SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
X Annual report pursuant to Section 13 or 15(d) of the Securities
- ---
Exchange Act of 1934 [Fee Required]
For the fiscal year ended December 31, 1994 or
------------------------
Transition report pursuant to Section 13 or 15(d) of the Securities
- ---
Exchange Act of 1934. [No Fee Required]
For the transition period from to .
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Commission File Number 0-2642
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DE TOMASO INDUSTRIES, INC.
--------------------------
(Exact name of registrant as specified in its charter)
Maryland
52-0466460
- -------------------------------------- -----------------
(State of other jurisdiction of (I.R.S. Employer I.D. No.)
incorporation or organization)
P.O. Box 856
107 Monmouth Street, Red Bank, New Jersey 07701
- ------------------------------------------ ------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 842-7200
----------------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ---------------------
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $2.50 per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes: X No:
------------ ------------
The aggregate market value of the voting stock held by non-affiliates of
the registrant, computed by reference to the average of bid and asked price
of the stock as of March 22, 1995, was $12,651,310.
The number of shares of common stock, $.10 par value, outstanding as of
March 22, 1995 was 2,057,446.
DOCUMENTS INCORPORATED BY REFERENCE:
None.
Page 1 of 46 Pages
Exhibit Index appears at Page 45.
<PAGE>
PART I
------
Item 1. (a) Business
- ------ --------
The Company is engaged primarily in the manufacture and
distribution of "Moto Guzzi" brand motorcycles in Italy, Europe and
elsewhere in the world. Until May, 1993, the Company, through its Italian
subsidiaries, was also engaged in the manufacture and distribution of
automobiles for its own account and, for a limited period, for other
companies as well. The Company had manufactured and distributed luxury
automobiles under the "Maserati" brand name, while until the end of 1992,
the Company had also manufactured and distributed economy automobiles under
the "Innocenti" brand name. Additionally, from 1989 through mid-1990, the
Company manufactured vehicles for Chrysler Corporation, while from mid-1990
until the end of 1991, it built vehicles for Fiat Auto S.p.A.
In 1993, O.A.M. S.p.A., one of the Company's Italian
subsidiaries, disposed of its controlling 51% equity interest in its
Maserati S.p.A. manufacturing subsidiary to Fiat, following years of
steadily declining Maserati sales and mounting losses, thereby ending the
Company's 18-year involvement in automobile manufacturing. Fiat had
acquired a 49% interest in the newly-formed Maserati subsidiary in 1990
when O.A.M. transferred the Maserati operating assets to its new
subsidiary. See "Management's Discussion and Analysis of Financial
---
Condition and Results of Operations -- The Company's Sale of Maserati
Operations," below.
Motorcycle manufacturing and distribution continues through the
Company's 89.1%-owned subsidiary, G.B.M. S.p.A., which is the successor to
businesses acquired by the Company in 1972. Until 1989, G.B.M. had also
manufactured and distributed a line of motorcycles and motor scooters under
the "Benelli" brand name. The Benelli division was sold to an entity
controlled by Biesse S.p.A. in October 1989, an entity in which G.B.M.
retained a minority equity interest until 1990 when it also sold that
interest to Biesse S.p.A.
The Company's wholly-owned subsidiary, Maserati Automobiles, Inc.
("MAI") had been the exclusive importer in the United States of G.B.M.
motorcycles until 1990 when it sold its inventory of vehicles and spare
parts to an unrelated third party, which then became the exclusive
importer. MAI had also been the exclusive importer of Maserati vehicles in
the United Sates, but had not imported any new vehicles since 1990. MAI
sold its remaining spare parts inventory and suspended operations, in 1994.
The subsidiary is in the process of winding up its affairs and selling its
real property.
The Company was incorporated under the laws of the State of
Maryland in 1917.
2
<PAGE>
Other Subsidiaries
- ------------------
The Company owns a controlling interest in a non-operating
subsidiary, Nuova Callegari e Ghigi S.p.A. ("Callegari") and has
substantially completed the liquidation of that subsidiary's assets. The
Company's American Finance, S.p.A. subsidiary owns and operates a 59-room
hotel in Modena. The hotel's operations are not material to the Company's
consolidated operations.
(b) Industry Segment Information.
----------------------------
The Company operates in one industry segment: motorcycle
manufacture and sales. For financial data concerning Company operations
for the last three fiscal years, which include data attributable to
Maserati, see the Financial Statements which accompany this report.
(c) Narrative Description of Business.
---------------------------------
G.B.M., the Company's motorcycle manufacturing subsidiary,
manufactures a high priced line of motorcycles under the trademark "Moto
Guzzi". G.B.M. will continue to sell Benelli finished goods inventory in
stock until that inventory has been exhausted; the Company estimates it
will complete the liquidation of Benelli inventory by the end of 1995.
Moto Guzzi cycles, whose engines vary in size from a displacement of 350cc
to 1100cc, vary in price to retail dealers in the Italian market from Lit.
6,450,000 ($3,977*) to Lit. 13,415,000 ($8,271). These price ranges do
not take into account the 19% Italian value-added tax paid by Italian
retail dealers.
In 1994, G.B.M. introduced one new model, the 1100 Sport. The
750cc PA was significantly restyled for 1994. All motorcycle manufacturing
is conducted at G.B.M.'s Mandello, Italy facility. G.B.M. acquires
completed power train components from outside suppliers, and performs
finishing work and assembly into motorcycle bodies. G.B.M.'s operations
were supervised in 1994 by the independent consulting firm of Temporary
Integrated Management, S.r.l. ("TIM"). TIM is a unit of Finprogetti,
S.p.A., an Italian corporation. The Company is in advanced negotiations
with Finprogetti involving the purchase of TIM and certain other assets for
newly issued shares of the Company's common stock. See "Management's
Discussion and Analysis of Financial Conditions and Results of Operations"
below.
Italian prices for motorcycles traditionally have been higher
than export prices. Prices in Italy are customarily reviewed and are
increased to cover increases in production costs at periodic intervals. In
1994, Moto Guzzi increased prices of its various models once for its
domestic sales and twice for export sales (to reflect weakening in the
Italian Lire exchange rate),
- --------------------
* Italian lire amounts are reported in U.S. dollars based on the
conversion rate of 1,622 lire to the dollar prevailing at
December 31, 1994.
3
<PAGE>
with such increases aggregating approximately 7% on average within Italy
and 4% in respect of export sales. Export sales continued to reflect lower
margins than domestic Italian sales.
Distribution
- ------------
G.B.M. maintains a domestic distribution network of over 200
independent dealers. G.B.M. will continue to sell Benelli mopeds and
Benelli motorcycles with engines of 125 cc or less until that inventory is
exhausted sometime in 1995.
In 1994, a single importer-distributor acted as exclusive
importer-distributor for Moto Guzzi in each of France, Japan, Sweden,
Austria, Switzerland, Australia, the U.K., the United States and in
Belgium/Holland. These distributors will continue to handle Moto Guzzi
products in 1995.
In October 1989, G.B.M. formed A + G Motorod GmbH ("A&G"), a
German corporation, with Aprilia S.p.A., another Italian manufacturer of
motorcycles with small displacement engines. G.B.M. and Aprilia each owned
45% of A&G, having each invested Lit. 200,000,000 ($123,305) as equity; the
managing director of A&G owned the remaining 10%. A&G distributes the
motorcycles of both G.B.M. and Aprilia in the German market. On January 1,
1995, A&G required a capital infusion in which G.B.M. did not participate.
As a result, its ownership interest declined to 25%. In 1996, G.B.M. can
choose to continue to distribute products in Germany through A&G or can
choose to distribute Moto Guzzi products through others.
No single Italian dealer accounted for more than 5% of the sales
of Moto Guzzi in 1994. The Italian dealers who distribute Moto Guzzi
motorcycles generally handle other brands as well.
Sales in 1994 of Moto Guzzi machines to the Italian and other
governments were 17.7% of its total motorcycle sales revenues.
Italian dealers in 1994 normally paid for motorcycles on the
following terms: if payment was received on receipt of a purchase order, a
4% discount was allowed; if payment was received 30 days after receipt of
invoice, a 2% discount was allowed; if payment was received 60 days after
receipt of invoice, a 1% discount was allowed. Payments made by dealers
other than in cash are evidenced by promissory notes which were discounted
at then-prevailing bank rates. Motorcycles sold for export are sold with a
3% discount if payment is made with delivery of a purchase order, and
otherwise at full invoiced price.
In 1983, Centro Ricambi S.r.l. was organized as a wholly-owned
subsidiary of a predecessor to G.B.M. to facilitate the distribution of
spare parts for Guzzi and Benelli motorcycles. Its only business was the
purchase from G.B.M. of such spare parts and their resale to Guzzi or
Benelli dealers and distributors on substantially the same terms as
motorcycles are sold. It will continue to sell Benelli parts until the
supply is exhausted.
4
<PAGE>
Backlogs
- --------
Based on confirmed purchase orders received to date for 1995
delivery, G.B.M.'s entire production capacity for 1995 has been pre-sold,
for the first time in that company's history. Backlog of Moto Guzzi for
1995 delivery as at January 1, 1995 was approximately Lit. 54,803,000,000
($33,787,300) in the aggregate, representing 5,523 units compared to Lit
10,000,000,000 ($6,165,228) in 1994. Additionally, G.B.M. signed an
agreement in March 1995 with a foreign purchaser to deliver over five years
special-purpose engines based on the Company's motorcycle engine design.
Backlogs under this agreement for 1995 delivery aggregate Lit.
2,576,000,000 ($1,588,163).
Competition
- -----------
The sale of motorcycles is a highly competitive business, with
competition typically coming from all powered passenger vehicles, as well
as motorcycles. In 1994, G.B.M. sold 4,278 units, of which 4,149 had
engine displacements of 350cc or greater, 77 had displacements of less than
350cc, and 52 were Benelli inventory. G.B.M.'s sales of its large
motorcycles constituted a 3.2% share of the Italian domestic market for
motorcycles with 350cc engines or greater, a 100% market share improvement
compared to the prior year. In 1993, G.B.M. sold 3,477 units, of which
3,274 had engines of 350cc or greater. The market itself continued to
contract significantly in 1994, with new vehicle registrations in Italy
declining by 15% compared to 1993. The Italian market remains dominated by
large, well-financed Japanese manufacturers. A number of foreign and
domestic manufacturers, principally Cagiva, Honda, Yamaha, Kawasaki and
Suzuki, sell their products in the Italian market. In 1994, the Italian
market shares of the principal competitors of Moto Guzzi, on a unit basis
were: Honda - 28.3%; Cagiva and Ducati - 8.9%; Yamaha - 19.2%; Aprilia -
3.5%; Suzuki - 11.7%; Kawasaki - 7.7%; and Harley Davidson 5.2%. From data
available in early 1995, the market has begun to rebound, and G.B.M.
anticipates that it will maintain its share of this larger market.
G.B.M. maintains an extremely small share of the worldwide
motorcycle market, which is dominated by many of the same Japanese
manufacturers that predominate in Italy.
5
<PAGE>
Raw Materials
- -------------
The source and supply of motorcycle raw materials, including
aluminum for power train components, is not a significant issue for G.B.M.
There are multiple reliable sources for motorcycle componentry as well as
for manufactured engines. The cost of imported raw materials, however, is
affected by variations in currency exchange rates. In 1994 the value of
the Lire had declined relative to the currency of Italy's primary trading
partners. The weakness of the Lire has resulted simultaneously in an
increase in the cost of imported raw materials and in an improvement in the
price competitiveness of Italian-made finished goods, such as G.B.M.'s
motorcycles.
During 1994, average prices paid for raw materials, and
components by G.B.M. increased by approximately 7.82% over 1993 average
price levels, approximately half of which was due to the use of higher
quality materials and to outsourcing of certain componentry.
MAI purchased all of its spare parts from O.A.M. in accordance
with O.A.M.'s agreement with Fiat until MAI operations were suspended and
its spare parts inventory sold in December, 1994.
Research and Development and Continuing Engineering
- ---------------------------------------------------
G.B.M. is continuously engaged in company-sponsored programs of
product improvement and development. Aggregate 1994 research and
development expenditures by G.B.M. were Lit. 197,133,421 ($121,537)
compared to Lit. 409,159,000 ($252,256) in 1993, and Lit. 219,852,597
($134,544) in 1992.
In addition, during 1994, on-going programs continued relating to
developing more powerful engines with improved performance and durability
characteristics, superior braking systems, suspensions, frames,
transmissions and other components applicable to two-wheeled vehicles.
G.B.M. introduced the 1100cc Sport in 1994 and is planning to introduce in
1995 a 1000cc Custom and either a 1000cc Daytona Sport Racing or an 1100cc
fuel injected Sport. The Company does not anticipate that the new models
will require a significant capital commitment.
The other companies do not conduct research and development
activities.
Seasonal Nature of Business
- ---------------------------
There is no significant seasonal variation in the business of the
Company or any of its subsidiaries except that traditionally vehicle
production ceases during August of each year in Italy.
6
<PAGE>
Working Capital Items
- ---------------------
The subsidiaries of the Company are not affected by any unusual
industry practices relating to returns of merchandise or extended payment,
nor are they required to carry unusually significant inventories since
their businesses are not seasonal.
Patents and Trademarks
- ----------------------
Except as described below, the business of G.B.M. is not and has
not been in any material respect dependent upon patents, licenses,
franchises or concessions. The component parts of motorcycles are
manufactured pursuant to well known techniques and include components which
are not unique to its products, although some of these components are
specially styled and designed. Management believes that the trade names
"MOTOBI", "Moto Guzzi", and their related trademarks are well known and
highly regarded throughout the world, and appropriate steps have been taken
to protect G.B.M's rights in these trade names and trademarks in those
countries representing significant markets.
Compliance with Governmental Regulations
- ----------------------------------------
G.B.M., along with other motorcycle manufacturers, have incurred
substantial costs in designing and testing products to comply with safety
and emissions requirements. Such standards have added, and will continue
to add, substantially to the price of the vehicles while competitive
pressures have kept export prices lower than domestic Italian sales prices.
Having suspended imports of new Maserati vehicles since 1990, and
having sold its controlling interest in the Maserati subsidiary in 1993,
the Company is no longer subject to the required federal safety equipment
and damage susceptibility regulations applicable only to automobiles, such
as bumper durability, and front and side impact resistance and passive
restraint systems insofar as they relate to newly manufactured post-1990
vehicles. Similarly, the Company also is no longer subject to state or
federal automobile fuel economy or emissions regulations with respect to
such vehicles.
All motorcycles produced by the Company and its subsidiaries for
sale in the United States are manufactured with the intent to comply with
all applicable federal safety standards. The Company's 1994 model year
motorcycles complied with EPA emission standards applicable in all 50
states.
Employees and Employee Relations
- --------------------------------
At December 31, 1994, G.B.M. had 303 employees, compared to 329
at December 31, 1993, of whom approximately 83% were engaged in factory
production and the balance in various supervisory, sales, purchasing,
administrative, design, engineering and clerical activities. At December
31, 1994, Centro Ricambi had 19 employees, down from 20 employees at
December 31, 1993. Approximately 42% of Centro Ricambi's employees are
7
<PAGE>
engaged in warehouse and shipping work, with the balance engaged in
supervisory, purchasing, administrative and clerical activities. Labor
costs increased approximately 0.4% in 1994 at Guzzi and Centro Ricambi and
are estimated by Management to increase approximately 6% for 1995.
In 1994, G.B.M. did not avail itself of the Italian government
furlough program. In 1993, workers were furloughed 48,622 production hours
and G.B.M. utilized the government furlough program. The cost to the
Company was immaterial.
Two national strikes in 1994 cost G.B.M. 3,217 production hours.
G.B.M. was not the subject of any strikes or work stoppages in 1993. In
Modena, the local Centro Recambi "company" contract expired on March 31,
1994. A new contract has not yet been signed. G.B.M.'s last "company"
contract expired on December 31, 1992 and it also has not yet been
renegotiated.
Under Italian law, persons in a company acquire the right to
severance pay based upon salary and years of service. At December 31,
1994, the Company was obligated to pay employees an aggregate of Lit.
7,137,000,000 ($4,400,123), compared to Lit. 7,245,000,000 ($4,466,708) at
December 31, 1993.
(d) Financial Information About Foreign and
Domestic (Italian) Operations and Export Sales
----------------------------------------------
All motorcycle production occurs in Italy and foreign sales are
made to distributors located outside Italy. Most foreign sales are made to
Western European countries and the U.S. Although in the aggregate such
sales are significant, sales to no particular country other than Germany,
the United Kingdom, Holland and Argentina are significant. Sales to other
continents are more insubstantial. In 1994, the Company had aggregate
sales outside of Italy of Lit. 23,172,000,000 ($14,286,067). See Note M of
Notes to Consolidated Financial Statements.
Set forth below are charts illustrating percentage of motorcycle
sales revenues attributable to various geographic areas.
8
<PAGE>
Geographic Areas
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Year Ended December 31
Benelli & Moto Guzzi Motorcycles 1994 1993 1992
-------------------------------- ---- ---- ----
Italy 38% 35% 37%
Europe (other than Italy) 51% 41% 52%
United States 5% 6% 6%
Elsewhere 6% 18% 5%
All of MAI's activities, before it suspended operations, occurred
in the United States, Puerto Rico and Canada.
Item 2. Properties
- ------ ----------
The following facilities were, and unless so indicated, are
presently, leased or owned by the Company in the active conduct of its
business:
(a) 1,460 square feet of office space at 107 Monmouth Street,
Red Bank, New Jersey 07701, in which are located the United States
administrative offices of the Company, and which is occupied under a
month-to-month lease, at a monthly rental of $970. This space is regarded
as adequate for the present and foreseeable needs of the Company in the
United States.
(b) Factory and office facilities owned in fee and located in
Mandello del Lario, Italy in a group of one, two and three story buildings
aggregating 54,550 square meters, which is the facility of the Guzzi
division of G.B.M. This facility will operate in 1995 at approximately 50%
of production capacity calculated as a percentage of available space,
compared to a utilization rate of 30% in 1994.
(c) One single-story 2,800 square meter concrete building
located in Modena, Italy and completed in late 1983, with an 8 meter
ceiling, rented on a month-to-month basis by Centro Ricambi from DeTomaso-
Modena, an affiliate of Mr. DeTomaso, at a monthly rental of Lit. 9,000,000
($5,549) since January 1, 1984. This facility has been fully utilized as a
spare parts distribution facility for Guzzi and Benelli.
(d) Additional executive offices and sales facilities located in
Hotel Canalgrande in Modena, Italy comprising approximately 500 square feet
of office space for which no rent is paid, and 5,000 square feet of
exhibition and dining space made available at prevailing commercial rates
when required. The hotel was erected in the fifteenth century, rebuilt in
the eighteenth century and renovated in 1970. The corporation which owns
the hotel is Mr. DeTomaso's affiliate, in which G.B.M. owns a 2.17%
minority interest.
9
<PAGE>
(e) Office, retail showroom, service and warehouse space at 1501
Caton Avenue, Baltimore, Maryland, situated on a 2.9 acre tract in a steel
and masonry building of approximately 25,000 square feet, owned by MAI.
The facility operated at approximately 40% of capacity in 1994.
(f) A 24,000 square foot steel and masonry warehouse located on
1.4 acres at 1221 Bernard Drive, Baltimore, Maryland owned by MAI. The
warehouse is nine years old and has been utilized by MAI for new vehicle
storage and preparation. Since new Maserati models have not been imported
since 1990, the facility is essentially unutilized.
(g) A combined commercial and residential building in Rome owned
by O.A.M. The two-story building occupies approximately 1100 square
meters. The commercial portion (the basement, ground floor and access
ramp) is rented to a Guzzi dealership pursuant to a long-term lease. The
first floor is rented for residential purposes, and contains approximately
152 square meters of space.
(h) A 59 room, 2500 square meter hotel, owned by the Company's
American Finance, S.p.A. subsidiary. The Hotel Roma in Modena, Italy,
facility was built in the 19th Century in the town's historic centre.
Item 3. Legal Proceedings
- ------ -----------------
A shareholder has commenced a litigation in federal court seeking
to compel the Board of Directors to hold a shareholders meeting relating to
the 1993 sale of Maserati to Fiat. While the Company believes the action
is without merit, it is, in any event, currently in the process of
scheduling a shareholders meeting. See "Submission of Matters to a Vote of
Security Holders," below.
Item 4. Submission of Matters to
- ------
a Vote of Security Holders
--------------------------
On May 19, 1993, O.A.M. sold its remaining equity interest in its
Maserati subsidiary to Fiat Auto S.p.A. As a result of the Maserati sale,
the Company's principal operating subsidiary was G.B.M. The Company's
Board of Directors resolved to convene a shareholders meeting to ratify the
sale of Maserati and to discuss the future of G.B.M. In anticipation of
such a meeting, the Company commissioned the preparation of an evaluation
of the Company as of the day preceding the Maserati sale and as of a
current date.
Just prior to the presentation of the evaluation report, the
Company received an offer from the Italian investment firm of Finprogetti
S.p.A. under which the Company would acquire certain subsidiaries of
Finprogetti in exchange for newly issued shares of the Company's common
stock, and Finprogetti would make or cause others to make additional
capital
10
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investments with the Company. Negotiations relating to this transaction
are at an advanced stage, and are expected to be completed, and a final
agreement executed shortly. The planned shareholders meeting has been
postponed as a result of these developments, and is now planned for July
1995, by which time the agreement with Finprogetti should have been
executed. In connection with the Finprogetti transaction, the Board of
Directors expects to institute a repurchase policy under which shareholders
will have an opportunity to realize fair value for most of their shares.
Details of the transaction and of the policy will be provided in
forthcoming proxy materials.
11
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity
- ------
and Related Stockholder Matters
---------------------------------------
As of March 31, 1995, there were 1,393 holders of record of
Registrant's common stock.
The Company's common stock traded on the non-NASD over-the-
counter market, commonly called the "pink sheets," in 1993 and until
September 23, 1994. Since September 26, 1994 the common stock has traded
on the NASDAQ small-capitalization market system. The reported prices
represent inter-dealer prices, which do not include retail mark-ups, mark-
downs or any commission to the broker-dealer, and may not necessarily
represent actual transactions.
Bid Prices
1993 High Bid Low Bid
- ---- ------------- ------------
1st Quarter 3 1/2 3 1/2
2nd Quarter 4 1/2 4
3rd Quarter - -
4th Quarter 2 2
1994
- ----
lst Quarter 3 2 1/2
2nd Quarter 5 1/2 2 1/2
3rd Quarter through September 23 5 1/2 4
September 26 through September 30 5 4 1/2
4th Quarter 9 1/4 4 1/4
1995
- ----
lst Quarter through March 22 9 1/2 7 3/4
No dividends were declared or paid during 1992, 1993 or 1994.
Registrant does not believe that its capital needs will permit the payment
of a dividend in the foreseeable future.
12
<PAGE>
Item 6. Selected Financial Data.
- ------ -----------------------
<TABLE><CAPTION>
Year Ended
December Year Ended December 31,
31, 19941 1994 1993 1992 1991 1990
---------- ---------------------------------------------------------------------------------------
(Expressed in Millions of Italian Lire - Except for per Share Amounts)
<S> <C> <C> <C> <C> <C> <C>
Net Sales $32,055 Lit. 51,994 Lit. 41,919 Lit. 45,346 Lit. 32,219 Lit. 48,676
Loss From Continuing
Operations Before
Extraordinary Items (2,021) (3,227) (6,736) (3,967) (9,811) (8,815)
Net Income (Loss) (2,021) (3,277) 153,497 (75,984) (17,320) 43,3962
Loss From Continuing
Operations Per Share
Before Extraordinary
Items (0.98) (1,593) (2,203) (1,928) (4,769) (2,883)
Net Income (Loss)
Per Share (0.98) (1,593) 50,204 (36,931) (8,418) 14,194
Total Assets 73,156 118,661 127,556 223,295 264,724 367,726
Long-Term Debt 3,085 5,004 5,738 71,9493 32,056 64,169
Cash Dividend
Paid Per Common
Share Dividends have not been paid in the past.
</TABLE>
1 The above information for the year ended December 31, 1994,
expressed in millions of Italian Lire, has been translated into
U.S. Dollar equivalents in thousands of dollars (except for per
share amounts), at the rate of exchange prevailing at December
31, 1994. The prevailing exchange rates as at the end of the
five most recently completed fiscal years is as follows:
1622 Lire per U.S. Dollar at December 31, 1994
1713 Lire per U.S. Dollar at December 31, 1993
1478 Lire per U.S. Dollar at December 31, 1992
1147 Lire per U.S. Dollar at December 31, 1991
1127 Lire per U.S. Dollar at December 31, 1990
The high, low and average conversion rates for the years 1990-1994 are
as follows:
High Low Average
---- --- -------
1994 1,689 1,539 1,612
1993 1,713 1,478 1,574
1992 1,475 1,066 1,243
1991 1,364 1,089 1,241
1990 1,300 1,109 1,138
2 Includes a gain of Lit. 105,622,000,000 resulting from the sale
of 49% of Maserati, S.p.A. and 51% of Innocenti Milano, S.p.A. to
Fiat.
3 Long-Term Debt includes Advances from Affiliates of Lit.
61,000,000,000.
13
<PAGE>
Item 7. Management's Discussion and Analysis of
- ------
Financial Condition and Results of Operations
---------------------------------------------
As a consequence of the sale of the Company's Maserati
subsidiary in May, 1993, which is described in greater detail below,
Management's discussion of the Company's operations in 1993 and 1992 deals
only with the Company's continuing operations in those years since
inclusion of the Company's discontinued Maserati operations would render
the discussion not comparable. See Note C of Notes to Consolidated
Financial Statements.
Results of Operations
---------------------
1994 Compared to 1993
---------------------
The Company's operations improved markedly in 1994 compared to
1993 as a result of production and management changes made during the year
at G.B.M. Unit sales of G.B.M. increased by 28%, to 4,880 motorcycles.
Net sales increased by 24%, to Lit. 51,994,000,000 ($32,055,000). The
increase in unit sales, moreover, was achieved despite an overall
contraction in the Italian motorcycle market.
Despite the growth in sales, gross profits declined
approximately 2% and gross profit margins declined approximately 3% from
1993. Gross profit margins in 1993 were favorably impacted by a reduction
in cost of goods sold resulting from a change in that year's estimate of
obsolescence reserves. Excluding the effect of that reduction, GBM achieved
a small increase in gross profit margins in 1994 from its sale of motorcycles.
A 13% decline in sales, general and administrative expenses due
to operating efficiencies, and a 52% decline in interest expenses due to
retirement of debt more than offset reduced margins and, as a result, the
Company's loss from continuing operations before minority interests dropped
by nearly 64% to Lit. 2,467,000,000 ($1,520,962) in 1994 from Lit.
6,736,000,000 ($4,152,898) in 1993.
1993 Compared to 1992
---------------------
Results for the 1993 fiscal year from continuing operations
primarily reflect the operations of the Company's G.B.M. motorcycle
subsidiary. G.B.M.'s Moto Guzzi unit sales declined 25% in 1993 compared
to 1992, largely reflecting a comparable decline in overall motorcycle
sales in Italy. Consolidated losses from continuing operations in the 1993
fiscal year increased by 69% to Lit. 6,736,000,000 ($4,152,898) from Lit.
3,967,000,000 ($2,445,746) in 1992. G.B.M.'s losses for the 1993 fiscal
year were approximately Lit. 4,000,000,000 ($2,466,091).
14
<PAGE>
Interest expense increased by 53.2% in 1993 compared to 1992 due
to increased bank advances to finance operating losses. The increase in
interest income was related to interest earned on amounts due from Fiat
relating to the Maserati sale.
The Company adopted FASB Statement No. 109 "Accounting For
Income Taxes" effective January 1, 1993. The principal effect of FASB
Statement No. 109 is that utilization of the net operating loss carry
forwards is reflected as a reduction of the tax provision rather than an
extraordinary item.
The Company's Sale of Maserati Operations
On May 17, 1993, the Company's 84%-owned subsidiary O.A.M.
S.p.A. completed the sale to Fiat Auto S.p.A. of its 51% equity interest in
its Maserati S.p.A. subsidiary. Fiat had purchased the other 49% interest
in Maserati in 1990, as part of a restructuring of O.A.M.'s manufacturing
capacity related to the termination of its earlier assembly agreement with
a unit of the Chrysler Corporation and the commencement of a new
manufacturing agreement with Fiat.
Operations at Maserati, and, before its 1990 founding, at
O.A.M., had been disappointing for many years. With significant unused
manufacturing capacity at the subsidiary's Milan facility, Maserati and its
O.A.M. predecessor, since 1984, had sought to create and maintain a viable
alliance with a larger automobile manufacturer which would enable Maserati
to make fuller and more profitable use of its plant and equipment as a
means of achieving and maintaining profitability. The underutilization of
Maserati's manufacturing capacity, with its resulting high ratio of fixed
costs to unit sales, limited that company's ability to achieve additional
market share through pricing strategies. Greater utilization, it was
hoped, would permit fixed costs to be spread over a much greater volume of
vehicles, improving the potential to achieve profitability.
In 1986, pursuing this goal, O.A.M. entered into a series of
relationships with Chrysler and certain of its subsidiaries relating to the
design, manufacture and assembly of a sports coupe, called the "TC." As
part of the agreement, Chrysler acquired a 15.6% equity interest in O.A.M.
and an option to purchase from Sig. Alejandro DeTomaso, the Company's
Chairman and principal stockholder, all of his common and preferred stock.
The option is exercisable at any time in 1996 or 1997 at the then-market
price less $1,250,000. Sig. DeTomaso can repurchase the Chrysler option
for $5,000,000 plus accumulated interest at 10% from October 1986.
The TC production arrangement however, largely due to modest
customer interest in the car, terminated prematurely in 1988, leaving
Maserati's manufacturing capacity again underutilized and its future in
doubt.
15
<PAGE>
In 1989 and 1990, with O.A.M.'s management continuing to hold
the view that a strategic alliance was essential to the economic recovery
of Maserati, the subsidiary entered into a series of agreements with Fiat.
As a consequence, Maserati was formed as a subsidiary of O.A.M., the
operating assets of O.A.M. were transferred to Maserati, and Fiat acquired
49% of the Maserati equity for Lit. 132,670,000,000 ($81,794,081), all of
which was contributed to Maserati. Maserati also agreed to assemble a Fiat
"Panda" model as a contract manufacturer for Fiat at a stated assembly fee
per vehicle. Fiat agreed to purchase up to 30,000 such vehicles per year
for three years.
Shortly thereafter, in mid-1990, the onset of the Gulf war and a
worldwide recession produced a major decline in European car sales
generally; the luxury segment occupied by Maserati was particularly hard
hit. Fiat's Panda sales fell substantially below expectations, reducing
the need for the quantity of vehicles the parties had contemplated. Fiat
formally terminated the Panda production program in December 1991. Under
the terms of the production agreement, there were no financial consequences
to Fiat stemming from its having terminated the program. At the same time,
the Italian economy as a whole was especially hard hit, due in part to a
national corruption scandal involving major leaders of government, industry
and finance.
O.A.M.'s management, with the approval of the Company's
management, concluded that an upturn in European luxury vehicles sales was
unlikely to occur in the foreseeable future. Absent an infusion of
substantial additional capital, Maserati's ability to continue operations
until the general economy and luxury car sales improved generally was
highly unlikely.
With losses mounting at Maserati, in late 1991, its management
attempted to reduce costs by terminating 500 workers, but Milanese labor
unions obtained local judicial relief against the terminations. Labor
strife plagued Maserati throughout 1992, causing several factory shutdowns,
production stoppages and shipping delays. Losses were greatly magnified as
a consequence. On January 22, 1993, after extended negotiations, Maserati,
its labor unions and the Italian government resolved the dispute and
related legal proceedings which stemmed from the 1991 terminations. The
parties agreed to implement the terminations of Maserati's Milan work force
in three stages, concluding on April 1, 1993. On March 31, 1993,
operations at Maserati's Lambrate (Milan) facility ceased completely,
thereby curtailing the single largest cause of its, and consequently the
Company's, operating losses.
As part of the labor dispute resolution, the Italian government
agreed to implement existing relocation and compensation programs for the
benefit of the terminated workers; Maserati agreed to contribute Lit.
3,850,000,000 ($2,373,613) in connection with these government programs.
16
<PAGE>
By the time Maserati's labor problems finally were resolved,
however, the combination of the foregoing factors resulted in substantial
operating losses at Maserati which no longer could continue operations
without a massive cash infusion sufficient to cover its capital deficiency
(as required by Italian law) and to fund projected further operated losses.
O.A.M. had looked to Fiat for operating capital. Since its
initial 1990 investment in Maserati, Fiat had helped to finance the
subsidiary's current operations by providing loans aggregating Lit.
61,000,000,000 ($37,607,891) by December 31, 1992. Maserati, as expected,
continued to operate at a loss during this period, losing Lit.
88,176,000,000 ($54,362,515), exclusive of a tax credit, in 1992 and
another Lit. 22,885,000,000 ($14,109,125) by the time O.A.M. sold its
equity share in Maserati in May 1993. By the end of 1992, Maserati had
accumulated a net capital deficiency of Lit. 102,484,000,000 ($63,183,724).
In connection with his discussions with Fiat regarding debt
financing, the Company's chairman had expanded the discussions to include
the possible acquisition by Fiat of O.A.M.'s majority interest in Maserati.
Sig. De Tomaso was simultaneously dealing with the Milan labor litigation.
Almost immediately after the conclusion of the labor negotiations, and with
talks with Fiat having reached an advanced stage concerning the acquisition
of Maserati, Sig. De Tomaso suffered a major stroke, and the Fiat talks
were temporarily suspended.
O.A.M. management appointed Sig. De Tomaso's son, Sig. Santiago
De Tomaso, to conclude the talks with Fiat, and an agreement to sell the
Maserati subsidiary resulted on May 17, 1993. The financial terms
contained in the final agreement, as executed, were substantially identical
to those which had been negotiated between Fiat and the elder Sig. De
Tomaso prior to his illness.
As required by the terms of agreement with O.A.M., Fiat paid the
three installments on the aggregate Lit. 75,750,000,000 ($46,701,603)
purchase price. The first installment was paid by the assignment to O.A.M.
of Lit. 23,500,000,000 ($14,488,286) owed to Fiat by American Finance
S.p.A., another Italian subsidiary of the Company. On January 1, 1994,
Fiat paid O.A.M. the second installment of Lit. 23,750,000,000
($14,642,417) in cash, forgave an O.A.M. debt of Lit. 1,500,000,000
($924,784) and paid interest of Lit. 2,805,000,000 ($1,729,346). Fiat paid
the final installment of Lit. 27,000,000,000 ($16,646,116) in cash, without
interest, on January 1, 1995. The aggregate purchase price of Lit.
75,750,000,000 includes imputed interest of Lit. 4,826,000,000 ($2,975,339)
from the final payment.
The agreement also contemplates, but does not require, the
potential development of a parcel of land in Milan which is owned by Fiat's
Maserati subsidiary which Maserati had used to manufacture Maserati and
Innocenti automobiles. O.A.M. will be entitled to receive up to a 5.25%
equity interest in the development company Fiat will form if certain
conditions are met, including the realization by the development company of
proceeds upon a sale of the parcel
17
<PAGE>
in excess of its approximate Lit. 109,800,000,000 ($67,694,205) Maserati
book value. Nothing in the agreement either requires Fiat to sell or
otherwise develop the parcel or limits in any way the price at which the
parcel could be sold. No assurance can be given that O.A.M. will receive
any additional compensation relating to the development of the land and no
amounts have been recorded on the financial statements of the Company
therefor.
The sale of Maserati produced a gain of Lit. 183,118,000,000
($112,896,424) in fiscal 1993, net of minority interests, which solely
accounted for the Company's 1993 net income of Lit. 153,497,000,000
($94,634,402). Maserati operations prior to the Fiat sale produced a net
loss in 1993 of Lit. 22,885,000,000 ($14,109,125), compared to the net loss
of Lit. 88,176,000,000 ($54,362,515) for the 1992 fiscal year, exclusive of
a tax credit.
Liquidity and Capital Resources
-------------------------------
Management anticipates that projected increases in production
and sales at G.B.M. will require approximately $2,500,000 in additional
capital to support operations. Management expects to fund such capital
requirements from available cash at its other subsidiaries.
At December 31, 1994, the Company had working capital of Lit.
40,819,000,000 ($25,165,844). Additionally, the Company has Lit.
14,759,000,000 ($9,099,260) of investments in long term bonds of which all
but Lit. 5,000,000 ($3,082,614) can be readily sold in established markets
if necessary.
In addition to certain trade facilities available to finance
import/expert trade, the Company has various line of credit arrangements
with a number of Italian banks under which they may borrow up to Lit.
23,934,000,000 ($14,755,856) of which Lit. 8,150,000,000 ($5,024,661) was
unused at December 31, 1994.
G.B.M. was past due at December 31, 1994 in payment of
installments on a loan having an unpaid principal balance on such date of
Lit. 4,151,000,000 ($2,559,186) and bearing interest at 11.5%. The Company
and the lender are in an advanced stage of discussions for the full
refinancing of the loan, which is expected to be completed within a matter
of weeks. The lender has informally agreed to forebear from taking any
action with respect to the default in the interim. The Company's American
Finance, S.p.A. subsidiary was past due at December 31, 1993 on a loan
having an unpaid principal balance on such date of Lit. 796,000,000
($490,752) bearing interest at 5.15%; such loan was repaid in full in
March, 1995 from funds made available from another subsidiary of the
Company.
18
<PAGE>
Transaction with Finprogetti
----------------------------
In February 1994, the Board of Directors resolved to examine a
variety of actions which could be taken to accommodate the strongly
expressed sentiments of some of the Company's shareholders that the public
shareholders be "cashed out" of their equity positions at a price
reflecting the fair market value of the Company's consolidated assets. To
that end, the Board of Directors undertook a number of actions:
The Board of Directors explored transactions with G.B.M., involving
possible joint ventures, sale or the refinancing of that subsidiary's
operations. Efforts to identify a relationship which would fully reflect
the Company's inherent value, were unsuccessful. Finprogetti, S.p.A. was
then retained to provide temporary management for G.B.M. The spare parts
inventory of MAI was sold at the end of 1994 and liquidation of its
remaining assets is in progress. The Board also retained a major
international firm of evaluators to determine the value of the Company
prior to the Maserati sale and on a current basis. Contemporaneously with
the presentation by the evaluators of their report to the Board of
Directors, Finprogetti, S.p.A. presented an offer to the Board in which the
Company would effectively acquire the Italian real estate assets of
Finprogetti (estimated to have a value of Lit. 35,000,000,000), and its TIM
unit in exchange for newly issued shares of the Company's common stock at
the price of Lit. 20,106.73 per share. Finprogetti would also invest, or
cause others to invest, an additional Lit. 15,000,000,000 in newly issued
common stock at such price. The Company has reached an agreement-in-
principle with Finprogetti consistent with its offer; the parties are
nearing completion of a formal agreement and are engaged in mutual due
diligence efforts.
Assuming the consummation of the transaction with Finprogetti, the
Company plans to continue to build on the growth at G.B.M., to complete the
winding up of the Company's non-performing Italian assets, and to seek new
opportunities in which the "turn around" management skills of TIM can be
employed profitably for the Company's benefit through its management of
other troubled companies and through the investment opportunities such
companies may present.
Expecting that a definitive agreement with Finprogetti will have been
reached and executed by that time, the Board, at the next annual meeting of
shareholders, currently planned for July, 1995, will ask shareholders to
ratify the May 17, 1993 sale of Maserati to Fiat and will offer to
shareholders who dissent from the ratification vote the opportunity to
obtain the fair market value of their shares as of the date immediately
prior to the Maserati sale. The Company's Board of Directors, including
Sig. Alejandro DeTomaso, the controlling shareholder of the Company,
ratified O.A.M.'s sale in 1993.
Additionally, the Company, subject to completing the Finprogetti
transaction plans to offer to purchase up to 80% of the shares of those
shareholders who vote to ratify the Maserati sale, at the same Lit.
20,106.73 price to be paid by Finprogetti and as determined by the asset
valuation. This Annual Report shall not be construed as such an offer,
nor as a solicitation of
19
<PAGE>
proxies to ratify the Maserati sale. Any such offer, and any such
solicitation, shall only be made by and pursuant to materials complying
with applicable federal law.
Impact of Inflation
-------------------
Management does not believe that inflation or price increases
charged by Moto Guzzi for its products had a material effect on 1994, 1993
or 1992 net sales, revenues or income. Rather, competition from third
parties selling products with better market acceptance is believed to
account for lower unit sales in all three years. Management believes that
market response to the Company's products is by far the most significant
factor impacting sales, revenues and income. Currency exchange rates have
a measurable effect on the prices paid by G.B.M. for imported raw
materials, and on the prices charged for its finished goods. In recent
years, the Italian lire has declined in value relative to the currencies of
its trading partners. While this has increased the effective cost of raw
materials to G.B.M., which G.B.M. has passed through in the price of its
motorcycles, it has lowered the effective cost of those goods to purchasers
in foreign markets.
20
<PAGE>
ICW
Annual Report on Form 10-K
Item 8, Item 14(a)(1) and (2) and Item 14(d)
List of Financial Statements and Financial Statement Schedule
Financial Statements, Financial Statement Schedules and
Supplementary Data
Year Ended December 31, 1994
De Tomaso Industries, Inc.
Red Bank, New Jersey
21
<PAGE>
Form 10-K--Item 14(a)(1) and (2)
De Tomaso Industries, Inc. and Subsidiaries
List of Financial Statements and Financial Statement Schedule
The following consolidated financial statements of De Tomaso Industries, Inc.
and subsidiaries are included in Item 8:
Consolidated Balance Sheets--December 31, 1994 and 1993 ....................F- 2
Consolidated Statements of Operations--Years Ended
December 31, 1994, 1993 and 1992 ...........................................F- 4
Consolidated Statements of Shareholders' Equity--Years
Ended December 31, 1994, 1993 and 1992 .....................................F- 5
Consolidated Statements of Cash Flows--Years Ended
December 31, 1994, 1993 and 1992 ...........................................F- 6
Notes to Consolidated Financial Statements--
December 31, 1994 .........................................................F- 7
The following consolidated financial statement schedule of De Tomaso
Industries, Inc. and subsidiaries is included in Item 14(d):
Schedule II--Valuation and Qualifying Accounts .............................F-19
All other schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission are not required under
the related instructions or are inapplicable, and therefore have been omitted.
22
<PAGE>
Report of Independent Auditors
Shareholders and Board of Directors
De Tomaso Industries, Inc.
We have audited the consolidated balance sheets of De Tomaso Industries,
Inc. and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of operations, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1994, all
expressed in Italian lire. Our audits also included the financial statement
schedule listed in the Index at Item 14(a). These financial statements
and schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule 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 and
related schedule 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 De Tomaso Industries, Inc. and subsidiaries at December 31, 1994
and 1993, and the consolidated results of its operations and its cash flows
for each of the three years in the period ended December 31, 1994 in
conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
As explained in Note B, the Company has concluded that its primary financial
statements should be shown in Italian lire. The accompanying financial
statements, expressed in U.S. dollar equivalents, have been prepared for
the convenience of the readers of the financial statements, and have been
translated at the rate of exchange prevailing at December 31, 1994. We have
reviewed this translation, and in our opinion, the 1994 financial statements
expressed in Italian lire have been translated into U.S. dollars on the basis
described in Note B to the financial statements.
ERNST & YOUNG LLP
March 31, 1995
F-1
23
<PAGE>
De Tomaso Industries, Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December December 31,
31, 1994 1994 1993
----------------------------------------------
(In Thousands (In Millions of
of Dollars) Italian Lire)
<S> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 3,259 Lit 5,286 Lit 2,662
Marketable securities 3,083 5,000 4,901
Receivables:
Trade, less allowances of $352 (Lit571 in
1994 and Lit588 in 1993) 8,888 14,416 13,296
Receivables from a related party and
affiliated companies 938 1,521 2,424
Installment receivable from
sale of subsidiary 16,646 27,000 25,250
Other, principally value added and other
taxes due from the Italian Government 9,627 15,614 15,288
Inventories:
Raw materials, spare parts and
work-in-process 10,856 17,609 18,329
Finished products 1,581 2,565 3,023
----------------------------------------------
12,437 20,174 21,352
Prepaid expenses 815 1,322 776
----------------------------------------------
Total current assets 55,693 90,333 85,949
Property, Plant and Equipment, substantially
pledged:
Land 692 1,123 1,149
Buildings 6,379 10,346 10,500
Machinery and equipment 18,366 29,790 29,621
----------------------------------------------
25,437 41,259 41,270
Less allowances for depreciation (17,451) (28,305) (27,351)
----------------------------------------------
7,986 12,954 13,919
Investments 9,099 14,759 291
Investments in unconsolidated companies 160 259 305
Other assets 218 356 27,092
----------------------------------------------
$73,156 Lit118,661 Lit127,556
==============================================
</TABLE>
F-2
24
<PAGE>
De Tomaso Industries, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
<TABLE>
<CAPTION>
December December 31,
31, 1994 1994 1993
-------------------------------------------
(In Thousands (In Millions of
of Dollars) Italian Lire )
<S> <C> <C> <C>
Liabilities and Shareholders' Equity
Current liabilities:
Advances from banks $ 9,731 Lit 15,784 Lit 22,995
Accounts payable 7,915 12,838 9,441
Accrued expenses 9,356 15,176 16,403
Payables to affiliates and related parties 22 35 213
Current portion of long-term debt 3,502 5,681 6,601
----------------------------------------------
Total current liabilities 30,526 49,514 55,653
Long-term debt, less current portion 3,085 5,004 5,738
Deferred severance pay 4,400 7,137 7,245
Minority interest 8,538 13,849 13,039
Shareholders' equity:
Voting preferred stock, convertible share
for share into common stock par value,
$2.50 per share:
Authorized 2,000,000 shares; 1,000,000
shares issued and outstanding 896 1,453 1,453
Common stock, par value $2.50 per share:
Authorized 10,000,000 shares; 2,057,446
shares issued and outstanding 1,842 2,988 2,988
Additional paid-in capital 29,311 47,543 47,543
Deficit (5,515) (8,946) (5,669)
Equity adjustment from translation 73 119 (434)
----------------------------------------------
26,607 43,157 45,881
----------------------------------------------
$73,156 Lit118,661 Lit127,556
==============================================
</TABLE>
See notes to consolidated financial statements.
F-3
25
<PAGE>
De Tomaso Industries, Inc. and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year ended
December Year ended December 31
31, 1994 1994 1993 1992
------------------------------------------------------------------------------
(In Thousands of (In Millions of Italian Lire
Dollars Except Per Except Per Share Amounts)
Share Amounts)
<S> <C> <C> <C> <C>
Net sales $ 32,055 Lit 51,994 Lit 41,919 Lit 45,346
Cost of products sold 28,518 46,256 36,060 39,361
------------------------------------------------------------------------------
3,537 5,738 5,859 5,985
Selling, general and
administrative expenses 6,670 10,818 12,439 11,156
------------------------------------------------------------------------------
(3,133) (5,080) (6,580) (5,171)
Interest expense (2,388) (3,874) (8,033) (5,242)
Interest income
3,413 5,536 6,772 4,176
Other income 610 990 1,117 2,316
------------------------------------------------------------------------------
Loss from continuing
operations before
income taxes, minority interest
and extraordinary item (1,498) (2,428) (6,724) (3,921)
Income taxes 24 39 12 46
------------------------------------------------------------------------------
Loss from continuing operations
before minority interest and
extraordinary item (1,522) (2,467) (6,736) (3,967)
Minority interest 499 810 - -
------------------------------------------------------------------------------
Loss from continuing operations
before extraordinary item (2,021) (3,277) (6,736) (3,967)
Discontinued operations:
Loss from operations (net of
income tax benefits of
Lit4, 118 in 1992) (22,885) (84,058)
Gain on disposal (net of
minority interest of
Lit 13,049) 183,118 -
------------------------------------------------------------------------------
Income (loss) from discontinued
operations - - 160,233 (84,058)
Extraordinary item:
Gain on early extinguishment of
debt - - - 12,041
------------------------------------------------------------------------------
Net income (loss) $ (2,021) Lit (3,277) Lit153,497 Lit (75,984)
==============================================================================
Loss from continuing operations
per share before
extraordinary item $ (0.98) Lit (1,593) Lit (2,203) Lit (1,928)
Discontinued operations $ - - Lit 52,407 Lit (40,855)
Extraordinary item _ - - Lit 5,852
------------------------------------------------------------------------------
Net income (loss) per share $ (0.98) Lit (1,593) Lit 50,204 Lit (36,931)
==============================================================================
Average number of common shares
and dilutive common equivalent
shares outstanding during the
year 2,057,446 2,057,446 3,057,446 2,057,446
==============================================================================
</TABLE>
See notes to consolidated financial statements.
F-4
26
<PAGE>
De Tomaso Industries, Inc. and Subsidiaries
Consolidated Statements of Shareholders' Equity
<TABLE>
<CAPTION>
Equity
Voting Additional Retained Adjustment
Preferred Common Paid-In Earnings from
Stock Stock Capital (Deficit) Translation Total
------------------------------------------------------------------------------------------------
(In Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1994 $ 896 $1,842 $29,311 $ (3,494) $ (268) $28,287
Net loss for the year (2,021) (2,021)
Translation adjustment 341 341
------------------------------------------------------------------------------------------------
Balance at December 31, 1994 $ 896 $1,842 $29,311 $ (5,515) $ 73 $26,607
================================================================================================
<CAPTION>
(In Millions of Italian Lire)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1992 Lit1,453 Lit 2,988 Lit47,543 Lit (83,182) Lit 2,601 Lit (28,597)
Net loss for the year (75,984) (75,984)
Translation adjustment (1,906) (1,906)
------------------------------------------------------------------------------------------------
Balance at December 31, 1992 1,453 2,988 47,543 (159,166) 695 (106,487)
Net income for the year 153,497 153,497
Translation adjustment (1,129) (1,129)
------------------------------------------------------------------------------------------------
Balance at December 31, 1993 1,453 2,988 47,543 (5,669) (434) 45,881
Net loss for the year (3,277) (3,277)
Translation adjustment 553 553
------------------------------------------------------------------------------------------------
Balance at December 31, 1994 Lit1,453 Lit 2,988 Lit47,543 Lit (8,946) Lit 119 Lit 43,157
================================================================================================
</TABLE>
See notes to consolidated financial statements.
F-5
27
<PAGE>
De Tomaso Industries, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended
December Year ended December 31
31, 1994 1994 1993 1992
--------------------------------------------------------------------
(In Thousands (In Millions of Italian Lire)
of Dollars)
<S> <C> <C> <C> <C>
Operating activities
Net income (loss) $ (2,021) Lit (3,277) Lit 153,497 Lit(75,984)
Adjustments to reconcile net income (loss) to
net cash (used in) operating activities:
Depreciation of property, plant and equipment 1,176 1,907 5,886 12,220
Gain on sales of operating assets (1,752) (2,841) - 1,302
Gain on early extinguishment of debt ~ - - - (12,041)
Minority interests in net income 499 810 13,039 -
Gain on sale of stock of subsidiary - - (196,157) -
Provision for deferred severance pay 633 1,027 1,058 5,472
Payments of deferred severance (699) (1,135) (561) (6,093)
Provision for inventory obsolescence 412 669 1,261 4,732
Other operating activities 933 1,512 (1,067) 1,316
Changes in operating assets and liabilities:
Trade and other receivables (680) (1,103) 781 16,006
Related party and affiliated company
receivables 557 903 4,689 10,485
Inventories 314 509 (8,314) 8,357
Prepaid expenses (337) (546) (667) (441)
Accounts payable and accrued expenses 1,339 2,170 (4,591) (5,418)
Income taxes payable - - - (4,963)
Related party and affiliated company
payables (110) (178) 64 4,712
--------------------------------------------------------------------
Net cash provided by (used in) operating
activities 264 427 (31,082) (41,640)
Investing activities
Increase in investments (8,920) (14,468) - -
Proceeds from disposals of operating assets 1,795 2,911 - -
Purchases of property, plant and equipment (697) (1,131) (1,369) (18,005)
Proceeds from sale of subsidiary stock 14,642 23,750 -
--------------------------------------------------------------------
Net cash provided by (used in) investing
activities 6,820 11,062 (1,369) (18,005)
Financing activities
Increase (decrease) in advances from banks (4,446) (7,211) 5,192 20,825
Proceeds from increase in long-term debt - - - 20,000
Proceeds from Fiat advances - - 28,500 61,000
Principal payments of long-term debt (1,020) (1,654) (2,028) (47,033)
--------------------------------------------------------------------
Net cash provided by (used in) financing
activities (5,466) (8,865) 31,664 54,792
--------------------------------------------------------------------
Increase (decrease) in cash and cash
equivalents 1,618 2,624 (787) (4,853)
Cash and cash equivalents at beginning of
year 1,641 2,662 3,449 8,302
--------------------------------------------------------------------
Cash and cash equivalents at end of year $ 3,259 Lit 5,286 Lit 2,662 Lit 3,449
====================================================================
</TABLE>
See notes to consolidated financial statements.
F-6
28
<PAGE>
De Tomaso Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1994
A. Summary of Significant Accounting Policies
1. Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its majority owned subsidiaries. Significant intercompany accounts and
transactions have been eliminated upon consolidation.
2. Cash Equivalents
Cash equivalents include short-term investments with a maturity of three months
or less at date of purchase.
3. Inventories
Inventories are stated at the lower of cost or market with cost being
determined by the last in, first out (LIFO) method. Valuation reserves
included in the inventory balances were Lit5,451,000,000 ($3,361,000) and
Lit7,144,000,000 as of December 31, 1994 and 1993, respectively. If inventories
had been determined by the lower of cost or market using the first in, first
out method, which approximates current cost, inventories would have been
greater by Lit4,599,000,000 ($2,835,000) and Lit4,944,000,000 at
December 31, 1994 and 1993, respectively.
4. Property, Plant and Equipment
Property, plant and equipment are recorded at cost. The carrying value is
reviewed when indicators of impairment are present by evaluating future cash
flows of those assets to determine if impairment exists. Depreciation of
plant and equipment is provided on the straight-line method over their
estimated useful lives.
5. Interest Expense
Interest expense incurred during the construction of manufacturing facilities
is capitalized as part of the cost of those assets. No interest was
capitalized in 1994, 1993 or 1992. Interest paid was Lit4,051,000,000
($2,498,000), Lit14,379,000,000 and Lit18,803,000,000 in 1994, 1993 and 1992,
respectively.
F-7
29
<PAGE>
De Tomaso Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
A. Summary of Significant Accounting Policies (continued)
6. Marketable Securities and Investments
Marketable securities and investments consist primarily of fixed income
investments which can be readily sold using established markets. Such
securities are carried at market which approximates cost at December 31, 1994.
Investments at December 31, 1994 consists primarily of bank bonds of
Lit9,760,000,000 ($6,017,000) due 2004 and long-term Italian government bonds
of approximately Lit5,000,000,000 ($3,083,000) due in 1998 which cannot be
traded. This investment is carried at cost.
7. Deferred Foreign Severance Pay
All employees of the Company's Italian subsidiaries are entitled to receive
severance pay in accordance with the terms of applicable national labor
contracts. The liability for severance pay is based on the individual
employee's length of service and latest level of compensation. The Company
has no obligations for postretirement or postemployment benefits to which
Statements of Financial Accounting Standards No. 106 "Employers' Accounting
for Post Retirement Benefits Other Than Pensions" and No. 112 "Employers'
Accounting for Postemployment Benefits" will apply.
8. Net Income (Loss) Per Common Share
Net income (loss) per common share is based on the average number of shares of
common stock and dilutive common stock equivalents outstanding during the years.
Convertible preferred shares of the Company are considered to be common stock
equivalents. These common stock equivalents were considered anti-dilutive for
1994 and 1992.
B. Basis of Translation to U.S. Dollar Equivalents and Foreign Currency
Translation
The primary financial statements are 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 conducted in lire. In
addition, trends developed in reporting financial information should be more
informative if they are presented in the currency in which the transactions
have occurred.
F-8
30
<PAGE>
De Tomaso Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
B. Basis of Translation to U.S. Dollar Equivalents and
Foreign Currency Translation (continued)
The accompanying financial statements, expressed in Italian lire, have been
translated into U.S. dollar equivalents at the rate of exchange prevailing at
December 31, 1994 of Lit1,622. The U.S. dollar equivalent amounts are included
solely for the convenience of the readers of the financial statements. 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.
The financial statements of U.S. entities have been translated to Italian lire
in accordance with FASB Statement No. 52, "Foreign Currency Translation."
Under that Statement, all balance sheet accounts are translated at the current
exchange rate and operations statement items are translated at the average
exchange rate for the year; resulting translation adjustments are made
directly to a separate component of shareholders' equity. Certain other
translation adjustments continue to be reported in operations.
C. Changes in Investments of Significant Subsidiary
On May 17, 1993, the Company sold its remaining 51% equity interest in Maserati
S.p.A. ("Maserati") to Fiat Auto S.p.A. ("Fiat") for approximately
Lit75,750,000,000 which resulted in a gain of Lit196,157,000,000. The purchase
price was paid in installments with the first installment of Lit23,500,000,000
offset against previous advances by Fiat to a subsidiary of the Company, paid
at closing, Lit23,750,000,000 paid January 1, 1994, Lit1,500,000,000 of
advances from Fiat offset effective January 1, 1994 and the balance of
Lit27,000,000,000 ($16,646,000) paid on January 1, 1995. Fiat paid interest
to the Company on all amounts due except the final installment. Accordingly,
interest was imputed on this receivable at a rate of 11%.
In accordance with APB Opinion No. 30, the disposal of this segment has been
accounted for as a discontinued operation and, accordingly, its operating
results are segregated and reported as a discontinued operation in the
accompanying Consolidated Statements of Operations.
F-9
31
<PAGE>
De Tomaso Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
C. Changes in Investments of Significant Subsidiary (continued)
A condensed summary of operations for the discontinued operation is as follows:
1993 1992
-----------------------------
(In Millions of Italian Lire)
Net sales Lit 21,937 Lit103,192
Net loss from operations Lit(22,885) Lit(84,058)
D. Receivable from Related Party and Affiliated Companies
1994 1994 1993
------------------------------------------
(In Thousands (In Millions of
of Dollars) Italian Lire)
A+G Motorod GmbH $ 928 Lit 1,506 Lit 1,932
De Tomaso Modena S.p.A. - - 201
Other 10 15 291
------------------------------------------
$ 938 Lit 1,521 Lit 2,424
==========================================
The amounts due from A+G Motorod GmbH, a 45% owned entity accounted for under
the equity method, resulted from the purchase of products and services from the
Company. Sales to A+G Motorod GmbH, consisting primarily of motorcycles and
parts, were Lit4,736,000,000 ($2,920,000), Lit5,169,000,000 and
Lit5,116,000,000 in 1994, 1993 and 1992.
E. Credit Arrangements
Under line of credit arrangements with a number of Italian banks, the Company
may borrow up to Lit23,934,000,000 ($14,756,000) of which Lit8,150,000,000
($5,025,000) was unused at December 31, 1994. The line of credit arrangements
do not have termination dates but are periodically reviewed. The weighted
average interest rate on advances from banks was 12.9% and 13.0% at
December 31, 1994 and 1993, respectively. In addition, the Company has trade
facilities available to finance import/export trade (see also Note G).
F-10
32
<PAGE>
De Tomaso Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
F. Accrued Expenses
Accrued expenses comprised the following:
<TABLE>
<CAPTION>
1994 1994 1993
---------------------------------------------
(In Thousands (In Millions of
of Dollars) Italian Lire)
<S> <C> <C> <C>
Salaries, wages and related items $ 2,908 Lit 4,717 Lit 5,788
Accrued interest 640 1,038 1,215
Accrued litigation and claim costs 1,970 3,195 3,195
Other accrued expenses 3,838 6,226 6,205
---------------------------------------------
$ 9,356 Lit15,176 Lit16,403
=============================================
</TABLE>
G. Payables to Affiliates and Related Parties
<TABLE>
<CAPTION>
1994 1994 1993
----------------------------------------------
(In Thousands (In Millions of
of Dollars) Italian Lire)
<S> <C> <C> <C>
Payable to De Tomaso Modena S.p.A. $16 Lit26 Lit 12
Payable to Canalgrande S.p.A. 6 9 200
Other - - 1
----------------------------------------------
$22 Lit35 Lit 213
==============================================
</TABLE>
The payable to De Tomaso Modena S.p.A. and Canalgrande S.p.A., companies owned
and controlled by the Chairman of the Board, resulted from services provided
to the Company.
F-11
~ 33
<PAGE>
De Tomaso Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
H. Long-Term Debt
<TABLE>
<CAPTION>
1994 1994 1993
----------------------------------------
(In Thousands (In Millions of
of Dollars) Italian Lire)
<S> <C> <C> <C>
Mortgage note payable, collateralized by
substantially all property, plant and
equipment of the Italian subsidiaries:
10.08%--payable in annual installments,
including interest beginning in 1992,
final installment due in 2001 $ 2,007 Lit 3,255 Lit 3,566
Unsecured notes payable:
11.5%--payable in semiannual installments,
including interest, (1) 2,559 4,151 4,568
12.4%--payable in semiannual installments
beginning in 1990, including interest,
final installment due in 1999 1,506 2,443 2,789
8.1%--payable in semiannual installments,
including interest, final installment due in 1991 - - 452
Note payable--denominated in Swiss Francs with
interest at 5.15% payable in two equal annual
installments due in 1989 and 1990 (1) 491 796 796
Mortgage note payable--denominated in U.S. dollars and
collateralized by substantially all property, plant and
equipment of the Company's United States subsidiary,
interest at 65% of the lender's prime interest rate - - 125
Sundry notes payable 24 40 43
----------------------------------------
6,587 10,685 12,339
Less current potion 3,502 5,681 6,601
----------------------------------------
$ 3,085 Lit 5,004 Lit 5,738
========================================
</TABLE>
(1)--At December 31, 1994, the Company was past due on current installments and
under the terms of the loan agreement, the loan is in default and has been
classified as a current liability.
In accordance with agreements reached with one of its lenders, the Company
retired an aggregate of Lit39,428,000,000 in 1992 of long-term notes and
accrued interest for cash resulting in gains of Lit12,041,000,000.
F-12
34
<PAGE>
De Tomaso Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
H. Long-Term Debt (continued)
The principal maturities of long-term debt included above during each of the
next five years are:
Thousands of Millions of
Dollars Italian Lire
------------------------------------
1995 $ 3,502 Lit 5,681
1996 503 816
1997 560 908
1998 619 1,004
1999 686 1,113
Subsequent to 1999 717 1,163
------------------------------------
$ 6,587 Lit10,685
====================================
I. Research and Development Expense
The Company incurred research and development expense for continuing operations
of Lit197,000,000 ($121,000) in 1994, Lit409,000,000 in 1993 and
Lit220,000,000 in 1992. Such amounts were charged to cost of products sold as
incurred.
J. Income Taxes
Loss from continuing operations before income taxes, minority interest and
extraordinary item consisted of the following:
<TABLE>
<CAPTION>
1994 1994 1993 1992
--------------------------------------------------------------
(In Thousands (In Millions of Italian Lire)
of Dollars)
<S> <C> <C> <C> <C>
United States $ (255) Lit (413) Lit(1,650) Lit (501)
Italy (1,243) (2,015) (5,074) (3,420)
--------------------------------------------------------------
$(1,498) Lit(2,428) Lit(6,724) Lit(3,921)
==============================================================
</TABLE>
F-13
35
<PAGE>
De Tomaso Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
J. Income Taxes (continued)
The provision for income taxes from continuing operations consisted of the
following:
<TABLE>
<CAPTION>
1994 1994 1993 1992
-----------------------------------------------
(In Thousands (In Millions of Italian Lire)
of Dollars)
<S> <C> <C> <C> <C>
Current
Italian $24 Lit39 Lit12 Lit46
-----------------------------------------------
$24 Lit39 Lit12 Lit46
===============================================
</TABLE>
The Company adopted FASB Statement No. 109, "Accounting for Income Taxes"
effective January 1, 1993. The principal effect of the adoption of FASB
Statement No. 109 is that utilization of the net operating loss carryforwards
is reflected as a reduction of the tax provision rather than an extraordinary
item.
Under Statement 109, the liability method is used in accounting for income
taxes. Under this method, deferred tax assets and liabilities are determined
based on differences between financial reporting and tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will
be in effect when the differences are expected to reverse. Prior to the
adoption of Statement 109, income tax expense was determined using the
deferred method. Deferred tax expense was based on items of income and expense
that were reported in different years in the financial statements and tax
returns and were measured at the tax rate in effect in the year the difference
originated.
F-14
36
<PAGE>
De Tomaso Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
J. Income Taxes (continued)
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 are as follows:
<TABLE>
<CAPTION>
1994 1994 1993
-----------------------------------------------
(In Thousands (In Millions of
of Dollars) Italian Lire )
-----------------------------------------------
<S> <C> <C> <C>
Expenses not currently deductible $ 5,193 Lit 6,574 Lit 6,263
Net operating loss carryforwards 13,257 21,503 27,743
-----------------------------------------------
Total deferred tax assets 18,450 28,077 34,006
Valuation allowance for deferred tax assets (18,450) (28,077) (34,006)
-----------------------------------------------
Net deferred tax assets $ - Lit - Lit -
===============================================
</TABLE>
The provision for income taxes from continuing operations varied from income
taxes computed at the statutory U.S. federal income tax rate as follows:
<TABLE>
<CAPTION>
1994 1994 1993 1992
--------------------------------------------------------------
(In Thousands (In Millions of Italian Lire)
of Dollars)
<S> <C> <C> <C> <C>
Computed tax (credit) at U.S.
federal statutory rate $ (524) Lit(850) Lit(2,353) Lit(1,333)
Increases (decreases):
Losses for which valuation
allowance has been
provided 548 889 2,341 1,379
--------------------------------------------------------------
$ 24 Lit 39 Lit 12 Lit 46
==============================================================
</TABLE>
F-15
37
<PAGE>
De Tomaso Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
J. Income Taxes (continued)
At December 31, 1994, the Company has a net operating loss carryforward for
Italian income tax purposes of approximately Lit34,373,000,000 ($21,192,000)
which expires as follows:
In Millions of In Thousands
Italian Lire of Dollars
------------------------------
1995 Lit 13,621 $ 8,398
1996 271 167
1997 2,706 1,668
1998 15,136 9,332
1999 2,639 1,627
For U.S. federal income tax purposes, the Company has net operating loss
carryforwards of approximately $5,667,000 at December 31, 1994, which expire
in 2003 ($1,588,000), 2005 ($1,949,000), 2006 ($570,000), 2007 ($1,304,000)
and 2008 ($256,000).
United States income taxes have not been provided on unremitted earnings of
subsidiaries located outside the United States as such earnings are considered
to be permanently reinvested.
Taxes paid were Lit40,000,000 ($25,000) in 1994. No taxes were paid in 1993
and 1992.
K. Related Party Transactions
<TABLE>
<CAPTION>
1994 1994 1993 1992
-----------------------------------------------------
(In Thousands (In Millions of Italian Lire)
of Dollars)
<S> <C> <C> <C> <C>
Companies with which the
President of the Company is
associated:
Sales of materials and services Lit 37
Purchases, services and other
expenses $124 Lit201 241 Lit1,762
</TABLE>
F-16
38
<PAGE>
De Tomaso Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
K. Related Party Transactions (continued)
In addition, see Notes D and G to the consolidated financial statements for
other transactions with the President and companies controlled by him.
L. Other Income
Other income from continuing operations comprised the following:
<TABLE>
<CAPTION>
1994 1994 1993 1992
--------------------------------------------------------------
(In Thousands (In Millions of Italian Lire)
of Dollars)
<S> <C> <C> <C> <C>
Currency exchange gain (loss) $ (368) Lit (597) Lit 786 Lit 721
Gain on sales of assets 1,752 2,841 - -
Other (774) (1,254) 331 1,595
--------------------------------------------------------------
$ 610 Lit 990 Lit 1,117 Lit 2,316
==============================================================
</TABLE>
M. Company's Industry and Export Sales
The Company is engaged in principally one segment of business which is the
manufacture and sale of motorcycles. Customers are principally retail
motorcycle dealers in Western Europe. Sales to dealers outside Italy are
guaranteed by letters of credit. The Company retains title on sales in Italy
until sold by dealers to the final customer at which time the sale is
recognized (see also Note C).
The Company's export sales from continuing operations outside of Italy
(principally Europe) were Lit23,172,000,000 ($14,286,000), Lit25,976,000,000
and Lit29,826,000,000 in 1994, 1993 and 1992, respectively.
N. Capital Stock
Holders of preferred stock are entitled to three votes for each share held.
O. Commitments
Total rent expense for continuing operations was Lit204,000,000 ($126,000),
Lit246,000,000 and Lit305,000,000 in 1994, 1993 and 1992, respectively.
F-17
39
<PAGE>
De Tomaso Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements (continued)
P. Proposed Business Combination
On December 28, 1994, the Company announced that it had reached an agreement in
principle to acquire certain assets and subsidiaries of Finprogetti S.p.A., a
Milan-based merchant bank, in exchange for common stock of De Tomaso
Industries Inc. To date, no agreement had been reached as to the terms and
conditions of an acquisition. Consummation of the transaction is also subject
to the parties completing their due diligence investigations.
F-18
40
<PAGE>
<TABLE><CAPTION>
De Tomaso Industries, Inc. and Subsidiaries
Schedule II--Valuation and Qualifying Accounts
- -----------------------------------------------------------------------------------------------------------------------------------
Col. A Col B Col. C Col. D Col. E
- -----------------------------------------------------------------------------------------------------------------------------------
Additions
----------------------------------------
(1) (2)
Balance at Charged to Charged to Balance at
Beginning of Costs and Other Accounts Deductions End of
Description Period expenses Describe Describe Period
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994--expressed
in thousands of U.S. Dollars:
Deducted from asset accounts:
Allowance for doubtful accounts $ 363 $ 56 $ (67)(1) $ 352
Inventory obsolescence reserve 4,405 412 (1,456)(1) 3,361
-------------------------------------------------------------------------------------
$4,768 $468 $ (1,523) $3,713
=================================== ==============================
Product warranty liability $ 159 $ 57 $ (88)(2) $ 128
=================================== ==============================
Year ended December 31, 1994--expressed
in millions of Italian Lire:
Deducted from asset accounts:
Allowance for doubtful accounts Lit 588 Lit 91 Lit (108)(1) Lit 571
Inventory obsolescence reserve 7,144 669 (2,362)(1) 5,451
----------------------------------- ------------------------------
Lit 7,732 Lit 760 Lit (2,470) Lit 6,022
=================================== ==============================
Product warranty liability Lit 257 Lit 93 Lit (143)(2) Lit 207
=================================== ==============================
</TABLE>
(1)--Amounts written off.
(2)--Product warranty costs incurred.
F-19
41
<PAGE>
<TABLE><CAPTION>
De Tomaso Industries, Inc. and Subsidiaries
Schedule II--Valuation and Qualifying Accounts (continued)
- -----------------------------------------------------------------------------------------------------------------------------------
Col. A Col B Col. C Col. D Col. E
- -----------------------------------------------------------------------------------------------------------------------------------
Additions
----------------------------------------
(1) (2)
Balance at Charged to Charged to Balance at
Beginning of Costs and Other Accounts Deductions End of
Description Period expenses Describe Describe Period
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1993--expressed
in millions of Italian Lire:
Deducted from asset accounts:
Allowance for doubtful accounts Lit 1,526 Lit 81 Lit (149)(1) Lit 588
(870)(5)
Inventory obsolescence reserve 25,558 1,261 (890)(1) 7,144
(18,785)(5)
----------------------------------- ------------------------------
Lit 27,084 Lit 1,342 Lit (20,694) Lit 7,732
=================================== ==============================
Product warranty liability Lit 2,118 Lit (831)(1) Lit 257
============= =========
185 (3)
(260)(4)
Lit (955)(5)
====================
Year ended December 31, 1992--expressed
in millions of Italian Lire:
Deducted from asset accounts:
Allowance for doubtful accounts Lit 1,477 Lit 49 Lit 1,526
Inventory obsolescence reserve 21,356 4,732 Lit (530)(1) 25,558
----------------------------------- ------------------------------
Lit 22,833 Lit 4,781 Lit (530) Lit27,084
=================================== ==============================
Product warranty liability Lit 2,791 Lit 1,435 Lit (2,108)(2) Lit 2,118
=================================== ==============================
</TABLE>
(1)--Amounts written off. (4)--Payments.
(2)--Product warranty costs incurred. (5)---Sale of business.
(3)--Translation effect.
F-20
42
<PAGE>
Item 9. Changes in and Disagreements with Accountants
- ------- in Accounting and Financial Disclosure
---------------------------------------------
None.
43
<PAGE>
PART III
Information required to be included in Part III will be filed by
amendment to this Annual Report on Form 10K within 120 days of the end of
the Company's fiscal year.
44
<PAGE>
PART IV
INDEX TO EXHIBITS
-----------------
Page Number
-----------
3(a) Restated Articles of Incorporation of
Registrant (filed as Exhibit 3(a) to
Registrant's 1981 Annual Report on Form 10-K
and incorporated herein by reference).
3(b) By-laws of Registrant (filed as Exhibit 3(b)
to Registrant's 1981 Annual Report on Form
10-K and incorporated herein by reference).
3(c) Articles of Amendment to Articles of
Incorporation filed January 31, 1986 with
Maryland Department of Assessments and Taxa-
tion (filed as Exhibit 3(c) to Registrant's
1985 Annual Report on Form 10-K and
incorporated herein by reference).
3(d) Articles of Incorporation, as amended by the
Articles of Amendment described in 3(c),
above (filed as Exhibit 3(d) to Registrant's
1985 Annual Report on Form 10-K and incorpo-
rated herein by reference).
10(a) Agreement dated May 17,1993 between O.A.M.
S.p.A., Fiat Auto, S.p.A. and other (filed as
Exhibit 10.1 to the Current Report Dated May
17, 1993 filed on Form 8-K).
12. Subsidiaries: Maserati Automobiles
Incorporated, G.B.M. S.p.A., American Finance
S.p.A., O.A.M. S.p.A., Storm S.r.l., Centro
Ricambi S.r.l., Nuova Callegari e Ghighi
S.p.A., Tridentis Financiere, S.A., Newstead,
Ltd.
45
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the
Securities and Exchange Act of 1934, the Registrant has duly caused this
report to be signed on its behalf by the undersigned, thereupon duly
authorized.
April 17, 1995 s/ Santiago DeTomaso
-------------------------
Santiago DeTomaso
President - Director
April 17, 1995 s/ Catherine D. Germano
-------------------------
Catherine D. Germano
Treasurer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the Registrant and in the capacity and on the dates indicated.
April , 1995
-------------------------------------
Alejandro DeTomaso - Director
April 17, 1995 s/ Paolo Donghi
-------------------------------------
Paolo Donghi - Director
April 17, 1995 s/ Roberto Corradi
-------------------------------------
Roberto Corradi - Director
April 17, 1995 s/ Howard E. Chase
-------------------------------------
Howard E. Chase
Vice President - Director
April 17, 1995 s/ Patrick D'Angelo
-------------------------------------
Patrick D'Angelo - Director
April 17, 1995 s/ Mario Tozzi Condivi
-------------------------------------
Mario Tozzi Condivi - Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the audited financial statements dated March 31, 1995 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 3,258,940<F1>
<SECURITIES> 3,082,614<F1>
<RECEIVABLES> 9,239,827<F1>
<ALLOWANCES> 352,035<F1>
<INVENTORY> 12,437,731<F1>
<CURRENT-ASSETS> 55,692,385<F1>
<PP&E> 25,437,115<F1>
<DEPRECIATION> 17,450,678<F1>
<TOTAL-ASSETS> 73,157,213<F1>
<CURRENT-LIABILITIES> 30,526,510<F1>
<BONDS> 3,085,080<F1>
<COMMON> 1,842,170<F1>
0
895,808<F1>
<OTHER-SE> 23,869,297<F1>
<TOTAL-LIABILITY-AND-EQUITY> 73,157,213<F1>
<SALES> 32,055,487<F1>
<TOTAL-REVENUES> 32,055,487<F1>
<CGS> 28,517,879<F1>
<TOTAL-COSTS> 6,669,544<F1>
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,388,409<F1>
<INCOME-PRETAX> (1,996,301)<F1>
<INCOME-TAX> 24,044<F1>
<INCOME-CONTINUING> (2,020,345)<F1>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,020,345)<F1>
<EPS-PRIMARY> (.98)<F1>
<EPS-DILUTED> (.98)<F1>
<FN>
<F1>Dollar amounts are based on conversion rate of 1,622 Lire to the
Dollar which prevailed on December 31, 1994.
</FN>
</TABLE>
