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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED,
EFFECTIVE OCTOBER 7, 1996).
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
COMMISSION FILE NUMBER 0-24354
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM _________ TO _________
DORSEY TRAILERS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 58-2110729
(State or jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
2727 PACES FERRY ROAD
ONE PACES WEST, SUITE 1700
ATLANTA, GEORGIA
30339
(Address of principal executive offices)
(770) 438-9595
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
COMMON STOCK $.01 PAR VALUE
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this form 10-K or any amendment to this
form 10-K. [X].
The aggregate market value of voting stock held by non-affiliates of the
registrant as of March 27, 1997 was $6,345,060, based upon the closing price of
the Company's common stock as quoted on The Nasdaq Stock Market composite tape
on such date.
The number of shares outstanding of the registrant's common stock as of
March 28, 1997 was 4,997,422.
Portions of the Proxy Statement for the Annual Meeting of Stockholders to
be held April 22, 1997 are incorporated into this form 10-K Part III by
reference.
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TABLE OF CONTENTS
DORSEY TRAILERS, INC.
FORM 10-K FOR THE FISCAL
YEAR ENDED DECEMBER 31, 1996
PAGES
-----
PART I.
Item 1. Business.................................................... 1
Item 2. Properties and Insurance.................................... 4
Item 3. Legal Proceedings........................................... 5
Item 4. Submission of Matters to Vote of Security Holders........... 5
PART II.
Item 5. Market for the Registrant's Common Stock and Related 5
Stockholder Matters.........................................
Item 6. Selected Financial and Operating Data....................... 5
Item 7 Management's Discussion and Analysis of Financial Condition 6
and Results of Operations...................................
Item 8. Financial Statements and Supplementary Data................. 11
Item 9. Changes in and Disagreement with Accountants on Accounting 11
and Financial Disclosure....................................
PART III.
Item 10. Directors and Executive Officers of the Registrant.......... 11
Item 11. Executive Compensation...................................... 12
Item 12. Security Ownership of Certain Beneficial Owners and 12
Management..................................................
Item 13. Certain Relationships and Related Transactions.............. 12
PART IV.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 12
8-K.........................................................
SIGNATURES.............................................................. 16
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PART I
ITEM I - BUSINESS
Dorsey Trailers, Inc. ("the Company" or "Dorsey") designs, manufactures and
markets a broad line of high-quality, customized truck trailers, including
aluminum and steel dry freight trailers, refrigerated trailers, flatbed
trailers, package carrier trailers and dump trailers. The Company competes in
the customized segment of the truck trailer industry and sells to many large,
highly regarded and growth-oriented customers, including AAA Cooper
Transportation, Averitt Express, Inc., Builders Transport, Covenant Transport,
Landstar System, Roadway Package Service, Ryder Truck Rental, Inc., Salem
Leasing Corp., Shaw Industries, Southeastern Motor Lines, Tyson Foods, United
Parcel Service, U.S. Xpress and XTRA, Inc.
PRODUCTS
The Company's broad line of customized products includes:
- Aluminum and Steel Dry Freight Vans. These trailers are also known as
sheet and post trailers and are the trailers purchased by most segments of
the trucking industry. The Company produces both aluminum and steel
full-size vans, shorter "pup" vans that are used in doubles or triples
operation and piggybacks used in intermodal transportation.
- CargoGuard(R). The CargoGuard(R) trailer was introduced by the Company
in 1994 and has achieved continued. These trailers are proprietary,
high-capacity, aluminum sheet and post vans with one-piece, seamless
plastic interior liners. The Company believes that CargoGuard(R) is
superior to traditional dry freight vans because of its greater cubic
capacity and because its seamless liner is less expensive to maintain than
plywood lining. The Company also believes that CargoGuard(R) offers
certain advantages over aluminum plateside trailers, including the
capability of bulk loading due to greater sidewall stiffness and decreased
aluminum content, thereby lessening exposure to the volatility of
commodity aluminum prices.
- Refrigerated Vans. These trailers are used to transport temperature
sensitive products. The Company's refrigerated vans are thermally
efficient and were among the first to employ insulation material that is
not harmful to the ozone layer of the atmosphere. The Company builds both
full size and "pup" refrigerated trailers. Dorsey's food service delivery
trailers are highly customized and may include such features as multiple
compartments with different temperatures.
- Package Carrier Vans. The Company has worked closely with the small
package carrier industry to develop lightweight, durable, high-capacity
trailers. These trailers frequently include specialized design features
such as integrated interior shelving and roller systems for efficient
loading and unloading.
- Flatbed Trailers. Flatbed trailers, also known as platform trailers, are
used to carry loads such as steel and building materials. The Company
produces a wide variety of platform trailers, including straight frames,
drop frames and multi-axle units for specialized loads. All steel as well
as composite steel and aluminum designs are produced to satisfy specific
customer requirements.
- Dump Trailers. Dump trailers are used to haul bulk products such as
dirt, sand, rock and gravel. The Company builds a variety of dump
trailers, including double trailers with frame and frameless designs, of
aluminum and steel construction.
- Other Products. The Company's other products include drop frame vans,
open top trailers, chip haul trailers, exterior post vans, bulk fruit
trailers and converter dollies. The Company has participated in the
international intermodal market by constructing container chassis and
specialized aluminum containers used in the transportation of chemicals
and other bulk products in Australia.
- Parts and Accessories. Replacement parts and accessories are primarily
sold to authorized Dorsey dealers.
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The Company provides a limited five-year warranty against defects in
material and workmanship on van trailers, refrigerated van trailers and platform
trailers. The Company provides a similar two year warranty on dump trailers. The
Company's warranty costs historically have been approximately one percent of net
sales per year. The Company is also involved in the sale of used trailers, which
are supplied primarily by trade-ins from its new trailer customers.
SALES AND MARKETING
The Company's marketing strategy is to offer a broad line of high quality
trailers manufactured to the design specifications of its customers. The Company
markets and distributes its products in two principal ways. Dorsey's national
accounts typically include the larger truckload and less-than-truckload common
carriers, large private carriers, leasing companies, third party logistics
companies, household moving and storage carriers, package carriers and
intermodal carriers. Dorsey authorized dealers primarily serve smaller and
medium-sized carriers, owner-operators and private fleets in the region where
the dealer is located.
CUSTOMERS
National Account Sales. The Company strives to establish and maintain
close, long-term relationships with its national account customers. Dorsey
involves manufacturing and engineering personnel in its team approach to
developing relationships with customers. The Company has been successful in
developing significant relationships as a supplier to many large,
growth-oriented customers, one of which accounted for more than 10% Dorsey's
1996 net sales, in the transportation industry, including:
- Dry Freight Vans: AAA Cooper Transportation, Averitt Express, Covenant
Transport, Landstar System, Southeastern Motor Lines, U.S. Xpress, Victory
Express and Watkins.
- CargoGuard(R): Decker Truck Lines, Rosedale Group, Shaw Industries,
Stop-n-Shop and U.S. Xpress.
- Refrigerated Trailers: Decker Truck Lines, KAT, Martrac (a subsidiary of
UPS), Pro-Source Distribution (formerly Burger King Distribution),
Stop-n-Shop, Tyson Foods and XTRA.
- Package Carrier Vans: Roadway Package Service, General Parcel Service
and United Parcel Service.
- Flatbed Trailers: Boyd Brothers, Builders Transport, and Landstar
System.
- Piggyback (intermodal) Trailers: Transamerica Leasing and United Parcel
Service.
Dealer Sales. Smaller and medium-sized customers are served through
Dorsey's independent dealer network. Dealer sales account for a substantial
percentage of sales of refrigerated, flatbed and dump trailers. The Company's
independent dealers are highly responsive to customers in their service areas,
allowing the Company to access these regional markets. There are 73 authorized
Dorsey dealers located in 36 states and five Canadian provinces, and each dealer
is independently owned. Most provide parts, general and warranty repair service
for trailers and also sell used trailers, thereby providing a sales outlet for
trailers taken in trade by the Company. The Company has no ownership interest in
any Dorsey dealership and owns no branches. Management believes that
independently owned dealerships are a more cost efficient distribution system
than Company-owned branches and has no plans to develop any.
The Company's relationships with its dealers are governed by non-exclusive
agreements that are terminable by either party upon 30 days' notice. These
agreements generally provide that it is the primary responsibility of the dealer
to promote the sale of the Company's products in the geographic area the dealer
serves.
ENGINEERING AND MANUFACTURING
Dorsey considers its engineering expertise, combined with the manufacturing
experience of its work force, key competitive advantages. The Company utilizes
this experience and expertise in its marketing by including engineering and
manufacturing personnel in initial meetings with potential Dorsey customers to
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assist in defining and meeting the customer's objectives. This team approach
often results in new and unique ways of satisfying the customer's needs. The
process also ensures effective communication throughout the organization.
In response to customer demands and to reduce costs, the Company seeks ways
to reduce trailer weight and material content. The Company also seeks to improve
its manufacturing methods to reduce the labor required to build its products.
These efforts involve teams from all disciplines, including the manufacturing
work force.
Each of the Company's trailers is manufactured from highly customized
designs based on detailed customer specifications of each aspect of the trailer,
including dimensions, structural requirements, fabrication materials, component
parts and accessories. Examples of some of the custom design features available
include extra floor support for heavy loads, specialized door placements, pull
out steps and platforms at doors, fluorescent interior lighting systems, axle
systems, braking systems, and specialized placement of cargo tie downs. The
manufacturing process involves the fabrication of components. Additional
materials, which need no modification prior to assembly, are also utilized in
the manufacturing process. These materials include wood floors, tires, wheels,
axles and support gear. The Company believes that there are multiple sources of
raw materials used in the manufacturing process.
BACKLOG
The Company's backlog of orders was approximately $26 million, $44 million
and $180 million at December 31, 1996, 1995 and 1994, respectively. Dorsey
includes in backlog only those orders for trailers for which a confirmed
customer order has been received. Dorsey expects to fill all of these orders by
the end of 1997. The Company manufactures trailers only to customer or dealer
order and generally does not maintain an inventory of "stock" trailers in
anticipation of future orders. However, many of Dorsey's dealers do maintain an
inventory of trailers.
EMPLOYEES
As of December 31, 1996, the Company employed 984 persons, of whom 29 were
employed in engineering, 884 in manufacturing, 18 in sales and marketing, 16 in
materials and 37 in administration, finance and management.
Substantially all of the Company's manufacturing employees at the Elba,
Alabama plant are represented by the International Association of Machinists and
Aero Space Workers ("IAM") under a three year collective bargaining agreement
that expires April 30, 1999. The Cartersville, Georgia and Dillon, South
Carolina plants are non-union.
The Company considers its relationship with its employees to be
satisfactory.
COMPETITION
The truck trailer manufacturing industry is highly competitive and barriers
to entry are relatively low. Dorsey faces competition from numerous truck
trailer manufacturers of various sizes and financial strength. Dorsey is one of
the larger manufacturers of truck trailers. Some of the other largest
manufacturers are Great Dane Limited Partnership, Wabash National Corporation,
Strick Trailers, Inc., Monon Corporation, Trailmobile, Inc., Utility Trailer
Manufacturing Company, Stoughton Trailers, Inc., Fruehauf Trailer Corporation
and Hyundai Precision America, Inc. The Company competes on the basis of price,
product availability and delivery time, design and engineering innovations and
capabilities, product quality and durability, warranties, service,
manufacturer's financial viability, and customer relationships.
The truck trailer industry faces competition from other types of products
in markets, such as the domestic intermodal container and chassis market, in
which the Company currently does not compete. The Company currently has chosen
not to participate in the intermodal container market based upon its belief that
the opportunity for container differentiation is minimal and industry
manufacturing supply is more than adequate. However, Dorsey's engineering and
marketing teams remain current on developments in this
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industry segment and could quickly produce containers and container chassis if
the market dynamics were to become more favorable.
REGULATION
Truck trailer length, height, width, gross vehicle weight and other
specifications are regulated by the National Highway Traffic Safety
Administration and individual states. Changes and anticipated changes in these
regulations have resulted in significant fluctuations in demand for new
trailers, thereby contributing to industry cyclicality. The Company also is
governed by a variety of regulations established by various federal, state and
local agencies governing such matters including employee safety and working
conditions, environmental protection and other activities.
ENVIRONMENTAL MATTERS
Subsequent to the closing of the Company's Edgerton, Wisconsin plant in
1989, the Wisconsin Department of Natural Resources (WDNR) conducted an
environmental inspection that identified certain 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 an adjacent landfill site.
The Company has established accruals that it believes to be adequate to address
its environmental liabilities associated with these matters.
In December 1990, a leak was detected in an underground storage tank
containing an industrial solvent at the Elba, Alabama facility. The Company
notified the Alabama Department of Environmental Management ("ADEM") of the leak
and hired an environmental consulting firm to investigate the problem and
conduct corrective action. Based on the consultant's investigations and
discussions with ADEM, the Company does not expect the costs of corrective
action to exceed the accruals it has established for this purpose.
PATENTS AND TRADEMARKS
The Company has been issued a patent in the United States to protect the
design concept and manufacturing method of the Company's CargoGuard(R) van
trailer. The Company has been granted a trademark registration for the
CargoGuard(R) name in the United States.
ITEM 2 - PROPERTIES AND INSURANCE
The Company's design and manufacture of truck trailers are performed at
three facilities. Dry freight vans and refrigerated vans are produced at a
400,000 square foot facility on 74 acres in Elba, Alabama. Platform trailers are
produced at a 150,000 square foot facility on 16 acres in Cartersville, Georgia.
Dump trailers are produced at a 45,100 square foot facility in Dillon, South
Carolina. Management believes these facilities have sufficient manufacturing
capacity to produce the Company's current market share of the estimated industry
shipments for the foreseeable future.
The Company also owns an inactive 343,000 square foot plant in Edgerton,
Wisconsin and an inactive 92,000 square foot facility in Griffin, Georgia.
Additionally, in December, 1995, the Company closed its 144,000 square foot
plant on 40 acres in Northumberland, Pennsylvania. The Company's principal
executive offices are located in an approximately 7,000 square foot office in
Atlanta, Georgia, which is leased by the Company.
The Company maintains insurance to limit certain risks associated with its
business activities. The Company's comprehensive property policy insures
business interruption losses in addition to the Company's buildings, machinery
and inventory. The property insurance has a total limit of $84 million and a
flood sub-limit of $15 million, subject to a $100,000 deductible per occurrence.
In addition, the Company maintains insurance covering general, product and
workers' compensation liabilities with a per occurrence and annual aggregate
limit of $21 million, subject to a self-insured retention of $250,000 for each
occurrence ($350,000 for workers' compensation losses).
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ITEM 3 - LEGAL PROCEEDINGS
See "Business -- Environmental Matters" for a description of certain legal
proceedings. In April, 1995, a class action lawsuit alleging racial
discrimination was filed against the Company, and in the normal course of
business, the Company is a defendant in certain other 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 or results of operations.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
PRICE RANGE OF COMMON STOCK
Following the Company's initial public offering of Common Stock on July 28,
1994, the Company's Common Stock has traded on The Nasdaq Stock Market under the
symbol "DSYT". The following table sets forth, for the period indicated, the
high and low sales prices per share of the Common Stock as reported on The
Nasdaq Stock Market.
HIGH LOW
------- -------
1995
First Quarter....................................... $15.500 $10.500
Second Quarter...................................... $12.125 $ 8.750
Third Quarter....................................... $ 9.750 $ 7.500
Fourth Quarter...................................... $ 8.250 $ 5.125
1996
First Quarter....................................... $ 6.375 $ 3.000
Second Quarter...................................... $ 5.375 $ 2.875
Third Quarter....................................... $ 5.000 $ 3.750
Fourth Quarter...................................... $ 4.125 $ 3.125
1997
First Quarter (through March 28, 1997).............. $ 3.375 $ 2.250
As of March 3, 1997, the Common Stock was held by approximately 110 holders
of record and approximately 1,300 beneficial owners.
DIVIDEND POLICY
The Company intends to retain any future earnings to provide funds for the
operation and expansion of its business and does not anticipate paying any cash
dividends on the Common Stock in the foreseeable future. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources."
ITEM 6 - SELECTED FINANCIAL AND OPERATING DATA
The following tables set forth selected financial and operating data of the
Company. The selected financial data, except for the unaudited pro forma data,
as of December 31, 1996, 1995, 1994, 1993 and 1992 and for each of the five
years then ended have been derived from the Financial Statements of the Company
which have been audited by Price Waterhouse LLP, the Company's independent
accountants. Unaudited pro forma adjustments for 1994 and 1993 have been shown
to reflect the income tax provision which would have been made if the Company
had been a taxable corporation throughout such period. The information set forth
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below should be read in conjunction with the Financial Statements and notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
YEAR ENDED DECEMBER 31,
----------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
(IN THOUSANDS OF DOLLARS, EXCEPT PER SHARE AND
OPERATING DATA)
Statement of Operations Data:
Net sales................................... $157,366 $227,944 $205,625 $170,863 $125,473
Cost of sales............................... 156,214 215,048 189,474 159,258 119,861
-------- -------- -------- -------- --------
Gross profit............................. 1,152 12,896 16,151 11,605 5,612
Selling, general and administrative
expenses................................. 8,142 7,349 6,774 6,458 5,669
Provision for plant closing................. 611 350 500 500
-------- -------- -------- -------- --------
Operating income (loss)..................... (7,601) 5,197 9,377 4,647 (557)
Interest expense, net....................... 408 62 647 1,149 889
-------- -------- -------- -------- --------
Income (loss) before income taxes........ (8,009) 5,135 8,730 3,498 (1,446)
Provision for (benefit from) income taxes... (3,084) 891
-------- -------- -------- -------- --------
Net income (loss)........................ $ (4,925) $ 4,244 $ 8,730 $ 3,498 $ (1,446)
======== ======== ======== ======== ========
Net income (loss) per share.............. $ (0.99) $ 0.85
Weighted average shares outstanding......... 4,952 4,969
Unaudited Pro Forma Data(1):
Pro forma income taxes................... $ 1,805 $ 1,332
Pro forma net income (loss).............. 6,925 2,166 $ (1,446)
Pro forma net income per share........... 1.53 0.52
Pro forma weighted average shares
outstanding............................ 4,516 4,191
Operating Data:
Number of trailers sold..................... 8,595 12,276 12,010 10,190 7,496
Sales per employee.......................... $160,251 $174,938 $155,306 $154,627 $142,260
Balance Sheet Data (at end of period):
Total assets................................ $ 45,019 $ 47,449 $ 47,516 $ 23,902 $ 20,196
Long-term debt, including current portion... 9,876 10,315 8,755 14,413 15,143
Total stockholders' equity (deficit)........ 5,615 10,193 5,248 (12,312) (15,203)
- ---------------
(1) From inception of the Company in 1987 until the Company's initial public
offering in July 1994, the Company elected to be treated as an S
Corporation and, accordingly, was not subject to corporate income taxes.
Following the initial public offering, the Company became subject to
corporate income tax. Unaudited pro forma net income has been computed as
if the Company were subject to federal and state income taxes for all
periods presented, calculated in accordance with Statement of Financial
Accounting Standards ("FAS") No. 109, "Accounting for Income Taxes", based
on the tax laws in effect during the respective periods. The pro forma net
income per share calculation in 1993 includes the issuance of shares to
fund the payment of undistributed S Corporation earnings to the S
Corporation stockholders. See Note 7 of Notes to Financial Statements.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company's sales are derived primarily from the sale of truck trailers
and, to a lesser extent, replacement parts and accessories and used trailers.
The Company recognizes revenue from the sale of trailers after manufacturing is
complete, at which time title is transferred to the customer. Materials
represent approximately 75% of cost of sales, with the remainder consisting of
labor and factory overhead.
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INCLUSION OF FORWARD-LOOKING STATEMENTS
Certain statements in this Annual Report, including "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the "Letter To Our Stockholders" 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 to the Company,
reliance on certain customers, shortages of new materials, labor shortages or
work stoppage, dependence on industry trends, government regulations and new
technologies or products. Readers should review and consider the various
disclosures included elsewhere in this Annual Report.
RESULTS OF OPERATIONS
The following table sets forth the percentage relationship of expense items
to net sales for the periods indicated:
YEAR ENDED DECEMBER 31,
-----------------------
1996 1995 1994
----- ----- -----
Net sales............................................. 100.0% 100.0% 100.0%
Cost of sales......................................... 99.3 94.3 92.1
----- ----- -----
Gross profit.......................................... 0.7 5.7 7.9
Selling, general and administrative expenses.......... 5.2 3.2 3.3
Provision for plant closing........................... .4 0.2
----- ----- -----
Income (loss) from operations......................... (4.9) 2.3 4.6
Interest expense, net................................. .2 0.3
----- ----- -----
Income (loss) before income taxes..................... (5.1) 2.3 4.3
Provision for (benefit from) income taxes............. (2.0) .4
----- ----- -----
Net income (loss)..................................... (3.1)% 1.9% 4.3
===== =====
Unaudited pro forma income taxes...................... 0.9
-----
Unaudited pro forma net income........................ 3.4%
=====
Net Sales
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
-------- -------- --------
(IN THOUSANDS OF DOLLARS, EXCEPT
PERCENTAGE DATA)
Net sales.................................... $157,366 $227,944 $205,625
Percentage increase (decrease) in sales from
prior period............................... (31.0)% 10.9% 20.3%
Net sales for 1996 decreased 31.0% to $157.4 million from $227.9 million
for 1995. The 31% decrease in net sales represented a 30% decrease in the number
of trailers sold. The decrease in net sales and the number of trailers sold was
a direct result of the decrease in demand for trailers from customers, massive
overcapacity in the industry and, as a result of these factors, severe pricing
pressure.
Net sales for 1995 increased 10.9% to $227.9 million from $205.6 million
for 1994. The increase in 1995 net sales represented a 2.2% increase in new
trailer units sold. Net sales and number of units sold were
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adversely affected by the labor strike and eventual shutdown of the Company's
Pennsylvania plant. The increase in net sales in 1995 compared to 1994 reflected
the continued demand for the Company's products as well as the increased
manufacturing capacity resulting from the 1994 expansion of a dry freight line
at the Elba, Alabama plant. The Company's Cartersville, Georgia facility opened
in 1995 has a greater capacity than the closed Pennsylvania plant.
Net sales for 1994 increased 20.3% to $205.6 million from $170.9 million
for 1993. The increase in 1994 net sales represented a 17.9% increase in new
trailer units sold, reflecting strong demand for the Company's products.
Gross Profit
YEAR ENDED DECEMBER 31,
--------------------------
1996 1995 1994
------ ------- -------
(IN THOUSANDS OF DOLLARS,
EXCEPT PERCENTAGE DATA)
Gross profit.................................. $1,152 $12,896 $16,151
As a percentage of net sales.................. 0.7% 5.7% 7.9%
Gross profit as a percentage of net sales, or gross margin, decreased to
0.7% in 1996, from 5.7% in 1995, and gross profit decreased to $1.2 million in
1996. The decrease was largely due to the factors affecting the decrease in net
sales including substantially lower volume of trailers sold and depressed
selling prices resulting from very weak market demand due to excess production
capacity in the industry. Also contributing to the decrease was significant
start-up costs incurred in connection with the opening of the Company's flatbed
facility in Cartersville, Georgia.
Gross margin decreased to 5.7% in 1995 from 7.9% in 1994, and gross profit
decreased 20.2% to $12.9 million in 1995. This was largely due to the production
inefficiencies caused by the use of temporary workers to replace certain
striking union employees and raw material shortages. The advantages of the new
Georgia plant include lower hourly labor costs, an experienced non-union
workforce, and a more efficient manufacturing layout. Gross margin increased to
7.9% in 1994 from 6.8% in 1993, and gross profit increased 39.2% to $16.2
million in 1994. These improvements resulted primarily from manufacturing
efficiencies associated with increased volume, productivity gains,
cost-effective design changes and the Company's materials purchasing program.
Selling, General and Administrative Expenses
YEAR ENDED DECEMBER 31,
--------------------------
1996 1995 1994
------ ------ ------
(IN THOUSANDS OF DOLLARS,
EXCEPT PERCENTAGE DATA)
Selling, general and administrative
expenses.................................... $8,142 $7,349 $6,774
As a percentage of net sales.................. 5.2% 3.2% 3.3%
Selling, general and administrative ("S, G & A") expenses increased 10.8%
to $8.1 million for 1996 from $7.3 million for 1995. The increase in expenses
was primarily due to professional fees incurred in connection with strategic
planning opportunities. S, G & A, as a percentage of net sales, increased from
3.2% in 1995 to 5.2% in 1996; this increase was due primarily to the decrease in
net sales.
S, G & A expenses for 1995 increased 8.5% to $7.3 million from $6.8 million
for 1994, but declined as a percentage of net sales to 3.2% from 3.3%. S, G & A
expenses for 1994 increased 4.9% to $6.8 million from $6.5 million in 1993, but
declined as a percentage of net sales to 3.3% from 3.8%. The reduction in S, G &
A expenses as a percentage of net sales in 1995 and 1994 was due to efficiencies
gained through increased sales volume and the effects of the Company's cost
containment efforts.
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Provision for Plant Closing
The Company recorded $611,000 and $350,000 in 1996 and 1995, respectively,
for expenses relating to its closed facilities in Edgerton, Wisconsin and
Northumberland, Pennsylvania. The 1996 provision primarily relates to salaries,
repairs, maintenance and depreciation expense at the Northumberland plant. The
1995 provision includes the expenses relating to severance pay due to the 1995
shutdown of the Pennsylvania facility, in addition to depreciation expense on
the Wisconsin facility. The Company believes it has accrued adequate carrying
costs for the period it expects to hold the Wisconsin facility, however this
period may be extended due to the uncertainty involved in the environmental
remediation. See "Business -- Environmental Matters."
INTEREST EXPENSE, NET
YEAR ENDED DECEMBER 31,
--------------------------------------
1996 1995 1994
---------- ---------- ----------
(IN THOUSANDS OF DOLLARS, EXCEPT
PERCENTAGE DATA)
Interest expense, net................... $ 408 $ 62 $ 647
As a percentage of net sales............ 0.2% * 0.3%
- ---------------
* Represents less than 0.1%.
Net interest expense increased $346,000 to $408,000 for 1996. The increase
in interest expense is a result of the notes payable for the purchases of the
Cartersville, Georgia facility and the Dillon, South Carolina operation and the
reduction in interest income between the years 1996 and 1995. Net interest
expense decreased from $647,000 in 1994 to $62,000 in 1995. This decrease
primarily reflects a lower principal amount of debt outstanding and an increase
in interest income earned. Net interest expense decreased from $1.1 million in
1993 to $647,000 in 1994. This decrease was due to lower utilization of the
Company's revolving line of credit, the total repayment of mortgages on the
Company's Pennsylvania facility and the significant paydown of the Company's
Small Business Administration loan.
PROVISION FOR (BENEFIT FROM) INCOME TAXES AND NET INCOME (LOSS)
The Company reported a net loss of $4.9 million, or $.99 loss per share,
for 1996 as compared to net income of $4.2 million, or $0.85 per share for 1995.
The Company recorded a benefit for income taxes of $3.1 million in 1996 for an
effective income tax benefit rate of 38.5% as compared to a provision for income
taxes of $891,000 in 1995 for an effective income tax provision rate of 17.4%.
The lower effective income tax provision rate in 1995 was due to the utilization
of the deferred tax valuation reserve, which reduced the provision for income
taxes by $1.1 million. Net income for 1994 was $8.7 million. On a pro forma
basis, net income was $6.9 million, or $1.53 per share. See "Item 6 -- Selected
Financial and Operating Data" for discussion of the pro forma basis for 1994.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at December 31, 1996 were $101,000 as compared to
$7.7 million at December 31, 1995. The $7.6 million decrease in cash and cash
equivalents is due to funding of the Company's net losses of $4.9 million,
payment of scheduled debt of $1.0 million, the cash payment portion of the
purchase of the dump-trailer manufacturing operations in Dillon, South Carolina
of $1.2 million.
Net cash used in operating activities was $4.3 million for 1996 as compared
to net cash provided by operating activities of $3.7 million and $4.4 million
for 1995 and 1994, respectively. Cash used in operating activities for 1996 was
primarily used to fund the increase in inventory of $1.8 million, a $2.4 million
increase in income tax receivable, and operating losses of $4.9 million. The
increase in inventory was due to a $3.6 million increase in used trailers which
was offset by a decrease in raw materials of $1.9 million. The cash used by
operating activities for 1996 was primarily funded by the Company's cash and
cash equivalents and an increase in accounts payable. Cash provided by
operations for 1995 and 1994 was primarily provided by net income.
9
12
Net cash used in investing activities was $2.5 million, $15,000, and $3.6
million for 1996, 1995 and 1994, respectively. Net cash used in investing
activities for 1996 was used to fund $1.3 million for capital expenditures and
$1.2 million for the cash payment portion of the purchase of a dump trailer
manufacturing operations. In July 1996, the Company purchased the operations of
a dump trailer manufacturer for $1.8 million. An unsecured note payable of
$577,000 was issued to the seller at a floating prime interest rate. For 1995
capital expenditures were $4.0 million of which the Company funded $2.0 million
with cash. In November 1995, the Company purchased a facility in Cartersville,
Georgia for $2.0 million for the manufacture of flatbed trailers by issuing a
note payable to the seller in the amount of $2.0 million at a fixed interest
rate of 8.5%. For 1994 capital expenditures were $2.3 million which was funded
with cash. The capital expenditures for 1994 included $1.3 million to expand the
production capacity of the Elba, Alabama manufacturing plant.
Net cash used in financing activities was $800,000 and $5.5 million for
1996 and 1995, respectively. Net cash used in financing activities for 1996 was
used for the scheduled repayment of long-term debt. The net cash used in 1995
was primarily used for the distribution to stockholders of $5.2 million which
represented the previously taxed and undistributed earnings of the Company as a
result of the termination of the Company's S Corporation election. Net cash
provided by financing activities for 1994 was $8.4 million which was a result of
the $16.2 million the Company received from the issuance of 1,400,000 shares of
common stock in an initial public offering. The Company used the net proceed to:
(a) repay indebtedness of $4.4 million, (b) purchase a portion of a stock option
held by a director for $2.4 million, (c) fund capital expenditures of $1.1
million, and (d) add $8.3 million to working capital of which $5.2 million was
paid as an S Corporation distribution in 1994 and 1995.
Due to the Company's operating losses in 1996 the Company was in violation
of covenants covering tangible net worth, leverage, and fixed charges under its
$10 million line of credit with a financial institution. The Company had no
borrowings outstanding as of December 31, 1996, although $1,990,000 in letters
of credit were outstanding under this facility. On March 28, 1997, the Company
entered into a $14 million 5 year working capital line of credit ("Financing
Agreement") with an asset based lender to replace the prior $10 million working
capital line of credit. The Company's availability under the Financing Agreement
changes daily based on the level of eligible accounts receivable and
inventories. As of March 28, 1997, the Company had $3.2 million outstanding,
including $1,990,000 of letters of credit and had $6.9 million of availability
under the Financing Agreement. See Note 13 of the Notes to the Financial
Statements for further discussion on the Financing Agreement.
The Company has experienced a significant tightening of its liquidity
beginning in the fourth quarter of 1996 and continuing to date. This situation
results primarily from continuing operating losses and a higher than normal
level of inventory of used trailers. With many customers purchasing replacement
trailers only, the Company has had to increase its acceptance of used trailers
as trade-ins in order to obtain certain new trailer orders. By accepting
trade-ins, cash is not received until after the subsequent sale of the used
trailers. As of December 31, 1996 the Company's inventory of used trailers was
$4.0 million and its purchase commitments for used trailers was $15.4 million.
Subsequent to December 31, 1996, management decided to sell certain used
trailers quickly at lower than normal pricing in order to generate cash to meet
its obligations. As a result, the Company has incurred losses on the sale of
used trailers through March 28, 1997 of approximately $1.5 million. Additionally
due to management's decision to sell the Company's inventory of used trailers as
quickly as possible and the effect thereon on used trailer values, the Company
has reduced the value of its remaining used trailers by $1.8 million.
With the closing of the new $14 million Financing Agreement, management
believes that sufficient funds will be advanced under the Financing Agreement
and from the sale of used trailers in order for the Company to timely meet its
obligations. The Company's projected cash flows assume the continued receipt of
materials from trade vendors on generally the same terms as the Company is
currently receiving and that the Company is able to increase sales prices
moderately during the second half of 1997.
10
13
ACCOUNTING STANDARDS
In June 1996, the Financial Accounting Standards Board issued FAS No. 125,
"Accounting for Transfers and Servicing of Financial Assets and Extinguishments
of Liabilities." FAS No. 125 provides accounting and reporting standards for
transfers and servicing of financial assets and extinguishments of liabilities.
FAS No. 125 requires an entity to recognize each of the components of the
financial instruments which it controls, derecognize the components of the
assets it has surrendered control over and derecognize liabilities which it has
paid or been legally released from. FAS No. 125 is effective for fiscal years
beginning after December 31, 1996. As the Company does not presently transfer
and/or service financial assets and/or liabilities as defined by FAS No. 125,
management does not believe the adoption of FAS No. 125 will have a significant
impact on the Company's financial position or results of operations but may
require additional disclosures regarding assets assigned as collateral to the
Company's debt.
In October of 1996, American Institute of Certified Public Accountants
issued Statement of Position 96-1, "Environmental Remediation Liabilities" (SOP
96-1). SOP 96-1 requires that environmental remediation liabilities should be
accrued when the criteria of FAS No. 5, "Accounting for Contingencies", are met.
SOP 96-1 provides guidance on what the accrual for environmental liabilities
should include and the measurement of the liability. SOP 96-1 is effective for
the Company beginning in 1997. Management has reviewed its current methodology
regarding accrual for environmental liability, and management does not believe
that the adoption of SOP 96-1 will have a materially adverse impact on the
Company's financial position or results of operations.
SEASONALITY AND INFLATION
Unit sales of new trailers are generally not affected by seasonal factors.
However, new trailer unit sales have historically been subject to cyclical
variation based upon general economic conditions. The federal government also
regulates certain trailer features, particularly with respect to safety. Any
changes in these regulations apply generally to all manufacturers in the
industry and can have a significant impact on industry sales. Long-term domestic
growth in demand for truck trailers has generally been in line with increases in
the United States Gross Domestic Product. However, in the short to intermediate
term, new trailer sales can be very cyclical. The short to intermediate term
cycle of trailer sales is also impacted by the environment for new business
investment in equipment particularly in the trucking industry.
The Company has not been materially impacted by inflation in the past three
years.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The response to this item is submitted in Part IV, Item 14 of this report.
ITEM 9 - CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The Company hereby incorporates by reference the information under the
headings "Proposal I -- Election of Directors -- Director and Director Nominee
Information" and -- "Executive Officers of the Company" from its definitive
Proxy Statement to be delivered to the stockholders of the Company in connection
with the 1997 Annual Meeting of Stockholders to be held April 30, 1997.
11
14
ITEM 11 - EXECUTIVE COMPENSATION
The Company hereby incorporates by reference the information contained
under the headings "Proposal I -- Election of Directors -- Executive
Compensation" from its definitive Proxy Statement to be delivered to the
stockholders of the Company in connection with the 1997 Annual Meeting of
Stockholders to be held April 30, 1997. In no event shall the information
contained in the Proxy Statement under the headings "Stockholder Return
Comparison" and "Report of the Compensation Committee of the Board of Directors"
be incorporated herein by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The Company hereby incorporates by reference the information contained
under the heading "Proposal I -- Election of Directors -- Principal Stockholders
of the Company" from its definitive Proxy Statement to be delivered to the
stockholders of the Company in connection with the 1997 Annual Meeting of
Stockholders to be held April 30, 1997.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company hereby incorporates by reference the information contained
under the headings "Proposal I -- Election of Directors -- Executive
Compensation -- Compensation Committee Interlocks and Insider Participation" and
"-- Certain Transactions" from its definitive Proxy Statement to be delivered to
the stockholders of the Company in connection with the 1997 Annual Meeting of
Stockholders to be held April 30, 1997. Additionally, see Note 13 of the Notes
to Financial Statements for related party transactions.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following financial statements of Dorsey Trailers, Inc., incorporated
by reference into Item 8, are attached hereto:
PAGE
NUMBER
------
Report of Independent Accountants........................... F-1
Balance Sheets as of December 31, 1996 and 1995............. F-2
Statements of Operations for the years ended December 31,
1996, 1995 and 1994....................................... F-3
Statements of Changes in Stockholders' Equity (Deficit) for
the years ended December 31, 1996, 1995 and 1994.......... F-4
Statements of Cash Flows for the years ended December 31,
1996, 1995 and 1994....................................... F-5
Notes to Financial Statements............................... F-6
2. Financial Statement Schedules
Schedule VIII -- Valuation and Qualifying Accounts.......... F-21
All other schedules have been omitted because the schedules are either
inapplicable or the information required is included in the financial statements
or notes thereto.
12
15
INDEX TO EXHIBITS
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION OF EXHIBITS NUMBERED PAGE
------- ----------------------- -------------
3.1 Certificate of Incorporation of the Company.*
3.2 Bylaws of the Company.**
4.1 See Exhibits 3.1 and 3.2 for provisions of the Certificate
of Incorporation and the Bylaws of the Company defining the
rights of holders of Common Stock.
4.2 Form of Common Stock certificate of the Company.**
10.1 Accounts Financing Agreement between Congress Financial
Corporation and the Company, dated August 8, 1990.*
10.2 First Consolidated Amendment to Accounts Financing Amendment
by and between the Company and Congress Financial
Corporation, dated June 28, 1993.*
10.3 Intercreditor Agreement by and between the U.S. Small
Business Administration and Congress Financial Corporation,
dated August 8, 1990.*
10.4 First Amendment to the Intercreditor Agreement by and
between the U.S. Small Business Administration and Congress
Financial Corporation, dated June 28, 1993.*
10.5 Limited Guarantee and Waiver by Marilyn R. Marks dated June
28, 1993.*
10.6 Trademark Security Agreement between Congress Financial
Corporation and the Company, dated June 28, 1993.*
10.7 Blocked Account Agreement by and among Citizens and Southern
National Bank, Congress Financial Corporation and the
Company, dated March 5, 1991.*
10.8 Loan Authorization and Agreement between the U.S. Small
Business Administration and the Company, dated May 3, 1990.*
10.9 Letter amending the Loan Authorization and Agreement between
the U.S. Small Business Administration and the Company,
dated August 6, 1990.*
10.10 Letter amending the Loan Authorization and Agreement between
the U.S. Small Business Administration and the Company,
dated May 4, 1992.*
10.11 Letter amending the Loan Authorization and Agreement between
the U.S. Small Business Administration and the Company,
dated May 18, 1994.*
10.12 Agreement between the Company and International Association
of Machinists and Aero Space Workers, Local Lodge No. 1769,
dated May 1, 1993.*
10.13 Agreement between the Company and International Union,
United Automobile Aerospace and Agricultural Implement
Workers of America for and on behalf of, UAW Local 1868,
dated March 4, 1992.*
10.14 Shareholder Agreement by and among Trailers Acquisition
Corp. (a predecessor of the Company) and certain
stockholders of the Company, dated March 16, 1987.*
10.15 First Amendment to Shareholder Agreement and Agreement with
Former Shareholder by and among the Company, the
stockholders of the Company and a former stockholder of the
Company, dated April 11, 1988.*
13
16
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION OF EXHIBITS NUMBERED PAGE
------- ----------------------- -------------
10.16 Dorsey Trailers, Inc. Marks/Rymer Shareholders Agreement by
and among the Company, Marilyn R. Marks and Hoyle Rymer,
dated January 12, 1993.*
10.17 Dorsey Trailers, Inc. Shareholder Agreement by and among the
Company and certain stockholders of the Company, dated
February 25, 1994.*
EXECUTIVE COMPENSATION PLANS AND ARRANGEMENTS
10.18 Form of Stock Option Agreement by and among the
Company, Marilyn R. Marks and each of T. Charles
Chitwood, Charles W. Mudd, David A. Kemp and H.
Douglas Allgood.*
10.19 Dorsey Trailers, Inc. 1994 Long-Term Incentive
Plan.**
10.20 Dorsey Trailers, Inc. 1994 Profit Plan.*
10.21 Dorsey Trailers, Inc. Amended and Restated
Salaried Employees' Retirement Plan, effective
January 1, 1989.**
10.22 Dorsey Trailers, Inc. Amended and Restated
Salaried Employees' Savings Incentive Plan, effective
January 1, 1989.*
10.23 Dorsey Trailers, Inc. (Edgerton, Wisconsin
Division) Amended and Restated International Union
Industrial Workers of America Local #786
Employees' Pension Plan, effective January 1,
1989.*
10.24 Dorsey Trailers, Inc. Northumberland,
Pennsylvania Plant Revised and Restated U.A.W. Local
#1868 Hourly Employees' Retirement Plan, effective
January 1, 1989.*
10.25 Form of the Dorsey Trailers, Inc. 1994 Stock
Plan for Non-Employee Directors.**
10.25(a) Registration Agreements between the Company and
T. Charles Chitwood, Charles W. Mudd, David A. Kemp
and H. Douglas Allgood, respectively, dated January
1995.***
10.26 Promissory Note between the Company and Marilyn R. Marks,
dated January 12, 1993.*
10.27 Promissory Note between the Company and Marilyn R. Marks,
dated June 10, 1988.*
10.28 First Amendment to Promissory Note between the Company and
Marilyn R. Marks, dated June 10, 1991.*
10.29 Second Amendment to Promissory Note between the Company and
Marilyn R. Marks, dated June 6, 1994.**
10.30 Non-Negotiable Promissory Note between the Company and
Marilyn R. Marks, dated April 14, 1994.**
10.31 Dorsey Trailers, Inc. Excess Benefit Plan, effective May 1,
1994.**
10.32 Form of Indemnity Agreement between the Company and each
director and executive officer of the Company.**
10.33 Fifth Amendment to Accounts Financing Agreement by and
between the Company and Congress Financial Corporation,
dated May 3, 1994.**
10.34 Collateral Assignment of Certificate of Deposit by and
between the Company and Congress Financial Corporation,
dated May 3, 1994.**
10.35 Sixth Amendment to Accounts Financing Agreement by and
between the Company and Congress Financial Corporation,
dated November 1, 1994.***
14
17
EXHIBIT SEQUENTIALLY
NUMBER DESCRIPTION OF EXHIBITS NUMBERED PAGE
------- ----------------------- -------------
10.36 Revolving Credit and Reimbursement Agreement by and between
the Company and NationsBank of Georgia, National
Association, dated August 11, 1995.****
10.37 Real Estate and Deed to Secure Debt by and between the
Company and Glenn T. Taylor and Bankhead Enterprises, Inc.,
dated November 14, 1995.****
10.38 First Amendment to Revolving Credit and Reimbursement
Agreement by and between the Company and NationsBank of
Georgia, National Association, dated June 11, 1996.*****
10.39 Agreement between the Company and International Association
of Machinists and Aerospace Workers, Local Lodge No. 1769,
dated May 1, 1996.
10.40 Asset Purchase Agreement by and among Dorsey Trailers, Inc.,
Carolina Coastal Investors, Inc and David Cottingham, dated
as of July 1, 1996 (the Registrant agrees to furnish a copy
of any schedule omitted to the Commission upon request).
- ---------------
* Incorporated by reference from the exhibit of the same number in the
Registrant's Registration Statement on Form S-1 (File No. 33-79404) dated
May 26, 1994.
** Incorporated by reference from the exhibit of the same number in the
Registrant's Registration Statement on Form S-1 (File No. 33-79404) dated
May 26, 1994, as amended on July 8, 1994.
*** Incorporated by reference from the Registrant's form 10-K for the year
ended December 31, 1994.
**** Incorporated by reference from the Registrant's Form 10-K for the year
ended December 31, 1995.
***** Incorporated by reference from the Registrant's Form 10-Q for the quarter
ended June 29, 1996.
15
18
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant had duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on March 28, 1997.
DORSEY TRAILERS, INC.
By: /s/ MARILYN R. MARKS
--------------------------------------
Marilyn R. Marks
President, Chief Executive Officer
and Chairman of the Board
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, this report has been signed below by the following persons
on behalf of the Registrant in the capacities indicated on March 28, 1997.
SIGNATURE TITLE
--------- -----
/s/ MARILYN R. MARKS President, Chief Executive Officer and
- -------------------------------------------------------- Chairman of the Board of Directors
Marilyn R. Marks
/s/ T. CHARLES CHITWOOD Vice President -- Finance
- -------------------------------------------------------- (Principal Financial and Accounting Officer)
T. Charles Chitwood
/s/ ERNEST LORCH Director
- --------------------------------------------------------
Ernest Lorch
/s/ LAWRENCE E. MOCK, JR. Director
- --------------------------------------------------------
Lawrence E. Mock, Jr.
/s/ J. HOYLE RYMER Director
- --------------------------------------------------------
J. Hoyle Rymer
/s/ NEIL A. SPRINGER Director
- --------------------------------------------------------
Neil A. Springer
16
19
ANNUAL REPORT ON FORM 10-K
Item 14 (a) 1. and 2.
Financial Statements and Financial Statement Schedules
17
20
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Dorsey Trailers, Inc.
In our opinion, the financial statements listed in the index appearing
under Item 14(a) (1) and (2) on page 13 present fairly, in all material
respects, the financial position of Dorsey Trailers, Inc. at December 31, 1996
and 1995, and the results of its operations and its cash flows for each of the
three years in the period ended December 31, 1996, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Atlanta, Georgia
January 20, 1997, except for Note 13 which
is as of March 28, 1997
F-1
21
DORSEY TRAILERS, INC.
BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
DECEMBER 31,
--------------------
1996 1995
------- -------
ASSETS
Current assets
Cash and cash equivalents................................. $ 101 $ 7,738
Accounts receivable, less allowance for doubtful accounts
of $168 and $250....................................... 8,296 9,394
Inventories............................................... 19,002 16,771
Prepaid expenses and other assets......................... 2,990 663
------- -------
Total current assets.............................. 30,389 34,566
Property, plant and equipment, net.......................... 9,681 9,459
Deferred income taxes....................................... 3,953 3,418
Other assets................................................ 996 6
------- -------
Total assets...................................... $45,019 $47,449
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt......................... $ 705 $ 1,011
Accounts payable.......................................... 18,126 15,568
Accrued wages and employee benefits....................... 4,403 5,004
Accrued expenses.......................................... 4,299 3,669
------- -------
Total current liabilities......................... 27,533 25,252
Long-term debt.............................................. 9,171 9,304
Accrued pension liability................................... 1,600 1,600
Accrued warranty............................................ 1,100 1,100
------- -------
Total liabilities................................. 39,404 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................................ 2,339 2,086
Retained earnings......................................... 3,304 8,229
Unrecognized pension liability............................ (77) (171)
------- -------
Total stockholders' equity........................ 5,615 10,193
Commitments and contingencies (Note 9)...................... -- --
------- -------
Total liabilities and stockholders' equity........ $45,019 $47,449
======= =======
The accompanying notes are an integral part of these financial statements.
F-2
22
DORSEY TRAILERS, INC.
STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
YEAR ENDED DECEMBER 31,
--------------------------------
1996 1995 1994
-------- -------- --------
Net sales................................................... $157,366 $227,944 $205,625
Cost of sales............................................... 156,214 215,048 189,474
-------- -------- --------
Gross profit.............................................. 1,152 12,896 16,151
Selling, general and administrative expenses................ 8,142 7,349 6,774
Provision for plant closing................................. 611 350
-------- -------- --------
Income (loss) from operations............................... (7,601) 5,197 9,377
Interest expense, net....................................... 408 62 647
-------- -------- --------
Income (loss) before income taxes......................... (8,009) 5,135 8,730
Provision for (benefit from) income taxes................... (3,084) 891
-------- -------- --------
Net income (loss)......................................... $ (4,925) $ 4,244 $ 8,730
======== ======== ========
Net income (loss) per share............................... $ (0.99) $ 0.85
======== ========
Weighted average number of common and common share
equivalents............................................ 4,952 4,969
======== ========
Unaudited pro forma data
Income before provision for income taxes.................. $ 8,730
Provision for income taxes................................ 1,805
--------
Net income................................................ $ 6,925
========
Net income per share...................................... $ 1.53
========
Weighted average number of common and common share
equivalents used in the pro forma net income per share
calculation............................................... 4,516
========
The accompanying notes are an integral part of these financial statements.
F-3
23
DORSEY TRAILERS, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
(IN THOUSANDS, EXCEPT SHARE DATA)
RETAINED
COMMON STOCK ADDITIONAL COMMON EARNINGS UNRECOGNIZED
------------------ PAID-IN STOCK (ACCUMULATED PENSION TREASURY
SHARES AMOUNT CAPITAL WARRANTS DEFICIT) LIABILITY STOCK
--------- ------ ---------- -------- ------------ ------------ --------
Balance, December 31, 1993.......... 3,901,682 $39 $ 703 $140 $(12,335) $(335) $(34)
Net income.......................... 8,730
Net proceeds from sale of common
stock............................. 1,400,000 14 16,215
Reclassification of accumulated
deficit to paid-in capital........ (7,590) 7,590
Accrued distribution to
stockholders...................... (5,743)
Repurchase of stock option from a
director.......................... (195,084) (2,311) (47)
Capital contribution of stock by
stockholder and cancellation by
Company........................... (55,876) (2) 2
Treasury shares canceled............ (50,722) (1) (33) 34
Issuance of common stock to non-
employee directors................ 1,728 22
Proceeds from stock purchase
notes.............................
Record unrecognized pension
liability......................... 190
--------- --- ------- ---- -------- ----- ---
Balance, December 31, 1994.......... 5,001,728 50 1,265 93 3,985 (145)
Net income.......................... 4,244
Reversal of accrued distribution to
stockholders...................... 409
Exercise of options................. 93 (93)
Record unrecognized tax benefit of
stock option compensation......... 296
Capital contribution of stock by
stockholder and cancellation by
Company........................... (14,989) (1) 1
Issuance of common stock to non-
employee directors................ 2,115 22
Record unrecognized pension
liability......................... (26)
--------- --- ------- ---- -------- ----- ---
Balance, December 31, 1995.......... 4,988,854 49 2,086 8,229 (171)
Net loss............................ (4,925)
Record unrecognized tax benefit of
stock option compensation......... 223
Issuance of common stock to non-
employee directors................ 8,568 30
Record unrecognized pension
liability......................... 94
--------- --- ------- ---- -------- ----- ---
Balance, December 31, 1996.......... 4,997,422 $49 $ 2,339 $ -- $ 3,304 $ (77) $ --
========= === ======= ==== ======== ===== ===
STOCK
PURCHASE
NOTE TOTAL
-------- --------
Balance, December 31, 1993.......... $(490) $(12,312)
Net income.......................... 8,730
Net proceeds from sale of common
stock............................. 16,229
Reclassification of accumulated
deficit to paid-in capital........
Accrued distribution to
stockholders...................... (5,743)
Repurchase of stock option from a
director.......................... (2,358)
Capital contribution of stock by
stockholder and cancellation by
Company...........................
Treasury shares canceled............
Issuance of common stock to non-
employee directors................ 22
Proceeds from stock purchase
notes............................. 490 490
Record unrecognized pension
liability......................... 190
----- --------
Balance, December 31, 1994.......... 5,248
Net income.......................... 4,244
Reversal of accrued distribution to
stockholders...................... 409
Exercise of options.................
Record unrecognized tax benefit of
stock option compensation......... 296
Capital contribution of stock by
stockholder and cancellation by
Company...........................
Issuance of common stock to non-
employee directors................ 22
Record unrecognized pension
liability......................... (26)
----- --------
Balance, December 31, 1995.......... 10,193
Net loss............................ (4,925)
Record unrecognized tax benefit of
stock option compensation......... 223
Issuance of common stock to non-
employee directors................ 30
Record unrecognized pension
liability......................... 94
----- --------
Balance, December 31, 1996.......... $ -- $ 5,615
===== ========
The accompanying notes are an integral part of these financial statements.
F-4
24
DORSEY TRAILERS, INC.
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
YEAR ENDED DECEMBER 31,
---------------------------
1996 1995 1994
------- ------- -------
Cash flows from operating activities
Net income (loss)......................................... $(4,925) $ 4,244 $ 8,730
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities
Depreciation and amortization.......................... 1,440 1,179 899
Issuance of common stock to non-employee directors..... 30 22 22
Change in assets and liabilities
Decrease (increase) in accounts receivable........... 1,098 457 (4,821)
(Increase) decrease in inventories................... (1,771) 1,034 (4,964)
Increase in prepaid expenses and other current
assets.............................................. (2,327) (583) (45)
Increase (decrease) in accounts payable.............. 2,558 (2,169) 4,531
(Decrease) increase in accrued wages and employee
benefits............................................ (449) 585 1,164
Increase in accrued expenses......................... 630 605 277
Decrease (increase) in other assets.................. 1 281 (234)
Increase in deferred income taxes.................... (593) (1,778) (1,533)
(Decrease) increase in other liabilities............. (198) 369
------- ------- -------
Net cash (used in) provided by operating
activities...................................... (4,308) 3,679 4,395
------- ------- -------
Cash flows from investing activities
Purchase of business assets............................... (1,198)
Capital expenditures...................................... (1,338) (2,015) (2,287)
Redeem (purchase) certificates of deposit................. 2,000 (1,300)
------- ------- -------
Net cash used in investing activities............. (2,536) (15) (3,587)
------- ------- -------
Cash flows from financing activities
Payments of long-term debt................................ (1,016) (490) (5,454)
Tax benefit from exercise of stock options................ 223 296
Proceeds from stock purchase notes........................ 323
Net proceeds from sale of common stock.................... 16,229
Repurchase of stock option from a director................ (2,358)
Distribution to stockholders.............................. (5,029) (305)
------- ------- -------
Net cash (used in) provided by financing
activities...................................... (793) (5,223) 8,435
------- ------- -------
(Decrease) increase in cash and cash equivalents............ (7,637) (1,559) 9,243
Cash and cash equivalents at beginning of year.............. 7,738 9,297 54
------- ------- -------
Cash and cash equivalents at end of year.................... $ 101 $ 7,738 $ 9,297
======= ======= =======
Supplemental disclosures of cash flow information
Cash paid during the year for interest.................... $ 384 $ 431 $ 891
======= ======= =======
Cash paid during the year for income taxes................ $ 36 $ 2,686 $ 1,777
======= ======= =======
Disclosure of non-cash investing and financing activities
Issuance of note payable for acquisition of property...... $ 577 $ 2,050
======= =======
Accrued stockholder distributions......................... $ 5,238
=======
The accompanying notes are an integral part of these financial statements.
F-5
25
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS
1. DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Company designs, manufactures and markets truck trailers. Significant
accounting policies followed by the Company are summarized below:
INITIAL PUBLIC OFFERING
On July 28, 1994, the Company sold 1,400,000 shares of common stock in an
initial public offering (the "Offering") and selling stockholders sold 670,000
shares including the over-allotment option of shares. The net proceeds received
by the Company were $16.2 million and were used to reduce debt, repurchase stock
option from a director, fund capital expenditures and fund a distribution to the
S Corporation stockholders (see Note 7).
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid investment instruments
with an original maturity of three months or less.
REVENUE RECOGNITION AND ACCOUNTS RECEIVABLE
The Company recognizes revenue from the sale of trailers when title and
risks of ownership are transferred to the customer, which generally is upon
shipment or customer pick-up. A customer may be invoiced for and receive title
to trailers prior to taking physical possession when the customer has made a
fixed written commitment to purchase, the trailers have been completed and are
available for pick-up or delivery, and the customer has requested the Company to
hold the trailers until the customer determines the most economical means of
taking physical possession. Upon such a request, the Company has no further
obligation except to segregate the trailers, invoice them under normal billing
and credit terms, and hold them for a short period of time as is customary in
the industry, generally for two weeks, until pick-up or delivery. Trailers are
built to customer specification and no right of return or exchange privileges
are granted. Accordingly, no provision for sales allowances or returns is
recorded.
For the year ended 1996, sales to one customer exceeded 10% of the
Company's total sales. For 1996, total sales to one customer were $16.0 million.
For the years ended 1995 and 1994, no one customer represented greater than 10%
of total sales of the Company. The Company markets its products directly to
national accounts and through a nationwide network of dealers into all of the
major segments of the trucking industry. The diverse customer base reduces the
risk of concentration in any market segment or geographical area. Although the
Company is affected by the credit worthiness of its customers, management does
not believe significant credit risk exists at December 31, 1996. The Company
generally does not require collateral and maintains accruals for potential
credit losses.
INVENTORIES
Inventories are stated primarily at the lower of first-in, first-out (FIFO)
cost or market values. Used trailers are carried at the lower of their estimated
net realizable value or cost.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is stated at cost. Depreciation is provided
using the straight-line method over the estimated lives of the assets ranging
from five to twenty years. Maintenance and repairs are charged to expense as
incurred; expenditures for renewals and betterments are capitalized. When assets
are retired or otherwise disposed of, the property accounts are relieved of
costs and accumulated depreciation and any resulting gain or loss is credited or
charged to income.
F-6
26
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
POSTRETIREMENT MEDICAL AND LIFE INSURANCE BENEFITS
The Company accrues the estimated cost of retiree benefit payments, other
than pensions, during employees' active service period in accordance with
Statement of Financial Accounting Standards ("FAS") No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions".
INCOME TAXES
From its inception through July 28, 1994, the Company elected to be taxed
as an S Corporation, whereby the income tax effect of the Company's activities
accrued directly to its stockholders. Accordingly, no provision for income taxes
is included in the accompanying financial statements through July 28, 1994. At
the time of the Offering, the Company's S Corporation election terminated and in
connection therewith the Company adopted the provisions of FAS No. 109,
"Accounting for Income Taxes". FAS No. 109 requires recognition of deferred tax
assets and liabilities for the expected future tax consequences of events that
have been included in the financial statements or tax returns. Using the enacted
tax rate in effect for the year in which the differences are expected to
reverse, deferred tax assets and liabilities are determined based on the
differences between the financial reporting basis and income tax basis of assets
and liabilities.
ACCRUED WARRANTY
The Company provides for warranty costs at the time of sale based on
experience and management's judgment. The portion of the warranty reserve
expected to be paid beyond one year is classified as noncurrent in the
accompanying financial statements.
ENVIRONMENTAL ACCRUAL
The Company accrues environmental costs when it is probable that the
Company has incurred a liability and the amount can be reasonably estimated.
Estimated costs associated with closure/postclosure are accrued over the
facilities' estimated remaining useful lives. Accruals for environmental
liabilities are included in accrued expenses at undiscounted amounts and exclude
claims for recoveries from insurance companies or other third parties.
Environmental costs are capitalized if they extend the life of the related
property, increase its capacity or mitigate or prevent future contamination.
GOODWILL
Goodwill represents the excess of the aggregate price paid by the Company
in acquisitions accounted for as purchases over the fair market value of the net
tangible assets acquired. Goodwill is being amortized on a straight-line basis
over 15 years. The carrying value of the goodwill is evaluated for indications
of possible impairment whenever events or changes in circumstances indicate that
the carrying value of an intangible asset may not be recoverable.
Goodwill was $991,000 at December 31, 1996 net of accumulated amortization
of $34,000. There was no goodwill in 1995.
SIGNIFICANT ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect 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.
F-7
27
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
NET INCOME PER SHARE
Net income per share is computed using the weighted average number of
common shares and common share equivalents outstanding during the period. Common
stock equivalents consist of the Company's common shares issuable upon the
exercise of stock options using the treasury stock method.
UNAUDITED PRO FORMA NET INCOME PER SHARE
Unaudited pro forma net income per share is computed using the weighted
average number of common shares and common share equivalents outstanding during
each period as adjusted for the stock split (see Note 8). Common share
equivalents consist of the Company's common shares issuable upon the exercise of
stock options using the treasury stock method.
RECLASSIFICATION
Certain 1995 and 1994 amounts have been reclassified to conform to the 1996
presentation.
2. INVENTORIES
Inventories are summarized as follows:
DECEMBER 31,
------------------
1996 1995
------- -------
(IN THOUSANDS OF
DOLLARS)
Raw materials............................................... $ 8,376 $10,284
Work-in-process............................................. 5,833 4,948
Finished trailers........................................... 981 1,312
Used trailers............................................... 3,812 227
------- -------
$19,002 $16,771
======= =======
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are summarized as follows:
DECEMBER 31,
------------------
1996 1995
------- -------
(IN THOUSANDS OF
DOLLARS)
Land........................................................ $ 688 $ 688
Building.................................................... 6,270 6,000
Equipment................................................... 10,516 9,178
------- -------
17,474 15,866
Less -- Accumulated depreciation............................ 7,793 6,407
------- -------
$ 9,681 $ 9,459
======= =======
At December 31, 1996, property, plant and equipment include land and
buildings held for sale as idle facilities of $760,000 in Northumberland,
Pennsylvania (see Note 10), and $280,000 in Edgerton, Wisconsin. The assets are
recorded at net book value which management believes is less than net realizable
value.
In November, 1995, the Company acquired a manufacturing facility in
Cartersville, Georgia, which was financed with the issuance of a note payable to
the seller.
F-8
28
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
4. REVOLVING LINE OF CREDIT
At December 31, 1996, the Company had a $10 million revolving line of
credit, including a $3 million letter of credit facility, with a financial
institution. The revolving line of credit was secured by substantially all of
the assets of the Company. Due to the Company's 1996 net loss, the Company was
in violation of covenants covering tangible net worth, leverage, and fixed
charges. The lender did not agree to waive this event of default and informed
the Company that funding requests under this agreement would not be honored as
long as the covenant violations existed. The Company had no borrowings
outstanding under this facility at December 31, 1996, although $1,990,000 in
letters of credit were outstanding under this facility.
Subsequent to year-end, the Company has completed negotiations with an
asset-based lender to provide a working capital line of credit. See Footnote 13
"Subsequent Events" for a discussion of the Company's new revolving line of
credit.
5. LONG-TERM DEBT
Long-term debt consists of the following:
DECEMBER 31,
-----------------
1996 1995
------ -------
(IN THOUSANDS OF
DOLLARS)
Note payable to Small Business Administration bearing
interest at 4%, payable in equal monthly principal and
interest installments of $69,000, secured by substantially
all of the Company's assets (subordinated to all other
notes payable)............................................ $7,296 $ 8,265
Note payable bearing interest at 8.5%, payable in quarterly
principal and interest installments of $89,250 commencing
in 1997, due 2005, secured by property, plant and
equipment................................................. 2,050 2,050
Note payable bearing interest at the prime rate, payable in
monthly principal and interest installments of $11,779,
due 2001, unsecured....................................... 530
------ -------
9,876 10,315
Less -- Current portion of long-term debt................... 705 1,011
------ -------
$9,171 $ 9,304
====== =======
In addition to the monthly principal and interest installments of $69,000
to the Small Business Administration, the Company is required to make
supplemental annual payments equal to 50% of the Company's net operating income,
as defined in the agreement, in excess of $3,000,000. At December 31, 1996, no
supplemental payment was required. At December 31, 1995, the current portion of
long-term debt includes $500,000 for the 1995 required supplemental payment.
During 1994, the required supplemental payment of $1.0 million was made in
addition to payments of $3.4 million from the proceeds of the Offering.
F-9
29
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
As of December 31, 1996, aggregate principal maturities of long-term debt
are as follows (in thousands of dollars):
YEAR ENDING
DECEMBER 31,
- ------------------------------------------------------------
1997...................................................... $ 705
1998...................................................... 877
1999...................................................... 923
2000...................................................... 979
2001...................................................... 968
Thereafter................................................ 5,424
------
$9,876
======
6. RETIREMENT AND EMPLOYEE BENEFIT PLANS
PENSION PLANS
The Company has a noncontributory defined-benefit retirement plan covering
all salaried employees and two noncontributory defined-benefit plans covering
certain former hourly employees who have met certain plan eligibility
provisions. Benefits under the hourly employees' plans are based on years of
service while benefits under the salaried employees' plan are based on years of
service and the employee's compensation during the five consecutive calendar
years prior to retirement. The Company makes contributions as required to
maintain the plans on an actuarially sound basis.
The following tables summarize the plans' funded status and amounts
recognized in the Company's financial statements:
DECEMBER 31,
--------------------------
1996 1995
---------- ----------
(IN THOUSANDS OF DOLLARS)
Actuarial present value of accumulated benefit obligation:
Vested.................................................... $ 5,525 $ 5,455
Nonvested................................................. 120 132
------- -------
$ 5,645 $ 5,587
======= =======
Projected benefit obligation for services rendered to
date...................................................... $ 6,279 $ 6,394
Plan assets, primarily common stock and bond funds, at fair
value..................................................... 4,663 3,750
------- -------
Excess of projected benefit obligation over plan assets..... (1,616) (2,644)
Unrecognized prior service cost............................. 120 105
Unrecognized net loss (gain) including actual gains and
losses not yet reflected in market-related asset value.... (442) 381
------- -------
Accrued pension cost included in the accompanying balance
sheet ($411,000 and $360,000 classified as current at
December 31, 1996 and 1995)............................... $(1,938) $(2,158)
======= =======
For financial reporting purposes, a pension plan is considered underfunded
when the fair value of the plan assets is less than the accumulated benefit
obligation. The difference between the underfunded liability of the pension plan
and the accrued pension costs is recorded net of deferred taxes as a reduction
to stockholders equity. As of December 31, 1996, the difference was $126,000
with a reduction to stockholders' equity of $77,000. As of December 31, 1995,
the difference was $278,000 with a reduction to stockholders' equity of
$171,000.
F-10
30
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Net pension cost included the following components:
YEAR ENDED DECEMBER 31,
--------------------------
1996 1995 1994
------ ------ ------
(IN THOUSANDS OF DOLLARS)
Costs related to services provided by employees............. $ 254 $ 233 $ 243
Interest cost on projected benefit obligations.............. 458 445 388
Actual return on plan assets................................ (540) (614) 48
Net amortization and deferral............................... 229 366 (321)
----- ----- -----
Net pension cost.................................. $ 401 $ 430 $ 358
===== ===== =====
In addition to net pension cost, net losses of $35,000 were recorded in
1995 pursuant to FAS No. 88, "Employers Accounting for Settlements and
Curtailments of Defined Benefit Pension Plans and for Termination Benefits", due
to termination of employees' services earlier than expected with respect to the
closing of the Company's Northumberland, Pennsylvania facility (see Note 10).
The assumptions used in accounting for the pension plans, where applicable,
are as follows:
1996 1995 1994
---- ---- ----
Discount rate............................................... 7.25% 7.00% 8.50%
Rate of increase in compensation levels..................... 4.00% 4.00% 5.50%
Expected long-term rate of return on assets................. 8.50% 8.50% 8.50%
For the years ended December 31, 1996, 1995 and 1994, the Company
contributed $409,000, $492,000 and $437,000, respectively, to a multi-employer
retirement plan sponsored by the I.A.M. National Pension Fund covering the Elba,
Alabama facility's hourly employees.
POSTRETIREMENT MEDICAL AND LIFE INSURANCE BENEFITS
In addition to providing pension benefits, the Company provides certain
medical and life insurance benefits to substantially all salaried employees upon
retirement. Salaried employees are eligible for these postretirement benefits
after attaining the age of 60 and providing five years of service. The Company
pays for claims when submitted by the retirees. The accounting for the
postretirement plan assumes future increases in annual costs will be divided
equally between the Company and the retirees.
The following tables summarize the plan's obligation and amounts recognized
in the Company's financial statements:
YEAR ENDED
DECEMBER 31,
----------------
1996 1995
----- -----
(IN THOUSANDS OF
DOLLARS)
Accumulated postretirement benefit obligation:
Retirees.................................................. $ 65 $ 33
Fully eligible active participants........................ 37 24
Other active participants................................. 349 269
----- -----
451 326
Unrecognized transition obligation.......................... (293) (311)
Unrecognized net gain (loss)................................ (29) 73
----- -----
Accrued postretirement benefit cost....................... $ 129 $ 88
===== =====
F-11
31
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Net postretirement benefit cost included the following components:
YEAR ENDED DECEMBER 31,
--------------------------
1996 1995 1994
------ ------ ------
(IN THOUSANDS OF DOLLARS)
Costs related to services provided by employees............. $31 $13 $14
Interest cost on accumulated postretirement benefit
obligation................................................ 33 24 26
Amortization of transition obligation....................... 18 18 18
Amortization of unrecognized net gain....................... (16) (2)
--- ---- ---
$82 $39 $56
=== ==== ===
The discount rate used in determining the accumulated benefit obligation
was 7.25% in 1996, 7.0% in 1995, and 8.25% in 1994. The accrued medical trend
rate used in 1996 was 9%, in 1995 was 10%, and in 1994 was 11%, decreasing 1%
per year until the ultimate rate of 5% is reached.
If the medical trend rate assumptions were increased by 1%, the accumulated
benefit obligation as of December 31, 1996 would be increased by approximately
$95,000. The effect of this change on the service and interest components of net
periodic postretirement benefit cost for the year would be an increase of
approximately $15,000.
SUPPLEMENTAL RETIREMENT PLAN
The Company also maintains a 401(k) supplemental retirement plan for
salaried employees. The Company, at the discretion of the Board of Directors,
may match up to one-half of an employee's contributions of up to ten percent of
gross salary. The Company accrued approximately $0, $139,000 and $115,000 of
matching contributions to the plan in 1996, 1995 and 1994, respectively.
Effective January 1, 1997, the Company established "Dorsey Trailers, Inc.
Hourly Employee Savings Incentive Plan" which is a 401(k) retirement plan for
hourly employees not covered by the union contract.
7. INCOME TAXES
The Company adopted FAS No. 109 effective July 28, 1994. The effect of
adopting FAS No. 109 did not have a material effect on the Company's financial
position or results of operations.
The components of the provision for (benefit from) income taxes for the
years ended December 31, 1996, and 1995 and the period July 29, 1994 through
December 31, 1994 are as follows:
YEAR ENDED
DECEMBER 31, PERIOD OF
------------------ JULY 29, 1994 -
1996 1995 DECEMBER 31, 1994
------- ------- -----------------
(IN THOUSANDS OF DOLLARS)
Current
Federal................................................ $(2,774) $ 2,408 $ 1,300
State.................................................. (45) 314 234
------- ------- --------
(2,819) 2,722 1,534
------- ------- --------
Deferred
Federal................................................ (1,533) (1,300)
State.................................................. (265) (298) (234)
------- ------- --------
(265) (1,831) (1,534)
------- ------- --------
$(3,084) $ 891 $ --
======= ======= ========
F-12
32
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
The Company's provision for income taxes differs from the amount computed
by applying the statutory federal income tax rate of 34% to income (loss) before
income taxes of ($8,009,000) and $5,135,000 for the years ended December 31,
1996 and 1995, respectively, and $3,755,000 for the period from July 29, 1994 to
December 31, 1994 as a result of the following:
YEAR ENDED
DECEMBER 31, PERIOD OF
------------------ JULY 29, 1994 -
1996 1995 DECEMBER 31, 1994
------- ------- -----------------
(IN THOUSANDS OF DOLLARS)
Tax at federal statutory rate............................ $(2,723) $ 1,746 $ 1,277
State income taxes, net of federal benefit............... (317) 203 149
Reduction in valuation reserve........................... (1,086) (1,534)
Tax exempt interest income............................... (48) (81) (19)
Other.................................................... 4 109 127
------- ------- --------
$(3,084) $ 891 $ --
======= ======= ========
Upon termination of the S election, deferred income taxes were recorded to
reflect the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes. Significant components of the Company's
deferred tax assets and liabilities as of December 31, 1996 and 1995 are as
follows:
DECEMBER 31,
----------------
1996 1995
------ ------
(IN THOUSANDS OF
DOLLARS)
Deferred assets
Employee benefits......................................... $1,351 $1,173
Pension benefit........................................... 953 979
Accrued warranty.......................................... 814 862
Provision for plant closing............................... 213 181
State net operating loss carryforward..................... 265
Other..................................................... 481 333
------ ------
4,077 3,528
------ ------
Deferred liabilities
Depreciation.............................................. (124) (106)
Other..................................................... (4)
------ ------
(124) (110)
------ ------
$3,953 $3,418
====== ======
At the time of the Offering, the Company established a valuation allowance
of $2,620,000. The change in the valuation allowance for the year ended December
31, 1995 was $1,086,000 and for the period July 29, 1994 through December 31,
1994 was $1,534,000.
PRO FORMA INCOME TAX INFORMATION (UNAUDITED)
From its inception through July 28, 1994, the Company elected to be an S
Corporation under the Internal Revenue Code. Accordingly, taxable income or loss
passed directly to the stockholders, and the Company did not provide for income
taxes. For information purposes, the statement of operations includes unaudited
pro forma adjustments for income taxes which would have been recorded had the
Company not
F-13
33
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
been an S Corporation, based on the tax laws in effect during the period
presented. Unaudited pro forma income taxes for the period is as follows:
YEAR ENDED
DECEMBER 31, 1994
-----------------
(IN THOUSANDS OF
DOLLARS)
Current
Federal................................................... $ 3,137
State..................................................... 564
Deferred
Federal................................................... (1,601)
State..................................................... (295)
--------
$ 1,805
========
The differences between unaudited pro forma income taxes at the statutory
federal income tax rate of 34 percent and pro forma income taxes reported in the
statement of operations are as follows:
YEAR ENDED
DECEMBER 31, 1994
-----------------
(IN THOUSANDS OF
DOLLARS)
Tax at federal statutory rate............................... $ 2,968
State income taxes, net of federal benefit.................. 343
Tax exempt interest income.................................. (40)
Reduction in valuation reserve.............................. (1,534)
Effect of proration of S Corporation earnings............... 61
Other....................................................... 7
--------
$ 1,805
========
INTERNAL REVENUE SERVICE EXAMINATION
During the year ended December 31, 1995, the Internal Revenue Service
examination of the Company's federal income tax returns for the years 1988
through 1990 was settled with no adverse consequences to the Company.
DISTRIBUTIONS TO STOCKHOLDERS
In connection with the termination of the Company's S Corporation election,
the Company distributed $5,241,000 to the S Corporation stockholders during 1994
and 1995. This amount represented the previously taxed and undistributed
earnings of the Company through the offering date.
8. COMMON STOCK, OPTIONS AND WARRANTS
The Board of Directors declared a stock split of 3.901682 shares for every
share previously held effective May 25, 1994. The accompanying financial
statements have been retroactively restated to reflect the stock split.
Additionally, the Company amended its Articles of Incorporation to authorize
issuance of 500,000 shares of preferred stock and increase the authorized common
shares to 30,000,000.
On March 18, 1987, the Company issued a warrant for the purchase of
1,560,672 shares of common stock to Westinghouse Credit Corporation (WCC) as
part of a financing arrangement. The Company reserved 1,560,672 shares of common
stock for issuance in connection with the warrant.
F-14
34
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
On January 12, 1993, the Company's majority stockholder borrowed $400,000
from an investor and purchased the warrant from WCC at $0.256 per share.
Simultaneously, the warrant was exchanged by the majority stockholder for
1,560,672 shares of the Company's common stock. As consideration of the majority
stockholder's loan from the investor, the investor holds the common shares as
security for repayment of the loan and releases the shares as note payments are
made. In addition, the investor was granted an option to purchase 585,252 shares
of the Company's common stock for $0.017 per share through January 12, 2013. In
1994, a portion of these options were repurchased and then canceled by the
Company with some of the net proceeds of the Offering. During 1995, the investor
exercised the remaining options to purchase 375,179 shares of the Company's
common stock. In conjunction with the exercising of the options, the majority
stockholder contributed 14,989 shares of common stock to the Company, which were
immediately canceled by the Company.
Simultaneously, with the warrant repurchase and investor loan, the majority
stockholder executed a loan agreement with the Company whereby the Company
loaned the majority stockholder the principal and interest payments due under
the investor loan at 6.5%. From January 1993 through June 1994, the Company made
payments of $234,000 under this agreement. At December 31, 1993 the $400,000
note payable from the majority stockholder to the investor and the related note
receivable from the majority stockholder were recorded on the Company's
financial statements. The note payable to the investor was discounted to
$260,000 to reflect the fair value of the options granted in connection with the
debt. The note payable to the Company was repaid on December 31, 1994 by the
majority stockholder.
MAJORITY STOCKHOLDER PLAN
The Company's majority stockholder sponsors a stock option plan for the
benefit of the Company and its employees. The exercise price of the options is
not less than the estimated fair market value of the common stock on the date of
grant as determined by the Company's majority stockholder or, in the case of the
January 12, 1993 grant, by comparison to a third-party transaction. Current
options granted are fully vested.
LONG-TERM INCENTIVE PLAN
During 1994, the Board of Directors adopted the 1994 Long-Term Incentive
Plan and reserved 250,000 shares of common stock for future issuance under the
plan. Pursuant to the terms of the 1994 Incentive Plan, the Board of Directors
or a committee thereof is authorized to identify officers and key employees of
the Company eligible to receive incentive stock options, non-qualified stock
options, or similar stock based awards under the plan. Grants have been awarded
at option prices equal to the fair market value of the common stock as of the
date of grant. Options vest equally over three years based on the date of grant
and expire ten years after date of grant.
F-15
35
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
A summary of the status of the Company's stock option plans as of December
31, 1996 and 1995, and changes during the years ending on those dates is
presented below:
1996 1995
--------------------------- --------------------------
WEIGHTED-AVERAGE WEIGHTED-AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
-------- ---------------- ------- ----------------
Majority Stockholder Plan
Outstanding at beginning of year.............. 738,389 $0.273 829,806 $0.269
Granted.....................................
Exercised................................... (146,240) 0.275 (85,536) 0.242
Forfeited/canceled.......................... (5,881) 0.256
-------- -------
Outstanding at end of year.................... 592,149 0.268 738,389 0.273
======== =======
Available for grant at end of year............ 5,881 5,881
Options exercisable at year-end............... 592,149 738,389
======== =======
1996 1995
-------------------------- --------------------------
WEIGHTED-AVERAGE WEIGHTED-AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE
------- ---------------- ------- ----------------
Long-Term Incentive Plan
Outstanding at beginning of year............. 75,000 $ 7.54
Granted...................................... 50,000 5.44 75,000 $7.54
Exercised....................................
Forfeited/canceled........................... (25,000) 11.125
------- -------
Outstanding at end of year..................... 100,000 5.59 75,000 $7.54
======= =======
Available for grant at end of year............. 150,000 175,000
Options exercisable at year-end................ 16,667
Weighted-average fair value of options granted
during the year.............................. $ 5.44 $7.54
The following table summarizes information about stock options outstanding
at December 31, 1996:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------- ----------------------------
NUMBER WEIGHTED-
OUTSTANDING AVERAGE WEIGHTED- NUMBER WEIGHTED-
RANGE OF AT REMAINING AVERAGE EXERCISABLE AVERAGE
EXERCISE PRICES 12/31/96 CONTRACTUAL LIFE EXERCISE PRICE AT 12/31/96 EXERCISE PRICE
--------------- ----------- ---------------- -------------- ----------- --------------
Majority Stockholder Plan
$0.053 - $0.320................. 592,149 5.35 $0.268 592,149 $0.268
Long-Term Incentive Plan
$5.44 - $5.75................... 100,000 9.50 $5.59 16,667 $5.75
The Company has adopted FAS No. 123, "Accounting for Stock-Based
Compensation". In accordance with the provisions of FAS 123, the Company applies
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees," and related Interpretations in accounting for its Long-Term
Incentive Plan. If the Company had elected to recognize compensation expense
based upon the fair value at the grant dates for awards under this plan
consistent with the methodology prescribed by FAS 123, the Company's net
F-16
36
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
income (loss) and net income (loss) per share would be reduced to the unaudited
pro forma amounts indicated below.
1996 1995
------- ------
(IN THOUSANDS,
EXCEPT PER SHARE
AMOUNTS)
Net income (loss)......................................... As reported $(4,925) $4,244
Pro forma (4,989) 4,210
Net income (loss) per share............................... As reported (0.99) 0.85
Pro forma (1.01) 0.85
The fair value of each option is estimated on the date of grant using the
Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1996 and 1995, respectively; expected volatility
of 47% and 53% and risk-free interest rates of 5.50% and 5.55%. An expected
option term of 6 years for both periods was developed based on historical grant
information.
Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
NON-EMPLOYEE DIRECTORS' STOCK PLAN
The Board of Directors adopted the 1994 Stock Plan for Non-Employee
Directors. Pursuant to the Directors' Plan, each director (other than employees,
former employees or immediate family members of current or former employees)
automatically will receive on the day following each annual meeting of
stockholders a grant of shares of common stock with a fair market value of
$7,500 on the date of issuance. During 1996 and 1995, 8,568 and 2,115 shares,
respectively, were issued to eligible directors. In addition, each eligible
director serving on the Board of Directors at the time of the Offering received
a grant of shares of common stock with a fair market value of $7,500 based upon
the initial public offering price of the common stock. A total of 1,728 shares
were issued to eligible directors at the completion of the Offering.
9. COMMITMENTS AND CONTINGENCIES
LEASE COMMITMENTS
The Company leases office facilities and certain equipment under
noncancelable lease agreements which expire at various times through 2006.
Minimum annual rentals under these agreements at December 31, 1996 are
summarized as follows (in thousands of dollars):
YEAR ENDING
DECEMBER 31,
- ------------
1997..................................................... $ 333
1998..................................................... 238
1999..................................................... 208
2000..................................................... 166
2001 and thereafter......................................... 844
------
$1,789
======
Rent expense under these and other lease agreements approximated $289,000,
$209,000 and $165,000 for the years ended December 31, 1996, 1995 and 1994,
respectively.
F-17
37
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
WORKERS' COMPENSATION INSURANCE AND CERTIFICATE OF DEPOSIT
The Company is self-insured for workers' compensation claims up to $350,000
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
$1,990,000 from a bank under its revolving credit agreement. Prior to May, 1995,
the Company used letters of credit secured by certificates of deposit to secure
its obligation to fund such retention. The accompanying financial statements
include an insurance accrual based upon third party administrator's and
management's evaluations of estimated future ultimate 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 December 31, 1996, 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 is contingently liable under repurchase agreements with a
finance company that provides wholesale floor plans for certain Dorsey dealers
and who also provides financing to end users for some trailers sold through such
dealers. The total contingent liability is approximately $4.8 million at
December 31, 1996.
In the opinion of management, it is not probable that the Company will be
required to satisfy this contingent liability.
PURCHASE COMMITMENTS
At December 31, 1996, the Company has executed sales agreements with
various customers which include purchase commitments for used trailers totaling
$15.4 million.
LITIGATION
In April, 1995, a class action lawsuit alleging racial discrimination was
filed against the Company, and in the normal course of business, the Company is
a defendant in certain other litigation. Management believes such litigation is
without merit and intends to contest the suits vigorously. Management believes
that the ultimate resolution of the litigation will not have a material impact
on the Company's financial position or results of operations.
ENVIRONMENTAL MATTERS
Subsequent to the closing of the Company's Edgerton, Wisconsin plant in
1989, the Wisconsin Department of Natural Resources (WDNR) conducted an
environmental inspection that identified certain 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 an adjacent landfill site.
The Company has established reserves that it believes to be adequate to address
its environmental liabilities associated with these matters.
In December 1990, a leak was detected in an underground storage tank
containing an industrial solvent at the Elba, Alabama facility. The Company
notified the Alabama Department of Environmental Management ("ADEM") of the leak
and hired an environmental consulting firm to investigate the problem and
conduct corrective action. Based on the consultant's investigations and
discussions with ADEM, the Company does not expect the costs of corrective
action to exceed the reserves it has established for this purpose.
F-18
38
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
10. CLOSING OF NORTHUMBERLAND, PENNSYLVANIA FACILITY
In December 1995, the Company closed its trailer manufacturing facility in
Northumberland, Pennsylvania. In connection with the plant closing, the Company
recorded a provision of $250,000 for employee termination costs which are
included in income from operations in the accompanying financial statements. The
plan of termination included 20 managerial and administrative employees and was
completed by December 1996.
11. BUSINESS COMBINATIONS
In July 1996, the Company acquired certain assets of a Dillon, South
Carolina based dump trailer manufacturer. The acquisition was accounted for
under the purchase method. As such, the results of operations of the acquired
company are included in the Company's financial statements for the period
subsequent to its acquisition date. The aggregate purchase price was $1.8
million paid in the form of cash and note payable. The excess of the purchase
price over the estimated fair value of the tangible and identifiable intangible
assets acquired was $1,025,000 and is being amortized on a straight-line basis
over 15 years. In connection with the acquisition, the Company entered into a
ten year lease agreement with the former owner for the manufacturing facility.
The pro forma effect of the acquisition for the years ending December 31, 1996
and 1995 is not provided since the effect of such acquisition was not material.
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
In preparing disclosures about the fair value of financial instruments, the
Company has reasonably assumed that the carrying amount approximates the
estimated fair value for cash and cash equivalents, accounts and other
receivables, accounts payable and other accrued expenses. The estimated fair
value of long-term debt instruments is based upon the current interest rate
environment and remaining term to maturity. The carrying value and estimated
fair value for long-term debt instruments as of December 31, 1996 and 1995 are
as follows (in thousands of dollars):
1996 1995
--------------------- ---------------------
CARRYING ESTIMATED CARRYING ESTIMATED
AMOUNT FAIR VALUE AMOUNT FAIR VALUE
-------- ---------- -------- ----------
Long-term debt............................................ $9,876 $8,430 $10,315 $8,485
In addition, the Company has certain off-balance sheet items such as
letters of credit and contingent liabilities. In the opinion of management, the
estimated fair value of the fees associated with these commitments is not
material to the Company.
13. SUBSEQUENT EVENTS
Subsequent to year-end 1996 through March 28, 1997, the Company has
purchased $14 million in used trailers, has incurred losses on the sale of used
trailers of approximately $1.5 million, and has reduced the value of the
remaining used trailers by approximately $1.8 million. These losses, recorded in
the first quarter of 1997, were a direct result of management's decision to
liquidate these trailers quickly in order to provide cash flow from operations
until such time as the credit facility, discussed below, could be finalized.
Subsequent to year-end 1996 through March 28, 1997, the Company sold used
trailers at various dates, upon the approval of the Board of Directors of the
Company, in the amount of approximately $4,657,000 to TYM, Inc. TYM, Inc. is a
corporation wholly-owned by Marilyn R. Marks, Chief Executive Officer of the
Company. The Company has incurred losses of approximately $819,000 on the sales
to TYM, Inc. In the opinion of management, based upon actual third-party offers,
the terms of the sale of these used trailers are no less favorable than terms
that could have been obtained from unaffiliated parties.
F-19
39
DORSEY TRAILERS, INC.
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
On March 28, 1997 the Company entered into a $14 million, five year line of
credit (Financing Agreement), including a $4 million term loan which amortizes
evenly over the next four consecutive months and a letter of credit facility of
up to $3 million, with an asset-based lender. This Financing Agreement replaces
the Company's $10 million revolving credit agreement the Company had with a
financial institution. In connection with the closing of the $14 million
Financing Agreement, the Company incurred cost of approximately $1.2 million
which will be amortized over the life of the Financing Agreement. The Financing
Agreement bears interest at prime plus 1.75%, at March 28, 1997 the interest
rate was 10.25%, and interest is payable monthly. 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 $5,000 servicing fee and an annual facility fee of .50% of the $14
million. The Financing Agreement allows advances of up to the lesser of $14
million 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 March 28, 1997, the
Company had $3.2 million outstanding under the Financing Agreement including
$1,990,000 in letters of credit with $6.9 million of availability under the
Financing Agreement. The Financing Agreement is secured 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: maximum amount of
capital expenditures; minimum tangible net worth; minimum working capital;
limitations on future indebtedness; sales of assets; and compliance with laws
and regulations.
F-20
40
DORSEY TRAILERS, INC.
SCHEDULE VIII: VALUATION AND QUALIFYING ACCOUNTS
BALANCE AT CHARGED TO ACCOUNTS BALANCE AT
BEGINNING OF COSTS AND RECOVERED END OF
DESCRIPTION PERIOD EXPENSES (WRITTEN OFF) PERIOD
----------- ------------ ---------- ------------- ----------
(IN THOUSANDS OF DOLLARS)
Year ended December 31, 1996
Allowance for Doubtful Accounts $250 $ -- $(82) $168
==== ==== ==== ====
Year ended December 31, 1995
Allowance for Doubtful Accounts $150 $ -- $100 $250
==== ==== ==== ====
Year ended December 31, 1994
Allowance for Doubtful Accounts $145 $ -- $ 5 $150
==== ==== ==== ====
F-21