FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION l3 OR l5(d) OF THE
SECURITIES EXCHANGE ACT OF l934
For the quarter period ended September 30, l994
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OR
( ) TRANSITION PURSUANT TO SECTION l3 OR l5(d) OF THE
SECURITIES EXCHANGE ACT OF l934
For the transition period from to
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Commission File Number 0-2642
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DE TOMASO INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Maryland 52-0466460
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(State or other jurisdiction of incorporation) (I.R.S. Employer
Identification No.)
P.0. Box 856, l07 Monmouth Street, Red Bank, N. J. 0770l
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Address of principal executive offices - Zip Code)
(908) 842-7200
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(Registrant's telephone number, including area code)
No Change
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(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section l3 or l5(d) of
the Securities Exchange Act of l934 during the preceding l2 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing re-
quirements for the past 90 days.
Yes X No __
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed
all documents and reports required to be filed by Sections l2, l3
or l5(d) of the Securities Exchange Act of l934 subsequent to the
distribution of securities under a plan confirmed by court. Yes
__ No __
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date. Common Stock $2.50 par value; 2,057,446 shares.
<PAGE>
PART I
FINANCIAL INFORMATION
2
<PAGE>
DE TOMASO INDUSTRIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
<TABLE><CAPTION>
Sept. 30, Sept. 30, December 31,
1994 1994 1993
--------- ---------- ------------
<S> <C> <C> <C>
(Note C)
(In Millions of Italian Lire)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,786,034 Lit 4,349 Lit 2,662
Marketable securities, at cost
12,595,131 19,661 4,901
Receivables
Trade, Net 3,495,836 5,457 13,296
Other, principally from install-
ment receivable from sale of
subsidiary, Italian
Government and affiliated
companies 26,065,983 40,689 42,962
Inventories
Raw materials, spare parts
and work-in-process 12,049,968 18,810 18,329
Finished Products 2,073,671 3,237 3,023
Prepaid expenses 222,293 347 776
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TOTAL CURRENT ASSETS 59,288,916 92,550 85,949
Property, Plant & Equipment - Net 7,962,204 12,429 13,919
Other Assets 2,310,058 3,606 27,688
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TOTAL ASSETS
$69,561,178 Lit 108,585 Lit 127,556
=========== =========== ===========
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Advances from banks $ 7,210,762 Lit 11,256 Lit 22,995
Accounts payable and
accrued expenses 12,209,481 19,059 25,802
Sundry payables 1,370,275 2,139 255
Current portion of long-term debt
3,477,899 5,429 6,601
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TOTAL CURRENT LIABILITIES
24,268,417 37,883 55,653
Long Term Debt 3,149,263 4,916 5,738
Deferred Foreign Severance Pay 4,691,224 7,323 7,245
Minority Interests 8,807,175 13,748 13,039
Shareholders' Equity
Voting Preferred Stock, con-
vertible share for share into
Common Stock, par value $2.50
(Lit l,453) per share; authorized
2,000,000 shares; issued and
outstanding l,000,000 shares 930,814 1,453 1,453
Common Stock, par value $2.50
(Lit l,453) per share;
authorized l0,000,000 shares
issued and outstanding 2,057,446
shares 1,914,158 2,988 2,988
Additional paid-in capital 30,456,758 47,543 47,543
Retained earnings (deficit) (4,989,110) (7,788) (5,669)
Equity adjustment from foreign
currency translation - Note C
332,479 519 (434)
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28,645,099 44,715 45,881
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TOTAL LIABILITIES & SHAREHOLDERS'
EQUITY $69,561,178 Lit 108,585 Lit 127,556
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</TABLE>
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<TABLE><CAPTION>
DE TOMASO INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
9 Months Ended 9 Months Ended Sept. 30, 3 Months Ended 3 Months Ended Sept. 30,
Sept. 30, l994 1994 1993 * Sept. 30, 1994 1994 1993 *
--------------- ---- ------ --------------- ---- ----
(Note C) (In Millions of Italian Lire) (Note C) (In Millions of Italian Lire)
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 22,057,015 Lit 34,431 Lit 27,136 $ 6,807,816 Lit 10,627 Lit 7,230
Cost of products sold 19,370,916 30,238 26,772 6,126,201 9,563 8,117
------------- ------------ ------------ ------------- ------------- ----------
2,686,099 4,193 364 681,615 1,064 (887)
Selling, general and admin-
istrative expenses 4,499,039 7,023 8,267 1,434,337 2,239 3,268
------------- ------------ ------------ ------------- ------------- ----------
(1,812,940) (2,830) (7,903) (752,722) (1,175) (4,155)
Interest expense (2,151,185) (3,358) (5,303) (628,443) (981) (1,813)
Interest and other income 3,060,858 4,778 5,321 830,878 1,297 2,637
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INCOME (LOSS) BEFORE
MINORITY INTERESTS (903,267) (1,410) (7,885) (550,287) (859) (3,331)
Minority interest share of
income (loss) (454,196) (709) (249) (186,419) (291) (249)
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Income (Loss) from
continuing operations (1,357,463) (2,119) (8,134) (736,706) (1,150) (3,580)
Income (Loss) from
Discontinued operations 160,841
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NET INCOME (LOSS) $(1,357,463) Lit (2,119) Lit 152,707 $ (736,706) Lit (1,150) Lit (3,580)
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Net income (loss) per share
based on the average number
of common shares and common
equivalent shares outstanding
during the period
Continuing operations $(.66) Lit (1,030) Lit (2,660) $(.36) Lit (559) Lit (1,740)
Discontinued operations 52,606
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$(.66) Lit (1,030) Lit 49,946 $(.36) Lit (559) Lit (1,740)
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</TABLE>
*Reclassified to conform to 1994 presentation.
4
<PAGE>
<TABLE><CAPTION>
DE TOMASO INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
9 Months Ended 9 Months Ended Sept. 30,
Sept. 30, 1994 1994 1993
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(Note C) (In Millions of Italian Lire)
<S> <C> <C> <C>
Operating Activities
Net income (loss) $ (1,357,463) Lit (2,119) Lit 152,707
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities 21,518,257 33,590 (154,968)
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Net cash provided by (used in)
operating activities 20,160,794 31,471 (2,261)
Investing Activities
Purchase of property, plant &
equipment (827,034) (1,291) (1,221)
Increase in investments (9,455,477) (14,760)
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Net cash provided by investing
activities (10,282,511) (16,051) (1,221)
Financing Activities
Increase (decrease) in
advances from banks (7,520,180) (11,739) 5,427
Increase (decrease) in
long-term debt (1,277,386) (1,994) 929
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Net cash provided by financing
activities (8,797,566) (13,733) 6,356
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Increase (Decrease) in Cash and
Cash Equivalents 1,080,717 1,687 2,874
Cash and cash equivalents at
beginning of period 1,705,317 2,662 3,449
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Cash and Cash Equivalents at End
of Period $ 2,786,034 Lit 4,349 Lit 6,323
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</TABLE>
5
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DE TOMASO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 30, l994
NOTE A--BASIS OF PRESENTATION
The accompanying unaudited consolidated financial state-
ments havebeen prepared in accordance with the instruc-
tions to Form l0-Q and therefore do not include all infor-
mation and footnotes necessary for a fair presentation of
financial position, results of operations and changes in
financial position in conformity with generally accepted
accounting principles. For a summary of the Registrant's
accounting principles, and other footnote information
reference is made to the Registrant's l993 Annual Report
on Form l0-K. All adjustments necessary for the fair
presentation of the results of operations for the interim
periods covered by this report have been included. All of
such adjustments are of a normal and recurring nature.
NOTE B--PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts
of the Company, its five Italian subsidiaries (GBM, Centro
Ricambi, American-Finance, OAM S.p.A., and Hotel Roma) and
two United States subsidiaries (Maserati Automobiles In-
corporated and Maserati Automobiles, Inc.) Significant
intercompany accounts and trans-actions have been elimi-
nated upon consolidation.
NOTE C--CHANGE IN BASIS OF TRANSLATION TO U.S. DOLLAR EQUIVALENTS
The accompanying financial statements, expressed in Ital-
ian lire, have been translated in U.S. dollar equivalents
at the rate of exchange prevailing at September 30, 1994.
Exchange gains and losses actually realized have been
included in operations.
In 1976, the Company determined that it would be a more
appropriate and meaningful presentation if the primary
financial statements were shown in Italian lire because
the Company's manufacturing operations are entirely in
Italy. Reports to the Italian government are made in lire,
purchases of capital goods, financing arrangements and
virtually all aspects of the Company's business are con-
ducted in lire. Trends developed in reporting financial
information should
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<PAGE>
NOTE C--(Continued)
also be more informative if they are presented in the
currency in which the transactions have occurred.
The financial statements of U.S. entities for the three
months ended September 30, 1994 and September 30, 1993
have been translated to Italian lire in accordance with
FASB Statement No. 52, "Foreign Currency Translation."
Under that Statement, all balance sheet accounts are tran-
slated at the current exchange rate and operations state-
ment items are translated at the average exchange rate for
the quarter; resulting translation adjustments are made
directly to a separate component of stockholders' equity.
Certain other transaction adjustments continue to be re-
ported in operations.
The U.S. dollar equivalent amounts are included solely for
the convenience of the shareholders of De Tomaso Indus-
tries, Inc. It should not be construed that the assets
and liabilities, expressed in U.S. dollar equivalents, can
actually be realized in or extinguished by U.S. dollars at
the exchange rates used in the accompanying translation
because of fluctuations in the rates of exchange.
NOTE D--GAIN ON SALE OF SUBSIDIARY STOCK
In May, l993, the Company sold 51% of the common stock of
Maserati, S.p.A., a 51% subsidiary of OAM S.p.A., to Fiat
Auto S.p.A. for Lit 75,750,000,000 ($48,526,586) payable
in installments ending January l, 1995. The sale resulted
in a gain of Lit 196,157,000,000 ($125,661,115) after
adjusting the final installment to present value. The
disposal of this segment has been accounted for as a dis-
continued operation and, accordingly, its operating re-
sults are segregated and reported as a discontinued opera-
tion in l993.
NOTE E--COMPUTATION OF INCOME (LOSS) PER SHARE
Net income for the nine months ended September 30, 1993 is
computed on the number of common stock and common stock
equivalents outstanding at all times during such periods.
Net loss per share for the nine months ended September 30,
l994 and the three months ended September 30, l994 and
September 30, l993 is computed only on the number of com-
mon stock outstanding at all times during such periods.
Convertible preferred shares are not considered to be
common stock equivalents because to do so would be anti-
dilutive.
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<PAGE>
Item 2. Management's discussion and analysis of Financial
Conditions and Results of Operations
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As a consequence of the sale of the Company's Maserati
subsidiary in May 1993, which is reported as a discontinued
operation in the accompanying unaudited financial statements for
the 1993 period, Management's discussion of the Company's opera-
tions deals only with its continuing operations for the 1993 and
1994 periods.
Operations
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Three Months Ended September 30, 1994 and September 30,
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1993
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Net sales increased approximately 47% to Lit.
10,627,000,000 ($6,807,816)1 in the three month period ended
September 30, 1994 compared to the third quarter of 1993. The
Company restored a gross profit margin in the 1994 period, after
operating at a negative margin in the third quarter of 1993.
G.B.M. motorcycle and related parts sales continued to
show significant improvements over 1993 and accounted for approx-
imately 92% of the Company's consolidated net sales in the third
quarter of 1994. Unit sales at G.B.M. rose 62% over the prior
year, although the subsidiary still is not operating profitably.
G.B.M. lost Lit. 1,364,000,000 ($873,799) in the third fiscal
quarter of 1994, compared to a loss of Lit. 2,203,000,000
($1,411,275) the prior year.
The Company's other subsidiaries are all operating at
or near break-even levels, and generate sufficient revenue to
fund their respective operations. None of their operations,
however, is material to the results of operations of the Company
on a consolidated basis.
The Company lost Lit. 1,150,000,000 ($736,706), equal
to Lit. 559 ($.36) per share in the 1994 third fiscal quarter,
compared to a loss of Lit. 3,580,000,000 ($2,293,402), equal to
Lit. 1,740 ($1.11), in the 1993 period. The third fiscal quarter
has historically been the Company's weakest, primarily because of
Italian summer holidays.
Nine months ended September 30, 1994 and September 30,
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1993
----
Net sales for the nine month period in 1994 increased
approximately 27%, to Lit. 34,431,000,000 ($22,057,015) compared
--------------------
1Lire amounts have been converted to dollar amounts at the
rate of 1561 lire to the dollar, the rate prevailing at September
30, 1994.
8
<PAGE>
to the 1993 period, while gross profit margins improved to 12.2%
from slightly over 1.3%. G.B.M.'s unit sales increased approxi-
mately 32% in 1994 over the comparable 1993 period.
Due to the increase in sales, the Company reduced its
third quarter 1994 loss by nearly 75% compared to 1993 (excluding
the non-recurring gain in 1993 of Lit. 160,841,000,000 attribut-
able to the sale of Maserati to Fiat Auto, S.p.A.), although the
improvement in sales was insufficient to enable the Company to
operate profitably overall. The Company lost Lit. 2,119,000,000
($1,357,463), equal to Lit. 1,030 ($.66) per share in the 1994
nine month period, compared to a net loss (excluding the discon-
tinued Maserati operations) of Lit. 134,000,000 ($5,210,762) in
the 1993 period.
Liquidity and Capital Resources
-------------------------------
Largely as a result of the May 1993 sale of its equity
interest in the Maserati subsidiary, the Company has ample liquid
assets, and has reduced bank debt by approximately Lit. 11,739-
,000 ($7,520,180) since December 31, 1993. G.B.M. continues to
maintain operations by utilizing cash generated from operations,
bank financing and credit from suppliers, but because it has not
restored profitability, operations will require additional cash
to support for future growth and operations.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of l934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly autho-
rized.
DE TOMASO INDUSTRIES, INC.
Dated: November 18, 1994 By: s/ Catherine D. Germano
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CATHERINE D. GERMANO
Treasurer
Dated: November 18, 1994 By: s/ Howard E. Chase
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HOWARD E. CHASE, ESQ.
Secretary
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