<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 APRIL 3, 1999
OR
TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE
[ ] SECURITIES EXCHANGE ACT OF 1934
Commission File Number : 0-24354
-----------------------------------------
DORSEY TRAILERS, INC.
-----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 58-2110729
- ----------------------------- ------------------------
(State of Incorporation) (IRS Employer
Identification Number
One Paces West, Suite 1700
2727 Paces Ferry Road
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 May 17, 1999, was
5,031,191.
<PAGE> 2
DORSEY TRAILERS, INC.
FORM 10-Q
Quarter ended April 3, 1999
Index
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Part I. Financial Information
Item 1. Condensed Financial Statements
Balance Sheets - April 3, 1999 and December 31, 1998 3
Statements of Operations - For the thirteen weeks ended
April 3, 1999 and April 4, 1998 4
Statements of Cash Flows - For the thirteen weeks ended
April 3, 1999 and April 4, 1998 5
Statement of Changes in Stockholders' Equity -
For the thirteen weeks ended April 3, 1999 6
Notes to Condensed Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Part II. Other Information 15
Item 1. Legal Proceedings 15
Item 2. Changes in Securities 15
Item 3. Defaults upon Senior Securities 15
Item 4. Submission of Matters to a Vote of Security Holders 15
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
</TABLE>
-2-
<PAGE> 3
PART 1 - FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
DORSEY TRAILERS, INC.
BALANCE SHEETS
(IN THOUSANDS EXCEPT PAR VALUE)
<TABLE>
<CAPTION>
APRIL 3, DECEMBER 31,
1999 1998
------------------ --------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 7 $ 7
Accounts receivable, net 8,404 6,284
Inventories 11,651 13,090
Prepaid expenses and other assets 119 133
----------- -----------
Total current assets 20,181 19,514
Property, plant and equipment, net 7,346 7,562
Deferred income taxes 4,235 4,235
Other assets, net 1,530 1,623
----------- -----------
TOTAL ASSETS $ 33,292 $ 32,934
=========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Current portion of long-term debt $ 499 $ 496
Accounts payable 16,717 16,815
Accrued wages and employee benefits 3,637 4,204
Accrued expenses 1,432 1,236
----------- -----------
Total current liabilities 22,285 22,751
Long-term revolving line of credit 4,231 3,807
Long-term debt, net of current maturities 8,375 8,487
Accrued pension liability 1,600 1,600
Accrued warranty 1,000 1,000
----------- -----------
TOTAL LIABILITIES 37,491 37,645
----------- -----------
Stockholders' deficit
Preferred stock, $.01 par value, 500 shares
authorized; none issued or outstanding
Common stock, $.01 par value, 30,000 shares
authorized: 5,020 issued and outstanding 50 50
Additional paid-in capital 2,681 2,681
Accumulated deficit (6,853) (7,365)
Accumulated other comprehensive loss (77) (77)
----------- -----------
TOTAL STOCKHOLDERS' DEFICIT (4,199) (4,711)
----------- -----------
Commitments and contingencies - -
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 33,292 $ 32,934
=========== ===========
</TABLE>
See notes to condensed financial statements.
-3-
<PAGE> 4
DORSEY TRAILERS, INC.
STATEMENTS OF OPERATIONS - UNAUDITED
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
APRIL 3, APRIL 4,
1999 1998
-------- --------
(13 WEEKS) (13 WEEKS)
<S> <C> <C>
Net sales $ 44,847 $ 35,355
Cost of sales 42,230 34,644
-------- --------
Gross profit 2,617 711
Selling, general and
administrative expenses 1,590 1,502
-------- --------
Income (loss) from operations 1,027 (791)
Interest expense, net (515) (424)
Gain on property sales -- 568
-------- --------
Income (loss) before income taxes 512 (647)
Benefit from income taxes -- --
-------- --------
Net income (loss) $ 512 $ (647)
======== ========
Basic income (loss) per share $ .10 $ (.13)
======== ========
Weighted average number of
common and common share
equivalents used in the net income
(loss) per share calculation 5,020 5,013
======== ========
</TABLE>
See notes to condensed financial statements
-4-
<PAGE> 5
DORSEY TRAILERS, INC.
STATEMENTS OF CASH FLOWS - UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
APRIL 3, APRIL 4,
1999 1998
--------- ---------
(13 WEEKS) (13 WEEKS)
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 512 $ (647)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities
Depreciation and amortization 434 440
Gain on property sales -- (568)
Change in assets and liabilities-
(Increase) decrease in accounts receivable (2,119) 2,098
Decrease (increase) in inventories 1,439 (2,413)
Decrease in prepaid expenses
and other current assets 14 444
(Decrease) increase in accounts payable (99) 5,881
(Decrease) in accrued expenses (371) (1,005)
Increase in other assets -- (76)
------- -------
Net cash (used in) provided by operating activities (190) 4,154
------- -------
Cash flows from investing activities:
Capital expenditures (125) (92)
Net proceeds from property sales -- 739
------- -------
Net cash (used in) provided by investing activities (125) 647
------- -------
Cash flows from financing activities:
Net borrowings (payments) under line of credit agreement 424 (4,811)
Payments on long-term debt (109) (92)
Deferred interest capitalized to long-term debt -- 101
------- -------
Net cash provided by (used in) financing activities 315 (4,802)
------- -------
Decrease in cash and cash equivalents -- (1)
------- -------
Cash and cash equivalents at beginning of period 7 8
------- -------
Cash and cash equivalents at end of period $ 7 $ 7
======= =======
</TABLE>
See notes to condensed financial statements
-5-
<PAGE> 6
DORSEY TRAILERS, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIT
(IN THOUSANDS)
<TABLE>
<CAPTION>
Accumulated
Common Stock Additional Other
------------ Paid-in Accumulated Comprehensive
Shares Amount Capital Deficit Loss Total
--------- ------- ---------- ----------- ------------- --------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1998 5,020 $ 50 $2,681 $ (7,365) $ (77) $ (4,711)
Net income 512 512
-------- -------- ------ -------- --------- -------
Balance, April 3, 1999 (Unaudited) 5,020 $ 50 $2,681 $ (6,853) $ (77) $(4,199)
======== ======== ====== ======== ========= =======
</TABLE>
See notes to condensed financial statements
-6-
<PAGE> 7
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, 1998.
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 April 3,
1999, and December 31, 1998, and its results of operations and its cash flows
for the thirteen weeks ended April 3, 1999 and April 4, 1998, respectively.
NOTE 2. INVENTORIES
Inventories consisted of the following:
<TABLE>
<CAPTION>
April 3, December 31,
1999 1998
------- ------------
(In thousands)
<S> <C> <C>
Raw material $ 8,905 $ 9,065
Work-in-process 2,019 3,127
Finished trailers 401 449
Used trailers 326 449
------- -------
$11,651 $13,090
======= =======
</TABLE>
NOTE 3. REVOLVING LINE OF CREDIT
On March 28, 1997, the Company entered into a $14,000, five-year line of
credit ("Financing Agreement"), including a $4,000 term loan and a letter of
credit facility of up to $3,000, with an asset-based lender. The term loan was
paid with the final payment being made on July 1, 1998. On December 31, 1998,
the Company's Financing Agreement was amended. The amendment provided for an
overadvance facility of $2,000 through January 31, 1999; $1,500 through
February 28, 1999; and $1,000 through March 31, 1999. On May 7, 1999 the
Company amended the Financing
-7-
<PAGE> 8
Agreement with a term loan of $200 payable in eight installments with the final
payment to be made on December 31, 1999. The term loan accrues interest at
prime plus 2.0%.
In connection with the closing of the $14,000 Financing Agreement, the
Company incurred cost of approximately $1,200 which is being amortized over the
life of the Financing Agreement. The Financing Agreement bears interest at
prime plus 2.0% with interest payable monthly. The term loan accrued interest
at prime plus 2.0% until April 30, 1998 and prime plus 3.0% thereafter, with
the final payment being made on July 1, 1998. At April 3, 1999, the interest
rate was 9.75% for the Financing Agreement. Annual commitment fees for the
unused portion of the Financing Agreement and outstanding letters of credit are
.375% and 2.0%, respectively. Additionally, the Company is required to pay
monthly a $5 servicing fee and an annual facility fee of $75. The Financing
Agreement allows advances of up to the lesser of $14,000 less the outstanding
principal amount of the term loan and letters of credit obligations, or 80% of
eligible accounts receivable plus 30% of eligible raw material, 40% of
eligible used trailers, and 60% of eligible finished goods inventory less the
outstanding principal amount of the term loan and letters of credit
obligations. The Company has certain limitations on the maximum amount of
advances the Company can receive against inventory. As of April 3, 1999, the
Company had $4,231 outstanding under the Financing Agreement and $1,968 in
letters of credit. The Financing Agreement is collateralized by a first
security interest in the Company's accounts receivable and inventory. The
Financing Agreement contains certain operational and financial covenants and
other restrictions with which the Company must comply. The covenants include,
but are not limited to, the following: minimum earnings before interest, income
taxes, depreciation, and amortization; minimum net worth; and maximum amount of
capital expenditures. As of April 3, 1999 and May 17, 1999, the Company was in
compliance with the covenants of the Financing Agreement.
NOTE 4. COMMITMENTS AND CONTINGENCIES
Workers' compensation insurance and letters of credit
The Company is self-insured for workers' compensation claims up to $350 per
occurrence. In order to secure the Company's obligation to fund its
self-insured retention, the Company has obtained standby letters of credit of
$1,968 as of April 3, 1999 under its Financing Agreement (See Note 3). As of
May 17, 1999, the balance on the standby letters of credit has been increased
to $1,990. The accompanying condensed financial statements include an insurance
accrual based upon third party administrators' and management's evaluation of
estimated future costs of outstanding claims and an estimated liability for
claims incurred, but not reported, on an undiscounted basis. The ultimate cost
of these claims will depend on the individual claims given the potential for
these claims to increase or decrease over time. Management believes that any
claims as of April 3, 1999 arising under this self-insurance program will not
have a material adverse effect on the financial position, results of
operations, or cash flows of the Company.
Customer Financing
The Company maintains an agreement with a finance company, which provides
wholesale floor plans for certain of the Company's independent dealers. The
Company is contingently liable under
-8-
<PAGE> 9
repurchase agreements with the finance company for approximately $13,656
million at April 3, 1999. In the opinion of management, it is not probable that
the Company will be required to satisfy this contingent liability.
Litigation
In December 1997, an Administrative Law Judge of the National Labor Relations
Board ("NLRB") ordered the Company to reinstate operations at the Company's
closed Northumberland, Pennsylvania facility, reinstate striking employees and
compensate affected employees for any loss of earnings. In March 1999, a
three-member panel of the NLRB affirmed the Administrative Law Judge's
decision. The Company will now continue the appeal process in the Federal
Courts, a procedure that could take up to several years. No part of this order
will take effect during the appeal process. The Company does not have
sufficient information to estimate the cost that would be incurred if the
Company was required to carry out this order. Management intends to vigorously
defend against this order and believes that the Company will prevail in the
appeal process.
In November 1997, a declaratory judgment action was filed by an insurance
company (GAN North American Insurance Co. v. Dorsey Trailers, Inc.) in United
States District Court for the Northern District of Georgia, Atlanta Division,
as to coverage of a previously paid claim of $1,000 by that insurance company
in the settlement of product liability litigation. The Company has filed a
motion for summary judgment. Management intends to vigorously defend such
litigation and believes that the ultimate resolution of the litigation will not
have a material impact on the Company's financial position, results of
operations or cash flows.
In April 1995, a class action lawsuit (James Starks et al. v. Dorsey Trailers,
Inc. et al.) alleging racial discrimination was filed in the United States
District Court for the Middle District of Alabama against the Company. The
Court has not issued a class certification as of this date. Due to the lack of
a class certification, management is unable to determine the potential damages,
if any, associated with this litigation. Management intends to vigorously
defend such litigation and believes that the ultimate resolution of the
litigation will not have a material impact on the Company's financial position,
results of operations, or cash flows.
In the normal course of business, the Company is a defendant in certain other
litigation, in addition to the matters discussed above. Management after
reviewing available information relating to the above matters and consulting
with legal counsel, has determined with respect to each such matter either that
it is not reasonably possible that the Company has incurred liability in
respect thereof or that any liability ultimately incurred will not exceed the
amount, if any, recorded at April 3, 1999 in respect thereof which would have a
material adverse impact on the Company's financial position, results of
operations, or cash flows. However, in the event of an unanticipated adverse
final determination in respect to these matters, the Company's financial
position, results of operations, and its cash flows in which period such
determination occurs could be materially affected.
Environmental Matters
Subsequent to the closing of the Company's Edgerton, Wisconsin plant in 1989,
the Wisconsin Department of Natural Resources conducted an environmental
inspection that identified certain
-9-
<PAGE> 10
environmental response requirements. The Company and certain prior owners of the
Edgerton plant are cooperating in conducting remediation at the plant site and
in joining with other potentially responsible parties in addressing the landfill
site. The Company has paid its appropriate share of the total costs needed to
finalize the remediation work at this site. In the first quarter of 1998, the
Company sold this facility, and management believes that it has no additional
environmental liability related to this site.
Labor Relations
On May 3, 1999 the Company reached agreement with the International
Association of Machinists and Aerospace Workers Local Lodge No. 1769 (the
"Union"), which represents the hourly employees of the Company's Elba, Alabama
plant. The Union membership ratified the three-year collective bargaining
agreement, which expires May 4, 2002.
-10-
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The following discussion of the Company's results of operations and of its
liquidity and capital resources should be read in conjunction with the
Condensed Financial Statements of the Company and the related Notes thereto
appearing elsewhere in this Quarterly Report:
INCLUSION OF FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-Q, including "Management's Discussion and
Analysis of Financial Condition and Results of Operations," may be deemed to be
forward-looking statements, as defined in the Private Securities Litigation
Reform Act of 1995. Any forward-looking statements included herein have been
included based upon facts available to management as of the date of the
statement. Any forward-looking statement is, however, inherently subject to the
uncertainty of future events, whether economic, competitive or otherwise, many
of which are beyond the control of the Company, or which may involve
determinations which may be made by management in the future. There can,
therefore, be no assurances that the events or results described in such
forward-looking statements will occur, and actual events or results may vary
materially from those included herein. The following are some of the factors
which may affect whether the events or results described in such
forward-looking statements will occur: increased competition, dependence on key
management, continued availability of credit from vendors, continued
advancement of funds from lender, reliance on certain customers, shortages of
new materials, component prices, labor shortages or work stoppage, dependence
on current industry trends and demand for product, manufacturing interruption
due to unfavorable natural events, government regulations, unfavorable results
of outstanding litigation, and new technologies or products. Readers should
review and consider the various disclosures included in this Quarterly Report
and in the Company's 1998 Annual Report on Form 10-K and other reports to
stockholders and public filings.
RESULTS OF OPERATIONS
NET SALES Net sales for the quarter ended April 3, 1999 increased by 26.9% or
$9,492 to $44,847 from $35,355 for the quarter ended April 4, 1998. The
increase in net sales is due to the continued strong demand for equipment by
the trucking industry and corresponding increases in unit sales and pricing.
The Company's emphasis on strengthening its existing independent dealer
network, as well as adding new productive dealers, also contributed to the
increase in net sales.
GROSS PROFIT Gross profit was $2,617 for the first quarter of 1999 or 5.8% of
sales compared to a gross profit of $711 for the first quarter of 1998 or 2.0%
of sales. The improvement in gross profit for the first quarter of 1999 was due
to the continued improved demand for product, the Company's improved plant
operating performance since the July 1998 shutdown for plant improvements at
Elba, and improved pricing, which management believes was primarily a result of
the Company's strategy of rebuilding its independent dealer organization and
targeting profitable customized niche markets. Gross profit for the quarter
ended April 4, 1998 was negatively impacted by production lost due to the Elba
flood and other flood-related business interruption costs.
-11-
<PAGE> 12
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and
administrative ("SG&A") expenses for the first quarter of 1999 increased
approximately $88 or 5.9% to $1,590 as compared to $1,502 for the first quarter
of 1998. SG&A expenses as a percent of net sales declined to 3.5% for the
quarter ended April 3, 1999 as compared to 4.2% for the quarter ended April 4,
1998. The reduction in SG&A expenses as a percent of sales was a result of
management's continuing plan of controlling costs, especially during a period
when net sales increased 26.9 %.
INTEREST EXPENSE, NET Interest expense, net for the quarter ended April 3, 1999
was $515 as compared to interest expense, net of $424 for the quarter ended
April 4, 1998. This increase in interest expense was attributable to increased
usage of the Company's long-term revolving line of credit during the first
quarter of 1999 in comparison with the first quarter of 1998.
NET INCOME Net income for the quarter ended April 3, 1999 was $512, or $0.10
per share, as compared to a net loss of $647, or $0.13 per share, for the
quarter ended April 4, 1998. The Company's net income for the first quarter of
1999 is attributed to the Company's improved plant operating performance and
the sales growth achieved by rebuilding its independent dealer organization and
targeting profitable customized niche markets. The Company's net loss in the
first quarter of 1998 is attributed primarily to the impact of the Elba flood
on the Company's profitability.
OVERALL On March 8, 1998, the Company's manufacturing facility in Elba,
Alabama, which accounts for approximately 80% of the Company's new trailer
production, was affected by flooding in the plant and surrounding area. In
March 1998, the Company lost approximately two weeks of new trailer production
due to the flood. Management estimates that the Elba flood resulted in
approximately a 14% reduction in new trailer sales volume for the first quarter
of 1998. The Company carries flood and business interruption insurance.
Uninsured property damage was immaterial. However, the Company did not exceed
the deductible under its business interruption policy. The Elba facility has
fully recovered from the effects of the flood. Although the flood adversely
impacted results in the quarter ended April 4, 1998, it did not impact
financial results for the balance of 1998.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at April 3, 1999 and April 4, 1998 were $7.
Net cash used in operating activities was $190 for the period ended April 3,
1999 as compared to net cash provided by operating activities of $4,154 for the
period ended April 4, 1998. The cash used in operating activities during the
first quarter of 1999 primarily resulted from an increase in accounts
receivable of $2,119. This increase resulted from a corresponding increase in
net sales. The net cash provided by operating activities during the first
quarter of 1998 was affected by the increase in accounts payable of $5,881 and
a net decrease in accounts receivable of $2,098. This resulted from the lost
production time after the March 1998 flood in Elba.
Net cash used in investing activities was $125 for the period ended April 3,
1999 as compared to net cash provided by investing activities of $647 for the
period ended April 4, 1998. The net cash provided by investing activities for
the first quarter of 1998 was the result of the Company's sale of two closed
facilities in Edgerton, Wisconsin and Griffin, Georgia for net proceeds of
$739.
-12-
<PAGE> 13
Net cash provided by financing activities was $315 for the period ended April
3, 1999 as compared to net cash used in financing activities of $4,802 for the
period ended April 4, 1998. Net cash used in financing activities in the first
quarter of 1998 was due to the Company making net payments on its long-term
revolving line of credit of $4,811.
On March 28, 1997 the Company entered into a $14,000 five-year working capital
line of credit ("Financing Agreement") with an asset-based lender. The
Company's availability under the Financing Agreement changes daily based on the
level of eligible accounts receivable and inventories. As of May 13, 1999, the
Company had $4,193 outstanding under the Financing Agreement and $1,990 in
letters of credit, and had $2,140 in availability under the Financing
Agreement. On May 7, 1999 the Company amended the Financing Agreement with a
term loan of $200 payable in eight installments with the final payment to be
made on December 31, 1999. The term loan accrues interest at prime plus 2.0%.
The term loan will be used to assist in the financing of new computer
equipment. As of April 3, 1999 and May 17, 1999, the Company was in compliance
with the covenant requirements of the Financing Agreement.
The $14,000 Financing Agreement allowed the Company to improve payment
conditions with its vendors and provide the liquidity necessary for a
consistent production flow. However, with the shut-down of the Elba facility
production for two-weeks due to flooding and the resulting losses, the
Company's liquidity position remained tight during the first quarter of 1998.
Management believes that the Company can generate some additional liquidity by:
reducing inventories, continuing to improve pricing and margins during this
time of strong demand for product and improving credit limits and terms with
vendors as the Company continues to show financial improvement. Actions
continue to be under way to implement these plans. No assurances can be given
that the Company will be successful in these efforts.
BACKLOG
The Company's backlog of orders was approximately $43,380 at April 3, 1999 and
$34,745 at December 31, 1998. The backlog includes only those orders for
trailers for which a confirmed customer order has been received. The Company
expects to fill these orders by the end of 1999. The Company manufactures
trailers primarily to customer or dealer order and does not generally maintain
an inventory of "stock" trailers in anticipation of future orders. However,
many of the Company's dealers do maintain an inventory of stock trailers.
YEAR 2000
The Company has conducted a comprehensive review of its computer systems to
identify the systems that could be affected by the Year 2000 issue and has
developed an implementation plan to resolve the issue. The Company is utilizing
both internal and external resources to identify and correct the Company's
computer systems. The Year 2000 issue is the result of computer hardware and
programs being designed to use two digits rather than four digits to define the
applicable year. Any of the Company's hardware and programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This factor could result in system failure
-13-
<PAGE> 14
or miscalculations. The Company does not currently have significant
manufacturing operation systems which would be affected by the Year 2000 issue.
The Company's systems which rely on time sensitive information include
primarily the accounting and purchasing systems. The Company presently believes
that with modification to existing hardware and software and conversions to new
software, the Year 2000 problem will not pose significant operational problems
for the Company's computer systems as modified and converted. Maintenance and
modification costs will be expensed as incurred, while the costs of new
hardware and software will be capitalized and amortized over the assets' useful
lives. Management estimates the total cost of the conversion and modification
to be $830, which has been approved by the Board of Directors of the Company
and has been incorporated in the Company's 1999 capital expenditure and
operating budget. It is estimated that $400 of the total cost will be financed,
with the remainder funded through operating cash flows. It is anticipated that
testing all modifications will occur in second quarter 1999, with conversion
third quarter 1999. This timing allows management sufficient time to implement
a contingency plan, should problems arise during testing or modification. With
limited reliance on time sensitive computer systems, management does not
believe that the Year 2000 issue will have a materially adverse affect on the
Company's operations and that such systems which currently rely on time
sensitive information could be performed by other methods, i.e., personal
computer based solutions. However, if such modifications and conversions are
not completed timely, the Year 2000 issue may have a material impact on the
operations of the Company.
Year 2000 related issues may also adversely affect the operations and financial
performance of one or more of the Company's customers or suppliers. The failure
of the Company's customers or suppliers to be Year 2000 ready could have a
materially adverse effect on the operations of the Company. Other than
utilities, the third parties on which the Company relies most heavily are its
suppliers of raw materials and customers. The Company is in the process of
obtaining information from key suppliers and customers on their company's
computer systems compliance with the Year 2000 issue. While the Company obtains
its materials from a number of vendors and sells its products to a number of
customers, if a sufficient number of these vendors or customers experience Year
2000 problems that prevent or substantially impair their ability to continue to
transact business with the Company as they currently do, the Company would be
required to find alternative sources of these materials or customers. The
inability to find or delay in finding such alternatives could have a material
adverse effect on the Company's operations.
-14-
<PAGE> 15
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.
Item 4. Submission of Matters to a Vote of Security Holders
A. The Company's annual meeting of stockholders was held on April
26, 1999.
B. Lawrence E. Mock, Jr. was elected as a Director. The term of
office of Marilyn R. Marks, J. Hoyle Rymer, and Neil A. Springer
continued after the meeting.
C. Stockholders voted on the matters disclosed in the following
table:
<TABLE>
<CAPTION>
Ratification of Independent
Election of Director* Certified Public Accountants
--------------------- ----------------------------
<S> <C> <C>
Votes Cast:
For 4,624,990 4,634,334
Against 133,096 29,251
Abstentions 0 94,501
Non Votes 0 0
</TABLE>
* For a term of three years
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
a. The exhibits filed as a part of this report are as follows:
10.49 Amendment No. 8 dated as of May 7, 1999 to the Loan and
Security Agreement dated March 28, 1997 between Foothill
Capital Corporation and Dorsey Trailers, Inc.
27 Financial Data Schedule [For SEC Purposes Only]
b. No reports on Form 8-K were filed during the period.
-15-
<PAGE> 16
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: May 17, 1999 By: /s/ Kurt Herbst
-------------------- ------------------------------------
Kurt Herbst
Vice President - Finance
(Principal Financial Officer and
Principal Accounting Officer)
-16-
<PAGE> 1
EXHIBIT 10.49
AMENDMENT NO. 8 TO
LOAN AND SECURITY AGREEMENT
AMENDMENT NO. 8, dated as of May 7, 1999, to the LOAN AND SECURITY
AGREEMENT, dated as of March 28, 1997, as amended by the FIRST AMENDMENT dated
as of April 10, 1997, the SECOND AMENDMENT dated as of July 1, 1997, the THIRD
AMENDMENT dated as of August 1, 1997, the FOURTH AMENDMENT dated as of November
22, 1997, the FIFTH AMENDMENT dated as of July 10, 1998, the SIXTH AMENDMENT,
dated as of August 31, 1998, and the SEVENTH AMENDMENT, dated as of December 31,
1998 (as so amended, the "Loan and Security Agreement"), between FOOTHILL
CAPITAL CORPORATION, a California corporation, with a place of business located
at 11111 Santa Monica Boulevard, Suite 1500, Los Angeles, California 90025-3333,
and DORSEY TRAILERS, INC., a Delaware corporation, with its chief executive
offices located at 2727 Paces Ferry Road, One Paces Ferry West, Suite 1700,
Atlanta, Georgia 30339.
PREAMBLE
The Borrower has repaid in full the original term loan made by Foothill
to the Borrower on the Closing Date in the original principal amount $4,000,000.
The Borrower has requested Foothill to amend the Loan and Security
Agreement to provide for a new term loan in the original principal amount of
$200,000 with a final maturity date of December 31, 1999. Accordingly, the
Borrower and Foothill hereby agree as follows:
1. Definitions. All terms used herein which are defined in the Loan
and Security Agreement and not otherwise defined herein are used herein as
defined therein.
2. Term Loan. Section 2.3 of the Loan and Security Agreement is hereby
amended in its entirety to read as follows:
"Foothill has agreed to make a term loan (the "Term Loan") to
Borrower on or about May 7, 1999 in the original principal amount of
$200,000. The Term Loan shall be repaid in eight (8) installments of
payment in the following amounts:
1
<PAGE> 2
<TABLE>
<CAPTION>
<S> <C>
Date Installment Amount
----------------------------------------------------------
June 1, 1999 $20,000
July 1, 1999 $20,000
August 1, 1999 $20,000
September 1, 1999 $20,000
October 1, 1999 $20,000
November 1, 1999 $20,000
December 1, 1999 $20,000
December 31, 1999 $60,000
</TABLE>
The outstanding principal balance and all accrued and unpaid
interest under the Term Loan shall be due and payable upon the
termination of this Agreement, whether by its terms, by prepayment, by
acceleration, or otherwise. The unpaid principal balance of the Term
Loan may be prepaid in whole or in part without penalty or premium at
any time during the term of this Agreement upon ten (10) days prior
written notice by Borrower to Foothill, all such prepaid amounts to be
applied to the installments due on the Term Loan in the inverse order
of their maturity. All amounts outstanding under the Term Loan shall
constitute Obligations."
4. Interest Rate. Section 2.5(a) of the Loan and Security Agreement
is hereby amended in its entirety to read as follows:
"(a) Interest Rate. Except as provided in clause (b) below,
all obligations (except for undrawn letters of Credit) shall bear
interest at a per annum rate of 2.0 percentage points above the
Reference Rate."
5. Repurchase of Used Trailer Inventory. Section 7.24 of the Loan
and Security Agreement is hereby amended in its entirety to read as follows:
"7.24 REPURCHASE OF USED TRAILER INVENTORY. Repurchase any
Used Trailer Inventory from TYM, Inc. or any other entity controlled
by Marilyn R. Marks unless (i) such repurchase occurs after August 1,
1997, (ii) the price paid by Borrower for such Used Trailer Inventory
is not greater than the price paid to Borrower when Borrower sold such
Used Trailer Inventory to TYM, Inc. or such other entity, and (iii)
both before and after the giving effect to such repurchase, no Default
or Event of Default has occurred and is continuing and Availability is
not less than $4,000,000."
2
<PAGE> 3
6. Conditions. This Amendment shall become effective only upon
satisfaction in full of the following conditions precedent (the first date upon
which all such conditions have been satisfied being herein called the "Effective
Date"):
(a) The representations and warranties contained in this Amendment
and in Section 5 of the Loan and Security Agreement and each other Loan
Document shall be correct on and as of the Effective Date as though made on
and as of such date (except where such representations and warranties relate to
an earlier date in which case such representations and warranties shall be true
and correct as of such earlier date); no Default or Event of Default shall have
occurred and be continuing on the Effective Date or result from this Amendment
becoming effective in accordance with its terms.
(b) Foothill shall have received a counterpart of this Amendment,
duly executed by the Borrower.
(c) The Borrower shall have paid Foothill a non-refundable amendment
fee of $5,000, which fee is earned in full on the date hereof.
(d) All legal matters incident to this Amendment shall be
satisfactory to Foothill and its counsel.
7. Representations and Warranties. The Borrower hereby represents
and warrants to Foothill as follows:
(a) The Borrower (i) is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and
(ii) has all requisite corporate power, authority and legal right to execute,
deliver and perform this Amendment, and to perform the Loan and Security
Agreement, as amended hereby.
(b) The execution, delivery and performance of this Amendment by the
Borrower, and the performance by the Borrower of the Loan and Security
Agreement, as amended hereby (i) have been duly authorized by all necessary
corporate action, (ii) do not and will not contravene its charter or by-laws or
any applicable law, and (iii) except as provided in the Loan Documents, do not
and will not result in the creation of any Lien upon or with respect to any of
its respective properties.
(c) This Amendment and the Loan and Security Agreement, as amended
hereby, constitute the legal, valid and binding obligations of the Borrower,
enforceable against the Borrower in accordance with its terms.
(d) No authorization or approval or other action by, and no notice
to or filing with, any Governmental Authority is required in connection with
the due execution, delivery and performance by the Borrower of this Amendment
and the performance by the Borrower of the Loan and Security Agreement as
amended hereby.
3
<PAGE> 4
(e) The representations and warranties contained in Section 7 of the
Loan and Security Agreement and each other Loan Document are correct on and as
of the Effective Date as though made on and as of the Effective Date (except to
the extent such representations and warranties expressly relate to an earlier
date in which case such representations and warranties shall be true and
correct as of such earlier date), and no Default or Event of Default has
occurred and is continuing on and as of the Effective Date or will result from
this Amendment becoming effective in accordance with its terms.
8. Continued Effectiveness of the Loan and Security Agreement and
Loan Documents. The Borrower hereby (i) confirms and agrees that each Loan
Document to which it is a party is, and shall continue to be, in full force and
effect and is hereby ratified and confirmed in all respects except that on and
after the Effective Date of this Amendment all references in any such Loan
Document to "the Loan and Security Agreement", the "Agreement", "thereto",
"thereof", "thereunder" or words of like import referring to the Loan and
Security Agreement shall mean the Loan and Security Agreement as amended by
this Amendment; (ii) confirms that the term loan in the original principal
amount of $200,000 made by Foothill to the Borrower on or about the Effective
Date constitutes an "Obligation" pursuant to the Loan and Security Agreement;
and (iii) confirms and agrees that to the extent that any such Loan Document
purports to assign or pledge to Foothill, or to grant a security interest in or
Lien on, any collateral as security for the obligations of the Borrower from
time to time existing in respect of the Loan and Security Agreement and the
Loan Documents, such pledge, assignment and/or grant of the security interest
or Lien is hereby ratified and confirmed in all respects.
9. Miscellaneous.
(a) This Amendment may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement.
(b) Section and paragraph headings herein are included for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose.
(c) This Amendment shall be governed by, and construed in accordance
with, the laws of the State of California.
(d) The Borrower will pay on demand all reasonable fees, costs and
expenses of Foothill in connection with the preparation, execution and delivery
of this Amendment including, without limitation, reasonable fees disbursements
and other charges of Schulte Roth & Zabel LLP, counsel to Foothill.
4
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
executed and delivered.
DORSEY TRAILERS, INC.,
a Delaware corporation
By: /s/ Kurt Herbst
----------------------------
Name: Kurt Herbst
Title: C.F.O.
FOOTHILL CAPITAL CORPORATION,
a California corporation
By: /s/ Victor Barwig
----------------------------
Name: Victor Barwig
Title: Vice President
5
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF DORSEY TRAILERS, INC. FOR THE THREE MONTHS ENDED APRIL
3, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> APR-03-1999
<EXCHANGE-RATE> 1
<CASH> 7
<SECURITIES> 0
<RECEIVABLES> 8,537
<ALLOWANCES> 133
<INVENTORY> 11,651
<CURRENT-ASSETS> 20,181
<PP&E> 17,896
<DEPRECIATION> 10,550
<TOTAL-ASSETS> 33,292
<CURRENT-LIABILITIES> 22,285
<BONDS> 12,606
0
0
<COMMON> 50
<OTHER-SE> (4,249)
<TOTAL-LIABILITY-AND-EQUITY> 33,292
<SALES> 44,847
<TOTAL-REVENUES> 44,847
<CGS> 42,230
<TOTAL-COSTS> 42,230
<OTHER-EXPENSES> 1,590
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 515
<INCOME-PRETAX> 512
<INCOME-TAX> 0
<INCOME-CONTINUING> 512
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 512
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
</TABLE>
