SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission file number 0-17430
DANZER CORPORATION
(Exact name of registrant as specified in its charter)
New York 13-3431486
(State of other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
17500 York Road 21740
Hagerstown, Maryland (Zip Code)
(Address of principal executive offices)
(301) 582-2000
(Registrant's telephone number, including area code)
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 ____
-----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Common Stock July 31, 2000
$.0001 par value 17,738,348 shares
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DANZER CORPORATION AND SUBSIDIARY
INDEX
PAGE(s)
------
PART I - CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets -July 31, 2000 and October 31, 1999. 3 - 4
Consolidated Statements of Operations -
Three Months and Nine Months Ended July 31,2000 and 1999 5
Consolidated Statements of Cash Flows -
Nine Months Ended July 31, 2000 and 1999 6 - 7
Notes to Consolidated Financial Statements 8 - 10
Management's Discussion and Analysis of
Financial Condition and Results of Operations 10 - 11
PART II - OTHER INFORMATION 12
2
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DANZER CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
2000 1999
-------------- ---------------
(Unaudited) (Audited)
CURRENT ASSETS
<S> <C> <C>
Cash and cash equivalents $ 35,199 $ 0
Accounts receivable, less allowance for doubtful
accounts of $125,000 and $75,000 respectively 1,200,659 828,812
Inventories 871,704 594,698
Prepaid expenses and other 38,628 52,240
------------- ---------------
Total current assets 2,146,190 1,475,750
---------- ------------
PROPERTY, PLANT AND EQUIPMENT
Land 25,797 25,797
Building and improvements 1,440,527 1,440,527
Equipment 2,567,500 2,475,269
----------- ----------
4,033,824 3,941,593
Less - accumulated depreciation and amortization ( 2,467,270 ) ( 2,277,521 )
--------- -----------
Total property, plant and equipment, net 1,566,554 1,664,072
---------- ------------
OTHER ASSETS
Morrison License 90,004 120,004
Other, net 64,947 41,170
---------- ---------
Total Other Assets 154,951 161,174
TOTAL ASSETS $ 3,867,695 $ 3,300,996
=========== ===========
</TABLE>
3
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DANZER CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
2000 1999
------------------ -----------------
( Unaudited ) ( Audited )
CURRENT LIABILITIES
<S> <C> <C>
Current portion of long-term debt $ 577,071 $ 859,278
Accounts payable 596,021 390,903
Accrued salaries and wages 334,414 173,481
Accrued expenses, other 136,711 254,042
------------ ------------
Total current liabilities 1,644,217 1,677,704
LONG-TERM DEBT, net of current portion 1,452,074 908,725
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Common stock, par value $.0001 per share;
20,000,000 shares authorized; 15,214,693 and 17,738,348
shares issued in 1999 and 2000 respectively 1,776 1,761
Additional paid-in capital 5,232,341 5,220,971
Deficit ( 4,508,164 ) ( 4,508,165 )
Retained Earnings Current 45,451 -0-
--------- ---------------
Total Stockholders' Equity 771,404 714,567
---------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 3,867,695 $ 3,300,996
=========== ===========
</TABLE>
4
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DANZER CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
UNAUDITED
<TABLE>
<CAPTION>
THREE MONTHS ENDED JULY 31, NINE MONTHS ENDED JULY 31,
--------------------------------------- ---------------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
NET SALES $ 2,272,679 $ 1,928,660 $ 5,759,426 $ 4,594,968
COST OF GOODS SOLD 1,782,995 1,470,741 4,602,174 3,535,048
----------- ----------- ----------- -----------
GROSS PROFIT 489,683 457,919 1,157,251 1,059,925
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 415,454 320,595 1,071,398 987,921
---------- ------------- --------- -----------
INCOME FROM OPERATIONS 74,229 137,324 85,853 72,044
---------- --------- ----------- ------------
INTEREST EXPENSE, NET ( 56,262 ) ( 65,409 ) ( 148,362 ) ( 177,597 )
OTHER INCOME 91,819 13,940 107,960 47,251
----------- ------------ ----------- -----------
INCOME (LOSS) 109,786 85,857 45,451 ( 58,342 )
---------- ----------- ---------- -----------
PER COMMON SHARE DATA:
NET INCOME (LOSS) $ .01 $ .01 $ .00 ($ .00 )
============== ============= ========== ===============
WEIGHTED AVERAGE
SHARES OUTSTANDING 17,738,348 15,214,693 17,738,348 15,214,693
============= =========== =========== ===========
</TABLE>
5
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DANZER CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED JULY 31,
--------------------------------------------
2000 1999
----------------- -----------------
OPERATING ACTIVITIES:
<S> <C> <C>
Net (Loss) Income $ 45,451 ( 58,342 )
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization 268,596 214,200
Non Cash Stock Options 11,386 -0-
Net (increase) decrease in non-cash current assets:
Accounts receivable ( 421,847 ) ( 124,667 )
Inventories ( 277,006 ) ( 227,621 )
Prepaid expenses and other 13,612 36,755
Provision for bad debt 50,000 35,600
Net increase (decrease) in non-debt current liabilities:
Accounts payable 205,118 ( 181,786 )
Accrued salaries and wages 160,933 27,578
Accrued expenses, other ( 117,331 ) 154,811
(Increase)decrease in other assets, net 38,502
Net cash provided by (used in) operating activities ( 61,088 ) ( 85,000 )
------
INVESTING ACTIVITIES:
Purchase of property, plant and equipment ( 92,232 ) ( 36,664 )
Proceeds from sale of equipment -0- -0-
----------------- ----------------
Net cash used in investing activities ( 92,232 ) ( 36,664 )
FINANCING ACTIVITIES:
Deferred Financing Fees ( 72,624 ) -0-
Net borrowings (repayments) under revolving loan agreement 326,115 290,750
Proceeds from long - term debt financing 600,000 25,000
Payments of long-term debt ( 664,973 ) ( 194,086 )
-
Net cash provided by (used in) financing activities 188,518 ( 121,644 )
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 35,199 -0-
CASH AND CASH EQUIVALENTS BEGINNING -0- -0-
----------------- ---------------
CASH AND CASH EQUIVALENTS ENDING $ 35,199 $ -0-
================= ===============
</TABLE>
6
<PAGE>
DANZER CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS ENDED JULY 31,
--------------------------------------------
2000 1999
------------------ --------------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION:
Cash paid for -
<S> <C> <C>
Interest $ 148,362 $ 151,070
=============== ==============
Income taxes $ - $ -
==================== ====================
</TABLE>
7
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DANZER CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2000
NOTE 1. BASIS OF PRESENTATION, DESCRIPTION OF BUSINESS AND SUMMARY
OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Description of Business
DANZER CORPORATION (the "Company".) was incorporated on October 6, 1987.
Effective August 1, 1988, DANZER CORPORATION acquired all of the issued and
outstanding common shares of Global Environmental Holdings, Inc. ("Global
Holdings" ). Danzer Industries, Inc. ("Danzer"), a wholly-owned subsidiary of
Global, is principally engaged in the design, manufacture of truck bodies
Danzer's truck body revenues represent approximately 100% of the Company's
revenues and are generated throughout the eastern and southern United States.
The accompanying consolidated financial statements present the accounts of
DANZER CORPORATION and its wholly-owned subsidiary. The entities are
collectively referred to herein as the "Company". All significant intercompany
transactions and balances have been eliminated in consolidation. The Company is
on an October 31, fiscal year. The Company has filed all required filing for its
year ending October 31, 1999 and incorporates by reference those filings. The
Company has also filed its 10-Q reports for the quarters ending January 31, 2000
and April 30, 2000. The reader should read the audit and accomparrying footnotes
and 10-Q filings in conjunction with this document.
The Company uses the equity method of accounting for a 49% owned interest
in a joint venture. The original investment is recorded at cost, adjusted for
the Company's share of undistributed earnings or losses. The operations of the
joint venture are presently immaterial.
.
8
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DANZER CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2000
NOTE 1. BASIS OF PRESENTATION, DESCRIPTION OF BUSINESS AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Inventories
Inventories are stated at the lower of cost (first - in, first - out) or market
and are comprised of the following components:
July 31, October 31,
2000 1999
---- ----
Raw materials $585,143 $364,397
Work-in-process 114,271 39,548
Finished goods 172,290 190,753
-------- --------
$871,704 $594,698
9
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DANZER CORPORATION AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE NINE MONTHS ENDED JULY 31, 2000
NOTE 1. BASIS OF PRESENTATION, DESCRIPTION OF BUSINESS AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (Continued)
Major Customers
The following is a list of the Company's customers which represent 10% or
more of consolidated net sales (from continuing operations):
TOTAL PERCENTAGE OF NET SALES
OCTOBER 31 JULY 31, 2000
-------------------------------- -------------
1997 1998 1999
---- ---- ----
Elevator Manufacturer 13% 4% 0% 0%
Truck Body Manufacturer 41% 55% 63% 52%
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires Management to make estimates and assumptions that
effected the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion and analysis of the financial condition and results of
operations of the Company should be read in conjunction with the unaudited
financial statements and related notes of the Company included elsewhere in this
report. This Management's Discussion and Analysis of Financial Condition and
Results of Operations and other parts of this Quarterly Report on Form 10-Q
contain forward-looking statements that involve risks and uncertainties.
The Company's ability to increase sales depends on many factors not within the
Company's control including planned capital expenditures by end users, general
economic conditions and pricing policies by competitors. Additionally, the
Company is dependent on sales to one purchaser that represent 52% of total sales
in the nine month period ending July 31,2000. The Company's decision to focus
exclusively on truck body sales also increases the risk of selling to only one
industry segment.
As a result, the actual results realized by the Company could differ materially
from the results discussed in or contemplated by the forward-looking statements
made herein. Words or phrases such as "will," "expect," "believe," "intend,"
"estimates," "project," "plan" or similar expressions are intended to identify
forward-looking statements. Readers are cautioned not to place undue reliance on
the forward-looking statements made in this Quarterly Report on Form 10-Q.
10
<PAGE>
Results of Operations
For the three months ended July 31, 2000 the Company reported sales of
$2,272,679. This represented an increase of $344,019 over the three months ended
July 31, 1999 when sales totaled $1,928,660. This represented a 17.8% sales
increase. During this period gross profits increased $31,764 to $489,683 or
6.9%. The gross profit margin was 21.5% in the three month period ending July
31, 2000 versus 23.7% for the same period in 1999. This decline in the gross
profit margin occurred due to increases in labor and material expense. The
Company had a small increase in sales prices for the Morrison bodies but no
increase in sales price for bodies sold to its largest customer. For the three
months ended July 31, 2000 selling, general and administrative expenses
increased $94,859 to $415,454. This increase was primarily caused by the
Company's decision to increase its reserve for doubtful accounts by $75,000
during the quarter. Net interest expenses for the three month period ending July
31, 2000 was $56,262 or $9,147 lower than the $65,409 interest expense reported
for the July 31, 1999 time period. This decrease resulted from a lower rate of
interest being charged by its' current lender. Other income was favorably
impacted by $75,000 from collection of a note which had previously been fully
reserved as uncollectable. Income from operations for the three month period
ending July 31, 2000 was $109,786, a 27.9% increase over the $85,857 in earnings
reported for the July 31, 1999 period.
For the nine month period ending July 31, 2000 the Company reported sales of
$5,759,426. This was an increase from the nine months figures for July 31, 1999
of $4,594,968. The primary reason for this increase was an increase in purchases
by its Morrison dealer network during the third quarter of the company's current
fiscal year. Sales to the Company's largest customer in the third quarter of
this fiscal year were $ 1,266,288 versus $ 1,275,601 in the same quarter last
year. Gross profits for the nine months ended July 31, 2000 totaled $1,157,251
compared to the July 31, 1999 gross profit of $1,059,925. The Company's selling,
general and administrative expenses for the July 31, 2000 nine month period were
$1,071,398 versus $987,921 in its July 31, 1999 nine month period. Net interest
expense decreased by $29,235 for the nine months ended July 31, 2000 to an
amount of $148,362. In the prior equivalent period in 1999 total net interest
expense was $177,597. For the nine month period ending July 31, 1999 the Company
reported a loss of $58,342 versus a gain of $45,451 in the nine months ending
July 31, 2000.
Backlog
At July 31, 2000 the Company's backlog of Morrison truck bodies units totaled
$190,643 versus $162,714 at July 31, 1999. Many of the Company's Morrison
customers reported a shortage of truck body chassis. The Company's Morrison
dealer network also reported a reluctance of end users to purchase any Ford
chasis with Bridgestone/Firestone tires. The Company believes that because of
this shortage and the Firestone situation the Morrison customers will not order
as many units in the fourth quarter of the Company's fiscal year as these
customers ordered in the same quarter during the prior year. The Company
believes this will have a negative impact on sales and profits for the fourth
quarter and for the year.
Liquidity and Capital Resources
During the three month period ending July 31, 2000 the Company increased its
working capital position. At the end of the April 30, 1999 quarter the Company
had a working capital of $472,219. This number improved to a working capital
figure of $501,973 at July 31, 2000. This primarily occurred due to an increase
in accounts receivable to $1,460,275 at July 31, 1999 versus $507,309 at April
30, 1999. At July 31, 2000 the Company has significant availability to it under
its line of credit. If operations continue on a normal basis, it is anticipated
that the Company will have adequate cash resources to meet its operating needs
in financial obligations.
11
<PAGE>
PART II OTHER INFORMATION
In July, 2000 the Company's Chief Financial Officer resigned in pursuit
of other job opportunities. In July , 2000 the Company hired Mr. Mark D.
McGlaughlin to fill this position. Mr. McGlaughlin has a number of years
experience with manufacturers and management believes he is more than capable to
handle all aspects of this position.
Part II
On May 23, 2000, the registrant held its annual meeting of
shareholders. At that meeting, directors were elected, the Company increased its
authorized shares of Common Stock to 40,000,000, the Company's 1999 Stock
Incentive Plan was ratified and auditors were appointed for the 2000 fiscal
year. The results of the voting was as follows:
a. Directors
NAME FOR AGAINST
Goodhue W. Smith 14,105,108 0
Russell Cleveland 14,105,108 0
M. E. Williams 14,105,108 0
b. Increase in the number of authorized shares
FOR AGAINST ABSTAIN
14,084,204 14,815 8,002
c. Adoption of the 1999 Stock Incentive Plan
FOR AGAINST ABSTAIN
12,165,216 579,824 77,990
d. Ratification of appointment of Linton, Schafer & Co., P.A. as the
registrant's independent accountants
FOR AGAINST ABSTAIN
13,996,809 132,450 7,762
12
<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.
DANZER CORPORATION
(Registrant)
Date: September 13 , 2000 /S/ Mark D. McGlaughlin
--------------------------
Mark D. McGlaughlin,
Chief Financial Officer
13
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