UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
X THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 33-69286
WRIGHT MEDICAL TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)
Delaware 62-1532765
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5677 Airline Road, Arlington, Tennessee 38002-0100
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (901)867-9971
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
Number of shares outstanding of Class A Common Stock, par value
$.001 at March 31, 1997: 9,199,025
1 of 19
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Wright Medical Technology, Inc. & Subsidiaries:
Consolidated Balance Sheets - March 31, 1997
and December 31, 1996...................................3
Condensed Consolidated Statements of Operations
for the Three Month Periods Ended March 31, 1997
and March 31, 1996......................................4
Consolidated Statements of Cash Flows for the
Three Month Periods Ended March 31, 1997 and
March 31, 1996..........................................5
Notes to Consolidated Financial Statements..............6
ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS........................8
2 of 19
<PAGE>
<TABLE>
WRIGHT MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
March 31, 1997 December 31, 1996
------------------ -----------------
(in thousands) (in thousands)
(unaudited)
ASSETS
Current Assets:
<S> <C> <C>
Cash and cash equivalents $ 1,122 $ 910
Trade receivables, net 21,124 18,289
Inventories, net 57,309 59,107
Prepaid expenses 1,673 1,692
Deferred income taxes 978 978
Other 2,351 2,540
------------------ -----------------
Total Current Assets 84,557 83,516
------------------ -----------------
Property, Plant and Equipment, net 31,759 33,659
Investment in Joint Venture 3,279 3,597
Other Assets 44,489 45,554
------------------ -----------------
$ 164,084 $ 166,326
================== =================
LIABILITIES AND STOCKHOLDERS' INVESTMENT
Current Liabilities:
Current portion of long-term debt $ 83 $ 138
Short-term borrowing 14,850 8,390
Accounts payable 5,823 6,063
Accrued expenses and other current liabilities 12,251 18,453
------------------ -----------------
Total Current Liabilities 33,007 33,044
------------------ -----------------
Long-Term Debt 84,688 84,668
Preferred Stock Dividends 16,385 17,999
Other Liabilities 3,533 3,189
Deferred Income Taxes 978 978
------------------ -----------------
Total Liabilities 138,591 139,878
------------------ -----------------
Commitments and Contingencies
Mandatorily Redeemable Series B Preferred Stock, $.01 par value, (aggregate
liquidation value of $77.2 million, including accrued and unpaid dividends
of $.6 million, 800,000 shares authorized, 765,395 shares issued and outstanding) 65,810 59,959
Redeemable Convertible Series C Preferred Stock, $.01 par value, (aggregate
liquidation value of $41.4 million, including accrued and unpaid dividends of
$6.4 million, 350,000 shares authorized, issued and outstanding) 26,107 24,995
Stockholders' Investment:
Series A preferred stock, $.01 par value, (aggregate liquidation value of
$25.8 million, including accrued and unpaid dividends of $9.3 million),
1,200,000 shares authorized, 915,325 shares issued 9 9
Undesignated preferred stock, $.01 par value, 650,000 shares authorized,
no shares issued - -
Class A common stock, $.001 par value, 46,000,000 shares authorized,
10,077,650 and 10,023,421 shares issued and outstanding 10 10
Class B common stock, $.01 par value, 1,000,000 shares authorized,
no shares issued - -
Additional capital 54,913 53,853
Accumulated deficit (120,401) (111,855)
Other 86 516
------------------ -----------------
(65,383) (57,467)
Less - Notes receivable from stockholders (1,039) (1,037)
Series A preferred treasury stock, 86,688 shares (1) (1)
Class A common treasury stock, 878,630 shares (1) (1)
------------------ -----------------
Total Stockholders' Investment (66,424) (58,506)
------------------ -----------------
$ 164,084 $ 166,326
================== =================
The accompanying notes are an integral part of these consolidated balance sheets.
3 of 19
</TABLE>
<PAGE>
<TABLE>
WRIGHT MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except earnings per share)
(unaudited)
<CAPTION>
Three Months Ended
-----------------------------------
March 31, 1997 March 31, 1996
-------------- --------------
<S> <C> <C>
Net sales $ 32,253 $ 30,707
Cost of goods sold 12,444 9,577
-------------- --------------
Gross profit 19,809 21,130
-------------- --------------
Operating expenses:
Selling 12,250 11,456
General and administrative 4,512 4,996
Research and development 2,937 3,048
Equity in loss of joint venture 317 -
-------------- --------------
20,016 19,500
-------------- --------------
Operating income (loss) (207) 1,630
Interest (income) expense, net 3,074 2,965
Other (income) expense, net (71) 129
-------------- --------------
Loss before income taxes (3,210) (1,464)
Provision for income taxes - 25
-------------- --------------
Net loss $ (3,210) $ (1,489)
============== ==============
Loss applicable to common stock $ (8,560) $ (6,681)
============== ==============
Loss per share of common stock $ (0.93) $ (0.75)
============== ==============
Weighted average common shares outstanding 9,168 8,957
============== ==============
The accompanying notes are an integral part of these statements.
4 of 19
</TABLE>
<PAGE>
<TABLE>
WRIGHT MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
<CAPTION>
Three Months Ended
-----------------------------
March 31, March 31,
1997 1996
-------------- ------------
Cash Flows From Operating Activities:
<S> <C> <C>
Net loss $ (3,210) $ (1,489)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation 1,643 2,496
Instrument amortization 1,385 -
Provision for instrument reserves 1,003 -
Provision for excess/obsolete inventory 926 (515)
Provision for sales returns 5 (98)
Deferred income - 856
Amortization of intangible assets 838 737
Amortization of deferred financing costs 346 351
Loss on disposal/abandonment of equipment - 49
Equity in loss of joint venture 317 -
Other (112) 129
Changes in assets and liabilities, net effect
of purchases of businesses
Trade receivables (2,845) (268)
Inventories (128) (3,017)
Other current assets 208 (110)
Accounts payable (240) 113
Accrued expenses and other liabilities (4,836) (4,695)
Other assets 570 435
---------- ----------
Net cash used in operating activities (4,130) (5,026)
---------- ----------
Cash Flows From Investing Activities:
Capital expenditures (1,257) (2,329)
Other (723) (87)
---------- ----------
Net cash used in investing activities (1,980) (2,416)
---------- ----------
Cash Flows From Financing Activities:
Net proceeds from short-term borrowings 6,460 6,950
Proceeds from issuance of stock and stock warrants - 631
Payments of debt (78) (112)
Other (60) (16)
---------- ----------
Net cash provided by financing activities 6,322 7,453
---------- ----------
Net increase in cash and cash equivalents 212 11
Cash and cash equivalents, beginning of period 910 1,126
---------- ----------
Cash and cash equivalents, end of period $ 1,122 $ 1,137
========== ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest $ 2,639 $ 4,870
========== ==========
Cash paid for income taxes $ - $ -
========== ==========
The accompanying notes are an integral part of these statements.
5 of 19
</TABLE>
<PAGE>
WRIGHT MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The consolidated financial statements as of March 31, 1997 and for the
three month periods ended March 31, 1997 and March 31, 1996 include the accounts
of Wright Medical Technology, Inc. and its wholly-owned domestic and foreign
subsidiaries and joint ventures ("the Company").
The accompanying unaudited financial information, in management's
opinion, includes all adjustments, consisting only of normal recurring
adjustments, necessary to present fairly the financial position, results of
operations and cash flows for the periods presented. The results of the periods
presented are not necessarily indicative of the results to be expected for the
full year.
The financial information has been prepared in accordance with the
instructions to Form 10-Q and, therefore, does not include all information and
footnote disclosures necessary for fair presentation of financial statements
prepared in accordance with generally accepted accounting principles. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements and notes thereto included in the Company's
1996 Annual Report on Form 10-K.
NOTE 2 - INVENTORIES
Components of inventory are as follows (in thousands):
March 31, Dec. 31,
1997 1996
------------- ----------
(unaudited)
Raw materials $ 1,978 $ 2,214
Work in process 8,294 10,186
Finished goods 37,185 36,388
Surgical instruments 9,852 10,319
---------- ----------
Total $ 57,309 $ 59,107
========== ==========
6 of 19
<PAGE>
NOTE 3 - ACCRUED EXPENSES
A detail of accrued expenses is as follows (in thousands):
March 31, Dec. 31,
1997 1996
----------- ------------
(unaudited)
Interest $ 2,419 $ 4,668
Employee benefits 1,590 3,489
Joint venture 1,385 2,105
Commissions 1,446 1,358
Professional fees 1,107 1,088
Taxes - other than income 639 761
Distributor product reserve 113 161
Other 3,552 4,823
----------- ------------
Total $ 12,251 $ 18,453
=========== ============
NOTE 4 - LEGAL PROCEEDINGS
No material developments occurred in the Company's legal proceedings in
the period covered by this report.
NOTE 5 - NEW ACCOUNTING PRONOUNCEMENTS
In February 1997, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards No. 128, "Earnings per Share"
("SFAS No. 128"), which establishes new standards for computing and presenting
earnings per share. SFAS No. 128 is effective for financial statements for both
interim and annual periods ending after December 15, 1997. At this time,
management does not believe that adoption of this standard will have a material
impact on the Company's earnings per share.
7 of 19
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
This discussion includes forecasts and projections that are forward
looking statements based on management's current expectations of the Company's
near term results, based on currently available information pertaining to the
Company. Actual future results and trends may differ materially depending on a
variety of factors, including competition in the marketplace, changing market
conditions, demographic trends, product research and development, government
approvals, government reimbursement schedules and other factors. The Company
assumes no obligation for updating any such forward looking statements.
The Company was pleased with first quarter 1997 results as the positive
sales trends, which began in the third quarter of last year, continued to
accelerate. Sales for the first quarter were $32.3 million representing a 5%
increase over the prior year period which, the Company believes, was in excess
of the industry average for reconstructive products. Adjusted earnings before
interest taxes, depreciation, and amortization increased 31% over prior year for
the period. The Company was particularly encouraged by its strong international
sales growth, with sales increasing 21% over the prior year period. Sales of its
core knee products, including the new ADVANCE(TM) Knee System were strong,
increasing $1.2 million. Also, net of interest expenses, the Company had
positive cash flow from operations during the period.
The Company expects these positive trends to continue given that many
of the Company's new key products, including OSTEOSET(TM) Bone Graft Substitute,
the VERSALOK(TM) Spinal Fixation System and the MAGELLAN(TM) Intramedullary
Nailing System, appear to have received very favorable market acceptance.
OSTEOSET(TM) is the industry's first FDA cleared synthetic bone graft
substitute which is totally bioresorbable. The surgeons response to the clinical
results they have been able to achieve with OSTEOSET(TM) has been very positive.
The Company also expects to receive FDA clearance to market for use in the spine
and pelvis, the largest markets for bone grafting material. The Company expects
those sales of the OSTEOSET(TM) family of products to contribute materially to
its growth in the full year 1997.
8 of 19
<PAGE>
Despite its limited release, the Company's VERSALOK(R) Spine System,
which addresses the lumbar spine fusion market, also has received favorable
reviews from surgeons. The sales trend for that product is positive and is
expected to accelerate in the second quarter as the Company rolls out the system
to the remainder of its domestic sales force.
The Company was pleased with the favorable reviews of its MAGELLAN(TM)
Intramedullary Nailing System which was previewed at the annual meeting of the
American Academy of Orthopaedic Surgeons. That product incorporates a novel and
patented targeting system for the distal screw and modular components at the
proximal end which permits required nail inventory to be reduced by as much as
75%. The first components of the MAGELLAN(TM) System, the femoral nail, is
expected to be released to selected trauma centers around the country in the
second quarter.
The Company's new CONSERVE(TM) Hip System which involves a resurfacing
of the femoral head has been well received. The Company's new TRANSCEND(TM) Hip
System, employing metal-on-metal and ceramic-on-ceramic bearing surfaces, began
to be sold in Europe and clinical trials in the U.S. were commenced.
Internationally, the Company established a new stocking distributor in
Australia and continued to see sales increases in Asia including Japan.
Domestically, the Company furthered its goal of improving its distribution by
reorganizing its operations in New England and by the purchase of two
distributorships that previously sold spinal devices for a competitor, Sofamor
Danek.
Results of Operations
The Company's net sales for the quarter ended March 31, 1997 were $32.3
million as compared to prior year's sales of $30.7 million for the same period.
The sales increase is attributable primarily to increases in the sales of the
Company's core knee products of $1.3 million. Spinal products and OSTEOSET(TM)
contributed $0.6 million to net sales.
International sales were strong during the first quarter with sales
increasing 21% over the prior year period to $9.3 million while domestic sales
remained unchanged. Sales in Australia as a result of the Company's new
distribution agreement with EBOS Group Limited as of February, 1997, contributed
significantly to the increase in international sales.
9 of 19
<PAGE>
Cost of Sales
Cost of Sales for the period increased by $2.9 million over the same
period in 1996 due to increased reserves and stronger sales volume. Increased
reserving for obsolescence due, in part, to new product introductions ($1.4
million) and increased instruments reserving in 1997 ($0.9 million) primarily
led to the unfavorable variance. In August 1996, instruments were reclassified
from property, plant & equipment to inventory as part of the Company's revised
instrument program designed to give the Company's independent distributors
better access to these instruments. During the first quarter of 1996,
instruments were classified as property and as such were depreciated to selling
expense. Increased sales volume accounted for an increase of $1.0 million in the
cost of sales and was unusually high relative to the increase in sales due to
the lower margins from international sales. These increases were offset by $0.4
million of lower manufacturing variances charged to cost of sales in the current
quarter.
Selling
Selling expenses increased in 1997 by $0.8 million to a total of $12.2
million as compared to prior year. Domestic selling expenses increased $1.3
million, mainly due to increased instrument amortization ($0.8 million), and
royalty expenses ($0.3 million). Those expenses were offset by a $0.4 million
savings the Company realized by eliminating its physician practice management
initiative last year.
General and Administrative
General and administrative expenses for the three months ended March
31, 1997 decreased $0.5 million, or approximately 10% over the same period in
1996. The major contributors to the 1997 decrease in expenses were decreased
domestic travel expenses ($0.4 million) due to the sale of the Company jet in
1996 and lower foreign expenses in Brazil ($0.2 million) associated with the
closure of that office.
Research and Development
Research and development expenses of $2.9 million for the first quarter
of 1997 remained relatively flat compared to the first quarter of 1996. Domestic
outside services decreased $0.3
10 of 19
<PAGE>
million offset by slightly higher domestic salaries and benefits of $0.2 million
in 1997.
Other
Equity in loss of joint venture ($0.3 million) represented the
Company's 50% share of expenses incurred related to the joint venture with
Tissue Engineering, Inc. Progress continues to be made in that venture in the
development of artificial collagen based ligaments, tendons, cartilage, and a
calcium phosphate based bone cement.
Interest expense remained relatively flat for the three months ended
March 31, 1997 when compared to the same period in 1996.
Other (income) expense for the three months ended March 31, 1997
decreased $0.2 million due, in part, to favorable currency conversion compared
to the same period in 1996.
For the three month periods ended March 31, 1997 and 1996 earnings
before interest, taxes, depreciation, and amortization ("EBITDA") is detailed in
the table below.
March 31,
---------------------------
1997 1996
----------- ----------
Operating Income $ (207) $ 1,630
Depreciation and Instrument Amortization 3,028 2,496
Provision for Instrument Reserves 1,003 -
Provision for Excess/Obsolete Inventory 926 (515)
Amortization of Intangibles 838 737
Amortization of Other Assets 133 91
Other Non Cash Addbacks 104 -
---------- ----------
EBITDA after Certain Adjustments $ 5,825 $ 4,439
=========== ==========
Liquidity and Capital Resources
Since the DCW Acquisition, the Company's strategy has been to attain
growth aggressively through new product development and acquisition of new
technologies through license agreements, joint
11 of 19
<PAGE>
ventures and purchases of other companies in the orthopaedic field. As
anticipated, the Company's substantial needs for working capital have been
funded through the sale of $85 million of senior debt securities and $15 million
of equity at the time of the DCW Acquisition, through the issuance of Series B
Preferred Stock in 1994 to the California Public Employees' Retirement System
($60 million), through the issuance of Series C Preferred Stock to the Princes
Gate purchasers in September 1995 ($35 million), and through borrowings on the
Company's revolving line of credit, that are discussed below.
The Company has available to it a $25 million revolving line of credit
under the Sanwa Agreement (the "Sanwa Agreement") which provided an eligible
borrowing base at March 31, 1997 of $20.8 million. As of March 31, 1997 the
Company had drawn $14.9 million under this agreement. The Company's continued
growth has resulted in an increase in its capital requirements and has been
dependent upon the Sanwa Agreement and other funding sources to meet working
capital needs. During the first quarter of 1997, borrowings under the Sanwa
Agreement reached $16.8 million compared to 1996 first quarter when borrowing
(under the former Heller Agreement) reached $14.4 million.
The Company's capitalization includes senior debt securities of $84.6
million and various series of preferred stock with an aggregate liquidation
value of $144.3 million including accrued dividends of $16.3 million at March
31, 1997. These securities currently bear interest or dividend rates ranging
from 10.0% to 18.9% and, in certain circumstances, these rates can increase to
21.4%. As a result of the Company's obligations to establish a sinking fund for
its senior debt securities beginning in July 1998 ($28.3 million) and its
obligation to issue additional warrants to acquire common stock in the event
that the Series C Preferred Stock is not redeemed or there has not otherwise
been a qualified initial public offering on or before March 1999, Management
believes that the Company will be required to effect a recapitalization plan to
satisfy these future obligations. In this regard, the Company has begun
discussions with a limited number of investment banks to discuss the various
alternatives available to the Company including without limitation, refinancing
the Senior Secured Notes. Management believes that a successful plan of
recapitalization will be completed prior to the sinking fund payment becoming
due in July, 1998, however, there can be no assurance that such a refinancing or
recapitalization plan can be consummated.
12 of 19
<PAGE>
At March 31, 1997, the Company had less than $1.0 million in
outstanding capital commitments, and has budgeted approximately $4.3 million for
1997 expenditures for the purchase of machinery and related capital equipment.
As of March 31, 1997, the Company had net working capital of $51.6
million, compared with $50.5 million as of December 31, 1996. Of this $1.1
million growth, $2.8 million was attributed to growth in accounts receivable,
and $6.2 million was due to a decrease in accrued expenses and other current
liabilities because of payout of the 1996 management bonus ($1.0 million) and
semi-annual interest payment on the bonds ($4.6 million). These increases were
offset by a $1.8 million decrease in inventories and a $6.5 million increase in
short term borrowings against the Company's line of credit.
13 of 19
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
See Note 4. in the "NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS" On Page 7.
ITEM 2. CHANGES IN SECURITIES.
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
A) See Exhibit Index at page 16.
B) No reports on Form 8-K were filed during the
quarter for which this report on Form 10-Q is
filed.
14 of 19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Date:
Richard D. Nikolaev
President and Chief Executive Officer
Date:
George G. Griffin, III
Executive Vice President and
Chief Financial Officer
15 of 19
<PAGE>
Exhibit Index
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT PAGE
11.1 Statement regarding Computation of Earnings
Per Share 17
12.1 Statement regarding Computation of Ratio of
Earnings to Fixed Charges and Preferred
Dividends 18
27.1 Financial Data Schedule 19
16 of 19
<TABLE>
WRIGHT MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
(in thousands, except loss per share)
(unaudited)
<CAPTION>
Three Months Ended
----------------------------------------
March 31, 1997 March 31, 1996
------------------ ------------------
<S> <C> <C>
Net loss $ (3,210) $ (1,489)
Dividends on preferred stock (3,735) (3,577)
Accretion of preferred stock discount (1,615) (1,615)
------------------ ------------------
Net loss applicable to common
and common equivalent shares $ (8,560) $ (6,681)
================== ==================
Weighted average shares of
common stock outstanding (a) 9,168 8,957
================== ===================
Loss per share of common stock $ (0.93) $ (0.75)
================== ===================
<FN>
(a) Because of the net loss applicable to common stock for the three months
ended March 31, 1997, and March 31, 1996, the assumed exercise of common
stock equivalents has not been included in the computation of weighted
average shares outstanding because their effect would be anti-dilutive.
</FN>
17 of 19
</TABLE>
<TABLE>
WRIGHT MEDICAL TECHNOLOGY, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED DIVIDENDS
(in thousands, except ratios)
(unaudited)
<CAPTION>
Three Months
Ended March 31, Year Ended December 31,
----------------------- ------------------------------------
1997 1996 1996 1995 1994
---------- ---------- ---------- ---------- ----------
Earnings:
<S> <C> <C> <C> <C> <C>
Loss before income taxes $ (3,210) $(1,464) $(14,589) $ (4,873) $(57,261)
Add back: Interest expense 2,774 2,643 10,718 10,899 9,311
Amortization of debt issuance cost 346 351 1,361 1,036 829
Portion of rent expense representative
of interest factor 119 124 459 451 349
---------- --------- ---------- --------- ---------
Earnings (loss) as adjusted $ 29 $ 1,654 $ (2,051) $ 7,513 $(46,772)
========== ========= ========== ========== ==========
Fixed charges:
Interest expense $ 2,774 $ 2,643 $ 10,718 $ 10,899 $ 9,311
Amortization of debt issuance cost 346 351 1,361 1,036 829
Portion of rent expense representative of interest factor 119 124 459 451 349
---------- --------- ---------- --------- ---------
$ 3,239 $ 3,118 $ 12,538 $ 12,386 $ 10,489
========== ========= ========== ========= =========
Preferred dividends (grossed up to pretax equivalent basis): $ 3,735 $ 5,769 $ 14,251 $ 16,863 $ 3,997
Accretion of preferred stock (grossed up to pretax equivalent basis): 1,615 2,604 6,458 4,573 394
---------- --------- ---------- ---------- ---------
$ 5,350 $ 8,373 $ 20,709 $ 21,436 4,391
========== ========= ========== ========== =========
Ratio of earnings to fixed charges (a) (a) (a) (a) (a)
========== ========= ========== ========== =========
Ratio of earnings to fixed charges, preferred dividends and accretion
of preferred stock (b) (b) (b) (b) (b)
========== ========= ========== ========== ==========
</TABLE>
(a) Earnings were inadequate to cover fixed charges by $3.2 million, $1.5
million, $14.6 million, $4.9 million and $57.3 million, respectively, for
the three months ended March 31, 1997 and March 31, 1996, for the years
ended December 31, 1996, December 31, 1995, and December 31, 1994.
(b) Earnings were inadequate to cover fixed charges, preferred dividends and
accretion of preferred stock by $8.6 million, $9.8 million, $35.3 million,
$26.3 million and $61.7 million, respectively, for the three months ended
March 31, 1997 and March 31, 1996, for the years ended December 31, 1996,
December 31, 1995 and December 31, 1994. Certain of the preferred
dividends are, at the option of the Company, payable in kind.
18 of 19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Financial Statements and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<CURRENCY> U.S. dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 1,122
<SECURITIES> 0
<RECEIVABLES> 21,768
<ALLOWANCES> 644
<INVENTORY> 57,309
<CURRENT-ASSETS> 84,557
<PP&E> 59,726
<DEPRECIATION> 27,967
<TOTAL-ASSETS> 164,084
<CURRENT-LIABILITIES> 33,007
<BONDS> 84,469
91,917
9
<COMMON> 10
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 164,084
<SALES> 32,253
<TOTAL-REVENUES> 32,253
<CGS> 12,444
<TOTAL-COSTS> 12,444
<OTHER-EXPENSES> 20,016
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,074
<INCOME-PRETAX> (3,210)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,210)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,210)
<EPS-PRIMARY> (0.93)
<EPS-DILUTED> (0.93)
</TABLE>
