FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the month of September, 2001
CENARGO INTERNATIONAL PLC
(Translation of registrant's name into English)
Puttenham Priory
Puttenham
Surrey GU3 1AR
United Kingdom
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will
file annual reports under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
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
INFORMATION CONTAINED IN THIS FORM 6-K REPORT
Set forth herein is Cenargo International Plc's
quarterly report for the period ended September 30, 2001
containing a Management's Discussion and Analysis of Financial
Condition and Results of Operation and Unaudited Consolidated
Financial Statements.
2
CENARGO INTERNATIONAL PLC
REPORT AND FINANCIAL STATEMENTS
SEPTEMBER 30, 2001
3
Cenargo International Plc
Contents
Page
Company Information
Chairman's Statement
Independent Auditors' Report
Consolidated Statements of Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
Consolidated Statements of Shareholders'
Equity and Comprehensive Income
Notes to the Consolidated Financial Statements
4
CENARGO INTERNATIONAL PLC
Company Information
Directors: M.A.W. Hendry - Chairman and
Chief Executive
R.P. Gregory
A.P.T. Hendry
Company Secretary: R.P. Gregory
Registered Office: Puttenham Priory
Puttenham
Surrey GU3 1AR
Bankers: HSBC Bank Plc
27-32 Poultry
London
EC2P 2BX
Auditors: Moore Stephens
Chartered Accountants and
Registered Auditors
St. Paul's House
Warwick Lane
London
EC4P 4BN
Legal Advisors: Seward & Kissel
One Battery Park Plaza
New York, NY 10004
Stephenson Harwood
1 St. Paul's Churchyard
London
EC4M 8SH
5
CENARGO INTERNATIONAL PLC
Chairman's Statement
The Company made significant progress during the year to
September 30, 2001. The loss after taxes for the year was 0.4
million pounds sterling compared to a loss after taxes for 2000
of 2.7 million pounds sterling. This loss in 2000 was after
taking into account compensation received of 6.1 million pounds
sterling. The significant improvement in the results has been
across all the Company's operating divisions despite the high
fuel cost experienced throughout the year.
In the Irish Sea, the Company has maintained its market share.
Freight and passenger volumes were up 5% and 9% respectively on
the previous year despite "foot and mouth" disease. Rates also
improved despite additional capacity introduced by our
competitors. The Mersey Viking and Lagan Viking were purchased
during the year. These two ropax vessels built in 1997 had been
previously time chartered by one of the Company's subsidiaries
for the Liverpool Belfast service. The purchase of the vessels
has enabled substantial cost savings compared to the time charter
rates previously paid for the two vessels. However, there is a
significant upgrading cost associated with these vessels
impacting 2001 and 2002.
The new riverside roro facility on the Mersey is under
construction and the first berth should be available for use
during the 2nd Quarter of 2002. The Liverpool Belfast service
will be switched to that berth as soon as it is operational.
This will enable the two vessels operating on the Belfast service
to make round trips everyday rather than every other day as they
currently do, giving approximately 20% extra capacity at little
extra cost. The second berth should be completed in the 3rd
Quarter of 2002 and the Liverpool Dublin service will be switched
to that berth at that time.
We are in discussion with a number of customers who presently
ship trailers to Ireland on the Northern corridor through the
Scottish routes. In the past the central corridor Belfast
services have not been sufficiently reliable. With the
introduction of new larger, more powerful vessels, the Company
believes that it has demonstrated the reliability of its Belfast
central corridor service. The costs savings to customers in
fuel, wear and tear on equipment and driver time by shipping
through Liverpool rather than Scotland can be substantial. The
Company's intention is to increase sailing frequency on the
Liverpool to Belfast route to accommodate the anticipated
increased demand once the river berth is completed in 2002.
6
Ferrimaroc has also had a more favorable year. The four
operators on the route agreed to comply with a predetermined
summer sailing schedule. The market between Almeria and Nador
increased by almost 20% compared to the previous year. The
Company vessel Mistral benefited from the agreed sailing schedule
and maximized passenger and car carryings during the summer
period. The Company's second vessel was time chartered to one of
our competitors. Discussions are in hand to extend the
scheduling agreement to cover the winter.
Logistics has also developed well during the year. The Company
now has operational sites in the North East of England,
Eaglescliffe, in the Midlands, Milton and in the South-East,
Heston. The Company is concentrating on pick and pack and
distribution to the direct selling market, offering bonded
warehousing, air, land and sea freight as added value to
customers. Significant pick and pack contracts have been gained
during the year with further contracts under negotiation.
The two newly built ropax vessels delivered in fiscal year 2000,
the Northern and Midnight Merchant have been time chartered since
delivery to Norfolkline, who use the vessels on their English
Channel services linking Dover and Dunkirk. Norfolkline has
recently extended the time charter on both vessels for a further
three years.
Based on professional valuation of the Company's vessels at
September 30, 2001 the total valuation at that date exceeded the
corresponding book value by approximately 25 million pounds
sterling.
7
CENARGO INTERNATIONAL PLC
Chairman's Statement
The Company has introduced a bunker hedging strategy during the
year which is expected to lead to significant fuel cost savings
in future years. The Company now has natural currency hedges in
place to minimize currency exposure. In this respect the loan
facilities for the purchase of the Mersey and Lagan Viking were
in Sterling and Euros, to match the income from the business.
The Company has opted to join the UK Tonnage Tax regime. This
means that in the future only a minimal tax will be chargeable on
the profits arising from the Company's shipping businesses.
Deferred taxation, which amounts to 10.5 million pounds sterling
at September 30, 2001, will be released over seven years
beginning with the year ending September 30, 2003. Tax will be
payable on profits arising from the Company's non shipping
business.
Since the year-end a competitor on the Irish Sea has introduced
two new services between Dublin - Mostyn and Larne - Liverpool.
While, to date, these services have had little impact on our own
volumes we continue to monitor the situation closely.
In an effort to improve the cost effectiveness of the Company
ship management operation (which has an annual cost of
approximately 20 million pounds sterling), the Company will
terminate its contract with its existing ship managers and will
transfer its ship management to another manager specializing in
roll-on roll-off vessels in which the Company will acquire a
minority shareholding.
Michael A.W. Hendry
Chairman
January 25, 2002
8
Independent Auditors' Report
The Board of Directors and Shareholders
Cenargo International Plc
We have audited the accompanying consolidated balance sheets of
Cenargo International Plc and subsidiaries as of September 30,
2001 and 2000 and the related consolidated statements of income
and cash flows for each of the years in the three year period
ended September 30, 2001. These consolidated financial
statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require
that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements 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 Cenargo International Plc and subsidiaries
as of September 30, 2001 and 2000, and the consolidated results
of their operations and their cash flows for each of the years in
the three year period ended September 30, 2001 in conformity with
accounting principles generally accepted in the United States.
Moore Stephens
Chartered Accountants
St. Paul's House
Warwick Lane
London EC4P 4BN
February 5, 2002
9
CENARGO INTERNATIONAL PLC
Consolidated Statements of Income
Years ended September 30, 2001, 2000 and 1999
(Sterling expressed in thousands)
Note 2001 2000 1999
---- ---- ---- ----
Operating revenues
Charterhire revenues 2(g) 16,595 5,444 4,273
Ferry service revenues 2(g) 88,187 81,356 56,170
Logistics and other revenues 23,407 15,986 13,249
Brokers' commission (193) (53) (205)
-------- ------- ------
Operating revenues 127,996 102,733 73,487
-------- ------- ------
Operating expenses
Vessel and other operating
costs 93,856 75,560 50,342
Depreciation and amortization
of deferred costs 7,784 6,208 6,475
Provision for impairment
in value of assets 2(l) 389 - 1,906
Amortization of drydocking
and special survey costs 1,480 1,993 2,096
Amortization of goodwill 1,174 1,112 69
General and administrative
expenses 10,558 12,857 10,940
Foreign currency (gain)/loss (461) 96 288
------- ------- ------
Operating expenses 114,780 97,836 72,116
------- ------- ------
Operating income 5 13,216 4,897 1,371
------- ------- ------
Other (expenses) income
Interest income 627 697 2,646
Interest expense 15(a) (14,202) (12,320) (12,543)
Litigation claim 16(b) - 6,116 922
(Loss)/gain on disposition
of fixed assets (219) 62 1,096
------- ------- ------
Other (expenses) income (13,794) (5,445) (7,879)
------- ------- ------
10
Loss before income taxes (578) (548) (6,508)
Income taxes 6 185 (2,080) 1,491
Minority interests (36) (86) (27)
------- ------- ------
Net (loss) (429) (2,714) (5,044)
======= ======= ======
See accompanying notes to consolidated financial statements.
11
CENARGO INTERNATIONAL PLC
Consolidated Balance Sheets
As of September 30, 2001 and 2000
(Sterling expressed in thousands)
Note 2001 2000
Assets
Current Assets
Cash and cash equivalents 13,043 9,644
Cash held in escrow 8 3,124 3,124
Trade accounts receivable 20,259 19,572
Other receivables 3,423 1,225
Due from joint ventures 10 1,255 457
Inventories 840 1,027
Prepaid expenses and
accrued income 2,651 1,465
------- -------
Total current assets 44,595 36,514
Non current assets
Vessels and equipment 9 132,118 93,785
Land and buildings 9 11,460 12,174
Investments in joint
ventures 10 - -
Loans to joint ventures 10 1,691 2,680
Goodwill, net 7 19,582 20,706
Trade investments - 351
Deferred charges, net 11 5,355 4,523
Pension fund debtor 12 3,659 3,467
Prepaid expenses and deposits 5,605 5,541
------- -------
Total assets 224,065 179,741
======= =======
Liabilities and shareholders' equity
Current liabilities
Bank overdrafts 1,355 2,730
Current maturities of
long-term debt 13 4,525 873
Capital lease obligations 17 533 760
Trade accounts payable 10,804 6,166
Accrued expenses 7,759 3,100
Accrued interest - ship
mortgage notes 3,483 3,462
Other creditors 2,868 4,092
Due to joint ventures 10 302 272
------- -------
12
Total current liabilities 31,629 21,455
Long-term liabilities
Ship Mortgage Notes 13 117,822 116,937
Long-term debt 13 38,726 2,831
Capital lease obligations 17 957 1,257
Other creditors 777 1,061
Deferred taxation 6 10,514 10,699
------- -------
Total liabilities 200,425 154,240
Contingent liability 16 - -
------- -------
Shareholders' equity
Share capital 14 12 12
Accumulated other
comprehensive income (391) 1,041
Retained earnings 24,019 24,448
------- -------
Total shareholders' funds 23,640 25,501
------- -------
Total liabilities and
shareholders' funds 224,065 179,741
======= =======
13
CENARGO INTERNATIONAL PLC
Consolidated Statements of Cash Flows
Year ended September 30, 2001, 2000 and 1999
(Sterling expressed in thousands)
2001 2000 1999
Operating activities
Net (Loss) income (429) (2,714) (5,044)
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Amortization of drydocking
and special survey costs 1,480 1,993 2,096
Amortization of ship
mortgage notes discount 189 173 209
Depreciation 7,784 6,208 6,475
Amortization of goodwill 1,174 1,112 69
Loss/(gain) on disposition
of fixed assets 219 (62) (1,096)
Provision for diminution
in value of assets 389 - 1,906
Foreign exchange (1,372) 1,161 972
(Increase)/decrease in
pension debtor (192) 205 (225)
(Increase)/decrease in
trade accounts
receivable (1,620) 752 (2,760)
(Increase)/decrease in
other receivables (2,198) 1,965 665
Decrease in inventories 187 177 168
(Increase)/decrease in
prepaid expenses and
accrued income (2,730) (2,984) 1,871
Increase/(decrease) in
trade accounts payable 4,638 (306) (2,232)
Increase/(decrease) in
accrued expenses 3,983 (2,574) 484
(Decrease)/increase in
other creditors (1,508) 1,073 (5,976)
Increase (decrease) in
deferred tax liabilities (185) 1,432 (1,537)
------- ------- -------
Net cash provided (absorbed)
by operating activities 9,809 7,611 (3,955)
------- ------- -------
14
Investing activities
Additions to land and
buildings (671) (3,630) (1,281)
Additions to vessels
and equipment (44,825) (2,076) (10,562)
Additions to vessels
under construction - (18,608) (20,954)
Purchase of subsidiary
undertakings, net
of cash acquired (50) (22,948) (803)
Sale of other investment 351 - -
Proceeds from sale of
fixed assets 1,151 56,038 42,120
------- ------- -------
Net cash provided by
(used in) investing
activities (44,044) 8,776 8,520
------- ------- -------
Financing activities
Proceeds from long-term debt 42,659 16,116 11,294
Repayment of long-term debt (2,512) (55,055) (980)
Due to (from) joint ventures 221 275 869
Repayments of capital leases (527) (9,195) (2,029)
Deferred charges paid (832) (585) (2,776)
------- ------- -------
Net cash provided by
(used in) financing
activities 39,009 (48,444) 6,378
------- ------- -------
Net increase/(decrease)
in cash and cash
equivalents 4,774 (32,057) 10,943
Cash and cash equivalents
at beginning of year 10,038 42,095 31,152
------- ------- -------
Cash and cash equivalents
at end of year 14,812 10,038 42,095
======= ======= =======
15
Supplemental disclosure of cash flow information:
Interest paid, net of
capitalized interest 14,202 12,320 12,543
Income taxes paid - - -
======= ======= =======
Cash and cash equivalents 13,043 9,643 18,020
Cash held in escrow and
blocked deposits 3,124 3,124 24,075
Bank overdraft (1,355) (2,729) -
------- ------- -------
14,812 10,038 42,095
======= ======= =======
Purchase of subsidiary
undertakings
Cash paid 50 28,475 885
Cash acquired - (5,527) (82)
------- ------- -------
50 22,948 803
======= ======= =======
See accompanying notes to consolidated financial statements.
16
CENARGO INTERNATIONAL PLC
Consolidated Statements of Shareholders' Equity and Comprehensive Income
Year ended September 30, 2001, 2000 and 1999
(Sterling expressed in thousands)
Accumulated
Other
Compre- Compre-
Ordinary hensive hensive
Share Income Retained Income
Capital (Loss) Earnings Total (Loss)
------- ------------ --------- ------- ---------
At September 30,
1999 12 260 27,162 27,434 -
Net loss - - (2,714) (2,714) (2,714)
Translation
adjustment - 781 - 781 781
------- ------- ------- ------- -------
At September 30,
2000 12 1,041 24,448 25,501 1,933
=======
Net loss - - (429) (429) (429)
Translation
adjustment - (735) - (735) (735)
Fair value of
derivatives
adjustment - (697) - (697) (697)
------- ------- ------- ------- -------
At September 30,
2001 12 (391) 24,019 23,640 (1,861)
======= ======= ======= ======= =======
17
CENARGO INTERNATIONAL PLC
Notes to Consolidated Financial Statements
As of September 30, 2001, 2000 and 1999
1. General
The Company was incorporated in 1979 in the United Kingdom
and has owned and operated vessels since 1982. The Company's
principal activities include ferry services, ship owning and
operating, shipbroking, logistics services and freight
forwarding. The Company and its subsidiaries currently
operate a fleet consisting of 11 owned vessels and 2 vessels
on long term operating leases, including freight and
passenger ferries.
2. Accounting Policies
(a) Basis of accounting
The consolidated financial statements have been prepared in
accordance with generally accepted accounting principles in
the United States.
The preparation of financial statements in accordance with
generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and
expenses during the period. Actual results could differ from
those estimates. The following are significant accounting
policies adopted by the Company.
(b) Consolidation
The consolidated financial statements incorporate the assets
and liabilities of the Company and its wholly-owned or
majority controlled subsidiaries. All intercompany balances
and transactions have been eliminated upon consolidation.
Entities in which the Company has a majority of the voting
rights are consolidated. Non-equity financing provided by
the minority interests is accounted for as other loans.
(c) Investments in joint ventures
The Company's investments in joint ventures are accounted for
using the equity method of accounting whereby the carrying
value is cost plus the Company's share of post-acquisition
net income (loss). Where investments in joint ventures are
18
not material to the Company, the investments are carried at
cost less any diminution for value which is other than
temporary.
(d) Cash and cash equivalents
For the purposes of the consolidated statements of cash flows
demand and time deposits with original maturities of three
months or less are considered equivalent to cash.
(e) Inventories
Inventories which comprise fuel and consumable stores are
stated at the lower of cost or market. Cost is determined on
a first-in, first-out basis.
(f) Vessels, equipment, land and buildings
The cost of the vessels less estimated residual value is
written off on a straight-line basis over the vessels'
remaining lives. The vessels' lives are estimated as being
between 15 and 30 years from dates of delivery. Other
equipment is depreciated over its estimated residual life at
rates of between 14% and 25% on a straight-line basis, except
for freehold buildings which are depreciated at a rate of 2%
and ferry terminal buildings at between 5% and 10%. Land is
not depreciated.
(g) Revenue and expense recognition
Revenues and expenses are recognized on a daily accrual
basis. Revenues are generated from time charter hires, ferry
services and freight income. The consolidated balance sheets
reflect the deferred portion of revenues and expenses for
total voyages in progress at the end of each period.
Estimated losses on voyages are provided for in full at the
time such losses are known.
(h) Drydocking and special survey costs
Expenditures incurred during drydocking are capitalized and
amortized on a straight-line basis over the period until the
next anticipated drydocking.
(i) Derivatives
Effective October 1, 2000, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 133 "Accounting for
Derivative Instruments and Hedging Activities", as amended,
which requires that all derivative instruments be reported on
19
the balance sheet at fair value and establishes criteria for
designation and effectiveness of hedging relationships.
The Company enters into interest rate swap transactions from
time to time to hedge a portion of its exposure to floating
interest rates. These transactions involve the conversion of
floating rates into fixed rates over the lives of the
transactions without an exchange of underlying principal.
Interest rate swaps are designated as cash flow hedges. The
difference in floating and fixed rates is recorded as a
current asset or liability in the Company's balance sheet.
As of September 30, 2001 there were no interest rate swaps in
effect.
The Company requires a significant amount of fuel in order to
carry out ferry activities on the Irish Sea and, as a result,
is exposed to movements in fuel prices. Accordingly, the
Company enters into swap and collars to hedge its exposure to
and manage the volatility associated with fuel prices. The
Company's swaps and collars on fuel prices are connected to
forecasted transactions and qualify as cash flow hedges. The
swaps and collars, which mature through September 2002, are
designated as cash flow hedges of forecasted transactions and
are recorded as current liabilities in the Company's balance
sheet. Since an assessment of the hedging relationships
revealed that they were 100% effective, the entire unrealized
loss, net of tax, is recorded in accumulated other
comprehensive income (loss) within stockholders' equity. As
of September 30, 2001 there was an unrealized loss of
1,025,000 pounds sterling related to these swaps and collars.
(j) Foreign currencies
The Company's functional currency is sterling as sterling
denominated transactions represent the single largest
component of revenues, expenditures and cash flows.
Until September 30, 2000 the functional currency of the
Company was the U.S. Dollar. However, following a review,
the directors determined that in view of the increasing
activity in the United Kingdom, the functional currency of
the Company should be sterling. All comparatives in these
financial statements have been restated.
All assets and liabilities in the balance sheets of
subsidiaries whose functional currency is other than sterling
are translated at the year end exchange rate. Revenue and
expense items are translated at average exchange rates
prevailing during the year. Translation gains and losses are
not included in determining net income but are accumulated as
a separate component of shareholders' equity.
20
Foreign currency monetary assets and liabilities in the
balance sheets of subsidiaries whose functional currency is
sterling are translated at exchange rates in effect at the
balance sheet date. Foreign currency non-monetary assets are
translated using historical rates of exchange. Foreign
currency revenues and expenses are translated at the average
exchange rates prevailing during the year and exchange gains
and losses are included in the determination of net income.
(k) Goodwill
Goodwill represents the excess of purchase price over fair
value of net assets acquired. Goodwill is amortized using
the straight line method over periods ranging from 10 to 20
years. The Company periodically assesses the recoverability
of this intangible asset by determining whether the
amortization of the goodwill balance over its remaining
useful life can be recovered through future operating
activities of the acquired entity.
If goodwill is negative as a result of the fair value of net
assets acquired exceeding the purchase price the resulting
negative goodwill is applied as a reduction in the value of
non-current assets acquired on a pro-rata basis.
(l) Asset impairment
Long lived assets of the Company, including goodwill, are
reviewed when changes in circumstances require as to whether
their carrying value has become impaired, pursuant to
guidance established in Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-
lived Assets and for Long-Lived Assets to be Disposed Of".
Management considers assets to be impaired if the carrying
value of the asset exceeds the future projected cash flows
from related operations (undiscounted and without interest
charges). When impairment is deemed to exist, the assets are
written down to fair value or projected discounted cash flows
from related operations. Management also re-evaluates the
period of amortization to determine whether subsequent events
and circumstances warrant revised estimates of useful lives.
In accordance with SFAS 121, the Company recorded impairment
losses of 1,906 pounds sterling for the year ended September
30, 1999, 0 pounds sterling for the year ended September 30,
2000 and 389 pounds sterling for the year ended September 30,
2001.
21
(m) Assets under capital leases
Assets used by the Company which have been funded through
capital leases are capitalized and depreciated over their
estimated useful lives in accordance with the Company's
normal depreciation policy. The resulting lease obligations
are included in creditors. Capital lease interest costs are
charged directly to income.
(n) Pension costs
The Company operates defined contribution and defined benefit
pension schemes.
Contributions to defined contribution pension schemes are
charged to income when incurred. The costs of providing
defined benefit pensions are charged to income in accordance
with the advice of independent qualified actuaries.
(o) Comprehensive income (loss)
Comprehensive income (loss) represents the change in
shareholders' equity from transactions and other events and
circumstances arising from non-shareholder sources. The
Company's comprehensive income (loss) for 2001, 2000
consisted of net income (loss), foreign currency translation
adjustments, and unrealized gains and losses on derivatives
established as cash flow hedges, net of applicable income
taxes. The disclosures required by SFAS No. 130 "Reporting
Comprehensive Income" have been included in the Statements of
Shareholders' Equity and Comprehensive Income.
3. Segment Information
The Company has adopted FASB Statement No. 131, "Disclosures
about Segments of Business Enterprise and Related
Information". The Company is managed in four operating
segments: Vessel Chartering and Other, Irish Sea Ferries,
Ferrimaroc and Logistics. The Vessel Chartering and Other
segment includes certain central overhead costs, central
financing costs and other general corporate income and
expenditure.
The Company utilises EBITDA as a measure of segmental
performance. The Company defines EBITDA as net income (loss)
before taxes, interest expense, interest income,
depreciation, provision for impairment in value of vessels,
amortization of drydocking and special survey costs,
amortization of goodwill, gain or loss from joint ventures
and minority interest.
22
Certain financial information is presented below: amounts are
in thousands of Sterling
Vessel
Chartering Irish Sea
and Other Ferries Ferrimaroc Logistics Total
---------- --------- ---------- --------- -----
2001
Revenue 16,595 75,674 12,514 23,407 128,190
EBITDA 1,406 17,744 3,085 1,589 23,824
Tangible assets - 120,940 11,559 11,079 143,578
Capital
expenditures - 44,619 93 784 45,496
2000
Revenue 5,391 71,768 9,588 15,986 102,733
EBITDA (1,789) 20,380 763 1,034 20,388
Tangible assets - 82,213 10,641 13,105 105,959
Capital
expenditures 18,608 1,097 15 5,035 24,755
1999
Revenue 4,067 44,422 11,749 13,249 73,487
EBITDA 762 9,900 3,306 (33) 13,935
Tangible assets 43,933 77,054 10,625 1,485 183,097
Capital
expenditures 11,187 10,390 9,677 1,542 32,796
EBITDA for all reportable segments differs from consolidated
income (loss) before income taxes reported in the consolidated
statements of income as follows: amounts are in thousands of
Sterling
Year Ended September 30
2001 2000 1999
---- ---- ----
EBITDA 23,824 20,388 13,935
Reconciling items:
Depreciation and amortization
of deferred costs (7,784) (6,208) (6,475)
Provision for impairment in
value of assets (389) - (1,906)
Amortization of goodwill (1,174) (1,112) (69)
Amortization of drydocking (1,480) (1,993) (2,096)
Net interest expense (13,575) (11,623) (9,897)
------- ------- -------
(Loss) before income taxes (578) (548) (6,508)
======= ======= =======
23
4. Adoption of New Accounting Standards
In June 2001, the Financial Accounting Standards Board (FASB)
issued SFAS No. 141, "Business Combinations". SFAS No. 141
supersedes Accounting Principals Board (APB) Opinion No. 16,
"Business Combinations" and SFAS No. 38, "Accounting for
Preacquisition Contingencies of Purchased Enterprises". SFAS
No. 141 prohibits the use of the pooling of interest method
and requires the purchase method of accounting for business
combinations. SFAS No. 141 is effective commencing July 1,
2001. The Company does not believe this statement will have a
material effect on the earnings or financial position of the
Company.
In June 2001, the FASB issued SFAS No. 142 "Goodwill and
Other Intangible Assets", effective for the fiscal years
beginning after December 15, 2001. SFAS No. 142 supersedes
APB Opinion No. 17, "Intangible Assets". Under the new rules,
goodwill and intangible assets deemed to have indefinite
lives will no longer be amortized but will be subject to
annual impairment tests in accordance with the Statements.
Other intangible assets will continue to be amortized over
their useful lives, and the Company has elected to adopt SFAS
142 as of October 1, 2002. Accordingly, as of October 1,
2002, the Company will no longer amortize goodwill.
In August 2001, the FASB issued SFAS No. 144, " Accounting
for the Impairment or Disposal of Long-lived Assets". The
FASB's new rules on asset impairment supersede SFAS No. 121,
"Accounting For The Impairment of Long-lived Assets and for
Long-lived Assets to be Disposed Of", and provide a single
accounting model for long-lived assets to be disposed of.
Although retaining many of the fundamental recognition and
measurement provisions of SFAS No. 121, the new rules
significantly change the criteria that would have to be met
to classify an asset as held-for-sale. The new rules also
supersede the provisions of APB Opinion No. 30, "Reporting
the Results of Operations - Reporting the Effects of Disposal
of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions", with regard
to reporting the effects of a disposal of a segment of a
business and require expected future operating losses from
discontinued operations to be displayed in discontinued
operations in the period(s) in which the losses are incurred
(rather than as of the measurement date as presently required
by APB No. 30). The Statement is effective for the Company in
the beginning of fiscal year 2003. The Company does not
believe this statement will have a material effect on the
earnings or financial position of the Company.
24
5. Operating income
The Company operates on a worldwide basis. No customers
comprise 10% or more of operating revenues.
6. Taxation
The Company records U.K. Corporation tax in accordance with
Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" which requires the Company to
compute deferred taxes based upon the amount of taxes payable
in future years, after considering known changes in tax rates
and other statutory provisions that will be in effect in
those years.
The reconciliation of the Company's effective tax rate to the
Corporation tax rate on income from continuing operations is
as follows:
2001 2000 1999
---- ---- ----
U.K. statutory rate
(average rate for period) (30) (30) (30)
Increase (decrease) in
rate resulting from:
Statutory rate
reduction - deferred
tax - - 1
Permanent book/tax
differences and other (2) (1,178) 4
Revision to prior
year estimate - (101) 2
------ ------ ------
Net effective tax
rate (32)% (1,309)% (23)%
====== ====== ======
Permanent book/tax differences and other includes the effect
of the exchange movement between sterling and dollars within
the deferred tax calculations.
The revision to prior year estimates represent adjustments to
deferred tax estimates and differences between tax
computations used for provisions and final computations
submitted to the UK Inland Revenue.
Income tax expense (benefit) attributable to income from
continuing operations consists of:
25
Current Deferred Total
------- -------- -----
Year ended September 30, 2001
US Federal and State - - -
Foreign - UK corporation tax - (185) (185)
------- ------- -------
- (185) (185)
======= ======= =======
Year ended September 30, 2000
US Federal and State - - -
Foreign - UK corporation tax (216) 2,296 2,080
------- ------- -------
(216) 2,296 2,080
======= ======= =======
Year ended September 30, 1999
US Federal and State - - -
Foreign - UK corporation tax 46 (1,537) (1,491)
------- ------- -------
46 (1,537) (1,491)
======= ======= =======
The following table shows the tax effect of the Company's
cumulative temporary differences and carryforwards included
on the Company's Consolidated Balance Sheet at September 30,
2001 and 2000.
2001 2000
---- ----
Excess of tax over book
depreciation and deductions 9,311 9,844
Holdover relief 855 855
Other 348 -
------- -------
Total net effective tax
liability 10,514 10,699
======= =======
The Company and subsidiaries represent a U.K. tax group and
file tax returns on that basis. The Company has no material
basic differences relating to its investments in
subsidiaries.
The Group is committed to entering the UK Tonnage Tax regime
from 1 October 2002 in respect of its vessel operations.
From this date the Group will be paying a flat rate tax based
on the size of the vessels it operates.
26
7. Goodwill
2001 2000
---- ----
Goodwill, net of accumulated
amortization of 2,286 pounds
sterling and 1,112 pounds
sterling 19,582 20,706
------- -------
19,582 20,706
======= =======
8. Cash Held in Escrow
At September 30, 2001 and 2000 the Company had cash in
blocked deposit accounts as security for the two operating
leases.
9. Vessels, Equipment, Land & Buildings
2001 2000
---- ----
Cost
Vessels 148,284 104,468
Land and buildings 13,078 13,603
Equipment 10,087 9,796
------- -------
171,449 127,867
Accumulated depreciation (27,871) (21,908)
------- -------
Net book value 143,578 105,959
======= =======
Included above are assets held under capital leases with a
cost of 2,196,116 pounds sterling and accumulated
depreciation of 789,182 pounds sterling.
During the year the company sold one ship and purchased two
ships, Mersey Lagan and Mersey Viking, previously operated
under capital leases. The purchase was funded with a new bank
loan and a third party loan.
The following is a summary of the vessels as of September 30,
2001:
27
Gross
Year Registered
Vessels Owned Type built tonnage
------------ ---- ----- ----------
m.v. Mistral Passenger/Car Ferry 1981 20,220
m.v. Scirocco Passenger/Car Ferry 1974 11,177
m.v. Merchant Bravery RoRo 1978 9,368
m.v. Merchant Brilliant RoRo 1978 9,366
m.v. Merchant Venture RoRo 1979 6,058
m.v. River Lune RoRo 1983 7,765
m.v. Saga Moon RoRo 1984 7,746
m.v. Dawn Merchant RoPax 1998 22,152
m.v. Brave Merchant RoPax 1999 22,152
m.v. Mersey Lagan RoPax 1997 21,856
m.v. Mersey Viking RoPax 1997 21,856
The vessels are pledged as disclosed in Note 13.
10. Loans to Joint Ventures
Loans to joint venture companies represent advances to
finance joint venture operations and are non-interest
bearing. Loans will only be repaid out of profits arising
from operations or the sale of joint venture assets.
11. Deferred Charges
Deferred charges represent debt arrangement fees and
capitalized drydocking and special survey costs. The debt
arrangement fees are being amortized over the life of the
long-term debt and are included within interest expense in
the statement of income. The drydocking and special survey
costs are being amortized over the period to the next
drydocking. The deferred charges are comprised of the
following amounts:
2001 2000
---- ----
Debt arrangement fees 3,933 3,909
Drydocking and special survey costs 2,996 3,293
------ ------
6,929 7,202
Accumulated amortization (1,574) (2,679)
------ ------
5,355 4,523
====== ======
28
12. Pension Costs
(a) Defined contribution pension plan
The Company sponsors a defined contribution pension
plan. Contributions to the plan for 2000 and 2001 were
179,112 pounds sterling and 261,801 pounds sterling
respectively, which were charged to operations.
(b) Defined benefit pension plan
Reconciliations of the pension benefit obligation and
the value of plan assets follow:
2001 2000
---- ----
Plan assets
Fair value, beginning
of year 18,589 18,818
Actual investments
returns (225) 1,023
Company and employee
contributions 44 26
Benefits paid to
participants (752) (1,244)
Foreign exchange
adjustment - (34)
------- -------
Fair value, end of year 17,656 18,589
======= =======
29
2001 2000
---- ----
Pension benefits
obligations
Balance, beginning of
year 16,011 16,050
Service cost 158 209
Interest cost 831 834
Actuarial (gains)/losses (1,822) 134
Company contributions 26 26
Benefits paid to
participants (752) (1,244)
Foreign exchange
adjustment - 2
------- -------
Balance, end of year 14,452 16,011
======= =======
At September 30, 2001 and 2000, the funded status
of the plan was as follows:
2001 2000
---- ----
Surplus of plan assets
over benefit obligations 3,204 2,579
Unrecognized net actuarial
gain 455 888
------- -------
Net amount recognized 3,659 3,467
======= =======
Components of net periodic benefit costs are:
2001 2000
---- ----
Service cost 158 209
Interest cost 831 834
Amortization of prior
service costs 30 31
Expected return on
plan assets (1,193) (1,208)
------- -------
Net periodic benefit
cost (credit) (174) (134)
======= =======
30
For 2001 and 2000 the following weighted-average
rates were used:
2001 2000
---- ----
Discount rate on the
benefit obligation 5.75% 5.25%
Rate of expected return
on plan assets 6.50% 6.50%
Rate of employee
compensation increase 4.75% 5.00%
2001 2000
---- ----
Pension (credit) (174) (134)
Company and employee
contributions 44 26
Benefits paid 752 1,244
======= =======
13. Long-term Debt
Ship Mortgage Notes and Construction Facility
On June 19, 1998 Cenargo International Plc refinanced the
majority of its group borrowings by issuing U.S.$175 million
of 9.75% First Priority Ship Mortgage Notes in the United
States of America.
The Mortgage Notes, issued at a discounted price of 98.445%,
are due for repayment at par in one installment in June
2008. Interest is payable six monthly in arrears at 9.75%.
The Notes are secured by first preferred ship mortgages over
the group vessels (excluding m.v. "Mersey Lagan" and m.v.
"Mersey Viking"), the group's freehold property at
Eaglescliffe, a fixed charge over the Company's shares in
Norse Irish Ferries Limited and a fixed charge over the net
assets of Norse Irish Ferries Limited as well as guarantees
from substantially all of the group's subsidiaries.
The Notes are registered in the United States of America
under the Securities Act of 1933 and listed on the
Luxembourg Stock Exchange.
31
Bank loans
On January 28, 2001 one of the subsidiaries entered into the
following loan facility agreement with a consortium of banks
in connection with the purchase of two vessels:
(a) A Sterling denominated loan facility of 20,473,623
pounds sterling of which 19,736,753 pounds sterling was
outstanding at September 30, 2001. The facility is
repayable by twenty seven quarterly installments of
368,525 pounds sterling followed by a final balloon
payment of 10,523,442 pounds sterling in March 2008.
Interest is payable at Sterling Libor plus a margin of
1.85%.
(b) A Euro denominated loan facility of Euro 30,716,908
(19,033,900 pounds sterling) of which Euro 29,611,099
(18,348,678 pounds sterling) was outstanding at
September 30, 2001. The facility is repayable by twenty
seven quarterly installments of Euro 552,904 (342,610
pounds sterling) followed by a final balloon payment of
Euro 15,788,491 (9,783,425 pounds sterling) in March
2008. Interest is payable at Euro Libor plus a margin
of 1.85%.
As security for the above facilities, the company provided
legal title to and beneficial interest in the two vessels,
their earnings and insurances and a guarantee given by the
ultimate parent company and other group companies.
Other Loans
(a) 184,780 pounds sterling nominal value of unsecured
guaranteed loan notes issued as part consideration for
the Company's acquisition of Scruttons Plc. The loan
notes are redeemable on application by the holder in
March and September each year.
Any notes in issue on October 7, 2002 will be
redeemable by the Company at par. Interest is payable
semi-annually in arrears at the HSBC Bank Plc offer
rate for six months deposits of 1,000,000 pounds
sterling in the interbank market minus 1%. The loan
notes are guaranteed by HSBC Bank Plc secured by a
collateral bank deposit of 367,000 pounds sterling.
(b) A Sterling denominated loan of 2,235,950 pounds
sterling is repayable as follows:
(i) 25% from the proceeds on the maturity of life
assurance policies maturing in 2015.
32
(ii) 25% repayable in equal annual installments over
the last 15 years of the 20 year term of the loan.
(iii) 50% on maturity in 2015.
Interest is payable at a fixed rate of 9.625% per annum over
the 20 year term of the loan and is secured by a fixed
charge on the Company's head office freehold property.
(c) A US Dollars denominated loan facility of US$ 3,750,000
(2,551,541 pounds sterling) of which US$3,125,000
(2,126,284 pounds sterling) was outstanding at
September 30, 2001. The facility is repayable by twelve
installments of US$312,500 (212,628 pounds sterling).
Interest is payable at three months US$ Libor plus a
margin of 0.75%.
(d) A loan due to a former joint venture partner
outstanding of 618,681 pounds sterling. The loan is
unsecured and repayable on an annuity basis by ten
equal six monthly installments of 382,623 pounds
sterling including interest fixed at the inception of
the loan at a rate of 8.07%.
The outstanding long-term debt as of September 30, 2001
is repayable as follows:
Pound Sterling
2001 4,525
2002 3,724
2003 3,298
2004 2,873
2005 2,873
2006 and later 143,780
-------
Total long-term debt 161,073
=======
33
14. Share Capital
2001 2000
---- ----
Share capital is as follows:
Authorized
500,000 ordinary shares
of 1 pound sterling each
(2000 - 500,000 ordinary
shares) 500 500
======= =======
Issued
50,000 ordinary shares
of 1 pound sterling each,
25p paid
(2000 - 50,000 ordinary
shares) 12 12
======= =======
The company is subject to restriction on the payment of
dividends imposed by covenants entered into in
connection with the issue of Ship Mortgage Notes (note
13).
15. Financial Investments
Off-balance sheet market and credit risk
Market risk exists with respect to changes in interest rates
and foreign exchange rates. The Company enters into
interest rate swap and forward exchange contracts from time
to time to manage a portion of this risk. Credit risk
exists to the extent that the counterparty is unable to
perform the contracts, but this risk is considered remote.
(a) Interest rate swap transactions
The fair value of interest rate swap transactions is
estimated based on the market value of these or similar
instruments, as adjusted for differences in maturity.
There are no interest rate swap transactions
outstanding at September 30, 2001 and 2000.
34
(b) Foreign currency hedging transactions
The fair value of foreign currency hedging transactions
is estimated based on the market value of these or
similar instruments, as adjusted for differences in
maturity. There are no foreign currency contracts
outstanding at September 30, 2001 and 2000.
(c) Fuel purchase transactions
The fair value of the Company's fuel price derivatives
is the amount the Company would receive or have to pay
to terminate the agreements at the reporting date,
taking into account current interest rates and exchange
rates. The fair value of the fuel price derivatives is
provided to the Company by its financial institution,
the counter-party to the derivative agreements.
(d) Fair value of Ship Mortgage Notes
The fair value of the Ship Mortgage Notes at September
30, 2001 was 90,494,659 pounds sterling (2000:
92,323,301 pounds sterling). Fair value was determined
from quoted market prices at which they traded.
(e) Other financial instruments
The carrying amount of other financial instruments
approximates to fair value as the long-term debt is at
floating rates of interest and all other financial
instruments are short-term in nature.
16. Contingent Liabilities and Assets
(a) The Company insures the legal liability risks for its
shipping activities with the Steamship Mutual, UK
Mutual and North of England mutual protection and
indemnity associations. As a member of mutual
associations, the Company is subject to calls payable
to the associations based on the Company's claims
record in addition to the claims record of all other
members of the associations. A contingent liability
exists to the extent that the claims records of the
members of the associations in the aggregate show
significant deterioration which result in additional
calls on the members.
(b) The Company continues to pursue claims for damages
relating to operations in Spain. The total claims
amount to 21.5 million pounds sterling of which 7
35
million pounds sterling has been received and
recognized in previous years.
17. Capital and Other Commitments
The Company has acquired certain fixed assets under capital
leases. The Company has the following commitments under
those capital leases:
2001
----
2002 629,000
2003 446,790
2004 365,813
2005 202,110
2006 50,711
---------
Minimum lease payments 1,694,424
Less imputed interest (203,675)
---------
Present value of obligations
under capital leases 1,490,749
=========
17. Capital and Other Commitments (continued)
The Company is committed to make rental payments for
vessels, properties and equipment under operating leases.
The future minimum rental payments under these operating
leases are as follows:
2001
----
2002 7,076,047
2003 7,054,662
2004 6,887,337
2005 6,805,737
2006 6,595,782
2007 and later 31,739,080
66,158,645
==========
Operating lease rentals paid in the year ended September 30,
2001 amounted to 14,154,184 pounds sterling (2000:
14,836,340 pounds sterling 1999: 4,684,072 pounds sterling).
36
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.
CENARGO INTERNATIONAL PLC (registrant)
Dated: February 12, 2002 By: /s/ Michael Hendry
_______________________
Michael Hendry
Chairman
37
02442003.AB1