SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 2001.
Texon International plc
(Translation of Registrant's Name Into English)
SEC File Number: 333-49619
100 Ross Walk
Leicester LE4 5BX England
(Address of Principal Executive Offices)
(Indicate by check mark whether the registrant files or
will file annual reports under cover of Form 20-F or Form 40-F.)
Form 20-F [X] Form 40-F [ ]
Indicate the number of outstanding shares of each of the issuer's
classes of capital or common stock as of the close of the period
covered by the annual report.
Not applicable
(Indicate by check mark whether the registrant by furnishing the
information contained in this form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.)
Yes [ ] No [X]
TEXON INTERNATIONAL PLC
Three Months Ended March 31, 2001
Index
Page No.
--------
PART I FINANCIAL INFORMATION
Item 1 Financial Statements
Condensed Consolidated Profit and Loss Accounts
Three months ended March 31, 2001 and 2000 3
Condensed Consolidated Balance Sheets
March 31, 2001 and December 31, 2000 4
Condensed Consolidated Cash Flow Statement
Three months ended March 31, 2001 and 2000 5
Reconciliation of Net Cash Flow to Movement in Debt
Three months ended March 31, 2001 and 2000 6
Consolidated Statement of Total Recognised Gains and Losses
Three months ended March 31, 2001 and 2000 7
Reconciliation of Movements in Shareholders' Funds
Three months ended March 31, 2001 and 2000 8
Notes to Condensed Consolidated Financial Statements 9-10
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 11-15
PART II OTHER INFORMATION
Item 1 Legal Proceedings 16
Item 2 Changes in Securities and Use of Proceeds 16
Item 3 Defaults Upon Senior Securities 16
Item 4 Submission of Matters to a Vote of Security Holders 16
Item 5 Other Information 16
Item 6 Exhibits - Reports on Form 8-K 16
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TEXON INTERNATIONAL PLC
CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNTS
(Pounds Sterling, In Thousands)
Unaudited
Three Months ended
March 31, March 31,
----------------------
2001 2000
---- ----
Sales Turnover 37,249 36,688
Cost of Sales (25,758) (25,355)
--------- --------
Gross Profit 11,491 11,333
Selling, general and administrative expenses (8,159) (8,191)
Goodwill Amortisation (326) (163)
-------- --------
Operating Profit 3,006 2,979
Net Interest Payable (3,031) (2,860)
-------- --------
(Loss)/profit on ordinary activities before taxation (25) 119
Taxation on (loss)/profit on ordinary activities (405) (60)
-------- --------
(Loss)/profit on ordinary activities after taxation (430) 59
Minority equity interests (66) 4
-------- --------
Net (loss)/profit for the financial period (496) 63
Finance charges in respect of non equity shares (1,114) (1,000)
-------- --------
Retained (loss) for the financial period for equity
shareholders (1,610) (937)
======== =======
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TEXON INTERNATIONAL PLC
CONDENSED CONSOLIDATED BALANCE SHEET
(Pounds Sterling, In Thousands)
Unaudited Audited
as at March 31, December 31,
Notes 2001 2000
----- --------------- ------------
FIXED ASSETS
Intangible assets
Intellectual Property 450 492
Goodwill 21,090 21,542
Tangible assets 21,445 22,071
Investment 1 1
--------- ---------
42,986 44,106
CURRENT ASSETS
Stocks 2 24,286 22,292
Debtors due within one year 29,955 33,167
Debtors due after one year 1,602 1,606
Cash at bank and in Hand 1,215 837
--------- ---------
57,058 57,902
CREDITORS
Amounts falling due within one year (47,967) (48,815)
--------- ---------
NET CURRENT ASSETS 9,091 9,087
--------- ----------
TOTAL ASSETS LESS CURRENT LIABILITIES 52,077 53,193
CREDITORS
Amounts falling due after more than one year (101,902) (104,504)
Provisions for liabilities and charges (7,519) (6,778)
--------- ---------
(57,344) (58,089)
========== =========
CAPITAL AND RESERVES
Called up share capital 9,973 9,973
Share premium 49,276 49,276
Profit and loss account (130,181) (129,746)
Premium redemption reserve 12,387 11,273
--------- ---------
Shareholders' deficit
Equity interests (125,683) (125,248)
Non-Equity interests 67,138 66,024
(58,545) (59,224)
Minority equity interests 1,201 1,135
--------- ---------
(57,344) (58,089)
========== =========
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TEXON INTERNATIONA PLC
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
(Pounds Sterling, In Thousands)
Unaudited
Three Months ended
-----------------------
March 31, March 31,
2001 2000
--------- ---------
Cash inflow from operating activities 6,889 3,952
Returns on investments and servicing of finance (4,941) (5,368)
Taxation 196 (237)
Capital expenditure and financial investment (167) (420)
Acquisitions and disposals -- (1,909)
--------- ----------
Cash inflow/(outflow) before financing 1,977 (3,982)
Financing (1,177) 2,159
--------- ----------
Increase/(decrease) in cash and overdrafts in the
period 800 (1,823)
========= ==========
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TEXON INTERNATIONAL PLC
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
(Pounds Sterling, In Thousands)
Unaudited
Three Months ended
-----------------------
March 31, March 31,
2001 2000
--------- ---------
Increase/(decrease) in cash and overdrafts in the
period 800 (1,823)
Cash inflow/(outflow) from debt and lease financing 1,177 (2,159)
--------- ----------
Change in net debt resulting from cash flows 1,977 (3,982)
Loans and finance leases acquired with subsidiary -- (462)
Issue of shares -- 637
Non cash movements in debt (188) (212)
Translation difference 1,407 3,625
--------- ----------
Movement in net debt in the period 3,196 (394)
Net debt at the opening date (117,648) (108,063)
---------- ----------
Net debt at the closing date (114,452) (108,457)
========== ==========
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TEXON INTERNATIONAL PLC
CONDENSED STATEMENTS OF TOTAL RECOGNIZED GAINS AND LOSSES
(Pounds Sterling, In Thousands)
Unaudited
Three Months ended
-----------------------
March 31, March 31,
2001 2000
--------- ---------
Net (loss)/profit for the financial period (496) 63
Currency translation differences on
foreign currency 1,173 2,850
------- ------
Total recognized gains in the period 677 2,913
======= ======
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TEXON INTERNATIONAL PLC
RECONCILIATION OF MOVEMENTS IN TOTAL SHAREHOLDERS' FUNDS
(Pounds Sterling, In Thousands)
Unaudited
Three Months ended
-----------------------
March 31, March 31,
2001 2000
--------- ---------
Retained (loss)/profit for the period for equity
shareholders of the Company (496) 63
Finance charges in respect of non equity shares (1,114) (1,000)
--------- --------
(1,610) (937)
Issue of shares -- 637
Premium on redemption reserve 1,114 1,000
Foreign Exchange adjustments 1,175 2,850
-------- -------
Net decrease to shareholders' deficit 679 3,550
Opening shareholders' deficit (59,224) (59,882)
--------- ---------
Closing shareholders' deficit (58,545) (56,332)
========= =========
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TEXON INTERNATIONAL PLC
Notes to the Unaudited Condensed Consolidated Financial Statements
1 Basis of Preparation
The accompanying unaudited condensed consolidated financial statements
have been prepared by Texon International plc and its subsidiaries
("the Company") in accordance with UK generally accepted accounting
principles. The unaudited condensed consolidated financial statements
and condensed notes are presented in accordance with Form 10-Q and do
not contain all the information required in the Company's annual
consolidated financial statements and notes. The operating results for
the three month periods are not necessarily indicative of the results
which may be expected for the full year. In the opinion of management,
all material adjustments, consisting of items of a normal recurring
nature, considered necessary for a fair presentation of the results of
operations, the financial position and the cash flows for each period
shown, have been included.
Where necessary comparatives are adjusted to ensure consistency with
current periods.
2 Stocks
Stock is stated at the lower of cost, including factory overheads where
applicable, and net realizable value on a first in first out basis.
Provision is made for slow-moving and obsolete items. Inventories are
summarised as follows:
March 31, December 31,
2001 2000
--------- ------------
Finished goods and goods for resale 4,484 4,687
Work in progress 1,954 1,550
Raw materials 17,848 16,055
------- -------
24,286 22,292
======= =======
3 Changes in UK Accounting Standards
The Accounting Standards Board (ASB) has issued FRS 17 Retirement
Benefits, which is mandatory for all accounting periods ending on or
after 22 June 2003. FRS 17 replaces SSAP 24 and UITF 6 relating to
accounting for pension costs and other post-retirement benefits. The
FRS makes radical changes in respect of accounting for defined benefit
schemes, leading to increased volatility in the balance sheet as
actuarial gains and losses are recognized immediately and scheme assets
are valued at fair values. While companies with defined benefit schemes
will be able to continue applying SSAP 24 for periods ending before
June 22, 2003, they will need to make additional disclosure in
accordance with FRS17 for periods ending on or after June 22, 2001. The
Group will apply the additional disclosure of FRS 17 prospectively in
2001.
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TEXON INTERNATIONAL PLC
3 Changes in UK Accounting Standards continued
The Accounting Standards Board (ASB) has issued FRS 18 Accounting
Policies, which is effective for all accounting periods ending on or
after June 22, 2001. FRS 18 replaces SSAP 2. This replacement of SSAP 2
brings the assumptions and the criteria on which entities select
accounting policies, into line with the ASB's statement of principles.
FRS 18 re-iterates the going concern and accruals bases, however the
previous concepts of prudence and consistency have been downplayed. In
determining the most appropriate accounting policy the emphasis is now
on the four objectives of relevance, reliability, comparability and
understandability. The Group will apply the provisions of FRS 18
prospectively in 2001.
The Accounting Standards Board (ASB) has issued FRS 19 Deferred Tax,
which is effective for all accounting periods ending on or after
January 23, 2002. Its main objectives for the treatment of deferred tax
to come more in line with international practice. Although FRS 19
introduces a form of "full provision" it has not harmonized with IAS
12. The general principle of FRS 19 is that deferred tax should be
recognized in full in respect of transactions or events that have taken
place by the balance sheet date and which give the entity an obligation
to pay more or less tax in the future.
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TEXON INTERNATIONAL PLC
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
consolidated financial statements and notes thereto included in this report, in
the Annual Report, Form 20-F filed by the Company with the Securities and
Exchange Commission (the "Commission") on May 2, 2001 and in the Company's
periodic reports filed with the Commission.
Except for the historical data set forth herein, the following discussion
contains certain forward-looking information. The Company's actual results may
differ significantly from the projected results. Factors that could cause or
contribute to such differences include, but are not limited to, levels of sales
to customers, actions by competitors, fluctuations in the price of primary raw
materials, foreign currency exchange rates and political and economic
instability in the Company's markets.
The cautionary statements appearing in the Company's annual report, a copy of
which is available on request, qualify the forward-looking statements contained
herein.
General
- -------
The Company believes it is the world's largest, in terms of sales, manufacturer
and marketer of structural materials that are essential in the manufacture of
footwear. The Company operates a global business, which generates sales that are
widely diversified by geographic region and product line. The Company's primary
products include materials for insoles, which form the structural foundation of
shoes; stiffeners, which support and shape the toe and heel of shoes; other
component products used in the manufacture of footwear, such as linings, lasts,
tacks, nails, steel shanks, steel toe caps, midsoles and adhesives; and a CAD
business, Crispin Dynamics a leading supplier of CAD solutions to the footwear
industry. The world's largest manufacturer of insole materials, the Company also
commands leading positions in the markets for its other footwear products. While
the products sold by the Company represent a small percentage of the total cost
of materials contained in footwear, they are critical to the performance and
manufacture of footwear and are not fashion sensitive. By leveraging its
expertise in the manufacture of these structural materials, the Company has
developed several related niche industrial products such as carpet gripper pins
and cellulose air freshener material. These industrial products are sold to a
wide range of industries.
The Company supplies most of the major footwear manufacturers in the world and
believes that its global presence gives it a unique competitive advantage to
exploit industry trends favoring suppliers who provide footwear companies with a
"global partner". The Company supplies over 7,500 customers worldwide, servicing
global athletic footwear companies such as Nike and Adidas, designers and
producers of casual shoes including Timberland and R. Griggs & Co (Dr Martens)
and manufacturers of men's and women's formal shoes such as Church's and Bally.
The Company has eighteen manufacturing sites strategically located in Europe,
the United States, Brazil, China and Australia and sells its products in more
than 90 countries through an extensive marketing and distribution network.
During the first three months of 2001, sales of insoles, stiffeners, other
footwear materials, industrial products and component products accounted for
34%, 26%, 6%, 10%, and 24% of total sales, respectively. In this period, 49% of
the Company's sales were made to Europe, 27% to Asia and the Pacific, 16% to the
Americas and 8% to the rest of the world.
-11-
TEXON INTERNATIONAL PLC
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 2001 TO THE THREE MONTHS
ENDED MARCH 31, 2000
Sales Turnover. Sales for the three months ended March 31, 2001 were (pound)
37.2 million, an increase of (pound) 0.5 million from (pound) 36.7 million in
the comparable period of 2000.
Insole sales for three months ended March 31, 2001 decreased to (pound) 12.7
million from (pound) 13.9 million for the comparable period in 2000, reflecting
the difficult market conditions in Europe and North America where the Company
has the majority of its insole sales.
Stiffener sales for the three months ended March 31, 2001 increased to (pound)
9.8 million from (pound) 7.8 million for the comparable period in 2000. The
increase in stiffener sales is mainly due to the inclusion of sales of Foss
products following its acquisition in July 2000.
Sales of other footwear product sales, decreased to (pound) 2.3 million from
(pound) 2.8 million for the three months ended March 31, 2001 and 2000,
respectively.
Metal products increased to (pound) 5.3 million from (pound) 4.8 million for the
comparable three months ended March 31, 2001 and 2000, respectively. This
increase is as a result of the performance of the Esjot businesses acquired in
July 1999.
Sales of industrial products for three months ended March 31, 2001 increased to
(pound) 3.8 million from (pound) 3.3 million for the comparable period in 2000.
During the three months ended March 31, 2001, sales of plastic products were
(pound) 2.4 million, compared to (pound) 3.9 million for the three months ended
March 31, 2000, primarily due to the disposal of the Cornwell Industrial
Business in January 2001.
During the three months ended March 31, 2001, sales of Crispin products were
(pound) 0.9 million, compared to (pound) 0.2 million for three months ended
March 31, 2000. This was as a result of the reflection of a full quarter of
Crispin sales following its acquisition in March 2000.
On a geographical basis, sales for the three months ended March 31, 2001, were
as follows; Europe 49%, Asia 27%, Americas 16%, and the rest of the world 8%.
For the comparable period in 2000, the percentages were 52%, 25%, 14%, and 10%,
respectively.
Gross Profit. Gross profit for the three months ended March 31, 2001 increased
by (pound) 0.2 million to (pound) 11.5 million compared to (pound) 11.3 million
in the comparable period in 2000. When expressed as a percentage of sales, gross
profit was 30.8% for the three months ended March 31, 2001 a decrease of 0.1%
from the comparable period in 2000.
Selling, General and Administrative Costs. Selling, general and administrative
costs for the three months ended March 31, 2001 were static at (pound) 8.2
million. Overheads have remained static despite the inclusion of a full quarter
of overheads associated with the 2000 acquisitions as a result of a continuing
cost reduction program being implemented throughout the group.
Operating Profit. Operating profit for the three months ended March 31, 2001 was
(pound) 3.0 million, the same as the comparable period in 2000.
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TEXON INTERNATIONAL PLC
Earnings before Interest Depreciation and Amortisation ("EBITDA"). EBITDA for
the three months ended March 31, 2001 was (pound) 4.4 million compared to
(pound) 4.2 million for the same period in 2000.
Interest Expense. Net interest expense increased by (pound) 0.1 million to
(pound) 3.0 million for the three months ended March 31, 2001 from (pound) 2.9
million from the comparable period in 2000. Included in the interest charge is
the amortization of debt insurance costs of (pound) 0.2 million for both the
three months ended March 31, 2001 and 2000.
Taxation. The tax charge for the three months ended March 31, 2001 is based on
the estimated percentage tax rate the Company will incur for the full year.
Liquidity and Capital Resources
- -------------------------------
The Company's liquidity needs arise primarily from debt service obligations on
the indebtedness incurred in connection with the Notes and the Revolving Credit
Facility, working capital needs and the funding of capital expenditures. Total
liabilities at March 31, 2001 were (pound) 157.4 million, including consolidated
indebtedness of (pound) 114.5 million as compared to total assets of (pound)
100.1 million. The excess of liabilities over assets of (pound) 57.3 million at
March 31, 2001 is due to the writing off of goodwill in earlier periods.
The shareholders' deficit as at March 31, 2001 (pound) was 58.5 million compared
to (pound) 59.2 million as at December 31, 2000.
The Company's primary sources of liquidity are cash flows from operations and
borrowings under the Company's financing agreements, which provide the Company
with a (euro) 35.0 million 5 year Term Loan and a (euro) 15.0 million Revolving
Credit Facility as well as several local facilities in Germany, Italy, Spain,
France, China, Australia, New Zealand, Brasil and the UK.
The net cash inflow from operating activities for the three months ended March
31, 2001 was (pound) 6.9 million compared to (pound) 4.0 million for the
comparable period in 2000. This increase of (pound) 2.9 million is primarily
attributable to improvements in the managements of working capital during the
quarter.
For the three months ended March 31, 2001 the Company had a cash inflow of
(pound) 0.8 million, the comparable period in 2000 was an outflow of (pound) 1.8
million.
Returns on investments and servicing of finance for the three months ended March
31, 2001 were (pound) 4.9 million compared to (pound) 5.4 million for the three
months ended March 31, 2000.
There was a tax refund of (pound) 0.2 million for the three months ended March
31, 2001, compared to taxation payable of (pound) 0.4 million for the comparable
period in 2000.
Capital expenditure, for the three months ended March 31, 2001 was (pound) 0.2
million, as compared to (pound) 0.4 million for the comparable period in 2000.
Acquisitions and disposals cash outflow for the three months ended March 31,
2001 was nil, compared with an outflow of (pound) 1.9 million in the comparable
period of 2000. The 2000 outflow consisted of (pound) 1.0 million for the
purchase of Crispin Dynamics and (pound) 0.9 million for the acquisition of
Boxflex.
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TEXON INTERNATIONAL PLC
Financial Instruments and Market Risks
- --------------------------------------
The Company's operations are conducted by entities in many countries and the
primary market risk exposures of the Company are interest rate risk and foreign
currency exchange risk. The exposure to market risk for changes in interest
rates relates to its debt obligations, upon which interest is paid at both
short-term fixed and variable rates, and local bank borrowings, upon which
interest is paid at variable rates. The Company does not use any instruments by
which to hedge against fluctuations in interest rates, as it is believed that
interest rates are low in the currencies in which debt is denominated and that
the risk of major fluctuations in such interest rates is low.
The results of the Company's operations are subject to currency translation risk
and currency transaction risk. Regarding currency translation risk, the
operating results and financial position of each entity is reported in the
relevant local currency and then translated into Sterling at the applicable
exchange rate for inclusion in the financial statements of the Company. The
fluctuation of Sterling against foreign currencies will therefore have an impact
upon the reported profitability of the Company and may also affect the value of
the Company's assets and the amount of the Company's shareholders equity.
Regarding currency transaction risk, fluctuations in exchange rates may affect
the operating results of the Company because many of each entities costs are
incurred in currencies different from the revenue currencies and there is also a
time lag between incurrence of costs and the collection of related revenues. To
protect against currency transaction risk the Company engages in hedging its net
transaction exposure by the use of foreign exchange forward contracts to cover
exposures arising from outstanding sales and purchase invoices. It has not
covered outstanding sales or purchase orders unless they are firm commitments.
At present hedging covers all traded currencies to which the Company is exposed
and in which forward contracts may be undertaken. This includes the Euro and the
U.S., Hong Kong, Australian and New Zealand Dollar. In addition the Company
hedges against certain non-trading exposures by using foreign exchange forward
contracts, these exposures being short-term loans between entities and interest
payable (within one year) on the Senior Notes. Short-term loans may fluctuate in
value depending upon the daily cash position of the various entities and may be
denominated in any of the currencies stated above.
On January 31, 2001 the Company paid interest on its Senior Notes in Euros. The
Company has covered this euro exposure for payments due in 2001.
International Operations
- ------------------------
The Company conducts operations in countries around the world including through
manufacturing facilities in the UK, the United States, France, Germany, Italy,
Australia, Brazil and China. The Company's global operations may be subject to
some volatility because of currency fluctuations, inflation and changes in
political and economic conditions in these countries.
The financial position and results of operations of the Company's businesses
outside the UK are measured using the local currency as the functional currency.
Most of the revenues and expenses of the Company's operations are denominated in
local currencies whereas the majority of raw material purchases are denominated
in US dollars. Assets and liabilities of the Company's subsidiaries outside the
UK are translated at the balance sheet exchange rate and statement of operations
accounts are translated at the average rate prevailing during the relevant
period.
The Company's financial performance in future periods may be impacted as a
result of changes in the above factors which are largely beyond the control of
the Company.
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TEXON INTERNATIONAL PLC
Exchange Rate Information
- -------------------------
The table below shows the major exchange rates, expressed per Pound Sterling,
used in the preparation of the condensed consolidated financial statements
included herewith.
2001 Average Rate Period End Rate
----------------- ---------------
US Dollar 1.46 1.44
Euro 1.58 1.63
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TEXON INTERNATIONAL PLC
PART II OTHER INFORMATION
Item 1 Legal Proceedings
From time to time, the Company is involved in routine litigation
incidental to its business. The Company is not a party to any
threatened legal proceedings which the Company believe would have
a material adverse effect on the Company's results or operations
or financial condition.
Item 2 Changes in Securities and Use of Proceeds
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 Report on Form 8 - K
None.
-16-
TEXON INTERNATIONAL PLC
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Texon International plc
-----------------------
(Registrant)
Date May 30 2001 By /s/ J. Neil Fleming
----------------------------------
J. Neil Fleming
Finance Director and
Chief Accounting Officer
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