<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter period ended September 30, 1997
-------------------------------------------
OR
( ) TRANSITION PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-2642
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TRIDENT ROWAN GROUP, INC.
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(Exact name of registrant as specified in its charter)
Maryland 52-0466460
- ---------------------------------------------- ------------------------
(State or other jurisdiction of incorporation) (I.R.S. Employer
Identification No.)
Two Worlds Fair Drive, Somerset, NJ 08873
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(Address of principal executive offices - Zip Code)
(732) 868-9000
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(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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
---- ----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by court. Yes No
---- ---
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date. Common Stock
$0.01 par value, 5,130,160 shares.
<PAGE>
PART I
FINANCIAL INFORMATION
<PAGE>
TRIDENT ROWAN GROUP, INC
Consolidated Condensed Balance Sheets
September 30, 1997
<TABLE>
<CAPTION>
SEPT. 30 SEPT. 30 DEC. 31
1997 1997 1996
US$'000 LIRE M. LIRE M.
UNAUDITED UNAUDITED NOTE
<S> <C> <C> <C>
ASSETS
CASH AND CASH EQUIVALENTS. . . . . . . . . . . . . . . . . $ 9,104 LIT. 15,696 LIT. 8,281
MARKETABLE SECURITIES, AT COST . . . . . . . . . . . . . . 555 956 -
RECEIVABLES. . . . . . . . . . . . . . . . . . . . . . . . 22,383 38,589 40,734
TRADE, LESS ALLOWANCE LIT. 1,685 (LIT.1,300) . . . . . . 17,020 29,344 32,261
FINANCE RECEIVABLES, LESS ALLOWANCE LIT.1,000 (LIT.2,400) 976 1,683 3,573
RECEIVABLES FROM RELATED PARTIES . . . . . . . . . . . . 3,049 5,256 63
OTHER RECEIVABLES. . . . . . . . . . . . . . . . . . . . 1,338 2,306 4,837
INVENTORIES. . . . . . . . . . . . . . . . . . . . . . . . 24,310 41,910 32,838
RAW MATERIALS, SPARE PARTS AND WORK-IN-PROCESS . . . . . 15,893 27,399 22,256
FINISHED PRODUCTS. . . . . . . . . . . . . . . . . . . . 8,417 14,511 10,582
PREPAID EXPENSES . . . . . . . . . . . . . . . . . . . . . 1,055 1,818 1,231
------- ------- -------
TOTAL CURRENT ASSETS 57,407 98,969 83,084
------- ------- -------
PROPERTY, PLANT AND EQUIPMENT. . . . . . . . . . . . . . . 8,884 15,316 13,922
AT COST. . . . . . . . . . . . . . . . . . . . . . . . . 22,797 39,302 36,638
LESS ALLOWANCES FOR DEPRECIATION . . . . . . . . . . . . (13,913) (23,986) (22,716)
TRADEMARKS AND OTHER INTANGIBLE ASSETS, NET OF
AMORTIZATION OF LIT. 1,125 (LIT. 750). . . . . . . . . . 2,248 3,875 4,250
GOODWILL, NET OF AMORTIZATION OF LIT. 438 (LIT. 283) . . . 794 1,368 1,515
REAL ESTATE FOR DEVELOPMENT, NET OF RESERVE OF LIT. 2,500. 2,030 3,500 3,500
REAL ESTATE FOR SALE. . . . . . . . . . . . . . . . . . . - - 15,100
INVESTMENTS IN UNCONSOLIDATED COMPANIES. . . . . . . . . . 898 1,548 1,574
RECEIVABLES FROM RELATED PARTIES . . . . . . . . . . . . . 2,731 4,708 4,708
MARKETABLE & OTHER SECURITIES AND INVESTMENTS, AT COST . . 8,860 15,275 15,004
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . 7,340 12,655 13,855
------- ------- -------
TOTAL ASSETS $ 91,192 LIT. 157,214 LIT. 156,512
------- ------- -------
------- ------- -------
</TABLE>
Note: The balance sheet as at December 31, 1996 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles.
See Notes to Consolidated Condensed Financial Statements
3
<PAGE>
TRIDENT ROWAN GROUP, INC.
Consolidated Condensed Balance Sheets
September 30, 1997
<TABLE>
<CAPTION>
SEPT. 30 SEPT. 30 DEC. 31
1997 1997 1996
US$'000 LIRE M. LIRE M.
UNAUDITED UNAUDITED NOTE
<S> <C> <C> <C>
LIABILITIES
ADVANCES FROM BANKS. . . . . . . . . . . . . . . . . . . . $ 20,204 LIT. 34,832 LIT. 25,344
ADVANCES FROM BANKS FOR FINANCE ACTIVITIES . . . . . . . . 1,274 2,197 4,439
CURRENT PORTION OF LONG-TERM REAL ESTATE DEBT. . . . . . . - - 4,998
CURRENT PORTION OF OTHER LONG-TERM DEBT. . . . . . . . . . 1,480 2,551 2,270
ACCOUNTS PAYABLE . . . . . . . . . . . . . . . . . . . . . 15,210 26,223 25,571
ACCRUED EXPENSES AND OTHER PAYABLES. . . . . . . . . . . . 6,541 11,276 11,434
--------- ------- -------
TOTAL CURRENT LIABILITIES 44,701 77,079 74,056
--------- ------- -------
LONG-TERM REAL ESTATE DEBT, LESS CURRENT PORTION . . . . . - - 4,714
OTHER LONG-TERM DEBT, LESS CURRENT PORTION . . . . . . . . 6,353 10,953 11,754
TERMINATION INDEMNITIES. . . . . . . . . . . . . . . . . . 5,035 8,680 8,031
PROVISION FOR CLAIMS . . . . . . . . . . . . . . . . . . . 1,897 3,270 3,270
MINORITY INTERESTS . . . . . . . . . . . . . . . . . . . . 8,277 14,267 14,788
PREFERRED STOCK OF SUBSIDIARY. . . . . . . . . . . . . . . 6,235 10,749 5,101
COMMON STOCK SUBJECT TO REPURCHASE . . . . . . . . . . . . 10,002 17,244 13,968
SHAREHOLDERS' EQUITY 8,684 14,972 20,830
COMMON STOCK, PAR VALUE $0.01 PER SHARE:
AUTHORIZED 50,000,000 SHARES; 5,130,160 (3,902,540)
SHARES ISSUED AND OUTSTANDING; LESS 947,260 (849,640)
SUBJECT TO REPURCHASE. . . . . . . . . . . . . . . . . . 51 88 69
ADDITIONAL PAID IN CAPITAL . . . . . . . . . . . . . . . 5,239 88,336 77,145
TREASURY STOCK, AT COST. . . . . . . . . . . . . . . . . (16,161) (27,861) (27,411)
CUMULATIVE TRANSLATION ADJUSTMENT . . . . . . . . . . . (147) (254) 1,854
ACCRETION EXPENSE AND RELATED EXCHANGE MOVEMENTS . . . . (1,169) (2,016) 100
DEFICIT. . . . . . . . . . . . . . . . . . . . . . . . . (25,129) (43,321) (30,927)
--------- ------- -------
$ 91,192 LIT. 157,214 LIT. 156,512
--------- ------- -------
--------- ------- -------
</TABLE>
Note: The balance sheet as at December 31, 1996 has been derived from the
audited financial statements at that date but does not include all of the
information and footnotes required by generally accepted accounting principles.
See Notes to Consolidated Condensed Financial Statements
4
<PAGE>
TRIDENT ROWAN GROUP, INC.
Unaudited Consolidated Condensed Statements of Operations
3 Months Ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
SEPT. 30 Sept. 30 SEPT. 30
1997 1997 1996
US $'000 LIRE M. LIRE M.
<S> <C> <C> <C>
NET SALES. . . . . . . . . . . . . . . . . . . . . . . $ 13,528 LIT. 23,323 LIT. 17,042
COST OF SALES. . . . . . . . . . . . . . . . . . . . . . . (12,050) (20,775) (15,024)
--------- --------- ---------
1,478 2,548 2,018
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES . . . . . . . (3,395) (5,853) (4,362)
RESEARCH AND DEVELOPMENT . . . . . . . . . . . . . . . . . (288) (496) (287)
RENTAL INCOME. . . . . . . . . . . . . . . . . . . . . . . 16 28 348
RESERVE FOR VALUE OF REAL ESTATE PROPERTIES. . . . . . . . - - (2,950)
OTHER INCOME, NET. . . . . . . . . . . . . . . . . . . . . 226 389 314
--------- --------- ---------
(1,963) (3,384) (4,919)
INTEREST EXPENSE . . . . . . . . . . . . . . . . . . . . . (571) (984) (1,705)
INTEREST INCOME. . . . . . . . . . . . . . . . . . . . . . 545 939 1,279
--------- --------- ---------
LOSS FROM OPERATIONS BEFORE INCOME TAXES
AND MINORITY INTERESTS . . . . . . . . . . . . . . . . . (1,989) (3,429) (5,345)
INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . (88) (151) (8)
MINORITY INTERESTS . . . . . . . . . . . . . . . . . . . . 117 202 (127)
AMORTIZATION OF PREMIUM FOR REDEMPTION OF
PREFERRED STOCK OF SUBSIDIARY. . . . . . . . . . . . . . (425) (732) -
--------- --------- ---------
NET LOSS . . . . . . . . . . . . . . . . . . . . . . . . . $ (2,385) Lit. (4,110) LIT. (5,480)
--------- --------- ---------
--------- --------- ---------
LOSS PER SHARE US $ LIRE LIRE
NET LOSS PER SHARE . . . . . . . . . . . . . . . . . . . . $ (0.46) (801) (1,155)
--------- --------- ---------
--------- --------- ---------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING DURING THE PERIOD. . . . . . . . . . . . . . 5,130,160 5,130,160 4,742,865
--------- --------- ---------
--------- --------- ---------
</TABLE>
See Notes to Consolidated Condensed Financial Statements
5
<PAGE>
TRIDENT ROWAN GROUP, INC.
Unaudited Consolidated Condensed Statements of Operations
9 Months Ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
SEPT. 30 SEPT. 30 SEPT. 30
1997 1997 1996
US $'000 LIRE M. LIRE M.
<S> <C> <C> <C>
NET SALES . . . . . . . . . . . . . . . . . . . . . . . . $ 44,437 LIT. 76,610 LIT. 66,043
COST OF SALES . . . . . . . . . . . . . . . . . . . . . . (38,551) (66,462) (56,821)
---------- ------------- ------------
5,886 10,148 9,222
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES . . . . . . . (10,213) (17,607) (14,179)
RESEARCH AND DEVELOPMENT . . . . . . . . . . . . . . . . . (808) (1,393) (613)
RENTAL INCOME. . . . . . . . . . . . . . . . . . . . . . . 245 423 1,098
RESERVE FOR VALUE OF REAL ESTATE PROPERTIES. . . . . . . . - - (2,950)
OTHER INCOME, NET. . . . . . . . . . . . . . . . . . . . . 1,528 2,635 227
--------- ------------- ------------
(3,362) (5,794) (7,195)
INTEREST EXPENSE . . . . . . . . . . . . . . . . . . . . . (2,068) (3,565) (4,882)
INTEREST INCOME. . . . . . . . . . . . . . . . . . . . . . 1,002 1,728 (3,318)
--------- ------------- ------------
LOSS FROM OPERATIONS BEFORE INCOME TAXES
AND MINORITY INTERESTS . . . . . . . . . . . . . . . . . (4,428) (7,631) (8,759)
INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . (258) (445) (600)
MINORITY INTERESTS . . . . . . . . . . . . . . . . . . . . 302 521 (476)
AMORTIZATION OF PREMIUM FOR REDEMPTION OF
PREFERRED STOCK OF SUBSIDIARY . . . . . . . . . . . . . . (1,575) (2,715) -
CHARGE FOR ISSUANCE OF WARRANTS. . . . . . . . . . . . . . (1,232) (2,124) -
--------- ------------- -------------
NET LOSS . . . . . . . . . . . . . . . . . . . . . . . . . $ (7,191) LIT. (12,394) LIT. (9,835)
--------- ------------- --------------
--------- ------------- --------------
LOSS PER SHARE . . . . . . . . . . . . . . . . . . . . . . US $ LIRE LIRE
NET LOSS PER SHARE . . . . . . . . . . . . . . . . . . . . $ (1.62) (2,800) (2,073)
--------- ------------- -------------
--------- ------------- -------------
WEIGHTED AVERAGE NUMBER OF COMMON SHARES . . . . . . . . .
OUTSTANDING DURING THE PERIOD. . . . . . . . . . . . . . 4,426,216 4,426,216 4,742,865
--------- ------------- -------------
--------- ------------- -------------
</TABLE>
See Notes to Consolidated Condensed Financial Statements
6
<PAGE>
TRIDENT ROWAN GROUP, INC.
Unaudited Consolidated Condensed Statements of Cash Flows
9 Months Ended September 30, 1997 and 1996
<TABLE>
<CAPTION>
SEPT. 30 SEPT. 30 SEPT. 30
1997 1997 1996*
US $'000 LIRE M. LIRE M.
<S> <C> <C> <C>
NET LOSS . . . . . . . . . . . . . . . . . . . . . . . . . (7,191) (12,394) (9,835)
ADJUSTMENTS TO RECONCILE NET LOSS TO NET
CASH USED BY OPERATING ACTIVITIES:. . . . . . . . . . . . 271 465 4,356
-------- --------- --------
NET CASH USED BY OPERATING ACTIVITIES. . . . . . . . . . . (6,920) (11,929) 5,479
-------- --------- --------
INVESTING ACTIVITIES:
NET DECREASE/(INCREASE) IN INVESTMENTS AND SECURITIES. . . (742) (1,280) 2,007
SALE/PURCHASE OF SUBSIDIARIES, LESS CASH
DISPOSED/ACQUIRED . . . . . . . . . . . . . . . . . . . 2,353 4,057 548
PROCEEDS FROM DISPOSAL OF FIXED ASSETS . . . . . . . . . . 39 67 2,070
PURCHASES OF PROPERTY, PLANT AND EQUIPMENT . . . . . . . . (1,132) (1,951) 4,601
-------- -------- --------
NET CASH PROVIDED/(USED) BY INVESTING ACTIVITIES . . . . . 518 893 24
-------- -------- --------
FINANCING ACTIVITIES:
INCREASE IN ADVANCES FROM BANKS. . . . . . . . . . . . . . 4,203 7,246 6,275
SALE OF PREFERRED STOCK OF SUBSIDIARY. . . . . . . . . . . 1,701 2,933 -
PROCEEDS FROM SHARE ISSUES . . . . . . . . . . . . . . . . 5,949 10,256 -
REPURCHASES OF SHARES. . . . . . . . . . . . . . . . . . . (261) (450) -
PROCEEDS FROM LONG-TERM DEBT . . . . . . . . . . . . . . . 55 94 752
PRINCIPAL PAYMENTS OF LONG-TERM DEBT . . . . . . . . . . . (1,033) (1,781) (4,967)
-------- ------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES. . . . . . . . . 10,614 18,285 2,060
-------- ------- --------
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . 4,212 7,262 (3,395)
EFFECT OF EXCHANGE RATE CHANGE ON CASH AND
CASH EQUIVALENTS. . . . . . . . . . . . . . . . . . . . . 89 153 (164)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD . . . . . . 4,803 8,281 24,137
-------- ------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD . . . . . . . . . 9,104 15,696 20,578
-------- ------- --------
-------- ------- --------
</TABLE>
* Reclassified to conform to September 30, 1997 presentation
SUPPLEMENTAL INFORMATION ON NON-CASH TRANSACTIONS
As described in Note 2, the Company disposed of its real estate subsidiary in
the first quarter of 1997, eliminating real estate of Lit. 15,100 million and
real estate loans of Lit. 9,379 million. The Company received Lit. 4,468
million of the sales proceeds in the period to September 30, 1997, included,
net of Lit. 411 million cash disposed, in the item "Sale/purchase of
subsidiaries net of cash disposed/acquired". The amount outstanding of Lit.
1,610 million is included in related party receivables.
See Notes to Consolidated Condensed Financial Statements
7
<PAGE>
TRIDENT ROWAN GROUP, INC.
Notes to the Consolidated Condensed Financial Statements
September 30, 1997
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with the instructions to Form 10-Q. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. For a summary of the Registrant's
accounting principles, and other footnote information, reference is made to
the Registrant's 1996 Annual Report on Form 10-K. All adjustments necessary
for the fair presentation of the results of operations for the interim
periods covered by this report have been included. All of such adjustments
are of a normal and recurring nature. The results of operations for the
three and nine months ended September 30, 1997 are not necessarily indicative
of the operating results for the full year.
The primary financial statements are shown in Italian lire because all of the
Company's material operating entities are based and operate in Italy.
Translation of lire amounts into U.S. Dollar amounts is included solely for
the convenience of the readers of the financial statements and has been made
at the rate of Lire 1,724 to U.S. $1, the approximate exchange rate at
September 30, 1997. It should not be construed that the assets and
liabilities, expressed in US dollar equivalents, can actually be realized in
or extinguished by U.S. dollars at that or any other rate.
In February, 1997, the FASB issued Statement No. 128, "Earnings per Share",
which is required to be adopted in 1998. Implementation of Statement No. 128,
which will require the Company to report "Basic Earnings per Share" and
"Diluted Earnings per Share", will not have a material impact on the earnings
per share amounts as currently reported by the Company.
NOTE 2 DISPOSAL OF REAL ESTATE SUBSIDIARY
On March 18, 1997, the Company entered into an agreement to sell its Cologne,
Italy property to a Company affiliated with Rag. Bertoni, a shareholder of
the Company and of Finprogetti, the Company's then largest shareholder (See
also Note 4 below). The agreement was consummated on April 15, 1997 by
transfer of the shares of Finprogetti Investimenti Immobiliari S.p.A., the
subsidiary holding the Cologne property. Under the terms of the agreement,
the purchaser assumed the mortgage loans over the property and paid Lit. 500
million on March 18, 1997, Lit. 1,928 million on April 15, 1997. A further
Lit. 2,040 million was received on July 1, 1997 and Lit. 2,040 million is due
on December 31, 1997. 120,000 shares of the Company's common stock were
deposited as security for the final installment.
8
<PAGE>
TRIDENT ROWAN GROUP, INC.
Notes to the Consolidated Condensed Financial Statements
September 30, 1997
NOTE 2 DISPOSAL OF REAL ESTATE SUBSIDIARY (CONTINUED)
The Company has granted the purchaser an option to settle the final
installment in cash of Lit. 2,040 million or by way of paying in up to
120,000 shares of the Company's common stock to be valued at the higher of
$10.00 and the market value of the shares as at December 31, 1997. The
Company reclassified these 120,000 shares subject to the option from
'Shareholders' equity' to 'Shares subject to repurchase' at their estimated
fair value, at the date of the transaction, of $8.00 (Lit. 13,416) per share
for an amount of Lit. 1,610 million ($960,000).
The net amount due in respect of the last installment, adjusted to reflect
the fair value of the 120,000 shares, of Lit. 1,610 million, is included in
the Balance Sheet in "Receivables from Related Parties".
As part of the agreement, the Company has also guaranteed 80% of the current
level of rentals for a period of one year in the case that the existing
rental contract is not renewed in July 1998. The Company has the right, in
such circumstances, to seek other tenants and mitigate this contingent
liability.
NOTE 3 COMPLETION OF SALE OF PREFERRED STOCK OF SUBSIDIARY
The Company's newly formed wholly-owned subsidiary, Moto Guzzi Corp.,
acquired all of the equity interest of the Company in Moto Guzzi S.p.A. and
in Moto America Inc. in exchange for 6,000,000 shares of common stock of Moto
Guzzi Corp. In December 1996 and January 1997, Moto Guzzi Corp. consummated
a private offering of convertible preferred stock and common stock purchase
warrants which raised an aggregate of approximately $5,250,000 (Lit. 8,034
million at the then prevailing exchange rates) for Moto Guzzi Corp., net of
expenses. Moto Guzzi Corp. issued 1,500,000 units, each consisting of one
share of Class A Convertible Preferred Stock and one common stock purchase
warrant exercisable for three years for the lesser of $4.00 or the initial
public offering price of the common stock. The preferred stock is
convertible at the option of the holder into an equal number of shares of
common stock, subject to adjustment to protect against events of dilution and
is automatically converted upon consummation of an initial public offering of
Moto Guzzi Corp. common stock which raises gross proceeds of at least
$8,000,000. The conversion rate for the preferred stock in such event will
be the lesser of the then applicable conversion rate or 75% of the per share
initial offering price. If such an initial public offering is not
consummated by June 30, 1998, the holders of a majority of the shares of
preferred stock will have the right to select a majority of the Moto Guzzi
Corp. board of directors. The holders of the Preferred Stock also have a
right to redeem their shares at $8.00 per share if no public offering is
completed on or before January 16, 2002.
9
<PAGE>
TRIDENT ROWAN GROUP, INC.
Notes to the Consolidated Condensed Financial Statements
September 30, 1997
NOTE 3 COMPLETION OF SALE OF PREFERRED STOCK OF SUBSIDIARY (CONTINUED)
The Moto Guzzi Corp. preferred stock was recorded in the consolidated balance
sheet as preferred stock of subsidiary in the amount of Lit. 5,101 million at
December 31, 1996 and a further Lit. 2,933 million was recorded in January
1997 as a result of the completion of the private placement. At September 30,
1997, the Company has recorded Lit. 2,715 million as accretion expense in the
statement of operations to reflect amortization of the difference between the
net proceeds received and the contingent redemption of such shares in January
2002 and the effects of changing exchange rates on such repurchase commitment.
NOTE 4 CHANGE OF CONTROL
Finprogetti S.p.A., the largest shareholder of the Company, sold to Tamarix
Investors, LDC on May 2, 1997, 900,000 shares of the Company's common stock.
Tamarix and Finprogetti agreed that Finprogetti shall have a put right and
Tamarix shall have a call right with respect to an additional 735,000 shares
of common stock owned by Finprogetti. The put option is exercisable for a
one year period, beginning on May 3, 1998 and the call option is exercisable
during the two years through May 2, 1999. During such two year period,
Tamarix has a proxy from Finprogetti to vote such 735,000 shares.
In addition, Finprogetti delivered the resignations from the Company's Board
of Directors of five persons who had been nominated at the request of
Finprogetti. In connection with the foregoing the Company entered an
agreement on April 8, 1997 to (a) engage Tamarix Capital Corporation to
provide financial advisory services to the Company at a cost of $200,000 per
year, (b) issue to Centaurus Management LDC, the Manager of Tamarix, a
warrant to purchase 1,250,000 shares of common stock with an exercise price
equal to the offering price per share of common stock of $6.00 in the public
securities offering of the Company completed on June 6, 1997 (See Note 5,
below), exercisable for a three year period, (c) register the shares of the
Company purchased from Finprogetti as well as the shares underlying such
warrants, and (d) cause the By-Laws or the Articles of Incorporation of the
Company to be amended to provide for (i) a staggered Board of Directors which
shall include at least one person nominated by Tamarix in each of the three
classes, (ii) provide for a representative of Tamarix to be Chairman of the
Board of the Company, (iii) provide that Tamarix's consent will be required
to further amend the Company's Articles of Incorporation, and (iv) require
that the Board of Directors be expanded and limited to not more than 11
members, such Board to include the Tamarix nominees and an additional three
independent directors who are experienced in business matters and otherwise
reasonably acceptable to Tamarix.
10
<PAGE>
TRIDENT ROWAN GROUP, INC.
Notes to the Consolidated Condensed Financial Statements
September 30, 1997
NOTE 4 CHANGE OF CONTROL (CONTINUED)
The Company estimated the fair value of the warrants issued to Centaurus
Management LDC, the manager of Tamarix Investors LDC, as an inducement to
acquiring Finprogetti S.p.A.'s shares of the Company's common stock, at $1
per warrant. The Company has accounted for the issuance of the warrants by
crediting additional paid-in capital in the amount of $1,250,000, Lit. 2,124
million at the then prevailing exchange rate, and charging such amount to the
statement of operations as a charge for issuance of warrants.
NOTE 5 PUBLIC OFFERING OF THE COMPANY'S SECURITIES
On June 6, 1997, the Company completed a public offering of its securities
(the "Offering"), issuing 1,250,000 shares of common stock at $6.00 per share
and 1,437,500 Redeemable Common Stock Purchase Warrants at $0.10 per Warrant.
Each Warrant is exercisable for five years at an exercise price of $7.20 per
share of Common Stock. The Company may redeem the Warrants at a price of
$0.01 per Warrant at any time if notice of not less than 30 days is given and
the last sale price of the Common Stock has been at least $9.60 on all 20
trading days ending on the third day prior to the day on which notice is
given. The Company also sold for $100 to GKN Securities Corp., the Company's
Representative for the Offering, an option to purchase up to 125,000 shares
of Common Stock and/or 125,000 Warrants. The option is exercisable for four
years commencing June 6, 1998 at an exercise price of $6.12 per share of
Common Stock and $0.102 per Warrant.
The gross proceeds of the Offering amounted to $7,643,750 and the net
proceeds, after underwriting commissions and other costs, received by the
Company amounted to approximately $6,037,000, equivalent to Lit. 10,256
million at the then prevailing exchange rate.
11
<PAGE>
TRIDENT ROWAN GROUP, INC.
Management's Discussion and Analysis of Financial Conditions
and Results of Operations
RESULTS OF OPERATIONS
3 MONTHS TO SEPTEMBER 30, 1997
1997 1996
LIRE M. LIRE M.
Net sales........................ 23,323 100.0% 17,042 100.0%
Cost of sales.................... (20,775) (89.1%) (15,024) (88.2%)
------- -------
2,548 10.9% 2,018 11.8%
Selling, general and
administrative expenses......... (5,853) (25.1%) (4,362) (25.6%)
Research & product development... (496) (2.1%) (287) (1.7%)
Rental income.................... 28 0.1% 348 2.0%
Reserves for value of real
estate.......................... - - (2,950) (17.3%)
Other income, net................ 389 1.7% 314 1.8%
------- -------
(3,384) (14.5%) (4,919) (28.9%)
Interest expense................. (984) (4.2%) (1,705) (10.0%)
Interest income.................. 939 4.0% 1,279 7.5%
------- -------
Loss before income taxes and
minority interests.............. (3,429) (14.7%) (5,345) (31.4%)
Income taxes..................... (151) (0.6%) (8) (0.0%)
Minority interests............... 202 0.9% (127) (0.7%)
Amortization of premium for
redemption of preferred stock of
subsidiary...................... (732) (3.1%) - -
------- -------
Net loss......................... (4,110) (17.6%) (5,480) (32.2%)
------- -------
------- -------
NET SALES 1997 1996 %CHANGE
Motorcycles*................ 18,105 12,959 39.7%
Steel tubing................ 4,661 3,534 31.9%
Corporate & other........... 1,354 807 67.8%
Intersegment eliminations... (797) (258) 208.9%
------ ------ -----
23,323 17,042 36.9%
------ ------ -----
------ ------ -----
* Motorcycle segment sales net of intrasegment eliminations
The increase in net sales of motorcycles is due to higher sales at Moto
America, the inclusion of the Moto Guzzi France which reports higher sales
prices than at the factory and an improved sales mix with increased sales of
larger, more expensive motorcycles. Unit motorcycle sales increased by 32.5%
in the third quarter of 1997 to 1,232. Third quarter 1996 motorcycle sales
had been restricted due to the failure of certain suppliers to provide
components.
12
<PAGE>
TRIDENT ROWAN GROUP, INC.
Management's Discussion and Analysis of Financial Conditions
and Results of Operations
The increase in net sales of steel tubing at the Company's L.I.T.A.
subsidiary is due to a 22.6% increase in volume to 3,195 tons, and to higher
prices which have now partly recovered after falling significantly in 1996.
COST OF SALES, MARGINS AND PRODUCTION
Margins in the three month period fell from 11.8% in 1996 to 10.9% in 1997
primarily because of increased material and variable production costs at Moto
Guzzi which the Company elected not to pass on to customers through increased
selling prices in favor of pursuing market share. 1996 margins had benefited
from increases in selling prices, effective from March 1996, averaging 5%
whereas no further price increases have been made since such time. The
Company's policy, of outsourcing more components to increase production
capacity, has also negatively impacted margins as production and sales
volumes have not yet increased sufficiently to produce an overall gain.
Offsetting these factors, Moto Guzzi recorded higher margins from increased
sales in the United States by Moto America and from its French importer, Moto
Guzzi France, which was operative from the end of the first quarter of 1997.
1,277 units were completed at Moto Guzzi in the three months ended September
30, 1997 compared to 1,103 units in the corresponding period in 1996, an
increase of approximately 16%. Completed units in 1996 were restricted by
component supply issues. The Moto Guzzi factory was closed for nearly all of
August in both 1997 and 1996, in accordance with Italian practice.
Margins at L.I.T.A. improved slightly in the three months ended September 30,
1997 due to the continued slow recovery of sale prices.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses in the three months ended
September 30, 1997 increased by Lit. 1,491 million ($864,849) or 34.2% over
the 1996 period. The increase was primarily in the motorcycle segment and
reflects higher selling and administrative costs at Moto America Inc. as a
result of increased business levels, the inclusion of Moto Guzzi France,
which was operative from the end of the first quarter of 1997, and increases
in personnel at Moto Guzzi S.p.A. in sales, marketing, product development
and information systems.
RESERVES FOR VALUE OF REAL ESTATE
In the third quarter of 1996, the Company made reserves in respect of land in
Sardinia and in respect of its Cologne property of which it subsequently
disposed.
13
<PAGE>
TRIDENT ROWAN GROUP, INC.
Management's Discussion and Analysis of Financial Conditions
and Results of Operations
OTHER INCOME, NET
In 1997 and 1996, other income is principally composed of exchange gains.
INTEREST INCOME AND EXPENSE
Interest income declined as a result of reduced liquidity stemming from
payments in November 1996 to consummate the Company's share repurchase
program and the funding of losses incurred by the Company. The decline was
partly offset by additional liquidity resulting from the Company's June 1997
share offering. Interest rates have also declined in 1997 compared to 1996.
Indebtedness from real estate activities was eliminated with the sale of the
Company's Cologne property in the first quarter of 1997, while advances from
banks, primarily to finance working capital at Moto Guzzi, have increased.
Overall, indebtedness has declined and interest expense has also benefited
from lower interest rates in 1997.
AMORTIZATION OF PREMIUM FOR REDEMPTION OF PREFERRED STOCK OF SUBSIDIARY
The Company recorded accretion expense in its third quarter 1997 statement of
operations of Lit. 732 million in respect of the obligation of its Moto Guzzi
Corp. subsidiary to redeem its outstanding class of preferred stock in
January 2002 for an aggregate cost of $12,000,000 upon the occurrence of
certain conditions. The accretion expense includes amounts for the effects
of exchange rates on this obligation, denominated in U.S. dollars.
NET LOSS
Overall, the Company's net loss decreased from Lit. 5,480 million to Lit.
4,110 million ($2,384,000) in the three months ended September 30, 1997
compared to 1996. The Company's operating loss (sales less costs of sales and
selling, general and administrative expenses) increased from Lit. 2,344
million to Lit. 3,305 million due principally to increased selling general
and administrative expenses at Moto Guzzi, offset by modest improvements at
L.I.T.A. 1996 results were also adversely affected by Lit. 2,950 million of
impairment reserves which item is not present in 1997. Net interest expense
benefited in 1997 due to reduced interest payable on loans on real estate
which have been disposed in the first quarter of 1997 and lower interest
rates. The Company has also recorded accretion expense of Lit 732 million
($424,594) relative to Moto Guzzi Corp., which item was not present in 1996.
14
<PAGE>
TRIDENT ROWAN GROUP, INC.
Management's Discussion and Analysis of Financial Conditions
and Results of Operations
RESULTS OF OPERATIONS
9 MONTHS TO SEPTEMBER 30, 1997
1997 1996
LIRE M. LIRE M.
Net sales...................... 76,610 100.0% 66,043 100.0%
Cost of sales.................. (66,462) (86.8%) (56,821) (86.0%)
------- -------
10,148 13.2% 9,222 14.0%
Selling, general and
administrative expenses........ (17,607) (23.0%) (14,179) (21.5%)
Research and development....... (1,393) (1.8%) (613) (0.9%)
Rental income.................. 423 0.6% 1,098 1.7%
Reserve for real estate
values........................ - - (2,950) (4.5%)
Other income, net.............. 2,635 3.4% 227 0.3%
------- -------
(5,794) (7.6%) (7,195) (10.9%)
Interest expense............... (3,565) (4.7%) (4,882) (7.4%)
Interest income................ 1,728 2.3% 3,318 5.0%
------- -------
Loss before income taxes and
minority interests............ (7,631) (10.0%) (8,759) (13.3%)
Income taxes................... (445) (0.6%) (600) (0.9%)
Minority interests............. 521 0.7% (476) (0.7%)
Amortization of premium for
redemption of preferred stock
of subsidiary................. (2,715) (3.5%) -
Charge for issuance of
warrants...................... (2,124) (2.8%) -
------- -------
Net loss....................... (12,394) (16.2%) (9,835) (14.9%)
------- -------
------- -------
NET SALES 1997 1996 %CHANGE
Motorcycles *............. 59,770 51,234 16.7%
Steel tubing ............. 15,202 13,296 14.3%
Corporate & other......... 2,758 2,297 20.1%
Intersegment eliminations. (1,120) (784) 42.9%
------ ------ -----
76,610 66,043 16%
------ ------ -----
------ ------ -----
* Motorcycle segment sales net of intrasegment eliminations
The increase in net sales of motorcycles is primarily due to factors
comparable to those that impacted the third quarter of 1997. Unit sales
increased in the 1997 nine month period to 4,416 from 4,015 in the 1996 period.
The increase in net sales of L.I.T.A. is mainly due to higher volumes.
15
<PAGE>
TRIDENT ROWAN GROUP, INC.
Management's Discussion and Analysis of Financial Conditions
and Results of Operations
COST OF SALES, MARGINS AND PRODUCTION
The decrease in margins is due to decreases at Moto Guzzi, for reasons
comparable to those which affected the third quarter, offset by an
improvement at L.I.T.A., mainly in the first half of 1997 compared to 1996.
The improvements at L.I.T.A. primarily reflect a recovery of margins to
normal levels in 1997 whereas, in 1996, margins were affected by losses on
inventory following sharp decreases in selling prices of products.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses increased by Lit. 3,428 million
($1,988,000) or 24.2% over 1996. The increase was primarily in the motorcycle
segment and, as discussed in connection with the 1997 third quarter period,
reflects higher selling and administrative costs at Moto America Inc., the
inclusion of Moto Guzzi France, and increases at Moto Guzzi S.p.A. in respect
of management and logistics. Expenses at L.I.T.A. have remained at similar
levels to 1996 and there has been a 5.6% decrease in corporate overhead.
OTHER INCOME, NET
In 1997 and 1996, other income is principally composed of exchange gains,
which in 1997 amounted to approximately Lit. 2,000 million. The Company also
received Lit. 335 million from The Carey Winston Company pursuant to the
termination, in February 1997, of the agreement to acquire such company.
INTEREST INCOME AND EXPENSE
Interest income declined in the 1997 nine month period as a result of reduced
liquidity and declining interest rates, offset by interest income on the
funds received from the Company's June 1997 public offering.
Interest expense declined primarily as a result of lower indebtedness and
lower interest rates. Indebtedness from real estate activities was
eliminated with the sale of the Company's Cologne property in the first
quarter of 1997. The benefits from these factors have been partially offset
by increased interest expense relative to increased advances from banks
financing working capital at Moto Guzzi.
16
<PAGE>
TRIDENT ROWAN GROUP, INC.
Management's Discussion and Analysis of Financial Conditions
and Results of Operations
AMORTIZATION OF PREMIUM FOR REDEMPTION OF PREFERRED STOCK OF SUBSIDIARY
The Company recorded accretion expense in its statement of operations of Lit.
2,715 million in respect of the obligation of its Moto Guzzi Corp. subsidiary
to redeem its outstanding class of preferred stock in January 2002 for an
aggregate cost of $12,000,000 upon the occurrence of certain conditions. The
accretion expense includes amounts for the effects of exchange rates on this
obligation, denominated in US dollars.
NET LOSS
Overall, the Company's net loss increased from Lit. 9,835 million to Lit.
12,394 million ($7,502,000) in the nine months ended September 30, 1997
compared to 1996. The Company's operating loss (sales less costs of sales and
selling, general and administrative expenses) increased from Lit. 4,957
million to Lit. 7,459 million ($4,327,000) due principally to lower margins
and increased selling general and administrative expenses at Moto Guzzi,
offset partially by improved results at L.I.T.A. and to exchange gains,
mainly recorded in the first quarter. The results of the Company also
include a number of non-comparable items: in 1996 the Company recorded losses
of Lit. 2,950 million in respect of the value of real estate assets; in 1997
the Company has recorded accretion expense of Lit. 2,715 million relative to
Moto Guzzi Corp., and Lit. 2,124 million in respect of issuance of warrants,
which items were not present in 1996.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS FROM OPERATING ACTIVITIES
Cash outflows from operating activities amounted to Lit. 11,929 million
($6,919,000) in the nine months ended September 30, 1997 compared to outflows
of Lit. 5,479 million in the corresponding period of the previous year. In
addition to cash outflows from losses, inventories have increased by Lit.
9,201 million ($5,337,000) due to inventories at the new Moto Guzzi France
importer, approximately 280 motorcycles in finished goods at Moto Guzzi
S.p.A. and an increase at L.I.T.A. due to higher business levels. There has
been a decrease in the level of trade and related party receivables (the 25%
owned German Moto Guzzi importer) due primarily to reduced Italian public
entity receivables at Moto Guzzi. Accounts payable and accrued expenses have
remained at similar levels. In 1996, cash outflows from losses, increased
inventories and trade receivables and a decrease in trade payables were
partially offset by receipt of tax receivables of Lit. 5,259 million.
17
<PAGE>
TRIDENT ROWAN GROUP, INC.
Management's Discussion and Analysis of Financial Conditions
and Results of Operations
INVESTING ACTIVITIES
Capital expenditures in the nine months ended September 30, 1997 amounted to
Lit. 1,951 million ($1,133,000), primarily at Moto Guzzi. Fixed assets of
Lit. 760 million ($440,835) were also acquired by way of finance leases.
As described in Note 2 to the Interim Financial Statements, the Company
agreed to sell its Cologne property in the first quarter of 1997 and such
sale was consummated in April 1997 by sale of the shares of the subsidiary
owning the Cologne property. In consequence, Lit. 15,100 million of real
estate and Lit. 9,379 million of long-term debt (after Lit. 333 million
principal payment by the Company in 1997 prior to sale of the company) has
been eliminated from the balance sheet. The Company received an advance of
Lit. 500 million and a further amount of Lit. 1,928 million in the period and
disposed of Lit. 411 million of cash held by the disposed subsidiary. A
further Lit. 2,040 million was received on July 1, 1997 and a final
installment of Lit. 2,040 million is due on December 31, 1997. This last
installment may be settled, at the acquirors option, by delivery of up to
120,000 shares of the Company's common stock and the 120,000 shares subject
to option have been classified outside shareholders' equity for Lit. 1,610
million.
FINANCING ACTIVITIES
As described in Note 5 to the Interim Financial Statements, the Company
received Lit. 10,256 million (US$ 6,037,000) net proceeds from its public
offering of securities at then-prevailing exchange rates. Of these funds,
Lit. 6,000 million had already been committed to finance further capital
expenditures and expansion at Moto Guzzi and a further Lit. 800 million was
committed in the quarter.
The Company received Lit. 2,933 million in January 1997 in respect of the
last closing of its sale of preferred stock in its subsidiary, Moto Guzzi
Corp. Lit. 5,101 million had been received in December 1996. The proceeds
have been applied to finance working capital and capital expenditure at Moto
Guzzi and to temporarily reduce advances from banks in anticipation of
further capital expenditure and development costs. The proceeds of the sale
of securities are shown in the balance sheet as "Preferred stock of
subsidiary". The holders of the preferred stock can redeem such stock for a
total of $12 million if no initial public offering of Moto Guzzi Corp. common
stock is made by January 2002. The Company has accrued Lit. 2,715 million for
the difference between the net proceeds received and this redemption price
and for the effects of exchange rates, through September 30, 1997, on such
contingent obligation, denominated in U.S. dollars.
Similarly, the Company has accrued for the effects of exchange rates of its
repurchase obligation of 776,530 shares at $11.27 per share, as described
below, and for amortization of the difference between the fair value of
$10.00 at the date when agreement was made to repurchase such shares and
18
<PAGE>
TRIDENT ROWAN GROUP, INC.
Management's Discussion and Analysis of Financial Conditions
and Results of Operations
the $11.27 per share payable. A total of Lit. 1,927 million has been accreted
through September 30, 1997.
The Company redeemed 22,380 shares on June 30, 1997 for Lit. 450 million
pursuant to obligations described below.
Loan principal repayments in the first three quarters of 1997 amounted to
Lit. 1,781 million, of which Lit. 333 million relates to the Cologne
property, disposed effective March 31, 1997. Advances from banks increased
primarily as a consequence of losses from operations and financing of
increased inventories at Moto Guzzi.
COMMITMENTS AND FUTURE LIQUIDITY
The Company has share repurchase commitments in 1998 for 776,530 shares
previously owned by the former Chairman for which amounts are deposited as
security. The Company has deposited investments included in the balance sheet
at Lit. 14,497 million to secure this repurchase commitment. The amounts
deposited, plus accrued interest, are expected to be sufficient to finance
such repurchase if the Dollar - Lire exchange rate is lower than
approximately 1,714. In the third quarter of 1997 the U.S. Dollar Lire
exchange rate reached levels close to 1,840, at which level the purchase
commitment exceeded the amounts deposited as security by approximately Lit.
1,200 million. At the date of this report, the U.S. Dollar Lire exchange rate
has fallen below 1,700 and, at such rates, the purchase commitment is fully
covered by the securities deposited. Since the end of the third quarter, the
Company has hedged part of the exchange risk by entering a forward purchase
contract for $3 million.
The Company also has share repurchase commitments at December 31, 1997 in
respect of up to 120,000 shares deriving from the sale of Cologne, as
discussed above and in Note 2 to the Interim Financial Statements. Up to such
number of shares may be used to settle a receivable due for the sale of the
property of Lit. 1,610 million.
In connection with the resolution of certain matters deriving from the
acquisition of the majority of Finprogetti's operating subsidiaries in July
1995, Finprogetti assumed responsibility for a claim which was successfully
brought against one of such subsidiaries. The Company agreed to repurchase
105,440 shares issued to Finprogetti at a present value of Lit. 1,940
million. The Company repurchased a total of 32,330 shares for Lit. 650
million in 1996, a further 22,380 shares at June 30, 1997 for Lit. 450
million and must repurchase, at Finprogetti's request, the remaining 50,730
shares for Lit. 450 million in December 1997 and Lit. 570 million in June
1998 for an aggregate purchase price of Lit. 1,020 million shown in the
balance sheet at September 30, 1997 at its estimated present value of Lit.
971 million.
19
<PAGE>
TRIDENT ROWAN GROUP, INC.
Management's Discussion and Analysis of Financial Conditions
and Results of Operations
The Company's cash resources of Lit. 15,696 million as at September 30, 1997
are expected to be sufficient for operations and the immediate phase of
expansion of Moto Guzzi, for which Lit. 6,800 million has been committed,
through the end of 1997 and the first quarter of 1998.
The net proceeds of the sale of preferred stock of Moto Guzzi Corp. and the
Company's public offering will not be sufficient to complete the planned
rehabilitation and expansion program at Moto Guzzi at the rate proposed by
management in 1998. The Company is discussing with a number of financial
institutions alternative forms of finance to provide the additional capital
that the Company expects will be needed by Moto Guzzi. The Company hopes to
finalize such financing by the end of the first quarter of 1998 so that the
rehabilitation program can proceed. No assurance can be given, however, that
finance will be available, on acceptable terms or at all.
PORTIONS OF THIS REPORT CONTAIN CERTAIN "FORWARD LOOKING" STATEMENTS WHICH
INVOLVE RISKS AND UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS MAY DIFFER
SIGNIFICANTLY FROM THE RESULTS DISCUSSED IN THE FORWARD LOOKING STATEMENTS.
FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE, BUT ARE NOT LIMITED TO,
MARKET ACCEPTANCE OF THE COMPANY'S PRODUCTS AND SERVICES, CHANGES IN CURRENCY
EXCHANGE RATES, OTHER FACTORS DISCUSSED IN THE REPORT AS WELL AS FACTORS
DISCUSSED IN OTHER FILINGS MADE WITH THE SECURITIES AND EXCHANGE COMMISSION.
ALTHOUGH THE COMPANY BELIEVES THAT THE ASSUMPTIONS UNDERLYING THE FORWARD
LOOKING STATEMENTS CONTAINED HEREIN ARE REASONABLE, ANY OF THE ASSUMPTIONS
COULD PROVE INACCURATE, AND THEREFORE, THERE CAN BE NO ASSURANCE THAT THE
FORWARD LOOKING STATEMENTS INCLUDED HEREIN WILL PROVE TO BE ACCURATE.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit No. Description
----------- -----------
11 Statement Re: Computation of per share earnings
27 Financial Data Schedule
20
<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.
TRIDENT ROWAN GROUP, INC.
Dated: November 18, 1997 By: s/ Howard E. Chase
--------------------------
Howard E. Chase, President
Dated: November 18, 1997 By: s/ Carlo Previtali
--------------------------
Carlo Previtali, Secretary
21
<PAGE>
Exhibit 11
Calculation of Loss per Share
9 months ended September 30, 1997
Weighted Average Number of Shares Outstanding
Days No. Weighted
January 1, 1997 273 3,902,540 3,902,540
June 6, 1997 offering 116 1,250,000 531,136
June 30, 1997 repurchase 91 (22,380) (7,460)
Total 5,130,160 4,426,216
Lit. m. U.S.$000(1)
Loss (12,394) (7,191)
Loss per Share (2,800) (1.62)
(1) Converted to U.S.$ solely for the convenience of the reader at 1,724 lire
per dollar, the approximate exchange rate as at September 30, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
unaudited financial statements dated September 30, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 9,104,000
<SECURITIES> 555,000
<RECEIVABLES> 17,998,000
<ALLOWANCES> 977,000
<INVENTORY> 24,310,000
<CURRENT-ASSETS> 57,407,000
<PP&E> 22,797,000
<DEPRECIATION> 13,913,000
<TOTAL-ASSETS> 91,191,000
<CURRENT-LIABILITIES> 44,709,000
<BONDS> 7,833,000
0
0
<COMMON> 51,000
<OTHER-SE> 18,636,000
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 44,437,000
<TOTAL-REVENUES> 44,437,000
<CGS> 38,551,000
<TOTAL-COSTS> 11,021,000
<OTHER-EXPENSES> 1,774,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,068,000
<INCOME-PRETAX> (4,428,000)
<INCOME-TAX> 258,000
<INCOME-CONTINUING> (7,191,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,191,000)
<EPS-PRIMARY> (1.62)
<EPS-DILUTED> (1.62)
</TABLE>
