FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter period ended June 30, 1995
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OR
( ) TRANSITION PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
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, 107 Monmouth Street, Red Bank, N. J. 07701
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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 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
--- ---
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 12, 13 or 15(d) of the Securities
Exchange Act of 1934 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; 4,827,466 shares.
<PAGE>
PART I
FINANCIAL INFORMATION
2
<PAGE>
<TABLE><CAPTION>
DE TOMASO INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
6 Months Ended 6 Months Ended June 30, 3 Months Ended 3 Months Ended June 30,
June 30, 1995 1995 1994 June 30, 1995 1995 1994
------------- ---- ---- ------------- ---- ----
(Note C) (In Millions of Italian Lire) (Note C) (In Millions of Italian Lire)
<S> <C> <C> <C> <C> <C> <C>
Net sales $ 18,055,147 Lit 29,466 Lit 23,804 $ 12,019,608 Lit 19,616 Lit 13,440
Cost of products sold 16,523,284 26,966 20,675 9,772,059 15,948 11,607
---------- ------ ------ --------- ------ ------
1,531,863 2,500 3,129 2,247,549 3,668 1,833
Selling, general and admin-
istrative expenses 3,572,304 5,830 4,784 2,129,289 3,475 2,506
--------- ----- ----- --------- ----- ------
(2,040,441) (3,330) (1,655) 118,260 193 (673)
Interest expense (971,201) (1,585) (2,377) (496,936) (811) (1,016)
Interest and other income 1,018,995 1,663 3,481 397,672 649 1,961
--------- ----- ----- ------- --- -----
INCOME (LOSS) BEFORE
MINORITY INTERESTS (1,992,647) (3,252) (551) 18,996 31 272
Minority interest share of income
(158,701) (259) (418) (61,275) (100) (226)
---------- ---------- ---------- ---------- --------- ---------
NET INCOME (LOSS) $(2,151,348) Lit (3,511) Lit (969) $ 42,279 Lit (69) Lit 46
=========== =========== =========== ============ ========= =========
Net income (loss) per share
based on the average number
of common shares and common
equivalent shares outstanding
during the period - Note D
$(1.05) Lit (1,706) Lit (471) $(.02) Lit (34) Lit 15
============= =========== =========== =========== ========= =========
</TABLE>
3
<PAGE>
<TABLE><CAPTION>
DE TOMASO INDUSTRIES, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
June 30, June 30, December 31,
1995 1995 1994
------- -------- ------------
(Note C) (In Millions of Italian Lire)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,799,632 Lit 4,569 Lit 5,286
Marketable securities, at cost 9,288,603 15,159 5,000
Receivables
Trade, Net 6,490,196 10,592 14,416
Other, principally from installment
receivable from sale of subsidiary
and Italian Government 13,006,127 21,226 44,135
Inventories
Raw materials, spare parts and
work-in-process 14,037,990 22,910 17,609
Finished Products 1,689,338 2,757 2,565
Prepaid expenses 115,809 189 1,322
----------- ----------- -------
TOTAL CURRENT ASSETS 47,427,695 77,402 90,333
Property, Plant and Equipment - Net 7,392,157 12,064 12,954
Investments and other Assets 13,812,500 22,542 15,374
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TOTAL ASSETS $68,632,352 Lit 112,008 Lit 118,661
----------- ----------- -----------
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Advances from banks $ 6,459,558 Lit 10,542 15,784
Accounts payable and accrued expenses
17,644,608 28,796 28,014
Sundry payables 139,706 228 35
Current portion of long-term debt 478,554 781 5,681
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TOTAL CURRENT LIABILITIES 24,722,426 40,347 49,514
Long Term Debt 6,569,853 10,722 5,004
Deferred Foreign Severance Pay 4,427,083 7,225 7,137
Minority Interests 8,644,608 14,108 13,849
Shareholders' Equity
Voting Preferred Stock, convertible share for share
into Common Stock, par value $2.50 (Lit 1,453)
per share; authorized 2,000,000 shares; issued
and outstanding 1,000,000 shares 890,319 1,453 1,453
Common Stock, par value $2.50 (Lit 1,453) per share;
authorized 10,000,000 shares issued and outstand-
ing 2,057,446 shares 1,830,882 2,988 2,988
Additional paid-in capital 29,131,740 47,543 47,543
Retained earnings (deficit) (7,632,966) (12,457) (8,946)
Equity adjustment from foreign currency translation - Note C
48,407 79 119
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24,268,382 39,606 43,157
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$68,632,352 Lit 112,008 Lit 118,661
----------- ------- -------
=========== ======= =======
</TABLE>
4
<PAGE>
DE TOMASO INDUSTRIES, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<TABLE><CAPTION>
6 Months Ended 6 Months Ended June 30,
June 30 , 1995 1995 1994*
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(Note C) (In Millions of Italian Lire)
<S> <C> <C> <C>
Operating Activities
Net income (loss) $ (2,151,348) Lit (3,511) Lit (969)
Adjustments to reconcile net income (loss)
to net cash provided by operating
activities (7,389,093) (12,059) 6,975
----------- -------- -----
Net cash provided by (used in) operating
activities (9,540,441) (15,570) 6,006
Investing Activities
Purchase of property, plant and equipment
(765,931) (1,250) (1,060)
Proceeds from sale of subsidiary stock
16,544,118 27,000 23,750
Increase in investments (4,392,157) (7,168) (15,000)
----------- ------- --------
Net cash provided by investing activities 11,386,030 18,582 7,690
Financing Activities
Increase (decrease) in advances from banks
(3,212,010) (5,242) (12,150)
Increase (decrease) in long-term debt 501,225 818 (1,994)
Other 425,858 695
--------- ------ -------
Net cash provided by financing activities (2,284,927) (3,729) (14,144)
Increase (Decrease) in Cash and Cash Equiva-
lents (439,338) (717) (448)
Cash and cash equivalents at beginning
of period 3,238,970 5,286 2,662
--------- ------ ------
Cash and Cash Equivalents at End of Period
$2,799,632 Lit 4,569 Lit 2,2l4
=========== ========= =========
</TABLE>
*Reclassified to conform to 1995 presentation.
5
<PAGE>
DE TOMASO INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
June 30, 1995
NOTE-A--BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and therefore do
not include all information 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 1994 Annual Report on
Form 10-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 (G.B.M., Centro Ricambi, American Finance,
OAM S.p.A., and Hotel Roma) and two United States subsidiaries (Maserati
Automobiles Incorporated and Maserati Automobiles, Inc.) Significant
intercompany accounts and transactions have been eliminated upon consolida-
tion.
NOTE C--CHANGE IN BASIS OF TRANSLATION TO U.S. DOLLAR EQUIVALENTS
The accompanying financial statements, expressed in Italian lire, have been
translated in U.S. dollar equivalents at the rate of exchange prevailing at
June 30, 1995.
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 conducted in lire. Trends developed in reporting
financial information should also be more informative if they are presented
in the currency in which the transaction have occurred.
6
<PAGE>
The financial statements of U.S. entities for the three months ended June
30, 1995 and June 30, 1994 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 quarter; resulting translation adjustments
are made directly to a separate component of stockholders' equity. Certain
other transaction adjustments continue to be reported in operations.
The U.S. dollar equivalent amounts are included solely for the convenience
of the shareholders of De Tomaso Industries, 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--COMPUTATION OF INCOME (LOSS) PER SHARE
Net income for the three months ended June 30, 1994 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 six months ended June 30, 1995 and June 30, 1994
and the three months ended June 30, 1995 is computed only on the number of
common 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.
NOTE E--SUBSEQUENT EVENTS
In July, 1995, the Company completed the acquisition of the principal
assets of Finprogetti S.p.A. in exchange for 2,035,786 of the Company's
common shares valued at $12.26 each and aggregating approximately $25,000,-
000. In a related transaction, certain Finprogetti shareholders purchased
408,008 of the Company's common shares at $12.26 each, aggregating ap-
proximately $5,000,000. Finprogetti is obligated to purchase by September
30, 1995, 338,011 additional common shares for approximately $4,100,000.
Also, in July, 1995, the Company reacquired from a former Officer of the
Company 703,774 common shares at a price of $11.27 per share.
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
----------------------------------------------------------------------
Operations
----------
Three Months Ended June 30, 1995 and June 30, 1994
--------------------------------------------------
Net sales increased approximately 46% to Lit. 19,616,000,000 ($12,019,608)
in the three month period ended June 30, 1995 compared to the second quarter of
1994. Gross profits doubled over the 1994 period, while gross profit margins
increased to 18.7% in the 1995 period from 13.6% in the 1994 period.
Operations at the Company's G.B.M. S.p.A. motorcycle subsidiary continued
to improve. Excluding the almost completed liquidation of the Benelli scooter
inventory, G.B.M. unit sales increased almost 41% over the second quarter of
1994. Production increased in each month of the quarter, and G.B.M. began to
reduce some of the production backlog which had built up in the first quarter.
While continuing improvements in production rates, quality control and
coordination of deliveries of out-sourced materials and components with
production requirements are anticipated, many problems remain to be addressed.
As a consequence, temporary setbacks in production could occur.
The operating improvements at G.B.M. were offset by a combination of
factors. Higher selling, general and administrative expenses were incurred due
to greater motorcycle sales and costs associated with the acquisition of the
principal assets of Finprogetti S.p.A. which was completed immediately after the
close of the quarter. Additionally, the Company reported lower interest and
other income in the 1995 second quarter because the 1994 period included
approximately Lit. 742,500,000 ($454,963) of imputed interest relating to the
final installment from Fiat of Lit. 27,000,000,000 ($16,544,117) paid in January
1995 from the 1993 sale of the Company's 51% equity interest in Maserati. In
contrast, the Company realized interest at a lower rate in 1995, and used
portions of the final installment to reduce bank indebtedness and fund prior
operating losses.
The Company, as a result of these factors, lost Lit. 69,000,000 ($42,279),
or Lit. 34 ($.02) per share, in the second quarter of 1995, compared to net
income of Lit. 46,000,000 ($28,186), or Lit. 15 ($.01), in the comparable 1994
period.
Six Months ended June 30, 1995 and June 30, 1994
------------------------------------------------
Net sales for the six month period in 1995 increased 23.8% to Lit. 29,466,-
000,000 ($18,055,147) compared to the 1994 period. Gross profits, however,
declined 20.1% from the 1994 to 1995 six month period, and gross profit margins
declined to 8.5% from 13.1% as a lingering result of the Company's poor first
quarter 1995 results.
8
<PAGE>
Due principally to the first quarter loss, the Company lost Lit. 3,511,000-
,000 ($2,151,348), equal to Lit. 1,706 ($1.05) per share in the 1995 six month
period, compared to a net loss of Lit. 969,000,000 ($593,750), equal to Lit. 471
($.29) in the 1994 period.
Liquidity and Capital Resources
-------------------------------
Using a portion of the proceeds of the 1993 Fiat transaction, the Company
has reduced bank indebtedness by approximately Lit. 5,000,000,000 ($3,063,726)
since December 31, 1994. G.B.M. has completed renegotiations on the terms of a
loan which had been in default, resulting in a decrease in the current portion
of long term indebtedness and a corresponding increase in long term
indebtedness. Accrued interest on the loan was also capitalized.
Within days after the completion of the Finprogetti transaction, on July
21, 1995, the Company acquired 703,774 shares of stock formerly owned by
Alejandro De Tomaso, the Company's former Chairman, at a price of $11.27 per
share. The Company paid the purchase price by delivering a combination of
approximately $3,063,000 in cash and certain other assets valued
at approximately $4,869,000. The Company's acquisition of the principal assets
of Finprogetti S.p.A. was in exchange for 2,035,786 newly issued shares of
common stock, valued at an aggregate of approximately $25,000,000. 248,673
shares, representing the consideration for an Italian tax refund of Lit.
5,000,000,000 ($3,063,725) due to Finprogetti, are being held in escrow until
the refund is received by the Company and until release may not be voted by
Finprogetti. Certain Finprogetti shareholders also purchased an additional
408,008 shares of common stock of the Company by paying $5,000,000 in cash.
Finprogetti is obligated to purchase or cause others to purchase an additional
338,011 shares of common stock for an aggregate of approximately $4,100,000 by
September 30, 1995. The Company is obligated to purchase the remaining 776,530
shares formerly owned by Mr. De Tomaso at $11.27 per share by June 20, 1998
unless those shares have already been sold.
Management holds the view that the development of the non-operating real
estate assets formerly owned by Finprogetti does not fit within the long term
strategic goals of the Company. Those assets will be sold over time in the
ordinary course of business and the resulting capital will be used for the
Company's operations. Given the improvement in G.B.M.'s operations, the
Company's internal capital resources, together with available bank financing,
are more than adequate for its foreseeable capital needs, including the planned
redemption of up to 80% of the outstanding shares held by public shareholders,
and the businesses of G.B.M., the temporary management company acquired from
Finprogetti, and other contemplated activities relating to potential
"turnarounds" of troubled companies.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DE TOMASO INDUSTRIES, INC.
Dated: August 14, 1995 By: s/ Catherine D. Germano
------------------------------------
Catherine D. Germano, Treasurer
Dated: August 14, 1995 By: s/ Howard E. Chase
-----------------------------------
Howard E. Chase, Secretary
10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
audited financial statements dated June 30, 1995 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 2,799,632<FN>
<SECURITIES> 9,288,603<FN>
<RECEIVABLES> 6,840,074<FN>
<ALLOWANCES> 349,878<FN>
<INVENTORY> 15,727,328<FN>
<CURRENT-ASSETS> 47,427,695<FN>
<PP&E> 26,044,118<FN>
<DEPRECIATION> 18,651,961<FN>
<TOTAL-ASSETS> 68,632,352<FN>
<CURRENT-LIABILITIES> 24,722,426<FN>
<BONDS> 6,569,853<FN>
<COMMON> 1,830,882<FN>
0<FN>
890,319<FN>
<OTHER-SE> 21,547,181<FN>
<TOTAL-LIABILITY-AND-EQUITY> 68,633,352<FN>
<SALES> 18,055,147<FN>
<TOTAL-REVENUES> 18,055,147<FN>
<CGS> 16,523,284<FN>
<TOTAL-COSTS> 3,572,304<FN>
<OTHER-EXPENSES> 0<FN>
<LOSS-PROVISION> 0<FN>
<INTEREST-EXPENSE> 971,201<FN>
<INCOME-PRETAX> (2,151,348)<FN>
<INCOME-TAX> 0<FN>
<INCOME-CONTINUING> (2,151,348)<FN>
<DISCONTINUED> 0<FN>
<EXTRAORDINARY> 0<FN>
<CHANGES> 0<FN>
<NET-INCOME> (2,151,348)<FN>
<EPS-PRIMARY> (1.05)<FN>
<EPS-DILUTED> (1.05)<FN>
<FN>
* Dollar amounts are based on conversion reate of 1,632 Lire to the Dollar
which porevailed on June 30, 1995.
</FN>
</TABLE>
