<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
[X] SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 28, 1996
OR
TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
[ ] SECURITIES EXCHANGE ACT OF 1934
Commission File Number : 0-24354
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DORSEY TRAILERS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 58-2110729
- --------------------------------- ---------------------------
(State of Incorporation) (IRS Employer
Identification Number
2727 Paces Ferry Road
One Paces West, Suite 1700
Atlanta, Georgia 30339
- -------------------------------- ---------------------------
Registrant's telephone number, including area code: (770) 438-9595
---------------------------
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 number of shares of common stock outstanding at November 8, 1996, was
4,997,422.
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DORSEY TRAILERS, INC.
FORM 10-Q
Quarter ended September 28, 1996
Index
<TABLE>
Part I. Financial Information
Page
Item 1. Condensed Financial Statements
<S> <C>
Balance Sheet - September 28, 1996 and December 31, 1995 3
Statement of Operations - For the three months and nine months
ended September 28, 1996 and September 30, 1995 4
Statement of Cash Flows - For the nine months ended
September 28, 1996 and September 30, 1995 5
Statement of Changes in Stockholders' Equity -
For the nine months ended September 28, 1996 6
Notes to Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-9
Part II. Other Information 9-10
</TABLE>
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PART 1 - FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENS
DORSEY TRAILERS, INC.
BALANCE SHEET
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
September 28, December 31,
1996 1995
------------- ------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 1,833 $ 7,738
Accounts receivable, net 12,544 9,394
Inventories 18,050 16,771
Prepaid expenses and other assets 2,793 663
------- -------
Total current assets 35,220 34,566
Property, plant and equipment, net 9,900 9,459
Other assets, net 1,013 6
Deferred income taxes 3,418 3,418
------- -------
$49,551 $47,449
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $ 604 $ 1,011
Accounts payable 21,795 15,568
Accrued wages and employee benefits 5,017 5,004
Accrued expenses 3,321 3,669
------- -------
Total current liabilities 30,737 25,252
Long-term debt, net of current maturities 9,434 9,304
Accrued pension liability 1,600 1,600
Accrued warranty 1,100 1,100
------- -------
42,871 37,256
------- -------
Stockholders' equity
Preferred stock, $.01 par value, 500,000 shares
authorized; none issued or outstanding
Common stock, $.01 par value, 30,000,000 shares
authorized; 4,997,422 and 4,988,854
shares issued and outstanding 49 49
Additional paid-in capital 2,223 2,086
Retained earnings 4,579 8,229
Unrecognized pension liability (171) (171)
------- -------
Total stockholders' equity 6,680 10,193
------- -------
Commitments and contingencies - -
------- -------
$49,551 $47,449
======= =======
</TABLE>
See notes to condensed financial statements.
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DORSEY TRAILERS, INC.
STATEMENT OF OPERATIONS - UNAUDITED
(IN THOUSANDS EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------------- ------------------------------------
SEPTEMBER 28, SEPTEMBER 30, SEPTEMBER 28, SEPTEMBER 30,
1996 1995 1996 1995
------------- ------------- ----------------- --------------
<S> <C> <C> <C> <C>
Net sales $39,653 $56,127 $119,572 $179,302
Cost of sales 38,930 52,622 118,476 166,846
------- ------- -------- --------
Gross profit 723 3,505 1,096 12,456
Selling, general and
administrative expenses 2,168 1,673 6,232 5,569
Provision for plant closing 84 23 511 70
------- ------- -------- --------
Income (loss) from operations (1,529) 1,809 (5,647) 6,817
Interest expense (income), net 112 (43) 286 14
------- ------- -------- --------
Income (loss) before income taxes (1,641) 1,852 (5,933) 6,803
Provision (credit) for income taxes (631) 714 (2,283) 1,534
------- ------- -------- --------
Net income (loss) $(1,010) $1,138 $(3,650) $ 5,269
======= ====== ======= ========
Net income (loss) per share $ (0.20) $ 0.23 $ (0.73) $ 1.06
======= ====== ======= ========
Weighted average number of
common and common share
equivalents used in the net income
(loss) per share calculation 4,956 4,967 4,951 4,979
====== ====== ====== ======
</TABLE>
See notes to condensed financial statements.
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DORSEY TRILERS, INC.
STATEMENT OF CASH FLOWS - UNAUDITED
(In Thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
--------------------------------------
SEPTEMBER 28, SEPTEMBER 30,
1996 1995
-------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(3,650) $ 5,269
Adjustments to reconcile net income (loss) to net cash
used in operating activities
Depreciation and amortization 1,022 877
Issuance of common stock to non-employee directors 30 22
Change in assets and liabilities-
Increase in accounts receivable (3,150) (4,580)
Increase in inventories (819) (1,386)
Increase in prepaid expenses and
other current assets (2,130) (70)
Increase (decrease) in accounts payable 6,227 (1,615)
(Decrease) increase in accrued expenses (335) 322
Decrease in other assets 1 243
Increase in deferred income taxes - (1,206)
Increase in other noncurrent liabilities - 100
------- -------
Net cash used in operating activities (2,804) (2,024)
------- -------
Cash flows from investing activities:
Purchase of business assets (1,198) -
Capital expenditures (1,156) (1,477)
Redeem certificate of deposit - 2,000
------- -------
Net cash (used in) provided by investing activities (2,354) 523
------- -------
Cash flows from financing activities:
Payments on long-term debt (854) (367)
Tax benefit from exercise of stock options 107 -
Payment of accrued distribution to stockholders - (5,029)
------- -------
Net cash used in financing activities (747) (5,396)
------- -------
Decrease in cash and cash equivalents (5,905) (6,897)
Cash and cash equivalents at beginning of period 7,738 9,297
------- -------
Cash and cash equivalents at end of period $ 1,833 $ 2,400
======= =======
</TABLE>
See notes to condensed financial statements.
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DORSEY TRAILERS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Common Stock Additional Unrecognized
------------ Paid-in Retained Pension
Shares Amount Capital Earnings Liability Total
---------- ---------- ------- ------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1995 4,988,854 $49 $2,086 $8,229 $(171) $10,193
Net loss (3,650) (3,650)
Record unrecognized tax benefit of
stock option compensation 107 - - 107
Issuance of common stock to non-
employee directors 8,568 - 30 - - 30
--------- ---- ------ ------ ----- -------
Balance, September 28, 1996 (unaudited) 4,997,422 $49 $2,223 $4,579 $(171) $ 6,680
========= ==== ====== ====== ===== =======
</TABLE>
See notes to condensed financial statements.
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DORSEY TRAILERS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. GENERAL
The financial statements included herein have been prepared by Dorsey Trailers,
Inc. (the Company) without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations; however, the Company believes that the
disclosures are adequate to make the information presented not misleading. The
condensed financial statements included herein should be read in conjunction
with the financial statements and the notes thereto included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1995.
In the opinion of the Registrant, the accompanying financial statements contain
all material adjustments (consisting only of normal recurring adjustments),
necessary to present fairly the financial position of the Company at September
28, 1996, and December 31, 1995, and its results of operations for the three
months and nine months ended September 28, 1996, and September 30, 1995, and
its cash flows for the nine months ended September 28, 1996 and September 30,
1995.
NOTE 2. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
September 28, December 31,
1996 1995
------------- --------------
(in thousands)
<S> <C> <C>
Raw material $ 9,644 $10,284
Work-in-process 5,734 4,948
Finished trailers 670 1,312
Used trailers 2,002 227
------- -------
$18,050 $16,771
======= =======
</TABLE>
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<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
NET SALES Net sales for the third quarter ended September 28, 1996 decreased
29.2% to $39.7 million from $56.1 million for the third quarter ended September
30, 1995. The decrease in sales for the quarter ended September 28, 1996, was
primarily attributable to a 29.7% decrease in new trailer units sold. Net
sales for the nine months ended September 28, 1996, were $119.6 million, a
33.3% decrease from the $179.3 million in the comparable prior year period.
This decrease in sales was primarily due to a 32.0% decrease in new trailer
units sold from the comparable period in 1995.
GROSS PROFIT Gross profit as a percentage of sales totaled 1.8% for the third
quarter of 1996 compared to 6.2% for the same period in 1995. The gross profit
percentage for the nine month period ended September 28, 1996 was .9% versus
6.9% for the same period in 1995. Lower gross profit in 1996 was due to
several factors, including substantially lower volume and selling prices
resulting from very weak market demand and excess production capacity in the
industry. Also contributing to the decrease was significant start-up losses at
the Company's new flatbed facility in Cartersville, Georgia.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and
administrative ("S, G, & A") expenses for the third quarter of 1996 increased
29.6% versus the third quarter of 1995 and also increased as a percentage of
sales to 5.5% in the third quarter of 1996 from 3.0% for the corresponding
period in 1995. S,G,&A expenses for the nine month period ended September 28,
1996 increased 11.9% versus the same period in 1995, and increased as a
percentage of sales to 5.2% from 3.1% for the corresponding period in 1995.
PROVISION FOR PLANT CLOSING Costs related to the Company's closed facilities
increased in the third quarter of 1996 over the same period in 1995 and
includes costs related to the closing of the Northumberland, Pennsylvania plant
which occurred during the fourth quarter of 1995.
INTEREST EXPENSE, NET Interest expense, net for the three and nine month
periods ended September 28, 1996 totaled $112,000 and $286,000 compared to
interest income of $43,000 and interest expense of $14,000 for the same periods
in 1995. The increase is a result of the notes payable for the purchases of
the Cartersville, Georgia facility and the Dillon, South Carolina facility.
NET INCOME (LOSS) Net loss for the three months and nine months ended
September 28, 1996 was $1.0 million and $3.7 million which included a credit
for income taxes of $.6 million and $2.3 million, respectively. Net income for
the three and nine months ended September 30, 1995 was $1.1 million and $5.3
million which was positively impacted by utilization of the deferred tax
valuation reserve, which reduced the income tax expense by $1.1 million for the
nine month period.
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<PAGE> 9
LIQUIDITY AND CAPITAL RESOURCES
As presented in the Statement of Cash Flows, net cash used in operating
activities was $2.8 million during the first nine months of 1996 and $2.0
million during the corresponding period of 1995.
In July, 1996, the Company purchased the majority of the assets of a Dillon,
South Carolina based dump trailer manufacturer. The purchase was made with a
combination of cash and notes.
Due to its 1996 operating loss, the Company is in violation of covenants
covering tangible net worth, leverage, and fixed charges as of September 28,
1996, under its revolving credit agreement with a financial institution. The
lender has not agreed to waive this event of default and has informed the
Company that funding requests under this agreement will not be honored as long
as these covenant violations exist. The Company has no borrowings outstanding
under this agreement as of September 28, 1996, although $2 million in letters
of credit are outstanding under this facility.
The Company is working with another financial institution to establish a credit
facility for replacing the existing revolving credit agreement. Although there
is no assurance that the proposed transaction will be consummated, management
believes a new facility will be in place before the end of 1996. The Company
expects to begin borrowing under the proposed line as soon as it becomes
available. The intended use of such borrowing would be to reduce the current
level of indebtedness to trade creditors. Until such time as a new facility is
available, management expects to meet its liquidity needs from cash provided by
operations, cash and cash equivalents, and a reduction in its working capital.
BACKLOG
The Company's backlog of orders was approximately $44 million at December 31,
1995 and $34 million at September 28, 1996. The backlog includes only those
orders for trailers for which a confirmed customer order has been received.
The Company manufactures trailers only to customer or dealer order and does not
generally maintain an inventory of trailers.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings
Not applicable.
ITEM 2. Changes in Securities
Not applicable.
ITEM 3. Defaults upon Senior Securities
Not applicable.
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ITEM 4. Submission of Matters to a Vote of Security Holders
Not applicable.
ITEM 5. Other Information
Not applicable.
ITEM 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the period.
EX - 27 Financial Data Schedule (For SEC use only)
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.
DORSEY TRAILERS, INC.
Date: November 12, 1996 By: /s/ T. Charles Chitwood
-------------------- ----------------------------------------
T. Charles Chitwood
Vice President - Finance
(Principal Financial Officer and
Principal Accounting Officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF DORSEY TRAILERS, INC. FOR THE NINE MONTHS ENDED
SEPTEMBER 28, 1996, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-30-1996
<PERIOD-END> SEP-28-1996
<CASH> 1,833
<SECURITIES> 0
<RECEIVABLES> 12,720
<ALLOWANCES> 176
<INVENTORY> 18,050
<CURRENT-ASSETS> 2,793
<PP&E> 17,312
<DEPRECIATION> 7,412
<TOTAL-ASSETS> 49,551
<CURRENT-LIABILITIES> 30,737
<BONDS> 0
0
0
<COMMON> 49
<OTHER-SE> 6,631
<TOTAL-LIABILITY-AND-EQUITY> 6,680
<SALES> 119,572
<TOTAL-REVENUES> 119,572
<CGS> 118,476
<TOTAL-COSTS> 6,232
<OTHER-EXPENSES> 511
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 286
<INCOME-PRETAX> (5,933)
<INCOME-TAX> (2,283)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,650)
<EPS-PRIMARY> (.73)
<EPS-DILUTED> (.73)
</TABLE>
