<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 11, 1997
REGISTRATION NO.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
TRIDENT ROWAN GROUP, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
MARYLAND 3751 52-0466460
(State or other jurisdiction of (Primary Standard (I.R.S. Employer
incorporation or organization) Industrial Classification Identification No.)
Code Number)
</TABLE>
--------------------------
TWO WORLDS FAIR DRIVE, FRANKLIN TOWNSHIP, SOMERSET, N.J. 08873
(908) 868-9000
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
------------------------------
HOWARD E. CHASE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
TWO WORLDS FAIR DRIVE
FRANKLIN TOWNSHIP, SOMERSET, N.J. 08873
(908) 868-9000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
------------------------------
COPIES OF ALL COMMUNICATIONS REGARDING THIS REGISTRATION STATEMENT SHOULD BE
SENT TO:
<TABLE>
<S> <C>
STEPHEN I. BUDOW, ESQ. DAVID ALAN MILLER, ESQ.
DAVID LERNER, ESQ. GRAUBARD, MOLLEN & MILLER
MORRISON COHEN SINGER & WEINSTEIN, LLP 600 THIRD AVENUE
750 LEXINGTON AVENUE NEW YORK, NEW YORK 10022
NEW YORK, NEW YORK 10022 (212) 818-8800 (TELEPHONE)
(212) 735-8600 (TELEPHONE) (212) 818-8881 (FACSIMILE)
(212) 735-8708 (FACSIMILE)
</TABLE>
--------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
--------------------------
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
TITLE OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER UNIT (1) OFFERING PRICE (1) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $0.01.................... 1,437,500 (2) $8.44 $12,132,500 $3,676.15
Warrants......................................... 1,437,500 (2) $.10 $143,750 $43.56
Common Stock issuable upon exercise of
Warrants....................................... 1,437,500 (3) $10.13 $14,561,875 $4,412.25
Common Stock issuable upon exercise of
Representative's Purchase Option............... 125,000 $9.28 $1,160,000 $351.48
Warrants issuable upon exercise of
Representative's Purchase Option............... 125,000 $0.11 $13,750 $4.17
Common Stock issuable upon exercise of warrants
issuable upon exercise of Representative's
Purchase Option................................ 125,000 $10.13 $1,266,250 $383.67
Total....................................................................................... $29,278,125 $8,871.28
</TABLE>
(1) Estimated solely for purposes of calculating the registration fee pursuant
to Rule 457(c) based on the last sale price of the Registrant's Common Stock
on the Nasdaq SmallCap Market on February 4, 1997.
(2) Includes 187,500 shares of Common Stock or 187,500 Warrants, as the case may
be, issuable upon exercise of the Underwriters' over-allotment option.
(3) This Registration Statement also relates to such indeterminate number of
shares of Common Stock issuable pursuant to the anti-dilution provisions of
the Warrants.
--------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TRIDENT ROWAN GROUP, INC.
CROSS-REFERENCE SHEET BETWEEN ITEMS OF FORM S-1 AND
FORM OF PROSPECTUS PURSUANT TO REGULATION S-K, ITEM 501(B)
<TABLE>
<CAPTION>
ITEM NO. LOCATION IN PROSPECTUS
- ------------- ----------------------------------------------------
<S> <C> <C>
1. Forepart of Registration Statement and Outside Front
Cover Page of Prospectus............................ Facing Page, Outside Front Cover Page
2. Inside Front and Outside Back Cover
Pages of Prospectus................................. Inside Front Cover Page, Outside Back Cover Page
3. Summary Information, Risk Factors and Ratio Ratio of
Earnings to Fixed Charges........................... Summary, Risk Factors
4. Use of Proceeds..................................... Summary, Use of Proceeds
5. Determination of Offering Price..................... Outside Front Cover Page, Underwriting
6. Dilution............................................ Inapplicable
7. Selling Security Holders............................ Inapplicable
8. Plan of Distribution................................ Underwriting; Inside Front Cover Page
9. Description of Securities to be Registered.......... Description of Securities
10. Interests of Named Experts and Counsel.............. Inapplicable
11. Information with Respect to the
Registrant.......................................... Summary, Summary Consolidated Financial Data,
Capitalization, Selected Consolidated Financial
Data, Risk Factors, Management's Discussion and
Analysis of Financial Condition and Results of
Operations, Business, Management, Certain
Transactions, Principal Stockholders, Description of
Securities
12. Disclosure of Commission Position on Indemnification
for
Securities Act Liabilities.......................... Inapplicable
</TABLE>
<PAGE>
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS, DATED FEBRUARY 11, 1997
PROSPECTUS
TRIDENT ROWAN GROUP, INC.
1,250,000 SHARES OF COMMON STOCK AND
1,250,000 REDEEMABLE COMMON STOCK PURCHASE WARRANTS
All of the shares of common stock ("Common Stock") and Redeemable Common
Stock Purchase Warrants ("Warrants") offered hereby (collectively, "Securities")
are being sold by the issuer, Trident Rowan Group, Inc. ("Company" or "TRG").
Each Warrant is exercisable for four years commencing one year from the date of
this Prospectus at an exercise price of 120% of the offering price per share of
Common Stock. The Company may redeem the Warrants at a price of $.01 per Warrant
at any time after they become exercisable if notice of not less than 30 days is
given and the last sale price of the Common Stock has been at least 133 1/3% of
the then exercise price of the Warrants on all 20 trading days ending on the
third day prior to the day on which notice is given. See "Description of
Securities."
The Company's Common Stock is traded on the Nasdaq SmallCap Market under the
symbol "TRGI." The last sale price of the Common Stock on February 4, 1997 was
$8 7/16. Prior to this Offerings there has been no public market for the
Warrants and there can be no assurance that any such market will develop. The
Company has made application for the Common Stock and Warrants to trade on the
Nasdaq National Market System under symbols TRGI and TRGIW, respectively.
------------------------
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" BEGINNING ON PAGE 9.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
UNDERWRITING
PRICE TO DISCOUNTS AND PROCEEDS TO
PUBLIC COMMISSIONS(1) COMPANY(2)
<S> <C> <C> <C>
Per Share............................................................... $ $ $
Per Warrant............................................................. $ $ $
Total(3)................................................................ $ $ $
</TABLE>
(1) Does not include a 3% nonaccountable expense allowance which the Company has
agreed to pay to the Underwriters. The Company has also agreed to sell to
the representative of the Underwriters an option ("Representative's Purchase
Option") to purchase 125,000 shares of Common Stock and/or 125,000 Warrants
and to indemnify the Underwriters against certain liabilities, including
liabilities under the Securities Act of 1933, as amended ("Securities Act").
See "Underwriting."
(2) Before deducting expenses payable by the Company, including the
nonaccountable expense allowance, estimated at approximately $ .
(3) The Company has granted to the Underwriters an option exercisable within 45
days from the date of this Prospectus to purchase up to an additional
187,500 shares of Common Stock and/or 187,500 Warrants on the same terms set
forth above solely to cover over-allotments, if any. If such over-allotment
option is exercised in full, the total Price to Public, Underwriting
Discounts and Commissions and Proceeds to Company will be $ ,
$ and $ , respectively. See "Underwriting."
------------------------
The Securities are being offered by the Underwriters subject to prior sale,
when, as and if delivered to and accepted by the Underwriters and subject to the
approval of certain legal matters by counsel and certain other conditions. The
Underwriters reserve the right to withdraw, cancel or modify this Offering and
to reject any order in whole or in part. It is expected that delivery of
certificates representing the Securities will be made against payment therefor
at the offices of GKN Securities Corp. in New York City on or about ,
1997.
GKN SECURITIES
, 1997
[INSIDE COVER PAGE]
<PAGE>
AVAILABLE INFORMATION
THE COMPANY IS SUBJECT TO THE INFORMATIONAL REQUIREMENTS OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED ("EXCHANGE ACT") AND, IN ACCORDANCE THEREWITH,
FILES REPORTS, PROXY STATEMENTS AND OTHER INFORMATION WITH THE SECURITIES AND
EXCHANGE COMMISSION ("COMMISSION"). SUCH REPORTS, STATEMENTS AND OTHER
INFORMATION CAN BE INSPECTED AND COPIES OBTAINED AT THE PUBLIC REFERENCE
FACILITIES MAINTAINED BY THE COMMISSION AT ITS OFFICES AT ROOM 1024, 450 FIFTH
STREET, N.W., WASHINGTON, D.C. 20549, AND AT THE COMMISSION'S REGIONAL OFFICES
AT SEVEN WORLD TRADE CENTER, NEW YORK, NEW YORK 10048. ALSO, COPIES OF SUCH
MATERIAL CAN BE OBTAINED AT PRESCRIBED RATES FROM THE PUBLIC REFERENCE SECTION
OF THE COMMISSION AT JUDICIARY PLAZA, 450 FIFTH STREET, N.W., WASHINGTON, D.C.
20549. THE COMMISSION MAINTAINS A WEB SITE THAT CONTAINS REPORTS, PROXY AND
INFORMATION STATEMENTS AND OTHER INFORMATION REGARDING REGISTRANTS THAT FILE
ELECTRONICALLY WITH THE COMMISSION. THE WEB SITE CAN BE REACHED AT
HTTP://WWW.SEC.GOV.
THE COMPANY INTENDS TO FURNISH ITS STOCKHOLDERS WITH ANNUAL REPORTS
CONTAINING CONSOLIDATED FINANCIAL STATEMENTS AUDITED BY AN INDEPENDENT
ACCOUNTING FIRM AND QUARTERLY REPORTS CONTAINING UNAUDITED CONSOLIDATED
FINANCIAL INFORMATION FOR EACH OF THE FIRST THREE FISCAL QUARTERS OF EACH FISCAL
YEAR OF THE COMPANY FOLLOWING THE END OF SUCH QUARTER AND SUCH OTHER PERIODIC
REPORTS AS THE COMPANY MAY DETERMINE TO BE APPROPRIATE OR AS MAY BE REQUIRED BY
LAW.
THIS PROSPECTUS DOES NOT CONTAIN ALL OF THE INFORMATION SET FORTH IN THE
REGISTRATION STATEMENT AND THE EXHIBITS THERETO; CERTAIN PORTIONS HAVE BEEN
OMITTED FROM THE PROSPECTUS IN ACCORDANCE WITH THE RULES AND REGULATIONS OF THE
SECURITIES AND EXCHANGE COMMISSION. FOR FURTHER INFORMATION WITH RESPECT TO THE
COMPANY, THE SECURITIES OFFERED BY THIS PROSPECTUS AND SUCH OMITTED INFORMATION,
REFERENCE IS MADE TO THE REGISTRATION STATEMENT, INCLUDING ANY AND ALL EXHIBITS
AND AMENDMENTS THERETO.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICES OF THE COMMON STOCK
AND WARRANTS OF THE COMPANY AT LEVELS ABOVE THOSE WHICH MIGHT OTHERWISE PREVAIL
IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY
TIME.
2
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO, AND
SHOULD BE READ IN CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND FINANCIAL
STATEMENTS (INCLUDING THE NOTES THERETO) APPEARING ELSEWHERE IN THIS PROSPECTUS.
EACH INVESTOR IS URGED TO READ THIS PROSPECTUS IN ITS ENTIRETY. UNLESS OTHERWISE
INDICATED, THE INFORMATION IN THIS PROSPECTUS DOES NOT GIVE EFFECT TO THE
EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION, THE WARRANTS OFFERED
HEREBY, THE REPRESENTATIVE'S PURCHASE OPTION, OR OPTIONS GRANTED OR RESERVED
UNDER THE COMPANY'S STOCK OPTION PLANS. THE PORTIONS OF THIS PROSPECTUS THAT
RELATE TO FUTURE PLANS, EVENTS OR PERFORMANCE ARE FORWARD-LOOKING STATEMENTS.
ACTUAL RESULTS, EVENTS OR PERFORMANCE MAY DIFFER MATERIALLY. INVESTORS ARE
CAUTIONED THAT ALL SUCH STATEMENTS INVOLVE RISKS AND UNCERTAINTIES AND THAT
UNDER RELIANCE SHOULD NOT BE PLACED ON THESE FORWARD LOOKING STATEMENTS. SEE
"RISK FACTORS." THESE FACTORS, AND OTHERS, ARE DISCUSSED MORE FULLY IN THE
PROSPECTUS. THE COMPANY UNDERTAKES NO OBLIGATION TO RELEASE THE RESULT OF ANY
REVISIONS TO THESE FORWARD-LOOKING STATEMENTS THAT MAY BE MADE TO REFLECT EVENTS
OR CIRCUMSTANCES AFTER THE DATE HEREOF, OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS.
THE COMPANY
Trident Rowan Group, Inc. ("TRG" or the "Company") is a U.S. holding company
which owns an Italian manufacturer of luxury motorcycles, and an Italian
manufacturer of welded steel tubes used principally by the automobile and
furniture industries, and provides temporary management and capital and merchant
banking to troubled businesses located primarily in Italy. The temporary
management services are provided through the Company's wholly-owned subsidiary,
Temporary Integrated Management S.p.A. ("T.I.M."). The Company's strategic
objective is to make investments in troubled businesses identified through the
management activities of T.I.M. and through the Company's merchant banking
group. The Company's principal operating subsidiary, Moto Guzzi, S.p.A. ("Moto
Guzzi"), manufactures and sells motorcycles internationally, ranging from medium
to high-priced, under the brand name "Moto Guzzi-Registered Trademark-." A
second operating subsidiary, L.I.T.A. S.p.A. ("L.I.T.A."), acquired as a result
of a T.I.M. engagement, manufactures steel tubing.
MOTO GUZZI
Moto Guzzi was founded 75 years ago and has earned a reputation as one of
the elite motorcycle manufacturers in the world. Moto Guzzi also sells
motorcycle spare parts through its wholly owned subsidiary, Centro Ricambi
S.r.l. Moto Guzzi distributes its motorcycles worldwide through a network of
wholly or partially owned importers and independent dealers. Recognizing the
strategic importance to its growth of the U.S. market, in 1996 Moto Guzzi
acquired Moto America, Inc., the exclusive U.S. importer and distributor of its
products.
For more than 10 years, Moto Guzzi has failed to operate profitably. In
1994, TRG engaged T.I.M., then an independent management company, and now, as
described above, a wholly owned subsidiary of the Company, to provide emergency
temporary management services to Moto Guzzi. T.I.M. developed a strategic plan
to improve the operating results of Moto Guzzi and materially enhance its value.
Under T.I.M.'s management, Moto Guzzi has implemented a program of selective
component outsourcing and has improved both production levels and results of
operations. Moto Guzzi currently produces four principal models, the "V-10
Centauro", the "Daytona RS" (which may be marketed under another name in the
United States), the "Sport 1100" and the "California 1100". New models are also
planned. Moto Guzzi also manufactures military and police models.
Since May 1994, Moto Guzzi has made significant progress in its turnaround
of operations, increasing sales and production from approximately 3,600 units in
1993 to more than 6,000 units in 1996. Despite a weak third quarter, revenues
increased by almost 15% during the first nine months of 1996 compared to 1995,
and motorcycle unit production increased nearly 25% in the same period.
Nonetheless, Moto Guzzi realized a net loss during the first nine months of
1996. Under the strategic plan proposed by T.I.M.,
3
<PAGE>
significant increases in production are planned for each of the next few years,
financed in part by the proceeds of a recent $6 million private offering of
securities by the Company's subsidiary, Moto Guzzi Corp., a Delaware corporation
which owns 100% of the capital stock of Moto Guzzi ("Moto Guzzi Financing"). See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
L.I.T.A.
L.I.T.A. manufacturers specialty steel tubes used principally in the
automotive and furniture industries. T.I.M. had been engaged by L.I.T.A. after a
material decline in L.I.T.A.'s operations and in 1995 the Company acquired
L.I.T.A. The Company is seeking to enhance the value of L.I.T.A. by increasing
sales volumes and market share to a level which will permit a sale to, or merger
with, a competitor on favorable terms. In the first nine months of 1996, the
positive effects of sales volume increases achieved (42% over the comparable
period of 1995) have been offset by falling steel prices which have led to
reductions in finished product prices and losses on sales of finished products.
Stability in its markets and further increase in volumes are likely to be
preconditions for eventual realization of value from L.I.T.A.
T.I.M.
T.I.M. provides temporary management for companies facing special problems.
It does so through a network of experienced and qualified managers which it
makes available to operate all or strategic portions of the businesses of its
clients. Managers are selected based on a client's specific needs and are
supported by T.I.M.'s management and administrative resources. T.I.M. analyzes
the client's businesses and develops strategic business plans based on the
client's objectives which, upon agreement with the client, define the goals and
standards upon which T.I.M.'s performance and incentive compensation will be
measured at the end of each engagement. A significant component of T.I.M.'s
compensation is performance related.
A typical T.I.M. engagement requires the appointment of a T.I.M. manager to
act as a temporary Chief Executive Officer, or, less frequently, as Chief
Financial Officer, Chief Operating Officer or as an executive responsible for a
specific functional team or project. The engagement might require the adoption
of a fundamental corporate restructuring, a sale or other divestiture of assets,
the reorganization of marketing or distribution functions, financial
restructuring, or managing technological innovation. T.I.M.'s strategic plans
usually focus on reestablishing profitability and increasing net worth,
achieving productivity growth and managing staff reductions, accelerating the
decision-making process, and bridging cultural gaps which may have inhibited
growth. Engagements are typically of a duration of 12 to 24 months.
In addition to providing senior management for Moto Guzzi and L.I.T.A.,
T.I.M. is currently engaged in the management of several companies and is
actively negotiating several other engagements. It is seeking to enlarge its
operations through establishing branch offices in addition to its Milan office.
The Company's merchant banking group analyzes investment opportunities from
a financial standpoint that arise out of, or which could involve, T.I.M.'s
management engagements, and then negotiates the terms of such investments. It is
the Company's policy that such investments will be made only in companies in
which it provides senior level temporary management.
TRG was organized in Maryland in 1917 as Rowan Controller, Inc., changing
its name to Rowan Industries, Inc. and then De Tomaso Industries, Inc. before
becoming Trident Rowan Group, Inc. in 1996. Its principal executive office is
located at Two Worlds Fair Drive, Franklin Township, Somerset, New Jersey 08873,
and its telephone number is (908) 868-9000.
4
<PAGE>
THE OFFERING
<TABLE>
<S> <C>
Securities Offered by the
Company.................... 1,250,000 shares of Common Stock and 1,250,000 Warrants.
Each Warrant will entitle the registered holder thereof to
purchase one share of Common Stock at a price of 120% of the
offering price per share of Common Stock. The Company may
redeem the Warrants at a price of $.01 per Warrant at any
time after they become exercisable if notice of not less
than 30 days is given and the last sale price of the Common
Stock has been at least 133 1/3% of the then exercise price
of the Warrants on all 20 trading days ending on the third
day prior to the day on which notice is given.
Common Stock Outstanding
Prior to the Offering...... 3,902,540 shares, including 849,640 shares that are subject
to repurchase. See "Business--Recent
Transactions--Finprogetti Acquisition and Repurchase of
Former Chairman's Shares."
Common Stock to be
Outstanding after the
Offering................... 5,152,540 shares.
Use of Proceeds of Planned
Offering................... To make investments in the Company's subsidiaries, and for
working capital and general corporate purposes. See "Use of
Proceeds."
Risk Factors................. The Securities offered hereby involve a high degree of risk,
including without limitation, the Company's history of
losses, intense competition, seasonality of the Company's
business and quarterly fluctuations, sensitivity to foreign
currency exchange rates, and other foreign operations risks.
See "Risk Factors."
Nasdaq Small Cap Market
Common Stock symbol........ TRGI
Proposed Nasdaq National
Market Common Stock and
Warrant Symbols,
respectively............... TRGI, TRGIW
</TABLE>
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(In millions of Italian Lire and thousands of U.S. Dollars, except per share
data)
THE FOLLOWING TABLE SETS FORTH SUMMARY FINANCIAL DATA FOR THE COMPANY ON A
CONSOLIDATED HISTORICAL BASIS FOR THE PERIODS AND DATES INDICATED. THE
HISTORICAL BALANCE SHEET DATA AS OF DECEMBER 31, 1995 AND 1994 AND THE STATEMENT
OF OPERATIONS DATA FOR EACH OF THE THREE YEARS ENDED DECEMBER 31, 1995, 1994 AND
1993 ARE DERIVED FROM THE AUDITED FINANCIAL STATEMENTS OF THE COMPANY INCLUDED
IN THIS PROSPECTUS. THE RESULTS OF ANY INTERIM PERIOD ARE NOT NECESSARILY
INDICATIVE OF THE RESULTS TO BE EXPECTED FOR THE FULL YEAR.
THE INFORMATION SHOULD BE READ IN CONJUNCTION WITH "MANAGEMENT'S DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" AND SUCH
FINANCIAL STATEMENTS, INCLUDING THE NOTES THERETO, INCLUDED ELSEWHERE IN THIS
PROSPECTUS.
THE PRO FORMA FINANCIAL INFORMATION ALSO GIVEN BELOW GIVES EFFECT TO (I) THE
INCLUSION OF L.I.T.A. , ACQUIRED EFFECTIVE JULY 25, 1995 AND THE ACQUISITION OF
THE OPERATING SUBSIDIARIES OF FINPROGETTI S.P.A., EFFECTIVE JULY 1, 1995 AS IF
BOTH HAD OCCURRED JANUARY 1, 1995, (II) THE COMPANY'S STOCK REPURCHASE PROGRAM
WHICH CLOSED ON OCTOBER 23, 1996 AND THE REPURCHASES BY THE COMPANY OF SHARES
FROM FINPROGETTI S.P.A. ON NOVEMBER 7, 1996 AND DECEMBER 31, 1996, AND (III) THE
MOTO GUZZI FINANCING AS IF ALL TRANSACTIONS OCCURRED AS OF JANUARY 1, 1996 AND
1995 IN THE PRO FORMA INCOME STATEMENT DATA AND AS IF THEY OCCURRED AS OF
SEPTEMBER 30, 1996 IN THE PRO FORMA BALANCE SHEET DATA. THE PRO FORMA FINANCIAL
DATA ARE NOT NECESSARILY INDICATIVE OF EITHER FUTURE RESULTS OF OPERATIONS OR
RESULTS THAT MIGHT HAVE BEEN ACHIEVED HAD THE TRANSACTIONS BEEN CONSUMMATED AS
OF THE DATES INDICATED. THE PRO FORMA FINANCIAL DATA SHOULD BE READ IN
CONJUNCTION WITH THE HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
THERETO OF THE COMPANY.
THE PRO FORMA AS ADJUSTED DATA REFLECTS THE ABOVE PRO FORMA ADJUSTMENTS AS
WELL AS THE RECEIPT BY THE COMPANY OF THE NET PROCEEDS FROM THE SALE OF THE
SECURITIES OFFERED HEREBY AND THE APPLICATION THEREOF.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
PRO FORMA(5) ACTUAL
---------------------- ----------------------------------------------
1995 1995 1995 1995 1994 1993
$000(1) LIT.M $000(1) LIT.M LIT.M LIT.M
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales................................. $ 51,891 82,403 $ 45,499 72,253 51,994 41,919
Gross profit.............................. 6,018 9,557 5,569 8,843 5,738 5,859
Selling, general and administrative....... 11,192 17,773 10,220 16,230 10,818 12,439
Net (loss) from continuing operations..... (4,972) (7,894) (4,395) (6,980) (3,277) (6,736)
Net (loss)/income......................... (4,972) (7,894) (4,395) (6,980) (3,277) 153,497(4)
Net (loss) per common share from
operations.............................. (1.29) (2,047) (1.30 (2) (2,065 (2) (1,593) (2,203)
Net (loss)/income per share............... $ (1.29) (2,047) $ (1.30 (2) (2,065 (2) (1,593) 50,204(4)
Weighted average number of common and
common equivalent shares (3)............ 3,855,788 3,855,788 3,380,441 3,380,441 2,057,446 3,057,446
</TABLE>
6
<PAGE>
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------
PRO FORMA(5) ACTUAL
---------------------- ----------------------------------------------
1995 1995 1995 1995 1994 1993
$000(1) LIT.M $000(1) LIT.M LIT.M LIT.M
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Cash and cash equivalents and marketable
securities.............................. $ 15,200 24,137 10,286 7,563
Current assets............................ 63,652 95,689 80,041 85,949
Total assets.............................. 115,133 182,830 118,661 127,556
Current liabilities excluding short-
term.................................... 22,185 33,788 24,854 36,057
Short-term debt........................... 24,292 38,575 21,465 29,596
Long-term debt, net of current portion.... 11,397 18,098 5,004 5,738
Shareholders' equity...................... $ 32,255 51,221 43,157 45,881
</TABLE>
- ------------------------
(1) Translated solely for the convenience of the reader at the approximate
exchange rate as of December 31, 1995 of Lire 1,588 to US$ 1.00.
(2) In July 1995, 1,000,000 preferred shares were converted to shares of common
stock and 703,774 of such shares of common stock were acquired by the
Company. Had such conversion and purchase taken place on January 1, 1995
then loss per share from continuing operations and loss per share would have
been Lit. (1,978) translated solely for the convenience of the reader as
$(1.25).
(3) 1,000,000 authorized and outstanding preferred shares were considered to be
dilutive in 1993 and anti-dilutive in 1994. They were converted to shares of
common stock in 1995, see note (2) above.
(4) In 1993, the Company recorded an extraordinary gain of Lit. 160,233 million
(Lit. 52,407 per share) on the sale to Fiat Auto S.p.A. of its 51% interest
in Maserati S.p.A.
(5) See unaudited pro forma financial statements and the related notes thereto
for discussion of pro forma adjustments.
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------------------
PRO FORMA(3) ACTUAL
---------------------- ----------------------------------
1996 1996 1996 1996 1995
$000(1) LIT.M $000(1) LIT.M LIT.M
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA
Net sales........................... $ 43,364 66,043 $ 43,364 66,043 47,001
Gross profit........................ 5,653 8,609 5,653 8,609 2,887
Selling, general and administrative
expense........................... 9,310 14,179 9,310 14,179 10,271
Net loss............................ (6,634) (10,106) (6,458) (9,835) (7,347)
Net loss per share(2)............... $ (1.70) (2,590) $ (1.36) (2,073) (2,499)
Weighted average number of common
and common equivalent shares
outstanding common equivalent
shares outstanding................ 3,902,540 3,902,540 4,742,865 4,742,865 2,939,842
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------------------
PRO FORMA AS ADJUSTED
PRO FORMA(3) ACTUAL
--------------------- ---------------------- ----------------------------------
1996 1996 1996 1996 1996 1996 1995
$000 LIT.M $000(1) LIT.M $000(1) LIT.M LIT.M
---------- --------- ---------- ---------- ---------- ---------- ----------
BALANCE SHEET DATA
<S> <C> <C> <C> <C> <C> <C> <C>
Cash and cash equivalents and
marketable securities............. $ 16,119 24,549 $ 7,406 11,280 $ 13,511 20,578 16,274
Current assets net of current
liabilities....................... 58,353 100,151 49,640 86,882 63,653 96,943 80,945
Total assets........................ 112,213 170,899 103,500 157,630 110,106 167,691 177,1055
Current liabilities excluding
short-term debt................... 20,956 31,916 20,956 31,916 20,956 31,916 13,129
Short-term debt..................... 22,913 34,897 22,913 34,897 26,443 40,273 33,190
Long-term debt, net of current
portion........................... 10,568 16,095 10,568 16,095 8,704 13,257 20,645
Shareholders' equity................ $ 29,947 45,609 $ 21,235 32,340 $ 27,212 41,444 50,023
</TABLE>
- ------------------------
(1) Translated solely for the convenience of the reader at the approximate
exchange rate as of September 30, 1996 of Lire 1,523 to US$ 1.00.
(2) In July 1995, 1,000,000 preferred shares were converted to shares of Common
Stock and 703,774 of such shares of Common Stock were acquired by the
Company. Had such conversion and purchase taken place on January 1, 1995
then loss per share would have been Lit. (2,342), translated solely for the
convenience of the reader as $(1.54).
(3) See unaudited pro forma financial statements and the related notes thereto
for discussion of pro forma adjustments.
UNLESS OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS DOES NOT GIVE
EFFECT TO THE EXERCISE OF THE WARRANTS, THE UNDERWRITERS' OVER-ALLOTMENT OPTION,
THE REPRESENTATIVE'S PURCHASE OPTION OR ANY OPTIONS GRANTED UNDER THE COMPANY'S
1995 NON-QUALIFIED STOCK OPTION PLAN OR 1995 OUTSIDE DIRECTORS' PLAN. SEE
"MANAGEMENT--EXECUTIVE COMPENSATION" AND "STOCK OPTION PLANS," "PRINCIPAL
STOCKHOLDERS," "CERTAIN TRANSACTIONS," "DESCRIPTION OF SECURITIES--WARRANTS,"
"DESCRIPTION OF CAPITAL STOCK," AND NOTE 11 OF NOTES TO FINANCIAL STATEMENTS.
THIS PROSPECTUS CONTAINS 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, THOSE DISCUSSED IN "RISK
FACTORS."
8
<PAGE>
RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE IN NATURE AND INVOLVE A HIGH
DEGREE OF RISK. ACCORDINGLY, IN ANALYZING AN INVESTMENT IN THESE SECURITIES,
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY, ALONG WITH THE OTHER MATTERS
REFERRED TO HEREIN, THE FOLLOWING RISK FACTORS.
HISTORY OF OPERATING LOSSES. The Company has sustained net losses from
continuing operations in each of the past five years, and for all quarters in
those five years, with the exception of the last quarter of 1995. By far the
largest portion of these losses through the second quarter of 1993 was
attributable to the operations of Maserati. In 1993, the Company disposed of its
remaining 51% equity interest in Maserati, and has significantly reduced net
losses. Nevertheless, the Company has not realized net income in any succeeding
year. For the year ended December 31, 1995, the Company reported a net loss of
Lit. 6,980 million ($4,395,000)*. For the nine months ended September 30, 1996
and September 30, 1995, the Company reported a net loss of Lit. 9,835 million
($6,458,000) and Lit. 7,347 million, respectively. Moto Guzzi, the Company's
principal operating subsidiary, has sustained net losses in each of the past ten
years. There can be no assurance that Moto Guzzi or the Company's consolidated
operations will achieve profitability. Until that occurs, the Company will have
to fund its operating losses and the operating losses of its subsidiaries with
its and their working capital.
POTENTIAL INABILITY TO MANAGE GROWTH OF MOTO GUZZI. The strategic plan for
Moto Guzzi contemplates a significant repair and rehabilitation, and subsequent
expansion, of production capabilities with a significant commitment of capital
and increased use of outsourcing of components and subassemblies. This expansion
may require the Company to implement a variety of additional systems, procedures
and controls to manage higher inventory levels and higher levels of outsourcing
and working capital requirements and may place significant strain on management,
financial and other resources. There can be no assurance that such expansion
will be successfully completed or that the Company's systems, procedures,
controls or resources will be adequate to support expanded operations. If the
Company is unable to manage its contemplated expansion successfully, its
business and results of operations could be adversely affected. The Company's
operating results could also be adversely affected by an increase in fixed costs
and operating expenses related to the expansion of production if revenues do not
increase commensurately. See "Industry Cyclicality and Demand for the Company's
Products and Services--Motorcycle Industry."
POSSIBLE LOSS OF CONTROL OVER PRINCIPAL OPERATING SUBSIDIARY. The Company,
directly and through a majority-owned subsidiary, has the ability to control the
election of the board of directors of Moto Guzzi Corp. and all other matters
relating to such corporation, which owns 100% of the equity of Moto Guzzi.
However, under certain circumstances, specifically, if there is no initial
public offering of such corporation's stock by July 1998, the holders of shares
of preferred stock of Moto Guzzi Corp. issued in the Moto Guzzi Financing,
although owning only a minority of Moto Guzzi Corp.'s capital stock (treating
the preferred stock as a common stock equivalent), will have the right to elect
a majority of its board of directors. There can be no assurance that there will
be any such public offering. Additionally, if the warrants to purchase Moto
Guzzi Corp. common stock issued in connection with the Moto Guzzi Financing are
exercised, the Company's percentage ownership of the equity of Moto Guzzi Corp.,
and thereby of Moto Guzzi will be diluted.
CAPITAL NEEDS--REPAYMENT OF REAL ESTATE LOANS. In connection with its
acquisition of the operating subsidiaries of Finprogetti, the Company assumed
certain mortgage loans relating to property located in Cologne, Italy. The
Company is currently seeking to dispose of the property, and the related
liability. Under the terms of the loans, principal in the aggregate amount of
approximately Lit. 5,000 million
- ------------------------
* Throughout this Prospectus, amounts reported in Lire as at December 31, 1995
are translated solely for the convenience of the reader at the approximate
exchange rate at such date of 1,588 Lire to the U.S. Dollar. Amounts
reported in Lire as at September 30, 1996 are translated at the approximate
exchange rate of Lit. 1,523 to the U.S. Dollar.
9
<PAGE>
($3,283,000) is required to be repaid in 1997, and an aggregate of an additional
approximately Lit. 4,700 million ($3,086,000) in 1998 and 1999. If such property
is not sold the Company will be required to repay or otherwise refinance the
loans. There can be no assurance that such loans can be repaid or timely
refinanced on acceptable terms, or on any terms at all. In such event, the
Company will be unable to accomplish its strategic objectives and also make
payments under the loans, and will have to choose between changing its planned
use of capital or suffering default of the loans. Such loans are collateralized
by the Cologne property, an assignment of rents, and the Company's equity
interest in its Pastorino S.r.l. subsidiary.
INDUSTRY CYCLICALITY AND DEMAND FOR THE COMPANY'S PRODUCTS AND
SERVICES--MOTORCYCLE INDUSTRY. In the past, the overall motorcycle industry has
been subject to dramatic changes in demand due to changing social and economic
conditions. Among other factors, prevailing economic conditions may unfavorably
affect disposable income for leisure activities and the increased cost of
gasoline could have a negative effect on the cost of motorcycling. Accordingly,
there can be no assurance that Moto Guzzi's markets will remain in a growth
phase or remain stable.
Moto Guzzi's performance is influenced by its ability to predict future
demand for existing and new products. Moto Guzzi plans its annual production
levels and long-term product development and introduction based on anticipated
demand for its products. For the majority of sales, the Company does not have
long-term purchase commitments or irrevocable orders. The Company relies on its
own market assessment and ongoing communication with its customers to anticipate
the future volumes of purchase orders. A number of factors could cause customers
to delay or cancel orders. Moto Guzzi has experienced frequent delays in
production and shipment. Delays in production and shipment by the Company could
also cause cancellation of orders or loss of significant customers and have an
adverse effect on the Company's business, financial condition and results of
operations. See "Seasonal Business; Quarterly Fluctuations-- Moto Guzzi."
DEPENDENCE ON LIMITED NUMBER OF THIRD PARTY SUPPLIERS AND MANUFACTURERS FOR
KEY COMPONENTS. Moto Guzzi purchases many significant motorcycle components from
third parties. The Company believes that there are numerous available sources of
supply for most of them. Although Moto Guzzi attempts to maintain alterative
sources for its supplies, certain significant components are available from only
one or two sources and Moto Guzzi may therefore be unable to obtain advantageous
pricing, and is subject to the risk of possible delays in deliveries. Delays in
deliveries of certain components have occurred as recently as December 1996.
Failure by suppliers to continue to supply Moto Guzzi on commercially reasonable
terms, or at all, would have a material adverse effect on the Company. Moto
Guzzi generally does not maintain long-term supply agreements with its suppliers
and purchases required componentry pursuant to purchase orders or short-term
contracts in the ordinary course of business. Failure or delay in receiving
necessary raw materials and components by Moto Guzzi would adversely affect the
Company's operations and its ability in turn to deliver its products on a timely
basis. Moto Guzzi is seeking to increase its reliance on outside suppliers for
assembly of partially completed componentry, as a means of reducing direct labor
expenses. There can be no assurance that adequate sources of reliable outside
suppliers will be identified and engaged at advantageous terms, or at all. See
"Business--Moto Guzzi--Manufacturing."
SEASONAL BUSINESS; QUARTERLY FLUCTUATIONS--MOTO GUZZI. Moto Guzzi's
operations are characterized by seasonal fluctuations in demand and production.
Retail market demand is highest in the spring and early summer, whereas most
sales to Italian government agencies, both federal and regional, take place in
the fourth quarter. Production at Moto Guzzi, as at most Italian companies,
declines materially during August, the traditional holiday month, and also
declines somewhat over the Christmas holiday and shortly thereafter as inventory
is taken. As the Company's largest operating subsidiary, sales and production
declines at Moto Guzzi significantly affect the Company's consolidated results
of operations. While Moto Guzzi's management is implementing plans to try to
reduce production and sales fluctuations, there can be no assurance that such
plans will be successful. See "Business--Moto Guzzi--Competition."
10
<PAGE>
SEASONAL BUSINESS--L.I.T.A. L.I.T.A.'s operations have historically been
seasonal due to the L.I.T.A.'s dependence on the automobile industry. Demand is
lowest over the period from November to February and is also significantly
reduced in the traditional holiday month of August. Since 1995, L.I.T.A. has
sought to reduce this seasonality by expanding the markets it serves to include
the furniture industry, which is less seasonal, but a majority of its sales
continues to be to the automobile industry. See "Business--Moto
Guzzi--L.I.T.A.--Customers."
COMPETITION--MOTO GUZZI. In the manufacture and sale of motorcycles, Moto
Guzzi competes with companies which are far larger and better capitalized, and
many of which have greater name recognition, including Yamaha, Kawasaki, Suzuki
and Honda, the industry leaders from Japan, Aprilia and Cagiva of Italy, and
Harley Davidson of the United States. Each of these competitors has a far larger
market share than Moto Guzzi, and access to greater financial resources. Moto
Guzzi competes principally through such intangible qualities as performance,
reputation and quality of manufacture, areas in which its current and potential
competitors also excel. See "Business--Moto Guzzi--Competition."
COMPETITION--L.I.T.A. L.I.T.A.'s principal competitors are principally
represented by larger companies, many of them subsidiaries of steel
manufacturers. These are predominantly Italian companies and include Profilmec
S.p.A. and Ispadue S.p.A., the Lombarda Tubi division of the Marcegaglia Group
and ITAS S.p.A. The size of these competitors and the support of their parent
companies enable them to compete aggressively in the market. L.I.T.A. competes
principally on quality, flexibility of service and timeliness of delivery,
factors which its competitors also seek to offer to the market. There is no
assurance that L.I.T.A. will be able to continue to compete successfully, if at
all.
COMPETITION--MERCHANT BANKING DIVISION. Many companies, including the large
investment banking firms of the United States and Europe, such as Goldman Sachs
& Company and Salomon Inc., U.S. and European venture capital funds such as
Advent International, 3I Investors in Industry, and Upside 1, and the investment
banking divisions of Italian and European commercial banks such as Medio
Credito, can be expected to compete with the Company. Most of these competitors
are larger and have considerably greater financial and marketing resources than
the Company. Although only a few of these competitors, such as Wexford Capital
and Upside 1, currently invest in troubled companies in Italy, there can be no
assurance that these and other companies will not provide increasing competition
to the Company for opportunities for investing in troubled Italian companies in
the future.
ENVIRONMENTAL, SAFETY AND OTHER GOVERNMENTAL REGULATIONS. Motorcycles sold
in the United States and the European Economic Community and other countries are
subject to environmental emissions regulations and safety standards with which
Moto Guzzi must comply. All 1997 Moto Guzzi models substantially comply with all
emission standards applicable in all countries in which they are sold. There can
be no assurance, however, that Moto Guzzi will be able to cost-effectively
comply with any emissions or safety standards which governments may hereafter
adopt (though the design of new products seeks to conform with such standards as
are believed likely to be introduced). In the event its compliance is not
cost-effective in the future, Moto Guzzi may be unable to achieve the market
growth that it desires.
Moto Guzzi and L.I.T.A. are subject to a number of governmental regulations
relating to the use, storage, discharge and disposal of minerals and alloys used
in their manufacturing processes and to the safety standards of their facilities
and processes. Claims or the failure to comply with present or future
regulations could result in the assessment of damages or imposition of fines
against the Company, suspension of production or cessation of certain activities
which could adversely affect the Company's operating results. New regulations
could require the Company to acquire costly equipment or incur other significant
expenses that could have an adverse effect on the Company's financial condition
and results of operations. Any failure by the Company to control the use of, or
adequately restrict the discharge of, hazardous substances or otherwise comply
with applicable safety requirements or current or future legislation could
subject it to future liabilities. See "Business--Moto Guzzi--Compliance with
Governmental Regulations" and "Business--L.I.T.A.--Compliance with Governmental
Regulations."
11
<PAGE>
RISK OF STRIKES. Both Moto Guzzi and L.I.T.A. operate in heavily unionized
industries, subjecting them to risk of strikes and other work stoppage. The
Company has been and may in the future be subject to day-long strikes and work
stoppages at its Moto Guzzi facility in connection with the current negotiation
of national labor contracts. Any increase in the duration of any day-long strike
or in the number of strikes may have a material adverse effect on production at
Moto Guzzi.
BROAD DISCRETION IN APPLICATION OF PROCEEDS. The Company will have broad
discretion regarding how and when the Offering proceeds will be applied and will
use a portion of such proceeds to pay salaries, including salaries of its
executive officers. See "Use of Proceeds" and "Certain Transactions."
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ACCESS TO CAPITAL. The proceeds of
this Offering are not expected to be sufficient to permit the Company to make
all of the entrepreneurial cash investments which could foreseeably become
available to it as the Company pursues its growth objectives. The Company also
plans to use its authorized and unissued shares of Common Stock for the purpose
of carrying out its investments and acquisitions, but there can be no assurance
that the capital requirements of a particular client or of an entity in which
the Company owns a significant equity interest (each a "Portfolio Company")
could be satisfied through the Company's Common Stock. Additionally, the Company
may develop or be presented with opportunities in which the willingness of third
parties to provide needed capital infusions to a client or Portfolio Company to
enable it to achieve the strategic plan created by T.I.M. would be contingent on
the Company's willingness and ability itself to participate in such financing.
See "Use of Proceeds" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations-- Future Liquidity Needs."
FUTURE CAPITAL NEEDS--MOTO GUZZI. The Company does not expect that its
existing capital resources, coupled with the proceeds of the Moto Guzzi
Financing and of this Offering, will be sufficient to meet Moto Guzzi's planned
expansion of production capacity and to finance the growth in sales, if any,
beyond the next 18 months. Additional financing will be necessary to develop or
expand operations and also possibly in order to meet future working capital
needs. The extent of available additional financing will also depend on the
willingness of the banking system in Italy to continue to provide advances
against trade receivables. Such financing therefore is dependent on short-term
production levels and is subject to being withdrawn in the case of production
delays or stoppages caused by any means or by any other factors which could
affect sales levels. Further, Moto Guzzi has only limited formal arrangements
regarding its currently available bank credit lines which could be significantly
reduced by the banks at any time and for any reason. For its long-term
viability, the Company will be required to borrow or sell additional securities
or seek other new sources of financing or may be required to curtail or reduce
Moto Guzzi's activities. Prior to the Moto Guzzi Financing, some of Moto Guzzi's
capital needs were provided by the Company. The Company, however, has no
commitment to provide additional financing to Moto Guzzi except for a portion of
the proceeds from this Offering. To the extent that any future financing
involves the sale of the Company's equity securities, the interest of the
Company's then-stockholders could be substantially diluted. There can be no
assurance that any sources of additional financing will be available to Moto
Guzzi or the Company on acceptable terms, if at all. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources" and "Use of Proceeds".
RISKS OF ENTERING INTO MERCHANT BANKING BUSINESS. The Company's growth
strategy depends in part on its ability to make additional entrepreneurial
investments and acquisitions, such as its acquisition of L.I.T.A., to add value
to such investments through the management skills provided by T.I.M. and the
investment and capital finance skills provided by the Company's merchant banking
group and to then realize the enhanced value generated. However, the Company's
management does not have experience operating a merchant bank, and has only
limited experience together managing the Company. Even assuming the success of
T.I.M. in obtaining the type of engagements which could stimulate opportunities
to provide investment capital to or to make acquisitions of its client
companies, there can be no assurance that any such opportunity will result in an
investment in or acquisition of a Portfolio Company on favorable
12
<PAGE>
terms or at all. Further, even if an investment or acquisition is consummated,
there can be no assurance that the Company will be able successfully to realize
all or any portion of the enhanced value it hopes to add to the particular
client or Portfolio Company.
INTERNATIONAL NATURE OF BUSINESS. The Company's principal operating
subsidiaries, Moto Guzzi and L.I.T.A., manufacture their products in Italy and
distribute them in many countries. As a result, the Company's business is
subject to various risks beyond its control such as changes in laws and policies
affecting labor, trade and investment (including trademark protection) and the
instability of foreign economies and governments. The Company has taken
applicable laws and regulations into account in structuring its business on a
global basis, which has been done in a manner which seeks to achieve operational
and tax efficiencies. Changes in such laws, including tax laws, could adversely
affect the Company's results of operations, cash flows and financial condition.
ENFORCEMENT OF JUDGMENTS; EFFECT OF FOREIGN LAW. The Company is a
corporation organized under the laws of the State of Maryland. The majority of
its directors and executive officers are non-residents of the United States. All
or a substantial portion of the assets of such persons and of the Company are
located outside the United States. As a result, it may not be possible for
investors to effect service of process within the United States upon such
persons or to enforce against them judgments obtained in U.S. courts predicated
upon civil liability provisions of the federal securities laws of the United
States. There can be no assurance as to the enforceability in Italy in original
actions or in actions for enforcement of judgments of U.S. courts, of civil
liabilities predicated solely upon the Federal securities laws of the United
States. In addition, awards of punitive damages in actions brought in the United
States or elsewhere may be unenforceable in Italy.
EXPOSURE OF RESULTS TO CHANGES IN EXCHANGE RATES. Moto Guzzi's sales and
operating profits will be affected by the impact of fluctuations in foreign
currency exchange rates on product prices and certain operating expenses. It is
expected that L.I.T.A.'s sales and operating profits will also be affected by
the impact of fluctuations in foreign currency exchange rates on product prices
as it seeks to expand export sales, which are not currently material.
Fluctuations in the exchange rates of certain foreign currencies (principally
the Deutschemark and the U.S. Dollar, as Germany and the U.S. are or are
expected to be significant markets for Moto Guzzi) relative to the Italian Lira
may have an adverse effect on the Company's sales and operating results and the
international competitiveness of its Italian-based manufacturing operations. In
1993 and 1994, the Company substantially benefited from the depreciation of the
Italian Lira against the major European currencies and the U.S. Dollar, although
there can be no assurance that such depreciation will occur in the future. See
"Exposure of Results to Raw Material and Commodity Prices."
EFFECT OF CURRENCY EXCHANGE RATES ON MARKET PRICE. Fluctuations in the
lira-to-dollar exchange rate will affect the Company's reported revenues and
operating results and are likely to have an effect on the market price of the
Company's shares.
EXPOSURE OF RESULTS TO RAW MATERIAL AND COMMODITY PRICES. The operations of
Moto Guzzi and L.I.T.A. are significantly affected by the prices of raw
materials, including commodities (principally steel and aluminum), which can be
subject to considerable short-term variations in price. Although the Company
generally seeks to pass on the effects of price increases of raw materials to
its customers, in the past it has not always been able to do so and in the
future may not be able to do so due to competitive pressures. In the first half
of 1996, the revenues and results of operations of L.I.T.A. were adversely
affected by a steep fall in the prices of the various grades of steel which form
its principal supply of raw material. This led to a steep fall in the market
prices of finished products and L.I.T.A. incurred losses on inventories of steel
purchased prior to the fall in steel prices. Aluminum products, which are
important in the manufacture of motorcycles by Moto Guzzi, increased in price by
approximately 30% in 1995 compared to 1994 as a result of increases in the price
of aluminum. Aluminum prices in 1996 were largely unchanged. The prices of other
raw materials and commodities, many of which are not produced or
13
<PAGE>
sourced in the countries in which the Company operates, are also subject to
fluctuations as a consequence of changes in foreign currency exchange rates. See
"Exposure of Results to Changes in Exchange Rates", "Business--Moto Guzzi--Raw
Materials and Components" and "Business--L.I.T.A.--Raw Materials and
Components."
RELIANCE ON MAIN MANUFACTURING FACILITIES. All of the manufacture of Moto
Guzzi motorcycles takes place at a single production facility in Mandello del
Lario, Italy. All of L.I.T.A.'s manufacture of steel tubing products takes place
at a single factory in Torino, Italy. A significant interruption of production
at either of these facilities due to strikes or other causes could have a
material adverse effect on the Company's business and operating results. Various
health and safety repairs are also required to be made at the Moto Guzzi
facility. Such repairs, if costly, could have an adverse effect on the Company.
See "Use of Proceeds" and "Management's Discussion and Analysis of Financial
Condition and Results of Operations--General."
LACK OF PATENT OR INTELLECTUAL PROPERTY PROTECTION. The design and
technology of motorcycles manufactured and sold by Moto Guzzi are not protected
by any patent, trademark or other intellectual property rights which would
create a competitive advantage for the Company, other than the registered
trademark for "Moto Guzzi-Registered Trademark-" itself, and related trademarks
which the Company believes are well known and highly regarded. The component
parts of motorcycles are manufactured pursuant to well-known techniques and
include components which are not unique to Moto Guzzi's products. Moto Guzzi
relies on design, manufacturing skills and know-how to produce motorcycles which
it believes will find acceptance in its market niche. There can be no assurance
that a competitor of Moto Guzzi will not develop an enhancement to motorcycle
transportation that will be superior and patentable or otherwise protected from
duplication by others. There can be no assurance that competitors do not have,
or will not develop, equivalent or superior manufacturing or design skills. See
"Business--Moto Guzzi--Patents and Trademarks."
PRODUCT LIABILITY. Moto Guzzi is engaged in a business which exposes it to
possible claims for personal injury from the use of its products. Moto Guzzi
maintains product liability insurance with a per-occurrence limit of Lit. 2,000
million. Although no claims have been made against the subsidiary in excess of
insurance coverage, there can be no assurance that such claims will not arise in
the future or that the insurance coverage will be sufficient to pay such claims.
A partially or completely uninsured claim, if successful and of significant
magnitude, could have a material adverse effect on the Company.
RELIANCE ON CURRENT MANAGEMENT GENERALLY. The success of the Company in
achieving its growth objectives depends, in part, on the continued participation
of certain key executives of the Company, including Howard E. Chase (President
and Chief Executive Officer), Albino Collini (Chief Operating Officer), Mario
Tozzi-Condivi (Vice Chairman of the Board and president of Moto Guzzi) and
Domenico Costa (Managing Director of T.I.M.). Although the Company has entered
into five-year employment agreements with Messrs. Chase and Collini, a five-year
consulting agreement with Como Consultants, Limited, a corporation which will
provide the services of Mr. Tozzi-Condivi, and a three-year employment agreement
with Mr. Costa and Mr. Carlo Previtali (Secretary and Treasurer), there can be
no assurance that the Company will be able to retain its key executives on a
long-term basis. The key executives, who each have experience in aspects of the
Company's business operations, have limited experience operating the Company
together, and are inexperienced at managing a publicly held holding company and
in merchant banking. See "Risks of Entering Into Merchant Banking Business."
SHARES ELIGIBLE FOR FUTURE SALE. Future sales of Common Stock in the public
market following this Offering could adversely affect the market price of the
Common Stock or the Warrants. See "Shares Eligible for Future Sale."
POSSIBLE VOLATILITY OF STOCK PRICE. The market price of the Common Stock
could be subject to significant fluctuations in response to such factors as,
among others, variations in the anticipated or actual
14
<PAGE>
results of operations of the Company or its subsidiaries, changes in economic or
political conditions affecting the U.S., Italy or the other countries in which
the Company will operate, the financial markets generally, and changes in the
motorcycle industry specifically. The Company's Common Stock has fluctuated
between a low bid price of $2 per share and a high bid price of $11 per share in
the past three years.
ANTI-TAKEOVER EFFECT OF MARYLAND CORPORATE LAW. The Company is not
currently, but may in the future become, subject to certain provisions of the
Maryland corporate law which may have the effect of deterring hostile takeovers
or delaying or preventing changes in the control or management of the Company,
including transactions in which stockholders might otherwise receive a premium
for their shares over the then current market prices. See "Description of
Securities--Maryland Takeover Statute."
ABSENCE OF DIVIDENDS. The Company has not paid any dividends on its Common
Stock and does not anticipate paying dividends in the foreseeable future. See
"Dividend Policy."
POTENTIAL LOSS OF ACTIVE TRADING MARKET. There has been no prior market for
the Warrants, and there can be no assurance that a public market for the
Warrants will develop or be sustained after the Offering. The Company's Common
Stock is traded on the Nasdaq SmallCap Market ("Nasdaq SmallCap"). The Company
has applied to have the Common Stock and Warrants approved for trading on the
Nasdaq National Market, although there is no assurance that such listing will be
approved. The Company has simultaneously applied for listing of the Warrants on
Nasdaq SmallCap and in the event that the Securities are not approved for
listing on the Nasdaq National Market, the Company anticipates that the Common
Stock will continue to be listed and the Warrants will commence trading on the
Nasdaq SmallCap. To continue to be listed on Nasdaq after the Offering, the
Company must satisfy certain maintenance criteria. The failure to meet these
maintenance criteria in the future may result in the Common Stock or Warrants
being ineligible for quotations on Nasdaq and trading, if any, of the Common
Stock and the Warrants would thereafter be conducted on the OTC Bulletin Board.
As a result of such ineligibility for quotations, an investor may find it more
difficult to dispose of, or to obtain accurate quotations as to the market value
of the Common Stock or the Warrants. See "Possible Volatility of Stock Price."
POTENTIAL ADVERSE EFFECT OF REDEMPTION OF WARRANTS. The Company may redeem
the Warrants once they become exercisable, at a price of $.01 per Warrant, at
any time upon not less than 30 days prior written notice if the last sale price
of Common Stock has been at least 133 1/3% of the then-exercise price of the
Warrants (initially $ ) on 20 consecutive trading days ending on the
third day prior to the date on which notice is given. Notice of redemption of
the Warrants could force the holders to exercise the Warrants and pay the
exercise price at a time when it may be disadvantageous for them to do so, to
sell the Warrants at the current market price when they might otherwise wish to
hold the Warrants, or to accept the redemption price which would be
substantially less than the market value of the Warrants at the time of
redemption. See "Description of Securities--Warrants."
CURRENT PROSPECTUS AND STATE BLUE SKY REGISTRATION REQUIRED TO EXERCISE
WARRANTS. The Company will be able to issue shares of its Common Stock upon
exercise of the Warrants only if there is then a current prospectus relating to
such Common Stock, and only if such Common Stock is qualified for sale or exempt
from qualification under applicable state securities laws of the jurisdictions
in which the various holders of the Warrants reside. The Company has undertaken
and intends to file and keep current a prospectus which will permit the purchase
and sale of the Common Stock underlying the Warrants, but there can be no
assurance that the Company will be able to do so. Although the Company intends
to seek to qualify for sale the shares of Common Stock underlying the Warrants
in those states in which the securities are to be offered, no assurance can be
given that such qualification will occur. The Warrants may be deprived of any
value and the market for the Warrants may be limited if a current prospectus
covering the Common Stock issuable upon the exercise of the Warrants is not kept
effective or if such Common Stock is not qualified or is exempt from
qualification in the jurisdiction in which the holders of the Warrants reside.
See "Description of Securities--Warrants."
15
<PAGE>
RISKS ASSOCIATED WITH FORWARD LOOKING STATEMENTS. This Prospectus contains
certain forward looking statements within the meaning of Section 27A of the
Securities Act, and Section 21E of the Exchange Act, which are intended to be
covered by the safe harbors created thereby. Investors are cautioned that all
forward looking statements involve risks and uncertainty, including without
limitation, the ability of the Company to implement its strategy and identify
new market and product opportunities, product development costs, and the
dependence of the Company on certain manufacturers, as well as general market
conditions, competition and pricing. Although the Company believes that the
assumptions underlying the forward looking statements contained herein are
reasonable, any of the assumptions could be inaccurate, and therefore, there can
be no assurance that the forward looking statements included in this Prospectus
will prove to be accurate. In light of the significant uncertainties inherent in
the forward looking statements included herein, the inclusion of such
information should not be regarded as a representation by the Company or any
other person that the objectives and plans of the Company will be achieved.
16
<PAGE>
THE COMPANY
The Company was organized in Maryland in 1917 as Rowan Controller, Inc.
changing its name to Rowan Industries, Inc. and then to De Tomaso Industries,
Inc. before changing its name in August 1996 to Trident Rowan Group, Inc. In
1993, the Company, through one of its Italian subsidiaries, disposed of its 51%
equity interest in its then-largest operating company, Maserati S.p.A. which for
years had been sustaining substantial losses. Following the sale of Maserati,
the Company's largest operating subsidiary was Moto Guzzi, which had also
incurred years of losses. In 1995, the Company acquired substantially all of the
operating assets of Finprogetti S.p.A., a small private Italian merchant bank,
including T.I.M. The Company's principal executive office is located at Two
Worlds Fair Drive, Franklin Township, Somerset, NJ 08873 and its telephone
number is (908) 868-9000.
USE OF PROCEEDS
The net proceeds to the Company from the sale of Common Stock and Warrants
offered hereby are estimated to be approximately $ (approximately
$ if the Underwriters' over-allotment option is exercised in full),
based on an assumed initial offering price of $8.00 per share of Common Stock
and $.10 per Warrant, less underwriting discounts and commissions and offering
expenses payable by the Company.
The Company intends to use approximately $4 million of the net proceeds to
provide further funds for some of the planned growth of Moto Guzzi, whose
projected significant expansion in production in the upcoming years requires
significant capital expenditure and working capital, including to repair,
replace and/or rehabilitate aged production equipment. See "Business--Recent
Transactions--Moto Guzzi Financing."
Approximately $1 million will be used to finance increased working capital
and the acquisition of plant and machinery at L.I.T.A. to support its growth.
The Company will also consider entrepreneurial investment and acquisition
opportunities arising out of its temporary management engagements and otherwise.
Although the Company currently has no arrangements, understandings or agreements
with respect to any such acquisitions or investments, the immediate availability
of funds is likely to be a determining factor in negotiating advantageous terms
for such possible transactions.
The balance of the net proceeds of this Offering is allocated for working
capital and general corporate purposes including, among other things, payment of
expenses incurred or to be incurred by the Company in connection with its
operations and payment of general corporate expenses including salaries of
officers. Pending the use of net proceeds such as described above, the Company
will invest such proceeds in United States government securities, short-term
deposits or other investment grade, short-term interest-bearing investments.
The Company believes that these funds, together with available cash, cash
equivalents and marketable securities, plus anticipated future revenues, will be
adequate to satisfy the regular cash requirements of Moto Guzzi and L.I.T.A. for
the next 12 to 18 months, but such funds will not be adequate to satisfy all of
the reasonably foreseeable capital needs which such subsidiaries will have,
including rehabilitation and expansion of production capacity and increased
sales. See "Risk Factors--Capital Needs; Uncertainty of Access to Capital."
If, however, the Company's plans or assumptions change or prove to be
inaccurate with respect to the proceeds of the Offering, and/or cash generated
from future revenues, if any, prove to be insufficient to fund operations (due
to unanticipated expenses, problems or otherwise), the Company may find it
necessary and/or advisable to reallocate some of the proceeds within the
above-described categories or to use portions thereof for other purposes and
therefore management will have significant discretion how and when the proceeds
will be applied. See also "Risk Factors--Capital Needs--Repayment of Real Estate
Loans."
17
<PAGE>
MARKET PRICE OF COMMON STOCK
Since September 24, 1994, the Common Stock has traded on the Nasdaq
SmallCap. The reported prices represent inter-dealer prices, which do not
include retail mark-ups, mark-downs, or any commission to the broker-dealer, and
may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
BID PRICES
------------------
<S> <C> <C>
HIGH
BID LOW BID
------- -------
1995
1st Quarter.................................................................................. 9 1/2 7 3/4
2nd Quarter.................................................................................. 9 5/8 8 1/2
3rd Quarter.................................................................................. 9 3/4 9 3/8
4th Quarter.................................................................................. 10 1/2 9 1/2
1996
1st Quarter.................................................................................. 11 10 1/4
2nd Quarter.................................................................................. 10 3/4 9 5/8
3rd Quarter.................................................................................. 10 5/8 9 7/8
4th Quarter.................................................................................. 10 1/4 8
1997
1st Quarter through February 7, 1997......................................................... 9 3/8 8 3/8
</TABLE>
As of February 7, 1997, there were 1,277 holders of record of the Company's
common stock.
DIVIDEND POLICY
The Company has not paid any dividends since its inception and does not
anticipate paying any dividends on its Common Stock for the foreseeable future.
Management intends to retain earnings, if any, for use in its business and to
support development and expansion of the Company's business.
18
<PAGE>
CAPITALIZATION
The tables below show (i) the actual debt and capitalization of the Company
as at September 30, 1996; (ii) on a pro forma basis to reflect (A) the inclusion
of L.I.T.A., acquired effective July 25, 1995 and the acquisition of the
operating subsidiaries of Finprogetti, effective July 1, 1995 as if both had
occurred January 1, 1995, (B) the Company's stock repurchase program which
closed on October 23, 1996 and the repurchases by the Company of shares from
Finprogetti on November 7, 1996 and December 31, 1996 (discussed in the
paragraph immediately following), and (C) the Moto Guzzi Financing and (iii) on
a pro forma as adjusted basis to reflect such pro forma adjustments and as
adjusted to give effect to the issuance and sale by the Company of 1,250,000
shares of Common Stock and Warrants offered hereby at an assumed public offering
price of $8.00 per share of Common Stock and $0.10 per Warrant, assuming no
exercise of the Underwriters' over-allotment option and after deduction of
estimated underwriting commissions and offering expenses payable by the Company.
The Company initiated a stock repurchase program on September 23, 1996 which
closed on October 23, 1996. 761,995 shares were repurchased under the program at
a price of $12.26 per share for a total of $9,342,000. The Company has paid
$7,479,000 (Lit. 11,390 million) in cash and has delivered 8% promissory notes
payable on October 23, 1998 in the aggregate principal amount of $1,863,000
(Lit. 2,838 million). The Company also repurchased a further 78,330 shares in
the aggregate on November 7, and December 31, 1996 for Lit. 650 million
($427,000) in cash and assignment of a receivable of Lit. 763 million
($501,000). See Note 6 to the Unaudited Condensed Consolidated Financial
Statements as at September 30, 1996. After giving effect to the two stock
repurchases, the Company had outstanding at December 31, 1996, 3,902,540 shares
outstanding.
<TABLE>
<CAPTION>
MILLIONS OF LIRE THOUSANDS OF DOLLARS(1)
------------------------------------- -------------------------------------
<S> <C> <C> <C> <C> <C> <C>
PRO FORMA AS PRO FORMA AS
ACTUAL PRO FORMA ADJUSTED ACTUAL PRO FORMA ADJUSTED
--------- ----------- ------------- --------- ----------- -------------
Advances from banks........................... 33,279 27,903 27,903 $ 21,851 $ 18,321 $ 18,321
Current portion of long-term debt............. 6,994 6,994 6,994 4,592 4,592 4,592
--------- ----------- ------------- --------- ----------- -------------
Long-term debt net of current portion......... 13,257 16,095 16,095 8,705 10,568 10,568
Minority interests............................ 14,895 17,126 17,126 9,780 11,245 11,245
Common stock subject to repurchase............ 14,392 13,742 13,742 9,450 9,023 9,023
Shareholders' equity:
Common stock, $0.01 par value, 50,000,000
shares authorized;
3,902,540 issued and outstanding;
5,152,540 to be issued and outstanding
(2)(3).................................. 69 68 88 45 45 58
Additional paid in capital.................... 76,538 82,425 95,674 50,255 54,120 62,819
Treasury stock.............................. (11,826) (26,816) (26,816) (7,765) (17,607) (17,607)
Other reserves.............................. 2,424 2,424 2,424 1,592 1,592 1,592
Accumulated deficit........................... (25,761) (25,761) (25,761) (16,915) (16,915) (16,915)
--------- ----------- ------------- --------- ----------- -------------
Total shareholders' equity.................. 41,444 32,340 45,609 27,212 21,236 29,947
--------- ----------- ------------- --------- ----------- -------------
Total capitalization........................ 83,988 79,303 92,572 $ 55,147 $ 52,072 $ 60,783
--------- ----------- ------------- --------- ----------- -------------
--------- ----------- ------------- --------- ----------- -------------
</TABLE>
- ------------------------
(1) Translated solely for the convenience of the reader from Lire into Dollars
at the approximate exchange rate at September 30, 1996 of Lit. 1,523 to
$1.00.
(2) Shares issued includes 849,640 shares subject to repurchase, classified
outside shareholders' equity as "Common stock subject to repurchase", and is
after giving effect to the repurchases of shares as described in the second
paragraph at the top of this page.
(3) Assumes the issuance of 1,250,000 shares of Common Stock pursuant to the
Offering.
19
<PAGE>
EXCHANGE RATES
Since all of the production, and much of the sales of the Company, occur in
Italy, the Company's primary financial statements are reported in Italian Lire,
the functional currency of the Company as defined by generally accepted
accounting principles. U.S. Dollar translations are provided solely for the
reader's convenience and have been made at the approximate rate of 1,523 lire to
the U.S. Dollar as of September 30, 1996 unless otherwise indicated.
Prior to September 1992, the Bank of Italy maintained the value of the Lira
within the narrow band contemplated by the Exchange Rate Mechanism (the "ERM")
of the European Monetary System (the "EMS"). On September 17, 1992, in response
to strong downward pressure on the exchange rate of the Lira against other EMS
currencies that continued despite intervention by the Bank of Italy and the
central banks of the other nations participating in the EMS, the Italian
Government, in consultation with the Bank of Italy, suspended the Lira from the
ERM. Following this suspension, the value of the Lira immediately declined by
approximately 20% against the main EMS currencies with similar consequent
depreciation against the U.S. Dollar. The Lira was readmitted into the ERM on
November 25, 1996.
The following table sets forth, for the period indicated, the high, low,
average and end of period exchange rates expressed in Lire per $1.00 (rounded to
the nearest Lira):
<TABLE>
<CAPTION>
CALENDAR YEAR HIGH LOW AVERAGE END OF PERIOD
- -------------------------------------------------------- --------- --------- ----------- ---------------
<S> <C> <C> <C> <C>
1996.................................................... 1,606 1,499 1,542 1,522
1995.................................................... 1,767 1,565 1,626 1,588
1994.................................................... 1,689 1,539 1,612 1,622
1993.................................................... 1,713 1,478 1,574 1,713
1992.................................................... 1,475 1,066 1,243 1,478
1991.................................................... 1,364 1,089 1,241 1,147
</TABLE>
Fluctuations in the exchange rates between the Lira and the Dollar will
affect the Dollar equivalents of the Company's reported revenues and earnings.
The Company does not currently engage in hedging activities to reduce its
exposure to exchange rate fluctuations.
In addition, fluctuations in the exchange rates of other foreign countries
relative to the Lira may affect the Company's results of operations as a
consequence of the competitiveness of the Company relative to its competitors
and due to effects on the cost of imported raw materials. See "Risk
Factors--Exposure of Results to Changes in Exchange Rates."
20
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
THE CONSOLIDATED FINANCIAL DATA SET FORTH BELOW AT THE END OF THE FISCAL
YEARS ENDED DECEMBER 31, 1995, 1994, 1993, 1992 AND 1991 HAVE BEEN DERIVED FROM
AUDITED FINANCIAL STATEMENTS. THE CONSOLIDATED FINANCIAL DATA AT THE END OF AND
FOR THE NINE MONTH PERIODS ENDED SEPTEMBER 30, 1996 AND 1995 HAVE BEEN DERIVED
FROM UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY. IN THE OPINION
OF THE COMPANY, ITS UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS HAVE BEEN
PREPARED ON THE SAME BASIS AS THE AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND
INCLUDE ALL ADJUSTMENTS, CONSISTING ONLY OF NORMAL RECURRING ADJUSTMENTS,
NECESSARY FOR A FAIR PRESENTATION OF THE FINANCIAL POSITION AND RESULTS OF
OPERATIONS FOR SUCH PERIODS. RESULTS FOR THE NINE MONTHS ENDED SEPTEMBER 30,
1996 ARE NOT NECESSARILY INDICATIVE OF RESULTS TO BE EXPECTED FOR THE RELATED
FULL FISCAL YEAR.
SEE ALSO SUMMARY PRO FORMA FINANCIAL INFORMATION AND THE PRO FORMA FINANCIAL
STATEMENTS ATTACHED TO THIS PROSPECTUS WHICH GIVE EFFECT TO (I) THE INCLUSION OF
L.I.T.A., ACQUIRED EFFECTIVE JULY 25, 1995 AND THE ACQUISITION OF THE OPERATING
SUBSIDIARIES OF FINPROGETTI EFFECTIVE JULY 1, 1995 AS IF BOTH HAD OCCURRED ON
JANUARY 1, 1995, (II) THE COMPANY'S STOCK REPURCHASE PROGRAM WHICH CLOSED ON
OCTOBER 23, 1996 AND THE REPURCHASES BY THE COMPANY OF SHARES FROM FINPROGETTI
ON NOVEMBER 7, AND DECEMBER 31, 1996, AND (III) THE SALE OF SHARES OF MOTO GUZZI
CORP., THE COMPANY'S SUBSIDIARY, AS IF ALL TRANSACTIONS OCCURRED AS OF JANUARY
1, 1996 AND 1995 IN THE PRO FORMA INCOME STATEMENT DATA AND AS IF THEY OCCURRED
AS AT SEPTEMBER 30, 1996 IN THE PRO FORMA BALANCE SHEET DATA.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED YEARS ENDED DECEMBER 31, SEPTEMBER 30
DECEMBER 31 ---------------------------------------------------------- --------------------
1995 1995 1994 1993 1992 1991 1996 1995
------------ ------------- --------- ---------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
US$1 (MILLIONS OF ITALIAN LIRE--EXCEPT FOR PER SHARE AMOUNTS)
Net sales................... $ 45,499 Lit. 72,253 51,994 41,919 45,346 32,219 66,043 47,001
Loss from continuing
operations before
extraordinary items....... (4,395) (6,980) (3,277) (6,736) (3,967) (9,811) (9,835) (7,347)
Net (loss)/income........... (4,395) (6,980) (3,277) 153,497(2) (75,984) (17,320) (9,885) (7,347)
Loss per share from
continuing operations
before extraordinary
items..................... (1.30) (2,065) (1,593) (2,203) (1,928) (4,769) (2,073) (2,499)
Net (loss)/income per
share..................... (1.30) (2,065) (1,593) 50,204(2) (36,931) (8,418) (2,073) (2,499)
Total assets................ 115,133 182,830 118,661 127,556 223,295 264,724 167,691 177,105
Long-term debt.............. 11,397 18,098 5,004 5,738 71,949(3) 32,056 13,257 20,645
Cash dividends paid per
common share.............. -- -- -- -- -- -- -- --
</TABLE>
- ------------------------
(1) The above information for the year ended December 31, 1995, expressed in
Italian Lire, has been translated into U.S. Dollar equivalents in thousands
of dollars (except for per share amounts), at the rate of exchange
prevailing at December 31, 1995.
(2) Includes a gain of Lit. 160,233 million (Lit. 52,407 per share) resulting
from the sale of the Company's 51% interest in Maserati S.p.A. to Fiat.
(3) Long-term debt in 1992 includes advances from affiliates of Lit. 61,000
million.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
THE DISCUSSION AND ANALYSIS BELOW SHOULD BE READ IN CONJUNCTION WITH THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES THERETO INCLUDED
ELSEWHERE IN THIS PROSPECTUS. IN ADDITION TO HISTORICAL INFORMATION, THE
FOLLOWING DISCUSSION AND ANALYSIS CONTAINS FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES WITHIN THE MEANING OF SECTION 27A OF THE
SECURITIES ACT AND SECTION 21E OF THE EXCHANGE ACT, WHICH ARE INTENDED TO BE
COVERED BY THE SAFE HARBORS CREATED THEREBY. ALTHOUGH THE COMPANY BELIEVES THAT
THE ASSUMPTIONS UNDERLYING THE FORWARD LOOKING STATEMENTS CONTAINED HEREIN ARE
REASONABLE, ANY OF THE ASSUMPTIONS COULD BE INACCURATE, AND THEREFORE, THERE CAN
BE NO ASSURANCE THAT THE FORWARD LOOKING STATEMENTS INCLUDED IN THIS PROSPECTUS
WILL PROVE TO BE ACCURATE. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
FROM THE RESULTS SPECIFICALLY DISCUSSED IN THE FORWARD LOOKING STATEMENTS
INCLUDING, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN "RISK FACTORS." IN LIGHT
OF THE SIGNIFICANT UNCERTAINTIES INHERENT IN THE FORWARD LOOKING STATEMENTS
INCLUDED HEREIN, THE INCLUSION OF INFORMATION SHOULD NOT BE REGARDED AS A
REPRESENTATION BY THE COMPANY OR ANY OTHER PERSON THAT THE OBJECTIVES AND PLANS
OF THE COMPANY WILL BE ACHIEVED.
GENERAL
The Company's consolidated results of operations are dominated by the
results of Moto Guzzi, its principal operating subsidiary. Both Moto Guzzi and
L.I.T.A., the Company's steel tubing subsidiary, are in cyclical businesses,
subject to fluctuating raw material prices, and operate in heavily unionized
industries subjecting them to risk of strikes and other work stoppages. Each
business operates from its respective single factory in Italy.
In general, neither business sells its product under long-term contracts or
other arrangements, and by scheduling production in anticipation of fulfilling
open orders each business may be left with substantial inventory if such orders
are canceled. Moto Guzzi's business is seasonal, with retail sales highest in
warm weather months. This effect is somewhat offset by demand from government
agencies, which is highest in the fourth quarter.
Most Italian companies are closed in August and for approximately ten days
for the Christmas holiday, which affects both production and sales at those
times. Moto Guzzi's business is capital intensive, particularly so at the
moment, as the business is in the midst of a significant refurbishing and
expansion of its production facility. Both Moto Guzzi and L.I.T.A. are subject
to currency fluctuations, as both export their product.
The 1995 acquisition of T.I.M. as part of the acquisition of the principal
operating subsidiaries of Finprogetti, enables the Company to apply that
subsidiary's management skills to "turn around" troubled companies, enhancing
their value. The significant progress achieved at Moto Guzzi at which an
operating loss of only Lit. 45,000,000 ($28,000) was realized in 1995, reflects
the importance of the acquisition of T.I.M. and of T.I.M.'s turnaround
abilities. See "Business--Recent Transactions--Finprogetti Acquisition."
T.I.M. RELATED INVESTMENTS. The acquisition of L.I.T.A. in 1995 at a price
substantially below its book value illustrates how a T.I.M. management
engagement for a client can create an investment opportunity. L.I.T.A., a
manufacturer of steel tubing, expects that 1996 operations will be material to
the Company's consolidated operations. See "Business--L.I.T.A.--Background."
MANAGEMENT INPUT. T.I.M.'s management engagements frequently involve "turn
around" plans requiring financial restructurings. Such restructurings frequently
involve the need for new capital, as well as the need for creditors to forgive
debt or to convert debt into equity. Each such engagement affords the Company an
investment opportunity. The most prominent distinguishing factor between the
Company and other financial investors is that the Company, in investing its
capital, relies on its own management skills rather than those of others.
22
<PAGE>
The real estate holdings acquired from Finprogetti, while currently
constituting material assets on the Company's balance sheet, are intended to be
disposed of, with the net proceeds to be utilized to make investments in
companies to be managed by T.I.M.
RESULTS OF OPERATIONS NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO SEPTEMBER
30, 1995--
THE COMPANY
<TABLE>
<CAPTION>
NINE MONTHS ENDED SEPTEMBER 30
------------------------------------------
<S> <C> <C> <C> <C>
(MILLIONS OF LIRE)
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C> <C> <C>
Net sales.............................................................. 66,043 100.0% 47,001 100.0%
Cost of sales.......................................................... (57,434) (87.0) (44,114) (93.9)
--------- --------- --------- ---------
Gross margin........................................................... 8,609 13.0 2,887 6.1
Selling, general and administrative expenses........................... (14,179) (21.5) (10,271) (21.9)
Rental income.......................................................... 1,098 1.7 385 0.8
Reserves against real estate........................................... (2,950) (4.5) --
Other income/(expense), net............................................ 227 0.3 442 0.9
--------- --------- --------- ---------
Operating loss......................................................... (7,195) (10.9) (6,577) (14.0)
Interest expense....................................................... (4,882) (7.4) (3,227) (6.9)
Interest income........................................................ 3,318 5.0 2,968 6.3
--------- --------- --------- ---------
Loss from continuing operations before income taxes and minority
interests............................................................ (8,759) (13.3) (6,836) (14.6)
Income taxes........................................................... (600) (0.9) (121) (0.3)
--------- --------- --------- ---------
Loss from continuing operations before minority interests.............. (9,359) (14.2) (6,957) (14.8)
Minority interests..................................................... (476) (0.7) (390) (0.8)
--------- --------- --------- ---------
Net loss from continuing operations.................................... (9,835) (14.9)% (7,347) (15.6)%
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Amounts are translated below into U.S. Dollars from Lire using an exchange
rate of 1,523 Lire to the U.S. Dollar, which was the approximate rate in effect
on September 30, 1996 and has been used solely as an aid in reading this
Prospectus.
SALES AND COST OF SALES--MOTORCYCLE BUSINESS. For the nine months ended
September 30, 1996, net sales at Moto Guzzi were Lit. 51,234 million
($33,640,000), compared to Lit. 44,584 million in the corresponding period of
1995, an increase of 14.9%. Results for the nine months ended September 30, 1996
include the results of Moto America Inc. from January 1, 1996, although such
results, after elimination of intercompany sales and purchases, are not material
to overall operations.
The growth in net sales for the first nine months of 1996 largely reflects
results during the first quarter, when sales were up 93% over the corresponding
quarter in 1995 due to production and sales volume increases. Sales growth of 4%
in the second quarter was due mainly to price increases averaging 5% which were
put into effect from March 1, 1996 and was limited because the booking of some
sales of motorcycles to the public administration sector (police and military)
was deferred, at the customers' request, until the fourth quarter of 1996. Sales
in the third quarter of 1996 were down 14.8% compared to the same period in 1995
caused by temporary production delays due to late delivery of parts by suppliers
in August and difficulties experienced in the production line in September with
the start of production of new models.
23
<PAGE>
The following is a summary of unit production for the first nine months of
1996 compared to the comparable period in 1995:
<TABLE>
<CAPTION>
1996 1995 % CHANGE
--------- --------- -----------
<S> <C> <C> <C>
First quarter.................................................... 1,520 812 87.2%
Second quarter................................................... 1,760 1,455 21.0%
Third quarter.................................................... 1,103 1,241 (11.1)%
--------- ---------
Total to September 30............................................ 4,383 3,508 24.9%
</TABLE>
Cost of sales as a percentage of sales decreased, and margins concomitantly
increased, in the first nine months of 1996 compared to 1995 due both to
improved performance and to the absence of exceptional costs of approximately
Lit. 1,800 million incurred in 1995 arising from the strategic decision to
abandon production of smaller "Benelli" motorcycles and "Benelli" motorcycles
badged as small "Moto Guzzi" models and to concentrate on larger and higher
priced models.
SALES AND COST OF SALES--STEEL TUBING SEGMENT. L.I.T.A. contributed Lit.
13,296 million ($8,730,000) to consolidated net sales in the nine months ended
September 30, 1996. From July 25, 1995, the date of L.I.T.A.'s acquisition by
the Company, to September 30, 1995, L.I.T.A. contributed Lit. 1,866 million to
consolidated net sales.
Sales volumes for the nine months ended September 30, 1996 totaled 9,071
tons, an increase of 32.3% over L.I.T.A.'s sales in the corresponding period in
1995, mainly from domestic (Italian) sales. Export sales represent one of the
areas of growth and amounted to 6.9% of total net sales through September 30,
1996 compared to less than 1% in 1995.
Market conditions for L.I.T.A. were unfavorable in the first half of 1996 as
a result of falling steel prices; this condition continued into the second
quarter with further price decreases of 10% to 15% for various types of steel.
Although the Company purchased steel at market prices at the time, when finished
products were sold steel prices had decreased, resulting in a loss on
inventories of such steel. Average raw material price decreases since the
beginning of the year have been approximately 22%. Prices have now stabilized
and there is even some indication of price increases for some types of steel.
Margins in the first half of 1996 were burdened by the drop in steel prices with
consequent decreases in L.I.T.A.'s selling prices. The fall in the steel prices
produced losses on inventories of steel with a negative effect on margins of
approximately Lit. 600 million, offsetting the benefits gained from increased
volumes. The effects were felt primarily in the first quarter of 1996, were more
contained in the second quarter and had no significant impact on the third
quarter.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses have increased in nine months of 1996 as a result of the
increased level of operations of Moto Guzzi, the expense of improving logistics
and management information systems, the inclusion of nine months of the costs of
the Company's enlarged structure following the Finprogetti acquisition effective
July 1, 1995 and the acquisition of Moto America in 1996.
RESERVES AGAINST REAL ESTATE. The Company recorded a reserve of Lit. 2,950
million ($1,937,000) in the nine months ended September 30, 1996 following the
expiration, unexercised, of an option held by third parties to acquire the
Company's interest in undeveloped land in Sardinia, Italy, and as a result of an
accrual for extraordinary maintenance at the Company's Cologne, Italy property.
The market value of the property at Sardinia had decreased in 1996 and changes
in rules and practices by local and regional governments relating to
construction permits and environmental authorizations, also hurt the value of
this property market.
INTEREST EXPENSES AND INTEREST INCOME. Higher interest expense primarily
resulted from the real estate loans acquired as part of the Finprogetti
Acquisition, increases in advances from banks which have
24
<PAGE>
financed the growth at Moto Guzzi in the first nine months of 1996 and the
acquisition of L.I.T.A., offset partly by slightly lower interest rates in 1996.
Interest income increased slightly from 1995 as a result of interest on tax
receivables acquired as part of the Finprogetti Acquisition and on the Domer
promissory note from the sale of the Company's 66.7% interest in Immobiliare
Broseta S.r.l., offset by small decreases in interest rates on short-term
deposits. See "Business--Recent Transactions."
RENTAL INCOME. Rental income increased by Lit. 713 million ($468,000) in
the nine months ended September 30, 1996 compared to the 1995 period because of
the inclusion of the operations of the former Finprogetti real property for the
full period in 1996, compared to only three months in the 1995 period.
FISCAL YEAR ENDED DECEMBER 31, 1995
COMPARED TO FISCAL YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER YEAR ENDED DECEMBER
31, 1995 31, 1994
-------------------- --------------------
<S> <C> <C> <C> <C>
LIRE M. LIRE M.
Net sales.............................................................. 72,253 100.0% 51,994 100.0%
Cost of sales.......................................................... (63,410) (87.8) (46,256) (89.0)
--------- ---------
8,843 12.2 5,738 11.0
Selling, general and administrative expenses........................... (16,230) (22.5) (10,818) (20.8)
Rental Income.......................................................... 770 1.1 -- --
--------- ---------
Operating loss......................................................... (6,617) (9.2) (5,080) (9.8)
Other income/(expense), net............................................ 513 0.7 990 1.9
Interest expense....................................................... (4,458) (6.2) (3,874) (7.5)
Interest income........................................................ 4,452 6.2 5,536 10.6
--------- ---------
Loss before income taxes and minority interests........................ (6,110) (8.5) (2,428) (4.7)
Income taxes........................................................... (420) (0.6) (39) (0.1)
--------- ---------
Loss before minority interests......................................... (6,530) (9.0) (2,467) (4.7)
Minority interests..................................................... (450) (0.6) (810) (1.6)
--------- ---------
Loss................................................................... (6,980) (9.7%) (3,277) (6.3%)
--------- ---------
--------- ---------
</TABLE>
NET SALES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1995 YEAR ENDED DECEMBER 31, 1994
----------------------------- -----------------------------
<S> <C> <C>
LIRE M. LIRE M.
Motorcycles....................... 64,671 48,849
Steel Tubes....................... 5,836 --
Hotel Operations.................. -- 1,073
Corporate and Other............... 2,458 2,305
Intersegment eliminations......... (712) (233)
------ ------
72,253 51,994
</TABLE>
OVERALL. Net sales increased 40% in 1995 compared to 1994 principally as a
result of a 30.4% increase in net sales of Moto Guzzi motorcycles and spare
parts and the inclusion of the operations of L.I.T.A. for the last five months
of 1995. The Company also reported net sales in 1995 of Lit. 2,458 million
($1,548,000) relating to the operations of T.I.M. and other businesses acquired
in July 1995 as a result of the Finprogetti Acquisition, and to residual sales
of Maserati spare parts. Net sales in 1994 included Lit. 2,305 million relating
to residual sales of Maserati inventory and spare parts. Net sales in 1994 also
25
<PAGE>
included revenues of Lit. 1,073 million from operations of the Hotel Roma, which
the Company disposed of in 1995.
MOTO GUZZI. Net sales of motorcycles and spare parts to unaffiliated
customers (net of sales by Moto Guzzi to its spare parts distribution
subsidiary) increased in 1995 over 1994 by 35.6%, to Lit. 55,218 million, and
16.2%, to Lit. 9,453 million, respectively. Unit sales of motorcycles (excluding
old Benelli inventory) increased to 5,198 in 1995, compared to 4,278 in 1994.
Sales of motorcycles of the Company's largest, most profitable units, those with
engine displacement greater than 750cc, increased in the period from 3,044 to
3,766. Sales to the public administration sector (military and police) declined
to 16.2% of total sales in 1995, from 17.7% in 1994. While sales to Italian and
foreign government bodies are significant as a whole to Moto Guzzi, sales to no
single government agency were significant in 1995.
L.I.T.A. The Company acquired the steel tube manufacturing subsidiary on
July 26, 1995. Accordingly, 1994 does not include any operations from L.I.T.A.,
and 1995 includes its operations for only the last five months of the year. In
that period, L.I.T.A.'s net sales aggregated Lit. 5,836 million ($3,675,000),
while total net sales of L.I.T.A. in 1995, including the period prior to its
acquisition by the Company, aggregated Lit. 14,541 million ($9,157,000). More
than 99% of such 1995 sales were made in Italy, and 65% thereof were in the
automotive sector. Approximately 14% of its net sales were to the aluminum
furniture market and the balance to the bicycle frame and household appliances
markets.
COST OF SALES AND MARGINS. Margins improved to 12.2% of net sales in 1995,
compared to 11% of net sales in 1994, principally as a result of improved
operations at Moto Guzzi and the inclusion of operations of L.I.T.A. in 1995.
Margins in 1994 benefitted by the reversal of reserves against inventories of
spare parts for Maserati automobiles. Largely as a result of higher unit sales,
thereby lowering per unit fixed costs, and generally higher selling price
increases compared to production cost increases, Moto Guzzi's margins increased
to 12.1% of net sales in 1995 from 8.3% in 1994, including the effects of
non-recurring write-downs aggregating approximately Lit. 1,800 million
($1,134,000) of inventories and tooling resulting from the strategic decision to
concentrate on larger motorcycles and largely abandon the smaller "Moto Guzzi"
and "Benelli" models, and of approximately Lit. 664 million ($418,000) of
increased research and development expenses over 1994's levels.
Cost of sales at Moto Guzzi in 1995 were negatively impacted by a
combination of 4.8% inflation in raw materials prices, due primarily to a 30%
increase in aluminum prices in 1995 increased labor costs resulting from a
greater number of workers (357 in 1995 compared to 322 in 1994), an average 3.4%
pay increase over 1994, including wages and bonuses, and higher overtime levels
(aggregating 9.6% of all production hours in 1995 compared to 5.9% in 1994),
although on a per unit basis, labor costs declined almost 18% in 1996 compared
to 1995 and increased use of outsourcing, which contributed 1.2% to unit
motorcycle costs.
Both raw material costs and export selling prices are affected by exchange
rates. Approximately 67% by units and 65.3% by sales of the business of Moto
Guzzi in 1995 were represented by exports. Other than sales to the United
States, which are denominated in U.S. Dollars and which were not significant to
overall 1995 sales, all export sales are denominated in Lire. Exchange rates
were relatively stable in 1995 against other major currencies. To the extent
permitted by competitive pressures, Moto Guzzi seeks to pass its increased costs
from changing prices on to its customers by increasing selling prices. In 1995,
Moto Guzzi continued to benefit from the devaluation of the Lira in 1993
following its exit from the European Exchange Mechanism, and was able to pass on
cost increases in its 1995 selling prices. See "Exchange Rates."
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses reflect an increase of approximately Lit. 2,200 million
($1,385,000) resulting from the acquisitions of Finprogetti and L.I.T.A. Direct
transaction costs of Lit. 1,224 million ($771,000) were capitalized as part of
the purchase costs but, more generally, costs of reorganizing the Company's
operating structure have added to expense
26
<PAGE>
in 1995, compared to 1994, while the anticipated benefits are expected to accrue
to future periods. The Company's new operational structure, which was put in
place in the second half of 1995, has a higher cost than in prior periods. The
Company will seek to (i) reduce these costs in future years by bringing certain
accounting and legal functions in-house, (ii) increase retainer and success fees
from services to third parties, and (iii) realize operating profits and
investment gains from Portfolio Companies. Selling, general and administrative
expenses in 1994 for corporate operations included expenses relating to
evaluating the Company and Moto Guzzi following the sale of Maserati, redefining
the Company's strategic mission, write-offs of expired Italian tax refund
rights, and accruals for costs to remove satisfied mortgages of record against
property in Italy. Expenses for 1995 were also increased due to the inclusion of
Lit. 862 million ($543,000) relating to the operation of the real estate assets
acquired from Finprogetti. Administrative costs at Moto Guzzi increased in 1995
as a result of an investment in personnel to manage new computer systems, and
the installation of a management group to control outsourcing, an exceptional
bad debt expense of Lit. 425 million ($268,000) and exchange losses of Lit. 338
million ($213,000).
OPERATING LOSS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
<S> <C> <C>
LIRE M. LIRE M.
Motorcycles............................................ (45) (632)
Steel Tubes............................................ 235 --
Real Estate............................................ (92) --
Hotel Operations....................................... -- (164)
Corporate and Other.................................... (6,809) (5,034)
Intersegment eliminations.............................. 94 750
------ ------
(6,617) (5,080)
</TABLE>
Operating loss increased by Lit. 1,537 million ($968,000), or 30.3%, in 1995
compared to 1994, but declined to 9.2% of net sales in 1995, compared to 9.8% of
net sales in 1994. The change is a result of improved operating results at Moto
Guzzi, which sustained an operating loss of Lit. 45 million ($28,000) in 1995
compared to Lit. 632 million ($398,000) in 1994, and a Lit. 235 million
($150,000) operating profit at L.I.T.A. net of Lit. 184 million in fees paid to
T.I.M. for managing the business. The single largest component of the Company's
operating loss, however, in 1995 as in 1994, related to the Company's corporate
operations, particularly costs associated with the restructuring of its business
plan and strategic focus. In 1994, these costs were offset by high margins due
to the reversal of Maserati inventory reserves.
OTHER INCOME/(EXPENSE). Results for 1995 include exchange losses of
approximately Lit. 900 million ($567,000) arising from a domestic currency swap
related to the planned stock repurchase program which commenced in September
1996 and from short-term intercompany advances from subsidiaries, and Lit. 890
million ($560,000) in expense and Lit. 978 million ($616,000) in income relating
to the residual operations of Finproservice, S.p.A., one of the businesses
acquired from Finprogetti which was later wound down by the Company. Results for
1994 include a gain of Lit. 2,841 million from the sale of certain fixed assets,
including an electric power generating plant, and currency exchange losses of
Lit. 1,022 million, consisting of a loss of Lit. 425 million from a loan
denominated in Swiss francs (paid in 1995), and the balance derived principally
from the collection and payment by Moto Guzzi and other Italian subsidiaries of
foreign accounts receivable and payable. The Company also realized a loss in
1994 of Lit. 829 million from a variety of sources, no one of which was
material.
RENTAL INCOME. As a consequence of the July 1995 Finprogetti acquisition,
the Company realized rental income of Lit. 690 million ($435,000) in the
remaining six months of 1995 from one commercial property, located in Cologne,
Italy, approximately 80% of which is leased to a multinational company at an
annual rental of Lit. 1,280 million, and Lit. 80 million ($50,000) from a
parking concession in Genoa, Italy. Rentals for Cologne are tied to the cost of
living index and the rental agreement expires in July 1998. The
27
<PAGE>
Company does not plan to remain engaged in the operation of the former
Finprogetti real estate assets on a long-term basis.
INTEREST EXPENSE. Interest expense increased by Lit. 584 million
($368,000), or 15%, compared to 1994, although as a percentage of net sales,
interest expense declined by 17.3%, to 6.2% of net sales in 1995 from 7.5% of
net sales in 1994. The increase in interest expense is due to the assumption of
loans relating to the real property acquired in the 1995 Finprogetti
acquisition, and to external interest expense at Moto Guzzi, which rose due to a
build-up of inventory levels in 1995 compared to 1994.
INTEREST INCOME. Interest income declined in 1995 by Lit. 1,084 million
($683,000), or 19.5%, compared to 1994. As a percentage of net sales, interest
income declined 41.5%, to 6.2% of 1995 net sales, from 10.6% of 1994 net sales.
Interest income for 1994 included Lit. 2,976 million ($1,874,000) of imputed
interest on the final installment of Lit. 27,000 million due from Fiat Auto
S.p.A. in connection with the 1993 sale of Maserati, which was received on
January 1, 1995. Following receipt, a portion of the Maserati proceeds were used
to finance losses in subsidiary operations.
INCOME TAXES. Because Italian companies are taxed in Italy on their
individual results and are not permitted to file consolidated returns, the
Company's Italian subsidiaries had income tax liabilities of Lit. 420 million
($264,000) despite operating losses from continuing operations of Lit. 6,110
million ($3,847,000).
FISCAL YEAR ENDED DECEMBER 31, 1994 COMPARED TO FISCAL YEAR ENDED DECEMBER
31, 1993
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER YEAR ENDED DECEMBER
31, 1994 31, 1993
-------------------- --------------------
<S> <C> <C> <C> <C>
LIRE M. LIRE M.
Net sales.............................................................. 51,994 100.0% 41,919 100.0%
Cost of sales.......................................................... (46,256) (89.0) (36,060) (86.0)
--------- ---------
5,738 11.0 5,859 14.0
Selling, general and administrative expenses........................... (10,818) (20.8) (12,439) (29.7)
--------- ---------
Operating loss......................................................... (5,080) (9.8) (6,580) (15.7)
Other income/(expense), net............................................ 990 1.9 1,117 2.7
Interest expense....................................................... (3,874) (7.5) (8,033) (19.2)
Interest income........................................................ 5,536 10.6 6,772 16.2
--------- ---------
Loss before income taxes and minority interests........................ (2,428) (4.7) (6,724) (16.0)
Income taxes........................................................... (39) (0.1) (12) (0.0)
--------- ---------
Loss before minority interests......................................... (2,467) (4.7) (6,736) (16.1)
Minority interests..................................................... (810) (1.6) -- --
--------- ---------
Loss from continuing operations........................................ (3,277) (6.3%) (6,736) (16.1%)
Discontinued operations................................................ -- -- 160,233
--------- ---------
Net loss............................................................... (3,277) (6,736)
--------- ---------
--------- ---------
</TABLE>
NET SALES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994 YEAR ENDED DECEMBER 31, 1993
----------------------------- -----------------------------
<S> <C> <C>
LIRE M. LIRE M.
Motorcycles....................... 48,849 37,484
Hotel Operations.................. 1,073 1,039
Corporate and Other............... 2,305 3,396
Intersegment eliminations......... (233) --
------ ------
51,994 41,919
</TABLE>
28
<PAGE>
OVERALL. Net sales increased 24% in 1994 over 1993 principally as a result
of improvements in operations of Moto Guzzi. Following the disposition of
Maserati, Moto Guzzi constituted the only significant operating subsidiary of
the Company. Net sales of Moto Guzzi constituted 94% of consolidated net sales
in 1994 and 89.4% of consolidated net sales from continuing operations in 1993.
The Company sold its remaining 51% equity interest in its former Maserati S.p.A.
subsidiary to Fiat Auto S.p.A. in 1993.
MOTO GUZZI. Unit sales increased at Moto Guzzi by 28% over 1993's unit
sales, while net sales of motorcycles increased 24% over the prior year. Net of
sales of spare parts by Moto Guzzi to Centro Ricambi, net sales of motorcycles
and spare parts to unaffiliated customers increased in 1995 over 1994 by 35.8%,
to Lit. 40,714 million, and 8.5%, to Lit. 8,135 million, respectively.
COST OF SALES AND MARGINS. Overall gross profits were essentially unchanged
in 1994 compared to 1993, although margins declined to 11% of net sales from 14%
of net sales. A change in the estimate in 1993 for obsolescence reserves was
partially offset by higher margins resulting from the reversal of inventory
reserves on Maserati spare parts.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses declined Lit. 1,621 million, or 13%, from 1993 levels.
The decline was due to new operating efficiencies at Moto Guzzi and to the
allocation of certain sales and administrative staff to production costs.
Expenses in the Company's other areas of operations were essentially unchanged
over the two years.
OPERATING LOSS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, 1994 YEAR ENDED DECEMBER 31, 1993
----------------------------- -----------------------------
<S> <C> <C>
Motorcycles....................... (632) (863)
Hotel Operations.................. (164) (210)
Corporate and Other............... (5,034) (6,052)
Intersegment eliminations......... 750 545
------ ------
(5,080) (6,580)
</TABLE>
Operating loss declined by Lit. 1,500 million, or 22.8%, in 1994 compared to
1993 due to reduced corporate expenses and to the improved results of Moto
Guzzi. As a percentage of sales, operating loss declined by 37.6%, to 9.8% of
1994 net sales, compared to 15.7% of 1993 net sales. Operating loss at Moto
Guzzi declined by Lit. 231 million, or 26.8%, in 1994 over 1993, to Lit. 632
million from Lit. 863 million, due principally to the operating efficiencies
implemented by T.I.M.
OTHER INCOME. Other income declined in 1994 to Lit. 990 million from Lit.
1,117 million in 1993 because 1993 was favorably affected by a currency exchange
gain of Lit. 786 million, whereas 1994 was negatively affected by currency
exchange losses.
INTEREST EXPENSE. Interest expenses declined 52% in 1994 compared to 1993
due to lower outstanding debt as a result of the application of a portion of the
proceeds of the sale of Maserati to the retirement of debt. Interest Income.
Interest income declined by Lit. 1,236 million, or 18.3%, in 1994 compared to
1993 as a result of the application of a portion of the proceeds of the sale of
Maserati to a reduction in short-term bank debt outstanding.
LIQUIDITY AND CAPITAL RESOURCES
WORKING CAPITAL.
Finished goods and work-in-progress inventories at September 30, 1996
increased approximately Lit. 9,501 million ($6,238,000) from year-end 1995, as a
result principally of the request of certain public administration customers of
Moto Guzzi to defer delivery of completed motorcycles until the fourth quarter
of 1996, coupled with production interruptions in the third quarter of 1996 due
to delays in the
29
<PAGE>
receipt by Moto Guzzi of certain outsourced components. Inventories also
increased as a result of ordinary seasonality, and from the expansion of Moto
Guzzi's operations.
The buildup of inventory at Moto Guzzi was financed by an increase in
short-term bank borrowings of approximately Lit. 9,663 million ($6,345,000). The
increase was largely offset by a comparable decrease in other current
liabilities due to a combination of reductions in accounts payable and in real
estate-related and other bank indebtedness from a variety of causes. Moto Guzzi
largely utilized short-term bank borrowings to make principal payments on
long-term indebtedness. See also "Investing Activities," below.
The increase in inventories was partially offset by a reduction in trade
receivables resulting from lower third quarter 1996 sales and improved
collections. Receivables nevertheless remained at a high level at September 30,
1996 as a result of 19% value added taxes included in receivables for domestic
(Italian) sales and the normal practice that payments due at the end of the
month are cleared by the banks in the early days of the following month.
Accounts receivable do not generally have a significant effect on liquidity
because Moto Guzzi has access to short-term advances from banks, secured by
trade receivables. At November 30, 1996, total credit facilities amounted to
Lit. 37,781 million ($24,807,000). Significant production shortfalls, such as
occurred in August 1996, however, have the effect of reducing the Company's
ability to draw down on its credit facilities, and, as a result, to cover
temporary cash requirements, in October 1996 Moto Guzzi opened unsecured credit
lines in Italy of Lit. 1,000 million backed by letters issued by the Company
acknowledging ownership of Moto Guzzi.
Moto Guzzi used a combination of short-term financing and finance leasing
for an aggregate of Lit. 3,863 million ($2,536,000) in fixed asset expenditures,
in anticipation of its receipt of capital from the Moto Guzzi Financing and of
capital following the closing of this Offering. See "Use of Proceeds."
Moto Guzzi has been advised that Italian government subsidies have been
approved for approximately Lit. 700 million in cash grants and Lit. 1,200
million in loans in respect of research and development programs implemented
through 1995. None of such subsidies were received prior to September 30, 1996;
however, the Company subsequently received approximately Lit. 1,600 million of
such subsidies.
INVESTING ACTIVITIES. In June 1996, the Company sold its 66.7% interest in
Immobiliare Broseta S.r.l. to Domer S.r.l., a 25%-owned affiliate of the
Company. The sale has removed Lit. 12,200 million of real estate assets and Lit.
5,049 million of short-term real estate loans from the balance sheet as well as
minority interests of Lit. 2,354 million ($1,547,000). The balance due from
Domer, representing notes payable of Lit. 4,708 million (as described in Note 2
to the Company's Unaudited Consolidated Financial Statements) is the principal
reason for the increase in related party receivables since December 31, 1995,
combined with an advance of $1,000,000 (Lit. 1,523 million) made to The Carey
Winston Company in accordance with an agreement dated August 14, 1996 to
purchase that company. See Note 4 to the Company's Unaudited Consolidated
Condensed Financial Statements. See also "Business--Commercial Real Estate
Development Segment" and "Business--Recent Transactions--Proposed Carey Winston
Acquisition."
In the third quarter of 1996, the Company sold a property in Baltimore,
Maryland, for approximately $1,100,000, and excess machinery at L.I.T.A. for
approximately Lit. 241 million ($158,000).
FINANCING ACTIVITIES. A tax receivable of approximately Lit. 5,250 million
($3,453,000) was received in the first quarter of 1996. Most of the proceeds
were invested in marketable securities. A further amount of approximately Lit.
800 million ($525,000) was received in the third quarter of 1996.
Repayments of principal due on loans collateralized by the property at
Cologne of Lit. 3,611 million ($2,371,000) have been financed by decreases in
investments. Other principal loan payments, mainly by Moto Guzzi, have been
financed from operations and bank credit lines. If the Cologne property is not
sold nor the related debt refinanced, the Company estimates that cash outflows
for the real estate segment for principal and interest repayment on the loan,
net of rental income received, will total approximately Lit. 4,800 million in
1997. The approximately Lit. 4,700 million principal balance of the loan
relating to
30
<PAGE>
Cologne will be due in installments in 1998 and 1999. See "Risk Factors--Capital
Needs--Repayment of Real Estate Loans."
EVENTS SUBSEQUENT TO SEPTEMBER 30, 1996.
STOCK REPURCHASE PROGRAM. The Company completed its stock repurchase
program on October 23, 1996. The program was initiated to accommodate a number
of shareholders who held the view that the Company, following the sale of the
Maserati business in 1993, was no longer engaged in the business activity which
had initially led them to invest in the Company's shares. The Company
repurchased 761,995 shares for a total amount of $7,478,657.58 (Lit. 11,390
million) in cash and $1,863,401.12 (Lit. 2,838 million) in the form of two-year
non-negotiable promissory notes, bearing interest at 8% per annum.
MOTO GUZZI FINANCING. The Company's newly-formed subsidiary, Moto Guzzi
Corp., acquired all of the Company's equity interest in Moto Guzzi and in Moto
America, 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 $5,300,000 for Moto Guzzi Corp. net of expenses.
The bulk of the proceeds were used to commence needed repairs and rehabilitation
of production equipment at Moto Guzzi.
REPURCHASE OF SHARES FROM FINPROGETTI. On November 7, 1996 the Company
entered into two agreements with Finprogetti S.p.A. to resolve certain open
matters deriving from the acquisition of the majority of Finprogetti's operating
subsidiaries in July 1995. A balance due by Finprogetti of Lit. 763 million
($501,000) was settled by the Company repurchasing 46,000 shares at a value of
Lit. 16,587 per share ($10.89 per share). Separately, Finprogetti S.p.A. also
agreed to accept responsibility for a claim which was successfully brought
against one of the subsidiaries acquired from Finprogetti for Lit. 2,120
million. In accordance with terms of the Company's agreement with Finprogetti,
the Company would have paid such claim and received in compensation 105,440 of
the shares issued to Finprogetti in July 1995. The Company and Finprogetti
agreed that Finprogetti would assume the responsibility for payments resulting
from the claim, which are payable in installments through June 1998, and that
the Company would, on the request of Finprogetti, repurchase shares for cash at
the dates and in the amounts of each installment payment. Pursuant to this
agreement, the Company is obligated to repurchase shares, at Finprogetti's
request, for Lit. 900 million in 1997, and Lit. 570 million in 1998.
FUTURE LIQUIDITY NEEDS
The net proceeds of the Moto Guzzi Financing, and the expected net proceeds
of this Offering, will not be sufficient to complete the needed rehabilitation
and expansion program at Moto Guzzi. Further, the Company contemplates
conducting a public offering of Moto Guzzi Corp. securities on or before June
30, 1998 to provide additional capital that the Company expects will be needed
by Moto Guzzi. No assurance can be given, however, that such an offering will be
made on acceptable terms or at all by such date. See "Risk Factors--Possible
Loss of Control Over Principal Operating Subsidiary." The sales growth which
Moto Guzzi hopes to achieve, in consequence of the application of proceeds of
the Moto Guzzi Financing and of this Offering, is expected to provide additional
capital to finance Moto Guzzi's rehabilitation and expansion program.
If needed sources of capital are not available when needed, the Company may
have to curtail its planned rehabilitation and expansion program for Moto Guzzi
and decline opportunities for future investments.
31
<PAGE>
BUSINESS
OVERVIEW
The Company owns Moto Guzzi, an Italian manufacturer of luxury and
high-performance motorcycles, and L.I.T.A., an Italian manufacturer of welded
steel tubes used principally in the automobile and furniture industries, and
provides temporary management and capital and merchant banking services to
troubled businesses located primarily in Italy.
In connection with the Company's temporary management services, the Company
earns fees from its management engagements (including the potential for
negotiated bonuses in the form of cash or equity for achieving agreed upon
results), and obtains the opportunity to make minority or controlling equity
investments, alone or with other strategic or financial investors, in managed
Portfolio Companies. The Company plans to realize income from (i) the operations
of wholly or majority owned Portfolio Companies and (ii) the disposition of its
equity interests in the Portfolio Companies and in managed companies in which it
owns minority interests at enhanced values resulting from T.I.M.'s rendering of
management services to these companies.
Until 1993, the Company was primarily in the business of luxury automobile
manufacture through its former Maserati S.p.A. subsidiary, and secondarily in
the motorcycle business through Moto Guzzi. In 1993, after the Maserati sale,
the Company's only operating subsidiary was Moto Guzzi, which the Company had
acquired in 1972. At that time, Moto Guzzi was a manufacturer of medium and high
priced motorcycles which for years had been both unprofitable and
undercapitalized. The Company's Board of Directors was prepared to consider a
capital investment by or joint venture with a third party, the sale of its
interest in Moto Guzzi, or some other form of business combination to repair
Moto Guzzi's capital deficiencies and financial condition.
When those efforts proved unsuccessful, the Company, in May 1994, engaged
the predecessor of T.I.M. to provide Moto Guzzi with critically needed temporary
management in order to staunch losses and to design a capital plan for future
growth or sale of the subsidiary. Management selected by T.I.M. continues to
operate Moto Guzzi. Under T.I.M.'s direction, Moto Guzzi increased production
and sales, reduced costs, and achieved, in 1995, nearly break-even results on an
operating basis. Moto Guzzi today manufactures a high priced line of motorcycles
under the trademark "Moto Guzzi-Registered Trademark-". Moto Guzzi motorcycles
vary in engine displacement from 350cc to 1,100cc, although the subsidiary has
determined to focus its future sales and development efforts on its larger
motorcycles, having engines of 750cc or greater.
L.I.T.A. was acquired in July 1995 and represents the Company's first
merchant banking investment by the Company in a client arising out of a T.I.M.
engagement. T.I.M. had been engaged by L.I.T.A.'s prior owners in 1994 to manage
the company through an operational crisis and to prepare the company for sale.
Since its acquisition by the Company, L.I.T.A. has expanded its customer base
and has initiated an export program, though at present export sales are not
material to its operations. L.I.T.A. produces welded steel tubes.
T.I.M.
T.I.M. is a wholly-owned subsidiary of the Company, having been acquired in
1995 as part of the purchase of substantially all of the operating subsidiaries
of Finprogetti (see "Recent Transactions-- Finprogetti Acquisition"). While the
operations of T.I.M. to date have not been material to the consolidated results
of operations of the Company, the acquisition of T.I.M. was an essential
component of the Company's strategic redirection, as it permits the Company to
combine T.I.M.'s skill and knowledge in providing capable management to troubled
businesses with the Company's abilities in analyzing capital requirements and
transaction structuring, and to apply such capabilities to investment
opportunities arising out of T.I.M.'s management engagement.
32
<PAGE>
T.I.M. provides temporary management for companies facing special problems
through a network of experienced and qualified managers which it makes available
to operate all or strategic portions of the businesses of its clients. Managers
are selected based on a client's specific needs and are supported by T.I.M.'s
management and administrative resources. T.I.M. analyzes the client's businesses
and develops strategic business plans based on the client's objectives which,
upon agreement with the client, define the goals and standards which T.I.M.'s
performance and incentive compensation will be measured at the end of each
engagement. A significant component of T.I.M.'s compensation is performance
related.
A typical T.I.M. engagement requires the appointment of a T.I.M. manager as
temporary Chief Executive Officer, or, less frequently, as Chief Financial
Officer, Chief Operating Officer or as an executive responsible for a specific
functional team or project. The engagement might require the adoption of a
fundamental corporate restructuring, a sale or other divestiture of assets, the
reorganization of marketing or distribution functions, a financial
restructuring, or the management of technological innovation. T.I.M.'s strategic
plans usually focus on reestablishing profitability and increasing net worth,
achieving productivity growth and managing staff reductions, accelerating the
decision-making process, and bridging cultural gaps which may have inhibited
growth. Engagements are typically of a duration of 12 to 24 months.
T.I.M. is compensated for its services by receiving a monthly fee. It also
negotiates a success fee based on achievement of agreed-upon results. T.I.M.
engagements normally continue for one to two years, beginning with an analysis
phase and continuing with a business plan implementation and review phase.
Among the management projects on which T.I.M. had been engaged recently are
the following:
- to plan for the complete operational and financial restructuring of a
frozen fish and vegetable processing and distribution company with sales
of Lit. 180,000 million ($118,000,000) which had experienced operating
losses and an inability to meet the terms of a plan of debt restructuring.
- to privatize a state-owned manufacturer of steel products with 1,000
employees and sales of Lit. 476,000 million ($310,000,000).
- to manage a wine producer operating in liquidation and with sales of Lit.
39,500 million ($26,000,000).
T.I.M.'s current engagements are for a company which manufactures tire
mounting and small welding machinery, a manufacturer of raw materials for
flexible packaging systems, a manufacturer of sewing machines and compressors.
In November 1993, T.I.M.'s management services were engaged by Finprogetti,
itself then a financially troubled, privately held Italian corporation, the
capital of which was invested in real estate and financial services ventures.
Albino Collini, T.I.M.'s founder, became Finprogetti's managing director in
November 1993. Finprogetti acquired a 55% equity interest in T.I.M. in November
1994 by buying shares from Sig. Collini.
SALES AND MARKETING. T.I.M. seeks new management engagements through
marketing efforts directed at financial and legal professionals, and
entrepreneurs, in Italy and elsewhere in Europe. The subsidiary conducts
seminars and symposia and makes direct mail and telephone solicitations.
The ability of T.I.M. to generate management services income and investment
opportunities for the Company is in part dependent on the availability of and
ability to attract suitably qualified managers to collaborate with T.I.M. The
availability of suitably qualified managers will depend on, among other factors,
the general economy in Italy and demand for managers, the actions of companies
that seek to compete with T.I.M. or offer alternative employment options to such
managers, and the ability of T.I.M. to negotiate attractive engagements and
attractive engagement terms for potential manager candidates.
The ability of the Company to achieve its broader long-term strategic goal
of investing in troubled companies and enhancing their values will depend in
large measure on the ability of T.I.M. to provide its
33
<PAGE>
services to troubled businesses in need of management intervention. While T.I.M.
is not expected to earn substantial revenue or profits from such temporary
management engagements in relation to the Company's consolidated revenues and
earnings, such engagements are expected to provide a significant source of
entrepreneurial investment opportunities for the Company, whether through
acquisition or merchant banking. However, there can be no assurance that
T.I.M.'s management engagements will prove to be a sufficient source of quality
investment opportunities.
MOTO GUZZI
OVERVIEW. The motorcycle segment continued to dominate the Company's
reported consolidated results of operations in 1995, accounting through the
third quarter of 1996 for approximately 77.6% of the Company's consolidated net
sales. Moto Guzzi, the Company's 100%-owned motorcycle manufacturing subsidiary
through its majority-owned Moto Guzzi Corp. subsidiary, was acquired by the
Company in 1972. For 75 years, Moto Guzzi was a manufacturer of medium and high
priced motorcycles. For many years it had been both unprofitable and
undercapitalized.
By 1994, after the Company had sold its majority interest in Maserati and
turned its attention to Moto Guzzi's operational and financial problems, the
Company was prepared to consider a capital investment by or joint venture with a
third party, the sale of its interest in Moto Guzzi, or some other form of
business combination to repair Moto Guzzi's capital deficiencies and financial
condition.
In 1994, following the engagement of T.I.M. to improve manufacturing and
sales results, Moto Guzzi's overall unit sales improved by 28% and production of
the Company's larger motorcycles (having engine displacements of at least 750cc)
expanded to 3,048 units from 2,175 units in 1993. Unit sales grew approximately
23% in 1995, and in 1996, overall unit sales increased by a further 16.4% over
1995 to 6,050 units, of which 5,548 had engine displacements of 750cc or
greater, compared to 4,690 in 1995. A portion of the Offering proceeds will be
used to rehabilitate old production machinery and equipment to help Moto Guzzi
increase production of these larger units.
INDUSTRY GENERALLY Historically, the motorcycle had been an "entry level"
form of transport which has been supplanted by the automobile. Over recent
years, the industry has become established as a recognized leisure industry in
developed markets and Moto Guzzi motorcycles, being larger and more expensive,
are principally targeted at the leisure segment of the vehicular industry. The
Company believes that the recent recognition of motorcycling as an acceptable
leisure activity is one of the major factors behind the steady growth in Moto
Guzzi's market segment over the last two years. The Company believes that this
trend will continue in the short and medium term and that its markets will not
be subject to violent demand changes, although no assurance can be provided that
this will be the case.
The Italian market today remains dominated by large, well-financed Japanese
manufacturers. A number of Italian and foreign manufacturers, principally
Cagiva, Honda, BMW, Yamaha, Kawasaki and Suzuki, sell their products in the
Italian market. In 1996, through November 30, the latest period for which
34
<PAGE>
data from the Ministry of Transportation is available, the Italian market shares
of the principal competitors of Moto Guzzi on a unit basis were as follows:
<TABLE>
<CAPTION>
ALL LARGE
MOTORCYCLES MOTORCYCLES
--------------- ---------------
<S> <C> <C>
Honda............................................................... 26.8% 18.0%
Yamaha.............................................................. 16.5% 14.2%
Aprilia............................................................. 10.2% -
Suzuki.............................................................. 9.8% 6.8%
BMW................................................................. 7.7% 19.7%
Kawasaki............................................................ 7.7% 10.4%
Ducati.............................................................. 4.6% 8.8%
Harley Davidson..................................................... 4.1% 15.7%
Cagiva.............................................................. 3.8% -
Moto Guzzi.......................................................... 3.1% 3.2%
Triumph............................................................. - 2.2%
</TABLE>
MANUFACTURING. Moto Guzzi today manufactures a high priced line of
motorcycles, and distributes spare parts, under the trademark "Moto
Guzzi-Registered Trademark-." Moto Guzzi motorcycles vary in engine displacement
from 350cc to 1,100cc, although Moto Guzzi has made a strategic decision to
concentrate development and sales efforts on its largest motorcycles, having
engines of 750cc or larger. Moto Guzzi spare parts are distributed through
Centro Ricambi, a 100% owned subsidiary of Moto Guzzi. Moto Guzzi had also
manufactured and sold smaller and lower priced cycles under the "Benelli"
trademark, but ceased production of these vehicles in 1993.
All motorcycle manufacturing is conducted at a factory in Mandello del
Lario, Italy. Moto Guzzi manufactures certain power train components, acquires
certain other components from outside suppliers, and performs finishing work and
assembly into motorcycle bodies. Until 1994, Moto Guzzi internally produced a
majority of the components of its motorcycles. As a result of its decision to
increase outsourcing to increase production capacity, Moto Guzzi produced fewer
than 40% of all motorcycle components in 1996.
Because much of the production machinery at Moto Guzzi's facility is aged
and in need of extensive modification, improvement or replacement, the Company
expects that, over the next four years, significant additional capital will be
required to complete the required overhaul. While anticipated increases in
sales, if any, during that period would provide some of the needed capital,
anticipated internally generated cash, and currently available bank financing,
will not in the aggregate be sufficient to enable Moto Guzzi to increase
production and sales rapidly enough to generate the remaining needed capital.
SEASONAL NATURE OF BUSINESS. Moto Guzzi's business has been turned around
to the point that again it is affected by seasonal factors. Retail market demand
is highest in the spring and early summer, whereas most sales to the Italian
government generally take place in the last quarter of the year. Moto Guzzi,
like most Italian companies, traditionally shuts down production in August of
each year and traditionally also has reduced production over the Christmas
holidays and in the period immediately following, while inventory is being
taken. Moto Guzzi is now seeking to reduce the production slowdown during this
December-January period as part of its effort to increase overall production
levels by not suspending production during the period of physical inventory
taking.
COMPLIANCE WITH GOVERNMENTAL REGULATIONS. Moto Guzzi, along with other
motorcycle manufacturers, incurs substantial costs in designing and testing
products to comply with safety and emissions requirements. Such standards have
added, and will continue to add, substantially to the price of the vehicles
while competitive pressures have kept export prices lower than domestic Italian
sales prices.
35
<PAGE>
Motorcycles sold in the United States, the European Economic Community and
all other countries are subject to environmental emissions regulations and
safety standards with which Moto Guzzi must comply in order to expand its
presence in such countries. All motorcycles produced for sale are manufactured
with the intent to comply with all applicable safety standards. All 1997 Moto
Guzzi models comply with all emission standards applicable in all countries in
which they are sold. There can be no assurance, however, that Moto Guzzi will be
able to cost effectively comply with any emissions or safety standards which the
governments may hereafter adopt (though the design of new products seeks to
conform with such standards as are believed likely to be introduced), in which
event, Moto Guzzi may be unable to achieve the market growth that it desires.
Moto Guzzi is subject to a number of governmental regulations relating to
the use, storage, discharge and disposal of minerals and alloys used in their
manufacturing processes and to the safety standards of its facilities and
processes. Although neither the Company nor Moto Guzzi has been subject to
material environmental or safety claims in the past and the Company believes
that the activities of its operating subsidiaries conform in all material
respects to presently applicable environmental and safety regulations, claims or
the failure to comply with present or future regulations could result in the
assessment of damages or imposition of fines against the Company, suspension of
production or cessation of certain activities. New regulations could require the
Company to acquire costly equipment or incur other significant expenses that
could have an adverse effect on the results of operations. Any failure by the
Company to control the use of, or adequately restrict the discharge of hazardous
substances or comply with safety requirements and legislation could subject it
to future liabilities.
BACKLOGS. On January 1, 1996, Moto Guzzi had open orders for its entire
1996 production capacity. Orders for 1997 delivery also exceed production
capacity and the Company expects it will again be unable fully to satisfy demand
for its motorcycles in the current year. Such orders are subject to cancellation
without penalty.
RAW MATERIALS AND COMPONENTS. There are multiple reliable sources for most
motorcycle raw materials, including aluminum for power train components.
However, certain significant components are available from only one or two
sources. In late November 1996, two of Moto Guzzi's suppliers were unable to
make timely deliveries of needed components due to production problems incurred
by such suppliers. All such delays adversely affect motorcycle production.
The cost of imported raw materials is affected by variations in currency
exchange rates. In 1994, the value of the Italian Lira had declined relative to
the currency of Italy's primary trading partners which resulted simultaneously
in an increase in the cost of imported raw materials and in an improvement in
the price competitiveness of Italian-made finished goods, such as Moto Guzzi's
motorcycles. In 1995 and 1996, as a result of greater stability, currency
exchange rates had a less significant effect on costs and price competitiveness.
RESEARCH AND DEVELOPMENT AND CONTINUING ENGINEERING. Moto Guzzi is
continuously engaged in product improvement and development. Aggregate 1996
research and development expenditures by Moto Guzzi were approximately Lit.
1,500 million ($1,033,000) compared to Lit. 861 million in 1995, and Lit. 197
million in 1994. Of 1996 expenditures, approximately Lit. 809 million was in
respect of development of models whose production is planned to commence in
1997. These on-going programs currently relate to developing more powerful
two-cylinder air-cooled engines with improved performance and durability
characteristics, superior braking systems, suspensions, frames, transmissions
and other components applicable to two-wheeled vehicles.
SALES AND MARKETING. Moto Guzzi primarily markets its products through
advertising in trade publications, participation in promotional events and
fairs, attendance at trade shows and from editorial coverage in trade and
general circulation press. All sales are invoiced in Italian lire except sales
to the United States which are invoiced in U.S. Dollars. Prices are customarily
reviewed and are increased to
36
<PAGE>
cover increases in production costs at periodic intervals and in light of
prevailing exchange rates. Italian prices for motorcycles traditionally have
been higher than export prices. In 1996, Moto Guzzi increased prices of its
various models twice, with such increases aggregating approximately 3% on
average for domestic sales and for export sales invoiced both in lire and in
dollars. Export sales continued to reflect lower margins than domestic Italian
sales.
Moto Guzzi is not affected by any unusual industry practices relating to
returns of merchandise or extended payment. It is obliged to maintain 10 years'
inventory of spare parts for all motorcycles sold to Italian government agencies
and, in common with many other motor vehicle manufacturers, maintains
significant spare parts inventories for commercial reasons.
DISTRIBUTION. Moto Guzzi maintains a distribution network throughout Italy
of over 150 independent dealers. No single Italian dealer accounted for more
than 5% of the sales of Moto Guzzi in 1996. The Italian dealers who distribute
Moto Guzzi motorcycles generally handle other brands as well.
In 1996, a single importer-distributor acted as exclusive
importer-distributor for Moto Guzzi in each of Argentina, Australia, Austria,
Belgium, the Czech Republic, Denmark, Finland, France, Germany, Greece, Holland,
Japan, Luxembourg, Malaysia, Malta, New Zealand, Norway, Portugal, Singapore,
Spain, Sweden, Switzerland, the United Kingdom, and the United States.
Moto America is Moto Guzzi's exclusive importer-distributor in the United
States. Until 1996, when it was acquired by TRG and later transferred to Moto
Guzzi Corp., Moto America was an independent business.
In November 1996, Moto Guzzi replaced the independent French
import-distributor with a newly created wholly-owned subsidiary of Moto Guzzi.
Moto Guzzi also owns a 25% equity interest in MGI GmbH, a new German
corporation which became the exclusive importer-distributor of Moto Guzzi
motorcycles and spare parts on January 1, 1997. Moto Guzzi has the right to
acquire up to a total of 90% of the equity interest within four years. Until
December 1996, Moto Guzzi also owned a 25% equity interest in A+G Motorrad GmbH
("A+G"), a German corporation, the majority of the shares of which is owned by
Aprilia S.p.A., another Italian manufacturer of motorcycles with small
displacement engines. A+G distributed the motorcycles of both Moto Guzzi and
Aprilia in the German market in 1996, but was replaced in 1997 by MGI GmbH.
Moto Guzzi provides support to its worldwide dealer network by, among other
things, operating a technical training and support facility at Mandello del
Lario. All dealers are required to attend training courses at the inception of
their relationship, and periodically thereafter.
Set forth below is a chart illustrating percentage of motorcycle sales
revenues attributable to various geographic areas in the three most recent
fiscal years. Sales outside Italy in 1996 were Lit. 40,927 million
($26,873,000), 63% of total sales.
MOTO GUZZI SALES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-----------------------------------
<S> <C> <C> <C>
GEOGRAPHIC AREAS 1996 1995 1994
- --------------------------------------------------------------------------------------------- --------- ----- -----
Italy........................................................................................ 37.3% 35% 38%
Europe (other than Italy).................................................................... 47.9% 49% 51%
United States................................................................................ 7.3% 6% 5%
Elsewhere.................................................................................... 7.5% 10% 6%
</TABLE>
COMPETITION. The sale of motorcycles is a highly competitive business, with
competition typically coming from all powered passenger vehicles, as well as
motorcycles. The overall market in Italy continued
37
<PAGE>
to contract slightly in 1996, through November 30th, the latest date for which
data is available, with new vehicle registrations in Italy declining by
approximately 2,300 units, or 4.4%, compared to the same period in 1995. The
market in Italy for larger motorcycles, in which Moto Guzzi is concentrating its
sales and production efforts, increased by 19.4% in the January to November
period in 1996 compared to the same period in 1995, according to the Italian
Ministry of Transportation. Moto Guzzi maintains an extremely small share of the
world-wide motorcycle market, which is dominated by many of the same
manufacturers that predominate in Italy. Many of such companies are far larger
and better capitalized, with greater name recognition. Moto Guzzi competes
principally through such intangible qualities as performance, reputation and
quality of manufacture, areas in which its competitors also excel. See "Risk
Factors--Competition-- Moto Guzzi".
PRODUCT LIABILITY. Moto Guzzi is engaged in a business which exposes it to
possible claims for personal injury from the use of its products. Moto Guzzi
maintains liability insurance with a per-occurrence limit of Lit. 2,000 million.
Although no claims have been made against the subsidiary in excess of insurance
coverage, there can be no assurance that such claims will not arise in the
future or that the insurance coverage will be sufficient to pay such claims. A
partially or completely uninsured claim, if successful and of significant
magnitude, could have a material adverse effect on the Company.
PATENTS AND TRADEMARKS. Except as described below, the business of Moto
Guzzi is not and has not been in any material respect dependent upon patents,
licenses, franchises or concessions. The component parts of motorcycles are
manufactured pursuant to well known techniques and include components which are
not unique to its products, although some of these components are specially
styled and designed. Management believes that the registered trade name "Moto
Guzzi-Registered Trademark-" and the related trademarks are well known and
highly regarded throughout the world, and appropriate steps have been taken to
protect Moto Guzzi's rights in these trade names and trademarks in 67 countries,
including those countries representing significant markets.
EMPLOYEES AND EMPLOYEE RELATIONS. Relations with Moto Guzzi employees are
considered by management to be excellent. At December 31, 1996, Moto Guzzi had
344 employees, compared to 338 at December 31, 1995, of whom approximately 72%
were engaged in factory production and the balance in various supervisory,
sales, purchasing, administrative, design, engineering and clerical activities.
Moto Guzzi workers each received bonuses aggregating Lit. 377,000 ($247) for
reaching 1996 production targets. Additionally, because the national metal
workers union contract is still under negotiation, it is possible, based on past
practice, that a resolution will result in a one-time payment which will be made
to workers in respect of periods prior to the date of the new agreement.
Management cannot currently predict the scope of such payment or its effect on
overall 1996 labor costs. An increase in Moto Guzzi's use of outsourced
components reduced overtime hours to 7.7% of total hours in 1996 compared to
9.6% in 1995. At December 31, 1996, the Company's Centro Ricambi parts
subsidiary had 14 employees who are engaged in various warehouse and shipping,
purchasing, administrative and clerical activities.
Moto Guzzi was subjected to strikes totaling 2-1/2 production days in 1996,
all concerning the negotiation of a national contract for all workers in metal
working industries. Moto Guzzi was not subjected to any local work stoppages or
strikes in 1996. The national strikes resulted in the loss of approximately four
production days because of additional time needed to restart production after
each strike. Moto Guzzi's "company" contract was renegotiated early in 1996. The
"national" contract is currently being negotiated. The terms of the
renegotiation are not expected to have a significant impact on labor costs in
1997 above the overall inflation rate.
Under Italian law, persons in a company acquire the right to severance pay
based upon salary and years of service. At September 30, 1996, Moto Guzzi was
obligated to pay employees an aggregate of Lit. 7,418 million ($4,871,000), and
Lit. 7,301 million at December 31, 1995. See Note 2 of Notes to Consolidated
Financial Statements of the Company.
38
<PAGE>
L.I.T.A.
BACKGROUND. On July 25, 1995, in the first application of its new business
plan following its acquisition of Finprogetti's operating subsidiaries, the
Company, through one of its Italian subsidiaries, acquired L.I.T.A. T.I.M. had
been retained to manage L.I.T.A. after a material decline in L.I.T.A.'s
operations, and to oversee its sale to a third party to be identified by T.I.M.
The physical and operational presence of T.I.M. at L.I.T.A., its ability to
examine and comprehensively analyze the managed company's operational and
capital needs and T.I.M.'s ability to help its client to meet its strategic
objective of selling L.I.T.A. represents an example of an investment opportunity
arising from T.I.M.'s management business. The stock of L.I.T.A. was acquired at
a cost of Lit. 615 million ($404,000), representing a discount of approximately
Lit. 1,600 million ($1,050,000) from the book value of L.I.T.A.'s assets Lit.
2,264 million ($1,487,000).
MANUFACTURING. L.I.T.A. manufactures plain and perforated welded specialty
steel tubes used principally in the automotive and furniture industries. The
subsidiary's 10,000 square meters factory in Torino has a two-shift production
capacity of approximately 15,000 tons. In 1996, following the installation of
T.I.M. management, L.I.T.A.'s production equaled 80% of capacity; in prior
years, however, production rarely reached 60% of capacity.
IMPACT OF CHANGING PRICES AND CURRENCY MOVEMENTS. Steel prices have a
material effect on the business of L.I.T.A. Finished product prices are affected
by the cost of steel; market and competitive pressures are such that selling
prices react quickly to changes in the price of steel. From January to June
1996, the prices of various qualities of steel used by L.I.T.A. decreased, on
average, by approximately 22%. Finished product selling prices fell in response
and margins were burdened by losses on inventories of steel. The negative effect
on margins over the first six months of 1996 has been estimated as approximately
Lit. 600 million. Steel prices stabilized in the fourth quarter of 1996. To the
extent permitted by competition, L.I.T.A. seeks to pass increased costs from
changing prices on to its customers by increasing selling prices.
Exchange rates historically did not have a significant effect on the
business of L.I.T.A., as export sales were not significant to overall sales.
However, as export sales are expected to increase in 1997 and thereafter,
L.I.T.A. will become more sensitive to exchange rates between Italy and the
countries of export.
PLANT AND MACHINERY. L.I.T.A.'s plant and machinery were acquired many
years ago. When the Company acquired L.I.T.A. in July 1995, the fair value of
the assets acquired was in excess of the price paid. This excess, in accordance
with generally accepted accounting principles, was applied to reduce the
carrying values of long-term assets and fixed assets. Depreciation expenses are
therefore significantly lower than if they were based on current prices. Plant
and machinery will be replaced over many years at higher costs with higher
depreciation charges which, in many cases, may be offset by technological
improvements.
RESEARCH AND DEVELOPMENT. Because L.I.T.A. manufactures according to a
well-known and relatively uncomplicated process, L.I.T.A.'s actual annual and
forecast research and development expenditure is approximately Lit. 150 million,
less than 1% of actual and projected revenues.
SALES AND MARKETING. L.I.T.A. distributes its products directly in all
countries except in the U.K., where it distributes through exclusive agents,
(which represents approximately 5% of net sales) and in certain regions of Italy
(which represent approximately 20% of net sales).
CUSTOMERS. L.I.T.A. has begun developing a market in the low-cost furniture
industry, which provides a steadier flow of production and demand than the
automotive industry. L.I.T.A. currently has a number of customers representing
between 5% and 9% of net sales. As a consequence of the current and planned
expansion of the business, including expansion of export sales and expansion in
markets other than the
39
<PAGE>
automobile market, it is expected that in the medium term the importance of any
single customer will decrease.
BACKLOGS. L.I.T.A. has no long-term contracts with customers and orders
typically reflect the requirements of customers for the following one to two
months. Its largest customer has placed a cancellable order for 1,200 tons of
exhaust tubing for 1997 delivery.
EXPORT SALES. L.I.T.A. did not have significant export sales prior to 1996.
In 1996, 90% of net sales were made in Italy, 7% elsewhere in Europe, and 3%
elsewhere in the world.
SUPPLIERS. There are multiple suppliers of the special clad and coated
steels used by L.I.T.A. L.I.T.A. does not have written long-term contracts with
such suppliers except in respect of a particular steel quality which is not
significant to net sales. L.I.T.A. is seeking to formalize its arrangements with
major suppliers to reduce the business risks associated with its planned
expansion and to reflect the fact that close collaboration with the steel
suppliers is required to ensure consistent quality and to shorten lead times for
significant change in supply levels, which currently can run from 12 to 18
months.
COMPETITION. L.I.T.A.'s principal competitors are principally larger
companies, many of them subsidiaries of Italian steel manufacturers, including
Profilmec, S.p.A., Ispadue S.p.A., Lombarda Tubi (a division of the Marcegaglia
Group) and ITAS, S.p.A. The size of these competitors and the support of their
parent companies enable them to compete aggressively in the market. L.I.T.A.
competes principally on quality, flexibility of service and timeliness of
delivery, factors which its competitors also seek to offer to the market.
L.I.T.A. is currently the leading supplier in Italy of aluminized steel tubes
for automotive exhaust systems. While automotive original equipment
manufacturers are increasing their usage of higher grade stainless steel, which
L.I.T.A. does not currently supply in material quantities, the automotive
aftermarket in Italy and elsewhere in Europe is increasing its purchases of
aluminized steel tubing as a cost-effective compromise between lower-grade cold
steel tubing and the higher priced stainless steel. Tubifici DiTermi S.p.A. is
the largest supplier of stainless steel exhaust tubing in Europe.
SEASONAL NATURE OF BUSINESS. L.I.T.A.'s operations historically have been
characterized by seasonal factors due to the company's dependence on the
automobile industry. Demand is lowest over the period from November to February
and is also significantly reduced in the traditional holiday month of August.
Since 1995, the Company has sought to reduce this seasonality by expanding its
markets in the furniture industry, which is less seasonal, but which is more
price sensitive and less profitable.
NUMBER OF EMPLOYEES. Labor relations with L.I.T.A.'s employees are
considered by management to be excellent. L.I.T.A. was not subjected to any
strikes or work stoppages in 1996. As of December 31, 1996 L.I.T.A. had 34
employees, of which 28 are engaged in production and 6 in management, sales and
administrative roles. At September 30, 1996, the amount of L.I.T.A.'s severance
pay obligation to employees was Lit. 856 million ($562,000).
COMPLIANCE WITH GOVERNMENTAL REGULATIONS. L.I.T.A. is subject to a number
of governmental regulations relating to the use, storage, discharge and disposal
of minerals and alloys used in its manufacturing processes and to the safety
standards of its facilities and processes. L.I.T.A. has not been the subject of
material environmental or safety claims in the past and its management believes
that L.I.T.A.'s activities conform in all respects to presently applicable
regulations. The anticipated costs of compliance with regulations are not
expected to be significant to L.I.T.A.'s operations.
COMMERCIAL REAL ESTATE DEVELOPMENT SEGMENT
The Company acquired, as part of the Finprogetti transaction, a real estate
portfolio which it will seek to liquidate at opportune times.
40
<PAGE>
Commercial property at Cologne, Italy, has a book value of Lit. 16,000
million ($10,505,000) and outstanding loans secured on the property aggregating
Lit. 10,935 million ($7,180,000) at September 30, 1996. The Cologne property is
approximately 22,000 square meters, 80% of which is currently rented to a
multinational company under an operating lease expiring in 1998. The remaining
space can only be commercially exploited after repairs to the existing
structure. The Company is seeking to sell this property and anticipates that, in
current market conditions, it will recover the book value of the property,
although there can be no assurance that such a recovery will eventuate.
In June 1996, the Company sold its 66.7% equity interest in Immobiliare
Broseta S.r.l. which owns industrial and commercial holdings and additional
surrounding land aggregating approximately 66,000 square meters in Bergamo,
Italy to its 25%-owned affiliate Domer S.r.l. The remaining 33.3% equity
interest in Immobiliare Broseta S.r.l. is owned by Interim S.p.A., a subsidiary
of Domer S.r.l. The Company had sought offers from third parties through an
independent broker and the sale price of Lit. 5,200 million offered by Domer
S.r.l. was the highest of the offers received. Domer S.r.l. issued a promissory
note for Lit. 1,800 million of the sale price, due December 31, 1996, which note
was subsequently extended for another year, bearing an interest rate equal to
the official Lira discount rate plus 3%. The balance due of Lit. 3,400 million
will be received from the sales of apartments which are being developed from the
Immobiliare Broseta S.r.l. property or on June 30, 1999, whichever is the
earlier. This amount of Lit. 3,400 million carries an interest rate of 6%,
payable bi-annually, and has been accounted for at its estimated net present
value of Lit. 2,908 million, applying a discount rate of 12%, considered to be a
fair market rate for similar notes receivable. The book value of the 66.7%
interest in Immobiliare Broseta S.r.l. was Lit. 4,708 million and no gain or
loss was recorded on the transaction.
The Company owns a minority interest in Interim S.p.A. (through a 25%
indirect interest in Domer S.r.l., which, in turn, owns 68.2% of Interim
S.p.A.). Interim S.p.A. is a property development company based in Brescia,
Italy which has several projects under active development. This investment had a
book value of Lit.1,630 million ($1,070,000) at September 30, 1996.
The Company owns an 80% interest in unimproved land aggregating 2,539,020
square meters near Cagliari (Sardinia), Italy which had a book value at
September 30, 1996 of Lit. 3,500 million ($2,298,000), net of reserves for risks
connected with the permitted use of the land and its development. An option held
by an unaffiliated third party to purchase the Company's interest in this land,
for an amount above book value, expired unexercised on June 30, 1996. The land
has development potential for tourism or residential purposes and the Company is
exploring its disposition.
The Company owns 100% of Pastorino S.r.l., which owns concession rights for
196 spaces in a municipal parking garage in Genoa, Italy. The book value of the
concession rights is Lit. 4,511 million ($3,001,000) at September 30, 1996. The
rights expire in the year 2041 and are being depreciated over the period from
acquisition to this date. The Company has sub-contracted management of the
parking spaces under a three-year contract and will consider disposition of the
concession rights upon the termination of this contract or sooner, depending on
market conditions. The interest in Pastorino is pledged as collateral for loans
relating to the Cologne property.
Unrelated to the real estate acquired from Finprogetti, the Company owned
surplus property remaining after the Maserati sale and the winding down of the
automobile spare parts operation. A parcel in Rome, Italy was sold in December
1996 for approximately Lit. 1,533 million ($1,000,000), and a parcel in
Baltimore, Maryland in July 1996 for approximately $1,100,000.
RECENT TRANSACTIONS
MOTO GUZZI FINANCING. The Company's newly-formed subsidiary, Moto Guzzi
Corp., acquired all of the equity interest of the Company in Moto Guzzi and in
Moto America, 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
41
<PAGE>
raised an aggregate of approximately $5,300,000 for Moto Guzzi Corp. net of
expenses. The bulk of the proceeds were used to commence needed repairs and
rehabilitation of production equipment at Moto Guzzi.
Moto Guzzi 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 million. 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 public 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. GKN acted as placement agent for the Moto Guzzi financing.
See "Underwriting."
STOCK REPURCHASE PROGRAM. The Company initiated a stock repurchase program
on September 25, 1996, which was completed on October 23, 1996. The program was
initiated to accommodate a number of shareholders who held the view that the
Company, following the sale of the Maserati business in 1993, was no longer
engaged in the business activity which had initially led them to invest in the
Company's shares. Two mutually exclusive alternative offers were made to
shareholders. The first offer was to purchase up to 80% of a shareholder's
common stock for a combination of cash and non-negotiable promissory notes
having a face value aggregating $12.26 per share (the "80% offer") and the
second offer was to purchase up to 50% of a shareholder's common stock for
$12.26 cash (the "50% offer"). Of the 4,742,865 then-issued shares of the
Company, shareholders representing 3,167,010 shares (66.8%) had agreed in
advance not to participate.
Of the remaining 1,575,855 shares, 506,359 were tendered under the 80% offer
and 255,636 under the 50% offer, all of which were accepted by the Company. In
consequence, the Company repurchased 761,995 shares for a total amount of
$7,478,657.58 (Lit. 11,390 million) in cash and $1,863,401.12 (Lit. 2,838
million) in the form of non-negotiable two-year promissory notes, bearing
interest at 8% per annum. An annual interest payment is due the first
anniversary of the notes (or October 23, 1997) principal and accrued interest is
due and payable on the second anniversary (or October 23, 1998).
FINPROGETTI ACQUISITION. Effective July 1, 1995, the Company acquired
substantially all of the operating subsidiaries of Finprogetti, including its
Italian real estate interests, its T.I.M. subsidiary, a leasing and factoring
company and certain Italian tax receivables aggregating Lit. 5,150 million
($3,381,000), in exchange for newly issued shares of the Company's Common Stock,
valued at Lit. 20,106.73 per share ($12.26 at the then-prevailing exchange
rate). As part of the transaction, Finprogetti committed to make itself or cause
others to make up to Lit. 15,000 million ($9,849,000) in purchases of additional
shares of Common Stock, at the same per-share price of Lit. 20,106.73. If less
than Lit. 15,000 million of shares were purchased, the acquisition consideration
would be adjusted. In total, 408,008 shares of Common Stock were purchased by
various Finprogetti shareholders and affiliates the ("Finprogetti Affiliate
Shareholders") for Lit. 8,204 million (approximately $5,000,000). Consequently,
the number of shares issued in the merger was adjusted to 1,922,652. Of these
170,343 shares are being held in escrow pending realization by the Company of
the tax receivable of Lit. 5,150 million that was included in the assets
acquired.
The total purchase price of Lit. 39,447 million reported in the balance
sheet to effect the Finprogetti Acquisition reflects Lit. 38,223 million (Lit.
16,400 per share; $10.00 per share) assigned to the 2,330,660 shares issued
(including the shares owned by the Finprogetti Affiliated Shareholders) plus
costs of Lit. 1,224 million incurred in connection with the acquisition. The
acquisition has been accounted for by the purchase method. Accordingly, the
purchase price has been allocated to the assets purchased and the
42
<PAGE>
liabilities assumed based on the fair values at the date of the acquisition. The
purchase price was allocated as follows:
<TABLE>
<CAPTION>
US$'000 LIRE M.
---------- ---------
<S> <C> <C>
Cash.................................................................... $ 5,166 8,204
Real estate interests................................................... 21,479 34,109
Concession rights over real estate...................................... 2,960 4,700
Less: related long-term debt............................................ (12,238) (19,431)
Trademark and other intangible assets................................... 3,148 5,000
Other assets and liabilities, net....................................... 3,355 5,329
Goodwill................................................................ 967 1,536
---------- ---------
$ 24,837 39,447
</TABLE>
The former Finprogetti real estate assets acquired by the Company are not
presently intended to be held long term. The Company either will seek a
strategic partner to help manage the properties or will seek to dispose of them
in due course and at maximally favorable values, although there can be no
assurance that such will occur.
On November 7, 1996 the Company entered into two agreements with Finprogetti
to resolve certain open matters deriving from the Finprogetti acquisition.
Pursuant to the first agreement, a balance due by Finprogetti to the Company of
Lit. 763 million ($501,000) was eliminated by Finprogetti surrendering to the
Company 46,000 shares at a value of Lit. 16,587 per share ($10.89 per share).
Pursuant to the second agreement, Finprogetti agreed to accept responsibility
for a claim for Lit. 2,120 million which was successfully brought against one of
the Company's subsidiaries acquired from Finprogetti. Pursuant to this
agreement, Finprogetti would assume the responsibility for payments resulting
from the claim, which are payable in installments through June 1998, and, to
facilitate those payments, the Company would, on the request of Finprogetti,
repurchase an aggregate of 105,440 shares for cash at the dates and in the
amounts of each installment payment, listed below.
<TABLE>
<S> <C> <C>
November 8, 1996....................... 9,950 shares Lit. 200 million
($131,000)
December 31, 1996...................... 22,380 shares Lit. 450 million
($295,000)
June 30, 1997.......................... 22,380 shares Lit. 450 million
($295,000)
December 31, 1997...................... 22,380 shares Lit. 450 million
($295,000)
June 30, 1998.......................... 28,350 shares Lit. 570 million
($374,000)
</TABLE>
At September 30, 1996, the Company has reclassified outside of shareholders'
equity these 105,440 shares thus subject to repurchase in the amount of the
present value of the amounts payable, applying a discount rate of 10%. The
resulting value of the 105,440 shares subject to repurchase is Lit. 1,940
million ($1,274,000) or Lit. 18,399 per share ($12.08 per share).
REPURCHASE OF FORMER CHAIRMAN'S SHARES. On April 10, 1995, the Company
entered into an agreement with Alejandro De Tomaso, then the Chairman of the
Board of the Company, under which the Company would repurchase Mr. De Tomaso's
1,000,000 shares of preferred stock and 480,304 shares of Common Stock at a
negotiated price of Lit. 18,400 per share, converted into dollars at the
exchange rate in effect on the closing date of 1,637 lire per dollar. Mr. De
Tomaso thereafter conveyed his stock to an individual who reconveyed such stock
to two trusts, which assumed his obligations and rights under the agreement.
Contemporaneously with the closing of the Finprogetti Acquisition 703,774 of
the preferred and common shares formerly owned by Mr. De Tomaso were delivered
to the Company in exchange for the Company's interests in the Hotel Canalgrande
and the Hotel Roma, its two hotel properties, valued by the Board of Directors
at Lit. 4,700 million ($3,086,000) in the aggregate based upon independent
appraisals, a collection of Maserati vehicles and engines valued by the Board at
Lit. 3,200 million ($2,101,000) and Lit.
43
<PAGE>
5,000 million ($3,283,000) in cash. The transaction was accounted for at the
assets' aggregate book value of Lit. 6,629 million and no gain or loss resulted.
Contemporaneously with the repurchase of the initial block of shares formerly
held by Mr. De Tomaso, Mr. De Tomaso resigned all directorships and offices
which he had held in the Company and all of its subsidiaries.
The remaining 776,530 preferred and common shares formerly held by Mr. De
Tomaso were exchanged for an equal number of shares of newly issued Common
Stock, which the Company is required to register for sale at the request of the
holder. Each share of preferred and Common Stock was valued identically because
Mr. De Tomaso agreed not to accept any premium for his preferred stock, despite
its three-vote per share preference. The Company may purchase any or all of such
776,530 shares at $11.27 per share, at any time prior to the third anniversary
of the Finprogetti Acquisition, subject to the holder's right to withdraw such
shares from such purchase right. Furthermore, the Company is obligated to
purchase all remaining shares on June 30, 1998, at $11.27 per share. A bank
letter of credit has been obtained by the Company to guaranty payment of the
repurchase price, secured by cash and certain investment securities owned by the
Company. See also Note 3 of Notes to Consolidated Financial Statements.
Management believes that the transaction with Mr. De Tomaso was on terms as
favorable as those which would have been available from an independent third
party.
PROPOSED CAREY WINSTON ACQUISITION. On August 14, 1996, the Company and its
wholly-owned subsidiary, DTI Acquisition Corporation ("Acquisition"), a Delaware
corporation, entered into an Agreement and Plan of Merger (the "Merger
Agreement") with The Carey Winston Company ("Carey Winston"), a commercial real
estate services provider in the greater Washington D.C., Baltimore and northern
Virginia metropolitan area. The Company had agreed to lend to Carey Winston $2
million of working capital at or before the merger closing, of which $1 million
was funded to Carey Winston on September 17, 1996 as an interim loan. Carey
Winston and the Company subsequently determined to terminate the Merger
Agreement, with the Company's loan being repayable, with interest, over 14
months and the Company being entitled to liquidated damages in lieu of
reimbursement for expenses of $200,000, and, if a change of control of Carey
Winston occurs within 15 months, liquidated damages in lieu of potential claims
for non-consummation of the merger of $500,000.
PROPOSED TRANSFER OF CONTROLLING INTEREST. Finprogetti, the largest
shareholder of the Company, is currently negotiating with Adzura, a limited
partnership ("Adzura"), for the sale to Adzura of its 1,708,350 shares of Common
Stock, as well as the sale of shares held by certain Finprogetti Affiliate
Shareholders (the "Adzura Purchase"). If such negotiations are successful, it is
expected that (i) upon the sale by Finprogetti of 1,000,000 such shares, the
existing voting agreement with the Company which was entered into in July 1995
will terminate, (ii) of the five directors which had been designated by
Finprogetti, four will resign, and three directors will be designated by Adzura,
(iii) upon the subsequent sale of the remaining shares, within two years
following the initial sale, the remaining director designated by Finprogetti
will resign and the size of the Board will be reduced to eight, and (iv) in
consideration of Adzura's agreeing to not sell the shares so purchased for 18
months from the date of this Offering without the consent of the Representative
of the Underwriters herein, the Company will grant to Adzura a warrant to
purchase 1,250,000 Shares of Common Stock, exercisable at the Offering Price per
share, exercisable for three years with the right to demand registration of the
shares so purchased under the Securities Act of 1933.
STRUCTURE OF THE COMPANY
The Company was incorporated under the laws of the State of Maryland in
1917. The following charts depict the current structure of the Company.
[The following is a textual summary of the current organizational chart of
the Company. The chart in graphical form is included in the paper version of
this filing:
44
<PAGE>
The Company owns 100% of the equity interest in Temporary Intergrated
Management, S.r.l., an Italian corporation, a 99.9% equity interest in Trident
Rowan Servizi S.p.A. ("TRS"), an Italian corporation, a 20% equity interest in
Moto Guzzi Corp., a Delaware corporation, and a 95.54% equity interest in
Finproservice S.p.A., an Italian corporation.
TRS owns an 83.92% equity interest in O.A.M. S.p.A. ("OAM"), an Italian
corporation.
OAM owns a 60% equity interest in Moto Guzzi Corp., a 100% equity interest
in Finprogetti International Holdings, S.A., a Luxembourg corporation ("FIH"),
and a 99.67% equity interest in Finprogetti Investimenti Immobiliari, S.p.A., an
Italian corporation ("Immobiliari").
Immobiliari owns a 99.9% equity interest in Pastorino Strade, S.r.l., a 25%
equity interest in Domer S.r.l., and an 80% equity interest in Grand Hotel Bitia
S.r.l. FIH owns the remaining .1% equity interest in Pastorino Strade. Domer
owns a 68.19% equity interest in Interim S.p.A. and a 100% equity interest in
Immobiliare Broseta S.r.l., all Italian entities. Interim S.p.A. owns a 100%
equity interest in Villa Giosis S.r.l.
FIH owns a 99.6% equity interest in L.I.T.A. S.p.A. O.A.M. owns the
remaining 0.4% interest in L.I.T.A.
Moto Guzzi Corp. owns a 100% equity interest in Moto Guzzi S.p.A. ("Moto
Guzzi"), an Italian corporation and 100% of the equity interest in Moto America,
Inc., a North Carolina corporation.
Moto Guzzi owns a 100% equity interest in Centro Ricambi S.r.l., an Italian
corporation, a 25% equity interest in MGI GmbH, a German corporation, and a 100%
equity interest in Moto Guzzi France, S.A., a French corporation.
PROPERTIES
The following facilities were in 1996, and unless so indicated, are
presently, leased or owned by the Company in the active conduct of its business:
(a) 1,700 square feet of office space at Two Worlds Fair Drive, Franklin
Township, Somerset, NJ 08873, in which are located the United States
administrative office of the Company, and which is occupied under a
five-year lease expiring in 2001, at a monthly rental of approximately
$2,200.
(b) Factory and office facilities owned in fee and located in Mandello
del Lario, Italy in a group of one, two and three story buildings
aggregating 54,550 square meters, and which is used by Moto Guzzi. This
facility is currently operating at approximately 55% of production capacity
calculated as a percentage of available space.
(c) Centro Ricambi's spare parts distribution facility is located at a
3,683 square meter facility in Modena, Italy, under a six-year lease
expiring in 2002. The current year lease obligation is Lit. 239 million
($157,000), and is subject to incremental annual increases.
(d) Offices aggregating 480 square meters in Milan, Italy, used by
Finprogetti Servizi, Trident Rowan Servizi, Finprogetti Investimenti
Immobiliari and T.I.M. are leased from an entity affiliated with Francesco
Pugno Vanoni, the Chairman of the Board of the Company, and his brother, at
a cost of Lit. 148 million ($97,000) in 1996 under a lease expiring on
August 31, 2000. The rental is believed to be comparable to rents paid for
similar facilities elsewhere in Milan.
(e) Warehouse, offices and surrounding land aggregating 63,874 square
meters in Cologne, Italy. Approximately 80% of the 28,122 square meter
office and warehouse space is rented to a single tenant at an annual rental
of Lit. 1,280 million ($806,000) and negotiations are proceeding to rent the
remainder of the space to the tenant. The Company is negotiating the
disposition of the property, which is encumbered by a Lit. 10,935 million
($7,180,000) mortgage.
45
<PAGE>
(f) Unimproved land aggregating 2,539,020 square meters in Cagliari,
Italy. The Company, through Finprogetti Immobiliari, owns an 80% interest
therein, and is exploring its disposition. An unaffiliated third party had
an option to purchase the Company's interest, which expired unexercised on
June 30, 1996 for Lit. 10,600 million ($6,675,000), less outstanding debt.
(g) Offices aggregating 150 square meters in Brescia, Italy used by
Finproservice S.p.A. at an annual rental of Lit. 16 million ($9,901) under a
six-year lease expiring in 2001.
(h) Factory and related commercial facility aggregating approximately
10,000 square meters in Torino, Italy leased by L.I.T.A., at an annual
rental of Lit. 510 million in 1996 and used at approximately 80% of present
production capacity, based in present equipment in place.
LEGAL PROCEEDINGS
The Company and its subsidiaries are involved in litigation in the normal
course of business. Management does not believe, based on the advice of its
legal advisors, that the final disposition of such litigation will have a
material adverse effect on the Company.
46
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following information concerns the directors, officers, key employees of
and consultants to the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Francesco Pugno Vanoni*.............................. 67 Chairman of the Board and member of the Executive
Committee
Mario Tozzi-Condivi.................................. 71 Vice Chairman, Director and member of the Executive
Committee
Howard E. Chase...................................... 60 President, Chief Executive Officer, Director and
member of the Executive Committee
Albino Collini....................................... 55 Executive Vice President, Chief Operating Officer,
Director and member of the Executive Committee
Carlo Previtali...................................... 52 Secretary and Treasurer
Giovanni Avallone*................................... 54 Director and member of the Executive Committee
Roberto Corradi*..................................... 59 Director
Santiago De Tomaso................................... 40 Director
Carlo Garavaglia*.................................... 52 Director
Maria Luisa Ruzzon*.................................. 49 Director
</TABLE>
- ------------------------
* Upon the consummation of the Adzura Purchase, these directors have agreed to
resign from their positions with the Company.
FRANCESCO PUGNO VANONI has served as Chairman of the Board since October
1995 and as President and director of Finprogetti S.p.A. for more than five
years prior thereto. He is also, and has been for more than the past five years,
the President and Director of Ceccato, S.p.A., which is a major European
manufacturer of vehicle washing equipment and systems and air compressors, which
are sold internationally.
MARIO TOZZI-CONDIVI has served as Director of the Company since 1993, and as
Vice Chairman since October 1995. He has also served as Director of Moto Guzzi,
S.p.A. since July 1995; President of Maserati Automobiles Incorporated, the
Company's former subsidiary, from February 1989 until 1996; Chairman of the
Board of Maserati U.K. Ltd., 1986 to 1987; and has been an independant
consultant to automobile importers, distributors and dealers in England, Italy,
Singapore and South Africa, since 1984.
HOWARD E. CHASE has served as Director of the Company since 1971, as
Secretary of the Company and Company counsel from 1971 until September 1995 and
President and Chief Executive Officer of the Company since October 1995. He has
also served as Vice-President of the Company from 1986 to October 1995; a
partner of Morrison Cohen Singer & Weinstein, LLP from April 1984 until
September 1995; and a director of Thoratec Laboratories, Inc., a Nasdaq-traded
company since 1987.
ALBINO COLLINI has served as Director of the Company since 1995, and
Executive Vice President and Chief Operating Officer of the Company since
October 1995. He has also served as a Director of Moto Guzzi since July 1995;
founder and President of T.I.M. S.p.A. and predecessors since 1987; Managing
47
<PAGE>
Director of Finprogetti S.p.A. from July 1995 until May 1996; and Director of
Finprogetti International Holding, S.A. since October 1993.
CARLO PREVITALI is Secretary and Treasurer of the Company. He has also
served as Director of Finprogetti International Holding, S.A. from November 1988
to December 1994; Director of Nolan S.r.l., a manufacturer of motorbike helmets,
from May 1989 to November 1990; Chief Executive Officer of Profin S.p.A., an
investment company from January 1990 to December 1995; Director of Cem S.p.A., a
manufacturer of compressors, from March 1990 to January 1991; Chief Executive
Officer of Unifin, S.r.l., an investment company from March 1990 to October
1991; Director of Progetti Cosmetics S.r.l. from June 1991 to June 1994;
Director of Oikos S.r.l., an investment company from September 1991 to March
1993; Director of Team Finanziaria S.r.l., an investment company from October
1991 to July 1993; Chief Executive Officer of Finprogetti Investimenti
Immobiliare, S.p.A. from February 1993 to October 1995; Director of
Finproservice, S.p.A. from March 1993 to September 1994; Director of O.A.M.,
S.p.A. since July 1995; Director of American Finance, S.p.A. since July 1995;
Director of Opticos S.r.l., a manufacturer of sport glasses, from May 1983 to
July 1991; San Giorgio S.r.l., in which Mr. Previtali held a non-executive post
until he resigned in November 1993, has been in "controlled administration" in
Italy since 1995. Controlled Administration is roughly analogous to United
States bankruptcy reorganization. He served as an officer of Finprogetti S.p.A.
from 1983 until June 1996.
GIOVANNI AVALLONE has served as Director of the Company since July 1995 and
has served as Director of Finprogetti from February 1993 until June 1996. He has
also served as Director and President of L.I.T.A. S.p.A. since February 1995; a
Director of T.I.M. since December 1994 and Director of Interim S.p.A. since
April 1993. Mr. Avallone has served as a director of financial and strategic
planning at Ori Martin S.p.A., a steel mill, since 1990. Since 1990 he has
served in a similar capacity at Finoger S.p.A. which is engaged in investment
finance. Mr. Avallone served as President of Comadepur, a water purification
joint venture from 1990 to 1994, and served as the manager responsible for
mergers and acquisitions at Viveco S.r.l. from 1990-1995.
ROBERTO CORRADI has served as Director of the Company since 1989, and as
Chairman of Progetto S.a.A. di Roberto Corradi & Co., an architectural firm,
since 1987.
SANTIAGO DE TOMASO has served as Director of the Company since 1993 and
President and Chief Operating Officer of the Company from 1993 to October 1995;
as Sales and Promotion Manager and Member of the Board of Directors of De Tomaso
Modena S.p.A., an unrelated company, for more than the past five years; Vice
President of Immobiliare Canalgrande S.p.A. for more than the past five years;
Administratore Unico of Storm S.r.l. since May 1992; and as a Director of Moto
Guzzi S.p.A. and of Trident Rowan Servizi S.p.A., each for more than the past
five years.
CARLO GARAVAGLIA has served as Director of the Company since 1995, and as a
Member of Studio Legale Tributario Associates, a law firm in Milan, for more
than five years. He has also served as a Director of Trident Rowan Servizi since
May 1994 and Chairman of its board of directors since July 1995; Director and
President of Moto Guzzi since July 1995; Director of O.A.M. since May 1994;
Chairman of the Board of O.A.M. since July 1995; Director of Finprogetti
Investimenti Immobiliare S.p.A. since October 1993; Director of Grand Hotel
Bitia S.r.l. since March 1994; Director of TIM since December 1994; Director of
Tridents Financiere S.r.l. since December 1990; and Director of Finprogetti
S.p.A. from September 1993 until June 1996.
MARIA LUISA RUZZON has served as Director of the Company since July 1995 and
had served as Director of Finprogetti from February 1993 until June 1996. She
was the sole Director of Filatura di Novana, a textile mill, from 1990 until
1992, has been a Director of Metano Parese S.p.A., a natural gas distributor,
since 1990, and a General Manager of Maglificio Giovanni Brugnoli S.p.A. since
.
Each of Finprogetti, Mario Tozzi-Condivi, Albino Collini, Howard E. Chase
and Francesco Pugno Vanoni have agreed to vote all shares he or it may hold in
favor a slate of nominees consisting of five
48
<PAGE>
persons designated by Finprogetti and five persons designated by management.
Upon the distribution by Finprogetti to its shareholders of its shares of Common
Stock of the Company, or upon the sale of such shares to a third party the
voting agreement will terminate.
None of the directors of the Company except Mr. Chase is a director of any
other company with a class of securities registered pursuant to Section 12 of
the Securities Exchange Act of 1934 or of any company registered as an
Investment Company under the Investment Company Act of 1940. There is no family
relationship among any of the members of the Board of Directors or the officers
of the Company.
The Board of Directors established an Audit Committee in 1995, which
currently consists of the following: Howard E. Chase, Carlo Garavaglia and Carlo
Previtali. The Audit Committee is charged with the responsibility to review the
performance of the independent accountants as auditors for the Company, discuss
and review the scope and the fees of the prospective annual audit, review with
the auditors the corporate accounting practices and policies and recommend to
whom reports should be submitted within the Company, review their final report
with the auditors, review with the auditors overall accounting and financial
controls, and be available to the auditors during the year for consultation
purposes. The Board of Directors also authorized, but has not yet appointed
members of, a Compensation Committee, charged with the responsibility to review
and make recommendations to the Board regarding salaries, compensation and
benefits of executive officers and key employees of the Company.
EXECUTIVE COMPENSATION
The following table shows, for the three years ended December 31, 1996, 1995
and 1994, the cash compensation paid or accrued for those years to the President
of the Company and each of the four most highly compensated executive officers
of the Company other than the President whose aggregate annual salary and bonus
exceeded $100,000 for the Company's last year in all the capacities in which
they served with respect the year ended December 31, 1996 ("Named Executive
Officers"):
49
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------
AWARDS
----------------------------
NAME AND ANNUAL COMPENSATION OTHER RESTRICTED OPTIONS/
PRINCIPAL ----------------------------- ANNUAL STOCK SARS
POSITION YEAR SALARY(LIT./$)(1) BONUS(LIT./$) COMPENSATION AWARDS($) (#)
- -------------------------------- --------- --------------- ------------ ------------------- --------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Santiago De Tomaso.............. 1994 Lit.100,000,000/ -0- -0- -0- -0-
President of the Company until ($65,703)
October 28, 1995
1995 Lit.76,500,000/ -0- -0- -0- 30,000
($50,263)
Howard E. Chase................. 1995 Lit.155,737,000/ -0- -0- -0- 300,000
President and Chief Executive 1996 ($102,324) -0- -0- -0- -0-
Officer since October 28, 1995 Lit.573,750,000/
($376,971)
Albino Collini.................. 1995 Lit.186,700,000/ 50,000,000 -0- -0- 150,000
Executive Vice President since 1996 ($122,668) ($31,486)
October 28, 1995 Lit.458,994,000/
($301,573)
Mario Tozzi-Condivi(2).......... 1995 Lit.93,414,000/ -0- -0- -0- 200,000
Vice Chair since October 28, ($61,376)
1995
Domenico Costa.................. 1995 Lit.237,850,000/ -0- -0- -0- 60,000
President of T.I.M. 1996 ($156,275) -0- -0- -0- -0-
Lit.240,000,000/
($157,687)
Arnolfo Sacchi.................. 1994 Lit.192,000,000/ -0- -0- -0- -0-
Administrative Delegato of 1995 ($126,150) -0- -0- -0- -0-
Moto Guzzi since 1994 1996 Lit.223,519,700/ -0- -0- -0- -0-
($146,859)
Lit.240,000,000
($156,863)
Carlo Previtali................. 1996 Lit.240,000,000 -0- -0- -0- -0-
Treasurer and Secretary ($156,863)
<CAPTION>
PAYOUTS
NAME AND ---------------
PRINCIPAL LTIP ALL OTHER(3)
POSITION PAYOUTS($) COMPENSATION($)
- -------------------------------- --------------- ---------------------
<S> <C> <C>
Santiago De Tomaso.............. -0-
President of the Company until
October 28, 1995
-0-
Howard E. Chase................. -0-
President and Chief Executive -0-
Officer since October 28, 1995
Albino Collini.................. -0-
Executive Vice President since
October 28, 1995
Mario Tozzi-Condivi(2).......... -0-
Vice Chair since October 28,
1995
Domenico Costa.................. -0-
President of T.I.M. -0-
Arnolfo Sacchi.................. -0-
Administrative Delegato of -0-
Moto Guzzi since 1994 -0-
Carlo Previtali................. -0-
Treasurer and Secretary
</TABLE>
- ------------------------------
(1) Lire amounts have been converted to dollars at the rate of 1,522 lire per
U.S. Dollar, the approximate rate in effect on December 31, 1996.
(2) In 1996, $185,000 plus expenses was paid to Como Consultants Limited, an
Isle of Jersey company, which provides the Company with the services of Mr.
Tozzi-Condivi. No other form of compensation was paid to Como Consultants or
to Mr. Tozzi-Condivi
(3) The aggregate amount of all perquisites and other personal benefits paid to
each of the Named Executive Officers did not exceed the greater of $50,000
or 10% of such Officer's salary.
STOCK OPTION PLANS
In order to attract and retain employees, the Board of Directors adopted,
and the shareholders approved, the 1995 Non-Qualified Stock Option Plan ("1995
NQ Plan") and the 1995 Stock Option Plan for Outside Directors ("1995 Directors
Plan"). The 1995 NQ Plan and the 1995 Directors Plan are referred to
collectively as the "1995 Plans". Options to purchase an aggregate of 2,150,000
shares of common stock (subject to antidilution adjustments under certain
circumstances) may be awarded under the 1995 Plans.
1995 NQ PLAN
The Board of Directors has authorized the grant of 2,000,000 options under
the 1995 NO Plan. In connection with the execution of employment agreements, a
total of 982,500 such options were granted in 1995, each at an exercise price of
$12.26 per share to ten officers and key employees, six of whom are also
50
<PAGE>
members of the Board of Directors, and an additional 22,500 options in 1996. The
options vest over three or five years in equal proportions. See "Option Grants."
The 1995 NQ Plan is administered by a committee consisting of two members of
the Board, neither of whom for at least one year prior to such member's
commencement of service, received any discretionary grant of options under the
1995 NQ Plan or otherwise. Members of the committee are not entitled to receive
grants under the 1995 NQ Plan. The maximum number of options which any optionee
may receive is 350,000 per calendar year.
All officers and employees who, in the opinion of the committee have made or
are expected to make key contributions to the success of the Company are
eligible to receive options under the Plan. The committee may determine, subject
to the terms of the 1995 NQ Plan, the persons to whom options will be awarded,
the number of shares and the specific terms of each option granted. Officers and
key employees of companies acquired or operated by the Company or its
subsidiaries may also be option recipients. Specific performance or other
criteria governing the granting of the remaining options have not yet been
established by the committee. Options may not be granted at an exercise price
below the fair market value on the date of grant.
If an option expires unexercised, is surrendered by the grantee for
cancellation, is canceled or otherwise becomes nonexercisable, the shares
underlying the grant will again become available for the granting of new options
under the 1995 NQ Plan.
The plan is subject to amendment by a majority of those members of the Board
of Directors who are ineligible to receive options, but the Board may not (i)
change the total number of shares of stock available for options; (ii) increase
the maximum number of options; (iii) extend the duration of the plan; (iv)
decrease the minimum option price or otherwise materially increase the benefits
accruing to recipients; or (v) materially modify the eligibility requirements.
1995 DIRECTORS' PLAN
All non-employee directors, who were never previously employed by the
Company or eligible to receive options, will annually receive, on each January 2
beginning in 1996, options to purchase 5,000 shares under the 1995 Directors
Plan. Newly appointed or elected non-employee directors receive a grant upon
taking office.
A total of 20,000 options under the plan was granted in each of 1996 and
1997. Options granted in 1996 are exercisable at $12.26 per share and options
granted on January 2, 1997 are exercisable at $9.313 per share. Options to be
granted in future years will be exercisable at the reported closing price of the
stock on January 2 of the year of grant. Options are not be exercisable until
the later of January 2 of the year succeeding the date of grant or six months
following the date of grant.
The authority to grant options under 1995 Directors Plan will terminate on
the earlier of December 31, 2005 or upon the issuance of the maximum number of
shares of stock reserved for issuance under the plan.
The plan may be amended by the Board of Directors except that provisions
thereof concerning granting of options may not be amended more than once every
six months unless necessary to comply with the Internal Revenue Code or the
Employee Retirement Income Security Act.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
No stock options or SARs were granted in the fiscal year ended December 31,
1996 to any of the Named Executive Officers.
51
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE(2) OF
UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS/SARS AT
SHARES OPTIONS/SARS AT FISCAL YEAR-END
ACQUIRED FISCAL YEAR-END (#) ($)
ON VALUE ---------------------------- ---------------
NAME EXERCISE(#)(1) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE
- --------------------------------------- ------------------- --------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Howard E. Chase, CEO................... -- -- 60,000 240,000 --
Mario Tozzi Condivi.................... -- -- 40,000 160,000 --
Albino Collini......................... -- -- 30,000 120,000 --
Santiago De Tomaso..................... -- -- 10,000 20,000 --
Domenico Costa......................... -- -- 20,000 40,000 --
Arnolfo Sacchi......................... -- -- 20,000 40,000 --
<CAPTION>
NAME UNEXERCISABLE
- --------------------------------------- -------------------
<S> <C>
Howard E. Chase, CEO................... --
Mario Tozzi Condivi.................... --
Albino Collini......................... --
Santiago De Tomaso..................... --
Domenico Costa......................... --
Arnolfo Sacchi......................... --
</TABLE>
- ------------------------
(1) None of the Named Executive Officers exercised any stock options in the 1996
fiscal year.
(2) Based on the fair market value per share of the Common Stock of $9.125,
which was the closing price of the Common Stock on the Nasdaq SmallCap
Market on December 31, 1996.
COMPENSATION OF DIRECTORS
Non-employee members of the Board of Directors of the Company will each be
paid $4,000 per year from the Company for services rendered in their capacity as
such and will receive automatic grants of stock options. Officers of the Company
or its subsidiaries who are members of the Board of Directors of the Company and
employees receive compensation for services rendered in their capacities as
officers only, and may be entitled to discretionary grants of stock options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Company's Board of Directors established a compensation committee on
October 28, 1995, but it has not convened. The Company and each of its
subsidiaries has, to date, addressed all compensation issues through its or
their respective boards of directors. All members of the Board of Directors
other than Ms. Ruzzon and Mr. Corradi served as executive officers and/or
employees of the Company and/or one or more of the Company's subsidiaries in
1996.
Messrs. Tozzi-Condivi, Chase, Pugno Vanoni, Garavaglia and Previtali engaged
in transactions with the Company during 1996 in addition to serving as a
director and/or officer of the Company. See "Certain Transactions."
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The compensation policy implemented by the Company and its subsidiaries for
the compensation of executive officers calls for consideration of the nature of
each executive officer's work and responsibilities, unusual accomplishments or
achievements on the Company's behalf, the time expended in connection with that
executive officer's duties, years of service, and the Company's (or
subsidiary's) financial condition generally. Historically, overall corporate
performance has not been a significant factor in establishing compensation.
However, as a result of the Finprogetti Acquisition and the many changes to the
Company's governing structure, including the creation of an Executive Committee
and Compensation Committee of the Board of Directors, other and additional
factors are likely to be included in compensation policies, including overall
corporate performance, and performance of individual units of the Company.
EMPLOYMENT CONTRACTS
In November 1995, the Company entered into employment agreements with each
of Howard E. Chase, Albino Collini, Giovanni Avallone, Domenico Costa and Carlo
Previtali, an agreement for limited
52
<PAGE>
services with Francesco Pugno Vanoni, and a consulting Agreement with Como
Consultants, Limited, a corporation which will provide the services of Mario
Tozzi-Condivi. The agreements with Messrs. Chase Collini, and Pugno Vanoni and
with Como Consultants are for a term of five years, and all other agreements are
for a term of three years, subject, in all cases, to early termination under
certain conditions. Pursuant to such agreements Mr. Chase serves as President
and Chief Executive Officer at a base salary of $375,000 per year, Mr. Collini
serves as Chief Operating Officer at a base salary of $250,000 per year and Mr.
Tozzi-Condivi serves as Vice-Chairman of the Board and Chairman of the Executive
Committee at a base compensation of $185,000 per year. All such agreements
include cost-of-living increases and non-competition provisions for a period of
two years after termination of employment. The three-year agreement with Mr.
Previtali provides for his serving as Treasurer of the Company at a salary of
Lit. 240 million ($157,584) per year, the agreement with Mr. Avallone provides
for his serving on a part-time basis as Director of Special Projects and
Merchant Banking at an annual salary of Lit. 60 million ($39,396), and the
agreement with Mr. Pugno Vanoni provides that in any year in which he serves on
the Company's Executive Committee, he will receive a salary of Lit. 80 million
($52,528) for such year. Mr. Costa is employed as Managing Director of T.I.M.
for three years at a salary of Lit. 240 million ($157,584) per year.
The compensation of the Named Executive Officers in 1996 was the result of
the negotiated employment agreements described above, and not the implementation
of a compensation policy.
COMPARATIVE STOCK PERFORMANCE GRAPH
The following is a graph comparing the annual percentage change in the
cumulative total shareholder return of the Company's common stock with the
corresponding returns of the published Dow Jones Equity Market Index and Dow
Jones Automobile Manufacturers Index and the Nasdaq Non-Financial Index compiled
by Research Data Group for the Company's five years ended December 31, 1992 to
1996, inclusive.
<TABLE>
<CAPTION>
TOTAL RETURN--DATA
SUMMARY
------------------------
CUMULATIVE TOTAL RETURN
-------------------------------------
RESEARCH DATA GROUP TRGI 12/91 12/92 12/93
- ---------------------------------------------------------------------- --------- ----- ----- -----
<S> <C> <C> <C> <C>
Trident Rowan Group, Inc.............................................. TRGI 100 100 57
DJ EQUITY MARKET...................................................... IDOW 100 109 119
DJ OTHER RECREATIONAL PRODUCTS........................................ IREQ 100 119 137
NASDAQ NON-FINANCIAL.................................................. INNF 100 109 126
<CAPTION>
RESEARCH DATA GROUP 12/94 12/95 12/96
- ---------------------------------------------------------------------- ----- ----- -----
<S> <C> <C> <C>
Trident Rowan Group, Inc.............................................. 264 296 261
DJ EQUITY MARKET...................................................... 120 167 206
DJ OTHER RECREATIONAL PRODUCTS........................................ 144 190 228
NASDAQ NON-FINANCIAL.................................................. 121 169 206
</TABLE>
53
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information concerning the beneficial
ownership** of capital stock of the Company as of the date of this Prospectus by
(i) each person who is known by the Company to own beneficially more than 5% of
the Company's Common Stock, (ii) each of the Company's directors, and (iii) all
directors and officers as a group:
<TABLE>
<CAPTION>
PERCENTAGE
------------------------
<S> <C> <C> <C>
NUMBER OF SHARES
BENEFICIALLY BEFORE AFTER
NAME OWNED OFFERING OFFERING
- -------------------------------------------------------------------------- ----------------- ----------- -----------
Finprogetti, S.p.A........................................................ 1,708,350(1) 43.8% 33.2%
Via Fieno 8
Milan, Italy 20123
Pirunico Trustees (Jersey)(2)............................................. 776,530 19.9 15.1%
Limited Account 282
44 Esplanade House
St. Helier, Jersey
Channel Islands
Howard E. Chase(3)........................................................ 70,000
Albino Collini(4)......................................................... 165,972 4.3 3.2
Francesco Pugno Vanoni(4)................................................. 32,971 * *
Mario Tozzi-Condivi(5).................................................... 40,000 * *
Santiago De Tomaso(6)..................................................... 10,000 * *
Domenico Costa(7)......................................................... 20,000 * *
Arnolfo Sacchi(7)......................................................... 20,000 * *
Giovanni Avallone......................................................... -0-
Roberto Corradi........................................................... -0-
Carlo Garavaglia.......................................................... -0-
Maria Luisa Ruzzon........................................................ -0-
All officers and directors as a Group..................................... 398,943(8) 9.7% 7.4%
</TABLE>
- ------------------------
* Less than 1%.
** Beneficial ownership is determined in accordance with the rules of the
Securities and Exchange Commission ("Commission") and generally includes
voting or investment power with respect to securities. Shares of Common
Stock upon the exercise of options, warrants currently exercisable, or
exercisable or convertible within 60 days, are deemed outstanding for
computing the percentage ownership of the person holding such options or
warrants but are not deemed outstanding for computing the percentage
ownership of any other person.
(1) Of such amount, 170,343 shares are held in escrow pending satisfaction of a
condition precedent and may not be voted by Finprogetti. Finprogetti
therefore may vote 39.2% of all votes entitled to be cast prior to the
Offering. Such amount excludes 165,972 shares owned beneficially by Albino
Collini. Such amount includes 73,110 shares which are subject to repurchase
pursuant to an agreement with the Company. See "Recent
Transactions--Proposed Transfer of Controlling Interest" for a description
of the proposed sale of shares not subject to such repurchase agreement.
(2) Pirunico Trustees (Jersey) Limited is the trustee of the Tail Trust, which
acquired by gift shares formerly owned by the Company's former principal
shareholder and Chairman.
(3) Includes 60,000 shares purchasable upon exercise of options.
(4) Mr. Collini is a former officer of, and Mr. Pugno Vanoni is a former officer
and director and a current shareholder, of Finprogetti, S.p.A., which
beneficially owns 1,708,350 shares. Neither has authority to dispose of or
vote the shares of Finprogetti, and disclaims beneficial ownership thereof.
Of the shares owned beneficially by Mr. Collini, 135,972 are held of record
by Tairona, S.A., a Luxembourg corporation affiliated with Mr. Collini, and
30,000 represent options exercisable within 60 days. Of the shares owned by
Mr. Pugno Vanoni, 8,000 represent options exercisable within 60 days.
54
<PAGE>
(5) Includes 40,000 shares purchasable upon exercise of options.
(6) Includes 10,000 shares purchasable upon exercise of options.
(7) Includes 20,000 shares purchasable upon exercise of options.
(8) Includes 228,000 shares purchasable upon exercise of options.
CERTAIN TRANSACTIONS
In 1995, the Company repurchased shares previously owned by its former
Chairman of the Board, and agreed to repurchase the remaining 776,530 shares
formerly so held. See "Business--Recent Transactions--Repurchase of Former
Chairman's Shares." The Company has also agreed to repurchase 73,110 shares from
Finprogetti currently a 43.8% shareholder, at a specified time and price. See
"Repurchase of Shares from Finprogetti."
The law firm of Morrison Cohen Singer & Weinstein, LLP is counsel to the
Company. Howard E. Chase, a Director of the Company and its Chief Executive
Officer, was a member of such firm until September 1, 1995, and he is now of
counsel to such firm. Fees paid by the Company and subsidiaries to Morrison
Cohen Singer & Weinstein, LLP in 1996 did not exceed 5% of such firm's gross
revenues for that period.
Como Consultants Limited, an Isle of Jersey company which employs Mario
Tozzi-Condivi, a Director of the Company and its Vice-Chairman, was paid an
aggregate of $207,594 in 1996 for consulting services rendered to the Company
and to its former Maserati Automobiles Incorporated subsidiary by Mr. Condivi.
Mr. Carlo Garavaglia, a Director of the Company, is a member of a law firm
which was paid by the Company and its subsidiaries in 1996 for legal and
statutory auditing services rendered, an amount less than 5% of such firm's
gross revenues in such period.
Mr. Pugno Vanoni and his brother own offices in Milan which are leased to
certain subsidiaries of the Company acquired from Finprogetti at a rental of Lit
148 million ($97,000) per year.
Upon consummation of the Adzura Purchase, Tamarix Capital Corporation, an
affiliate of Adzura will be retained by the Company as a financial advisor for a
period of two years at an annual fee of $200,000.
All transactions between the Company and its officers, directors, principal
shareholders or other affiliates have been on terms no less favorable than those
that are generally available from unaffiliated third parties. Any such future
transactions will be on terms no less favorable to the Company than could be
obtained from an unaffiliated third party on an arm's-length basis and will be
approved by a majority of the Company's independent and disinterested directors.
DESCRIPTION OF SECURITIES
As of the date of this Prospectus, the authorized capital stock of the
Company consisted of 50,000,000 shares of Common Stock, par value $0.01 per
value, 3,902,540 of which are outstanding. The securities offered hereby consist
of 1,250,000 shares of Common Stock and 1,250,000 Warrants.
COMMON STOCK
The issued and outstanding shares of Common Stock are, and the shares of
Common Stock being offered hereby by the Company, when sold and issued in
accordance herewith will be, validly issued, fully paid and non-assessable. The
holders of outstanding shares of Common Stock are entitled to receive dividends
out of assets legally available therefor at such times and in such amounts as
the Board of Directors may from time to time determine. See "Dividends" and
"Risk Factors--Absence of Dividends."
All shares of Common Stock have equal voting rights and, when validly issued
and outstanding, the holders of shares of Common Stock are entitled to one vote
for each share held on record on all matters to
55
<PAGE>
be voted on by the stockholders. Cumulative voting in the election of directors
is not allowed, which means that the holders of more than 50% of the outstanding
shares can elect all of the directors if they choose to do so and, in such
event, the holders of the remaining shares will not be able to elect any
directors.
Holders of shares of Common Stock have no preemptive, subscription, or
redemption rights and there are no conversion provisions applicable to the
Common Stock. Upon liquidation, dissolution or winding-up of the Company, the
holders of Common Stock are entitled to receive pro rata the assets of the
Company which are legally available for distribution to stockholders, unless
there are outstanding shares of preferred stock with priority rights. Currently,
there is no class of preferred stock authorized to be issued by the Company.
WARRANTS
Each Warrant will entitle the registered holder thereof to purchase one
share of Common Stock at an exercise price of 120% of the offering price per
share of Common Stock for four years commencing one year from the date of this
Prospectus. The Company may redeem the Warrants at a price of $.01 per Warrant
at any time after they become exercisable if notice of not less than 30 days is
given and the last sale price of the Common Stock has been at least 133 1/3% of
the then exercise price of the Warrants (initially $ ) on all 20 trading
days ending on the third day prior to the day on which notice is given.
Unless extended by the Company at its discretion, the Warrants will expire
at 5:00 p.m., New York time, on the fifth anniversary of the date of this
Prospectus. In the event a holder of Warrants fails to exercise the Warrants
prior to their expiration, the Warrants will expire and the holder will have no
further rights with respect to the Warrants.
The exercise price of the Warrant and the number of shares of Common Stock
to be obtained upon exercise of the Warrants are subject to adjustment in the
event of a stock dividend on or a split of the Common Stock, or in the event of
a reorganization or recapitalization of the Company or of the merger or
consolidation of the Company or in the event of distributions (other than cash
dividends) to stockholders of the Company. No assurance can be given that the
market price of the Company's Common Stock will exceed the exercise price of the
Warrants at any time during the exercise period.
No Warrants will be exercisable unless at the time of exercise there is a
current prospectus covering the shares of Common Stock issuable upon exercise of
such Warrants under an effective registration statement filed with the
Commission and such shares have been qualified for sale or are exempt from
qualification under the securities laws of the state of residence of the holder
of such Warrants. Although the Company intends to have all shares so qualified
for sale in those states where the Securities are being offered and to maintain
a current prospectus relating thereto until the expiration of the Warrants,
subject to the terms of the Warrant Agreement, there can be no assurance that
the Company will be able to do so.
Fractional shares will not be issued upon exercise of Warrants and, in lieu
thereof, a cash adjustment based on the market price of the Common Stock on the
date of exercise will be made. The Warrants do not confer upon the holder
thereof any voting or preemptive rights, or any other rights of a stockholder of
the Company. The Company is required to reserve a sufficient number of
authorized shares of Common Stock to permit the exercise of the Warrants.
A Warrant may be exercised upon the surrender of a duly completed
certificate on or prior to its expiration at the office of the Warrant Agent,
accompanied by cash or a certified or official bank check payable to the order
of the Warrant Agent for the exercise price.
See "Business--Recent Transactions--Proposed Transfer of Controlling
Interest" for a description of certain other warrants that may be granted.
56
<PAGE>
MARYLAND TAKEOVER STATUTE
Under Section 3-602 of the Maryland General Corporation Laws, which prevents
an "interested stockholder" (defined in Section 601, generally, as a person
owning 15% or more of a corporation's outstanding voting stock) from engaging in
a "business combination" with a publicly held Maryland corporation for five
years following the date such person became an interested stockholder, unless:
(i) before such person became an interested stockholder, the board of directors
of the corporation approved the transaction in which the interested stockholder
became an interested stockholder or approved the business combination; (ii) upon
consummation of the transaction that resulted in the interested stockholder's
becoming an interested stockholder, the interested stockholder owns at least 80%
of the voting stock of the corporation outstanding at the time the transaction
commenced (subject to certain exceptions); or (iii) following the transaction in
which such person became an interested stockholder, the business combination is
approved by the board of directors of the corporation and authorized at a
meeting of stockholders by the affirmative vote of the holders of 66% of the
outstanding voting stock of the corporation not owned by the interested
stockholder. A "business combination" includes mergers, stock or asset sales and
other transactions resulting in a financial benefit to the interested
stockholder. The Company is not currently subject to such statute.
INDEMNIFICATION OF DIRECTORS
A Maryland corporation may indemnify any director or officer made a party to
any proceeding by reason of service in that capacity unless it is established
that:
(1) The act or omission of the director was material to the matter
giving rise to the proceeding; and (a) was committed in bad faith; or (b)
was the result of active and deliberate dishonesty; or
(2) The director received an improper personal benefit in money,
property, or services; or
(3) In the case of any criminal proceeding, the director has reasonable
cause to believe that the act or omission was unlawful.
Under most circumstances, a court may order indemnification as it deems
proper if it determines that the director or officer is fairly and reasonable
entitled to indemnification in view of all the relevant circumstances, whether
or nor the director has met the foregoing standards. A determination that a
director has met the foregoing standards can be made by a majority of the Board
of Directors who are not parties to the proceeding, by special legal counsel
selected by the Board of Directors, or by the stockholder. Such director shall
be reimbursed for reasonable expenses incurred by a director in connection with
the proceeding, the determination of what constitutes reasonable expenses is
made at the same proceeding that authorized the indemnification. Neither the
articles of incorporation nor by-laws of the Company contain any provision which
varies or amplifies the provision of the Maryland GCL. Certain officers and
employees are entitled to indemnification by the Company pursuant to existing
employment agreements.
TRANSFER AGENT, WARRANT AGENT AND REGISTRAR
American Stock Transfer and Trust Company, New York, New York, is the
transfer agent, Warrant agent and registrar for the Company's Common Stock and
Warrants.
SHARES ELIGIBLE FOR FUTURE SALE
SHARES ELIGIBLE FOR FUTURE SALE. Future sales of substantial amounts of
Common Stock in the public market following this Offering could adversely affect
the market price of the Common Stock. Upon completion of this Offering, the
Company will have 5,152,540 shares of Common Stock outstanding, assuming no
exercise of the Warrants, the Underwriters' over-allotment option or 1,045,000
currently outstanding options. The 1,250,000 shares of Common Stock being sold
pursuant to this Offering (plus any
57
<PAGE>
additional shares of Common Stock sold upon exercise of the Underwriters'
over-allotment option) will be, and an additional 843,680 outstanding shares are
freely transferable as of the date of this Prospectus without restriction under
the Securities Act, unless they are held by "affiliates" of the Company as that
term is used under the Securities Act and the regulations promulgated
thereunder. The remaining 3,088,860 shares of Common Stock currently outstanding
("Restricted Shares") were sold by the Company in reliance on exemptions from
the registration requirements of the Securities Act and are "restricted
securities" under the Securities Act. Subject to lock-up restrictions and other
contractual restrictions described below, 3,058,860 of such Restricted Shares
are now eligible for sale and the remaining 30,000 restated Shares will be
eligible for sale beginning January 1, 1998, pursuant to Rule 144 of the
Securities Act.
In addition to the possibility of such Restricted Shares being sold freely
now or after certain time periods pursuant to Rule 144, the Company is required
to register 776,530 Restricted Shares under the Securities Act, at the expense
of the Company, if demanded by the holder of such shares and to maintain the
effectiveness of such registration statement until June 30, 1998 (or the earlier
sale of all such shares). The Company is obligated to purchase on June 30, 1998
all of such shares not theretofore sold by the holder, at $11.27 per share, and
with respect to which the holder did not reject an earlier offer, by the Company
if any, to purchase same at such price. The Company is also required to register
upon demand, at any time after June 30, 1997, 2,252,330 Restricted Shares on up
to two occasions. 1,844,322 of such Restricted Shares were issued in the
Finprogetti Acquisition (after repurchases of certain of such Restricted Shares
from Finprogetti under the November 7, 1996 agreement) and 408,008 of such
Restricted Shares were issued to certain investors in connection with the
Finprogetti acquisition. The Company is also obligated to purchase 73,110 shares
from Finprogetti under the November 7, 1996 agreement.
Finprogetti and other persons holding in the aggregate 2,282,330 Restricted
Shares, have agreed, subject to certain limited exceptions, not to sell or
otherwise dispose of any of the shares held by them prior to June 30, 1997. See
however "Business--Recent Transactions--Proposed Transfer of Controlling
Interest" for a description of the possible sale of certain of such shares and
the grant of registration rights to the purchaser thereof. In addition, pursuant
to the Underwriting Agreement, all of the officers, directors of the Company and
existing stockholders of the Company each holding one percent or more of the
shares outstanding as of the date of this Prospectus have agreed not to sell any
of their shares of Common Stock until eighteen months from the date of this
Prospectus without obtaining the prior written consent of the Representative.
In general, under Rule 144 as currently in effect, a person (or persons
whose shares are aggregated), including any person who may be deemed an
"affiliate" of the Company, who has beneficially owned any restricted securities
for at least two years is entitled to sell within any three-month period a
number of restricted securities that does not exceed the greater of 1% of the
then outstanding shares of Common Stock and the average weekly trading volume in
the over-the-counter market during the four calendar weeks preceding such sale,
provided that at least two years have elapsed since such shares were acquired
from the Company and certain manner of sale, notice requirements and
requirements as to the availability of current public information about the
Company are satisfied. Any person who is deemed to be an affiliate of the
Company must comply with the provisions of Rule 144 (other than the two-year
holding period requirement) in order to sell shares of Common Stock which are
not restricted securities (such as shares acquired by affiliates in this
offering). In addition, under Rule 144(k), a person who is deemed not to be an
affiliate of the Company, and who is deemed not to have been an affiliate of the
Company at any time during the 90 days preceding any sale, is entitled to sell
such shares without regard to the foregoing limitations, provided at least three
years have elapsed since the shares were acquired from the Company.
No predictions can be made of the effect, if any, that future sales of
shares or the availability of shares for sale will have on the market price
prevailing from time to time. Nevertheless, sales of substantial amounts of the
Common Stock in the public market could adversely affect the then prevailing
market price.
58
<PAGE>
UNDERWRITING
The Underwriters named below ("Underwriters") for whom GKN Securities Corp.
("Representative") is acting as Representative, have agreed, subject to the
terms and conditions of the Underwriting Agreement, to purchase from the Company
a total of 1,250,000 shares of Common Stock and 1,250,000 Warrants.
The number of securities which each such Underwriter has agreed to purchase
is set forth opposite its name:
<TABLE>
<CAPTION>
UNDERWRITERS COMMON STOCK WARRANTS
- ------------------------------------------------------------------- --------------- -----------
<S> <C> <C>
Total..............................................................
</TABLE>
The Underwriting Agreement provides that the obligations of the Underwriters
are subject to the approval of certain legal matters by counsel to the
Underwriters and various other conditions precedent, and the Underwriters are
obligated to purchase all of the Securities offered by this Prospectus (other
than the Securities covered by the over-allotment option described below), if
any are purchased.
The Representative has advised the Company that the Underwriters propose to
offer the Securities to the public at the public offering prices set forth on
the cover page of this Prospectus and to certain dealers, who are members of the
National Association of Securities Dealers, Inc. ("NASD"), at those prices less
a concession not in excess of $ per share of Common Stock and $
per Warrant, of which not in excess of $ per share of Common Stock and
$ per Warrant may be further reallowed to other dealers who are also
members of the NASD. After this Offering, the offering price and other selling
terms may be changed by the Representative.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liability under the Securities Act. The Company has
agreed to pay to the Representative a non-accountable expense allowance of 3% of
the aggregate gross proceeds of the Offering (including the Underwriters'
over-allotment option, if exercised) in connection with the Offerings, of which
$60,000 has been paid to date. The Company has also agreed to pay all expenses
in connection with qualifying the Securities offered hereby for sale under the
laws of such states as the Representative may designate and for obtaining the
clearance of this Offering with the NASD including fees and expenses of counsel
retained for such purposes by the Representative and the costs of investigative
searches of the Company's executive officers. The Company has also agreed to
sell to the Representative, for $100, an option ("Representative's Purchase
Option") to purchase 125,000 shares of Common Stock and/or 125,000 Warrants. The
Representative's Purchase Option is exercisable for four years commencing one
year from the date of this Prospectus, at an exercise price of % of the
public offering price of the Common Stock or Warrants, as the case may be. The
Securities purchasable upon the exercise of the Representative's Purchase Option
are identical to those offered hereby. The Representative's Purchase Option
grants to the holders thereof certain "piggyback" rights and one demand right
for a period of seven and five years, respectively, from the date of this
Prospectus with respect to registration thereof under the Securities Act of the
securities directly and indirectly issuable upon exercise of the
Representative's Purchase Option. The Representative's Purchase Option cannot be
transferred, sold, assigned or hypothecated during the one-year period following
the date of this Prospectus, except to officers of the Representative and to the
Underwriters and selected dealers and their officers or partners.
The Company has also granted to the Underwriters an option exercisable
during the 45-day period after the date of this Prospectus, to purchase from the
Company at the offering price set forth on the cover page of this Prospectus,
less underwriting discounts and commissions, up to an additional 187,500 shares
of
59
<PAGE>
Common Stock and an additional 187,500 Warrants for the sole purpose of covering
over-allotments, it any.
The Company has engaged the Representative, on a non-exclusive basis, as its
agent for the solicitation of the exercise of the Warrants. Other NASD members
may be engaged by the Representative in its solicitation efforts. To the extent
not inconsistent with the guidelines of the NASD and the rules and regulations
of the Commission, the Company has agreed to pay the Representative for bona
fide services rendered a commission equal to 5% of the exercise price for each
Warrant exercised if the exercise was solicited by the Representative. In
addition to soliciting, either orally or in writing, the exercise of the
Warrants, such services may also include disseminating information, either
orally or in writing, to warrant holders about the Company or the market for the
Company's securities, and assisting in the processing of the exercise of the
Warrants. No compensation will be paid to the Representative in connection with
the exercise of the Warrants if the market price of the underlying shares of
Common Stock is lower than the exercise price, the Warrants are held in a
discretionary account, the Warrants are exercised in an unsolicited transaction,
or the arrangement to pay the commission is not disclosed in the prospectus
provided to warrant holders at the time of exercise. In addition, unless granted
an exemption by the Commission from Rule 10b-6 under the Exchange Act, while it
is soliciting exercise of the Warrants, the Representative will be prohibited
from engaging in any market activities or solicited brokerage activities with
regard to the Company's securities unless the Representative has waived its
right to receive a fee for the exercise of the Warrants.
Pursuant to the Underwriting Agreement, all of the officers, and directors
of the Company and existing shareholders of the Company each holding less than
one percent or more of the shares outstanding as of the date of this Prospectus
("Insiders") have agreed not to sell any of their shares of Common Stock until
eighteen months from the date of this Prospectus without obtaining the prior
written consent of the Representative. Additionally, the Underwriting Agreement
provides that for a period of five years from the date of this Prospectus, the
Company will use its best efforts to elect as members up to two representatives
of the Representative to its Board of Directors. If the Representative does not
exercise its option to designate at least one member of the Company's Board of
Directors, it shall nevertheless be entitled to send a representative to observe
each meeting of such Board of Directors. GKN has not yet selected a designee or
representative.
During the three-year period following the Effective Date, GKN shall have
the right to purchase for GKN's account or to sell for the account of the
Insiders any securities sold by the Insiders (or by any family member or
affiliate of any of the Insiders) pursuant to Rule 144 under the Securities Act.
Each Insider will agree to consult with GKN with regard to any such sales and
will offer GKN the exclusive opportunity to purchase or sell such securities on
terms at least as favorable to the Insiders as they can secure elsewhere. If GKN
fails to accept in writing any such proposal for sale by the Insiders within 24
hours after receipt of a notice containing such proposal, then GKN shall have no
claim or right with respect to any such sales contained in any such notice. If,
thereafter, such proposal is modified in any material respect, the Insiders
shall adopt the same procedure as with respect to the original proposal.
The prices of the Securities offered hereby have been determined by
negotiations between the Company and the Representative. Among the factors to be
considered in such negotiations, in addition to prevailing market price of the
Common Stock immediately prior to the effective date of the Offering and other
market conditions, will be certain financial information of the Company, an
assessment of the Company's management, estimates of the business potential and
earnings prospects of the Company, the current state of the Company's
development and operations, the current state of the industry in which the
Company will compete, the Company's capital structure, and the above factors in
relation to market values of other companies engaged in activities similar to
the Company. The offering price set forth on the cover page of this Prospectus
should not, however, necessarily be considered an indication of the actual value
of the Common Stock. Such price is subject to change as a result of market
conditions and other factors.
60
<PAGE>
In December 1996 and January 1997, the Representative acted as placement
agent for the Moto Guzzi Financing and was paid commissions and expenses of
$570,000.
LEGAL MATTERS
The validity of the Securities offered hereby and certain legal matters will
be passed upon for the Company by Morrison Cohen Singer & Weinstein, LLP, New
York, New York. Graubard, Mollen & Miller, New York, New York, has acted as
counsel for the Underwriters in connection with this Offering.
EXPERTS
The financial statements of the Company as of December 31, 1995 and 1994,
and for each of the years in the three-year period ended December 31, 1995, have
been included herein and in the Registration Statement in reliance upon the
report of Reconta Ernst & Young, independent auditors, appearing elsewhere
herein, given upon the authority of said firm as experts in accounting and
auditing.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement under the Securities Act with respect to
the Common Stock offered hereby. This Prospectus, which is part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement and the exhibits and schedules thereto, certain items of
which are omitted in accordance with the rules and regulations of the
Commission. For further information with respect to the Company and the
Securities offered by this Prospectus and such omitted information, reference is
hereby made to the Registration Statement and such exhibits, amendments and
schedules filed as a part thereof, which may be inspected, without charge, at
the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at its New York Regional Office, Seven
World Trade Center, 13th Floor, New York, New York 10048. Copies of all or any
portion of the Registration Statement may be obtained from the Public Reference
Section of the Commission, upon payment of prescribed fees.
Statements contained in this Prospectus as to the contents of any contract,
agreement or other document referred to are of necessity brief descriptions
thereof and are not necessarily complete. With respect to each such contract,
agreement or other document filed as an exhibit to the Registration Statement,
reference is made to the copy of the document filed as an exhibit for a more
complete description of the matter involved, each such statement being qualified
in its entirety by such reference.
The Company intends to furnish its stockholders with annual reports
containing consolidated financial statements audited by an independent
accounting firm and quarterly reports containing unaudited consolidated
financial information for each of the first three fiscal quarters of each fiscal
year of the Company following the end of such quarter and such other periodic
reports as the Company may determine to be appropriate or as may be required by
law.
61
<PAGE>
TRIDENT ROWAN GROUP, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
AUDITED FINANCIAL STATEMENTS AT DECEMBER 31, 1995
Balance Sheets............................................................................................. F-3
Statements of Operations................................................................................... F-5
Statements of Stockholders' Equity (deficit)............................................................... F-6
Statements of Cash Flows................................................................................... F-7
Notes to Financial Statements.............................................................................. F-9
UNAUDITED INTERIM FINANCIAL STATEMENTS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
Balance Sheets............................................................................................. F-29
Statements of Operations................................................................................... F-31
Statements of Cash Flows................................................................................... F-33
Notes to Interim Financial Statements...................................................................... F-34
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
De Tomaso Industries, Inc.
We have audited the consolidated balance sheets of De Tomaso Industries,
Inc. and subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the three years in the period ended December 31, 1995, all expressed in
Italian Lire. Our audits also included the financial statement schedule listed
in the index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and related schedules are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above,
present fairly, in all material respects, the consolidated financial position of
De Tomaso Industries, Inc. and subsidiaries at December 31, 1995 and 1994, and
the consolidated results of its operations and its cash flows for each of the
three years in the period ended December 31, 1995, in conformity with accounting
principles generally accepted in the United States of America. Also, in our
opinion, the related financial schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
RECONTA ERNST & YOUNG
April 3, 1996
Milan, Italy
F-2
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31 DECEMBER 31
1995 1995 1994
NOTE US$'000 LIRE M. LIRE M.
--------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
ASSETS
Cash and cash equivalents................................... 15,200 24,137 5,286
Marketable securities, at cost.............................. -- -- 5,000
Receivables................................................. 25,016 39,726 48,259
Trade, less allowance of Lit. 1,268 in 1995 and Lit. 571
in 1994................................................. 14,940 23,725 14,416
Finance receivables, less allowance of Lit. 2,200......... 4,784 7,597 --
Receivables from related parties.......................... 13 2,282 3,624 1,521
Other receivables......................................... 3,010 4,780 5,322
Installment receivable from sale of subsidiary............ -- -- 27,000
Inventories................................................. 19,343 30,717 20,174
Raw materials, spare parts and work-in-process............ 13,520 21,469 17,609
Finished products......................................... 5,824 9,248 2,565
Prepaid expenses............................................ 698 1,109 1,322
------------ ------------- -------------
TOTAL CURRENT ASSETS........................................ 60,257 95,689 80,041
------------ ------------- -------------
Property, plant and equipment............................... 4,855 7,709 12,954
Land...................................................... 679 1,078 1,123
Buildings................................................. 2,782 4,418 10,346
Machinery and equipment................................... 19,136 30,388 29,790
------------ ------------- -------------
22,597 35,884 41,259
Less allowances for depreciation.......................... (17,742) (28,175) (28,305)
------------ ------------- -------------
Trademarks and other intangible assets net of amortization
of Lit. 250 million....................................... 2,991 4,750 --
Goodwill.................................................... 919 1,459 --
Real estate for sale........................................ 4 21,554 34,227 --
Investments in unconsolidated companies..................... 1,389 2,205 259
Marketable and other securities and investments............. 10,816 17,176 14,759
Other assets................................................ 5 12,352 19,615 10,648
------------ ------------- -------------
TOTAL ASSETS................................................ $ 115,133 Lit. 182,830 Lit. 118,661
------------ ------------- -------------
------------ ------------- -------------
</TABLE>
See Notes to Consolidated Financial Statements
F-3
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 31 DECEMBER 31
1995 1995 1994
NOTE US$'000 LIRE M. LIRE M.
--------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
LIABILITIES
Advances from banks......................................... 6 11,674 18,538 15,784
Advances from banks for finance activities.................. 6 5,429 8,621 --
Accounts payable............................................ 14,843 23,570 12,838
Accrued expenses............................................ 7 5,725 9,092 11,981
Amounts due to related and affiliated parties............... 13 321 509 35
Income taxes payable........................................ 10 389 617 --
Current portion of long-term real estate debt............... 8 6,014 9,550 --
Current portion of other long-term debt..................... 8 1,175 1,866 5,681
------------ ------------- -------------
TOTAL CURRENT LIABILITIES................................... 45,570 72,363 46,319
------------ ------------- -------------
Long-term real estate debt, less current portion............ 8 6,116 9,712 --
Other long-term debt, less current portion.................. 8 5,281 8,386 5,004
Termination indemnities..................................... 5,183 8,231 7,137
Provision for claims........................................ 2,264 3,595 3,195
Minority interests.......................................... 10,562 16,773 13,849
Common Stock subject to repurchase.......................... 3, 16 7,902 12,549 --
SHAREHOLDERS' EQUITY........................................ 32,255 51,221 43,157
Voting preferred stock, convertible share for share into
common stock par value $2.50 per share:
Authorized 2,000,000 shares; 1,000,000 shares issued and
outstanding in 1994....................................... -- -- 1,453
Common stock, par value $2.50 per share:
Authorized 10,000,000 shares; 4,714,332 (1994-- 2,057,446)
shares issued and outstanding less 776,530 subject to
repurchase................................................ 4,247 6,744 2,988
Additional paid in capital.................................. 44,919 71,332 47,543
Treasury stock, at cost..................................... (7,447) (11,826) 0
Deficit..................................................... (10,030) (15,926) (8,946)
Equity adjustment from translation.......................... 448 711 119
Accretion expense and related exchange gains................ 118 186 --
------------ ------------- -------------
$ 115,133 Lit. 182,830 Lit. 118,661
------------ ------------- -------------
------------ ------------- -------------
</TABLE>
See Notes to Consolidated Financial Statements
F-4
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1995 1994 1993
US$'000 LIRE M. LIRE M. LIRE M.
---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Net sales................................................... 45,499 72,253 51,994 41,919
Cost of sales............................................... (39,931) (63,410) (46,256) (36,060)
---------- ----------- ----------- ------------
5,568 8,843 5,738 5,859
Selling, general and administrative expenses................ (10,220) (16,230) (10,818) (12,439)
Rental income............................................... 485 770 -- --
Other income, net........................................... 323 513 990 1,117
---------- ----------- ----------- ------------
(3,844) (6,104) (4,090) (5,463)
Interest expense............................................ (2,801) (4,448) (3,874) (8,033)
Interest income............................................. 2,797 4,442 5,536 6,772
---------- ----------- ----------- ------------
Loss from continuing operations before income taxes and
minority interests........................................ (3,848) (6,110) (2,428) (6,724)
Income taxes................................................ (264) (420) (39) (12)
---------- ----------- ----------- ------------
Loss from continuing operations before minority interest.... (4,112) (6,530) (2,467) (6,736)
Minority interests.......................................... (283) (450) (810) 0
---------- ----------- ----------- ------------
Loss from continuing operations............................. (4,395) (6,980) (3,277) (6,736)
Discontinued operations..................................... -- -- -- 160,233
Loss from operations........................................ -- -- -- (22,885)
Gain on disposal (net of minority interest of Lit.
13,039)................................................... -- -- -- 183,118
---------- ----------- ----------- ------------
Net (loss)/income........................................... $ (4,395) Lit. (6,980) Lit. (3,277) Lit. 153,497
---------- ----------- ----------- ------------
---------- ----------- ----------- ------------
EARNINGS/(LOSS) PER SHARE US$ LIRE LIRE LIRE
---------- ----------- ----------- ------------
Loss from continuing operations per share................... $ (1.30) Lit. (2,065) Lit. (1,593) Lit. (2,203)
Disposed operations......................................... $ -- Lit.-- Lit.-- Lit. 52,407
---------- ----------- ----------- ------------
Net income/(loss) per share................................. $ (1.30) Lit. (2,065) Lit. (1,593) Lit. 50,204
---------- ----------- ----------- ------------
---------- ----------- ----------- ------------
Average number of common shares and equivalents outstanding
during the year........................................... 3,380,441 3,380,441 2,057,446 3,057,446
Earnings per share if preferred shares had been converted
and repurchased January 1, 1995........................... (1.25) Lit. (1,978)
---------- -----------
---------- -----------
</TABLE>
See Notes to Consolidated Financial Statements
F-5
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
VOTING ADDITIONAL RETAINED
PREFERRED COMMON PAID-IN EARNINGS/ TREASURY TRANSLATION
LIRE MILLION STOCK STOCK CAPITAL (DEFICIT) STOCK ADJUSTMENT
- -------------------------------------------- ----------- ----------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
AT JANUARY 1, 1993.......................... Lit. 1,453 2,988 47,453 (159,166) -- 695
Net income for the year..................... -- -- -- 153,497 -- --
Translation adjustment...................... -- -- -- -- -- (1,129)
----------- ----------- ----------- ----------- --------- -----------
AT DECEMBER 31, 1993........................ Lit. 1,453 2,988 47,453 (5,669) -- (434)
Net loss for the year....................... -- -- -- (3,277) -- --
Translation adjustment...................... -- -- -- -- -- 553
----------- ----------- ----------- ----------- --------- -----------
AT DECEMBER 31, 1994........................ Lit. 1,453 2,988 47,453 (8,946) -- 119
Net loss for the year....................... -- -- -- (6,980) -- --
Translation adjustment...................... -- -- -- -- -- 592
Conversion of shares........................ (1,453) 1,453 -- -- -- --
Repurchase of shares (A).................... -- -- -- -- (11,826) --
Shares subject to repurchase (B)............ -- (1,128) (11,607) -- -- --
Issues of shares............................ -- 3,431 35,396 -- -- --
----------- ----------- ----------- ----------- --------- -----------
AT DECEMBER 31, 1995........................ Lit. -- 6,744 71,332 (15,926) (11,826) 711
----------- ----------- ----------- ----------- --------- -----------
AT DECEMBER 31, 1995........................ $'000 -- 4,247 44,919 (10,030) (7,447) 448
----------- ----------- ----------- ----------- --------- -----------
----------- ----------- ----------- ----------- --------- -----------
<CAPTION>
ACCRETION
EXPENSE,
LIRE MILLION NET TOTAL
- -------------------------------------------- ------------- ---------
<S> <C> <C>
AT JANUARY 1, 1993.......................... (106,487)
Net income for the year..................... -- 153,497
Translation adjustment...................... -- (1,129)
--- ---------
AT DECEMBER 31, 1993........................ -- 45,881
Net loss for the year....................... -- (3,277)
Translation adjustment...................... -- 553
--- ---------
AT DECEMBER 31, 1994........................ -- 43,157
Net loss for the year....................... -- (6,980)
Translation adjustment...................... -- 592
Conversion of shares........................
Repurchase of shares (A).................... -- (11,826)
Shares subject to repurchase (B)............ 186 (12,549)
Issues of shares............................ -- 38,827
--- ---------
AT DECEMBER 31, 1995........................ 186 51,221
--- ---------
AT DECEMBER 31, 1995........................ 118 32,255
--- ---------
--- ---------
</TABLE>
- ------------------------
(A) Treasury stock represents 703,774 shares recorded at cost.
(B) Shares subject to repurchase relate to 776,530 shares subject to repurchase
under certain conditions on July 17, 1998, as described in Note 3. Such
shares were recorded at the date of the contingent repurchase agreement at
their estimated market value of $10.00 (Lit. 16,400) per share. Accretion
expense represents amortization over the period through July 17, 1998 of the
difference between market value and the agreed repurchase price of $11.27,
net of exchange movements.
See Notes to Consolidated Financial Statements
F-6
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996
CONSOLIDATED STATEMENT OF CASH FLOWS
DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
1995 1995 1994 1993
US$'000 LIRE M. LIRE M. LIRE M.
--------- ------------ ------------- --------------
<S> <C> <C> <C> <C>
Net (loss)/income.............................................. (4,395) (6,980) (3,277) 153,497
Adjustments to reconcile net (loss)/income to net Cash
(used)/provided by operating activities:
Depreciation and amortization................................ 1,883 2,990 1,907 5,886
Gain on sales of operating assets............................ (154) (244) (2,841) --
Minority interests in net income............................. 283 450 810 13,039
Gain on sale of stock of subsidiary.......................... -- -- -- (196,157)
Provision for termination indemnities........................ 753 1,196 1,027 1,058
Payments of termination indemnities.......................... (638) (1,013) (1,135) (561)
Provision for inventory obsolescence......................... 990 1,572 669 1,261
Other operating activities................................... 1,316 2,089 1,512 (1,067)
Changes in operating assets and liabilities:
Trade and other receivables.................................. 766 1,217 (1,103) 781
Related party receivables.................................... (857) (1,361) 903 4,689
Inventories.................................................. (5,702) (9,055) 509 (8,314)
Prepaid expenses............................................. 269 427 (546) (667)
Accounts payable and accrued expenses........................ 2,083 3,308 2,170 (4,591)
Related party payables....................................... (495) (786) (178) 64
--------- ------------ ------------- --------------
Net cash (used)/provided by operating activities............... (3,898) (6,190) 427 (31,082)
--------- ------------ ------------- --------------
Investing activities:
Net Decrease/(Increase) in investments....................... 2,038 3,236 (14,468) --
Purchase of subsidiaries, net of cash acquired............... (751) (1,193) -- --
Proceeds on disposal of operating assets..................... 679 1,079 2,911 --
Deferred receipts from sale of Maserati...................... 17,003 27,000 23,750 --
Purchases of property, plant and equipment................... (1,747) (2,775) (1,131) (1,369)
--------- ------------ ------------- --------------
Net cash provided/(used) by investing activities............. 17,222 27,347 11,062 (1,369)
Financing activities
Net increase/(decrease) in advances from banks............... (2,374) (3,770) (7,211) 5,192
Proceeds from share issues................................... 5,166 8,204 --
Repurchase of shares......................................... (3,149) (5,000) -- --
Advances for sale of Maserati................................ -- -- -- 28,500
Proceeds from long-term debt................................. 247 392 -- --
Principal payments of long-term debt......................... (1,317) (2,091) (1,654) (2,028)
--------- ------------ ------------- --------------
Net cash provided/(used) by financing activities............... (1,427) (2,265) (8,865) 31,664
--------- ------------ ------------- --------------
Increase/(decrease) in cash and cash equivalents............... 11,897 18,892 2,624 (787)
Exchange movement on opening cash balances..................... (26) (41) -- --
Cash and cash equivalents, beginning of period................. 3,329 5,286 2,662 3,449
--------- ------------ ------------- --------------
Cash and cash equivalents, end of period....................... $ 15,200 Lit. 24,137 Lit. 5,286 Lit. 12,662
--------- ------------ ------------- --------------
--------- ------------ ------------- --------------
</TABLE>
See Notes to Consolidated Financial Statements
F-7
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996
CONSOLIDATED STATEMENT OF CASH FLOWS
DECEMBER 31, 1995, 1994 AND 1993
SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND FINANCING ACTIVITIES
In connection with the Finprogetti acquisition, the Company issued shares
for Lit. 38,223 million in exchange for cash of Lit. 8,204 million and assets
with a fair value of Lit. 29,707 million, net of advances from banks of Lit.
12,572 million and long-term debt of Lit. 19,431 million. Cash acquired amounted
to Lit. 631 million. The Company also paid costs, included in the total purchase
price, of Lit. 1,224 million in this transaction. See Note 3--Acquisition and
Purchase of Treasury Stock.
In connection with the repurchase of stock formerly owned by the ex
Chairman, also described in Note 3, the Company gave assets with a book value of
Lit. 6,629 million as part of the consideration for the stock repurchased.
The Company issued stock with a value of Lit. 603 million to purchase the
minority shareholding in its motorcycle subsidiary, GBM S.p.A.
The Company assumed advances from banks of Lit. 3,425 million in connection
with the acquisition of Lita. S.p.A. and acquired each of Lit. 15 million.
OTHER SUPPLEMENTAL INFORMATION
Interest paid in 1995 amounted to Lit. 4,416 million and Lit. 4,051 million
and Lit. 14,379 million in 1994 and 1993 respectively.
See Notes to Consolidated Financial Statements
F-8
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995
1. BACKGROUND AND ORGANIZATION
Trident Rowan Group, Inc. is incorporated in the United States but operates
primarily in Italy, managing troubled and underperforming Italian companies. It
provides temporary management services to third parties and its subsidiaries
which operate in three industry segments: the manufacture and distribution of
"Moto Guzzi" brand motorcycles in Italy, Europe and elsewhere in the world; the
manufacture and distribution of steel tubes for the automotive and furniture
markets; and the development and sale of commercial real estate property.
Information on the Company's operations by segment and geographic area are
included in Notes 14 and 15 to the Financial Statements.
The primary financial statements are shown in Italian lire because all of
the Company's material operating entities are based and operate entirely 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 Lit. 1,588 to US $1, the approximate exchange rate at December
31, 1995. It should not be construed that the assets and liabilities, expressed
in US dollar equivalents, can actually be realized in or extinguished by US
dollars at that or any other rate.
In these Financial Statements, the word "Company" is used to denote Trident
Rowan Group, Inc. and its subsidiaries.
2. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its majority owned subsidiaries. Significant intercompany accounts and
transactions have been eliminated on consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from these assumptions.
FOREIGN CURRENCY TRANSLATION
The financial statements of non Italian entities have been translated from
the applicable functional currency to Italian lire using the year-end exchange
rate for balance sheet items and the average exchange rate for the year for
statement of operation items. The translation differences resulting from the
change in exchange rate from year to year have been reported separately as a
component of shareholder's equity.
FOREIGN CURRENCY TRANSACTIONS
Transactions, receivables and payables denominated in currencies other than
the functional currency are recorded at the exchange rate in effect on the
transaction date. Such receivables and payables are adjusted to current exchange
rates as of the date paid or the balance sheet date, whichever is earlier. Gains
and losses are included in the statement of operations.
F-9
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
REVENUE RECOGNITION
Revenues from sale of products are recorded upon shipment, which is when
title passes.
RESEARCH AND DEVELOPMENT
The Company's motorcycle business is continuously engaged in
company-sponsored programs of product improvement and development. Other
businesses do not conduct research and development activities. Research and
development costs are expensed as they are incurred.
Aggregate 1995 research and development expenditures were Lit. 861 million
($542,000) compared to Lit. 197 million in 1994, and Lit. 409 million in 1993.
Of the 1995 expenditure, approximately Lit. 602 million ($379,000) was in
respect of the development of models whose production is planned to commence in
1996.
INVENTORIES
Inventories are stated at the lower of cost or market with cost being
determined principally by the last in, first out (LIFO) method applying average
cost of the year to increases in inventory quantities. If inventories had been
determined by the lower of cost or market value using the first in, first out
(FIFO) methods, which approximates current cost, inventories would have been
greater by approximately Lit. 2,000 million in 1995 and Lit. 4,900 million in
1994.
Valuation reserves included in the inventory balances were Lit. 6,612
million ($4,164,000) and Lit. 5,451 million as of December 31, 1995 and 1994,
respectively.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at cost. Depreciation is provided
on the straight-line method over the estimated useful lives of the assets.
GOODWILL AND OTHER INTANGIBLES
On the purchases of businesses or other assets, the excess of purchase cost
over fair value of assets acquired is accounted for as goodwill and is amortized
on a straight line basis over a period determined by the Company taking into
consideration the nature of the business or assets acquired. Goodwill in the
balance sheet as at December 31, 1995 relative to the Finprogetti acquisition is
being amortized over 10 years. Where the fair value of assets acquired is higher
than the purchase price, then the excess is applied to reduce firstly the
long-term intangible assets acquired, then other long-term assets and fixed
assets.
F-10
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Trademarks and other intangibles, in respect of the Company's temporary
management subsidiary, are being amortized over 10 years. Concession rights,
included in other assets (Note 5), are amortized over the life of the
concession.
REAL ESTATE FOR SALE
It is the Company's intention to sell its real estate portfolio. Properties
are valued at estimated market value, allowing for depreciation through to the
expected dates of sales. In the absence of definite contracts for sale, no
amounts have been included in current assets at December 31, 1995.(1)
MARKETABLE AND OTHER SECURITIES AND INVESTMENTS
Marketable and other securities and investments consist primarily of fixed
income investments which cannot be readily sold using established markets.
Securities as at December 31, 1995 are held available for sale and are
represented by Italian government-backed securities: CFIFR 2004 floating rate
for Lit. 9,410 million, CCT 12.5% 1998 for Lit. 4,901 million and CDEFI floating
rate December 28, 1996 for Lit. 2,207 million. Such securities are carried at
fair value which approximates cost plus accrued interest. Lit. 15,000 million of
such amounts are deposited as security in respect of the Company's commitment to
repurchase the shares which were previously owned by its former Chairman (see
Notes 3 and 15). At December 31, 1994, there were marketable securities included
for Lit. 5,000 million in respect of government bonds which could be readily
sold using established markets and which were valued at cost plus accrued
interest which approximated market value.
TERMINATION INDEMNITIES
All employees of the Company's Italian subsidiaries are entitled to receive
severance pay in accordance with the terms of applicable national labor law and
contracts. The liability for severance pay is accrued for service to date and is
payable immediately on termination. The liability is calculated in accordance
with the individual employee's length of service, employment category and
compensation and is adjusted annually by a cost of living index provided by the
Italian Government. There is no vesting period or funding requirement associated
with the liability. The liability recorded in the balance sheet is the amount
that the employee would be entitled to if the employee separates immediately.
INCOME TAXES
Income taxes are provided by each entity included in the consolidation in
accordance with local laws. Deferred income taxes have been provided using the
liability method in accordance with FASB Statement No. 109 Accounting for Income
Taxes.
- ------------------------
(1) See Note 20--Events subsequent to the date of the audit report (Unaudited)
and the Unaudited Condensed Interim Financial Statements as at September 30,
1996.
F-11
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
STATEMENTS OF CASH FLOW
The cash flows for the roll-over of maturing fixed-term securities into new
securities is included in the caption "Net Decrease/(Increase) in Investments"
in the Consolidated Statement of Cash Flows. Advances from banks arise primarily
under the Company's short-term lines of credit with its banks. These short-term
obligations are payable on demand. The cash flows for these items are included
in the caption "Net increase/(decrease) in advances from bank" in the
Consolidated Statements of Cash Flow.
NET INCOME/(LOSS) PER COMMON SHARE
Net income/(loss) per common share is based on the average number of shares
of common stock and dilutive common stock equivalents outstanding during the
years. All outstanding convertible preferred stock of the Company (which were
converted during 1995) were considered to be common stock equivalents and were
considered anti-dilutive for 1994.
RECLASSIFICATIONS
Comparative figures for 1994 and 1993 have been reclassified to conform with
1995 presentation.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
In March 1995, the FASB issued Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,
which requires impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the assets'
carrying amounts. Statement 121 also addresses the accounting for long-lived
assets that are expected to be disposed of.
The Company will adopt Statement 121 in the first quarter of 1996 and, based
on current circumstances, does not believe that the effects of adoption will be
material.(1)
3. ACQUISITIONS AND PURCHASE OF TREASURY STOCK
FINPROGETTI ACQUISITION
On July 17, 1995, effective July 1, 1995, pursuant to the terms of the
"Finprogetti Agreement" the Company acquired from Finprogetti S.p.A. (an Italian
entity) all of that company's equity interests in its principal operating
subsidiaries and a tax receivable of Lit. 5,150 million in exchange for shares
of the Company. The operating subsidiaries comprised TIM, a temporary management
company specialized in the "turnaround" of troubled and underperforming Italian
and foreign companies, subsidiaries holding Italian real estate buildings and
concession rights and a leasing/factoring company, Finproservice. As part of the
same transaction, the Company acquired the minority interest in TIM from Dott.
Albino Collini, its founder and CEO. Under the terms of the Finprogetti
Agreement, the final number of the Company's shares to be issued was conditional
on the purchase before September 30, 1995 by Finprogetti S.p.A., or its
- ------------------------
(1) See Note 20--Events subsequent to the date of the audit report (Unaudited)
and the Unaudited Condensed Interim Financial Statements as at September 30,
1996.
F-12
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
3. ACQUISITIONS AND PURCHASE OF TREASURY STOCK (CONTINUED)
shareholders or third parties directed by it, of a specified number of shares in
the Company at a stipulated price of Lit. 20,106.73 ($12.26 at then current
exchange rates) per share. After the receipt of cash of Lit. 8,204 million
(approximately U.S. $5,000,000) for the subscription to 408,008 shares, the
Company adjusted the number of shares to be given so that 1,922,652 shares were
issued to effect the acquisition from Finprogetti S.p.A., in addition to the
shares issued in exchange for cash. Of the total number of shares issued of
2,330,660 for the acquisition from Finprogetti, including the subsequent
purchase of 408,008 shares, 248,673 are to be held in escrow pending realization
by the Company of the tax receivable of Lit. 5,150 million that was included in
the assets acquired.
The Lit 39,447 million total purchase price reported in the balance sheet to
effect the Finprogetti Agreement reflects Lit. 38,223 million (Lit. 16,400 per
share; U.S.$10.00 per share) assigned to the 2,330,660 shares issued plus costs
of Lit. 1,224 million incurred in connection with the acquisition. The value of
$10.00 per share represents the fair value of the shares issued, approximating
the trading price of the Company's shares at the date of the acquisition and
supported by the Company's estimate of the fair values of assets and liabilities
acquired. The acquisition has been accounted for by the purchase method.
Accordingly, the purchase price has been allocated to the assets purchased and
the liabilities assumed based on the fair values at the date of the acquisition.
The purchase price was allocated as follows:
<TABLE>
<CAPTION>
US$'000 LIRE M.
--------- ---------
<S> <C> <C>
Cash..................................................................... 5,166 8,204
Real estate interests.................................................... 21,479 34,109
Concession rights over real estate....................................... 2,960 4,700
Less: related long-term debt............................................. (12,238) (19,431)
Trademark and other intangible assets.................................... 3,148 5,000
Other assets and liabilities, net........................................ 3,355 5,329
Goodwill................................................................. 967 1,536
--------- ---------
24,837 39,447
--------- ---------
--------- ---------
</TABLE>
The excess of the purchase price paid over the fair values of the net assets
acquired has been recorded as goodwill, which is being amortized in accordance
with the Company's policy. Results of the Finprogetti companies are included in
operations from July 1, 1995 and the amount of goodwill amortization for fiscal
year 1995 was Lit. 77 million.
LITA ACQUISITION
On July 25, 1995, the Company acquired Lita S.p.A., an Italian manufacturer
of steel tubes for the motor and furniture industries for cash in the amount of
Lit. 615 million ($387,000). The fair value of the assets received was Lit.
1,649 million ($1,038,000) in excess of the purchase price. This excess has been
allocated to reduce the carrying value of property, plant and equipment by Lit.
1,482 million ($933,000) and other non-current assets by Lit. 167 million
($105,000). A valuation allowance was established against the deferred tax asset
arising from the adjustment of the book basis of the assets. When realized the
tax benefit will be credited to income.
F-13
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
3. ACQUISITIONS AND PURCHASE OF TREASURY STOCK (CONTINUED)
PURCHASE OF TREASURY STOCK
In April 1995, the Company entered into an agreement with Mr. Alejandro De
Tomaso (DeTomaso Agreement), the then Chairman of the Board, under which the
Company would repurchase Mr. De Tomaso's 1,000,000 shares of preferred stock and
480,304 shares of common stock at a negotiated price of Lit. 18,400 per share,
converted into dollars at the exchange rate in effect on closing date of Lit.
1,637.
Prior to the closing of that transaction, Mr. De Tomaso conveyed such
shares, subject to the DeTomaso Agreement, by gift. The shares are currently
held by a trust.
Performance under the De Tomaso Agreement was conditional upon the
consummation of the Finprogetti acquisition. Contemporaneously with the closing
of that transaction, 703,774 of the preferred and common shares formerly owned
by Mr. De Tomaso were delivered to the Company in exchange for cash of Lit.
5,000 million and properties (a hotel valued by the Board of Directors based
upon independent appraisals of Lit. 4,700,000,000 ($2,960,000) and a museum
collection of Maserati vehicles and engines valued by the Board of Directors at
Lit. 3,200,000,000 ($2,015,000)) that had a book carrying value of Lit. 6,629
million. The remaining preferred and common shares formerly owned by Mr. De
Tomaso have been exchanged for an equal number of shares of newly issued common
stock, which the Company is required to register for sale at the request of the
holder.
The value of Lit. 11,826 million (Lit. 16,804 per share; $10.26 per share)
placed on the Treasury stock acquired in 1995 pursuant to the DeTomaso Agreement
represents the book value of the consideration, including taxes payable of Lit
197 million, given in exchange for the treasury stock and no net gain or loss
has been recognized on the transaction.
Under the terms of the De Tomaso Agreement, if the remaining 776,530 shares
are not sold by their current owner prior to July 17, 1998 (the third
anniversary of the Finprogetti transaction), the Company is committed to acquire
the shares at $11.27 per share. The Company has obtained a letter of credit to
guarantee payment of the repurchase price which is collateralized by certain
investment securities owned by the Company and reported in the balance sheet in
the amount of Lit. 16,518 million. The agreement also provides that (a) at any
time prior to July 17, 1998, the Company may offer to buy any part or all of
such shares at $11.27 per share and (b) if such an offer made by the Company is
not accepted, the Company's commitment to buy the remaining 776,530 shares is
reduced by the number of shares stipulated in the offer that was not accepted.
These 776,530 shares were recorded on the balance sheet at July 17, 1995 at
estimated market value of $10.00 (Lit. 16,400 per share) as shares subject to
repurchase and are not included in shareholders' equity. The difference between
$10.00 and the redemption price of $11.27 is being amortized over the period to
July 17, 1998.
F-14
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
3. ACQUISITIONS AND PURCHASE OF TREASURY STOCK (CONTINUED)
PROFORMA INFORMATION
The pro forma unaudited results of operations for the years ended December
31, 1995 and 1994, assuming the Finprogetti and Lita acquisitions and the
repurchase of shares from the former Chairman had been consummated as at January
1, 1994, are as follows:
<TABLE>
<CAPTION>
1995 1995 1994
US$'000 LIRE M. LIRE M.
----------- ------------ ------------
<S> <C> <C> <C>
Net sales................................................................... 51,891 82,403 66,870
Rental income............................................................... 1,242 1,972 4,640
Finance income.............................................................. 1,032 1,639 2,686
Net loss.................................................................... (4,848) (7,699) (7,021)
Net loss per common share................................................... $ (1.03) Lit. (1,369) Lit. (1,499)
</TABLE>
It cannot be inferred that the proforma operating results as shown above
would have resulted had the acquisitions and repurchase of shares been
consummated as at January 1, 1994 as transactions between the entities acquired
and their then parent companies may not have occurred or may have occurred on
different terms and conditions.
4. REAL ESTATE FOR SALE
<TABLE>
<CAPTION>
1995 1995
US$'000 LIRE M.
----------- ---------
<S> <C> <C>
Building ready for sale................................................... 10,249 16,276
Real estate under development
Buildings............................................................... 5,568 8,842
Industrial areas........................................................ 1,959 3,109
Undeveloped land........................................................ 3,778 6,000
----------- ---------
21,554 34,227
----------- ---------
----------- ---------
</TABLE>
All of the real property was acquired as part of the Finprogetti
transaction. Part of one building ready for sale is rented to a third party
under an operating lease agreement expiring in 1998. A mortgage over the
building and a lien over the rentals received has been given as security for
this loan (see Note 8). The Company is seeking to dispose of this property by
the end of the second quarter of 1996. Alternatively, a sale of a significant
interest in the property with proceeds sufficient to cover all debt repayments
on related loans in 1996 is being examined, again with the objective of
completion within the end of the second quarter of 1996.(1)
A building and contiguous industrial areas under development are mortgaged
in favor of a financial institution as collateral for a loan facility of Lit.
6,000 million, which has not yet drawn upon. Bank advances from another
institution of Lit. 4,716 million have been drawn down, secured by such loan
facility
- ------------------------
(1) See Note 20--Events subsequent to the date of the audit report (Unaudited)
and the Unaudited Condensed Interim Financial Statements as at September 30,
1996.
F-15
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
4. REAL ESTATE FOR SALE (CONTINUED)
and are included in the short-term portion of real estate debt (see Note 8). The
Company has agreed in principle to sell its 66.7% interest in this property to
its 25% affiliate, Domer S.p.A. at book value. Closing of this transaction is
expected before the end of the second quarter.(1)
Undeveloped land represents an area in Sardinia for development of hotel and
leisure facilities and is owned by the Company through an 80% interest in Grand
Hotel Bitia S.r.l. The minority shareholder has an option, expiring on June 30,
1996, to purchase the Company's interest at a price above carrying value. The
Company will examine disposal of this property following the exercise or expiry
of the outstanding option.(1)
None of the proposed disposals have been finalized and, accordingly, no
amounts in respect of real estate are included in current assets.
5. OTHER ASSETS
<TABLE>
<CAPTION>
1995 1995 1994
US$'000 LIRE M. LIRE M.
----------- --------- ---------
<S> <C> <C> <C>
Concession rights net of amortization of Lit. 59..................................... 2,923 4,641 --
Tax receivables...................................................................... 9,160 14,546 10,292
Other................................................................................ 269 428 356
----------- --------- ---------
12,352 19,615 10,648
----------- --------- ---------
----------- --------- ---------
</TABLE>
A mortgage over the concession rights has been granted as collateral for
certain loans (see Note 8). The concession rights expire in February, 2041 and
are being amortized on a straight line basis. Tax receivables represent amounts
for which reimbursement has been requested. Current tax balances for value added
and other taxes to be utilized against future liabilities are included in
current assets. The times for reimbursement in Italy have, in the recent past,
invariably been in excess of 12 months and, accordingly, amounts for which
reimbursement has been requested are not classified as current assets. Interest
accrues on these/ receivables at rates set from time to time by the Italian
Government.
6. ADVANCES FROM BANKS AND CREDIT ARRANGEMENTS
The operating subsidiaries of the Company have lines of credit arrangements
with a number of Italian banks. Under these, the Company, at December 31, 1995,
could have borrowed up to Lit. 18,550 million ($11,681,000). The line of credit
arrangements do not have termination dates and are periodically reviewed. At the
end of March 1996, facilities totalling Lit. 23,570 million had been arranged.
The average interest rate on advances from banks was approximately 12.75% and
12.9% at December 31, 1995 and 1994. Advances from banks for finance activities
relate to factoring and leasing activities of a company acquired in the
Finprogetti acquisition and are partly secured by guarantees given by
Finprogetti S.p.A. The average interest rate on these borrowings was
approximately 12.75% as at December 31, 1995. No
- ------------------------
(1) See Note 20--Events subsequent to the date of the audit report (Unaudited)
and the Unaudited Condensed Interim Financial Statements as at September 30,
1996.
F-16
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
6. ADVANCES FROM BANKS AND CREDIT ARRANGEMENTS (CONTINUED)
significant new finance transactions will be entered into and these activities
and relative facilities will gradually expire as individual positions are
closed.
7. ACCRUED EXPENSES
<TABLE>
<CAPTION>
1995 1995 1994
US$'000 LIRE M. LIRE M.
----------- ----------- ---------
<S> <C> <C> <C>
Salaries, wages and related items.................................................... 2,186 3,471 4,717
Value added and other non income taxes............................................... 1,001 1,590 1,550
Other accrued expenses............................................................... 2,538 4,031 5,714
----- ----- ---------
5,725 9,092 11,981
----- ----- ---------
----- ----- ---------
</TABLE>
8. LONG-TERM DEBT
LONG-TERM DEBT FROM REAL ESTATE ACTIVITIES:
<TABLE>
<CAPTION>
1995 1995
US$'000 LIRE M.
----------- ---------
<S> <C> <C>
Mortgage note payable secured on land and buildings. Interest at a rate of
11.95%, payable in semi-annual installments, final installment due in
1998.................................................................... 5,668 9,000
Mortgage note payable secured on land, buildings, concession rights and
lien on rents. 12.55%, payable in semi-annual installments, final
installment due in 1999................................................. 3,492 5,546
Advances in respect of mortgage loan granted but not drawn down (see
below).................................................................. 2,970 4,716
----------- ---------
12,130 19,262
Less current portion...................................................... (6,014) (9,550)
----------- ---------
6,116 9,712
----------- ---------
----------- ---------
</TABLE>
All of the above long-term debt was acquired as part of the Finprogetti
transaction (see Note 3). The Company has in place a mortgage loan facility of
Lit. 6,000 million secured on land and buildings and has drawn down advances
from another financial institution, secured by this facility, of Lit. 4,716
million ($2,970,000) which are included above. The mortgage loan, when drawn
down, will be repayable in installments.
F-17
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
OTHER LONG-TERM DEBT:
<TABLE>
<CAPTION>
1995 1995 1994
US$'000 LIRE M. LIRE M.
----------- --------- ---------
<S> <C> <C> <C>
Mortgage note payable, collateralized by substantially all property, plant and
equipment of the motorcycle operations. 10.08% interest p.a., payable in
semi-annual installments, including interest....................................... 1,834 2,913 3,255
Notes payable, collateralized by second mortgage over properties of the motorcycle
operations. 12.40% interest p.a., payable in semi-annual installments, including
interest........................................................................... 3,305 5,248 4,151
12.36% interest p.a., payable in semi-annual installments, including interest 1,301 2,066 2,443
Unsecured note payable denominated in Swiss Francs at 5.15% interest, p.a............ -- -- 796
Sundry notes payable................................................................. 16 25 40
----------- --------- ---------
6,456 10,252 10,685
Less current portion................................................................. (1,175) (1,866) (5,681)
----------- --------- ---------
5,281 8,386 5,004
----------- --------- ---------
----------- --------- ---------
</TABLE>
As at December 31, 1994 a loan of one of the Company's subsidiaries of Lit.
4,151 million ($2,613,000) was technically in default and was classified as a
current liability. During 1995, the Company renegotiated this loan, including
accrued interest and unrealized exchange losses on a portion denominated in ECU,
in a new facility repayable over five years.
Maturities of long-term debt over the next five years are as follows:
<TABLE>
<CAPTION>
REAL ESTATE LOANS OTHER LOANS
---------------------- ----------------------
<S> <C> <C> <C> <C>
US$'000 LIRE M. US$'000 LIRE M.
----------- --------- ----------- ---------
1996...................................................................... 6,014 9,550 1,175 1,866
1997...................................................................... 3,147 4,998 1,234 1,959
1998...................................................................... 2,132 3,386 1,294 2,055
1999...................................................................... 837 1,328 1,361 2,162
2000...................................................................... -- -- 1,008 1,601
Subsequent to 2000........................................................ -- -- 384 609
----------- --------- ----- ---------
12,130 19,262 6,456 10,252
----------- --------- ----- ---------
----------- --------- ----- ---------
</TABLE>
As discussed in Note 4, the Company is seeking to dispose of its real estate
interests. Disposals, planned to be completed before the end of the second
quarter of 1996, would eliminate the related real estate loans above.(1)
- ------------------------
(1) See Note 20--Events subsequent to the date of the audit report (Unaudited)
and the Unaudited Condensed Interim Financial Statements as at September 30,
1996.
F-18
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
9. OTHER INCOME
Other income from continuing operations comprised the following:
<TABLE>
<CAPTION>
1995 1995 1994 1993
$'000 LIRE M. LIRE M. LIRE M.
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Currency exchange gain/(loss)................................................. (279) (443) (1,022) 786
Gain on sales of assets....................................................... 202 321 2,841 --
Finance income................................................................ 616 978 -- --
Finance expense............................................................... (560) (890) -- --
Other......................................................................... 344 547 (829) 331
--- --- --------- -----
323 513 990 1,117
--- --- --------- -----
</TABLE>
Finance income and expense represent the residual finance activities of
Finproservice, acquired as part of the Finprogetti acquisition in July 1995, and
whose operations are being wound down. The gain on sale of assets in 1994
derived principally from the sale of an electric power generating plant by the
motorcycle subsidiary, Moto Guzzi.
10. INCOME TAXES
Loss from continuing operations before income taxes, minority interests and
extraordinary items consisted of the following:
<TABLE>
<CAPTION>
1995 1995 1994 1993
$'000 LIRE M. LIRE M. LIRE M.
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
United States............................................................... (3,742) (5,942) (413) (1,650)
Italy....................................................................... (106) (168) (2,015) (5,074)
--------- --------- --------- ---------
(3,848) (6,110) (2,428) (6,724)
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
The provisions/(credit) for income taxes from continuing operations
consisted of the following:
<TABLE>
<CAPTION>
1995 1995 1994 1993
$'000 LIRE M LIRE M. LIRE M.
----- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Current taxation
United States................................................................ -- -- -- --
Italy........................................................................ 264 420 39 12
-- --
--- ---
264 420 39 12
-- --
-- --
--- ---
--- ---
Deferred taxation
United States................................................................ -- -- -- --
Italy........................................................................ -- -- -- --
-- --
--- ---
264 420 39 12
-- --
-- --
--- ---
--- ---
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax
F-19
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
10. INCOME TAXES (CONTINUED)
purposes. Valuation allowances have been recorded for the deferred tax assets as
management believes it more likely than not that these assets will not be
realized. Significant components of the Company's deferred tax assets as of
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
1995 1995 1994
$'000 LIRE M. LIRE M.
--------- --------- ---------
<S> <C> <C> <C>
Short-term reserves............................................................... 2,666 4,234 6,574
Carrying values of fixed assets................................................... 2,023 3,212 --
Net operating loss carryforwards.................................................. 8,004 12,710 21,503
Other............................................................................. 120 191 --
--------- --------- ---------
12,813 20,347 28,077
Valuation allowance (12,813) (20,347) (28,077)
--------- --------- ---------
Net deferred tax assets........................................................... -- -- --
--------- --------- ---------
--------- --------- ---------
</TABLE>
The effective provision/(credit) for income taxes from continuing operations
varied from the income taxes at the statutory US federal income tax rates as
follows:
<TABLE>
<CAPTION>
1995 1995 1994 1993
$'000 LIRE M. LIRE M. LIRE M.
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Computed tax/(credit) at U.S. federal rate.................................. (1,347) (2,138) (850) 2,353
Losses for which valuation allowance has been provided...................... 2,004 3,181 889 (2,341)
Utilization of tax losses................................................... (491) (780) -- --
Elimination of intercompany profit.......................................... 312 496 -- --
Other....................................................................... (213) (339) -- --
--------- --------- --- ---------
264 420 39 12
--------- --------- --- ---------
--------- --------- --- ---------
</TABLE>
At December 31, 1995 the Company had net operating loss carryforwards for
Italian income tax purposes of approximately Lit. 25,340 million ($15,958,000)
which expires as follows:
<TABLE>
<CAPTION>
1995 1995
US$'000 LIRE M.
----------- ---------
<S> <C> <C>
1996...................................................................... 61 97
1997...................................................................... 2,159 3,428
1998...................................................................... 10,814 17,172
1999...................................................................... 2,218 3,522
2000...................................................................... 706 1,121
----------- ---------
15,958 25,340
----------- ---------
----------- ---------
</TABLE>
For US Federal income tax purposes, the Company has net operating loss
carryforwards of approximately US$ 6,000,000 at December 31, 1995. These losses
expire from 2003 through 2010.
F-20
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
10. INCOME TAXES (CONTINUED)
United States income taxes have not been provided on unremitted earnings of
subsidiaries located outside the United States as such earnings are considered
to be permanently reinvested. Approximately Lit. 4,800 million of earnings of
foreign subsidiaries cannot be distributed under local laws.
11. CAPITAL STOCK
248,673 common stock shares issued as part of the Finprogetti acquisition
(see Note 3) do not have a right to vote until receipt of a Lit. 5,150 million
tax receivable that was included in the assets acquired.
The Company has entered into a commitment to repurchase shares from its
ex-Chairman in respect of 776,530 shares as described in Note 3 and 16.
12. STOCK OPTIONS
The Board of Directors of the Company have approved two share options plans
for 1,300,000 shares in total, to be submitted to the forthcoming shareholder's
meeting for their approval.
The "1995 Non-Qualified Plan" provides for the grant of non-qualified stock
options for officers and key employees. Options over a total of 1,150,000 shares
have been authorized by the Board. Grants were made in 1995 (subject to approval
of the plans) of a total of 960,000 options at an exercise price of $12.26. The
options granted can be exercised as follows:
<TABLE>
<S> <C>
1996............................................................... 228,000
1997............................................................... 228,000
1998............................................................... 228,000
1999............................................................... 138,000
2000............................................................... 138,000
</TABLE>
Under the "1995 Director's Plan", 5,000 options will be granted annually to
each non-employee Director of the Company for each full year of service, reduced
PRO RATA for incomplete years of service. The exercise price is fixed as at a
price of $12.26 for 1995 and, for years after 1995, at the reported closing
price of the stock on January 2 of the following year.
When shareholders' approval is obtained, the Company will account for stock
options in accordance with APB No. 25 which requires recognition of compensation
expense when the fair value of the stock exceeds the exercise price.
F-21
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
13. RELATED PARTY TRANSACTIONS
RECEIVABLES FROM RELATED PARTIES AND AFFILIATED COMPANIES
<TABLE>
<CAPTION>
1995 1995 1994
US$'000 LIRE M. LIRE M.
----------- ----------- -----------
<S> <C> <C> <C>
A+G Motorad GmbH..................................................................... 1,739 2,761 1,506
Finprogetti S.p.A.................................................................... 533 847 --
Other................................................................................ 10 16 15
----- ----- -----
2,282 3,624 1,521
----- ----- -----
----- ----- -----
</TABLE>
The amounts due from A+G Motorad GmbH, a 25% owned entity (1994--45% owned)
accounted for using the equity method, resulted from the purchase of products
and services from the Company. Sales to A+G Motorad GmbH, consisting primarily
of motorcycles and parts were Lit. 7,660 million ($4,823,000) in 1995 and Lit.
4,736 million and Lit. 5,169 million in 1994 and 1993 respectively.
The balance with Finprogetti S.p.A. results principally from balances in
existence at the date of acquisition of the Finprogetti subsidiaries.
AMOUNTS DUE TO RELATED PARTIES AND AFFILIATED COMPANIES
<TABLE>
<CAPTION>
1995 1995 1994
US$'000 LIRE M. LIRE M.
----------- ----------- -----------
<S> <C> <C> <C>
Finprogetti S.p.A................................................ 217 345 --
Interim S.p.A.................................................... 98 155 --
Other............................................................ 6 9 35
--
--- ---
321 509 35
--
--
--- ---
--- ---
</TABLE>
Amounts due to Finprogetti S.p.A. are in respect of balances arising from a
group value added tax system in effect prior to the acquisition by the Company,
personnel of Finprogetti S.p.A. who worked for the Company from the July 17,
1995 but who become employees of the Company as at December 31, 1995 and for
office machinery and furniture sold to the Company. Amounts due to Interim
S.p.A. are in respect of real estate consulting and management services rendered
to the Company's real estate subsidiaries.
Various guarantee arrangements between the acquired Finprogetti companies
and their former parent company have expired before or shortly after December
31, 1995, with the exception of guarantees by Finprogetti S.p.A. of part of the
bank advances in respect of finance activities (see Note 6)
TRANSACTIONS AND ARRANGEMENTS WITH FORMER CHAIRMAN
The repurchase of shares formerly owned by the ex-Chairman and commitment of
the Company to acquire the remaining shares formerly owned by him are detailed
in Notes 3 and 16. The repurchase has been accounted for at cost.
F-22
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
13. RELATED PARTY TRANSACTIONS (CONTINUED)
MORRISON COHEN SINGER & WEINSTEIN, LLP
The law firm of Morrison Cohen Singer & Weinstein, LLP, of which Howard E.
Chase, a Director of the Company and its Chief Executive Officer, was a member
until September 1, 1995, and to which he is now of counsel, was paid by the
Company and its subsidiaries in 1995 an aggregate of Lit. 1,327 million
($816,000 at the actual dollar amounts invoiced) in legal fees and disbursements
for services rendered.
The law firm of which Mr. Garavaglia, a Director of the Company, is a member
was paid an aggregate of Lit. 268 million ($169,000) by the Company and its
subsidiaries in 1995 for legal, statutory audit and tax consulting services
rendered.
RENTAL AGREEMENTS
Currently, rent is being paid in the amount of Lit. 108 million ($68,000)
annually by Centro Ricambi, the spare parts distribution subsidiary, to DeTomaso
Modena for the 2,800 square meter distribution facility owned by the affiliate
of Mr. DeTomaso. Management believes this rate of rental conforms with
prevailing market rates. The Company plans to vacate the facility and move to
other available space.
Mr. Francesco Pugno Vanoni, a Director of the Company, and his brother own
offices in Milan which are leased to certain subsidiaries of the Company
acquired from Finprogetti at a rental of Lit. 130 million ($82,000) per year.
Management believes this rate of rental conforms with prevailing market rates.
14. EXPORT SALES AND GEOGRAPHIC INFORMATION
The Company's sales by geographic destination were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
LIRE M. LIRE M. LIRE M.
----------- ----------- -----------
<S> <C> <C> <C>
Italy............................................................. 35% 38% 35%
Europe other than Italy........................................... 49% 51% 41%
United States..................................................... 6% 5% 6%
Elsewhere......................................................... 10% 6% 18%
</TABLE>
Sales to Germany represented approximately 14% of motorcycle sales in 1995.
No other country represented over 10% of motorcycle sales. As at December 31,
1995 all operating subsidiaries of the Company were located in Italy. The
Company has assets in the Unites States in respect of offices which deal with
regulatory matters and the remaining assets of a previous distribution company
which have yet to be sold. Identifiable assets in the United States are not
significant.
15. INDUSTRY SEGMENT ANALYSIS
The following tables shows net sales, operating profit and identifiable
assets for the Company's industry segments:
F-23
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
15. INDUSTRY SEGMENT ANALYSIS (CONTINUED)
NET SALES
<TABLE>
<CAPTION>
1995 1995 1994 1993
$'000 LIRE M. LIRE M. LIRE M.
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Motorcycles............................................ 45,878 72,854 54,961 43,593
Steel tubing........................................... 3,675 5,836 -- --
Other:
Management services.................................. 961 1,526 -- --
Corporate services and other......................... 587 932 2,305 3,408
Disposed hotel operations--Hotel Roma.................. -- -- 1,073 1,027
--------- --------- --------- ---------
51,101 81,148 58,339 48,028
Intersegment eliminations.............................. (5,602) (8,895) (6,345) (6,109)
--------- --------- --------- ---------
Total net sales........................................ 45,499 72,253 51,994 41,919
--------- --------- --------- ---------
--------- --------- --------- ---------
Real Estate--rentals................................... 485 770 -- --
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Intersegment sales represent sales of spare parts by the Company's
motorcycle production subsidiary to its spare part distribution subsidiary,
management services provided by the Company's temporary management subsidiary
and corporate administrative services. They are accounted for at prices
comparable to unaffiliated customers.
OPERATING PROFIT/(LOSS)
<TABLE>
<CAPTION>
1995 1995 1994 1993
$'000 LIRE M. LIRE M. LIRE M.
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Motorcycles............................................. (28) (45) (632) (846)
Steel tubing............................................ 148 235 -- --
Real estate............................................. (58) (92) -- --
--------- --------- --------- ---------
OPERATING PROFIT/(LOSS)................................. 62 98 (632) (846)
Corporate expenses less other income.................... (4,189) (6,652) (4,368) (4,617)
Interest, net........................................... (4) (6) 1,662 (1,261)
Income taxes............................................ (264) (420) (39) (12)
--------- --------- --------- ---------
Loss from continuing operations......................... (4,395) (6,980) (3,277) (6,736)
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
Operating profit/(loss) is total revenues less operating expenses, excluding
interest, corporate expenses and other income/(expense).
Capital expenditure and depreciation expense recorded in the financial
statements relate primarily to the Company's motorcycle segment in 1995, 1994
and 1993.
F-24
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
15. INDUSTRY SEGMENT ANALYSIS (CONTINUED)
Identifiable assets
<TABLE>
<CAPTION>
1995 1995 1994
$'000 LIRE M. LIRE M.
--------- --------- ---------
<S> <C> <C> <C>
Motorcycles.................................................. 36,937 58,656 47,206
Steel tubing................................................. 5,547 8,808 --
Real estate.................................................. 26,388 41,904 --
Corporate.................................................... 46,261 73,462 71,475
--------- --------- ---------
115,133 182,830 118,681
--------- --------- ---------
--------- --------- ---------
</TABLE>
Identifiable assets for operating industry segments are those identifiable
assets used by those industry segments. There are no shared assets. Corporate
assets are represented by cash, investments, tax and other receivables,
financing of the operating industry segments and other assets in the course of
realization following the sale of the Company's Maserati business, disposed of
in 1993.
16. COMMITMENTS AND CONTINGENCIES
PLANNED SELF-TENDER OFFER(1)
The Company plans to conduct a redemption offer to purchase up to 80% of the
shares held of record by each of its public shareholders at $12.26 per share.
Such shareholders own approximately 33.45% of the Company's outstanding stock at
December 31, 1995. Shareholders owning 66.55% of the outstanding stock as at
such date have agreed not to participate. The Company also has a commitment to
purchase the shares formerly owned by Mr. De Tomaso and now held by a trust, as
described in Note 3.
The following proforma analysis shows the effects on cash, investments and
shareholder's equity if the planned redemption offer is all cash, is accepted by
100% of those shareholders entitled to participate and the commitment to
purchase the shares formerly owned by Mr. De Tomaso were effected as at December
31, 1995:
<TABLE>
<CAPTION>
LIT. M CASH INVESTMENTS EQUITY
- ------------------------------------------------------------------------------ --------- ----------- ----------
<S> <C> <C> <C>
Financial Statements.......................................................... 24,137 17,176 51,221
Shares subject to repurchase.................................................. -- (13,897)(1) (1,348)
Redemption (assuming all cash)................................................ (24,564) -- (24,564)(2)
--------- ----------- ----------
Proforma...................................................................... (427) 3,279 25,309
--------- ----------- ----------
--------- ----------- ----------
</TABLE>
- ------------------------
(1) 776,530 shares are subject to repurchase at $11.27 per share (Lit. 13,897
million at exchange rate in effect on December 31, 1995).
(2) A maximum of 1,261,714 shares may be offered for repurchase at $12.26 per
share (Lit. 24,564 million at exchange rate in effect on December 31, 1995).
- ------------------------
(1) See Note 20--Events subsequent to the date of the audit report (Unaudited)
and the Unaudited Condensed Interim Financial Statements as at September 30,
1996.
F-25
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
16. COMMITMENTS AND CONTINGENCIES (CONTINUED)
The Company is seeking to dispose of certain of its real estate interests,
which depending on the timing thereof, could provide additional cash for the
planned redemption offer, to meet its obligations arising in the ordinary course
of business and to provide funds for further investment.
The Company is required to deposit investments in the amount of Lit. 15,000
million as security for the repurchase of shares formerly owned by Mr. De
Tomaso. As at December 31, 1995, investments for a total of Lit. 16,215 million
are held as security for the repurchase. The Company, by switching the form of
the security from cash into zero coupon bonds or similar investments, should be
able to release approximately Lit. 2,000 million in available cash.
The completion of the planned redemption offer, assuming 100% acceptance of
an all cash offer, will be dependant on realizing sufficient proceeds from the
sale of fixed assets and/or arranging adequate credit facilities.
OTHER COMMITMENTS
The Company has no other material commitments other than for purchases of
goods for production or resale in the ordinary course of business.
LITIGATION
The Company and its subsidiaries are involved in litigation in the normal
course of business. Management does not believe, based on the advice of its
legal advisors, that the final settlement of such litigation will have an
adverse effect on the Company's consolidated financial statements as of December
31, 1995.
17. CONCENTRATION OF CREDIT RISKS
Concentrations of credit risk with respect to trade accounts receivable are
limited due to the large number of entities in the customer base. Sales to
governmental bodies in Italy are significant as a whole, but no single
government body represents more than 10% of net sales.
The Company is reducing the level of its finance activities acquired from
Finprogetti and does not intend to take on any significant new contracts.
The Company maintains cash and cash equivalents, short and long investments
with various financial institutions of national standing in Italy and the United
States.
18. FINANCIAL INSTRUMENTS
The Company does not normally enter into foreign exchange contracts in the
normal course of its business. In 1995, the Company entered into a domestic
currency swap through March 1996 for US $10,000,000 in respect of its intention
to conduct a redemption offer, payable in US dollars, as discussed in Note 16.
F-26
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
18. FINANCIAL INSTRUMENTS (CONTINUED)
OFF BALANCE SHEET RISK
Unrealized losses arising through December 31, 1995 on the domestic currency
swap above, have been included in the financial statements as at December 31,
1995. In view of the imminence of the planned redemption offer, the Company is
not planning to enter into any new arrangements.
As described in Notes 3 and 16, the Company has a commitment denominated in
US Dollars to repurchase shares formerly owned by its ex-Chairman, Mr. De
Tomaso. At the exchange rate at December 31, 1995, this commitment amounts to
Lit. 13,897 million.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in estimating
its fair value disclosure for financial instruments.
Cash and cash equivalents: the carrying amount of cash and cash equivalents
reported by the Company approximates their fair value.
Short and long term debt: the carrying amount of the Company's borrowings
under its short-term credit arrangements, approximates their fair value. The
fair values of the Company's long-term debt are estimated using cash flow
analyses, based on the Company's incremental borrowing rates for similar types
of borrowing arrangements.
Fixed interest securities which have maturities from one to three years:
fair value for marketable quoted securities is based on market price and for non
marketable securities, is estimated using discounted cash flow analysis based on
similar investments available as at the balance sheet date.
There are no significant differences between fair value and carrying value
for any of the Company's financial instruments as at December 31, 1995.
The Company accrued unrealized gains and losses on domestic currency swaps
in accordance with ruling exchange rates at period ends. As at December 31,
1995, unrealized losses of Lit. 400 million were accrued and the contract
recorded in the financial statements at its fair value (determined as the amount
the Company would have received or paid to terminate the contract at the
reporting date) as a payable of approximately Lit. 400 million.
19. SUBSEQUENT EVENTS
The Company has agreed to purchase the outstanding stock of Moto America
Inc., the sole distributor of Moto Guzzi motorcycles in the United States. The
acquisition is not material and will be consummated by issue of stock by the
Company. It is expected that the results of Moto America, Inc. will be included
in operations from April 1, 1996. See below, Note 20.
20. EVENTS SUBSEQUENT TO THE DATE OF THE AUDIT REPORT (UNAUDITED)
The information reported below does not form part of the audited financial
statements.
F-27
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
(DE TOMASO INDUSTRIES, INC. THROUGH AUGUST 22, 1996)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1995
20. EVENTS SUBSEQUENT TO THE DATE OF THE AUDIT REPORT (UNAUDITED) (CONTINUED)
As described in Note 1 to the financial statements, the Company adopted
Statement 121, Accounting for Impairment of Long-lived Assets and for Long-lived
Assets to be Disposed Of, in the first quarter of 1996. The effects of adoption
were not material.
Notes 1, 4 and 8 to the financial statements make reference to the Company's
plan to dispose of certain real estate and consequent reduction of real estate
debt. In June 1996, the Company sold its 66.7% interest in Immobiliare Broseta
S.r.l. to its 25% affiliate Domer S.r.l. The remaining 33.3% of Immobiliare
Broseta S.r.l. is owned by Interim S.p.A., a subsidiary of Domer S.r.l. The
Company had sought offers from third parties through an independent broker and
the sale price Lit. 5,200 million offered by Domer S.p.A. was the highest of the
offers received. Lit. 1,800 million of the sale price was settled by a loan note
of Domer S.r.l , bearing an interest rate equal to the official Lire discount
rate plus 3% and the balance of Lit. 3,400 million will be received pro-quota
from the sales of apartments which are being developed from the Immobiliare
Broseta S.r.l. property or on June 30, 1999, whichever is the earlier. This
amount of Lit. 3,400 million carries an interest rate of 6% payable six-monthly
and has been accounted for at its estimated net present value of Lit. 2,908
million applying a discount rate of 12%, considered to be a fair market rate for
similar notes receivable. The book value of the 66.7% interest in Immobilaire
Broseta S.r.l. was Lit. 4,708 million and no gain or loss has been recorded on
the transaction. The principal effects of this disposal, with reference to the
balance sheet as at December 31, 1995, were to remove Lit. 11,951 million of
real estate, Lit. 4,716 million of related debt and to eliminate minority
interests of Lit. 2,364 million.
The option held by a third party over the Company's 80% interest in Grand
Hotel Bitia S.r.l. , also discussed in Note 4 to the financial statements,
expired unexercised on June 30, 1996.
The planned redemption offer, discussed in Note 16 to the financial
statements, was initiated in September 1996 and closed on October 23, 1996.The
program was initiated to accommodate a number of shareholders who held the view
that the Company, following the sale of the Maserati business in 1993, was no
longer engaged in the business activity which had initially led them to invest
in the Company's shares. Two mutually exclusive alternative offers were made to
shareholders. The first offer was to purchase up to 80% of a shareholder's
common stock for a combination of cash and non-negotiable promissory notes
having a face value aggregating $12.26 per share ("the 80% offer") and the
second offer was to purchase up to 50% of shareholder's common stock for $12.26
cash (the "50% offer"). Of the 4,742,865 issued shares of the Company,
shareholders representing 3,167,010 shares (66.8%) had agreed in advance not to
participate.
Of the remaining 1,575,855 shares, 506,359 were tendered under the 80% offer
and 255,636 under the 50% offer, all of which were accepted by the Company. In
consequence the Company will repurchase 761,995 shares for a total amount of
$7,478,657.58 (Lit. 11,390 million) in cash and $1,863,401.12 (Lit. 2,838
million) in the form of non-negotiable promissory notes, bearing interest at 8%
per annum.
The acquisition of Moto America Inc., referred to in Note 19 to the
financial statements, was completed in April 1996 with effective date January 1,
1996.
F-28
<PAGE>
TRIDENT ROWAN GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
SEPT. 30 SEPT. 30 DEC. 31
1996 1996 1995
US$'000 LIRE M. LIRE M.
UNAUDITED UNAUDITED NOTE
----------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents.................................................. 13,511 20,578 24,137
Marketable securities, at cost............................................. -- -- --
Receivables................................................................ 22,764 34,670 39,726
Trade, less allowance of Lit. 1,729 (1995--1,268).......................... 13,277 20,221 23,725
Finance receivables, less allowance of Lit. 2,050.......................... 2,953 4,498 7,597
Receivables from related parties......................................... 4,073 6,203 3,624
Other receivables........................................................ 2,461 3,748 4,780
Inventories................................................................ 26,407 40,218 30,717
Raw materials, spare parts and work-in-process........................... 17,987 27,394 21,469
Finished products........................................................ 8,420 12,824 9,248
Prepaid expenses........................................................... 970 1,477 1,109
----------- ----------- ---------
TOTAL CURRENT ASSETS....................................................... 63,652 96,943 95,689
----------- ----------- ---------
Property, plant and equipment.............................................. 6,625 10,088 7,709
At cost.................................................................. 23,289 35,468 35,884
Less allowances for depreciation......................................... (16,664) (25,380) (28,175)
Trademarks and other intangible assets, net of amortization of Lit. 625
(1995--250)............................................................... 2,873 4,375 4,750
Goodwill, net of amortization of Lit. 231 (1995--77)....................... 1,029 1,567 1,459
Real estate for development, net of reserve of Lit. 2,500.................. 2,298 3,500 --
Real estate for sale....................................................... 10,508 16,004 34,227
Investments in unconsolidated companies.................................... 1,438 2,190 2,205
Receivables from related parties........................................... 1,909 2,908 --
Marketable & other securities and investments, at cost..................... 10,711 16,313 17,176
Other assets............................................................... 9,063 13,803 19,615
----------- ----------- ---------
TOTAL ASSETS............................................................... $ 110,106 Lit 167,691 Lit 182,830
----------- ----------- ---------
----------- ----------- ---------
</TABLE>
Note: The balance sheet as at December 31, 1995 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
F-29
<PAGE>
TRIDENT ROWAN GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
SEPT. 30 SEPT. 30 DEC. 31
1996 1996 1995
US$'000 LIRE M. LIRE M.
UNAUDITED UNAUDITED NOTE
----------- ----------- ---------
<S> <C> <C> <C>
LIABILITIES
Advances from banks........................................................ 18,517 28,201 18,538
Advances from banks for finance activities................................. 3,334 5,078 8,621
Accounts payable........................................................... 13,557 20,647 23,570
Accrued expenses and other payables........................................ 7,400 11,269 10,218
Current portion of long-term real estate debt.............................. 3,253 4,955 9,550
Current portion of other long-term debt.................................... 1,339 2,039 1,866
----------- ----------- ---------
TOTAL CURRENT LIABILITIES.................................................. 47,400 72,189 72,363
----------- ----------- ---------
Long-term real estate debt, less current portion........................... 3,926 5,980 9,712
Other long-term debt, less current portion................................. 4,778 7,277 8,386
Termination indemnities.................................................... 5,462 8,319 8,231
Provision for claims....................................................... 2,098 3,195 3,595
Minority interests......................................................... 9,780 14,895 16,773
Common stock subject to repurchase......................................... 9,450 14,392 12,549
SHAREHOLDERS' EQUITY....................................................... 27,212 41,444 51,221
Common stock, par value $0.01 per share (1995--$2.50):
Authorized 10,000,000 shares; 4,742,865 (1995--4,712,865) shares issued
and outstanding less 881,970 (1995--776,530) subject to repurchase...... 45 69 6,744
Additional paid in capital............................................... 50,254 76,538 71,332
Treasury stock, at cost.................................................. (7,765) (11,826) (11,826)
Deficit.................................................................. (16,915) (25,761) (15,926)
Equity adjustment from translation....................................... 1,405 2,141 711
Accretion expense and related exchange gains............................. 186 283 186
----------- ----------- ---------
$ 110,106 Lit 167,691 Lit 182,830
----------- ----------- ---------
----------- ----------- ---------
</TABLE>
Note: The balance sheet as at December 31, 1995 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
F-30
<PAGE>
TRIDENT ROWAN GROUP, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
9 MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
SEPT. 30 SEPT. 30 DEC. 31
1996 1996 1995
US$'000 LIRE M. LIRE M.
--------- --------- ---------
<S> <C> <C> <C>
Net sales............................................................. 43,364 66,043 47,001
Cost of sales......................................................... (37,711) (57,434) (44,114)
--------- --------- ---------
5,653 8,609 2,887
Selling, general and administrative expenses.......................... (9,310) (14,179) (10,271)
Rental income......................................................... 721 1,098 365
Reserve for value of real estate properties........................... (1,937) (2,950) --
Other income, net..................................................... 149 227 442
--------- --------- ---------
(4,724) (7,195) (6,577)
Interest expense...................................................... (3,206) (4,882) (3,227)
Interest income....................................................... 2,179 3,318 2,968
--------- --------- ---------
Loss from continuing operations before income taxes and minority
interests............................................................ (5,751) (8,759) (6,836)
Income taxes.......................................................... (394) (600) (121)
--------- --------- ---------
Loss from continuing operations before minority interests............. (6,145) (9,359) (6,957)
Minority interests.................................................... (313) (476) (390)
--------- --------- ---------
Net (loss)............................................................ (6,458) (9,835) (7,347)
--------- --------- ---------
--------- --------- ---------
LOSS PER SHARE US $ LIRE LIRE
Net loss per share.................................................... $ (1.36) Lit. (2,073) Lit. (2,499)
--------- --------- ---------
--------- --------- ---------
Average number of common shares and equivalents outstanding during the
period............................................................... 4,742,865 4,742,865 2,939,842
--------- --------- ---------
--------- --------- ---------
</TABLE>
See Notes to Consolidated Condensed Financial Statements
F-31
<PAGE>
TRIDENT ROWAN GROUP, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
3 MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
SEPT. 30 SEPT. 30 SEPT. 30
1996 1996 1995
US$'000 LIRE M. LIRE M.
---------- ---------- ----------
<S> <C> <C> <C>
Net sales............................................................... 11,190 17,042 17,535
Cost of sales........................................................... (10,053) (15,311) (17,148)
---------- ---------- ----------
1,137 1,731 387
Selling, general and administrative expenses............................ (2,864) (4,362) (4,441)
Rental income........................................................... 228 348 365
Reserve for value of real estate properties............................. (1,937) (2,950) --
Other income, net....................................................... 206 314 442
---------- ---------- ----------
(3,230) (4,919) (3,247)
Interest expense........................................................ (1,120) (1,705) (1,642)
Interest income......................................................... 840 1,279 1,305
---------- ---------- ----------
Loss from continuing operations before income taxes and minority
interests.............................................................. (3,510) (5,345) (3,584)
Income taxes............................................................ (5) (8) (121)
---------- ---------- ----------
Loss from continuing operations before minority interests............... (3,515) (5,353) (3,705)
Minority interests...................................................... (83) (127) (131)
---------- ---------- ----------
Net loss................................................................ (3,598) (5,480) (3,836)
---------- ---------- ----------
---------- ---------- ----------
<CAPTION>
LOSS PER SHARE US $ LIRE LIRE
<S> <C> <C> <C>
Net loss per share...................................................... $ (0.76) (1,155) (814)
---------- ---------- ----------
---------- ---------- ----------
Average number of common shares and equivalents outstanding during the
period................................................................. 4,742,865 4,742,865 4,712,865
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See Notes to Consolidated Condensed Financial Statements
F-32
<PAGE>
TRIDENT ROWAN GROUP, INC.
UNAUDITED CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
9 MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
<TABLE>
<CAPTION>
SEPT. 30 SEPT. 30 SEPT. 30
1996 1996 1995
US$'000 LIRE M. LIRE M.
--------- ----------- ---------
<S> <C> <C> <C>
Net loss.......................................................................... (6,458) (9,835) (7,347)
Adjustments to reconcile net loss to net cash (used)/provided by operating
activities: (1,158) (1,764) 4,725
--------- ----------- ---------
Net cash used by operating activities............................................. (7,616) (11,599) (2,622)
--------- ----------- ---------
Investing activities:
Net decrease/(increase) in investments and securities............................. 1,318 2,007 (12,092)
Purchase of subsidiaries, net of cash acquired.................................... 360 548 (1,192)
Deferred receipts from sale of Maserati........................................... -- -- 27,000
Proceeds from disposal of fixed assets............................................ 1,359 2,070 --
Purchases of property, plant and equipment........................................ (3,021) (4,601) (1,078)
--------- ----------- ---------
Net cash provided by investing activities......................................... 16 24 12,638
--------- ----------- ---------
Financing activities:
Increase/(decrease) in advances from banks........................................ 4,120 6,275 (6,464)
Proceeds of share issue........................................................... -- -- 8,205
Repurchase of shares.............................................................. -- -- (5,000)
Receipt of tax receivable......................................................... 4,018 6,120 --
Proceeds from long-term debt...................................................... 494 752 --
Principal payments of long-term debt.............................................. (3,261) (4,967) (786)
--------- ----------- ---------
Net cash provided/(used) by financing activities.................................. 5,371 8,180 (4,045)
--------- ----------- ---------
Exchange movement on opening cash balances........................................ (108) (164) 8
Cash and cash equivalents, beginning of period.................................... 15,849 24,137 5,286
--------- ----------- ---------
Cash and cash equivalents, end of period.......................................... 13,512 20,578 11,265
--------- ----------- ---------
--------- ----------- ---------
</TABLE>
See Notes to Consolidated Condensed Financial Statements
F-33
<PAGE>
TRIDENT ROWAN GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
NOTE 1 BASIS OF PRESENTATION
The accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with the instructions to Form 10-Q and, therefore,
do not include all information and footnotes necessary for a fair presentation
of financial position, results of operations and cash flows in conformity with
generally accepted accounting principles. For a summary of the Registrant's
accounting principles, and other footnote information, reference is made to the
Registrant's 1995 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 primary financial statements are shown in Italian lire because all of
the Company's material operating entities are based and operate entirely 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 1,523 to U.S. $1, the approximate exchange rate at September
30, 1996. 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.
NOTE 2 REDUCTION IN PAR VALUE OF COMMON STOCK TO $0.01 PER SHARE
At the general meeting of shareholders held on August 22, 1996, the par
value per share of the Company's common stock was reduced from $2.50 per share
to $0.01 per share, or Lit. 15.1915 per share applying the approximate exchange
rate at August 22, 1996.
NOTE 3 ACQUISITIONS AND DISPOSALS OF SUBSIDIARIES
Effective January 1, 1996, the Company completed its acquisition of the
outstanding shares of Moto America Inc., the sole distributor of Moto Guzzi
motor cycles in the United States. The acquisition was consummated by the
issuance of 30,000 shares of the Company and the purchase price of Lit. 471
million reflects the shares issued at a fair value of $10.00 per share (Lit.
15,710 per share). The acquisition has been accounted for as a purchase and the
excess of the purchase consideration over the fair value of assets acquired has
been accounted for as goodwill, determined in the amount of Lit. 262 million,
which is being amortized over 5 years. The effects of the acquisition are not
material to the operations of the Company and, accordingly, no proforma
information as if the acquisition had been consummated on January 1, 1995 is
presented.
In June 1996, the Company sold its 66.7% equity interest in Immobiliare
Broseta S.r.l. to its 25% owned affiliate Domer S.r.l. The remaining 33.3%
equity interest in Immobiliare Broseta S.r.l. is owned by Interim S.p.A., a
subsidiary of Domer S.r.l. The Company had sought offers from third parties
through an independent broker and the sale price of Lit. 5,200 million offered
by Domer S.p.A. was the highest of the offers received. Lit. 1,800 million of
the sale price was evidenced by a promissory note of Domer S.r.l. due December
31, 1996, bearing an interest rate equal to the official Lire discount rate plus
3% and the balance of Lit. 3,400 million will be received pro-quota from the
sales of apartments which are being developed from the Immobiliare Broseta
S.r.l. property or on June 30, 1999, whichever is the earlier. This amount of
Lit. 3,400 million carries an interest rate of 6% payable bi-annually and has
been accounted for at its estimated net present value of Lit. 2,908 million
applying a discount rate of 12%, considered to be a fair market rate for similar
notes receivable. The book value of the 66.7% interest in Immobiliare Broseta
S.r.l. was Lit. 4,708 million and no gain or loss has been recorded on the
transaction.
NOTE 4 AGREEMENT TO ACQUIRE THE CAREY WINSTON COMPANY
On August 14, 1996, the Company and the Carey Winston Company ("Carey
Winston") entered into an agreement providing for the acquisition by the Company
of Carey Winston for a purchase price valued
F-34
<PAGE>
TRIDENT ROWAN GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996
NOTE 4 AGREEMENT TO ACQUIRE THE CAREY WINSTON COMPANY (CONTINUED)
at $7,600,000 (Lit. 11,575 million), subject to adjustment, and payable to the
extent of at least 80% in common stock of the Company and not more than 20% in
cash. As part of the agreement, the Company agreed to lend to Carey Winston,
prior to closing, up to $2,000,000 (Lit. 3,046 million). The Company lent
$1,000,000 (Lit. 1,523 million) to Carey Winston on September 17, 1996 in
accordance with these arrangements. The closing of the agreement is conditioned
upon, among other things, the Company completing a public offering resulting in
proceeds to the Company, after underwriting discounts and commissions, of not
less than $10,000,000. If the closing does not occur, for this or for any other
reason, then the Company's loan will continue on a subordinated basis for a
three year period.
Carey Winston is engaged in the business of providing real estate management
services in the Washington, D.C., Northern Virginia, and Baltimore, Maryland
regions.
NOTE 5 COMPUTATION OF LOSS PER SHARE
Net loss per share for the three months and nine months ended September 30,
1996 and September 30, 1995 is computed on the average number of common shares
outstanding during such periods.
In July 1995, convertible preference shares formerly held by the
ex-President of the Company were exchanged for an equal number of common stock
and 703,774 of the resulting total of 1,480,304 common stock formerly held by
the ex-President were acquired by the Company. Had the exchange of voting
preference shares and acquisition of common shares been consummated as at
January 1, 1995, then the loss per share for the nine months to September 30,
1995 would have amounted to Lit. 2,342.
NOTE 6 SUBSEQUENT EVENTS
STOCK REPURCHASE PROGRAM
The Company completed its stock repurchase program on October 23, 1996. The
program was initiated to accommodate a number of shareholders who held the view
that the Company, following the sale of the Maserati business in 1993, was no
longer engaged in the business activity which had initially led them to invest
in the Company's shares. Two mutually exclusive alternative offers were made to
shareholders. The first offer was to purchase up to 80% of a shareholder's
common stock for a combination of cash and non-negotiable promissory notes
having a face value aggregating $12.26 per share ("the 80% offer") and the
second offer was to purchase up to 50% of shareholder's common stock for $12.26
cash (the "50% offer"). Of the 4,742,865 issued shares of the Company,
shareholders representing 3,167,010 shares (66.8%) had agreed in advance not to
participate.
Of the remaining 1,575,855 shares, 506,359 were tendered under the 80% offer
and 255,636 under the 50% offer, all of which were accepted by the Company. In
consequence the Company will repurchase 761,995 shares for a total amount of
$7,478,657.58 (Lit. 11,390 million) in cash and $1,863,401.12 (Lit. 2,838
million) in the form of non-negotiable promissory notes, bearing interest at 8%
per annum. Proforma information showing the effects of the repurchase program
are shown in Note 7.
REPURCHASE OF SHARES FROM FINPROGETTI
On November 7, 1996 the Company entered into an agreement with Finprogetti
S.p.A. to resolve certain open matters deriving from the acquisition of the
majority of Finprogetti's operating subsidiaries in July 1995. Reference is made
to the Company's 1995 Annual Report on Form 10-K for a full description of such
Finprogetti Acquisition. A balance due by Finprogetti of Lit. 763 million
($501,000) was settled by the Company taking back 46,000 shares at a value of
Lit. 16,587 per share ($10.89 per share). Finprogetti S.p.A. also agreed to
accept responsibility for a claim which was successfully brought against one of
the subsidiaries acquired in the Finprogetti Acquisition for Lit. 2,120 million.
In accordance with terms of the
F-35
<PAGE>
TRIDENT ROWAN GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996
NOTE 6 SUBSEQUENT EVENTS (CONTINUED)
Finprogetti Agreement, the Company would have paid such claim and received in
compensation 105,440 of the shares issued to Finprogetti in July 1995. The
Company and Finprogetti agreed that Finprogetti would assume the responsibility
for payments resulting from the claim, which are payable in installments through
June 1998, and that the Company would, on the request of Finprogetti, repurchase
shares for cash at the dates and in the amounts of each installment payment.
At September 30, 1996, the Company has reclassified the 105,440 shares thus
subject to repurchase outside of shareholders' equity in the amount of the
present value of the amounts payable under the repurchase commitment, applying a
discount rate of 10%. The resulting value of the 105,440 shares subject to
repurchase is Lit. 1,940 million ($1,274,000) or Lit. 18,399 per share ($12.08
per share). Immediately following the agreement, Finprogetti requested that the
Company repurchase 9,950 shares for Lit. 200 million ($131,000) in respect of
the first installment. The dates, number of shares and financial commitment for
further possible repurchases of shares are as follows:
<TABLE>
<S> <C>
December 31, 1996 22,380 shares Lit. 450 million ($295,000)
June 30, 1997 22,380 shares Lit. 450 million ($295,000)
December 31, 1997 22,380 shares Lit. 450 million ($295,000)
June 30, 1998 28,350 shares Lit. 570 million ($374,000)
</TABLE>
PROPOSED PRIVATE PLACEMENT OF SHARES REPRESENTING FROM 17.2% TO 20% OF THE
OUTSTANDING SHARES OF MOTO GUZZI CORP., A WHOLLY OWNED SUBSIDIARY OF THE
COMPANY.
In October, 1996 the Company entered into an agreement with GKN Securities
Corp. whereby GKN would seek to sell, before December 20, 1996, on a best
efforts basis, between 1,250,000 and 1,500,000 shares of convertible Preferred
Stock and the same number of Warrants to purchase shares of Common Stock of Moto
Guzzi Corp. at a price of $4.00 (Lit. 6,092) for each Unit consisting of one
share of Preferred Stock and one Warrant. Moto Guzzi Corp., currently a wholly
owned subsidiary of the Company, owns Moto Guzzi S.p.A., the manufacturer of
Moto Guzzi motorcycles, its wholly owned spare parts distribution subsidiary
Centro Ricambi S.r.l., both Italian companies, and Moto America Inc., the
exclusive U.S. importer of Moto Guzzi motorcycles in the United States.
Each share of Preferred Stock may be converted, at the option of the holder
thereof, into shares of Common Stock ("Conversion Shares") at the rate of one
share of Common Stock for each share of Preferred Stock, subject to adjustment
to protect against events of dilution ("Conversion Price"). Each share of
Preferred Stock shall be automatically converted into Conversion Shares upon the
consummation by Moto Guzzi Corp. of an underwritten public offering of its
Common Stock that raises gross proceeds of at least $8 million ("Qualified
IPO"). The conversion rate in connection with the Qualified IPO ("IPO Conversion
Price") will be the lesser of the then-applicable Conversion Price or 75% of the
per share, Qualified IPO public offering price. If a Qualified IPO is not
consummated by June 30, 1998, the then majority holders of the Preferred Stock
shall have a right to elect a majority of Moto Guzzi Corp.'s board of directors.
If not previously converted to Conversion Shares, each share of Preferred Stock
outstanding shall be redeemed by Moto Guzzi Corp., solely at the option of the
holder thereof at any time after the fifth anniversary of the Closing, at a
price of $8.00, as adjusted for stock-splits or any distributions previously
made. Each Warrant will entitle the holder thereof to purchase one share of
Common Stock for the lesser of $4.00 or the initial public offering price of the
Common Stock, exercisable during the three-year period commencing on the closing
of the Offering ("Closing").
F-36
<PAGE>
TRIDENT ROWAN GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996
NOTE 6 SUBSEQUENT EVENTS (CONTINUED)
If the Private Placement is completed in accordance with the terms currently
envisaged and outlined above, holders of the Preferred Stock will acquire an
interest between 17.2% (if 1,250,000 shares of Preferred Stock are sold), and
20% (if 1,500,000 shares of Preferred Stock are sold) and the Company will
record a gain, net of expenses connected with the Private Placement, of between
approximately Lit. 5,000 million ($3,275,000) and Lit. 5,800 million
($3,800,000).
THERE CAN BE NO ASSURANCE THAT THE PRIVATE PLACING OF SHARES OF MOTO GUZZI
CORP. OR THE ACQUISITION OF CAREY WINSTON WILL TAKE PLACE ON THE TERMS INDICATED
ABOVE, OR AT ALL.
NOTE 7 PROFORMA INFORMATION
The following summarized proforma financial information show the effects on
the balance sheet at September 30, 1996 and on operations for the nine months
ended September 30, 1996 and year ended December 31, 1995 if the stock
repurchase program and the repurchase of shares from Finprogetti, all as
described in Note 6, had been consummated on January 1, 1996 and 1995.
PROFORMA BALANCE SHEET
<TABLE>
<CAPTION>
SEPT. 30 SEPT. 30 SEPT. 30
1996 REPURCHASES 1996 1996
ACTUAL OF SHARES PROFORMA PROFORMA
---------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
LIRE M. LIRE M. LIRE M. $'000
Cash and marketable securities 20,578 (11,590) 8,988 5,902
Other current assets 76,365 (763) 75,602 49,640
---------- ----------- ---------- ----------
Current assets 96,943 (12,353) 84,590 55,542
Property, plant & equipment and other assets, excluding
goodwill & intangibles 64,806 64,806 42,552
---------- ----------- ---------- ----------
Total assets excluding goodwill & intangibles 167,691 (12,353) 149,396 98,094
Goodwill and intangibles 5,942 5,942 3,902
Total assets 169,691 (12,353) 155,338 101,996
Advances from banks 33,279 33,279 21,851
Current portion of loans 6,994 6,994 4,592
Other current liabilities 31,916 31,916 20,957
---------- ----------- ---------- ----------
Current liabilities 72,189 72,189 47,400
Long term loans 13,257 2,838 16,095 10,568
Other long term liabilities, minority interests 26,409 26,409 17,340
Shares subject to repurchase 14,392 (200) 14,192 9,318
Shareholders equity 41,444 (14,991) 26,453 17,370
---------- ----------- ---------- ----------
Total liabilities and equity 167,691 (12,353) 155,338 101,996
---------- ----------- ---------- ----------
---------- ----------- ---------- ----------
Book value per share in Lire/$ $ 10,734 8,665 $ 5.69
Number of shares (note) 3,860,895 3,052,900 3,052,900
---------- ----------- ---------- ----------
---------- ----------- ---------- ----------
</TABLE>
Note: The number of shares used to calculate book value per share excludes
881,970 shares
subject to repurchase.
F-37
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following summarized unaudited pro forma balance sheet as of September
30, 1996 and statements of operations for the nine months ended September 30,
1996 and for the year ended December 31, 1995 ("the pro forma financial
statements") give effect to (i) the inclusion of L.I.T.A., acquired effective
July 25, 1995 and the Finprogetti Acquisition, effective July 1, 1995, as if
both transactions had occurred on January 1, 1995, (ii) the Company's stock
repurchase program which closed on October 23, 1996 and the repurchase by the
Company of shares from Finprogetti on November 7 and December 31, 1996, and
(iii) the sale by the Company of shares in its Moto Guzzi Corp. subsidiary, the
final Closing of which occurred on January 17, 1997, as if all transactions
occurred as of January 1, 1996 and 1995 in the pro forma combined statements of
operations and as if they occurred as at September 30, 1996 in the pro forma
combined balance sheet.
The pro forma adjustments are based on currently available information and,
on certain assumptions which management believes are reasonable.
The pro forma financial statements are not necessarily indicative of either
future results of operations or results that might have been achieved had the
transactions been consummated as of the dates indicated. The pro forma financial
statements should be read in conjunction with the historical consolidated
financial statements and notes thereto of the Company.
Solely for the convenience of the reader, the Company has translated the
balance sheet as at September 30, 1996 and the statement of operations for the
nine months then ended at the conversion rate of 1,523 lire per U.S. Dollar, and
the statement of operations for the year ended December 31, 1995 at the
conversion rate of 1,588 lire per U.S. Dollar, each being the approximate rate
at the end of the relevant periods.
P-1
<PAGE>
TRIDENT ROWAN GROUP INC.
SUMMARIZED UNAUDITED PROFORMA BALANCE SHEET
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
SEPT. 30 SALE OF SEPT. 30 SEPT. 30
1996 REPURCHASES 20% OF 1996 1996
ACTUAL OF SHARES MGCORP. PROFORMA PROFORMA
--------- ----------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C>
LIRE MILLION US$'000
Cash and marketable securities.............. 20,578 (12,040) (b) 2,742(c) 11,280 7,406
Other current assets........................ 76,365 (763)(b) 75,602 49,640
--------- ----------- ----------- --------- ---------
Current assets.............................. 96,943 (12,903) 2,742 86,882 57,046
Property, plant & equipment and other
assets, excluding goodwill & intangibles.. 64,806 64,806 42,552
--------- ----------- ----------- --------- ---------
Total assets excl. goodwill & intangibles... 161,749 (12,353) 2,742 151,688 99,598
Goodwill and intangibles.................... 5,942 5,942 3,902
--------- ----------- ----------- --------- ---------
Total assets................................ 167,691 (12,353) 2,742 157,630 103,500
--------- ----------- ----------- --------- ---------
--------- ----------- ----------- --------- ---------
Advances from banks......................... 33,279 (5,376)(c) 27,903 18,321
Current portion of loans.................... 6,994 6,994 4,592
Other current liabilities................... 31,916 31,916 20,956
--------- ----------- ----------- --------- ---------
Current liabilities......................... 72,189 0 (5,376) 66,813 43,869
Long term loans............................. 13,257 2,838(a) 16,095 10,568
Other long term liabilities................. 11,514 11,514 7,560
Minority interests.......................... 14,895 2,231(d) 17,126 11,245
Shares subject to repurchase................ 14,392 (650)(b) 13,742 9,023
Common stock................................ 69 68 45
Additional paid in capital.................. 76,538 5,887(e) 82,425 54,120
Treasury stock.............................. (11,826) (14,991) (b) (26,816) (17,607)
Other reserves.............................. 2,424 2,424 1,592
Accumulated deficit......................... (25,761) (25,761) (16,916)
--------- ----------- ----------- --------- ---------
Shareholders equity......................... 41,444 (14,991) 5,887 32,340 21,236
--------- ----------- ----------- --------- ---------
Total liabilities and equity................ 167,691 (12,803) 2,742 157,630 103,501
--------- ----------- ----------- --------- ---------
--------- ----------- ----------- --------- ---------
Tangible value per share in Lire/$.......... 9,195 8,647 5.68
--------- --------- ---------
--------- --------- ---------
Number of shares (note)..................... 3,860,895 3,052,900 3,052,900
--------- --------- ---------
--------- --------- ---------
</TABLE>
Note: The number of shares used in calculating book value per share excludes
shares subject to repurchase.
See Notes to Summarized Unaudited Proforma Balance Sheet
P-2
<PAGE>
NOTES TO SUMMARIZED UNAUDITED PRO FORMA COMBINED BALANCE SHEET
Repurchases of shares:
(a) Reflects 761,995 shares repurchased under the Company's stock
repurchase program which closed October 23, 1996 for $7,479,000 (Lit. 11,390
million) in cash and the Company's 8% promissory note payable in October
1998 for $1,863,000 (Lit. 2,838 million).
(b) Reflects 9,950 shares repurchased from Finprogetti S.p.A. on
November 7, 1996 for Lit. 200 million ($131,000) in cash, 22,380 shares
repurchased December 31, 1996 for Lit. 450 million ($295,000) and 46,000
shares repurchased for the assignment of a receivable due from Finprogetti
S.p.A. of Lit. 763 million ($501,000).
See Note 6 to the Unaudited Interim Financial Statements as at September 30,
1996 for a full description of the Company's share repurchase program and other
repurchases of shares subsequent to September 30, 1996.
Sale of securities of Moto Guzzi:
(c) Application of proceeds to temporarily reduce short-term debt and
investments in short-term bank deposits pending application of proceeds of
sale.
(d) Recording of minority interests representing the 20% of the issued
and outstanding shares of Moto Guzzi Corp. sold in the Private Placement.
(e) Estimated gain on sale of shares of Moto Guzzi Corp., net of
commissions and expenses payable by Moto Guzzi Corp.
See Note 6 to the Unaudited Interim Financial Statements as at September 30,
1996 for a description of the sale by the Company of shares of its Moto Guzzi
Corp. subsidiary and the circumstances under which Moto Guzzi Corp. may have to
redeem the shares issued. The private placement of the shares was completed on
January 17, 1996 raising a gross amount of $6,000,000 (Lit. 9,138 million) and
an estimated amount net of commissions and expenses of $5,330,000 (Lit. 8,118
million).
P-3
<PAGE>
TRIDENT ROWAN GROUP INC.
SUMMARIZED UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR TO DECEMBER 31, 1995
<TABLE>
<CAPTION>
YEAR ENDED INCLUDE INCLUDE ADJ. FOR LITA,
DEC. 31 L.I.T.A. FINPROGETTI FINPROGETTI
1995 FOR 12 FOR 12 AND RELATED
ACTUAL MONTHS MONTHS TRANSACTIONS
----------- ----------- ------------- -----------------
MILLIONS OF LIRE
<S> <C> <C> <C> <C>
Net sales........................................................ 72,253 8,710 1,440
Total cost of sales.............................................. (63,410) (8,337) (1,339) 240(a)
----------- ----------- ------ ---
8,843 373 101 240
Selling, general and administrative expenses..................... (16,230) (333) (829) (327)(b)
Rental income.................................................... 770 677
Other income/(expense)........................................... 513 5 320
----------- ----------- ------ ---
(6,104) 45 269 (87)
Interest expense................................................. (4,458) (82) (908)
Interest income.................................................. 4,452 7
----------- ----------- ------ ---
Loss before income taxes and minority interests.................. (6,110) (30) (639) (87)
Income taxes..................................................... (420) (5)
Minority interests............................................... (450) 22
----------- ----------- ------ ---
Net loss......................................................... (6,980) (30) (622) (87)
----------- ----------- ------ ---
----------- ----------- ------ ---
Loss per share................................................... (2,065)
-----------
-----------
Average number of shares......................................... 3,380,441
-----------
-----------
<CAPTION>
YEAR ENDED YEAR ENDED
ADJ. FOR SALE OF DEC. 31 DEC. 31
REPURCHASES 20% OF 1995 1995
OF SHARES MGCORP. PROFORMA PROFORMA
------------- ------------- ----------- -----------
US$'000
<S> <C> <C> <C> <C>
Net sales........................................................ 82,403 51,891
Total cost of sales.............................................. (72,846) (45,873)
------ ----- ----------- -----------
9,557 6,018
Selling, general and administrative expenses..................... (54)(f) (17,773) (11,192)
Rental income.................................................... 1,447 911
Other income/(expense)........................................... 63(c) 901 567
------ ----- ----------- -----------
63 (54) (5,868) (3,696)
Interest expense................................................. (242)(d) 915(g) (4,775) (3,007)
Interest income.................................................. (1,213)(e) 3,246 2,044
------ ----- ----------- -----------
Loss before income taxes and minority interests.................. (1,392) 861 (7,397) (4,659)
Income taxes..................................................... (148)(h) (573) (361)
Minority interests............................................... 504(i) 76 48
------ ----- ----------- -----------
Net loss......................................................... (1,392) 1,217 (7,894) (4,972)
------ ----- ----------- -----------
------ ----- ----------- -----------
Loss per share................................................... (2,047) (1.29)
----------- -----------
----------- -----------
Average number of shares......................................... 3,855,788 3,855,788
----------- -----------
----------- -----------
</TABLE>
Note: Results for Carey Winston are for the company's fiscal year to October 31,
1995
See Notes to Summarized Unaudited Proforma Financial Statements
P-4
<PAGE>
TRIDENT ROWAN GROUP INC.
SUMMARIZED UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
ADJ. FOR
SEPT. 30 REPUR- SALE OF SEPT. 30 SEPT. 30
1996 CHASES 20% OF 1996 1996
ACTUAL OF SHARES MGCORP. PROFORMA PROFORMA
--------- ------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
MILLIONS OF LIRE
US$ '000
Net sales.............................................. 66,043 66,043 43.364
Total cost of sales.................................... (57,434) (57,434) (37,711)
--------- --- ----- ------------- -------------
8,609 8,609 5,653
Selling, general and administrative expenses........... (14,179) (14,179) (9,310)
Rental income.......................................... 1,098 1,098 721
Other income/(expense)................................. (2,723) 121(c) (2,602) (1,708)
--------- --- ----- ------------- -------------
(7,195) 121 0 (7,074) (4,644)
Interest expense....................................... (4,882) (173)(d) 709(g) (4,346) (2,854)
Interest income........................................ 3,318 (801)(e) 2,517 1,653
--------- --- ----- ------------- -------------
Loss before income taxes and minority interests........ (8,759) (853) 709 (8,903) (5,845)
Income taxes........................................... (600) (115)(h) (715) (469)
Minority interests..................................... (476) (12)(i) (488) (320)
--------- --- ----- ------------- -------------
(9,835) (853) 582 (10,106) (6,634)
--------- --- ----- ------------- -------------
--------- --- ----- ------------- -------------
Loss per share......................................... (2,074) (2,590) (1.70)
--------- ------------- -------------
--------- ------------- -------------
Average number of shares............................... 4,742,865 3,902,540 3,902,540
--------- ------------- -------------
--------- ------------- -------------
</TABLE>
Note: Results included for Carey Winston are for the 9 months to October 31,
1996
See Notes to Summarized Unaudited Proforma Financial Statements
P-5
<PAGE>
NOTES TO THE CONDENSED UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1996 AND THE YEAR ENDED DECEMBER 31, 1995
L.I.T.A. and Finprogetti acquisitions and adjustments
In the 1995 financial statements, the L.I.T.A. acquisition was accounted for
effective July 25, 1995 and the Finprogetti Acquisition was accounted for
effective July 1, 1995. The columns for L.I.T.A. and Finprogetti show the
results of these companies for the periods in 1995 prior to their effective
accounting dates. See Note 3 to the Financial Statements at December 31, 1995.
(a) Reduced depreciation of fixed assets at L.I.T.A. resulting from
purchase accounting and application of the excess of the fair value of
assets acquired over the price paid to reduce long term intangible and
tangible assets.
(b) Depreciation of trademarks and other intangibles (250) and goodwill
(77)
Repurchases of shares:
(c) Represents exchange differences on the Company's 8% promissory note
in US Dollars, issued as part of the share repurchase program.
(d) Represents interest payable on the promissory note.
(e) Represents reduced interest income as a consequence of the cash
payments to finance the repurchase program.
See Note 6 to the Unaudited Interim Financial Statements as at September 30,
1996 for a full description of the Company's share repurchase program and other
repurchases of shares subsequent to September 30, 1996.
Sale of securities of Moto Guzzi Corp.:
(f) Goodwill amortization arising in the year to December 31, 1995 from
treating the acquisition of Moto America Inc, which was made effective for
accounting purposes at January 1, 1996 as if it had been consummated and
effective as of 1 January 1995.
(g) Estimated reduction in interest payable on advances from banks.
(h) Income tax effects of reduced interest payable in Moto Guzzi Corp.
(i) Recording of minority interests in consolidated losses of Moto Guzzi
Corp.
See Note 6 to the Unaudited Interim Financial Statements as at September 30,
1996 for a description of the sale by the Company of securities of its Moto
Guzzi Corp. subsidiary.
P-6
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS OFFERING
OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR BY THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR SOLICITATION OF AN OFFER TO BUY ANY SECURITY
OTHER THAN THE SECURITIES OFFERED BY THIS PROSPECTUS, OR AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES BY ANY PERSON IN ANY JURISDICTION
IN WHICH SUCH OFFER OR SOLICITATION IS NOT AUTHORIZED OR IS UNLAWFUL. THE
DELIVERY OF THIS PROSPECTUS SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE OF THIS PROSPECTUS.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Summary......................................... 3
Risk Factors.................................... 6
The Company..................................... 17
Use of Proceeds................................. 17
Market Price of Common Stock.................... 18
Dividend Policy................................. 18
Capitalization.................................. 19
Exchange Rates.................................. 20
Management's Discussion and Analysis
of Financial Condition and Plan
of Operations.................................. 22
Business........................................ 32
Management...................................... 47
Principal Stockholders.......................... 54
Certain Transactions............................ 55
Description of Securities....................... 55
Shares Eligible for Future Sale................. 57
Underwriting.................................... 59
Legal Matters................................... 61
Experts......................................... 61
Available Information........................... 61
Index to Consolidated Financial
Statements..................................... F-1
</TABLE>
TRIDENT ROWAN
GROUP, INC.
1,250,000 SHARES OF COMMON STOCK
AND
1,250,000 REDEEMABLE COMMON STOCK
PURCHASE WARRANTS
--------------
PROSPECTUS
--------------
GKN SECURITIES
, 1997
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses expected to be incurred
by the Registrant in connection with the sale and distribution of the securities
being registered hereby, other than underwriting discounts and commissions. All
amounts are estimated except the Securities and Exchange Commission registration
fee and the National Association of Securities Dealers, Inc. filing fee.
<TABLE>
<CAPTION>
PAYABLE BY
REGISTRANT
----------
<S> <C>
SEC registration fee............................................................. $ 8,871.28
National Association of Securities Dealers, Inc. filing fee...................... 3,427.81
Blue Sky fees and expenses.......................................................
Nasdaq listing fee...............................................................
Accounting fees and expenses.....................................................
Legal fees and expenses..........................................................
Printing and engraving expenses..................................................
Registrar and Transfer Agent's fees..............................................
Miscellaneous fees and expenses..................................................
----------
Total........................................................................ $
----------
----------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Maryland General Corporation Law provides for the indemnification of
officers, directors, and other corporate agents in terms sufficiently broad to
indemnify such persons under certain circumstances for liabilities (including
reimbursement of expenses incurred) arising under the Securities Act of 1933, as
amended ("Act"). The Registrant has also entered into agreements with each of
its directors that provide for the indemnification of and the advancement of
expenses to such persons to the greatest extent permitted by Maryland law.
At present, there is no pending litigation or proceeding involving a
director, officer, employee or other agent of the Registrant where
indemnification will be required or permitted. The Registrant is not aware of
any threatened litigation or proceeding that may result in a claim for
indemnification by any director, officer, employee or other agent.
The Underwriting Agreement (Exhibit 1.1) provides for indemnification by the
Underwriters of the Registrant and its directors and officers for certain
liabilities, including liabilities arising under the Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
Within the past three years, the Registrant has sold and issued the
following securities that were not registered under the Act:
(1) In July 1995 the Company issued (a) 1,922,652 shares of Common Stock
(after adjustment) to Finprogetti S.p.A. in consideration of the purchase of
assets from Finprogetti S.p.A., (b) 408,008 shares of Common Stock in
consideration of cash subscriptions by various purchasers (most of whom were
stockholders of Finprogetti S.p.A. and (c) 30,000 shares of Common Stock in
exchange for minority interests in the Registrant's majority-owned
subsidiary, Moto Guzzi S.p.A.
(2) As of January 1, 1996 the Registrant issued 30,000 shares of Common
Stock to four persons in consideration of the acquisition of 100% of the
stock of Moto America, Inc., the U.S. importer of motorcycles manufactured
by the Registrant's subsidiary, Moto Guzzi.
II-1
<PAGE>
(3) The Registrant has granted options to 13 persons options to purchase
1,005,000 shares of Common Stock under its 1995 Non-Qualified Stock Option
Plan and options to 4 persons to purchase a total of 40,000 shares of Common
Stock under its 1995 Directors Plan.
The sale and issuance of securities in the transactions described above in
paragraph (1) were deemed to be exempt from registration under the Act by virtue
of Section 4(2) thereof and Regulation S thereunder as transactions not
involving any public offering and involving offers and sales made outside the
United States. The sale and issuance of securities in the transaction described
above in paragraph (2) were deemed to be exempt from registration under the Act
by virtue of Section 4(2) thereof and Regulation D thereunder as transactions
not involving any public offering. The purchasers of all of the above-described
shares represented their intention to acquire the shares for investment only and
not with a view to the distribution thereof and appropriate legends were affixed
to the certificates representing securities issued in such transactions. Similar
representations of investment intent were obtained and similar legends imposed
in connection with any subsequent sales of any such securities. All purchasers
had adequate access, through employment or other relationships, to information
about the Registrant.
No registration was required with respect to the grant of the options
described above in paragraph (3) by virtue of Section 4(2) of the Act as a
transaction not involving a public offering, in light of the small number of
persons to whom such options were granted as well as their familiarity with the
business and affairs of the Registrant.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ---------
<C> <S>
1.1 Proposed form of Underwriting Agreement (to be filed by amendment).
2.1 Agreement and Plan of Merger dated August 14, 1996 (filed on August 21, 1996 as Exhibit 99.1 to Current
Report on Form 8-K).
2.2 Termination of Agreement and Plan of Merger dated , 1997 (to be filed by amendment).
3.1 Restated Articles of Incorporation of the Company, as amended (filed as Exhibit 3(a) to 1981 Annual
Report on Form 10-K and Exhibit 3(c) to 1985 Annual Report on Form 10-K and to be re-filed by amendment).
3.2 Bylaws of the Company (filed as Exhibit 3(b) to 19981 Annual Report on Form 10-K and to be re-filed by
amendment).
4.1 Form of Common Stock Certificate (to be filed by amendment).
4.2 Proposed form of Warrant Agreement (with form of Warrant Certificate attached thereto as Exhibit A) (to
be filed by amendment).
5.1 Opinion of Morrison Cohen Singer & Weinstein, LLP, as to the legality of the shares of Common Stock (to
be filed by amendment).
10.1 1995 Non-Qualified Stock Option Plan filed as Exhibit A to the Company's Preliminary Proxy Statement
filed May 24, 1996.
10.2 1995 Directors Plan, filed as Exhibit B to the Company's Preliminary Proxy Statement filed May 24, 1996.
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ---------
<C> <S>
10.3 Voting Agreement dated July 17, 1995 among Finprogetti, S.p.A. and Messrs Howard E. Chase, Mario
Tozzi-Condivi and Albino Collini (filed as Exhibit 10.1 to Current Report on Form 8-K for Event Dated
July 17, 1995).
10.4 Agreement dated July 20, 1995 between De Tomaso Industries, Inc. and Pirunico Trustees (Jersey) Limited
(filed as Exhibit 10.2 to Current Report on Form 8-K for Event Dated July 17, 1995.
10.5 Agreement dated May 17, 1993 between O.A.M. S.p.A., Fiat Auto S.p.A., and others (filed as Exhibit 10.1
to the Current Report Dated May 17, 1993 filed on Form 8-K).
10.6 Agreement dated April 27, 1993 between Registrant and Finprogetti, S.p.A., together with Exhibits A-D
thereto (filed as Exhibit 10(b) to 1994 Annual Report on Form 10-K/A, Amendment No. 2).
10.7 Agreement dated April 10, 1995 between Registrant and Alejandro DeTomaso (filed as Exhibit 10(c) to 1994
Annual Report on Form 10-K/A, Amendment No. 2).
10.8 Agreement dated as of November 1, 1995 between the Registrant and Howard E. Chase (filed as Exhibit 10(g)
to 1995 Annual Report on Form 10-K).
10.9 Agreement dated as of November 1, 1995 between the Registrant and Albino Collini (filed as Exhibit 10(h)
to 1995 Annual Report on Form 10-K).
10.10 Agreement dated as of November 1, 1995 between the Registrant and Francesco Pugno Vanoni (filed as
Exhibit 10(i) to 1995 Annual Report on Form 10-K).
10.11 Agreement dated as of November 1, 1995 between the Registrant and Como Consultants, Limited (filed as
Exhibit 10(j) to 1995 Annual Report on Form 10-K).
10.12 Agreement dated as of November 1, 1995 between the Registrant and Domenico Costa (filed as Exhibit 10(k)
to 1995 Annual Report on Form 10-K).
10.13 Agreement dated as of November 1, 1995 between the Registrant and Carlo Previtali (filed as Exhibit 10(l)
to 1995 Annual Report on Form 10-K).
10.14 Agreement dated as of November 1, 1995 between the Registrant and Giovanni Avallone (filed as Exhibit
10(m) to 1995 Annual Report on Form 10-K).
10.15 Option Agreement between the Registrant and Howard E. Chase (filed as Exhibit 10(n) to 1995 Annual Report
on Form 10-K).
10.16 Option Agreement between the Registrant and Albino Collini (filed as Exhibit 10(o) to 1995 Annual Report
on Form 10-K).
10.17 Option Agreement between the Registrant and Como Consultants, Limited (filed as Exhibit 10(p) to 1995
Annual Report on Form 10-K).
10.18 Option Agreement between the Registrant and Domenico Costa (filed as Exhibit 10(q) to 1995 Annual Report
on Form 10-K).
10.19 Option Agreement between the Registrant and Carlo Previtali (filed as Exhibit 10(r) to 1995 Annual Report
on Form 10-K).
10.20 Option Agreement between the Registrant and Giovanni Avallone (filed as Exhibit 10(s) to 1995 Annual
Report on Form 10-K).
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO.
- ---------
<C> <S>
10.21 Option Agreement between the Registrant and Santiago De Tomaso (filed as Exhibit 10(t) to 1995 Annual
Report on Form 10-K).
10.22 Description of 8% 2 year promissory notes issued in connection with the Company's Stock Repurchase Plan
included in the Company's Schedule 13E-4 dated September 20, 1996.
21. Subsidiaries: The Registrant's significant subsidiaries, the jurisdiction of their incorporation and
nature of their respective activities is contained in the current Registration Statement.
23.1 Consent of Morrison Cohen Singer & Weinstein, LLP (included in the Opinion of Morrison Cohen Singer &
Weinstein, LLP to be filed by amendment as Exhibit 5.1).
23.2 Consent of Reconta Ernst & Young S.p.A. (included in Part II of this Registration Statement).
</TABLE>
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Financial Statement Schedules filed as part of this Registration Statement:
Report of Independent Certified Public Accountants on Schedule............................................. S-1
Schedule II--Valuation and Qualifying Accounts............................................................. S-2
</TABLE>
ITEM 17. UNDERTAKINGS
The Registrant hereby undertakes to provide to the underwriters at the
closing specified in the underwriting agreement certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The Registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4)
or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on February 11, 1997.
TRIDENT ROWAN GROUP, INC.
BY /S/ HOWARD E. CHASE
-----------------------------------------
Howard E. Chase
PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
NAME TITLE DATE
- ------------------------------ --------------------------- -------------------
/s/ CARLO PREVITALI Secretary and Treasurer February 11, 1997
- ------------------------------
Carlo Previtali
/s/ FRANCESCO PUGNO VANONI Director and Chairman of February 11, 1997
- ------------------------------ the Board
Francesco Pugno Vanoni
/s/ MARIO TOZZI-CONDIVI Director and Vice Chairman February 11, 1997
- ------------------------------ of the Board
Mario Tozzi-Condivi
/s/ HOWARD E. CHASE Director, President and February 11, 1997
- ------------------------------ Chief Executive Officer
Howard E. Chase
/s/ ALBINO COLLINI Director, Executive Vice February 11, 1997
- ------------------------------ President and Chief
Albino Collini Operating Officer
/s/ CARLO GARAVAGLIA Director February 11, 1997
- ------------------------------
Carlo Garavaglia
/s/ GIOVANNI AVALLONE Director February 11, 1997
- ------------------------------
Giovanni Avallone
/s/ MARIA LUISA RUZZON Director February 11, 1997
- ------------------------------
Maria Luisa Ruzzon
/s/ SANTIAGO DE TOMASO Director February 11, 1997
- ------------------------------
Santiago De Tomaso
/s/ ROBERTO CORRADI Director February 11, 1997
- ------------------------------
Roberto Corradi
II-5
<PAGE>
TRIDENT ROWAN GROUP, INC. AND SUBSIDIARIES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COL A COL. B COL. C COL. D COL. E
<S> <C> <C> <C> <C> <C>
<CAPTION>
(2)
(1) CHARGED TO
BALANCE AT CHARGED TO OTHER BALANCE AT
BEGINNING OF COSTS AND ACCOUNTS DEDUCTIONS END OF
DESCRIPTION PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
<S> <C> <C> <C> <C> <C>
IN MILLIONS OF ITALIAN LIRE
YEAR ENDED DECEMBER 31, 1995
Deducted from asset accounts:
Allowance for doubtful accounts... 571 433 (a)2,464 3,468
Inventory obsolescence reserve.... 5,451 1,772 (b) (611) 6,612
------ ----- ------------ ---------- -----------
6,022 2,205 2,464 (611) 10,080
------ ----- ------------ ---------- -----------
------ ----- ------------ ---------- -----------
<CAPTION>
YEAR ENDED DECEMBER 31, 1994
<S> <C> <C> <C> <C> <C>
Deducted from asset accounts:
Allowance for doubtful accounts... 588 91 (c) (108) 571
Inventory obsolescence reserve.... 7,144 669 (c) (2,361) 5,451
------ ----- ------------ ---------- -----------
7,732 760 (2,470) 6,022
------ ----- ------------ ---------- -----------
------ ----- ------------ ---------- -----------
<CAPTION>
YEAR ENDED DECEMBER 31, 1993
<S> <C> <C> <C> <C> <C>
Deducted from asset accounts:
Allowance for doubtful accounts... 1,526 81 (c) (149) 588
(d) (870)
------ ----- ------------ ---------- -----------
Inventory obsolescence reserve.... 25,558 1,261 (c) (890) 7,144
(d)(18,785)
------ ----- ------------ ---------- -----------
27,084 1,342 (20,694) 7,732
------ ----- ------------ ---------- -----------
------ ----- ------------ ---------- -----------
Product warranty liability............ 2,118 (c) (831) 257
(e) 185
(f) (260)
(d) (955)
<CAPTION>
IN THOUSANDS OF US DOLLARS
YEAR ENDED DECEMBER 31, 1995
<S> <C> <C> <C> <C> <C>
Deducted from asset accounts:
Allowance for doubtful accounts... 352 273 (a)1,552 2,184
(e) 7
Inventory obsolescence reserve.... 3,361 1,116 (e) 72 (b) (385) 4,164
------ ----- ------------ ---------- -----------
3,713 1,389 1,631 (385) 6,348
------ ----- ------------ ---------- -----------
------ ----- ------------ ---------- -----------
</TABLE>
- ------------------------
(a) Acquisitions of businesses
(b) Disposal of inventory
(c) Amounts written off
(d) Sale of business
(e) Exchange movements
(f) Product warranty payments
S-1
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- ---------------------------------------------------------------------------------------------
<S> <C> <C>
1.1 Proposed form of Underwriting Agreement (to be filed by amendment).
2.1 Agreement and Plan of Merger dated August 14, 1996 (filed on August 21, 1996 as Exhibit 99.1
to Current Report on Form 8-K).
2.2 Termination of Agreement and Plan of Merger dated , 1997 (to be filed by
amendment).
3.1 Restated Articles of Incorporation of the Company, as amended (filed as Exhibit 3(a) to 1981
Annual Report on Form 10-K and Exhibit 3(c) to 1985 Annual Report on Form 10-K and to be
re-filed by amendment).
3.2 Bylaws of the Company (filed as Exhibit 3(b) to 19981 Annual Report on Form 10-K and to be
re-filed by amendment).
4.1 Form of Common Stock Certificate (to be filed by amendment).
4.2 Proposed form of Warrant Agreement (with form of Warrant Certificate attached thereto as
Exhibit A) (to be filed by amendment).
5.1 Opinion of Morrison Cohen Singer & Weinstein, LLP, as to the legality of the shares of Common
Stock (to be filed by amendment).
10.1 1995 Non-Qualified Stock Option Plan (filed as Exhibit A to the Company's Preliminary Proxy
Statement filed May 24, 1996).
10.2 1995 Directors Plan (filed as Exhibit B to the Company's Preliminary Proxy Statement filed
May 24, 1996).
10.3 Voting Agreement dated July 17, 1995 among Finprogetti, S.p.A. and Messrs Howard E. Chase,
Mario Tozzi-Condivi and Albino Collini (filed as Exhibit 10.1 to Current Report on Form 8-K
for Event Dated July 17, 1995).
10.4 Agreement dated July 20, 1995 between De Tomaso Industries, Inc. and Pirunico Trustees
(Jersey) Limited (filed as Exhibit 10.2 to Current Report on Form 8-K for Event Dated July
17, 1995).
10.5 Agreement dated May 17, 1993 between O.A.M. S.p.A., Fiat Auto S.p.A., and others (filed as
Exhibit 10.1 to the Current Report Dated May 17, 1993 filed on Form 8-K).
10.6 Agreement dated April 27, 1993 between Registrant and Finprogetti, S.p.A., together with
Exhibits A-D thereto (filed as Exhibit 10(b) to 1994 Annual Report on Form 10-K/A, Amendment
No. 2).
10.7 Agreement dated April 10, 1995 between Registrant and Alejandro DeTomaso (filed as Exhibit
10(c) to 1994 Annual Report on Form 10-K/A, Amendment No. 2).
10.8 Agreement dated as of November 1, 1995 between the Registrant and Howard E. Chase (filed as
Exhibit 10(g) to 1995 Annual Report on Form 10-K).
10.9 Agreement dated as of November 1, 1995 between the Registrant and Albino Collini (filed as
Exhibit 10(h) to 1995 Annual Report on Form 10-K).
10.10 Agreement dated as of November 1, 1995 between the Registrant and Francesco Pugno Vanoni
(filed as Exhibit 10(i) to 1995 Annual Report on Form 10-K).
10.11 Agreement dated as of November 1, 1995 between the Registrant and Como Consultants, Limited
(filed as Exhibit 10(j) to 1995 Annual Report on Form 10-K).
10.12 Agreement dated as of November 1, 1995 between the Registrant and Domenico Costa (filed as
Exhibit 10(k) to 1995 Annual Report on Form 10-K).
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ------------- ---------------------------------------------------------------------------------------------
<S> <C> <C>
10.13 Agreement dated as of November 1, 1995 between the Registrant and Carlo Previtali (filed as
Exhibit 10(l) to 1995 Annual Report on Form 10-K).
10.14 Agreement dated as of November 1, 1995 between the Registrant and Giovanni Avallone (filed as
Exhibit 10(m) to 1995 Annual Report on Form 10-K).
10.15 Option Agreement between the Registrant and Howard E. Chase (filed as Exhibit 10(n) to 1995
Annual Report on Form 10-K).
10.16 Option Agreement between the Registrant and Albino Collini (filed as Exhibit 10(o) to 1995
Annual Report on Form 10-K).
10.17 Option Agreement between the Registrant and Como Consultants, Limited (filed as Exhibit 10(p)
to 1995 Annual Report on Form 10-K).
10.18 Option Agreement between the Registrant and Domenico Costa (filed as Exhibit 10(q) to 1995
Annual Report on Form 10-K).
10.19 Option Agreement between the Registrant and Carlo Previtali (filed as Exhibit 10(r) to 1995
Annual Report on Form 10-K).
10.20 Option Agreement between the Registrant and Giovanni Avallone (filed as Exhibit 10(s) to 1995
Annual Report on Form 10-K).
10.21 Option Agreement between the Registrant and Santiago De Tomaso (filed as Exhibit 10(t) to
1995 Annual Report on Form 10-K).
10.22 Description of 8% 2 year promissory notes issued in connection with the Company's Stock
Repurchase Plan included in the Company's Schedule 13E-4 dated September 20, 1996.
21. Subsidiaries: The Registrant's significant subsidiaries, the jurisdiction of their
incorporation and nature of their respective activities is contained in the current
Registration Statement (to be filed by amendment).
23.1 Consent of Morrison Cohen Singer & Weinstein, LLP (included in the Opinion of Morrison Cohen
Singer & Weinstein, LLP to be filed by amendment as Exhibit 5.1).
23.2 Consent of Reconta Ernst & Young S.p.A. (included in Part II of this Registration Statement).
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to
the use of our report dated April 3, 1996, in the Registration Statement (Form
S-1) and related Prospectus of Trident Rowan Group Inc. dated February 11, 1997
/s/ Reconta Ernst & Young
Milan, Italy
February 10, 1997
