale securities are stated at fair value, with
the unrealized gains and losses, net of tax, reported as a separate component of
shareholders' deficit.
Following is a summary of held-to-maturity and available-for-sale securities
of the Insurance Subsidiary, which are generally reserved for Insurance
Subsidiary operations, as of December 31, 1994:
<TABLE>
<CAPTION>
HELD-TO-MATURITY
---------------------------------------------------
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
U.S. Treasury securities and obligations of U.S.
Government corporations and agencies............. $ 7,285 $ 73 $ 143 $ 7,215
Obligations of states and political
subdivisions..................................... 8,828 51 367 8,512
Mortgage-backed securities........................ 3,142 -- 200 2,942
Corporate and other debt securities............... 25,943 88 1,005 25,026
--------- ----- ------------ -----------
$ 45,198 $ 212 $ 1,715 $ 43,695
--------- ----- ------------ -----------
--------- ----- ------------ -----------
</TABLE>
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE
---------------------------------------------------
GROSS GROSS ESTIMATED
UNREALIZED UNREALIZED FAIR
COST GAINS LOSSES VALUE
--------- ------------- ------------ -----------
<S> <C> <C> <C> <C>
Obligations of states and political subdivisions.. $ 9,958 $ 10 $ 689 $ 9,279
Corporate and other debt securities............... 23,198 272 1,148 22,322
--------- ----- ------------ -----------
Total debt securities......................... 33,156 282 1,837 31,601
Equity securities................................. 15,994 227 1,926 14,295
--------- ----- ------------ -----------
Total available-for-sale...................... $ 49,150 $ 509 $ 3,763 $ 45,896
--------- ----- ------------ -----------
--------- ----- ------------ -----------
</TABLE>
F-9
<PAGE>
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE E -- INVESTMENTS (CONTINUED)
The amortized cost and estimated market value of debt securities at December
31, 1994, by contractual maturity, are shown below. Expected maturities will
differ from contractual maturities because borrowers may have the right to call
or prepay obligations with or without call or prepayment penalties.
<TABLE>
<CAPTION>
HELD-TO-MATURITY
--------------------
ESTIMATED
FAIR
COST VALUE
-------- --------
<S> <C> <C>
Due in one year or less...................................................... $ 7,300 $ 7,314
Due after one year through five years........................................ 28,338 27,512
Due after five years through ten years....................................... 4,424 4,074
Due after ten years.......................................................... 1,994 1,853
-------- --------
42,056 40,753
Mortgage-backed securities................................................... 3,142 2,942
-------- --------
$ 45,198 $43,695
-------- --------
-------- --------
</TABLE>
<TABLE>
<CAPTION>
AVAILABLE-FOR-SALE
--------------------
ESTIMATED
FAIR
COST VALUE
-------- --------
<S> <C> <C>
Due in one year or less...................................................... $ 289 $ 284
Due after one year through five years........................................ 2,847 2,833
Due after five years through ten years....................................... 19,296 18,132
Due after ten years.......................................................... 10,724 10,352
-------- --------
$ 33,156 $31,601
-------- --------
-------- --------
</TABLE>
The proceeds from sales of available-for-sale securities was $2.8 million
for the year ended December 31, 1994. No gross gains or gross losses were
realized on those sales during the year ended December 31, 1994.
Bonds with an amortized cost of $2.3 million at December 31, 1994, were on
deposit to meet certain regulatory requirements.
F-10
<PAGE>
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE F -- BORROWINGS
Long-term debt is summarized below (dollars in thousands) (see Note O):
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1993 1994
----------- -----------
<S> <C> <C>
12 3/4% Senior Subordinated Debentures less debt discount of $11,124 (1993)
and $9,725 (1994)......................................................... $ 120,916 $ 122,315
14 1/2% Subordinated Discount Debentures less debt discount of $6,531
(1993) and $6,335 (1994).................................................. 54,816 55,012
Notes payable to shareholders.............................................. 30,000 30,000
Great Dane term loan payable............................................... 21,511 17,411
Great Dane Revolving credit line........................................... 17,132 27,201
Partnership term loan payable.............................................. 22,500 16,500
Equipment term loan........................................................ 5,500 3,500
Economic Development term loan............................................. 10,909 10,375
Installment notes.......................................................... 979 --
Other debt................................................................. 7,010 5,951
----------- -----------
291,273 288,265
Less current portion....................................................... (14,321) (13,613)
----------- -----------
$ 276,952 $ 274,652
----------- -----------
----------- -----------
</TABLE>
Interest on the $132 million face value of 12 3/4% Senior Subordinated
Debentures is payable semiannually at the stated rate. The recorded debt
discount is being amortized as interest expense over the expected life of the
debentures using an imputed interest rate of approximately 15% compounded
semiannually. Under the terms of the debentures, the Company's payment of
dividends is limited to, among other things, 50% of consolidated net income
subsequent to June 30, 1986, plus $12 million. At December 31, 1994, the Company
was restricted from paying a dividend. The debentures are redeemable at the
option of the Company in whole or in part at a decreasing premium. The
debentures are subject to redemptions through a sinking fund whereby the Company
is required to make five annual sinking fund payments of $18 million commencing
August 1, 1996, with the final payment due August 1, 2001.
Interest on the $61 million face value of 14 1/2% Subordinated Discount
Debentures is payable semiannually at the stated rate. The recorded debt
discount is being amortized as interest expense over the expected life of the
debentures using an imputed interest rate of approximately 16.7% compounded
semiannually. The 14 1/2% debentures are subject to redemption through a sinking
fund whereby the Company is required to redeem, at their face value, on January
1 in each of the years 1997 through 2005, 7 1/2% of the principal amount of the
debentures outstanding on January 1, 1997. The balance of debentures are due
January 1, 2006. The debentures are callable any time at their face value and
are subordinated to all present or future indebtedness of the Company not
expressly subordinated to, or on a parity with, the debentures.
The notes payable to shareholders, which were paid off in February 1995 (See
Note O) bore interest payable quarterly in arrears at an annual rate equal to
the prime rate of a New York bank (8.5% at December 31, 1994) plus 3 1/2%.
In March 1990, Great Dane entered into a five year loan and security
agreement ("Agreement") with certain banks. The Agreement made available to
Great Dane a $33 million five-year term loan and a $47 million revolving credit
line. In 1993, the maximum revolving credit line was increased to $65 million.
The amount available under the revolving credit line is based upon the amount of
Great Dane's eligible trade accounts receivable and inventory as defined in the
Agreement. The additional amount
F-11
<PAGE>
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE F -- BORROWINGS (CONTINUED)
available under the revolving credit line under the borrowing base terms of the
Agreement totaled $30.2 million at December 31, 1994. The term loan is payable
in equal monthly installments of $0.34 million plus interest at the bank's prime
interest rate (8.5% at December 31, 1994) plus 1 1/2%, with the balance due in
March 1995. The revolving credit line is due in 1995 and requires interest
payments at the bank's prime rate (8.5% at December 31, 1994) plus 1 1/2%. In
February 1995, Great Dane entered into an amended and restated loan and security
agreement with certain banks (See Note O). Accordingly, since these obligations
have been refinanced on a long-term basis, the amounts have been classified as
long-term debt as of December 31, 1994.
All borrowings under the Agreement are fully secured by substantially all of
the Great Dane assets. The Agreement requires Great Dane to, among other things,
comply with certain financial covenants, and limits the amount of loans and
transfers to the Company, limits additions to and sales of Great Dane's fixed
assets and limits additional Great Dane borrowings. Under the most restrictive
covenant, no additional transfers of funds to the Company are available until
after December 31, 1994.
During 1992, the Partnership entered into a Loan and Guaranty Agreement with
a bank pursuant to which the bank provided a $30 million term loan to the
Partnership. The term loan requires twenty quarterly principal payments of $1.5
million, plus interest at the bank's prime rate (8.5% at December 31, 1994) plus
1 1/4%, which payments commenced December 31, 1992. The term loan is secured by
substantially all of the Partnership's assets, excluding the stock of the
Insurance Subsidiary. The term loan agreement, which is guaranteed by Motors,
requires Motors to, among other things, comply with certain financial covenants
and limits additional loans to Motors.
The equipment term loan requires quarterly payments of $0.5 million plus
interest at the bank's prime rate (8.5% at December 31, 1994) plus 1 1/4%. The
obligation is secured by certain machinery and equipment with a net carrying
amount of $5.9 million at December 31, 1994.
In connection with the Partnership term loan and the equipment term loan,
Motors is required to comply with certain financial covenants.
The economic development term loan, which is guaranteed by Motors, is
payable by SCSM to the West Virginia Economic Development Authority, and
requires monthly payments of $0.1 million, including interest at 5% with the
unpaid balance due 2008. The interest rate will be adjusted in April 1998 and
2003, so as to remain equal to 75% of the base rate, as defined, plus 1/2%. The
loan is secured by certain machinery and equipment with a net carrying amount of
$22.5 million at December 31, 1994.
Maturities of long-term debt for the four years subsequent to 1995, after
giving effect to the payoff of the notes payable to shareholders and to the
refinancing of Great Dane's and Motors' debt, are as follows: $14.2 million in
1996, $32.2 million in 1997, $32.2 million in 1998 and $29.0 million in 1999.
Interest paid totaled $42.4 million in 1992, $39.8 million in 1993 and $38.5
million in 1994.
SCSM has a line of credit with a bank totaling $7.5 million at December 31,
1994. Borrowing under the line ($5.0 million at December 31, 1994) bears
interest at the bank's prime rate (8.5% at December 31, 1994) plus 1%.
The Partnership has $3.8 million available under a line of credit with a
bank. Borrowings under the line ($0 at December 31, 1994) bear interest at the
bank's prime rate (8.5% at December 31, 1994) plus 1%.
The weighted average interest rate on short-term borrowings outstanding as
of December 31, 1993 and 1994 was 7.25% and 9.75%, respectively.
F-12
<PAGE>
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE G -- COMMITMENTS AND CONTINGENCIES
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. In that lawsuit, Boeing sought damages and declaratory relief for
past and future costs resulting from alleged groundwater contamination at a
location in Gresham, Oregon, where the three prior subsidiaries of the Company
formerly conducted business operations. 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 will pay Boeing $12.5
million over the course of five years, at least $5 million of which has been
committed by certain insurance companies in the form of cash or irrevocable
letters of credit. In accordance with the settlement agreement, Boeing's claims
against the Company and the three former subsidiaries have been dismissed with
prejudice and Boeing has released and indemnified the Company with respect to
certain claims. Accordingly, a $7.5 million special charge was recorded in 1993,
to provide for the cost associated with this legal proceeding.
On March 4, 1992, Motors received notice that the Insurance Commissioner of
the State of California, as Conservator and Rehabilitator of ELIC, a limited
partner of the Partnership, had filed an Amendment to the Application for Order
of Conservation filed in Superior Court of the State of California for the
County of Los Angeles. The amendment seeks to add to the Order, dated April 11,
1991, Motors, the Partnership and Checker Holding Corp. III, a limited partner
of the Partnership. The amendment alleges that the action by Motors invoking
provisions of the Partnership Agreement that alter ELIC's rights in the
Partnership upon the occurrence of certain events is improper and constitutes an
impermissible forfeiture of ELIC's interest in the Partnership and a breach of
fiduciary duty to ELIC. The amendment seeks (a) a declaration of the rights of
the parties in the Partnership and (b) damages in an unspecified amount. The
Partnership believes that it has meritorious defenses to the claims of ELIC. On
April 15, 1994, the Company and the Conservator entered into a letter agreement
pursuant to which the Company agreed to purchase ELIC's interest in the
Partnership for $37 million. On May 26, 1994, the California Court approved a
settlement of this litigation. Pursuant to the Settlement Agreement, on December
22, 1994, Motors redeemed ELIC's interest in the Partnership for $37.0 million
(the "Minority Interest Redemption") and the litigation was thereafter dismissed
with prejudice. Under certain circumstances, if all or substantially all of the
assets of the Partnership are sold within five years of the consummation of the
Minority Interest Redemption, ELIC may be entitled to receive a payment equal to
the positive difference between (x) the distribution ELIC would have received
upon liquidation of the Partnership as a result of such transaction, calculated
in accordance with the provisions of the Partnership Agreement as if it had
continued to hold its partnership interest, and (y) the future value of $37.0
million calculated at 15% per annum from the date of the Minority Interest
Redemption to the date of such transaction.
In 1988, Great Dane entered into an operating agreement with the purchaser
of a previously wholly-owned finance company ("Finance"). Under the terms of the
agreement, the purchaser is given the opportunity to finance certain sales of
Great Dane. The 1988 operating agreement requires that Great Dane, among other
things, (i) not finance the sale of its products for the first eight years and
(ii) maintain a minimum net worth as defined in the agreement. In addition,
under this operating agreement, Great Dane is liable to the purchaser for 50% of
losses incurred in connection with the realization of certain new receivables
financed by the purchaser subsequent to the sale of Finance subject to certain
maximums. Failure to comply with these requirements of the agreement would
result in Great Dane having to repay the purchaser varying amounts reducing to
$5 million during the year ending September 8, 1996. At December 31, 1994, Great
Dane was in compliance with the provisions of the operating agreement.
In addition, at December 31, 1994, the Company has guaranteed the
realization of receivables of approximately $0.6 million in connection with the
sale of Finance and is partially responsible for the realization of new
receivables of approximately $156.9 million financed by the purchaser under the
F-13
<PAGE>
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE G -- COMMITMENTS AND CONTINGENCIES (CONTINUED)
operating agreement subject to certain maximums. In addition to Great Dane's
guarantee, these receivables are also collateralized by a security interest in
the respective trailers originally sold by Great Dane. A loss reserve of $3.1
million, for potential losses that may be incurred on the ultimate realization
of these receivables, is included in other accrued and other non-current
liabilities in the December 31, 1994, consolidated balance sheet.
To secure certain obligations, the Company and its subsidiaries had
outstanding letters of credit aggregating approximately $3.4 million at December
31, 1994, which letters of credit were fully secured by cash deposits included
in other assets in the consolidated balance sheets. In addition, Great Dane has
standby letters of credit aggregating approximately $7.6 million and the
Partnership has standby letters of credit aggregating approximately $1.2 million
outstanding at December 31, 1994.
The Company and certain of its subsidiaries have employment agreements with
three officers of the Company that provide for minimum annual compensation of
approximately $1.8 million. The contracts expire on various dates from June 1995
to February 1997.
The Company and its subsidiaries lease real estate and equipment. Certain
leases are renewable and provide for monthly rentals, real estate taxes and
other operating expenses. The Company believes that, in the normal course of
business, leases that expire will be renewed or replaced by other leases. Rental
expense under operating leases was approximately $3.8 million in 1992, $4.8
million in 1993, and $5.5 million in 1994. Minimum rental obligations for all
noncancelable operating leases at December 31, 1994 are as follows: $3.0 million
in 1995, $2.8 million in 1996, $2.6 million in 1997, $2.5 million in 1998, $2.4
million in 1999, and $14.6 million thereafter.
Management believes that none of the above legal actions, guarantees or
commitments will have a material adverse effect on the Company's consolidated
financial position.
NOTE H -- RETIREMENT PLANS
The Company and its subsidiaries have defined benefit pension plans
applicable to substantially all employees. The contributions to these plans are
based on computations by independent actuarial consultants. The Company's
general funding policy is to contribute amounts required to maintain funding
standards in accordance with the Employee Retirement Income Security Act.
Employees' benefits are based on years of service and the employees' final
average earnings, as defined by the plans.
Net periodic pension cost includes the following components (dollars in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
1992 1993 1994
--------- --------- ---------
<S> <C> <C> <C>
Service cost -- benefits earned (normal cost)...................................... $ 1,473 $ 1,752 $ 2,384
Interest on projected benefit obligation........................................... 3,565 3,972 4,384
Return on investments.............................................................. (2,718) (2,867) (1,007)
Net amortization and deferral...................................................... 129 328 (1,459)
--------- --------- ---------
Net periodic pension cost charged to expense....................................... $ 2,449 $ 3,185 $ 4,302
--------- --------- ---------
--------- --------- ---------
</TABLE>
Gains and losses and prior service cost are amortized over periods ranging
from seven to fifteen years. Other assumptions used in the calculation of the
actuarial present value of the projected benefit obligation were as follows:
<TABLE>
<CAPTION>
1992 1993 1994
------------ ------------ ------------
<S> <C> <C> <C>
Discount rate........................................................... 8 1/4% 7 1/2% 7 1/2% - 8%
Rate of increase in compensation levels................................. 4% - 5% 4% - 4 1/4% 4% - 4 1/4%
Long-term rate of return on assets...................................... 5% - 9 1/2% 5% - 9 1/2% 5% - 9%
</TABLE>
F-14
<PAGE>
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE H -- RETIREMENT PLANS (CONTINUED)
The following table sets forth the plans' funded status and amounts
recognized in the Company's consolidated balance sheets (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1993 1994
---------- ----------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligations................................................ $ 41,846 $ 44,642
---------- ----------
---------- ----------
Accumulated benefit obligation............................................ $ 44,731 $ 47,836
---------- ----------
---------- ----------
Plan assets (principally guaranteed investment contracts with insurance
companies)................................................................. $ 41,664 $ 43,541
Projected benefit obligation................................................ 54,568 60,655
---------- ----------
Projected benefit obligation in excess of plan assets....................... (12,904) (17,114)
Unrecognized prior service cost............................................. 1,115 778
Unrecognized net loss....................................................... 1,687 6,353
Minimum liability........................................................... (1,450) (2,351)
Unrecognized net obligation at transition................................... 1,819 1,591
---------- ----------
Pension liability recognized in the balance sheets.......................... (9,733) (10,743)
Less noncurrent liability................................................... 6,442 6,943
---------- ----------
Current pension liability................................................... $ (3,291) $ (3,800)
---------- ----------
---------- ----------
</TABLE>
Relative positions and undertakings in multiemployer pension plans covering
certain of the Partnership's employees are not presently determinable. Expenses
related to multiemployer pension plans totaled $0.2 million, $0.2 million and
$0.3 million for the years ended December 31, 1992, 1993 and 1994, respectively.
Expense related to defined contribution plans, which is based on a
stipulated contribution for hours worked or employee contributions, approximated
$0.3 million in 1992, $0.5 million in 1993 and $0.5 million in 1994.
The Company and its subsidiaries provide postretirement health care and life
insurance benefits to eligible retired employees. The Company's policy is to
fund the cost of medical benefits as paid. Prior to 1993, the Company recognized
expense in the year the benefits were provided. The amount charged to expense
for these benefits was approximately $2.5 million in 1992. Effective January 1,
1993, the Company adopted SFAS No.106, "Employers Accounting for Postretirement
Benefits Other Than Pensions." This statement requires the accrual of the cost
of providing postretirement benefits, including medical and life insurance
coverage, during the active service period of the employee. The Company recorded
a charge of $29.7 million (net of taxes of $16.5 million), or $1.78 per share,
during 1993 to reflect the cumulative effect of this change in accounting
principle.
F-15
<PAGE>
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE H -- RETIREMENT PLANS (CONTINUED)
The following table sets forth the plan's funded status reconciled with
amounts recognized in the Company's consolidated balance sheets (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1993 1994
---------- ----------
<S> <C> <C>
Accumulated post retirement obligation:
Retirees.................................................................. $ (34,040) $ (32,473)
Fully eligible active plan participants................................... (4,319) (5,315)
Other active plan participants............................................ (11,218) (9,751)
---------- ----------
(49,577) (47,539)
Unrecognized net (gain) loss.............................................. 1,119 (2,568)
Unrecognized prior service cost........................................... (3,432) (3,146)
---------- ----------
Accrued postretirement benefit liability recorded in balance sheets....... (51,890) (53,253)
Less noncurrent liability................................................. 49,609 51,061
---------- ----------
Current postretirement benefit liability.................................. $ (2,281) $ (2,192)
---------- ----------
---------- ----------
</TABLE>
Net periodic postretirement benefit cost includes the following components
(in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
1993 1994
---------- ----------
<S> <C> <C>
Service cost................................................................ $ 634 $ 541
Interest cost............................................................... 3,888 3,625
Unrecognized prior service cost............................................. -- (286)
---------- ----------
$ 4,522 $ 3,880
---------- ----------
---------- ----------
</TABLE>
The health care cost trend rate as of December 31, 1994, ranges from 12.6%
down to 5.5% over the next 20 years and remains level thereafter. The health
care cost trend rate assumption has a significant effect on the amounts
reported. For example, increasing the assumed health care cost trend rates by
one percentage point in each year would increase the accumulated postretirement
benefit obligation as of December 31, 1994, by $2.9 million. The
weighted-average discount rate used in determining the accumulated
postretirement benefit obligation was 7.5% and 8.0% at December 31, 1993 and
1994, respectively.
The effect of adopting SFAS No. 106 decreased 1993 pre-tax income by $2.0
million as compared to 1992.
NOTE I -- MINORITY EQUITY
On April 11, 1991, ELIC was placed in conservatorship. In accordance with
the provisions of the Partnership Agreement, the Partnership continues, but
ELIC's interest in the Partnership and rights under the Partnership Agreement
are limited to the right to receive the balance of its capital account as
calculated and on the terms set forth in the Partnership Agreement. On December
22, 1994, the Company purchased ELIC's interest in the Partnership for $37
million.
Minority equity for the year ended December 31, 1994, represents the
minority interest holder's allocable share of SCSM's net income for the period.
F-16
<PAGE>
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
NOTE J -- INCOME TAXES
Effective January 1, 1993, the Company adopted the provisions of Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes." As
permitted under the new rules, prior years financial statements have not been
restated. The Company recorded a charge of $16.9 million, or $1.00 per share,
during 1993 to reflect the cumulative effect of this change in accounting
principle. Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of the Company's deferred tax assets and liabilities
as of December 31, 1993 and 1994 are as follows (dollars in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1993 1994
--------- ---------
<S> <C> <C>
Deferred tax assets:
Other postretirement benefits.................................................. $ 18,961 $ 19,675
Pension........................................................................ 3,377 2,799
Reserves....................................................................... 10,986 13,143
Bad debt reserve............................................................... 1,601 1,769
Other.......................................................................... 5,555 6,868
--------- ---------
40,480 44,254
Valuation allowance............................................................ (1,000) (1,000)
--------- ---------
39,480 43,254
Deferred tax liabilities:
Property, plant and equipment.................................................. 31,646 28,519
Finance lease receivables...................................................... 517 --
Debenture discount............................................................. 4,647 4,354
Intangible assets.............................................................. 5,249 4,525
Inventory...................................................................... 3,624 2,530
Other.......................................................................... 645 76
--------- ---------
46,328 40,004
--------- ---------
Net deferred tax assets (liabilities)............................................ $ (6,848) $ 3,250
--------- ---------
--------- ---------
</TABLE>
The components of income tax expense are as follows (dollars in thousands):
<TABLE>
<CAPTION>
LIABILITY METHOD
----------------------
DEFERRED METHOD YEAR ENDED
------------------ DECEMBER 31,
YEAR ENDED ----------------------
DECEMBER 31, 1992 1993 1994
------------------ ---------- ----------
<S> <C> <C> <C>
Current taxes:
Federal.................................................. $ (3,296) $ (10,244) $ (23,395)
State.................................................... (1,702) (4,025) (4,298)
------- ---------- ----------
(4,998) (14,269) (27,693)
Deferred taxes............................................. 4,311 8,512 9,044
------- ---------- ----------
Income tax expense......................................... $ (687) $ (5,757) $ (18,649)
------- ---------- ----------
------- ---------- ----------
</TABLE>
F-17
<PAGE>
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE J -- INCOME TAXES (CONTINUED)
The components of the deferred tax benefit are as follows (dollars in
thousands):
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1992
--------------
<S> <C>
Tax depreciation less than book depreciation............................................ $ 1,742
Finance leases.......................................................................... (37)
Inventory reserves...................................................................... 505
Financing costs......................................................................... (75)
Warranty reserves....................................................................... 22
Other reserves.......................................................................... 602
Partnership allocation.................................................................. 1,469
Other................................................................................... 83
-------
Deferred tax benefit.................................................................... $ 4,311
-------
-------
</TABLE>
Income tax expense differs from the amount computed by applying the
statutory federal income tax rate to income (loss) before income taxes. The
reasons for these differences are as follows (dollars in thousands):
<TABLE>
<CAPTION>
LIABILITY METHOD
----------------------
DEFERRED METHOD
------------------ YEAR ENDED DECEMBER
YEAR ENDED 31,
DECEMBER 31, ----------------------
1992 1993 1994
------------------ ---------- ----------
<S> <C> <C> <C>
Computed expected tax benefit (expense).................... $ 2,335 $ (3,192) $ (15,049)
(Increase) decrease in taxes resulting from:
State income taxes, net of federal income tax benefit.... (1,123) (2,616) (2,794)
Appraisal depreciation................................... (1,024) -- --
Amortization of goodwill and other items................. (530) (643) (714)
Nontaxable Partnership income............................ 574 446 286
Other.................................................... (919) 248 (378)
------- ---------- ----------
Actual tax expense......................................... $ (687) $ (5,757) $ (18,649)
------- ---------- ----------
------- ---------- ----------
</TABLE>
Income taxes paid totaled $3.9 million in 1992, $13.4 million in 1993 and
$24.5 million in 1994.
NOTE K -- RELATED PARTY TRANSACTIONS
The Company leases an airplane owned by a corporation of which a director is
the sole shareholder. Lease expenses totaled $0.7 million each year in 1992 and
1993 and $1.1 million in 1994.
NOTE L -- INDUSTRY SEGMENT INFORMATION
The Company operates in four principal segments:
TRAILER MANUFACTURING SEGMENT -- Manufacturing and distribution of
highway truck trailers.
AUTOMOTIVE PRODUCTS SEGMENT -- Manufacturing metal stampings and
assemblies and coordination of related tooling production for motor vehicle
manufacturers.
VEHICULAR OPERATIONS SEGMENT -- Leasing taxicabs.
INSURANCE OPERATIONS SEGMENT -- Providing property and casualty
insurance coverage to the Partnership and to outside parties.
F-18
<PAGE>
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE L -- INDUSTRY SEGMENT INFORMATION (CONTINUED)
Trailer Manufacturing segment sales to J. B. Hunt totaled approximately
$50.0 million in 1992, $92.3 million in 1993 and $85.3 million in 1994.
Automotive product net sales to General Motors Corporation totaled
approximately $109.1 million in 1992, $121.5 million in 1993 and $145.9 million
in 1994 (includes accounts receivable of $8.9 million, $8.9 million and $13.0
million at December 31, 1992, 1993 and 1994, respectively).
Industry segment data is summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
TRAILER AUTOMOTIVE VEHICULAR INSURANCE
MANUFACTURING PRODUCTS OPERATIONS OPERATIONS ELIMINATIONS CONSOLIDATED
--------------- ----------- ------------ ------------ ------------- --------------
<S> <C> <C> <C> <C> <C> <C>
1992
Revenues:
Outside customers............. $ 536,336 $ 112,631 $ 40,580 $ 27,186 $ -- $ 716,733
Intersegment sales............ -- 1 4,043 13,161 (17,205 ) --
--------------- ----------- ------------ ------------ ------------- --------------
$ 536,336 $ 112,632 $ 44,623 $ 40,347 $ (17,205 ) $ 716,733
--------------- ----------- ------------ ------------ ------------- --------------
--------------- ----------- ------------ ------------ ------------- --------------
Operating profit (loss)......... $ 17,590 $ 11,622 $ 5,727 $ (1,557 ) $ 33,382
Corporate expenses.............. (4,396 )
Interest income:
Segment....................... 1,168 6,321 7,489
Corporate..................... 1,406
Interest expense:
Segment....................... (5,852 ) (5,852 )
Corporate..................... (36,874 )
Other expenses, net............. (2,023 )
--------------
Loss before income taxes........ $ (6,868 )
--------------
--------------
Identifiable assets............. $ 230,465 $ 66,561 $ 25,516 $ 117,960 $ 440,502
Partnership assets.............. 38,712
Corporate assets................ 14,549
--------------
Total assets at December 31,
1992........................... $ 493,763
--------------
--------------
Depreciation and amortization:
Segment....................... $ 6,303 $ 4,148 $ 10,099 $ 462 $ 21,012
Other......................... 42
Capital expenditures............ 4,996 1,889 10,412 252 17,549
</TABLE>
F-19
<PAGE>
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE L -- INDUSTRY SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
TRAILER AUTOMOTIVE VEHICULAR INSURANCE
MANUFACTURING PRODUCTS OPERATIONS OPERATIONS ELIMINATIONS CONSOLIDATED
--------------- ----------- ------------ ------------ ------------- --------------
1993
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Outside customers............. $ 711,862 $ 127,925 $ 42,103 $ 27,436 $ -- $ 909,326
Intersegment sales............ -- -- 4,346 13,400 (17,746 ) --
--------------- ----------- ------------ ------------ ------------- --------------
$ 711,862 $ 127,925 $ 46,449 $ 40,836 $ (17,746 ) $ 909,326
--------------- ----------- ------------ ------------ ------------- --------------
--------------- ----------- ------------ ------------ ------------- --------------
Operating profit (loss)......... $ 32,381 $ 15,306 $ 6,251 $ (1,947 ) $ -- $ 51,991
Corporate expense............... (4,646 )
Interest income:
Segment....................... 428 5,877 6,305
Corporate..................... 1,091
Interest expense:
Segment....................... (4,811 ) (4,811 )
Corporate..................... (36,803 )
Special charge.................. (7,500 )
Other income, net............... 3,494
--------------
Income before income taxes...... $ 9,121
--------------
--------------
Identifiable assets............. $ 259,837 $ 67,937 $ 20,493 $ 116,692 $ 464,959
Partnership assets.............. 37,701
Corporate assets................ 14,676
--------------
Total assets at December 31,
1993........................... $ 517,336
--------------
--------------
Depreciation and amortization... $ 8,280 $ 4,991 $ 9,530 $ 494 $ 23,295
Capital expenditures............ 7,265 4,728 7,913 100 20,006
</TABLE>
F-20
<PAGE>
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE L -- INDUSTRY SEGMENT INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
TRAILER AUTOMOTIVE VEHICULAR INSURANCE
MANUFACTURING PRODUCTS OPERATIONS OPERATIONS ELIMINATIONS CONSOLIDATED
--------------- ----------- ------------ ------------ ------------- --------------
1994
<S> <C> <C> <C> <C> <C> <C>
Revenues:
Outside customers............. $ 859,089 $ 157,568 $ 43,653 $ 36,167 $ -- $ 1,096,477
Intersegment sales............ -- -- 3,648 12,145 (15,793 ) --
--------------- ----------- ------------ ------------ ------------- --------------
$ 859,089 $ 157,568 $ 47,301 $ 48,312 $ (15,793 ) $ 1,096,477
--------------- ----------- ------------ ------------ ------------- --------------
--------------- ----------- ------------ ------------ ------------- --------------
Operating profit (loss)......... $ 58,619 $ 19,652 $ 6,824 $ (916 ) $ -- $ 84,179
Corporate expenses.............. (8,534 )
Interest income:
Segment....................... 5,510 5,510
Corporate..................... 1,591
Interest expense:
Segment....................... (3,784 ) (3,784 )
Corporate..................... (36,381 )
Other expenses, net............. 1,002
Minority equity................. (586 )
--------------
Income before income taxes...... $ 42,997
--------------
--------------
Identifiable assets............. $ 264,147 $ 81,976 $ 17,827 $ 116,062 $ 480,012
Partnership assets.............. 36,776
Corporate assets................ 5,263
--------------
Total assets at December 31,
1994........................... $ 522,051
--------------
--------------
Depreciation and amortization:
Segment....................... $ 7,876 $ 5,294 $ 8,992 $ 409 $ 22,571
Other......................... 23
Capital expenditures:
Segment....................... 8,937 1,152 7,580 215 17,884
Other......................... 325
</TABLE>
Intersegment sales are accounted for at prices comparable to normal
unaffiliated customer sales. Corporate and Partnership assets consist of
short-term investments, savings deposits and certain other assets.
NOTE M -- FAIR VALUES OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating
the fair value of financial instruments:
CASH AND CASH EQUIVALENTS: The carrying amount reported in the balance
sheet for cash and cash equivalents approximates its fair value.
INDEBTEDNESS: The carrying amounts of the Company's notes payable to
shareholders, Great Dane term loan payable, Great Dane revolving credit line,
Partnership term loan payable, equipment term loan, economic development term
loan and line of credit approximate their fair value. The fair
F-21
<PAGE>
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE M -- FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)
values of the Company's 12 3/4% Senior Subordinated Debentures and 14 1/2%
Subordinated Discount Debentures are based on quoted market prices. The fair
values of the Company's other indebtedness is estimated using discounted cash
flow analyses based on current market rates.
The carrying amount and fair value of the Company's indebtedness at December
31, 1994, are as follows (dollars in thousands):
<TABLE>
<CAPTION>
CARRYING AMOUNT FAIR VALUE
----------------- -----------
<S> <C> <C>
Long-term debt and notes payable..................................... $ 293,265 $ 292,000
</TABLE>
NOTE N -- SELECTED QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
1993 QUARTER ENDED 1994 QUARTER ENDED
---------------------------------------------- ---------------------------------------------
SEPTEMBER DECEMBER SEPTEMBER DECEMBER
MARCH 31 JUNE 30 30 31 MARCH 31 JUNE 30 30 31
--------- -------- --------- --------- --------- -------- --------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............... $204,933 $225,407 $230,655 $248,331 $271,680 $277,622 $256,679 $290,496
Gross profit........... 29,302 33,808 31,126 36,285 40,845 44,969 39,495 41,936
Income (loss) before
accounting changes.... (744) 1,350 (536) 3,294 6,386 8,391 2,310 7,261
Accounting changes..... (46,626) -- -- -- -- -- -- --
Net income (loss)...... (47,370) 1,350 (536) 3,294 6,386 8,391 2,310 7,261
Income (loss) per
share:
Income (loss) before
accounting
changes............. $ (.04) $ .08 $ (.03) $ .19 $ .38 $ .50 $ .14 $ .43
Accounting changes... (2.78) -- -- -- -- -- -- --
Net income (loss).... (2.82) .08 (.03) .19 .38 .50 .14 .43
</TABLE>
NOTE O -- SUBSEQUENT EVENTS
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 to repay approximately $27 million of bank debt including the
Partnership term loan, the equipment term loan and the notes payable to the
bank, provide $15 million to the Company to retire a portion of certain notes
outstanding to the Company's shareholders and 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 general corporate purposes.
The new term loan requires twenty quarterly principal payments of
approximately $2.3 million, commencing June 30, 1995, plus interest at either
the bank's prime rate plus 1.25% (subject to reductions of up to 0.5% upon the
occurrence of certain events) or a selected Eurodollar contract rate plus 300
basis points (subject to reductions of up to 50 basis points upon the occurrence
of certain events). The new term loan is secured by substantially all of Motors'
assets including the stock of the Insurance Subsidiary. The new term loan
agreement requires Motors to, among other things, comply with certain financial
covenants, limits addition to and sales of Motors' fixed assets and limits
additional borrowings by Motors.
In February 1995, Great Dane Trailers amended its loan and security
agreement. Pursuant to the amended agreement, the Lenders have loaned $28
million as a term loan and have agreed to provide, at any given time, up to $150
million (less amounts then outstanding as a term loan) as a revolving credit
facility (subject to availability based on the amount of eligible trade accounts
receivable and inventory) to be used as working capital by Great Dane and for
general corporate purposes. The initial term loan proceeds, which were drawn
immediately upon closing, were used, together with drawings under the revolver,
to repay approximately $17 million of bank debt, provide $15 million to the
Company to retire the balance of the shareholder notes and pay fees and
expenses. The term loan requires monthly
F-22
<PAGE>
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE O -- SUBSEQUENT EVENTS (CONTINUED)
principal payments of $0.3 million plus interest on the unpaid principal amount
of the loan in arrears at a rate equal to 1% above the prime rate of interest
charged from time to time by Bank of America or a rate equal to 2.5% above a
selected Eurodollar contract rate with the unpaid principal balance due five
years after the closing date. The loans are secured by substantially all of the
assets of Great Dane and its subsidiaries. The Agreement requires Great Dane to,
among other things, comply with certain financial covenants, and limits the
amount of loans and transfers to the Company, limits additions to and sales of
Great Dane's fixed assets and limits additional Great Dane borrowings.
In January 1995, Motors liquidated the Partnership.
On November 23, 1994, the Company filed a Registration Statement on Form S-1
with the Securities and Exchange Commission in connection with an initial public
offering ("IPO") of the Company's common stock. The Company is registering
6,555,000 shares of common stock (including 855,000 shares which the
underwriters have the right to purchase to cover over-allotments) (in each case,
giving effect to a 16,800 to 1 split of the common stock to be effected prior to
commencement of the IPO). It is currently estimated that the initial public
offering price will be between $12 and $14 per share. All of the net proceeds
are intended to be used to redeem approximately $66.7 million of the Company's
12 3/4% Senior Subordinated Debentures due 2001.
F-23
<PAGE>
[LARGE AERIAL PHOTOGRAPH OF THE SCSM PLANT SURROUNDED BY INSETS OF (1) 4-DOOR
EXTENDED CAB TRUCK, (2) CHECKER LOGO, (3) 2-DOOR TAHOE TRUCK, (4) PORTION OF THE
SCSM PRESS LINE, (5) SCSM LOGO AND (6) PORTION OF THE SCSM ASSEMBLY LINE]
CMC AND SCSM DEVELOP, DESIGN, ENGINEER AND MANUFACTURE A BROAD RANGE OF
SHEET METAL AUTOMOTIVE COMPONENTS AND SUBASSEMBLIES FOR SALE TO NORTH AMERICAN
OEM'S. CMC AND SCSM FOCUS ON SUPPLYING HIGHER-MARGIN, VALUE-ADDED PRODUCTS TO
THE HIGH GROWTH LIGHT TRUCK AND SPORT UTILITY VEHICLE MARKET.
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED IN CONNECTION WITH THE OFFERING MADE HEREBY TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE
RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR ANY UNDERWRITER. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO
BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................. 3
Risk Factors................................... 9
Use of Proceeds................................ 12
Dividend Policy................................ 12
Capitalization................................. 13
Dilution....................................... 14
Selected Consolidated Financial Data........... 15
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.................................... 16
Business....................................... 20
Management..................................... 33
Certain Relationships and Related
Transactions.................................. 42
Ownership of Common Stock...................... 43
Description of Capital Stock................... 43
Shares Eligible for Future Sale................ 45
Underwriting................................... 46
Legal Matters.................................. 47
Experts........................................ 47
Available Information.......................... 47
Index to Financial Statements.................. F-1
</TABLE>
5,700,000 SHARES
GREAT DANE
HOLDINGS INC.
COMMON STOCK
-------------
PROSPECTUS
-------------
ALEX. BROWN & SONS
INCORPORATED
SMITH BARNEY INC.
, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
<TABLE>
<S> <C>
Registration Fee................................................. $ 33,906
NASD Filing Fee.................................................. 10,333
Listing Fees..................................................... 50,000
Legal Fees and Expenses..........................................
Blue Sky Fees and Expenses....................................... 50,000*
Accounting Fees and Expenses.....................................
Printing and Engraving Expenses..................................
Transfer Agent and Registrar Fees................................
Miscellaneous....................................................
---------
Total........................................................ $
---------
---------
</TABLE>
* Estimated
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law ("DGCL") and Article
EIGHTH of the Certificate of Incorporation of Holdings provide for
indemnification of the directors and officers of the Registrant in a variety of
circumstances which may include liabilities under the Securities Act of 1933, as
amended (the "Act").
Article EIGHTH of the Certificate of Incorporation of Holdings provides:
EIGHTH. Any person who was or is a party or is threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative (whether or not by or in the right of the
Corporation) by reason of the fact that he is or was a director, officer,
incorporator, employee, or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, incorporator,
employee, partner, trustee, or agent of another corporation, partnership,
joint venture, trust, or other enterprise (including an employee benefit
plan), shall be entitled to be indemnified by the Corporation to the full
extent then permitted by law against expenses (including counsel fees and
disbursements), judgments, fines (including excise taxes assessed on a
person with respect to an employee benefit plan), and amounts paid in
settlement incurred by him in connection with such action, suit, or
proceeding. Such right of indemnification shall inure whether or not the
claim asserted is based on matters which antedate the adoption of this
Article EIGHTH. Such right of indemnification shall continue as to a person
who has ceased to be a director, officer, incorporator, employee, partner,
trustee, or agent and shall inure to the benefit of the heirs and personal
representatives of such a person. The indemnification provided by this
Article EIGHTH shall not be deemed exclusive of any other rights which may
be provided now or in the future under any provision currently in effect or
hereafter adopted of the By-laws, by any agreement, by vote of stockholders,
by resolution of disinterested directors, by provision of law, or otherwise.
The general effect of the provisions in the Holdings' Certificate of
Incorporation and the DGCL is to provide that Holdings shall indemnify its
directors and officers against all liabilities and expenses actually and
reasonably incurred in connection with the defense or settlement of any judicial
or administrative proceedings in which they have become involved by reason of
their status as corporate directors or officers, if they acted in good faith and
in the reasonable belief that their conduct was neither unlawful (in the case of
criminal proceedings) nor inconsistent with the best interests of Holdings. With
respect to legal proceedings by or in the right of Holdings in which a director
or officer is adjudged liable for improper performance of his duty to Holdings
or another enterprise which such person served in a similar capacity at the
request of Holdings, indemnification is limited by such provisions to that
amount which is permitted by the court.
II-1
<PAGE>
In addition, Holdings and/or its subsidiaries have entered into employment
agreements with David R. Markin, Jay H. Harris and Jeffrey Feldman which require
the Company to indemnify Messrs. Markin, Harris and Feldman against certain
liabilities that may arise by reason of their status or service as directors or
officers of, or consultants to, the Company or its subsidiaries (other than
liabilities arising from gross negligence or willful misconduct) to the full
extent permitted by law. Holdings has also entered into indemnification
agreements with its officers and directors.
[Reference is made to Section of the Underwriting Agreement, a copy of
which is filed as Exhibit 1.1 hereto, which provides for indemnification of the
directors and officers of the Registrant who sign the Registration Statement by
the Underwriters against certain liabilities, including those arising under the
Securities Act, in certain circumstances.]
ITEM 15. RECENT ISSUANCES OF UNREGISTERED SECURITIES.
In October 1994 International Controls Corp., a Florida corporation
("International Controls") merged with and into Holdings, its wholly-owned
subsidiary for the purpose of reincorporating in Delaware. Each share of common
stock held by the four shareholders of International Controls was cancelled and
converted into the right to receive a pro rata portion of the 1,000 shares of
Common Stock of Holdings then outstanding. Prior to commencement of this
Offering, each share of Common Stock of Holdings will be split 16,800 for 1,
resulting in 16,800,000 shares outstanding prior to this Offering.
The issuances referenced were not sales of securities, but if characterized
as sales, would be entitled to the exemption from registration set forth in
Section 4(2) of the Securities Act relating to sales not involving a public
offering.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Underwriting Agreement.*
3.1 Certificate of Incorporation of Holdings.***
3.2 By-Laws of Holdings.***
4.1 Form of Indenture between International Controls Corp. ("International Controls") and First
Fidelity Bank, National Association ("First Fidelity"), New Jersey, as Trustee relating the
12 3/4% Senior Subordinated Debentures due August 1, 2001 of International Controls (incorporated
herein by reference to Exhibit 4.1 to Registration Statement No. 33-7212 filed with the Securities
and Exchange Commission on July 15, 1986).
4.2 First Supplemental Indenture relating to the 12 3/4% Senior Subordinated Debentures due August 1,
2001 of International Controls dated as of October 19, 1994 among International Controls, the
Registrant and First Fidelity.***
4.3 Form of Indenture between International Controls and Midlantic National Bank ("Midlantic"), as
Trustee, relating to the 14 1/2% Subordinated Discount Debentures due January 1, 2006 of
International Controls (incorporated herein by reference to Exhibit 4.1 to Registration Statement
No. 33-1788 filed with the Securities and Exchange Commission on November 26, 1985).
4.4 First Supplemental Indenture relating to the 14 1/2% Subordinated Discount Debentures due January
1, 2006 of International Controls, dated October 19, 1994 among International Controls, the
Registrant and Midlantic.***
4.5 Form of Common Stock Certificate.*
4.6 Great Dane Holdings Inc. 1994 Stock Option Plan.**
4.7 1995 Outside Directors Stock Option Plan.**
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------
<C> <S>
5.1 Opinion of Hutton Ingram Yuzek Gainen Carroll & Bertolotti regarding the legality of the securities
being registered.*
10.1 [Intentionally Left Blank]
10.2 [Intentionally Left Blank]
10.3 [Intentionally Left Blank]
10.4 Amended and Restated Employment Agreement, dated as of November 1, 1985, between Motors (as the
successor to Checker L.P.) and David R. Markin ("Markin Employment Agreement") (incorporated
herein by reference to Exhibit 10.18 of International Controls' Annual Report on Form 10-K for the
year ended December 31, 1989 (the "1989 10-K")).
10.5 Amendment, dated as of March 4, 1992, to Markin Employment Agreement (incorporated herein by
reference to Exhibit 10.3 of International Controls' Annual Report on Form 10-K for the year ended
December 31, 1991 (the "1991 10-K")).
10.6 Extension, dated July 12, 1993, of Markin Employment Agreement (incorporated herein by reference to
Exhibit 10.6 of International Controls' Annual Report on Form 10-K for the year ended December 31,
1993 (the "1993 10-K")).
10.7 Amended and Restated Employment Agreement, dated as of June 1, 1992, between Yellow Cab Company (as
the assignee of Motors) and Jeffrey Feldman (incorporated herein by reference to Exhibit 28.2 of
International Controls' Quarterly Report on Form 10-Q for the quarter ended June 30, 1992 (the
"June 1992 10-Q")).
10.8 Stated Benefit Salary Continuation Agreement (incorporated herein by reference to Exhibit 10.21 to
the 1989 10-K).
10.9 Employment Agreement, dated as of July 1, 1992, between Registrant (as the successor to
International Controls) and Jay H. Harris (incorporated herein by reference to Exhibit 28.1 to the
June 1992 10-Q) (the "Harris Employment Agreement").
10.10 Amendment, dated April 6, 1994, to Harris Employment Agreement.***
10.11 [Intentionally Left Blank]
10.12 [Intentionally Left Blank]
10.13 [Intentionally Left Blank]
10.14 [Intentionally Left Blank]
10.15 [Intentionally Left Blank]
10.16 [Intentionally Left Blank]
10.17 [Intentionally Left Blank]
10.18 [Intentionally Left Blank]
10.19 Lease, dated December 1, 1988, between SCSM and Park Corporation (incorporated herein by reference
to Exhibit 10.25 to the 1989 10-K).
10.20 [Intentionally Left Blank]
10.21 [Intentionally Left Blank]
10.22 [Intentionally Left Blank]
10.23 [Intentionally Left Blank]
10.24 [Intentionally Left Blank]
10.25 [Intentionally Left Blank]
10.26 [Intentionally Left Blank]
10.27 [Intentionally Left Blank]
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------
<C> <S>
10.28 [Intentionally Left Blank]
10.29 [Intentionally Left Blank]
10.30 [Intentionally Left Blank]
10.31 [Intentionally Left Blank]
10.32 Assumption Agreement dated as of August 1, 1989, by and between Motors and the West Virginia
Economic Development Authority (incorporated herein by reference to Exhibit 10.12 to International
Controls' Annual Report on Form 10-K for the year ended December 31, 1990).
10.33 Agreement, dated as of September 1, 1991, between Yellow Cab (as the assignee of Checker L.P.) and
Jerry E. Feldman (incorporated herein by reference to Exhibit 10.12 to the 1991 10-K).
10.34 Form of Checker Motors Corporation Excess Benefit Retirement Plan, effective January 1, 1983
(incorporated herein by reference to Exhibit 19.9 to the 1991 10-K).
10.35 Amended and Restated License Agreement, dated December 30, 1992, between Motors and Checker Taxi
Association, Inc. (incorporated herein by reference to Exhibit 10.28 of International Controls'
Annual Report on Form 10-K for the period ended December 31, 1992 (the "1992 10-K")).
10.36 Employment Agreement, dated as of January 1, 1994, between Registrant (as successor to
International Controls) and David R. Markin.***
10.37 [Intentionally Left Blank]
10.38 Settlement Agreement, dated as of June 21, 1994, among John Garamendi, as Insurance Commissioner of
the State of California, Base Assets Trust, Checker L.P., Motors, Checker Holding Corp. III and
Registrant (as successor to International Controls).***
10.39 Form of Indemnification Agreement.***
10.40 Sale, Installation and Technical Assistance Agreement, dated November 14, 1983, between Graaff KG
and Great Dane.***
10.41 Form of Great Dane Supplemental Retirement Income Plan, effective January 1, 1994.***
10.42 [Intentionally Left Blank]
10.43 Amended and Restated Operating Agreement, dated as of August 31, 1988, between Associates
Commercial Corporation (as successor to Great Dane Finance Company) and Great Dane (the
"Associates Agreement")***.
10.44 Amendment, dated February 7, 1994, to the Associates Agreement.***
10.45 Amendment, dated May 18, 1994, to the Associates Agreement.***
10.46 Stock Option Agreement between Registrant and Jay H. Harris dated as of January 17, 1995.**
10.47 Form of Escrow Deposit Agreement between Registrant and First Fidelity.*
10.48 Loan Agreement, dated January 26, 1995, by and among Motors, Yellow Cab, AutoWerks, CMC, SCSM, the
Lenders therein and NBD Bank, as Agent ("NBD") (the "Loan Agreement") (incorporated herein by
reference to Exhibit 10.23 to Registrant's Annual Report on Form 10-K for the year ended December
31, 1994 (the "1994 10-K")).
10.49 Pledge Agreement and Irrevocable Proxy, dated as of January 26, 1995, given by Motors to NBD
(incorporated herein by reference to Exhibit 10.24 of the 1994 10-K).
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- --------- ---------------------------------------------------------------------------------------------------
<C> <S>
10.50 Security Agreement, dated as of January 26, 1995, made by Motors, Yellow Cab, AutoWerks and CMC to
NBD (incorporated herein by reference to Exhibit 10.25 of the 1994 10-K).
10.51 Amended and Restated Loan and Security Agreement dated as of February 14, 1995, by and among Great
Dane, Great Dane Trailers Tennessee, Inc., Great Dane Los Angeles, Inc., the financial
institutions named therein and BankAmerica Business Credit Inc., as Agent ("BABC") (incorporated
herein by reference to Exhibit 10.26 of the 1994 10-K).
10.52 Amended and Restated Pledge Agreement, dated as of February 14, 1995, made by Great Dane Trailers,
Inc., in favor of BABC (incorporated herein by reference to Exhibit 10.27 of the 1994 10-K).
10.53 Amended and Restated Agreement Regarding Stock and Other Matters, dated as of February 14, 1995,
between the Company and BABC (incorporated herein by reference to Exhibit 10.28 of the 1994 10-K).
11.1 Statement re:computation of income (loss) per share.**
21.1 Subsidiaries of Registrant.**
23.1 Consent of Ernst & Young LLP.**
23.2 Consent of Hutton Ingram Yuzek Gainen Carroll & Bertolotti -- see Exhibit 5.1.
23.3 Consent of Miles Berger to become a director of Registrant.**
23.4 Consent of Leonard Gubar to become a director of Registrant.**
23.5 Consent of Alan Hirschfield to become a director of Registrant.**
24.1 Power of Attorney (appears on signature page of the Registration Statement filed on November 23,
1994).
27.1 Financial Data Schedule.**
28.1 Schedule P of Annual Statements provided by Country to Illinois Regulatory Authorities
(incorporated herein by reference to Exhibit 28.1 of the 1994 10-K).
<FN>
- --------------
* To be filed by amendment.
** Filed herewith.
***Filed as an exhibit to this Registration Statement on November 23, 1994.
</TABLE>
(b) Financial Statement Schedules
The following financial statement schedules are filed as part of the
Registration Statement:
<TABLE>
<C> <C> <S> <C>
Report of Independent Auditors................................................................. S-2
Schedule III -- Condensed Financial Information of Registrant......................... S-3
Schedule -- Valuation and Qualifying Accounts.....................................
VIII S-6
Schedule XIV -- Supplemental Information Concerning Property-Casualty Insurance
Operations............................................................ S-7
</TABLE>
II-5
<PAGE>
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes as follows:
(a) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities
being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such
issue.
(b) (1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed
as part of this registration statement in reliance upon Rule 430A
and contained in a form of prospectus filed by the Registrant
pursuant to Rule 424(b)(1) or (4), or 497(h) under the Securities
Act shall be deemed to be part of this registration statement as of
the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of
such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, on February 23,
1995.
GREAT DANE HOLDINGS INC.
By: ________/s/_DAVID R. MARKIN_______
David R. Markin,
President and Chief Executive
Officer
Executed in City of New York,
State of New York
Pursuant to the requirements of the Securities Act of 1933, the Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated.
GREAT DANE HOLDINGS INC.:
<TABLE>
<C> <S> <C>
** Chairman of the Board February 23, 1995
Allan R. Tessler
/s/DAVID R. MARKIN President, Chief Executive February 23, 1995
David R. Markin Officer and Director
(Principal Executive
Officer)
** Treasurer (Principal February 23, 1995
Marlan R. Smith Financial and Accounting
Officer)
** Vice Chairman of the Board February 23, 1995
Martin L. Solomon and Secretary
** Vice Chairman of the Board February 23, 1995
Wilmer J. Thomas, Jr.
** By: /s/DAVID R. MARKIN
David R. Markin
Attorney in Fact
</TABLE>
II-7
<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULES
COVERED BY REPORTS OF INDEPENDENT AUDITORS
<TABLE>
<C> <C> <S> <C>
Report of Independent Auditors................................................................. S-2
Schedule III -- Condensed Financial Information of Registrant........................ S-3
Schedule VIII -- Valuation and Qualifying Accounts.................................... S-6
Schedule XIV -- Supplemental Information Concerning Property -- Casualty Insurance
Operations........................................................... S-7
</TABLE>
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore, have been omitted.
S-1
<PAGE>
The following report is in the form that will be signed upon the completion
of the 16,800 to 1 stock split as described in Note A to the consolidated
financial statements.
ERNST & YOUNG LLP
Kalamazoo, Michigan
February 24, 1995
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Great Dane Holdings Inc.
We have audited the consolidated financial statements of Great Dane Holdings
Inc. and subsidiaries as of December 31, 1993 and 1994, and for each of the
three years in the period ended December 31, 1994, and have issued our report
thereon dated February 14, 1995, (included elsewhere in this Registration
Statement). Our audits also included the financial statement schedules listed in
Item 16(b) of this Registration Statement. These schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion based on our audits.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.
Kalamazoo, Michigan
February 14, 1995
S-2
<PAGE>
GREAT DANE HOLDINGS INC.
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT
CONDENSED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------
1993 1994
------------ ------------
<S> <C> <C>
Assets:
Cash and cash equivalents........................................................ $ 1,468 $ 1,401
Accounts receivable.............................................................. 566 535
Other current assets............................................................. 4,345 1,481
------------ ------------
Total Current Assets........................................................... 6,379 3,417
Equipment, net................................................................... -- 302
Investments in subsidiaries...................................................... 91,388 152,873
Other assets..................................................................... 16,331 15,022
------------ ------------
Total Assets....................................................................... $ 114,098 $ 171,614
------------ ------------
------------ ------------
Liabilities and Shareholders' Deficit:
Accounts payable................................................................. $ 34 $ 869
Income taxes payable (recoverable)............................................... (1,702) 9,062
Accrued compensation............................................................. 256 257
Accrued interest................................................................. 11,468 11,468
Other accrued liabilities........................................................ 9,565 7,041
------------ ------------
Total Current Liabilities...................................................... 19,621 28,697
Long-term debt................................................................... 205,732 207,327
Other noncurrent liabilities..................................................... 31,713 29,489
Intercompany accounts with subsidiaries.......................................... 6,622 31,343
Shareholders' deficit:
Common stock................................................................... 168 168
Paid-in capital................................................................ 14,832 14,832
Retained earnings deficit...................................................... (36,217) (11,869)
Amount paid in excess of Motors' net assets.................................... (127,748) (127,748)
Notes receivable from shareholders............................................. (625) (625)
------------ ------------
Total Shareholders' Deficit.................................................... (149,590) (125,242)
------------ ------------
Total Liabilities and Shareholders' Deficit........................................ $ 114,098 $ 171,614
------------ ------------
------------ ------------
</TABLE>
S-3
<PAGE>
GREAT DANE HOLDINGS INC.
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- CONTINUED
CONDENSED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1992 1993 1994
---------- ---------- ----------
<S> <C> <C> <C>
Selling, general and administrative expenses................................ $ (4,396) $ (4,646) $ (8,534)
Interest expense............................................................ (30,138) (30,216) (30,812)
Equity in earnings of subsidiaries.......................................... 14,959 29,376 48,323
Other income (expense)...................................................... (99) 211 307
Special charge.............................................................. -- (7,500) --
Intercompany income:
Corporate charges......................................................... 1,008 1,008 1,008
Interest.................................................................. 305 -- --
---------- ---------- ----------
Income (loss) before income taxes and accounting changes.................... (18,361) (11,767) 10,292
Income tax benefit.......................................................... 10,806 15,131 14,056
---------- ---------- ----------
Income (loss) before accounting changes..................................... (7,555) 3,364 24,348
Accounting changes.......................................................... -- (46,626) --
---------- ---------- ----------
Net Income (Loss)........................................................... $ (7,555) $ (43,262) $ 24,348
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
S-4
<PAGE>
GREAT DANE HOLDINGS INC.
SCHEDULE III -- CONDENSED FINANCIAL INFORMATION OF REGISTRANT -- CONTINUED
CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1992 1993 1994
---------- ---------- ----------
<S> <C> <C> <C>
Net cash flow used in operating activities.................................. $ (20,973) $ (47,640) $ (11,317)
Cash flows from investing activities:
Purchase of equipment..................................................... -- -- (325)
Investment in subsidiaries................................................ -- -- (30,000)
Other..................................................................... (334) 5,900 16
---------- ---------- ----------
Net cash flow provided by (used in) investing activities.................... (334) 5,900 (30,309)
Cash flows from financing activities:
Advances from subsidiaries................................................ 21,284 38,278 41,559
---------- ---------- ----------
Net cash flow provided by financing activities.............................. 21,284 38,278 41,559
---------- ---------- ----------
Decrease in cash and cash equivalents....................................... (23) (3,462) (67)
Beginning cash and cash equivalents......................................... 4,953 4,930 1,468
---------- ---------- ----------
Ending cash and cash equivalents............................................ $ 4,930 $ 1,468 $ 1,401
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The Registrant's subsidiaries declared dividends totaling $120.9 million in
1992, $22 million in 1993 and $15 million in 1994. These dividends were declared
to offset certain intercompany account balances at the respective dates.
S-5
<PAGE>
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
- ----------------------------------- ----------- -------------------------- ----------- -----------
ADDITIONS CHARGED TO:
BALANCE AT -------------------------- BALANCE AT
BEGINNING COST AND OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS(1) PERIOD
- ----------------------------------- ----------- ------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1992:
Deducted from assets:
Allowance for doubtful accounts
-- trade...................... $ 606 $ 183 $ -- $ (166 ) $ 623
----------- ------------- ----- ----------- -----------
----------- ------------- ----- ----------- -----------
Allowance for doubtful accounts
-- finance lease
receivables................... $ 944 $ 52 $ -- $ (317 ) $ 679
----------- ------------- ----- ----------- -----------
----------- ------------- ----- ----------- -----------
Contract & warranty reserves..... $ 8,263 $ 3,564 $ -- $ (3,452 ) $ 8,375
----------- ------------- ----- ----------- -----------
----------- ------------- ----- ----------- -----------
Workers' compensation............ $ 265 $ 4,584 $ -- $ (3,008 ) $ 1,841
----------- ------------- ----- ----------- -----------
----------- ------------- ----- ----------- -----------
Claims........................... $ 2,717 $ 783 $ -- $ (168 ) $ 3,332
----------- ------------- ----- ----------- -----------
----------- ------------- ----- ----------- -----------
YEAR ENDED DECEMBER 31, 1993:
Deducted from assets:
Allowance for doubtful accounts
-- trade...................... $ 623 $ 234 $ -- $ (109 ) $ 748
----------- ------------- ----- ----------- -----------
----------- ------------- ----- ----------- -----------
Allowance for doubtful accounts
-- finance lease
receivables................... $ 679 $ 52 $ -- $ (572 ) $ 159
----------- ------------- ----- ----------- -----------
----------- ------------- ----- ----------- -----------
Contract & warranty reserves..... $ 8,375 $ 5,439 $ -- $ (3,429 ) $ 10,385
----------- ------------- ----- ----------- -----------
----------- ------------- ----- ----------- -----------
Workers' compensation............ $ 1,841 $ 1,200 $ -- $ (1,927 ) $ 1,114
----------- ------------- ----- ----------- -----------
----------- ------------- ----- ----------- -----------
Claims........................... $ 3,332 $ 1,103 $ -- $ (1,106 ) $ 3,329
----------- ------------- ----- ----------- -----------
----------- ------------- ----- ----------- -----------
YEAR ENDED DECEMBER 31, 1994:
Deducted from assets:
Allowance for doubtful accounts
-- trade...................... $ 748 $ 804 $ -- $ (210 ) $ 1,342
----------- ------------- ----- ----------- -----------
----------- ------------- ----- ----------- -----------
Allowance for doubtful accounts
-- finance lease
receivables................... $ 159 $ (172 ) $ -- $ 13 $ 0
----------- ------------- ----- ----------- -----------
----------- ------------- ----- ----------- -----------
Contract & warranty reserves..... $ 10,385 $ 8,076 $ -- $ (4,016 ) $ 14,445
----------- ------------- ----- ----------- -----------
----------- ------------- ----- ----------- -----------
Workers' compensation............ $ 1,114 $ 956 $ -- $ (435 ) $ 1,635
----------- ------------- ----- ----------- -----------
----------- ------------- ----- ----------- -----------
Claims........................... $ 3,329 $ 1,078 $ -- $ (2,103 ) $ 2,304
----------- ------------- ----- ----------- -----------
----------- ------------- ----- ----------- -----------
<FN>
- --------------
(1) Reclassification to other reserves and utilization of reserves.
</TABLE>
S-6
<PAGE>
GREAT DANE HOLDINGS INC. AND SUBSIDIARIES
SCHEDULE XIV -- SUPPLEMENTAL INFORMATION CONCERNING PROPERTY -- CASUALTY
INSURANCE OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F COL. G
- ------------------------------ ------------ -------------- -------------- -------------- -------------- -----------------
RESERVES FOR
UNPAID
DEFERRED CLAIMS DISCOUNT,
POLICY AND CLAIM IF ANY,
AFFILIATION WITH ACQUISITION ADJUSTMENT DEDUCTED IN UNEARNED EARNED NET INVESTMENT
REGISTRANT COSTS EXPENSE(1) COLUMN C PREMIUMS(2) PREMIUMS(3) INCOME
- ------------------------------ ------------ -------------- -------------- -------------- -------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
WHOLLY-OWNED INSURANCE SUBSIDIARY:
Year Ended:
December 31, 1992........... $ 1,832 $ 75,780 $ -- $ 10,463 $ 40,347 $ 8,227
------------ -------------- ------- -------------- -------------- -------
------------ -------------- ------- -------------- -------------- -------
December 31, 1993........... $ 1,893 $ 71,179 $ -- $ 9,547 $ 40,836 $ 7,838
------------ -------------- ------- -------------- -------------- -------
------------ -------------- ------- -------------- -------------- -------
December 31, 1994........... $ 2,258 $ 69,318 $ -- $ 12,203 $ 48,312 $ 6,890
------------ -------------- ------- -------------- -------------- -------
------------ -------------- ------- -------------- -------------- -------
<CAPTION>
COL. A COL. H COL. I COL. J COL. K
- ------------------------------ ------------------- --------------- ------------- -----------
CLAIMS AND CLAIM
ADJUSTMENT EXPENSES
INCURRED RELATED
TO: AMORTIZATION PAID
------------------- OR DEFERRED CLAIMS
(1) (2) POLICY AND CLAIM
AFFILIATION WITH CURRENT PRIOR ACQUISITION ADJUSTMENT PREMIUM
REGISTRANT YEAR YEARS COSTS EXPENSES WRITTEN
- ------------------------------ -------- --------- --------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
WHOLLY-OWNED INSURANCE SUBSIDI
Year Ended:
December 31, 1992........... $ 30,322 $ 2,043 $ (241 ) $ 27,319 $ 39,238
-------- --------- ------ ------------- -----------
-------- --------- ------ ------------- -----------
December 31, 1993........... $ 33,193 $ (269) $ 61 $ 30,832 $ 39,920
-------- --------- ------ ------------- -----------
-------- --------- ------ ------------- -----------
December 31, 1994........... $ 39,517 $ (592) $ 365 $ 37,010 $ 50,652
-------- --------- ------ ------------- -----------
-------- --------- ------ ------------- -----------
<FN>
- ----------------
(1) Excludes reinsurance recoverable on unpaid claims and claims adjustment
expense of $13,888, $7,195 and $3,419 in 1992, 1993 and 1994, respectively,
in connection with the restatement of the balance sheet loss reserve amounts
as reported in accordance with SFAS No. 113.
(2) Excludes net ceded premiums of $286, $286 and $602 in 1992, 1993 and 1994,
respectively, in connection with the restatement of the balance sheet
unearned premium amounts as reported in accordance with SFAS No. 113.
(3) Includes premiums earned of $13,161, $13,400 and $12,145 in 1992, 1993 and
1994, respectively, in connection with coverage provided to other entities
in the consolidated group which have been eliminated in consolidation.
</TABLE>
S-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION PAGE
- --------- -------------------------------------------------------------------------------------------- -----
<C> <S> <C>
1.1 Form of Underwriting Agreement.*
3.1 Certificate of Incorporation of Holdings.***
3.2 By-Laws of Holdings.***
4.1 Form of Indenture between International Controls Corp. ("International Controls") and First
Fidelity Bank, National Association ("First Fidelity"), New Jersey, as Trustee relating the
12 3/4% Senior Subordinated Debentures due August 1, 2001 of International Controls
(incorporated herein by reference to Exhibit 4.1 to Registration Statement No. 33-7212
filed with the Securities and Exchange Commission on July 15, 1986).
4.2 First Supplemental Indenture relating to the 12 3/4% Senior Subordinated Debentures due
August 1, 2001 of International Controls dated as of October 19, 1994 among International
Controls, the Registrant and First Fidelity.***
4.3 Form of Indenture between International Controls and Midlantic National Bank ("Midlantic"),
as Trustee, relating to the 14 1/2% Subordinated Discount Debentures due January 1, 2006 of
International Controls (incorporated herein by reference to Exhibit 4.1 to Registration
Statement No. 33-1788 filed with the Securities and Exchange Commission on November 26,
1985).
4.4 First Supplemental Indenture relating to the 14 1/2% Subordinated Discount Debentures due
January 1, 2006 of International Controls, dated October 19, 1994 among International
Controls, the Registrant and Midlantic.***
4.5 Form of Common Stock Certificate.*
4.6 Great Dane Holdings Inc. 1994 Stock Option Plan.**
4.7 1995 Outside Directors Stock Option Plan.**
5.1 Opinion of Hutton Ingram Yuzek Gainen Carroll & Bertolotti regarding the legality of the
securities being registered.*
10.1 [Intentionally Left Blank]
10.2 [Intentionally Left Blank]
10.3 [Intentionally Left Blank]
10.4 Amended and Restated Employment Agreement, dated as of November 1, 1985, between Motors (as
the successor to Checker L.P.) and David R. Markin ("Markin Employment Agreement")
(incorporated herein by reference to Exhibit 10.18 of International Controls' Annual Report
on Form 10-K for the year ended December 31, 1989 (the "1989 10-K")).
10.5 Amendment, dated as of March 4, 1992, to Markin Employment Agreement (incorporated herein by
reference to Exhibit 10.3 of International Controls' Annual Report on Form 10-K for the
year ended December 31, 1991 (the "1991 10-K")).
10.6 Extension, dated July 12, 1993, of Markin Employment Agreement (incorporated herein by
reference to Exhibit 10.6 of International Controls' Annual Report on Form 10-K for the
year ended December 31, 1993 (the "1993 10-K")).
10.7 Amended and Restated Employment Agreement, dated as of June 1, 1992, between Yellow Cab
Company (as the assignee of Motors) and Jeffrey Feldman (incorporated herein by reference
to Exhibit 28.2 of International Controls' Quarterly Report on Form 10-Q for the quarter
ended June 30, 1992 (the "June 1992 10-Q")).
</TABLE>
<PAGE>
<TABLE>
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10.8 Stated Benefit Salary Continuation Agreement (incorporated herein by reference to Exhibit
10.21 to the 1989 10-K).
10.9 Employment Agreement, dated as of July 1, 1992, between Registrant (as the successor to
International Controls) and Jay H. Harris (incorporated herein by reference to Exhibit 28.1
to the June 1992 10-Q) (the "Harris Employment Agreement").
10.10 Amendment, dated April 6, 1994, to Harris Employment Agreement.***
10.11 [Intentionally Left Blank]
10.12 [Intentionally Left Blank]
10.13 [Intentionally Left Blank]
10.14 [Intentionally Left Blank]
10.15 [Intentionally Left Blank]
10.16 [Intentionally Left Blank]
10.17 [Intentionally Left Blank]
10.18 [Intentionally Left Blank]
10.19 Lease, dated December 1, 1988, between SCSM and Park Corporation (incorporated herein by
reference to Exhibit 10.25 to the 1989 10-K).
10.20 [Intentionally Left Blank]
10.21 [Intentionally Left Blank]
10.22 [Intentionally Left Blank]
10.23 [Intentionally Left Blank]
10.24 [Intentionally Left Blank]
10.25 [Intentionally Left Blank]
10.26 [Intentionally Left Blank]
10.27 [Intentionally Left Blank]
10.28 [Intentionally Left Blank]
10.29 [Intentionally Left Blank]
10.30 [Intentionally Left Blank]
10.31 [Intentionally Left Blank]
10.32 Assumption Agreement dated as of August 1, 1989, by and between Motors and the West Virginia
Economic Development Authority (incorporated herein by reference to Exhibit 10.12 to
International Controls' Annual Report on Form 10-K for the year ended December 31, 1990).
10.33 Agreement, dated as of September 1, 1991, between Yellow Cab (as the assignee of Checker
L.P.) and Jerry E. Feldman (incorporated herein by reference to Exhibit 10.12 to the 1991
10-K).
10.34 Form of Checker Motors Corporation Excess Benefit Retirement Plan, effective January 1, 1983
(incorporated herein by reference to Exhibit 19.9 to the 1991 10-K).
10.35 Amended and Restated License Agreement, dated December 30, 1992, between Motors and Checker
Taxi Association, Inc. (incorporated herein by reference to Exhibit 10.28 of International
Controls' Annual Report on Form 10-K for the period ended December 31, 1992 (the "1992
10-K")).
10.36 Employment Agreement, dated as of January 1, 1994, between Registrant (as successor to
International Controls) and David R. Markin.***
</TABLE>
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<TABLE>
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10.37 [Intentionally Left Blank]
10.38 Settlement Agreement, dated as of June 21, 1994, among John Garamendi, as Insurance
Commissioner of the State of California, Base Assets Trust, Checker L.P., Motors, Checker
Holding Corp. III and Registrant (as successor to International Controls).***
10.39 Form of Indemnification Agreement.***
10.40 Sale, Installation and Technical Assistance Agreement, dated November 14, 1983, between
Graaff KG and Great Dane.***
10.41 Form of Great Dane Supplemental Retirement Income Plan, effective January 1, 1994.***
10.42 [Intentionally Left Blank]
10.43 Amended and Restated Operating Agreement, dated as of August 31, 1988, between Associates
Commercial Corporation (as successor to Great Dane Finance Company) and Great Dane (the
"Associates Agreement").***
10.44 Amendment, dated February 7, 1994, to the Associates Agreement.***
10.45 Amendment, dated May 18, 1994, to the Associates Agreement.***
10.46 Stock Option Agreement between Registrant and Jay H. Harris dated as of January 17, 1995.**
10.47 Form of Escrow Deposit Agreement between Registrant and First Fidelity.*
10.48 Loan Agreement, dated January 26, 1995, by and among Motors, Yellow Cab, AutoWerks, CMC,
SCSM, the Lenders therein and NBD Bank, as Agent ("NBD") (the "Loan Agreement")
(incorporated herein by reference to Exhibit 10.23 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1994 (the "1994 10-K")).
10.49 Pledge Agreement and Irrevocable Proxy, dated as of January 26, 1995, given by Motors to NBD
(incorporated herein by reference to Exhibit 10.24 of the 1994 10-K).
10.50 Security Agreement, dated as of January 26, 1995, made by Motors, Yellow Cab, AutoWerks and
CMC to NBD (incorporated herein by reference to Exhibit 10.25 of the 1994 10-K).
10.51 Amended and Restated Loan and Security Agreement dated as of February 14, 1995, by and among
Great Dane, Great Dane Trailers Tennessee, Inc., Great Dane Los Angeles, Inc., the
financial institutions named therein and BankAmerica Business Credit Inc., as Agent
("BABC") (incorporated herein by reference to Exhibit 10.26 of the 1994 10-K).
10.52 Amended and Restated Pledge Agreement, dated as of February 14, 1995, made by Great Dane
Trailers, Inc., in favor of BABC (incorporated herein by reference to Exhibit 10.27 of the
1994 10-K).
10.53 Amended and Restated Agreement Regarding Stock and Other Matters, dated as of February 14,
1995, between the Company and BABC (incorporated herein by reference to Exhibit 10.28 of
the 1994 10-K).
11.1 Statement re:computation of income (loss) per share.**
21.1 Subsidiaries of Registrant.**
23.1 Consent of Ernst & Young LLP.**
23.2 Consent of Hutton Ingram Yuzek Gainen Carroll & Bertolotti -- see Exhibit 5.1.
23.3 Consent of Miles Berger to become a director of Registrant.**
23.4 Consent of Leonard Gubar to become a director of Registrant.**
</TABLE>
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<TABLE>
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23.5 Consent of Alan Hirschfield to become a director of Registrant.**
24.1 Power of Attorney (appears on signature page of the Registration Statement filed on November
23, 1994).
27.1 Financial Data Schedule.**
28.1 Schedule P of Annual Statements provided by Country to Illinois Regulatory Authorities
(incorporated herein by reference to Exhibit 28.1 of the 1994 10-K).
<FN>
- --------------
* To be filed by amendment.
** Filed herewith.
***Filed as an exhibit to this Registration Statement on November 23, 1994.
</TABLE>
<PAGE>
EXHIBIT 4.6
GREAT DANE HOLDINGS INC.
1994 STOCK OPTION PLAN
1. PURPOSE
The purpose of this Stock Option Plan (the "Plan") is to encourage
and enable key employees (which term, as used herein, shall include officers),
and directors, of Great Dane Holdings Inc. or a parent or subsidiary thereof
(collectively, unless the context otherwise requires, the "Corporation"),
consultants, and advisors to the Corporation, and other persons or entities
providing goods or services to the Corporation to acquire a proprietary interest
in the Corporation through the ownership of common stock of the Corporation. As
used herein, the term "parent" or "subsidiary" shall mean any present or future
corporation which is or would be a "parent corporation" or "subsidiary
corporation" of the Corporation determined in a manner consistent with the
requirements of Section 424 of the Internal Revenue Code of 1986, as amended
(the "Code"). Such directors, consultants, advisors, and other persons or
entities providing goods or services to the Corporation and entitled to receive
options hereunder are hereinafter collectively referred to as the "Associates".
Such ownership will provide such employees and Associates with a more direct
stake in the future welfare of the Corporation and encourage them to remain
employed by or associated with the Corporation. It is also expected that the
Plan will encourage qualified persons to seek and accept employment or
association with the Corporation.
2. ADMINISTRATION
(a) The Plan shall be administered by a Stock Option Committee (the
"Committee"), consisting of persons who are "disinterested persons" within the
meaning of Rule 16(b) promulgated under the Securities Exchange Act of 1934, as
amended from time to time.
(b) A majority of the members of the Committee shall constitute a
quorum, and the action of a majority of the members of the Committee present at
a meeting at which a quorum is present, as well as actions taken pursuant to the
unanimous written consent of all of the members of the Committee without holding
a meeting, shall be deemed to be actions of the Committee. All actions of the
Committee and all interpretations and decisions made by the Committee with
respect to any question arising under the Plan shall be final and conclusive and
shall be binding upon the Corporation and all other interested parties.
<PAGE>
(c) Subject to the terms and conditions of the Plan and such
limitations as the Board of Directors may from time to time impose, the
Committee shall be responsible for the overall management and administration of
the Plan and shall have such authority as shall be necessary or appropriate in
order to carry out its responsibilities, including, without limitation, the
authority to (i) interpret and construe the Plan and to determine the terms of
all options granted pursuant to the Plan, but subject to the provisions of the
Plan, including, but not limited to, the persons to whom, and the time or times
at which, grants shall be made, the number of options to be included in the
grants, the number of options which shall be treated as incentive stock options
(in the case of options granted to employees) as described in Section 422 of the
Code, the number of options which do not qualify as incentive stock options
("non-qualified options"), whether an option will be granted together with a
stock appreciation right and the terms and conditions thereof; (ii) to adopt
rules and regulations and to prescribe forms for the operation and
administration of the Plan; and (iii) to take any other action not inconsistent
with the provisions of the Plan that it may deem necessary or appropriate.
3. ELIGIBILITY AND PARTICIPATION
Key employees are eligible to receive incentive stock options and key
employees and Associates are eligible to receive non-qualified options and stock
appreciation rights. Each option and stock appreciation right shall be granted,
and the number of shares and stock appreciation rights subject thereto shall be
determined by the Committee.
4. STOCK APPRECIATION RIGHTS
(a) An employee or Associate who has been granted options pursuant to
the Plan may at the same time that the options are granted, also be granted
stock appreciation rights relating to some or all of the shares subject to such
options. Any such stock appreciation right shall be evidenced by a written
agreement which shall (i) identify the option to which the stock appreciation
right relates; (ii) specify the number of shares covered by the stock
appreciation right; (iii) specify the exercise price at which the stock
appreciation right may be exercised; and (iv) contain such other terms and
conditions not inconsistent with the Plan as the Committee may, in its
discretion, prescribe.
(b) Upon exercise of a stock appreciation right, the Company shall
pay to the employee or Associate an amount equal to the difference between (i)
the fair market value of the shares to which the stock appreciation right
relates on the date of exercise, over (ii) the exercise price of such stock
appreciation right. Payment may, in the Committee's discretion, be made in cash
(including check, bank draft or money order), in shares of
<PAGE>
common stock of the Corporation equivalent in value to the excess of such fair
market value over such exercise price, or in a combination of cash and shares of
common stock of the Corporation which, together, are equivalent in value to the
excess of such fair market value over such exercise price.
5. SHARES SUBJECT TO THE PLAN
(a) Options and stock appreciation rights shall be evidenced by
written agreements which shall, among other things (i) designate the option as
either an incentive stock option or a non-qualified stock option, (ii) specify
the number of shares covered by the option; (iii) specify the exercise price,
determined in accordance with paragraph 8 hereof, for the shares subject to the
option; (iv) specify the option period determined in accordance with paragraph 7
hereof; (v) set forth specifically or incorporate by reference the applicable
provisions of the Plan; and (vi) contain such other terms and conditions not
inconsistent with the Plan as the Committee may, in its discretion, prescribe.
(b) The stock to be offered and delivered under the Plan, whether
pursuant to the exercise of an option or a stock appreciation right, shall be
shares of the Corporation's authorized common stock and may be unissued shares
or reacquired shares, as the Committee may from time to time determine. Subject
to adjustment as provided in paragraph 14 hereof, the aggregate number of shares
to be delivered under the Plan shall not exceed 1,600,000.00 shares. If an
option expires or terminates for any reason during the term of the Plan prior to
the exercise thereof in full, the shares subject to but not delivered under such
option shall be available for options thereafter granted. The shares under a
related option which is surrendered upon the exercise of a stock appreciation
right shall be charged against the aggregate number of shares available which
may be delivered under the Plan. The maximun number of shares of common stock
with respect to which options or rights may be granted during the life of the
Plan to any employee shall not exceed 400,000.
6. INCENTIVE STOCK OPTIONS
(a) An option designated by the Committee as an "incentive stock
option" is intended to qualify as an "incentive stock option" within the meaning
of Section 422 of the Code. An incentive stock option shall only be granted to
a key employee of the Corporation.
(b) No incentive stock option shall provide any person with a
right to purchase shares to the extent that such right first becomes exercisable
during a prescribed calendar year and the sum of (i) the fair market value
(determined as of the date of grant) of the shares subject to such incentive
stock option which first becomes available for purchase during such calendar
year,
<PAGE>
plus (ii) the fair market value (determined as of the date of grant) of all
shares subject to incentive stock options previously granted to such person
which first become available for purchase during such calendar year, exceeds
$100,000.
(c) Without the prior written consent of the Committee, no person
shall dispose of shares acquired pursuant to the exercise of an incentive stock
option until after the later of (i) the second anniversary of the date on which
the incentive stock option was granted, or (ii) the first anniversary of the
date on which the shares were acquired pursuant to the exercise of such option;
provided, however, that a transfer to a trustee, receiver, or other fiduciary in
any insolvency proceeding, as described in Section 422(c)(3) of the Code, shall
not be deemed to be such a disposition. The optionee shall make appropriate
arrangements with the Corporation for any taxes which the Corporation is
obligated to collect in connection with any such disposition, including any
federal, state or local withholding taxes.
7. TERM OF OPTION PERIOD
The term during which options or stock appreciation rights may be
granted under the Plan shall expire on [date which is 10 years from the date of
this Plan]. Options and stock appreciation rights shall expire not later than
the tenth anniversary (the fifth anniversary in the case of incentive stock
options granted to a person who owns (within the meaning of Section 424(d) of
the Code) more than 10 percent of the total combined voting power of all classes
of stock of the Corporation at the time such option is granted) of the date the
option or stock appreciation right is granted.
8. OPTION PRICE
The price at which shares may be purchased upon exercise of a
particular option shall be such price as may be fixed by the Committee but in no
event less than the minimum required in order to comply with any applicable law,
rule or regulation and, in the case of incentive stock options, shall not be
less than 100 percent, or in the case of incentive stock options granted to an
optionee who is a 10 percent stockholder (within the meaning of paragraph 7
hereof), shall not be less than 110 percent, of the fair market value (as
defined in paragraph 9) of such shares on the date such option is granted.
9. STOCK AS FORM OF EXERCISE PAYMENT
An employee or Associate who owns shares of the Corporation's common
stock may elect to use such shares, with the value thereof to be determined as
the fair market value of such shares on the day prior to the date of exercise of
the option, to pay all or part of the option price required by reason of the
<PAGE>
exercise of an option. As used herein, fair market value shall be deemed to be
the closing price on such day of the Corporation's common stock (if the
Corporation's common stock is then traded on a national securities exchange or
in the NASDAQ National Market System) or, if not so traded, the average of the
closing bid and asked prices thereof on such day. The optionee shall make
appropriate arrangements with the Corporation for any taxes which the
Corporation is obligated to collect in connection with the exercise of such
option, including federal, state or local withholding taxes.
10. EXERCISE OF OPTIONS AND RIGHTS
(a) Each option and stock appreciation right granted shall be
exercisable in whole or in part at any time, or from time to time, during the
option period as the Committee may determine; provided that the election to
exercise an option or stock appreciation right shall be made in accordance with
applicable federal and state laws and regulations; and provided, further, that
neither a stock appreciation right, the exercise of which would result in a cash
payment, nor any related option shall be exercisable during the first six months
of the option period, except that, subject to the written agreements covering
the stock appreciation right and related option, this six-month limitation shall
not apply if the employee or Associate to whom such stock appreciation right and
related option have been granted dies or becomes disabled prior to the
expiration of the six-month period. No stock appreciation right can be
exercised by an employee or Associate unless (i) the Corporation has been
subject to the reporting requirements of Section 12 of the Securities Exchange
Act of 1934 for at least one year prior to the date of such exercise and has
filed all reports and statements required to be filed pursuant to that section
during that period and (ii) the corporation on a regular basis does release for
publication quarterly and annual summary statements of sales and earnings.
(b) No option may at any time be exercised with respect to a
fractional share. If shares are issued pursuant to the exercise of a stock
appreciation right, no fractional shares shall be issued; payment shall be made
in cash for any such fractional shares.
(c) No shares shall be delivered pursuant to the exercise of any
option or stock appreciation right, in whole or in part, until qualified for
delivery under such securities laws and regulations as may be deemed by the
Committee to be applicable thereto, until such shares are listed on each
securities exchange on which the Corporation's common stock may then be listed,
and until, in the case of the exercise of an option, payment in full of the
option price is received by the Corporation in cash or common stock of the
Corporation as provided in paragraph 9. Unless prior to the exercise of the
option the shares of the
<PAGE>
Corporation's common stock issuable upon such exercise have been registered with
the Securities and Exchange Commission pursuant to the Securities Act of 1933,
the notice of exercise shall be accompanied by a representation or agreement of
the individual exercising the option to the Corporation to the effect that such
shares are being acquired for investment and not with a view to the resale or
distribution thereof or such other documentation as may be required by the
Corporation unless in the opinion of counsel to the Corporation such
representation, agreement, or documentation is not necessary to comply with said
Act. No holder of an option or stock appreciation right, or such holder's legal
representative, legatee, or distributes shall be or be deemed to be a holder of
any shares subject to such option or stock appreciation right unless and until a
certificate or certificates therefor is issued in his name.
11. ACCELERATION OF VESTING
(a) An option shall automatically be vested and immediately
exercisable in full upon the occurrence of any of the following events:
(i) Any person within the meaning of Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, other than the
Corporation, has become the beneficial owner, within the meaning of
Rule 13d-3 under such Act, of 75% (seventy-five percent) or more of
the combined voting power of the Corporation's then outstanding
voting securities, unless such ownership by such person has been
approved by the Board of Directors immediately prior to the
acquisition of such securities by such person;
(ii) The first day on which shares of the Corporation's
common stock are purchased pursuant to a tender offer or exchange
offer, unless such offer is made by the Corporation or unless such
officer has been approved or not opposed by the Board of Directors;
(iii) The stockholders of the Corporation have approved an
agreement to merge or consolidate with or into another corporation
(and the Corporation is not the survivor of such merger or
consolidation) or an agreement to sell or otherwise dispose of all
or substantially all of the Corporation's assets (including a plan
of liquidation), unless the Board of Directors has resolved that
options shall not automatically vest; or
(iv) During any period of two consecutive years, individuals
who at the beginning of such period constitute the Board of
Directors of the corporation
<PAGE>
cease for any reason to constitute at least a majority
thereof, unless the election or the nomination for the
election by the Corporation's stockholders of each new
director was approved by a vote of at least a majority of
the directors then still in office who were directors at the
beginning of the period.
(b) Other than upon the occurrence of any of the events described in
paragraph 11(a), the Committee shall have the authority at any time or from time
to time to accelerate the vesting of any individual option and to permit any
stock option not theretofore exercisable to become immediately exercisable.
12. TRANSFER OF OPTIONS AND RIGHTS
Options and stock appreciation rights granted under the Plan may not
be transferred except by will or the laws of descent and distribution and,
during the lifetime of the employee or Associate to whom granted, may be
exercised only by such employee or Associate or by such employee's or
Associate's guardian or legal representative.
13. DEATH, RETIREMENT, AND TERMINATION OF EMPLOYMENT
(a) An incentive stock option or non-qualified stock option, which
has not theretofore expired, shall terminate at the time of the death of the
employee to whom granted or of the termination for any reason of the employee's
employment with the Corporation, and no shares may thereafter be delivered
pursuant to such option, except that, subject to the condition that no option
may be exercised later than the tenth anniversary of the date the option was
granted:
(i) upon the termination of the employment of any such
employee due to disability or retirement, the employee may, within a
period of up to two years after the date of such termination,
purchase some or all of the shares covered by the employee's
nonqualified stock options which was exercisable immediately prior
to such termination;
(ii) upon the termination of the employment of any such
employee due to disability or retirement, the employee may, within
three months after the date of such termination (12 months in the
case of disability) purchase some or all of the shares covered by
the employee's incentive stock option which was exercisable
immediately prior to such termination; shares not purchased within
three months (12 months in the case of disability) after the date of
termination due to disability or retirement under such incentive
stock option may be purchased within two years after the date
<PAGE>
of such termination but no longer will be incentive stock option
stock; and
(iii) upon the death of any employee while in the active service
of the Corporation or of any such disabled or retired employee
within the above-referenced periods, the person or persons to whom
the employee's rights under the option are transferred by will or
the laws of descent and distribution may, within 12 months after the
date of the employee's death, purchase some or all of the shares
covered by such employee's option which was exercisable on the date
of his death.
The Committee may, if it determines that to do so would be in the
Corporation's best interests, provide in a specific case or cases for the
exercise of options which would otherwise terminate upon termination of
employment with the Corporation for any reason, upon such terms and conditions
as the Committee determines to be appropriate. Nothing in the Plan or in any
option agreement shall confer any right to continue in the employ of the
Corporation or interfere in any way with the right of the Corporation to
terminate the employment of a recipient at any time.
In the case of a recipient on an approved leave of absence, the
Committee may, if it determines that to do so would be in the best interests of
the Corporation, provide in a specific case for continuation of options during
such leave of absence, such continuation to be on such terms and conditions as
the Committee determines to be appropriate. Leaves of absence for such period
and purposes conforming to the personnel policy of the Corporation as may be
approved by the Committee shall not be deemed terminations or interruptions of
employment.
For purposes of this paragraph 13, disability shall have the meaning
provided in Section 22(e)(3) of the Code and "retirement" shall mean retirement
pursuant to a pension or retirement plan adopted by the Corporation or at the
normal retirement date prescribed from time to time by the Corporation.
(b) If an employee to whom a stock appreciation right has been
granted ceases employment with the Corporation for any reason, including death
and retirement, such stock appreciation right may be exercisable at the
discretion of the Committee but only to the extent and upon the conditions that
its related option is exercisable under subparagraph (a) of this paragraph.
(c) Options granted to Associates shall be subject to such terms
and provisions as the Committee shall determine in the event of the death,
retirement, or disability of an Associate or the termination of an Associate's
association with the Corporation.
<PAGE>
14. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
(a) If the Corporation's outstanding common stock is hereafter
changed by reason of reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, combination, or exchange of shares or the
like, or dividends payable in shares of the Corporation's common stock, an
appropriate adjustment shall be made by the Board of Directors upon
recommendation of the Committee in the aggregate number of shares available
under the Plan and in the number of shares and price per share subject to
outstanding options. All adjustments made pursuant to this paragraph to the
terms or conditions of an incentive stock option shall be subject to the
requirements of Section 424 of the Code.
(b) Any adjustment in the number of shares shall apply
proportionately to only the unexercised portion of any option granted hereunder.
If fractions of a share would result from any such adjustment, the adjustment
shall be revised to the next higher whole number of shares.
15. TERMINATION, MODIFICATION, AND AMENDMENT
The Plan shall terminate 10 years from the earlier of the date of its
adoption by the Board of Directors or the date on which the Plan is approved by
the stockholders of the Corporation and no option shall be granted after
termination of the Plan.
The Plan may from time to time be terminated, modified, or amended by
the affirmative vote of the holders of a majority of the outstanding shares of
the Corporation entitled to vote thereon.
The Board of Directors may at any time terminate the Plan or from time
to time make such modifications or amendments of the Plan as it may deem
advisable including, without limitation, modifications to reflect changes in
applicable law; provided, however, that the Board of Directors shall not (i)
modify or amend the Plan in any way that would disqualify any option issued
pursuant to the Plan as an incentive stock option as defined in Section 422 of
the Code or (ii) without approval by the affirmative vote of the holders of a
majority of the outstanding shares of the Corporation entitled to vote thereon,
increase (except as provided by paragraph 14) the maximum number of shares as to
which options may be granted under the Plan.
No termination, modification, or amendment of the Plan, may, without
the consent of the individual to whom the option or stock appreciation right
shall have been previously granted, adversely affect the rights conferred by
such option or stock appreciation right.
<PAGE>
16. EFFECTIVE DATE
The Plan shall become effective upon the adoption by the Board of
Directors, subject to the approval by the affirmative vote of the holders of a
majority of the outstanding shares of the Corporation present, in person, or by
proxy, at a stockholders meeting duly held within one year following adoption of
the Plan by the Board of Directors. All options granted prior to the date of
such stockholder approval shall be subject to such approval.
<PAGE>
Exhibit 4.7
GREAT DANE HOLDINGS INC.
1995 OUTSIDE DIRECTORS STOCK OPTION PLAN
1. PURPOSE
The purpose of this Stock Option Plan (the "Plan") is to attract and
retain, as members of the Board of Directors of Great Dane Holdings Inc. or a
parent or subsidiary thereof (collectively, unless the context otherwise
requires, the "Corporation"), knowledgeable persons of broad business experience
and professional expertise who have no employment or consulting relationship
with the Corporation ("Outside Directors"), in order to promote the success of
the Corporation. As used herein, the term "parent" or "subsidiary" shall mean
any present or future corporation which is or would be a "parent corporation" or
"subsidiary corporation" of the Corporation determined in a manner consistent
with the requirements of Section 424 of the Internal Revenue Code of 1986, as
amended (the "Code"). The Plan will encourage and enable Outside Directors to
acquire a proprietary interest in the Corporation through the ownership of
common stock of the Corporation. Such ownership will provide such Outside
Directors with a more direct stake in the future welfare of the Corporation and
inspire them to remain members of the Board of Directors of the Corporation. It
is also expected that the Plan will encourage qualified persons to seek
membership on the Board of Directors of the Corporation as Outside Directors.
2. AUTOMATIC GRANT OF OPTION RIGHTS TO OUTSIDE DIRECTORS
Each individual who is an Outside Director of the Corporation on June
30 of any year beginning on or after June 30, 1995, whether or not such person
is currently an Outside Director of the Corporation, is hereby automatically
granted an option to purchase 2,000 shares of common stock of the Corporation on
June 30 of each such year at an option price equal to the fair market value of
the common stock subject to the option on the date of the grant. As used
herein, fair market value on the date of the grant shall be deemed to be the
closing trading price of the Corporation's common stock, as reported in THE WALL
STREET JOURNAL, on the date preceding the date of the grant (or, if no such
trading occurred on the date preceding the date of the grant, on the last date
prior to the date of the grant on which such trading did occur). The options
automatically granted to Outside Directors under the Plan shall be non-qualified
stock options. Non-qualified stock options are those which do not qualify for
the preferential tax treatment afforded incentive stock options under Section
422 of the Code. Each grant shall be evidenced by a
<PAGE>
written agreement in accordance with paragraph 3 hereof.
3. SHARES SUBJECT TO THE PLAN
(a) Options shall be evidenced by written agreements which shall,
among other things, (i) designate the option as a non-qualified stock option;
(ii) specify the number of shares covered by the option; (iii) specify the
option price for the shares subject to the option; (iv) specify the option
period determined in accordance with paragraph 4 hereof; and (v) set forth
specifically or incorporate by reference the applicable provisions of the Plan.
(b) The stock to be offered and delivered under the Plan pursuant to
the exercise of an option shall be shares of the Corporation's authorized common
stock and may be unissued shares or reacquired shares. Subject to adjustment as
provided in paragraph 10 hereof, the aggregate number of shares to be delivered
under the Plan shall not exceed 60,000 shares. If an option expires or
terminates for any reason during the term of the Plan prior to the exercise
thereof in full, the shares subject to, but not delivered under, such option
shall be available for options thereafter granted.
4. TERM OF OPTION PERIOD
The term during which options may be granted under the Plan shall
expire on [date which is 10 years from the date of this Plan]. Options shall
expire on the tenth anniversary of the date the option is granted.
5. STOCK AS FORM OF EXERCISE PAYMENT
An Outside Director who owns shares of the Corporation's common stock
may elect to use such shares to pay all or part of the option price required by
reason of the exercise of an option; provided, however, that such election may
be made by an Outside Director only if the Corporation's common stock is traded
on a national securities exchange or in the NASDAQ National Market System at the
time of the election. The value of any shares of the Corporation's common stock
used by an Outside Director to pay all or part of the option price required by
reason of the exercise of an option shall be deemed to be equal to the fair
market value of such shares on the date of the exercise of the option. As used
herein, fair market value on the date of the exercise of an option shall be
determined in a manner consistent with the provisions of paragraph 2 hereof.
The optionee shall make appropriate arrangements with the Corporation for any
taxes which the Corporation is obligated to collect in connection with the
<PAGE>
exercise of such option, including federal, state or local withholding taxes.
6. EXERCISE OF OPTIONS
(a) Each option granted shall be exercisable, in whole or in part, at
any time on or after one year from the date of the grant; provided that the
election to exercise an option shall be made in accordance with applicable
federal and state laws and regulations.
(b) No option may at any time be exercised with respect to a
fractional share.
(c) No shares shall be delivered pursuant to the exercise of any
option, in whole or in part, until qualified for delivery under such securities
laws and regulations as may be applicable thereto, until such shares are listed
on each securities exchange on which the Corporation's common stock may then be
listed, and until payment in full of the option price is received by the
Corporation in cash or common stock of the Corporation as provided in paragraph
5 hereof. Unless prior to the exercise of the option the shares of the
Corporation's common stock issuable upon such exercise have been registered with
the Securities and Exchange Commission pursuant to the Securities Act of 1933,
the notice of exercise shall be accompanied by a representation or agreement of
the individual exercising the option to the Corporation to the effect that such
shares are being acquired for investment and not with a view to the resale or
distribution thereof or such other documentation as may be required by the
Corporation unless in the opinion of counsel to the Corporation such
representation, agreement or documentation is not necessary to comply with said
Act. No holder of an option, or such holder's legal representative, legatee, or
distributee, shall be or be deemed to be a holder of any shares subject to such
option unless and until a certificate or certificates therefor is issued in his
name.
7. ACCELERATION OF VESTING
An option shall automatically be vested and immediately exercisable in
full upon the occurrence of any of the following events:
(a) Any person within the meaning of Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, other than the Corporation, has
become the beneficial owner, within the meaning of Rule 13d-3 under
such Act, of 75% (seventy-five percent) or more of the combined voting
power of the Corporation's then outstanding voting securities, unless
such ownership by such person has been approved by the Board of
Directors immediately prior to the acquisition of such securities by
such person;
<PAGE>
(b) The first day on which shares of the Corporation's common
stock are purchased pursuant to a tender offer or exchange offer,
unless such offer is made by the Corporation or unless such offer has
been approved or not opposed by the Board of Directors;
(c) The stockholders of the Corporation have approved an agreement
to merge or consolidate with or into another corporation (and the
Corporation is not the survivor of such merger or consolidation) or an
agreement to sell or otherwise dispose of all or substantially all of
the Corporation's assets (including a plan of liquidation), unless the
Board of Directors has resolved that options shall not automatically
vest; or
(d) During any period of two consecutive years, individuals who at
the beginning of such period constitute the Board of Directors of the
Corporation cease for any reason to constitute at least a majority
thereof, unless the election or the nomination for the election by the
Corporation's stockholders of each new director was approved by a vote
of at least a majority of the directors then still in office who were
directors at the beginning of the period.
8. TRANSFER OF OPTIONS
Options granted under the Plan may not be transferred except by will
or the laws of descent and distribution and, during the lifetime of the Outside
Director to whom granted, may be exercised only by such Outside Director or by
such Outside Director's guardian or legal representative.
9. CESSATION OF MEMBERSHIP ON THE BOARD OF DIRECTORS
Except as provided in this paragraph 9, any option granted under the
Plan, which has not theretofore expired, shall terminate on the date the Outside
Director to whom the option was granted ceases to be a member of the Board of
Directors of the Corporation for any reason, and no shares may thereafter be
delivered pursuant to such option. However, subject to the condition that no
option may be exercised later than the tenth anniversary of the date the option
was granted, the Outside Director to whom the option was granted (or the person
or persons to whom the Outside Director's rights under the option have been
transferred by will or the laws of descent and distribution) may, within a
period of up to one year after the date the Outside Director ceases to be a
member of the Board of Directors of the Corporation, purchase some or all of the
shares covered by any
<PAGE>
option of the Outside Director which was exercisable on the date of such
cessation of membership.
Nothing in the Plan or in any option agreement shall confer any right
on any individual to continue as a member of the Board of Directors of the
Corporation or shall interfere in any way with the right of the Corporation to
terminate the membership of any Outside Director on the Board of Directors of
the Corporation.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION
(a) If the Corporation's outstanding common stock is hereafter
changed by reason of reorganization, merger, consolidation, recapitalization,
reclassification, stock split-up, combination, or exchange of shares or the
like, or dividends payable in shares of the Corporation's common stock, an
appropriate adjustment shall be made by the Board of Directors in the aggregate
number of shares available under the Plan and in the number of shares and price
per share subject to outstanding options.
(b) Any adjustment in the number of shares shall apply
proportionately to only the unexercised portion of any option granted hereunder.
If fractions of a share would result from any such adjustment, the adjustment
shall be revised to the next higher whole number of shares.
11. TERMINATION, MODIFICATION AND AMENDMENT
The Plan shall terminate 10 years from the earlier of the date of its
adoption by the Board of Directors or the date on which the Plan is approved by
the stockholders of the Corporation and no option shall be granted after
termination of the Plan.
The Plan may from time to time be terminated, modified or amended (a)
by the affirmative vote of the holders of a majority of the outstanding shares
of the Corporation entitled to vote thereon, or (b) by the Board of Directors;
provided, however, that (i) the Board of Directors shall not, without approval
by the affirmative vote of the holders of a majority of the outstanding shares
of the Corporation entitled to vote thereon, increase (except as provided in
paragraph 10 hereof) the maximum number of shares as to which options may be
granted under the Plan, and (ii) the provisions of paragraph 2 hereof shall not
be modified or amended, by either the Board of Directors or the stockholders of
the Corporation, more than once every six months, other than to comport with
changes in the Code, the Employee Retirement Income Security Act of 1974, or the
rules thereunder.
No termination, modification or amendment of the Plan, may, without
the consent of the individual to whom the option
<PAGE>
shall have been previously granted, adversely affect the rights conferred by
such option.
12. GOVERNMENT AND OTHER REGULATIONS
The obligation of the Corporation to sell and deliver shares under the
options granted under the Plan shall be subject to (i) all applicable laws,
rules and regulations and such approvals by any governmental agencies as may be
required, and (ii) the requirements of any stock exchange upon which the common
stock of the Corporation may then be listed.
13. SEPARABILITY
If any of the terms or provisions of the Plan conflict with the
requirements of Rule 16b-3 under the Securities Exchange Act of 1934 (as the
same shall be amended form time to time), then such terms or provisions shall be
deemed inoperative to the extent they so conflict with the requirements of said
Rule 16b-3.
14. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board of Directors nor the
submission of the Plan to the stockholders of the Corporation for approval shall
be construed as creating any limitations on the power of the Board of Directors
to adopt such other incentive arrangements as it may deem desirable, and such
arrangements may be either generally applicable or applicable only in specific
cases.
15. EFFECTIVE DATE
The Plan shall become effective upon the adoption by the Board of
Directors, subject to the approval by the affirmative vote of the holders of a
majority of the outstanding shares of the Corporation present, in person or by
proxy, at a stockholders meeting duly held within one year following adoption of
the Plan by the Board of Directors. All options granted prior to the date of
such stockholder approval shall be subject to such approval.
<PAGE>
EXHIBIT 10.46
THIS OPTION AGREEMENT is entered into as of the 17th
day of January, 1995 between GREAT DANE HOLDINGS INC. (the "Company"), a
Delaware corporation with an address at 2016 North Pitcher Street, Kalamazoo,
Michigan 49007, and Jay Harris (the "Employee"), an individual with an address
at 550 South Ocean Blvd., Apt. 2203, Boca Raton, Florida, 33432.
WHEREAS, the Employee is a key employee of the Company; and
WHEREAS, the Company wishes to secure for itself and its
shareholders the benefits arising from stock ownership by the Employee who is
expected to contribute to the Company's future growth and success.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the parties hereby agree to the following:
1. The Employee is hereby granted the option to purchase from the
Company, on the terms and conditions set forth in this Agreement, all or any
part of 52,500 shares of Common Stock, par value $.01 per share (the "Shares of
Common Stock") of the Company at $1 per share.
2. The Shares of Common Stock subject to this option shall become
exercisable in three annual installments, in accordance with the following
schedule:
<PAGE>
Date Number of Shares
---- ----------------
Closing of the Company's Initial 17,500
Public Offering (the "Closing Date")
One year after the Closing Date 17,500
Two years after the Closing Date 17,500
This option shall terminate, and shall not be exercisable on a date
after the earlier of (i) the tenth anniversary of this Agreement; or (ii) the
termination of the Employee's employment with the Company. Notwithstanding
anything in this Section 2 to the contrary, upon termination of employment by
the Company for any reason other than Cause, as defined in the Employment
Agreement effective as of July 1, 1992 by and between the Company and the
Employee, all options which were exercisable on the date of termination of
employment may be exercised for a period of three months from the date of
termination of employment, but in no event after the tenth anniversary of this
Agreement.
3. Upon each exercise of this option, the Employee shall give written
notice to the Company specifying the number of Shares of Common Stock to be
purchased and accompanied by payment in cash of the aggregate purchase price
thereof. Such exercise shall be effective upon receipt by the Company of such
notice and payment. The Employee shall not be entitled to any rights as a
shareholder of the Company in respect of any Shares of Common
- 2 -
<PAGE>
Stock to be received upon exercise of this option until such Shares of Common
Stock have been paid for in full and issued to him.
4. (a) This option contemplates and is conditional upon the
recapitalization (the "Recapitalization") and stock split described in the
Registration Statement on Form S-1 filed by the Company with the SEC on November
23, 1994. In the event, after the Recapitalization, there is any further change
in the Common Stock of the Company by reason of any reorganization,
recapitalization, stock split, stock dividend or otherwise, the number of Shares
of Common Stock deliverable upon exercise thereafter of this option shall be
increased or decreased proportionately, as the case may be, without a change in
the option price.
(b) Upon (i) the merger or consolidation of the Company with or into
another company, if the agreement of merger or consolidation does not provide
for (x) the continuance of this option, or (y) the substitution of new options,
or (ii) the dissolution, liquidation, or sale of substantially all the assets of
the Company, or any person or persons who are not currently stockholders of the
Company acquire 75% of the Company's Common Stock, the Employee shall have the
right immediately prior to the effective date of such merger, consolidation,
dissolution,
- 3 -
<PAGE>
liquidation or sale of assets to exercise this option in whole or in part
without regard to Section 2. The Company, to the extent possible, shall give
advance notice to the Employee of such merger, consolidation, dissolution,
liquidation or sale of assets. All options which are not exercised shall
terminate as of the effective time of such merger, consolidation, dissolution,
liquidation or sale of assets.
5. (a) If at any time or from time to time the Company shall determine to
register any of its capital stock, for its own account or for the account of
others, other than a registration relating solely to employee benefits plans or
a registration relating solely to a Commission Rule 145 transaction or a
registration on any registration form that does not include substantially the
same information as would be required to be included in a registration statement
covering the sale of the Shares of Common Stock, the Company will:
(i) promptly give to the Employee written notice thereof
(which shall include a list of the jurisdictions in which the Company intends to
attempt to qualify such securities under the applicable blue sky or other state
securities laws); and
(ii) include in such registration (and any related
qualification under blue sky laws or other compliance), and in any underwriting
involved therein, all the Shares of
- 4 -
<PAGE>
Common Stock specified in a written request or requests by the Employee, made
within twenty days after receipt of such written notice from the Company,
provided, however, that the Company shall not be required to effect any such
registration if at the time of the request the Employee could sell all of the
Shares of Common Stock requested to be registered under Rule 144 during the
three-month period following such request.
(b) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise the Employee as a part of the written notice given pursuant to Section
5(a)(i). In such event the right of the Employee to registration pursuant to
this Section 5 shall be conditioned upon the Employee's participation in such
underwriting and the inclusion of the Shares of Common Stock in the underwriting
to the extent provided herein. If the Employee proposes to distribute its
securities through such underwriting it shall (together with the Company and any
other holders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company. Notwithstanding any
other provision of this Section 5, if the underwriter determines that marketing
factors require a limitation of the number of shares to be underwritten, the
- 5 -
<PAGE>
limitation of the underwriter may exclude some or all Shares of Common Stock
from such registration and underwriting. The Company shall so advise the
Employee, and the number of shares of the Company's capital stock included in
such registration and underwriting in addition to those included by the Company
for its own account shall be allocated among the Employee and any other holder
of shares of the Company's capital stock sought to be included in such
registration and underwriting pursuant to comparable registration rights in
proportion, as nearly as practicable, to the respective amounts of the aggregate
number of Shares of Common Stock then held by the Employee and shares of the
Company's capital stock then held by other shareholders with comparable rights
to participate in the registration. No Shares of Common Stock excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration. If the Employee disapproves of the terms of any
such underwriting, the Employee may elect to withdraw therefrom by written
notice to the Company and the underwriter.
(c) The Company may withdraw any registration proceeding begun
pursuant to this Section 5 at any time without liability to the Employee.
6. This option is not transferable other than by will or the laws of
descent and distribution and is exercisable, during
- 6 -
<PAGE>
the lifetime of the Employee, only by him.
7. All notices hereunder shall be in writing, and if to the Company,
shall be delivered personally to the President of the Company or mailed to its
principal office, addressed to the attention of the President and if to the
Employee, shall be delivered personally or mailed to the Employee at the address
noted above. Such addressed may be changed at any time by notice from one party
to the other.
8. This Agreement shall bind and inure to the benefit of the parties
hereto and the successors and assigns of the Company and, to the extent provided
in Section 2, the executors, administrators, legatees and heirs of the
Employees.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
as of the day and year first above written.
GREAT DANE HOLDINGS INC.
/s/ David R Markin
-----------------------------------------
By: David R. Markin
/s/ Jay H. Harris
-----------------------------------------
Jay H. Harris
- 7 -
<PAGE>
EXHIBIT 11.1
COMPUTATION OF INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
AVERAGE NUMBER OF SHARES OUTSTANDING 16,800,000 16,800,000 16,800,000 16,800,000 16,800,000
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS
AND ACCOUNTING CHANGES (20,274,000) (27,006,000) (7,555,000) 3,364,000 24,348,000
EXTRAORDINARY ITEMS 27,749,000 31,188,000 0 0 0
ACCOUNTING CHANGES 0 0 0 (46,626,000) 0
----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS) 7,475,000 4,182,000 (7,555,000) (43,262,000) 24,348,000
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
INCOME (LOSS) PER SHARE:
BEFORE EXTRAORDINARY ITEMS
AND ACCOUNTING CHANGES (1.21) (1.61) (0.45) 0.20 1.45
EXTRAORDINARY ITEMS 1.66 1.86 0.00 0.00 0.00
ACCOUNTING CHANGES 0.00 0.00 0.00 (2.78) 0.00
----------- ----------- ----------- ----------- -----------
NET INCOME (LOSS) PER SHARE 0.45 0.25 (0.45) (2.58) 1.45
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
PRIMARY:
- ---------------------------
AVERAGE NUMBER OF SHARES OUTSTANDING 16,800,000 16,800,000 16,800,000 16,800,000 16,800,000
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
FULLY DILUTED:
- ---------------------------
AVERAGE NUMBER OF SHARES OUTSTANDING 16,800,000 16,800,000 16,800,000 16,800,000 16,800,000
NET EFFECT OF DILUTIVE STOCK OPTIONS, USING
AN ASSUMED ISSUE PRICE OF $13 PER SHARE 135,712 135,712 135,712 135,712 135,712
----------- ----------- ----------- ----------- -----------
TOTAL FULLY DILUTED SHARES 16,935,712 16,935,712 16,935,712 16,935,712 16,935,712
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
NOTE: SHARES SUBJECT TO STOCK OPTIONS ARE NOT INCLUDED IN THE EARNINGS PER
SHARE COMPUTATION BECAUSE THE PRESENT EFFECT THEREOF IS NOT MATERIALLY DILUTIVE
<PAGE>
EXHIBIT 21.1
SUBSIDIARIES OF
GREAT DANE HOLDINGS INC.
(Active)
Jursidiction of
Company Name(1) Incorporation
------------ ---------------
Checker Motors Corporation Delaware
Yellow Cab Company Delaware
Chicago AutoWerks Inc. Delaware
CMC Kalamazoo Inc. Delaware
South Charleston Stamping & Manufacturing
Company West Virginia
American Country Insurance Company Illinois
American Country Financial Services Corp. Illinois
Parmelee Transportation Company Illinois
City Wide Towing, Inc. Illinois
Great Dane Trailers, Inc. Georgia
Great Dane Trailers Tennessee, Inc. Tennessee
Great Dane Los Angeles, Inc. Georgia
Trailer Rental Company, Inc. Georgia
_______________
(1) Other than SCSM which is 10% owned by Executive Life
Insurance Company, the voting securities of each company
whose name is indented are owned by the company set forth
immediately above whose name is not indented.
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Summary
Consolidated Financial Information," "Selected Consolidated Financial Data" and
"Experts" and to the use of our unsigned reports on Great Dane Holdings Inc. and
subsidiaries dated February 14, 1995, in the Registration Statement (Amendment
No. 1 to Form S-1 No. 33-56595) and related Prospectus of Great Dane Holdings
Inc. dated February 27, 1995.
ERNST & YOUNG LLP
Kalamazoo, Michigan
February 27, 1995
<PAGE>
EXHIBIT 23.3
Great Dane Holdings Inc.
2016 North Pitcher Street
Kalamazoo, MI 49007
Ladies and Gentlemen:
I agree to serve on the Board of Directors of Great Dane Holdings Inc. (the
"Company") upon consummation of its initial public offering and consent to be
named as such in the Registration Statement of the Company relating to such
offering to be filed with the Securities and Exchange Commission.
__________/s/_MILES L. BERGER_________
Miles L. Berger
December 7, 1994
<PAGE>
EXHIBIT 23.4
Great Dane Holdings Inc.
2016 North Pitcher Street
Kalamazoo, MI 49007
Ladies and Gentlemen:
I agree to serve on the Board of Directors of Great Dane Holdings Inc. (the
"Company") upon consummation of its initial public offering and consent to be
named as such in the Registration Statement of the Company relating to such
offering to be filed with the Securities and Exchange Commission.
___________/s/_LEONARD GUBAR__________
Leonard Gubar
December 7, 1994
<PAGE>
EXHIBIT 23.5
Great Dane Holdings Inc.
2016 North Pitcher Street
Kalamazoo, MI 49007
Ladies and Gentlemen:
I agree to serve on the Board of Directors of Great Dane Holdings Inc. (the
"Company") upon consummation of its initial public offering and consent to be
named as such in the Registration Statement of the Company relating to such
offering to be filed with the Securities and Exchange Commission.
________/s/_ALAN J. HIRSCHFIELD_______
Alan J. Hirschfield
December 7, 1994
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000051200
<NAME> GREAT DANE HOLDINGS INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 34,875
<SECURITIES> 0
<RECEIVABLES> 91,418
<ALLOWANCES> 1,342
<INVENTORY> 96,580
<CURRENT-ASSETS> 241,260
<PP&E> 217,112
<DEPRECIATION> 103,164
<TOTAL-ASSETS> 522,051
<CURRENT-LIABILITIES> 192,411
<BONDS> 274,652
<COMMON> 168
0
0
<OTHER-SE> (127,470)
<TOTAL-LIABILITY-AND-EQUITY> 522,051
<SALES> 1,016,657
<TOTAL-REVENUES> 1,096,477
<CGS> 870,656
<TOTAL-COSTS> 929,232
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 40,165
<INCOME-PRETAX> 42,997
<INCOME-TAX> 18,649
<INCOME-CONTINUING> 24,348
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 24,348
<EPS-PRIMARY> 1.45
<EPS-DILUTED> 1.45
</TABLE>
