FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 1996 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File Number: 0-14802
Calgene, Inc.
(Exact name of registrant as specified in its charter)
Delaware 68-0369863
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1920 Fifth Street,
Davis, California 95616
(Address of principal executive offices) (Zip Code)
(916) 753-6313
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
X Yes No
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock Outstanding at April 30, 1996: 60,443,115 shares
<PAGE>
CALGENE, INC.
INDEX
Page No.
--------
Part I. Financial Information (unaudited)
Condensed consolidated balance sheets -
March 31, 1996 and June 30, 1995 ................................4
Condensed consolidated statements of operations -
three months ended March 31, 1996 and 1995
and nine months ended March 31, 1996 and 1995....................5
Condensed consolidated statements of cash flows -
nine months ended March 31, 1996 and 1995 .......................6
Notes to condensed consolidated financial statements ............7
Management's discussion and analysis of financial
condition and results of operations ............................11
Part II. Other Information
Item 1. Legal Proceedings .....................................18
Item 4. Submission of Matters to a Vote of Security Holders....19
Item 5. Other Information .....................................19
Item 6. Exhibits and Reports on Form 8-K.......................19
Signatures...............................................................20
<PAGE>
PART I. FINANCIAL INFORMATION
<PAGE>
Calgene Inc.
Condensed Consolidated Balance Sheets
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
March 31 June 30
Assets 1996 1995
-------- --------
<S> <C> <C>
Current assets:
Cash and equivalents $ 3,845 $ 11,753
Available-for-sale securities 3,694 10,283
Accounts receivable, net of allowances 44,273 6,697
Receivable from affiliate 7,000 --
Inventories 35,373 8,148
Prepaid expenses and other current assets 2,468 1,699
-------- --------
Net assets held for sale 0 0
Total current assets 96,653 38,580
Property, plant and equipment:
Land 18,623 763
Buildings 23,258 3,743
Leasehold improvements 8,624 9,643
Furniture, fixtures and equipment 37,179 22,436
Construction in progress 2,503 1,459
-------- --------
90,187 38,044
Less accumulated depreciation and amortization 14,495 15,524
-------- --------
Property, plant and equipment, net 75,692 22,520
Product rights, patents and other intangible
assets, less accumulated amortization 33,085 16,199
Costs in excess of fair values assigned to net
assets acquired, less accumulated amortization 31,675 10,025
Other non-current assets 4,897 1,907
-------- --------
$242,002 $ 89,231
Liabilities and shareholders' equity
Current liabilities:
Notes payable $ 46,413 $ 7,761
Accounts payable 21,648 6,487
Accrued payroll and related expenses 2,644 2,049
License contract payable 750 1,500
Accrued grower payments 4,605 942
Amounts due customers 1,636 4,596
Other current liabilities 8,520 2,930
Current portion of long-term debt 13,216 1,494
-------- --------
Total current liabilities 99,432 27,759
License contract payable, long-term -- 750
Note payable to affiliate 22,080 --
Long-term debt 22,671 14,671
Commitments and contingencies
Minority interest 414 --
Shareholders' equity:
Common stock, $.001 par value; 80,000,000
shares authorized; 60,443,115 and 30,244,226
shares issued and outstanding at
March 31, 1996 and June 30, 1995, respectively 60 30
Additional paid-in capital 367,544 223,161
Accumulated deficit (270,199) (177,140)
-------- --------
Total shareholders' equity 97,405 46,051
-------- --------
$242,002 $ 89,231
======== ========
See accompanying notes.
</TABLE>
<PAGE>
Calgene, Inc.
Condensed Consolidated Statements of Operations
($ in thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended March 31 Ended March 31
--------------------------- ----------------------------
1996 1995 1996 1995
---------- ----------- ----------- -----------
Revenues:
<S> <C> <C> <C> <C>
Product sales, net $ 17,326 $ 18,399 $ 37,266 $ 33,512
Product development revenues 225 797 1,075 5,230
---------- ---------- ---------- ----------
17,551 19,196 38,341 38,742
Costs and expenses:
Cost of goods sold 13,173 15,039 35,272 34,094
Research and development 3,404 3,330 9,917 11,839
Selling, general and administrative 4,550 4,583 12,072 11,925
In-process research and development
acquired 59,200 -- 59,200 --
Write-off of assets 14,574 -- 14,574 --
---------- ---------- ---------- ----------
94,901 22,952 131,035 57,858
Interest expense 341 257 1,606 614
Other income (expense), net 754 (333) 1,295 231
---------- ---------- ---------- ----------
Loss from operations before
income taxes (76,937) (4,346) (93,005) (19,499)
Provision for income taxes 18 113 54 146
---------- ---------- ---------- ----------
Net loss $ (76,955) $ (4,459) $ (93,059) $ (19,645)
========== ========== ========== ==========
Net loss per share $ (2.52) $ (0.15) $ (3.06) $ (0.67)
========== ========== ========== ==========
Shares used in per share calculations 30,578,620 30,214,756 30,364,124 29,171,658
See accompanying notes.
</TABLE>
<PAGE>
Calgene, Inc.
Condensed Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Equivalents
($ in Thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31
------------------------
1996 1995
-------- --------
Cash flows from operating activities:
<S> <C> <C>
Net loss $(93,059) $(19,645)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 3,682 3,678
Stock compensation -- 339
In-process research and development acquired 59,200 --
Write-off of assets 14,574 --
Other (902) 710
Net changes in:
Operating assets (8,558) (13,565)
Operating liabilities (3,991) (1,337)
-------- --------
Net cash used in operating activities (29,054) (29,820)
Cash flows from investing activities:
Proceeds from sales of securities 10,552 16,732
Purchase of securities (3,962) (7,916)
Capital expenditures for property, plant and equipment (2,204) (4,750)
Purchases of product rights, patents and
other intangible assets (2,008) (3,066)
Decrease in cash and equivalents resulting from
acquisition of subsidiaries, net of cash and
equivalents acquired (1,219) --
Other 95 (43)
-------- --------
Net cash provided by investing activities 1,254 957
Cash flows from financing activities:
Proceeds from notes payable 8,453 18,712
Payments on notes payable (2,650) (14,699)
Decrease in securities-pledged 166 134
Increase in borrowings of long-term debt 14,649 --
Principal payments on long-term debt (931) (1,574)
Sale of common stock 205 31,677
-------- --------
Net cash provided by financing activities 19,892 34,250
-------- --------
Net increase (decrease) in cash and equivalents (7,908) 5,387
Cash and equivalents at beginning of period 11,753 5,286
-------- --------
Cash and equivalents at end of period $ 3,845 $ 10,673
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 1,420 $ 595
Income taxes $ 69 $ 42
See accompanying notes.
</TABLE>
<PAGE>
Notes to Condensed Consolidated Financial Statements
1. Summary of Significant Accounting Policies
------------------------------------------
The accompanying condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the interim periods. These financial statements should
be read in conjunction with the Company's audited financial statements contained
in the Company's Annual Report on Form 10-K, as amended, for the fiscal year
ended June 30, 1995.
In the opinion of management, the interim financial statements reflect all
adjustments necessary, consisting only of normal recurring adjustments, to
present fairly the Company's consolidated financial position at March 31, 1996
and the consolidated results of operations and cash flows for the fiscal
quarters and nine month periods ended March 31, 1996 and 1995. Results for the
period ended March 31, 1996 are not necessarily indicative of results to be
expected for the entire fiscal year.
Calgene's quarterly operating performance is affected by seasonal factors.
Cottonseed sales normally occur primarily in the third and fourth fiscal
quarters.
Net loss per share has been computed by dividing the net loss by the
weighted average number of common shares outstanding during each period. Common
shares issuable upon the exercise of stock options have been excluded from the
computation of net loss per share since their inclusion would be antidilutive.
Certain amounts reported in the fiscal quarter and nine month period ended
March 31, 1995 have been reclassified to conform with the presentation of the
fiscal quarter and the nine month period ended March 31, 1996.
2. Inventories
-----------
Inventories are stated at the lower of cost, determined on a first-in,
first-out basis, or market value. Inventories consist of the following (in
thousands):
March 31, 1996 June 30, 1995
---------------------- ---------------------
Raw materials $ 8,429 $ 897
Work in progress 19,702 4,613
Finished goods 7,242 2,638
--------- --------
$35,373 $8,148
======= ======
3. Patent and Legal Proceedings
----------------------------
See Part II - Other Information
Item 1. Legal Proceedings
4. Strategic Alliance
------------------
On March 31, 1996, Calgene and Monsanto Company ("Monsanto") consummated
the Agreement and Plan of Reorganization (the "Reorganization Agreement") and
related Plan of Merger under which Monsanto contributed Gargiulo, Inc.
("Gargiulo"), $30 million and certain oils and produce related technology in
exchange for a 49.9% interest in Calgene. Gargiulo is a grower, packager,
marketer and distributor of tomatoes, strawberries and other produce with
operations in Florida, California, Virginia, Puerto Rico and Mexico. The
acquisition of Gargiulo was accounted for as a purchase.
In connection with the Reorganization Agreement a total of 30,161,114
shares of Calgene common stock were issued with an aggregate fair value of
approximately $144,206,000. The per share value of Calgene common stock assigned
to the transaction was based on the last trade as reported on the National
Market System on the day the Company's negotiations with Monsanto concluded. The
common stock trade price was discounted to account for Monsanto's liquidity
restrictions based on an independent appraisal. The estimated purchase price
consists of the following:
(In thousands)
30,161,114 shares of common stock $144,206
Estimated acquisition costs, consisting primarily
of financial advisory, legal and accounting fees 1,602
Less cash received (30,000)
--------
$115,808
========
Certain items affecting the purchase price and the allocation are
preliminary. A summary of the preliminary purchase price allocation is as
follows:
(In thousands)
Net assets acquired $ 14,432
Identified intangible assets 21,680
Excess purchase price over net assets acquired 20,496
In-process research and development 59,200
--------
$115,808
========
Intangible assets include completed technology, assembled workforce and
costs in excess of fair values assigned to net assets acquired. The estimated
useful lives are expected to range from 5 to 15 years. Because the technological
feasibility of the acquired in-process research and development has not been
established and has no alternative future uses, the $59.2 million allocated to
in-process research and development has been expensed. Although the Company is
in the process of evaluating its research and development projects, it is
expected that future expenditures of over $20 million will be necessary to
develop the acquired in-process research and development into commercial
products.
Between June 29, 1995 and March 19, 1996 Calgene received $23 million in
advances toward the $30 million proceeds in the form of a subordinated
promissory note. The subordinated note was converted to equity upon consummation
of the transaction. The additional $7 million was received on April 1, 1996.
Acquisition of Collier Farms
- ----------------------------
On February 29, 1996, Gargiulo and Collier Enterprises consummated an asset
purchase agreement whereby Gargiulo acquired substantially all the assets,
subject to the assumption of certain specified liabilities, of the produce
business conducted by certain affiliates of Collier Enterprises under the trade
name Collier Farms ("Collier"). Collier is an agricultural producer of tomatoes
and other vegetables in Florida, and engages in the packaging, marketing and
distribution of those products in the commodity markets. The purchase price
consists of $10 million in cash and a $10 million promissory note, plus an
earn-out payment based upon achieving certain earnings of the combined
operations of Gargiulo and Collier in Southwest Florida. Gargiulo also acquired
Collier's 1995-1996 crop and assumed liabilities related thereto, and committed
to lease certain farmland from affiliates of Collier. The acquisition was
accounted for as a purchase. The estimated purchase price consists of the
following:
(In thousands)
Cash $10,000
Promissory note 10,000
Investment in 1995-1996 crop 8,834
Estimated acquisition costs, consisting primarily
of financial advisory, legal and accounting fees 107
-------
$28,941
=======
Certain items affecting the purchase price and the allocation thereof
remain unresolved at this time. A summary of the preliminary purchase price
allocation is as follows:
(In thousands)
Net assets acquired $24,866
Excess purchase price over net assets acquired 4,075
-------
$28,941
=======
Unaudited Proforma Combined Results of Operations
- -------------------------------------------------
Unaudited proforma combined results of operations giving effect to certain
adjustments as if the Gargiulo and Collier acquisitions occurred on July 1, 1995
are displayed in the following table. These unaudited proforma combined results
have been prepared for comparative purposes only and do not purport to be
indicative of the results of operations which actually would have resulted had
the acquisition been in effect on July 1, 1995 or which may result in the
future.
(In thousands,
except per share
amounts)
Revenue $ 130,360
Net loss $(119,093)
Net loss per share $ (1.97)
5. PGI-Kirin Partnership
---------------------
In March 1990 the Company and Kirin Brewery Co., Ltd. established PGI-Kirin
Partnership ("PGK"), a joint venture to develop and commercialize new potato
varieties. In January 1996 management decided to cease PGK operations and sell
its remaining assets. Consequently, Calgene recorded an estimated net write-off
of its investment in PGK of $982,000 in the third fiscal quarter of fiscal 1996.
PGK's revenues in fiscal 1995 and for the nine month period ended March 31,
1996, were $1.5 million and $482,000, respectively.
6. Write-off of Assets
-------------------
During the third quarter of fiscal 1996 the Company recorded a charge of
approximately $14.6 million for the write-off of assets, including $9.4 million
primarily related to the merger of Calgene's tomato operations into Gargiulo.
The write-off of tomato assets primarily reflects a $5.4 million asset
impairment charge due to the consolidation of facilities and equipment and a
$2.5 million write-off of obsolete technology licenses. The Company also
recorded $1.5 million for the write-off of its investment in PG-K (before
minority interest), and $1.0 million for the write-off of an option to a
technology license the Company does not intend to exercise. As a consequence of
the Company's decision in the third quarter of fiscal 1996 to reduce its
emphasis on commodity distribution products at Calgene Chemical, the excess
purchase price of net assets acquired associated with the commodity distribution
business was written-down to net realizable value resulting in a $1.2 million
expense.
7. Significant Changes in Debt
---------------------------
With the acquisition of Gargiulo, the debt obligations, of Gargiulo are
being included in the consolidated financial statements of Calgene, the most
significant of which are noted below:
Convertible subordinated note payable to an affiliate,
due on March 31, 2000, subject to extension, borrowings
tied to prime plus two percent................................ $22,080,000
Line of credit totaling $17,500,000 with a financial
institution, borrowings tied to prime plus 0.85%,
expiring on September 30, 1996.................................$17,500,000
Line of credit totaling $3,500,000 with a financial
institution, borrowings tied to prime, expiring on
June 30, 1996...................................................$3,500,000
Mortgage notes payable to a bank, borrowings tied to
prime plus 0.85%, due September 30, 1996........................$7,403,667
Non-interest bearing note payable to a former owner of
an acquired business for the purchase of growing crops,
principal due upon the collection of crop receivables
but in no case later than September 1, 1996....................$11,849,655
Note payable to a former owner of an acquired business;
due in twenty equal quarterly installments of $219,034,
plus interest tied to prime, secured by the assets acquired
and land........................................................$4,380,671
Note payable to a former owner of an acquired business;
due in twenty equal quarterly installments of $280,966,
plus interest tied to prime, secured by the assets acquired
and land........................................................$5,619,329
Mortgage note payable in annual installments of
$1 million through August 1999, with borrowings
tied to prime...................................................$4,000,000
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Overview of Gargiulo
On March 31, 1996, Calgene and Monsanto Company consummated an agreement
whereby Monsanto contributed Gargiulo Inc., $30 million cash and certain oils
and produce related technology in exchange for 49.9% interest in Calgene (the
"Reorganization Agreement"). Gargiulo is a grower, packer, marketer and
distributor of tomatoes, strawberries and other produce. Gargiulo tomato
producing operations are conducted principally in southwest and northern
Florida, north central California, Virginia, Puerto Rico and Mexico. Gargiulo
berry production operations are conducted principally in northern California. On
February 29, 1996, Gargiulo and Collier Enterprises consummated an asset
purchase agreement whereby Gargiulo acquired substantially all the assets
subject to the assumption of certain specified liabilities of the produce
business conducted by certain affiliates of Collier Enterprises under the trade
name Collier Farms ("Collier"). Collier is an agricultural producer of tomatoes
and other vegetables in Florida, and engages in the packaging, marketing and
distribution of those products in the commodity markets.
Gargiulo provides Calgene with a diversified base for the production and
marketing of large volumes of high quality fresh market tomatoes. Calgene has
incurred considerable losses due primarily to the difficulty in scaling up
production of its MacGregor's(R) brand tomato. Calgene believes that Gargiulo's
production and marketing infrastructure should enable Calgene to significantly
reduce its unit costs and expand sales volumes of high quality, premium-priced,
branded tomatoes. Gargiulo also provides Calgene with superior tomato germplasm
into which the FLAVR SAVR(R) gene and other genetically engineered traits can be
incorporated. Gargiulo provides Calgene with a platform upon which to build a
diversified branded produce business, including strawberries and other fresh
produce. Calgene Fresh operations were merged into Gargiulo effective April 1,
1996.
Revenues
Calgene's product sales in the third quarter of fiscal 1996 decreased 5.8%
to $17.3 million from $18.4 million in the comparable period of the prior year.
The decrease reflects $1.2 million in lower specialty oleochemical and commodity
distribution sales at Calgene Chemical, and lower sales of fresh market
tomatoes. These decreases were partly offset by a $736,000 increase in
cottonseed sales primarily in the export market. In the third quarter of fiscal
1996, cottonseed sales were $11.4 million, plant based oil sales were $3.3
million and tomato sales were $2.4 million. Product sales for the nine month
period ended March 31, 1996 increased 11.2% to $37.3 million from $33.5 million
in the comparable period of the prior year. Tomato sales increased by $4.2
million. This increase was partly offset by a $833,000 decrease primarily in
specialty oleochemical product sales.
Product development revenues decreased by $572,000 in the third quarter and
by $4.2 million in the first nine months of fiscal 1996 as compared to the
corresponding periods of the prior year. The fiscal 1996 decreases reflect the
conclusion of certain research contracts and lower funding for one contract.
More significantly, the decrease in year-to-date product development revenues
reflects a non-recurring $3,750,000 technology license sale that occurred in the
second quarter of fiscal 1995. The product development revenue decreases in the
third quarter and first nine months of fiscal 1996 were partly offset by the
addition of three new research contracts.
Gross Profit
Calgene's gross profit on net product sales was $4.2 million in the third
quarter of fiscal 1996 as compared to a gross profit of $3.4 million in the
prior year. The $793,000 improvement is attributable to a negative gross profit
of $258,000 on tomato sales during the third quarter of fiscal 1996, compared
with a negative gross profit of $1.9 million in the corresponding period of
1995. The increase in gross profit was partly offset by a gross profit decrease
of $602,000 due to lower oleochemical sales. Gross profit in the first nine
months of fiscal 1996 was $2.0 million as compared to a negative gross profit of
$582,000 in the corresponding period of the prior year. The year-to-date
increase in gross profit reflects a $3.5 million reduction in the negative gross
profit from tomato sales. This gross profit improvement was partly offset by a
$690,000 decrease attributable to lower oleochemical sales.
Research and Development Expenses
Research and development expenses in the third quarter of fiscal 1996 were
generally unchanged as compared to the corresponding period of the prior year.
Research and development expenses decreased by $1.9 million or 16.2% in the
first nine months of fiscal 1996 as compared to the same period of the prior
year. The decrease primarily reflects the positive fiscal 1996 impact of the
Company's third quarter fiscal 1995 implementation of a program to reduce
ongoing research expenses. This program included staff reductions of
approximately 10% of the Company's 320 regular full time employees, and
reflected a shift in resources from research into product development to focus
on commercialization of the Company's genetically engineered products. In
addition, the year-to-date decrease reflects lower expenses for licensing
activities.
Selling, General and Administrative Expenses
Calgene's selling, general and administrative expenses in the third quarter
of fiscal 1996 were generally unchanged as compared to the corresponding period
of the prior year. Selling, general and administrative expenses in the first
nine months of fiscal 1996 increased $147,000 or 1.2% to $12.1 million from
$11.9 million in the comparable period of the prior year. The increase primarily
reflects an increase in cottonseed selling expenses, an increase in expenses for
the marketing and business development of genetically engineered plant oils, and
higher administrative expenses in the Company's tomato operations. These factors
were partly offset by the inclusion of a $339,000 stock compensation charge in
the first nine months of fiscal 1995.
In-process Research & Development Acquired
In connection with Calgene's transaction with Monsanto, Calgene engaged an
independent appraiser to provide the Company with recommendations of value for
certain assets acquired from Monsanto, including Gargiulo. Based on the
valuation analysis, Calgene assigned $59.2 million of the purchase price to
in-process research and development. Because the technological feasibility of
the acquired in-process research and development has not been established and
has no alternative future uses, it was expensed in the third quarter of fiscal
1996. Although the Company is in the process of evaluating its research and
development projects, it is expected that future expenditures of over $20
million will be necessary to develop the acquired in-process technology into
commercial products.
Write-off of Assets
During the third quarter of fiscal 1996 the Company recorded a charge of
$14.6 million for the write-off of assets, including $9.4 million primarily
related to the merger of Calgene's tomato operations into Gargiulo. The
write-off of tomato assets primarily reflects a $5.4 million asset impairment
charge due to the consolidations of facilities and equipment and a $2.5 million
write-off of obsolete technology licenses. The Company also recorded $1.5
million for the write-off of its investment in PG-K (before minority interest),
and $1.0 million for the write-off of an option to a technology license the
Company does not intend to exercise. As a consequence of the Company's decision
in the third quarter of fiscal 1996 to reduce its emphasis on commodity
distribution products at Calgene Chemical, the excess purchase price of net
assets acquired associated with the commodity distribution business was
written-down to net realizable value resulting in a $1.2 million expense.
Interest Expense
Interest expense, which reflects the Company's borrowings on its bank line
of credit and long-term debt obligations increased by $84,000 in the third
quarter of fiscal 1996 and by $992,000 in the first nine months as compared to
the corresponding periods of the prior year. The third quarter and year-to-date
increases in interest expense reflect higher borrowings on the Company's bank
line of credit to finance inventories and receivables. More significantly, the
higher interest expense for the first nine months of fiscal 1996 was
predominantly due to a $23 million loan made by Monsanto in the form of a
subordinated convertible note. The note was converted into equity on March 31,
1996 pursuant to the terms of the Reorganization Agreement.
Other Income (Expense), Net
Other income in fiscal 1996 increased by $1.1 million in both the third
quarter and first nine months as compared to the corresponding periods of the
prior year. The increases primarily reflect the positive fiscal 1996 impact of
the Company's prior year third quarter $686,000 write-off of obsolete assets
used in its tomato operations. In addition, the increases reflect the minority
partner's interest share of the higher net losses from PG-K attributable to
management's decision to cease its operations and sell remaining assets. These
factors were partly offset by lower interest income.
Loss Before Income Taxes
In the third quarter of fiscal 1996, Calgene incurred a pre-tax loss of
$76.9 million as compared to a pre-tax loss of $4.3 million in the corresponding
period of the prior fiscal year. In the first nine months of fiscal 1996,
Calgene incurred a pre-tax loss of $93.0 million as compared to a $19.5 million
in the comparable period of the prior year. The increased fiscal 1996 third
quarter and year-to-date losses reflect non-cash charges associated with closing
the Reorganization Agreement including $59.2 million for the purchase of
in-process research and development, and $14.6 million for the write-off of
assets. In addition, the higher loss reflects lower product development
revenues, increases in interest expense and decreases in gross profit
attributable to lower oleochemical sales. These factors were partly offset by a
reduction in gross losses on net product sales for tomatoes and increases in
other income. The higher year-to-date loss was partly offset by lower research
and development expenses.
Provision for Income Taxes
For federal income tax return purposes, as of June 30, 1995 the Company has
a net operating loss carryover of approximately $180 million which expires
between 1995 and 2010, and a general business tax credit carryover of
approximately $4 million which expires between 1995 and 2010. In addition, as of
June 30, 1995 the Company has a net operating loss carryover of approximately
$125 million for state income tax purposes which expires between 1995 and 2010.
Approximately $20 million and $3 million of the federal and state net operating
loss carryovers, respectively, and $700,000 of the general business tax credit
carryover, are available only to offset the separate federal and state taxable
income, if any, of Calgene Fresh. For financial reporting purposes, a valuation
allowance of approximately $72.8 million has been recognized at June 30, 1995 to
offset the deferred tax assets related to all of the aforementioned
carryforwards.
Because of the change in ownership provisions of the Tax Reform Act of
1986, a portion of the Company's federal net operating loss and tax credit
carryovers will be subject to an annual limitation regarding their utilization
against taxable income in future periods. The Company expects that the annual
limitation will not have a material adverse effect on the Company's ability to
utilize the net operating loss and credit carryovers prior to the expiration of
the carryover periods.
Seasonality
Tomato prices are generally higher and unit volume lower during winter
months due to adverse weather conditions. The opposite effects occur in the
summer months. Sales of planting seed are seasonal, causing significant
fluctuations in product sales and working capital requirements. Cottonseed sales
are concentrated in the quarters ending March 31 and June 30. Strawberry sales
occur predominantly in the quarters ending June 30 and September 30. Sales of
canola oil occur almost entirely in the quarter ending September 30. Specialty
oleochemical sales are generally not seasonal.
Litigation
See "Legal Proceedings."
Inflation and Price Fluctuations
The market price for fresh produce can experience substantial fluctuations
in short periods. When the supply of tomatoes and berries on the market exceeds
the demand for such products, the market price may be driven down significantly,
in some instances below the cost of harvesting and packing. In such situations
it may be uneconomical to harvest a crop, resulting in a total loss of the costs
incurred in growing such crop. Even when market prices are sufficient to permit
recovery of direct harvesting and packing costs, prices may not be high enough
to permit recovery of growing costs and/or overhead and other indirect costs.
Calgene's plant oil and cotton operations can also be affected by changes in
prices of commodity plant oil and cottonseed oil and meal. The effects of
general inflation have not had a material impact on Calgene's consolidated
results of operations.
Liquidity and Capital Resources
- -------------------------------
Unless otherwise indicated, the following discussion of net cash changes to
operating assets and liabilities exclude the effects of the Reorganization
Agreement, including the Gargiulo acquisition.
At March 31, 1996 Calgene had cash and equivalents and short term
available-for-sale securities of approximately $7.5 million, excluding $1.1
million in securities pledged as collateral for certain obligations. This was a
decrease of $14.5 million from June 30, 1995. Uses of cash include financing the
Company's net loss ($93.1 million less a non-cash charge of $73.8 million for
the purchase of in-process research and development and the write-down of
assets); an $8.6 million increase in operating assets; a $4.0 million decrease
in operating liabilities; the acquisition of $2.2 million in property, plant and
equipment, payments of $2.0 million for product rights, patents and other
intangible assets (including capitalized patent legal defense costs); payments
of $1.2 million for the Reorganization Agreement (net of Gargiulo cash and
equivalents acquired of $383,000); and payments of $931,000 on long-term debt.
Sources of cash included a $14.6 million increase in borrowings of long-term
debt and a $5.8 million net increase in notes payable. The Company's cash
balance excludes $7 million received on April 1, 1996, as a consequence of the
Reorganization Agreement. The Company's investment policy is to invest excess
cash in high quality, liquid, short-term fixed income securities.
Operating assets increased by $8.6 million at March 31, 1996 as compared to
June 30, 1995 due to a $7.3 million increase in accounts receivable and a $2.0
million increase in inventories. These increases were partly offset by a
$737,000 decrease in prepaid expenses and other current assets. The increase in
accounts receivable was primarily due to higher seasonal sales of cottonseed.
This increase was partly offset by lower tomato receivables of $2.6 million.
Inventories increased due to the seasonal build-up of cottonseed and potato
tubers. These increases were partly offset by a $2.2 million decrease in tomato
inventory, and a reduction of specialty canola oil inventory. Prepaids and other
current assets decreased $737,000 primarily due to lower prepaid tomato growing
costs.
Operating liabilities decreased $4.0 million at March 31, 1996 as compared
to June 30, 1995 largely due to a $3.0 million decrease in amounts due customers
and a $1.6 million decrease in trade accounts payable. These decreases were
partly offset by increases in other accrued liabilities, accrued payroll and
accrued grower payments. The decrease in amounts due customers primarily
reflects seasonal incentive payments and refunds due customers for prior year
cottonseed returns consistent with current industry practice.
Net working capital decreased $13.6 million from $10.8 million at June 30,
1995, to a deficit of $2.8 million at March 31, 1996 primarily due to the
inclusion of Gargiulo's $12.5 million working capital deficit. Excluding
Gargiulo, net working capital decreased $1.1 million primarily due to the $14.9
million decrease in cash and equivalents and available-for-sale securities, net
of cash acquired, and a $1.6 million increase in current liabilities, partly
offset by a $15.4 million increase in current operating assets.
A $13 million bank line of credit is used to help finance working capital
requirements for Calgene's subsidiaries, with the exception of Gargiulo.
Borrowings under the line of credit bear interest at the greater of one quarter
percent over the bank's prime rate or two and one half percent over the federal
funds rate. On March 31, 1996 the bank's prime rate was 8.25% and the federal
funds rate was 5.25%. The weighted average annual interest rate under the line
of credit was 8.92% for the fiscal year ended June 30, 1995 and 8.91% for the
nine month period ended March 31, 1996. As of March 31, 1996, $12.1 million of
indebtedness was outstanding on the bank line of credit, which expires on
September 30, 1996.
Gargiulo has a $17.5 million bank line of credit used to finance its
working capital requirements, and has four mortgage loans through the same bank
that were used to finance the purchase of packing house equipment and
facilities. Borrowings under the line of credit and mortgage loans bear interest
at 0.85% over the bank's prime rate. On March 31, 1996, the bank's prime rate
was 8.25%. As of March 31, 1996, $17.5 million and $7.4 million was outstanding
on the bank line of credit and mortgage loans, respectively. The line of credit
and mortgage loans are due on September 30, 1996.
Gargiulo also has $3.5 million bank line of credit with a second bank that
is used to finance its working capital for its Puerto Rico operations.
Borrowings under the line of credit bear interest at the prime rate. On March
31, 1996, the prime rate was 8.25%. As of March 31, 1996, $3.5 million was
outstanding on the bank line of credit which expires June 30, 1996.
In the normal course of business, the Company enters into various grower
contracts with third party growers. Pursuant to these contracts, the Company
contracts with growers to purchase their crop, subject to certain quality
standards, at the end of the growing cycle which is generally less than one
year. The amount of outstanding grower contract commitments was approximately
$1.5 million at March 31, 1996.
The Company has capitalized the legal fees incurred in its lawsuit with
Enzo Biochem, Inc. related to Calgene's defense of its antisense patent. On
February 2, 1996, the court ruled on behalf of the Company and held that
Calgene's patent was valid. If the defense of Calgene's patent is unsuccessful
as a result of potential appeals, the Company would have to expense all of these
unamortized legal costs. At March 31, 1996, the amount of these unamortized
costs was $6.3 million.
The Company expects that remaining capital expenditures in fiscal 1996 will
be approximately $3.0 million, a portion of which the Company expects to fund
with debt or lease financing. The Company's plans for capital expenditures may
change during the course of the year.
With the consummation of the Reorganization Agreement, Calgene and Monsanto
entered into a "Gargiulo Credit Facility" agreement pursuant to which Monsanto
shall, subject to certain terms and conditions, make available to Gargiulo a
revolving credit facility of up to $40 million (the "Gargiulo Loan"). Gargiulo
borrowed $22 million from Monsanto under a credit facility that existed prior to
the consummation of Calgene's transaction with Monsanto. These funds were used
to acquire Collier Farms, support Gargiulo's branded tomato strategy and to
allow Gargiulo to make a $2 million payment to Monsanto pursuant to a research
agreement. The outstanding amount was converted into a loan under the Gargiulo
Credit Facility on March 31, 1996. The balance of the Gargiulo Loan is to be
used solely to support the branded tomato strategy. The Gargiulo Loan bears
interest at two percent over the prime rate and is payable on March 31, 2000,
and may be extended under certain conditions.
The Company's cash and equivalents and short-term investments at March 31,
1996, amounts available under Calgene's credit facility agreement with Monsanto
and amounts expected to be available under its current bank lines of credit are
expected to be sufficient to meet Calgene's cash requirements until September
30, 1996 and, assuming the Company's credit facilities are renewed, until the
end of fiscal 1997. This expectation is based on the Company's anticipated
future operating results which are difficult to predict and continued
availability of the Company's bank credit lines. The Company's future liquidity
is expected to depend largely on the level of profit or losses generated by the
Company's operating businesses. In addition, the Company anticipates that, if
its tomato, cotton, and plant oil businesses expand significantly, they will
require increasing levels of working capital.
At March 31, 1996, Gargiulo is not in compliance with certain line of
credit and mortgage loan financial covenants contained in its loan agreements
with its principal lender. Such lender has waived Gargiulo's non-compliance
through September 30, 1996. Although the Company expects the Calgene and
Gargiulo lines of credit and the Gargiulo mortgage loans to be renewed before
the September 30, 1996 due date, there is no assurance that they will be renewed
or that their terms will not be modified, that the Company will continue to
satisfy the financial covenants in the future or that in the event of
non-compliance the banks would grant waivers. If the Company's bank credit lines
are not extended beyond September 30, 1996, the Company would be required to
issue equity securities, or enter into other financing arrangements. There is no
assurance that the Company would be successful in raising sufficient additional
funds to finance its operations or that the terms of any funding would be
favorable.
<PAGE>
PART II. OTHER INFORMATION
<PAGE>
ITEM 1. Legal Proceedings
-----------------
From 1992 through early 1996, Calgene was engaged in a litigation with Enzo
Biochem, Inc. ("Enzo") a company licensed under three related U.S. patents and
counterpart foreign patents (the "Enzo Patents") which purported to cover the
use of antisense technology in all cells, including plant cells. Some of
Calgene's products, including the FLAVR SAVR tomato, use antisense technology.
Enzo had claimed that Calgene infringed the Enzo Patents. Calgene denied
infringement and challenged the validity of the Enzo Patents. On February 2,
1996, the District Court ruled that the Enzo Patents are invalid. In addition,
the validity of a patent owned by Calgene directed to the use of antisense in
plant cells was upheld by the District Court. Calgene subsequently requested
that the court clarify certain aspects of the infringement portion of its
decision, and the court has agreed to reconsider on this basis. There is no
indication that the court would reverse any aspect of its original ruling.
Meanwhile, Enzo has indicated that it intends to appeal the decision.
Although the trial court has the option of altering any aspect of its
decision upon reconsideration, and Enzo may appeal the decision after its
publication, Calgene believes that further proceedings will not have a
materially adverse effect on its consolidated financial position or results of
operations, based on the trial court's determination that the SUNY/Enzo Patents
are invalid and not infringed by Calgene and that the Calgene Antisense Patent
is valid.
Nevertheless, if on reconsideration or as a result of an appeal a court
were to determine that one or more of the Enzo Patents validly covers plant
cells and that such patents are infringed by Calgene's sales of products
incorporating such antisense technology, Calgene could be held liable for
significant damages and could be precluded from producing and selling the FLAVR
SAVR tomato, as well as other products currently under development. There is no
assurance that a license, if necessary, could be obtained by Calgene on
commercially acceptable terms, if at all. If the court were to determine that
the Calgene Antisense Patent is invalid or unenforceable, Calgene would be
deprived of the competitive and licensing advantages afforded by its patent.
Moreover, the Company would have to expense the capitalized legal fees related
to the defense of the Calgene's Antisense Patent, which amounted to
approximately $6.3 million at March 31, 1996.
Gargiulo is a defendant in two pending cases which involve personal injury
claims relating to a vehicle accident in which numerous migrant labor workers
being transported to the farm of Gargiulo & Dresick Associates (which was being
farmed under contract by Dresick Farms, Inc.) were killed or injured. The two
cases, Alvertano Alberto Jiminez; et al. v. Gargiulo & Associates; Pat Kreger,
Inc., Manuel Vega; Robles Rios; Jesus Loza and Samuel Santiago Vasquez, and Jose
Vasquez; et al. v. Gargiulo & Associates; Pat Kreger, Inc., Manuel Vega; Robles
Rios; Jesus Loza and Samuel Santiago Vazquez, were both filed on October 18,
1995, in the United States District Court for the Eastern District of
California. The company hiring and transporting such farm workers was Pat
Kreger, Inc., an independent contractor engaged by Dresick Farms, Inc. to
arrange for migrant farm labor for the farm. The plaintiffs allege that the
vehicle in question was in violation of one or more federal and state safety
regulations governing farm labor vehicles. The plaintiffs are seeking general
damages, including compensation for pain and suffering; special damages,
including past, present and future medical expenses; compensation for the loss
of past and future income; and punitive damages in an unspecified amount.
Gargiulo's insurance carriers have been contacted regarding these lawsuits. It
has not yet been determined whether Gargiulo's insurance will be sufficient to
cover these claims, if any. Gargiulo intends to vigorously defend itself against
these claims. Otherwise, Gargiulo currently is not a party to any pending legal
proceedings, other than ordinary routine litigation incidental to its business.
The Company is party to other pending litigation incidental to its business
and has from time to time been notified of various claims that are not the
subject of pending litigation. While the results of litigation and claims cannot
be predicted with certainty, the Company believes that the final outcome of all
such other litigation matters and claims will not have a materially adverse
effect on its consolidated financial position or results of operations.
ITEM 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
At the Special Meeting of Stockholders on March 25, 1996, the stockholders
approved the Agreement and Plan of Reorganization (the "Reorganization
Agreement"), between Calgene and Monsanto Company ("Monsanto"), and the related
Plan of Merger, under which Calgene and Tomato Investment Associates, Inc., a
wholly-owned subsidiary of Monsanto ("TIA"), which owns the entire equity
interest in Gargiulo, L.P., a Delaware limited partnership, became on March 31,
1996, wholly-owned subsidiaries of a newly-formed holding company, Calgene II,
Inc. ("Newco"), pursuant to: (i) a merger of a wholly-owned subsidiary of Newco
with and into Calgene and the conversion of each outstanding share of Calgene
Common Stock (the "Calgene Common Stock"), into the right to receive one share
of Common Stock of Newco (the "Newco Common Stock"), followed immediately by
(ii) the exchange by Monsanto of all of the outstanding shares of capital stock
of TIA and certain other assets for that number of shares of Newco Common Stock
representing 49.9% of the outstanding shares of Newco Common Stock (the "Merger
Proposal"). On March 31, 1996, Newco was renamed "Calgene, Inc." Approval of the
Merger Proposal by a majority of the stockholders ratified (i) the assumption by
Newco of Calgene's 1991 Stock Option Plan, (ii) the assumption by Newco of
Calgene's 1990 Employee Stock Purchase Plan, (iii) the adoption of the Newco
1996 Stock Option Plan and (iv) the election of the eight directors of Newco.
The vote was 15,879,504 in favor, 1,296,646 opposed and 170,774 abstaining.
ITEM 5. Other Information
-----------------
Carl V. Stinnett, a designee for Calgene's Board of Directors, passed away
on February 9, 1996, as a result of injuries from an automobile accident.
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
A. Exhibits
10.42 Ninth Amendment to Secured Revolving Credit Agreement
and Secured Revolving Credit Note Among Calgene, Inc.
and Harris Trust and Savings Bank Dated March 28, 1996.....22
B. Reports on Form 8-K
Form 8-K dated March 31, 1996 regarding consummation of
Calgene's transaction with Monsanto Company.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CALGENE, INC.
Date: May 15, 1996
/s/ Michael J. Motroni
------------------------------
Vice President of Finance
(Principal Financial and
Accounting Officer)
CALGENE, INC.
NINTH AMENDMENT TO
SECURED REVOLVING CREDIT AGREEMENT AND
SECURED REVOLVING CREDIT NOTE
Harris Trust and Savings Bank
Chicago, Illinois
Ladies and Gentlemen:
Reference is hereby made to that certain Secured Revolving Credit Agreement
dated as of April 26, 1990, as amended (the "Credit Agreement") originally among
the undersigned, CALGENE, INC., a Delaware corporation (the "Company"), Harris
Trust and Savings Bank (the "Bank") and Caisse Nationale de Credit Agricole,
acting through its Grand Cayman Branch ("Credit Agricole") and Harris Trust and
Savings Bank as agent thereunder (the "Agent"). All defined terms used herein
shall have the same meaning as in the Credit Agreement unless otherwise defined
herein.
The Bank has extended a revolving credit facility to the Company on the
terms and conditions set forth in the Credit Agreement. Credit Agricole has
assigned to Harris, and Harris has assumed all of Credit Agricole's rights and
obligations under the Credit Agreement. The Company and Harris now wish to
extend the termination date of the Credit Agreement to September 30,1 996, and
amend certain terms of the Credit Agreement, all in the manner and on the terms
and conditions set forth in this Amendment.
SECTION 1. AMENDMENTS.
Upon satisfaction of all the conditions precedent set forth in Section 3
hereof, the Credit Agreement shall be amended as follows:
Section 1.1. The Termination Date of the Credit Agreement shall be extended
to September 30, 1996.
Section 1.2. Section 1.1(a) of the Credit Agreement shall be amended by
replacing the date "March 31, 1996" appearing therein with the date "September
30, 1006".
Section 1.3. Section 4.44 of the Credit Agreement shall be amended to read
as follows:
"4.44. "Tangible Net Worth" shall mean Net Worth less the amount of
all Intangible Assets less the amount of all investments in Gargiulo,
Inc. ("Gargiulo")."
"(i) the sale of all or substantially all of the assets of Calgene
Fresh, Inc. to Gargiulo or any of its Subsidiaries."
"Section 1.8. Section 8.1 of the Credit Agreement shall be amended by
deleting the word "or" appearing at the end of subsection (i) thereof, by
replacing the period appearing at the end of subsection (j) thereof with a
semi-colon, and by adding the following provisions thereto as subsections (k)
and (l) thereof:
"(k) Newco shall disavow, repudiate, terminate or breach the Newco
Guaranty or any part thereof, or the Newco Guaranty shall cease for
any reason to be valid and binding obligation of Newco, or any event
described in Sections 8.1(i) or (j) hereof shall occur with respect to
Newco; or
(l) no later than May 31, 1996, (i) the Company shall have failed to
deliver to the Agent copies, certified by the secretary or assistant
secretary of the Company, of resolutions of the Company's board of
directors ratifying the execution and delivery by the Company of the
Ninth Amendment, a Certificate of the Secretary or Assistant Secretary
of the Company as to be incumbency and signatures of the authorized
officers of the Company, and an opinion of counsel to the Company and
its Subsidiaries in form and substance satisfactory to the Bank, or
(ii) Newco shall have failed to deliver to the Agent copies, certified
by the secretary or assistant secretary of Newco, of resolutions of
its board of directors ratifying the execution and delivery by Newco
of the Newco Guaranty and the performance of its obligations
thereunder, a certificate of the secretary or assistant secretary of
Newco as to incumbency and signatures of authorized officers of Newco,
and an opinion of counsel to Newco in form and substance satisfactory
to the Bank."
Section 1.9. Exhibit A to the Credit Agreement and the Revolving Note of
the Company payable to the order of Harris Trust and Savings Bank (the "Note")
shall each by amended by deleting the date "March 31, 996" appearing twice in
the first paragraph therein and inserting in lieu thereof the date "September
30, 1996".
Section 1.10. Harris Trust and Savings Bank shall type the following legend
on its Note:
"This Note has been amended pursuant to the terms of an Ninth
Amendment to Secured Revolving Credit Agreement and Secured
Revolving Credit Note dated as of March 28, 1996, including an
extension of the maturity date hereof, to which reference is
hereby made for a statement of terms thereof."
Section 1.11. The Bank hereby waives the restrictions of Section 7.6 of the
Credit Agreement to the extent necessary to permit, and hereby consents to, the
transactions contemplated by the Agreement and Plan of Reorganization between
Calgene, Inc. and Monsanto Company dated as of October 13, 1995.
SECTION 2. CONDITIONS PRECEDENT.
The effectiveness of this Amendment is subject to the satisfaction of all
of the following conditions precedent:
Section 2.1. The Company and the Bank shall have executed this Amendment
(such execution may be in several counterparts and the several parties hereto
may execute on separate counterparts).
Section 2.2. Each of the representations and warranties set forth in
Section 5 of the Credit Agreement shall be true and
correct.
Section 2.3. The Company shall be in full compliance with all of the terms
and conditions of the Credit Agreement and no Event of Default or Potential
Default shall have occurred and be continuing thereunder or shall result after
giving effect to this Amendment.
Section 2.4. All legal matters incident to the execution and delivery
hereof and the instruments and documents contemplated hereby shall be
satisfactory to the Bank.
3. REPRESENTATIONS.
In order to induce the Bank to execute and deliver this Amendment, the
Company hereby represents to the Bank that as of the date hereof, each of the
representations and warranties set forth in Section 5 of the Credit Agreement
are and shall be and remain true and correct (except that the representations
contained in Section 5.2 shall be deemed to refer to the most recent financial
statements of the Company delivered to the Bank) and the Company is in full
compliance with all of the terms and conditions of the Credit Agreement and no
Default or Event of Default has occurred and is continuing thereunder or shall
result after giving effect to this Amendment.
4. MISCELLANEOUS.
Section 4.1. The Company has heretofore executed and delivered to the Agent
that certain Security Agreement Re: Inventory and Receivables and various
separate Pledge and Security Agreements, each dated as of April 26, 1990 (the
"Security Documents") and the Company hereby agrees that notwithstanding the
execution and delivery of this Amendment, the Security Documents shall be and
remain in full force and effect and that any rights and remedies of the Agent
thereunder shall be and remain in full force and effect and shall not be
affected, impaired or discharged thereby. Nothing herein contained shall in any
manner affect or impair the priority of the liens and security interests created
and provided for by the Security Documents as to the indebtedness which would be
secured thereby prior to giving effect to this Amendment.
Section 4.2. The Company agrees to pay on demand all costs and expenses of
or incurred by the Bank in connection with the negotiation, preparation,
execution and delivery of this Amendment, including the fees and expenses of
counsel for the Bank.
Section 4.3. Except as specifically amended herein the Credit Agreement and
the Note shall continue in full force and effect in accordance with their
original terms. Reference to this specific Amendment need not be made in any
note, document, letter, certificate, the Credit Agreement itself, the Note, or
any communication issued or made pursuant to or with respect to the Credit
Agreement or the Note, any reference to this Credit Agreement or Note being
sufficient to refer to the Credit Agreement as amended hereby.
Section 4.4. This Amendment may be executed in any number of counterparts,
and by the different parties on different counterparts, all of which taken
together shall constitute one and the same agreement. Any of the parties hereto
may execute this Amendment by signing any such counterpart and each of such
counterparts shall for all purposes by deemed to be an original. This Amendment
shall be governed by the internal laws of the State of Illinois.
Dated as of March 28, 1996
CALGENE, INC.
By /s/ Michael J. Motroni
Its Vice President
Accepted as of the date last written above.
HARRIS TRUST AND SAVINGS BANK
By /s/ Erica T. Kuhlmann
Its Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CONDENSED BALANCE SHEET AND CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 3,845
<SECURITIES> 3,694
<RECEIVABLES> 44,273
<ALLOWANCES> 0
<INVENTORY> 35,373
<CURRENT-ASSETS> 96,653
<PP&E> 90,187
<DEPRECIATION> 14,495
<TOTAL-ASSETS> 242,002
<CURRENT-LIABILITIES> 99,432
<BONDS> 22,671
<COMMON> 60
0
0
<OTHER-SE> 97,345
<TOTAL-LIABILITY-AND-EQUITY> 242,002
<SALES> 37,266
<TOTAL-REVENUES> 38,341
<CGS> 35,272
<TOTAL-COSTS> 45,189 <F1>
<OTHER-EXPENSES> 73,774
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,606
<INCOME-PRETAX> (93,005)
<INCOME-TAX> 54
<INCOME-CONTINUING> (93,059)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (93,059)
<EPS-PRIMARY> (3.06)
<EPS-DILUTED> 0
<FN>
<F1>
TOTAL COSTS INCLUDE EXPENSES FOR BOTH FUNDED AND UNFUNDED R&D PROJECTS.
</FN>
</TABLE>
