UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q/A
(Amendment No. 2)
Mark One
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended November 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File No. 1-15851
APW Ltd.
(Exact name of registrant as specified in its charter)
Bermuda 04-2576375
------- ----------
(State or other jurisdiction of (I.R.S. Employer Id. No.)
incorporation or organization)
N22 W23685 Ridgeview Parkway West
Waukesha, Wisconsin 53188-1013
(Address of principal executive offices) (Zip code)
(262) 523-7600
--------------
(Registrant's telephone number, including area code)
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
------- -------
The number of shares outstanding of the registrant's Common Stock (including
related Preferred Stock purchase rights) as of January 2, 2002 was 40,813,086.
APW Ltd.
INDEX
This amendment on Form 10-Q/A #2 amends Items 1 and 2 of the Quarterly Report of
APW Ltd. (the "Company") on Form 10-Q previously filed for the three months
ended November 30, 2001 and 2000. This Quarterly Report on Form 10-Q/A #2 is
filed in connection with the Company's restatement of its financial statements
as of August 31, 2001 and 2000 and for the years ended August 31, 2001, 2000 and
1999 and for the quarters ended November 30, 2001 and November 30, 2000.
Financial statement information and related disclosures included in this amended
filing reflect, where appropriate, changes as a result of the restatements as
described in Notes 1 and 9. All other information contained in this Quarterly
Report on Form 10-Q/A #2 is as of the date referenced for such information in
the original filing or, if no date is referenced for information in the original
filing, as of the date of such filing.
PART I - FINANCIAL INFORMATION Page No.
- ------------------------------ --------
Item 1 - Financial Statements
Condensed Consolidated Statements of Operations -
Three Months Ended November 30, 2001 and 2000............ 3
Condensed Consolidated Balance Sheets -
November 30, 2001 and August 31, 2001.................... 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended November 30, 2001 and 2000............ 5
Notes to Condensed Consolidated Financial Statements........ 6
Item 2 - Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 18
Item 3 - Quantitative and Qualitative Disclosures About Market Risk...... 26
PART II - OTHER INFORMATION
- ---------------------------
Item 1 - Legal Proceedings............................................... 27
Item 6 - Exhibits and Reports on Form 8-K................................ 27
SIGNATURE................................................................ 27
- ---------
2
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
- -----------------------------
APW Ltd.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
Three Months Ended November 30,
-------------------------------
As Restated
-------------------------------
2001 2000
-------------- --------------
Net sales $ 219,829 $ 359,723
Cost of products sold 198,944 270,631
--------- ---------
Gross profit 20,885 89,092
Engineering, selling and administrative expenses 40,136 56,005
Amortization of intangibles assets 6,302 6,025
Restructuring charges 10,011 -
Loss on sale of subsidiary - 2,667
--------- ----------
Operating earnings (loss) (35,564) 24,395
Net financing costs 14,500 6,464
Other expense (income), net (362) 317
--------- ----------
Earnings (loss) before income tax expense (benefit) (49,702) 17,614
Income tax expense (benefit) (12,464) 5,935
--------- ----------
Net earnings (loss) $ (37,238) $ 11,679
========= =========
Basic earnings (loss) per share:
Earnings (loss) per share $ (0.93) $ 0.30
========= ==========
Weighted average common shares outstanding 40,046 39,213
========= ==========
Diluted earnings (loss) per share:
Earnings (loss) per share $ (0.93) $ 0.28
========= ==========
Weighted average common and potential dilutive common shares outstanding 40,046 41,381
========= ==========
See accompanying Notes to Condensed Consolidated Financial Statements
3
APW Ltd.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
As Restated
--------------------------------
November 30, August 31,
2001 2001
------------ ------------
(Unaudited)
ASSETS
------
Current assets
Cash and cash equivalents $ 5,571 $ 6,190
Accounts receivable, net 100,591 112,948
Inventories 113,354 130,937
Prepaid expenses 15,188 14,213
Deferred income taxes 16,031 16,650
----------- -----------
Total current assets 250,735 280,938
Property, plant and equipment 461,615 477,915
Less: Accumulated depreciation (224,381) (222,886)
----------- -----------
Net property, plant and equipment 237,234 255,029
Goodwill, net 674,407 679,225
Other intangible assets, net 26,730 27,616
Other assets 69,966 58,524
----------- -----------
Total assets $ 1,259,072 $ 1,301,332
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current liabilities
Short-term borrowings $ 625,835 $ 603,353
Trade accounts payable 89,599 119,904
Accrued compensation and benefits 26,206 30,126
Income taxes payable 38,157 33,859
Other current liabilities 45,620 40,701
----------- -----------
Total current liabilities 825,417 827,943
Long-term debt 20,754 18,096
Other long-term liabilities 41,824 45,375
Shareholders' equity (deficit)
Common Stock--$0.01 par value per share; authorized 250,000,000 shares;
issued and outstanding, less contingent shares, 40,055,453
and 40,042,207 shares, respectively 400 400
Share premium 669,772 669,772
Accumulated deficit (271,044) (233,765)
Accumulated other comprehensive loss (28,051) (26,489)
----------- ------------
Total shareholders' equity 371,077 409,918
----------- ------------
Total liabilities and shareholders' equity $ 1,259,072 $ 1,301,332
=========== ============
See accompanying Notes to Condensed Consolidated Financial Statements
4
APW Ltd.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
November 30,
-------------------------------------
As Restated
-------------------------------------
2001 2000
--------------- ----------------
Operating activities
- --------------------
Net earnings (loss) $ (37,238) $ 11,679
Adjustments to reconcile net earnings (loss) to net cash
used in operating activities:
Depreciation and amortization 25,121 15,525
Amortization of financing fees 1,605 -
Gain from sale of assets (153) -
Loss on sale of subsidiary - 2,667
Benefit for deferred income taxes (11,138) (338)
Restructuring charges 10,011 -
Changes in operating assets and liabilities:
Accounts receivable 24,622 (14,693)
Inventories 16,761 (17,200)
Prepaid expenses and other assets (2,270) (5,089)
Trade accounts payable (29,442) 3,275
Income taxes 4,883 (22,974)
Other liabilities (11,707) (1,987)
--------------- ----------------
Net cash used in operating activities (8,945) (29,135)
Investing activities
- --------------------
Proceeds on the sale of property, plant and equipment 2,689 -
Additions to property, plant and equipment (5,932) (30,840)
Net proceeds on sale of subsidiary, net of cash sold - 1,782
Other investing activities (366) (600)
--------------- ----------------
Net cash used in investing activities (3,609) (29,658)
Financing activities
- --------------------
Net short term borrowings (5,667) 3,314
Principal repayments on long-term debt (67,507) (58,536)
Principal borrowings on long-term debt 99,023 90,332
Net commercial paper borrowings - 25,062
Net receivables financed (13,402) -
Stock option exercises - 704
Other financing activities (42) 168
--------------- ----------------
Net cash provided by financing activities 12,405 61,044
Effect of exchange rate changes on cash (470) (23)
--------------- ----------------
Net increase (decrease) in cash and cash equivalents (619) 2,228
Cash and cash equivalents - beginning of period 6,190 712
--------------- ----------------
Cash and cash equivalents - end of period $ 5,571 $ 2,940
=============== ================
See accompanying Notes to Condensed Consolidated Financial Statements
5
APW Ltd.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Restatements
- --------------------------------
APW Ltd. (hereinafter referred to as "APW Ltd.", "APW" or "the Company")
has determined that accounting improprieties occurred in fiscal 2002, 2001, 2000
and 1999 at one U.S. subsidiary and in fiscal 2001 at one U.K. subsidiary. These
accounting improprieties resulted in the overstatement of assets (primarily cash
and inventory) and income and the understatement of liabilities (primarily trade
accounts payable and accrued compensation and benefits) and expense. As a
result, the consolidated financial statements as of August 31, 2001 and 2000 and
for the years ended August 31, 2001, 2000 and 1999 as well as the interim
results for these periods and the results for the interim periods ended November
30, 2001 have been restated. The restated consolidated financial statements as
of August 31, 2001 and 2000 and for the years ended August 31, 2001, 2000 and
1999 have been included in a Form 10-K/A. Restated condensed financial statement
information for the interim periods in the years ended August 31, 2001 and 2000
have been included in Item 8 of the Form 10-K/A. Restated condensed financial
statement information for the interim periods ended November 30, 2001 and 2000
are included herein.
A summary of the effects of the restatements are set forth in Note 9.
As a result of the restatement for the year ended August 31, 2001, the Company
believes that it would have been in default of certain debt covenants as of
August 31, 2001, unless the Company had obtained waivers or the Company's
lenders had amended the debt covenants. Accordingly, the Company has classified
borrowings under the Revolving Multi-Currency Credit Agreement and the U.K.
Facility Agreement as a current liability as of November 30, 2001 and August 31,
2001 in the restated consolidated financial statements.
Note 2 - Summary of Significant Accounting Policies
- ---------------------------------------------------
Description of Business: APW Ltd. is a leading global provider of
------------------------
Technically Enabled Manufacturing Services ("TEMS"), focused on designing and
integrating large electronic products. APW has the capabilities to design and
manufacture various subsystems for electronic products, including enclosures,
thermal management systems, backplanes, power supplies, printed circuit board
assemblies, and cabling, either as integrated custom systems or as individual
subsystems. In addition, APW provides a wide range of integration services to
its customers, including product design, supply chain management, manufacturing,
assembly, testing and drop-ship services. APW's focus is large infrastructure
solutions, such as wireless base stations and switches, enterprise hardware and
internet server enclosures. APW is not targeting high volume markets, such as
personal computers or cell phone handsets. These offerings provide APW's
customers with accelerated time-to-market and decreased time-to-volume
production, while reducing their production costs and allowing them to focus on
the design and marketing of their products. APW believes the Company's emphasis
on technical innovation and vertically integrated engineering and manufacturing
expertise, coupled with its total solution approach, which can be delivered on a
worldwide basis, differentiates the Company in the marketplace.
Basis of Presentation: The accompanying unaudited condensed consolidated
----------------------
financial statements of APW Ltd. and its subsidiaries have been prepared in
accordance with accounting principles generally accepted in the United States of
America for interim financial reporting and with the instructions of Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by accounting principles generally accepted
in the United States of America for complete financial statements. In the
opinion of management, the financial statements include all adjustments which
are normal and recurring in nature necessary to present fairly the financial
position of the Company at November 30, 2001 and the results of operations and
cash flows for the three months ended November 30, 2001 (fiscal 2002 first
quarter) and 2000 (fiscal 2001 first quarter). These financial statements should
be read in conjunction with the audited consolidated financial statements and
notes thereto in the Company's fiscal 2001 Annual Report on Form 10-K.
Earnings (Loss) Per Share: Basic earnings per share is calculated by
--------------------------
dividing net earnings (loss) by the weighted average common shares outstanding
during the period. Diluted earnings per share is calculated by using the
weighted average common shares outstanding adjusted to include the potentially
dilutive effect of outstanding stock options and warrants.
Earnings per share for the fiscal 2002 and fiscal 2001 first quarter is
based on the following (in thousands, except earnings per share amounts):
Three Months Ended
November 30,
------------------------------
As Restated
------------------------------
Numerator: 2001 2000
------------- --------------
Net earnings (loss) for basic and diluted earnings
per share $ (37,238) $ 11,679
============= ==============
Denominator:
Weighted average common shares outstanding for
basic earnings (loss) per share 40,046 39,213
Net effect of dilutive stock options based on the
treasury stock method - 2,168
------------- --------------
Weighted average common and potential common shares
outstanding for diluted earnings (loss) per share 40,046 41,381
============= ==============
Basic earnings (loss) per share: $ (0.93) $ 0.30
============= ==============
Diluted earnings (loss) per share: $ (0.93) $ 0.28
============= ==============
6
When the Company reports positive net earnings, the diluted earnings per
share calculation will include the impact of dilutive securities issued under
the existing stock option plans and issued warrants. Fiscal 2002 diluted
earnings per share exclude the effect of options to purchase approximately 7.0
million shares of common stock because they would be anti-dilutive due to the
net loss during the fiscal 2002 first quarter. Warrants to purchase
approximately 2.1 million shares of common stock were outstanding as of November
30, 2001, but were not included in the computation of diluted earnings (loss)
per share because they would be anti-dilutive due to the net loss for the
quarter ending November 30, 2001.
New Accounting Pronouncements: In June 2001, SFAS No. 141, "Business
------------------------------
Combinations" and SFAS No. 142, "Goodwill and Other Intangible Assets" were
issued. The statements eliminate the pooling-of-interests method of accounting
for business combinations and require that goodwill and certain intangible
assets not be amortized. Instead, these assets will be reviewed for impairment
annually with any related losses recognized in earnings when incurred. SFAS No.
141 was effective for APW Ltd. as of July 31, 2001. SFAS No. 142 will be
effective for the Company on September 1, 2002 for existing goodwill and
intangible assets. The Company is currently evaluating the impact of SFAS No.
142.
In June 2001, SFAS No. 143, "Accounting for Asset Retirement Obligations"
was issued. SFAS No. 143 sets forth the financial accounting and reporting to be
followed for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. SFAS No. 143 requires entities
to record the fair value of a liability for an asset retirement obligation in
the period in which it is incurred if a reasonable estimate of fair value can be
made. The associated asset retirement costs are to be capitalized as part of the
carrying amount of the long-lived asset. Subsequently, the recorded liability
will be accreted to its present value and the capitalized costs will be
depreciated. The Company is required to adopt SFAS No. 143 on September 1, 2002.
The Company is currently evaluating the impact of SFAS No. 143.
In August 2001, SFAS No. 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets" was issued. SFAS No. 144 modifies and expands the
financial accounting and reporting for the impairment or disposal of long-lived
assets other than goodwill, which is specifically addressed by SFAS No. 142.
SFAS No. 144 maintains the requirement that an impairment loss be recognized for
a long-lived asset to be held and used if its carrying value is not recoverable
from its undiscounted cash flows, with the recognized impairment being the
difference between the carrying amount and fair value of the asset. With respect
to long-lived assets to be disposed of other than by sale, SFAS No. 144 requires
that the asset be considered held and used until it is actually disposed of but
requires that its depreciable life be revised in accordance with APB Opinion No.
20, "Accounting Changes." SFAS No. 144 also requires that an impairment loss be
recognized at the date a long-lived asset is exchanged for a similar productive
asset. The Company will be required to adopt SFAS No. 144 on September 1, 2002.
The Company is currently evaluating the impact of SFAS No. 144.
Reclassifications: Certain prior quarter amounts have been reclassified to
------------------
conform with the fiscal 2002 first quarter presentations. Such reclassifications
had no impact on previously reported net earnings.
Note 3 - Restructuring and Other Charges
- ----------------------------------------
During the fiscal 2002 first quarter, APW Ltd. recognized pre-tax
restructuring and other charges totaling $19.6 million. The components of the
charges recorded are as follows (dollars in millions):
Charges
-------------
Facility closure costs:
Severance $ 6.4
Lease exit costs 3.6
Equipment impairment 7.9
Other costs 1.7
-------------
Total facility closure costs $ 19.6
=============
7
Facility closure costs relate to the rationalization of seven facilities
and impact both salaried and hourly employees. The costs are recorded in the
Condensed Consolidated Statement of Operations for the fiscal 2002 first quarter
as follows: 1) severance and lease exit costs totaling $10.0 million are
recorded as restructuring charges; and 2) equipment impairment charges,
resulting from facility closures, of $7.9 million and other facility closure
costs totaling $1.7 million are recorded as cost of products sold.
Restructuring
Beginning in fiscal 2001 and continuing in the fiscal 2002 first quarter,
management developed formal plans to exit certain facilities and involuntarily
terminate employees. Management's plans to exit certain facilities included the
identification of duplicate manufacturing and sales facilities for closure and
the transfer of the related operations to other facilities. Management currently
anticipates that the facility closures and all related activities will be
substantially complete within one year of the commitment dates of the respective
exit plans.
The following table summarizes the activity with respect to fiscal 2002
first quarter restructuring charges (in millions, except employee data):
Severance Facilities Total
Number
of
Employees Reserve Reserve Reserve
------------- ------------ ------------- --------------
Total reserve balance at August 31, 2001 287 $ 2.1 $ 5.2 $ 7.3
Add: Fiscal 2002 first quarter charges 461 6.4 3.6 10.0
Less: Fiscal 2002 first quarter utilization (443) (3.4) (2.1) (5.5)
------------- ------------ ------------- --------------
Ending balance at November 30, 2001 305 $ 5.1 $ 6.7 $ 11.8
============= ============ ============= ==============
Note 4 - Comprehensive Income (Loss)
- ------------------------------------
The components of comprehensive income (loss) are as follows (in
thousands):
Three Months Ended
November 30,
------------------------------
As Restated
------------------------------
2001 2000
------------- -------------
Net earnings (loss) $ (37,238) $ 11,679
Cumulative effect of change in accounting principle
for derivatives and hedging activities, net of tax - 168
Derivative instrument fair market value adjustment (655) -
Reclassification of derivative losses to earnings 196 -
Foreign currency translation adjustments (1,103) (2,095)
------------- -------------
Comprehensive income (loss) $ (38,800) $ 9,752
============= =============
Note 5 - Inventories
- --------------------
Inventories consisted of (in thousands):
As Restated
-----------------------------------
November 30, August 31,
2001 2001
--------------- ----------------
Raw material $ 66,741 $ 73,427
Work-in-progress 29,112 31,945
Finished goods 29,705 39,591
-------------- ----------------
Total inventories, gross 125,558 144,963
Less: inventory reserves (12,204) (14,026)
-------------- ----------------
Total inventories $ 113,354 $ 130,937
============== ================
8
Note 6 - Accounts Receivable Facility
- -------------------------------------
At November 30, 2001 and August 31, 2001, accounts receivable were reduced
by $44.6 million and $58.0 million, respectively, representing receivable
interests sold under the accounts receivable facility.
Note 7 - Contingencies and Litigation
- -------------------------------------
APW Ltd. is a party to various legal proceedings which have arisen in the
normal course of its business. These legal proceedings typically include product
liability, environmental, labor, patent and contract claims, and commission
disputes.
APW Ltd. has recorded reserves for loss contingencies based on the
specific circumstances of each case. Such reserves are recorded when it is
probable that a loss has been incurred as of the balance sheet date and such
loss can be reasonably estimated. In the opinion of management, the resolution
of these contingencies will not have a material adverse effect on APW Ltd.'s
financial condition, results of operations or cash flows.
APW Ltd. has facilities at numerous geographic locations, which are
subject to a range of environmental laws and regulations. Compliance with these
laws has and will require expenditures on a continuing basis. Predecessors to
APW Ltd. have been identified by the United States Environmental Protection
Agency ("EPA") as "Potentially Responsible Parties" regarding various
multi-party Superfund sites. Potentially Responsible Parties are jointly and
severally liable with respect to Superfund remediation liabilities. Any
liability in connection with these sites has been assumed by APW Ltd. Based on
the Company's investigations, management believes that the Company is a de
minimis participant in certain of these sites. As to one other site, the Company
is a minor participant, and the Company's share of estimated cleanup costs is
not likely to exceed $1.1 million. As to another EPA site where the Company is
not a de minimis participant, the state has required additional ground water
testing at a former APW Ltd. manufacturing facility, and the Company cannot
reasonably estimate the amount of the Company's liability, if any. In addition,
the Company is also involved in other state cleanup actions for which management
believes the aggregate costs of remediation are adequately reserved for.
APW Ltd. anticipates that environmental costs will be expensed or
capitalized depending on their future economic benefits. Expenditures that have
no future economic value are expensed. Liabilities will be recorded when
environmental remediation is probable and the costs can be reasonably estimated.
Although the level of future expenditures for environmental remediation is
impossible to determine with any degree of certainty, management does not
believe these costs are likely to have a material adverse effect on APW Ltd.'s
financial position, results of operations or cash flows.
Note 8 - Subsequent Events, Liquidity and Management's Plans
- ------------------------------------------------------------
On September 27, 2001, the Company's lenders amended certain debt
covenants associated with APW Ltd.'s Multi-Currency Credit Agreement, UK
Revolving Credit Agreement and the Accounts Receivable Facility
(collectively,"credit facilities"). These revised covenants were established
based upon APW Ltd. management's financial forecasts prior to the events of
September 11, 2001. Throughout the fiscal 2002 first quarter, APW Ltd.
experienced a significant decline in net sales compared to prior periods and
compared to management's financial forecasts that were the basis for the
financial covenants set forth in the September 27, 2001 amendment. Such declines
are related to a number of factors, certain of which were impacted by the
terrorist attacks that took place in the United States on September 11, 2001.
Those terrorist attacks were unprecedented events that have created many
economic and political uncertainties. On December 13, 2001, the Company's
lenders again amended certain debt covenants associated with the Company's
credit facilities to reflect the Company's revised financial forecasts as of
that point in time. The revisions in the covenants were considered necessary due
to the magnitude of the decline in the fiscal 2002 first quarter actual results
compared to prior periods and management's forecasts. In addition, the amendment
repriced the outstanding warrants issued in conjunction with the May 15, 2001
amendment to the closing price of APW Ltd.'s common stock on December 10, 2001
of $1.98 and eliminates the previous reduction provision if the Company met
repayment targets by August 31, 2002. The Company also issued warrants for 9.9%
of the common stock outstanding on December 13, 2001 (approximately 4.1 million
shares) at a price of $0.01. These $0.01 warrants are cancelled if the credit
facilities are repaid by July 31, 2002 (entirely cancelled) or September 30,
2002 (49.5% cancelled).
9
If the decline in net sales continues or APW Ltd. experiences a
significant change in its cost structure, APW Ltd. may not be able to comply
with the covenants which were agreed to with the Company's lenders as of
December 13, 2001. Further, such covenants contemplate the sale of one of the
Company's divisions during the three months ending February 28, 2002 (fiscal
2002 second quarter). The Company is in negotiations with another independent
party concerning the sale of one of the Company's divisions and is still
negotiating some key material terms, including price, and those negotiations are
ongoing. Nonetheless, there can be no assurances that the transaction will be
consummated. If the transaction is not consummated with any party, the Company
may violate a financial covenant and will have to consider a number of measures
available to the Company in the event of a covenant violation, which are
discussed below.
APW Ltd.'s management plans to continue to aggressively pursue additional
revenue opportunities within its core customer markets. APW Ltd. adopted several
restructuring plans during fiscal 2001 and the fiscal 2002 first quarter in an
effort to reduce costs in the wake of declining net sales experienced during
fiscal 2001 and the fiscal 2002 first quarter. These programs resulted in
restructuring charges during fiscal 2001 and the fiscal 2002 first quarter and
have provided cost savings that are expected to continue into the future.
Management plans to consider additional cost-reduction programs, as necessary,
to further align the Company's cost base with net sales.
While the Company's revised financial forecasts reflect management's best
estimates, there can be no assurances that the Company's fiscal 2002 financial
forecasts, which are the basis of the current financial covenants, will be
achieved. If the Company's actual operating performance does not substantially
meet the fiscal 2002 financial forecasts associated with the amended covenants,
the Company may have difficulty achieving compliance with certain debt covenants
in APW Ltd.'s amended credit facilities. The Company's actual sales for the
month of December 2001 were less than the December 2001 forecasted sales that
are the basis of the Company's most recent financial covenants, but still in
compliance with the sales covenant. If APW Ltd. fails to comply with debt
covenants for any reason, the Company may have to consider a number of the
following measures: (a) obtain a waiver of default for the violated covenant(s);
(b) obtain an amendment of the covenants in the existing credit facilities; (c)
seek additional sources of debt financing, which likely would be subject to
obtaining necessary lender consents; (d) seek additional equity financing or
other strategic alternatives; (e) restructure its obligations and/or the
business; or (f) consider a combination of the foregoing. Given the
circumstances, the Company is evaluating its alternatives. There can be no
assurances that the aforementioned alternatives would be available to the
Company in the future. If this were the case, a future violation of debt
covenants would cause a material adverse effect on the Company's ability to
continue in its present form and to achieve its intended business objectives.
As a result of the restatement for the year ended August 31, 2001, the
Company believes that it would have been in default of certain debt covenants as
of August 31, 2001, unless the Company had obtained waivers or the Company's
lenders had amended the debt covenants. Accordingly, the Company has classified
borrowings under the Revolving Multi-Currency Credit Agreement and the U.K.
Facility Agreement as a current liability as of November 30, 2001 and August 31,
2001 in the restated consolidated financial statements.
In December 2001, the Company received notification from the lessor of two
of its aircraft that the lease contracts ("contracts") for the two aircraft will
be terminated effective March 4, 2002. In conjunction with the termination, the
lease terms of the contracts would require the Company to pay the lessor
approximately $12.3 million for the two aircraft, as defined by the contracts,
and, in exchange, the lessor would convey all of its rights, title and interest
in the two aircraft to the Company. The Company is actively working with the
lessor to identify a third party which would purchase and/or lease the two
aircraft, thereby eliminating the Company's $12.3 million payment obligation.
The Company has obtained an estimate of the fair market value of the two
aircraft. Based on the estimated fair market value of the two aircraft and the
Company's ongoing discussions with the lessor, the Company does not believe that
it will incur a loss in connection with the termination of the contracts, and
therefore no such loss provision has been recorded by the Company. If the
estimated fair market value of the two aircraft changes or the Company and the
lessor are unable to identify a third party purchaser or lessee of the two
aircraft, the Company may incur a loss in connection with the termination of the
contracts. If the Company were to incur a loss in conjunction with the
termination of the contracts, the Company, under the current terms of the
Company's credit facilities, may fail to be in compliance with a debt covenant.
If the Company were to fail to comply with this debt covenant, the Company would
then have to consider the aforementioned measures available to the Company in
the event of the Company's failure to comply with a debt covenant.
At November 30, 2001 and December 31, 2001, the Company had $24.0 million
and $10.3 million, respectively, of borrowings available under its two credit
facilities and $5.6 million in cash at November 30, 2001. To provide additional
liquidity, the Company has been extending payables beyond their normal payment
terms. At November 30, 2001 and December 31, 2001, although the Company sold all
eligible accounts receivable under its accounts receivable facility, the Company
had the availability to sell an incremental $35.4 million and $32.3 million,
respectively.
The Company understands that it, and two of its senior executives have
been sued in connection with alleged violations of Federal securities laws which
preceded a drop in the price of its common stock ending on March 20, 2001. The
complaint, which is captioned Stewart Norman Hicks v. APW Ltd., et al., was
filed on December 10, 2001. The complaint alleges violations of the Federal
securities laws and seeks certification of a plaintiff class consisting of all
purchasers of the Company's common stock between September 26, 2000 and March
20, 2001, inclusive. The complaint does not quantify the damages. The Company
also understands that two additional suits containing similar allegations have
been filed. The Company has not yet been served with the complaints and,
therefore, cannot evaluate the merits of the claims.
10
Note 9--Restated Financials
- ---------------------------
As described in Note 1, the consolidated financial statements as of
November 30, 2001 and 2000 and for the three months ended November 30, 2001 and
2000 have been restated. These quarterly statements are unaudited. A review of
the consolidated financial statements for the three months ended November 30,
2001 has not been performed by the Company's independent accountants. A summary
of the effects of the restatements follows:
APW Ltd.
Consolidated Statement of Operations
(Dollars in millions, except per share data)
For the 3 Months Ended November 30, 2001 (Unaudited)
----------------------------------------------------
Previously
Reported Adjustments As Restated
---------- ----------- -----------
Net sales $ 219.8 $ -- $ 219.8
Costs of products sold 197.9 1.0 198.9
------- ------- -------
Gross profit 21.9 (1.0) 20.9
Engineering, selling and administrative expenses 40.4 (.2) 40.2
Amortization of intangible assets 6.3 -- 6.3
Restructuring charges 10.0 -- 10.0
------- ------- -------
Operating loss (34.8) (.8) (35.6)
Net financing costs 14.5 -- 14.5
Other income, net (.4) -- (.4)
------- ------- -------
Loss before income tax benefit (48.9) (.8) (49.7)
Income tax benefit (12.2) (.3) (12.5)
------- ------- -------
Net loss $ (36.7) $ (.5) $ (37.2)
======= ======= =======
Basic and diluted loss per share:
Loss per share $ (.92) $ (.01) $ (.93)
Weighted average common shares outstanding 40,046 40,046
11
APW Ltd.
Consolidated Balance Sheet
(Dollars in millions)
November 30, 2001 (Unaudited)
--------------------------------------------
Previously Adjustments As Restated
Reported
ASSETS
- ------
Current assets
Cash and cash equivalents $ 7.8 $ (2.2) $ 5.6
Accounts receivable, net 100.6 -- 100.6
Inventories 118.5 (5.2) 113.3
Prepaid expenses 15.4 (.2) 15.2
Deferred income taxes 16.0 -- 16.0
-------- ------- --------
Total current assets 258.3 (7.6) 250.7
Property, plant and equipment 461.6 -- 461.6
Less: Accumulated depreciation (224.4) -- (224.4)
-------- ------- --------
Net property, plant and equipment 237.2 -- 237.2
Goodwill, net 674.4 -- 674.4
Other intangibles, net 26.7 -- 26.7
Other assets 70.0 -- 70.0
-------- ------- --------
Total assets $1,266.6 $ (7.6) $1,259.0
======== ======= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities
Short-term borrowings $ -- $ 625.8 $ 625.8
Trade accounts payable 88.2 1.4 89.6
Accrued compensation and benefits 25.6 .6 26.2
Income taxes payable 42.0 (3.9) 38.1
Other current liabilities 45.0 .6 45.6
-------- ------- --------
Total current liabilities 200.8 624.5 825.3
Long-term debt 646.5 (625.8) 20.7
Other long-term liabilities 41.8 -- 41.8
Shareholders' equity
Common stock .4 -- .4
Share premium 669.8 -- 669.8
Accumulated deficit (264.7) (6.3) (271.0)
Accumulated other comprehensive loss (28.0) -- (28.0)
-------- ------- --------
Total shareholders' equity 377.5 (6.3) 371.2
-------- ------- --------
Total liabilities and shareholders' equity $1,266.6 $ (7.6) $1,259.0
======== ======= ========
12
APW Ltd.
Consolidated Condensed Statement of Cash Flows
(Dollars in millions)
For the 3 Months Ended November 30, 2001 (Unaudited)
----------------------------------------------------
Previously
Reported Adjustments As Restated
---------- ----------- -----------
Net loss $(36.7) $ (.5) $(37.2)
Net cash used in operating activities (9.0) .1 (8.9)
Net cash used in investing activities (3.6) -- (3.6)
Net cash provided by financing activities 12.4 -- 12.4
Effect of exchange rate changes on cash (.5) -- (.5)
Net decrease in cash and cash equivalents (.7) .1 (.6)
Cash and cash equivalents-beginning of year 8.5 (2.3) 6.2
Cash and cash equivalents-end of year $ 7.8 $(2.2) $ 5.6
13
APW Ltd.
Consolidated Statement of Operations
(Dollars in millions, except per share data)
For the 3 Months Ended November 30, 2000 (Unaudited)
----------------------------------------------------
Previously
Reported Adjustments As Restated
---------- ----------- -----------
Net sales $359.7 $ -- $359.7
Costs of products sold 268.9 1.7 270.6
------- ------- -------
Gross profit 90.8 (1.7) 89.1
Engineering, selling and administrative expenses 56.0 -- 56.0
Amortization of intangible assets 6.0 -- 6.0
Loss on sale of subsidiary 2.7 -- 2.7
------- ------- -------
Operating earnings 26.1 (1.7) 24.4
Net financing costs 6.5 -- 6.5
Other expense, net .3 -- .3
------- ------- -------
Earnings before income tax expense 19.3 (1.7) 17.6
Income tax expense 6.5 (.6) 5.9
------- ------- -------
Net earnings $ 12.8 $(1.1) $ 11.7
======= ======= =======
Basic earnings per share:
Earnings per share $.33 $(.03) $.30
Weighted average common shares outstanding 39,213 39,213
Diluted earnings per share:
Earnings per share $.31 $(.03) $.28
Weighted average common shares outstanding 41,381 41,381
14
APW Ltd.
Consolidated Condensed Statement of Cash Flows
(Dollars in millions)
For the 3 Months Ended November 30, 2000 (Unaudited)
------------------------------------------------------
Previously
Reported Adjustments As Restated
-------- ----------- -----------
Net earnings $ 12.8 $(1.1) $ 11.7
Net cash used in operating activities (28.5) (.6) (29.1)
Net cash used in investing activities (29.7) -- (29.7)
Net cash provided by financing activities 61.0 -- 61.0
Effect of exchange rate changes on cash -- -- --
Net increase in cash and cash equivalents 2.8 (.6) 2.2
Cash and cash equivalents-beginning of year .6 .1 .7
Cash and cash equivalents-end of year $ 3.4 $ (.5) $ 2.9
15
Note 10 - Reorganization Under Chapter 11
On May 16, 2002, APW Ltd. (in provisional liquidation), a Bermuda company,
filed a voluntary petition for relief under Chapter 11 of the United States
Bankruptcy Code ("Bankruptcy Code") in the United States Bankruptcy Court for
the Southern District of New York ("Bankruptcy Court") (Case No. 02-12335). The
proceeding involved only APW Ltd., the Bermuda company, and Vero Electronics,
Inc., a non-operating entity and subsidiary of APW Ltd. (Case No. 02-12334). All
other subsidiaries of the Company were excluded from the proceeding and continue
to conduct business with customers and suppliers in the ordinary course. The
Company will continue to operate its business as a debtor-in-possession under
the jurisdiction of the Bankruptcy Court and in accordance with the applicable
provisions of the Bankruptcy Code. The bankruptcy proceedings are being jointly
administered under Case No. 02-12334 (PCB).
On May 30, 2002, a proceeding (the "Bermuda Proceeding") was commenced
pursuant to the Companies Act 1981 with respect to APW Ltd. in the Bermuda
Supreme Court in connection with a winding-up petition. One of the purposes of
the filing was the imposition of a statutory stay preventing third parties from
continuing or taking actions against APW in Bermuda. On May 30, 2002, the
Bermuda court appointed Malcolm L. Butterfield of KPMG Bermuda and Philip W.
Wallace of KPMG London, England as joint provisional liquidators of APW Ltd.
(or, as referred to herein, the JPLs) with limited supervisory powers. The
appointment of the JPL's and statutory stay enabled the JPL's to perform
supervisory and oversight of the management of APW while reviewing the Plan of
reorganization with a view to its treatment of creditors. On July 22, 2002, the
JPLs were granted various powers, including the power to authorize the sale of
any business, operation, subsidiary, division or other significant asset of APW
Ltd.
APW Ltd. decided to pursue reorganization under Chapter 11 of the
Bankruptcy Code based upon the certainty of the elimination of pre-petition
indebtedness and as a consequence the ability of the Company to emerge from
bankruptcy significantly deleveraged. As a debtor-in-possession, APW Ltd. is
authorized to continue to operate as an ongoing business, but may not engage in
transactions outside the ordinary course of business without the approval of the
Bankruptcy Court, after notice and an opportunity for a hearing.
Confirmation of Plan of Reorganization
On July 24, 2002, the Bankruptcy Court entered an order confirming APW
Ltd.'s and Vero's Amended and Restated Plan of Reorganization dated June 19,
2002 (as modified, amended or supplemented, the "Plan"). APW Ltd. emerged on
July 31, 2002.
Pursuant to the terms of the Plan, subject to the approval of the joint
provisional liquidators (the "JPLs") appointed in the Bermuda Proceeding and, if
required, the approval of the Bermuda Supreme Court, all of the assets and
liabilities which were to be retained by APW Ltd. under the original Plan will
be transferred to AWP Ltd. ("AWP"), a newly formed Bermuda company, including
the right to use the name "APW Ltd.," which became the successor-in-interest to
APW Ltd. After the consummation of the Plan, APW Ltd. changed its name to BQX
Ltd. and AWP Ltd. changed its name to APW Ltd. The above name changes became
effective on July 31, 2002.
In addition, as of July 31, 2002, the effective date of the Plan, AWP (the
successor in interest to APW Ltd.) issued under the Plan the following:
. New Secured Notes in the aggregate principal amount of $100 million
issued to its senior secured lenders,
. 1,000,000 common shares of AWP (the successor in interest to APW Ltd.)
(the "APW Common Shares") issued to its senior secured lenders which
represents 100% of the outstanding common shares of AWP after the
consummation of the Plan,
16
. Warrants to purchase up to 60,606 APW Common Shares at an exercise price
of $448.95 per share issued to the current equity holders of APW Ltd.,
and
. Warrants to purchase up to 303,030 APW Common Shares at an exercise
price of $0.02 per share issued to lenders under the Credit Facility
(defined below).
As of July 31, 2002, there were approximately 40.8 million common shares of
APW Ltd. outstanding. Under the Plan, holders of APW Ltd. common shares as of
the July 31, 2002 record date received (a) warrants representing the right
to purchase 60,606 APW Common Shares as stated above and (b) retain existing
common shares in APW Ltd. (which as a practical matter will be liquidated and no
distribution is expected to shareholders). Subsequent to the effective date of
the Plan, APW Ltd. will be dissolved, liquidated or wound-up by joint
provisional liquidators in connection with a proceeding in Bermuda or otherwise
pursuant to applicable Bermuda law, and no assets are expected to be distributed
to current shareholders.
After the consummation of the Plan, AWP Ltd. (as successor to APW Ltd.) is
expected to have approximately 1.8 million authorized common shares, par value
$0.02 per share, of which 1,000,000 common shares will be outstanding. All such
1,000,000 shares will be issued as of the consummation of the Plan.
The board of directors of AWP Ltd. (as successor to APW Ltd.) after
consummation of the Plan are to consist of: Richard G. Sim, W. Peter Douglas,
Christopher S. Brothers, Stephen A. Kaplan, Michael P. Harmon, J. Richard Budd
and Toni J. Smith.
In addition, the Plan provides for a new management incentive plan for
issuance of options to purchase to key employees or the opportunity for such key
employees to purchase 10% of the APW Common Shares on a fully diluted basis (or
151,515 shares).
The Credit Facility
Concurrent with the Chapter 11 filing, the Company entered into a new
$110.0 million debtor-in-possession credit facility ("Credit Facility") to
provide for the payment of permitted pre-petition claims, working capital needs,
letters of credit and other general corporate purposes. The Credit Facility
requires that we maintain certain financial covenants and restrict liens,
indebtedness, capital expenditures, dividend payments and sale of assets. Upon
emergence from the Chapter 11 proceeding, the Credit Facility was extended until
November 15, 2003 with respect to $90.0 million of the Credit Facility and
May 15, 2004 with respect to $20.0 million of the Credit Facility.
Fresh Start Accounting
As a result of the bankruptcy, the Company will adopt fresh start
accounting pursuant to guidance provided by the American Institute of Certified
Public Accountant's Statement of Position 90-7, "Financial Reporting by Entities
in Reorganization under the Bankruptcy Code", as of July 31, 2002. In accordance
with the principles of fresh start accounting, the Company will adjust the
carrying values of its assets and liabilities to their fair values as of July
31, 2002. The application of fresh start accounting will result in material
changes to the carrying values of the Company's assets and liabilities.
Going Concern
Following its emergence from the Chapter 11 proceeding, the ability of APW
Ltd., the successor company, to continue as a going concern is predicated upon,
among other things, compliance with the provisions of the Credit Facility and
the term loan agreement related to the $100 million in new secured notes issued
under the Plan and the ability to generate cash flows from operations and obtain
financing sources sufficient to satisfy future obligations.
17
Item 2 - Management's Discussion and Analysis of Financial Condition and Results
- --------------------------------------------------------------------------------
of Operations
- -------------
This amendment on Form 10-Q/A #2 amends Items 1 and 2 of the Quarterly Report of
APW Ltd. (the "Company") on Form 10-Q previously filed for the three months
ended November 30, 2002 and 2001. This Quarterly Report on Form 10-Q/A #2 is
filed in connection with the Company's restatement of its financial statements
as of August 31, 2001 and 2000 and for the years ended August 31, 2001, 2000 and
1999 and for the quarters ended November 30, 2001 and November 30, 2000.
Financial statement information and related disclosures included in this amended
filing reflect, where appropriate, changes as a result of the restatements. All
other information contained in this Quarterly Report on Form 10-Q/A #2 is as of
the date referenced for such information in the original filing or, if no date
is referenced for information in the original filing, as of the date of such
filing.
The following discussion of our financial condition and our results of
operations should be read in conjunction with our accompanying unaudited
condensed consolidated financial statements and related notes thereto.
Overview
APW Ltd. is a leading global technically enabled manufacturing services
provider, focused on designing and integrating large electronic enclosure
products. We have the capabilities to design and manufacture various subsystems
for electronic products, including enclosures, power supplies, thermal
management systems, printed circuit board assemblies, and cabling, either as
individual subsystems or as integrated custom systems. We provide a wide range
of integrated design, manufacturing and logistics services to customers,
including product design, supply chain management, manufacturing, assembly,
testing and drop-ship services. Operating in over 30 locations throughout North
America, South America, Europe and Asia, we provide our solutions and services
to original equipment manufacturers, primarily in the communications (datacom
and telecom), computing (enterprise hardware - large servers, large data
storage, networking) and Internet (application service providers, Internet
service providers and web hosting) markets. Our customers include industry
leaders such as Applied Materials, Cisco, Compaq, Cymer, EMC, Ericsson, Fujitsu,
Hewlett-Packard, IBM, Lucent, Marconi, Motorola, NCR, Nortel Networks and Sun
Microsystems.
Reorganization Under Chapter 11
On May 16, 2002, APW Ltd., (in provisional liquidation) (herinafter
referred to as "APW Ltd.", "APW" or "the Company"), a Bermuda company, filed a
voluntary petition for relief under Chapter 11 of the United States Bankruptcy
Code ("Bankruptcy Code") in the United States Bankruptcy Court for the Southern
District of New York ("Bankruptcy Court") (Case No. 02-12335). The proceeding
involved only APW Ltd., the Bermuda company, and Vero Electronics, Inc., a
non-operating entity and subsidiary of APW Ltd. (Case No. 02-12334). All other
subsidiaries of the Company were excluded from the proceeding and continue to
conduct business with customers and suppliers in the ordinary course. The
Company will continue to operate its business as a debtor-in-possession under
the jurisdiction of the Bankruptcy Court and in accordance with the applicable
provisions of the Bankruptcy Code. The bankruptcy proceedings are being jointly
administered under Case No. 02-12334 (PCB).
On May 30, 2002, a proceeding (the "Bermuda Proceeding") was commenced
pursuant to the Companies Act 1981 with respect to APW Ltd. in the Bermuda
Supreme Court in connection with a winding-up petition. One of the purposes of
the filing was the imposition of a statutory stay preventing third parties from
continuing or taking actions against APW in Bermuda. On May 30, 2002, the
Bermuda court appointed Malcolm L. Butterfield of KPMG Bermuda and Philip W.
Wallace of KPMG, London, England as joint provisional liquidators of APW Ltd.
(or, as referred to herein, the JPLs) with limited supervisory powers. The
appointment of the JPL's and statutory stay enabled the JPL's to perform
supervisory and oversight of the management of APW while reviewing the Plan of
reorganization with a view to its treatment of creditors. On July 22, 2002, the
JPLs were granted various powers, including the power to authorize the sale of
any business, operation, subsidiary, division or other significant asset of APW
Ltd.
APW Ltd. decided to pursue reorganization under Chapter 11 of the
Bankruptcy Code based upon the certainty of the elimination of pre-petition
indebtedness and as a consequence the ability of the Company to emerge from
bankruptcy significantly deleveraged. As a debtor-in-possession, APW Ltd. is
authorized to continue to operate as an ongoing business, but may not engage in
transactions outside the ordinary course of business without the approval of the
Bankruptcy Court, after notice and an opportunity for a hearing.
Confirmation of Plan of Reorganization
On July 24, 2002 the Bankruptcy Court entered an order confirming APW
Ltd.'s and Vero's Amended and Restated Plan of Reorganization dated June 19,
2002 (as modified, amended or supplemented, the "Plan"). APW Ltd. emerged on
July 31, 2002.
18
Pursuant to the terms of the Plan, subject to the approval of the joint
provisional liquidators (the "JPLs") appointed in the Bermuda Proceeding and, if
required, the approval of the Bermuda Supreme Court, all of the assets and
liabilities which were to be retained by APW Ltd. under the original Plan will
be transferred to AWP Ltd. ("AWP"), a newly formed Bermuda company, including
the right to use the name "APW Ltd.," which became the successor-in-interest to
APW Ltd. After the consummation of the Plan, APW Ltd. changed its name to BQX
Ltd. and AWP Ltd. changed its name to APW Ltd. The above name changes became
effective on July 31, 2002.
In addition, as of July 31, 2002 the effective date of the Plan, AWP (the
successor in interest to APW Ltd.) issued under the Plan the following:
. New Secured Notes in the aggregate principal amount of $100 million
issued to its senior secured lenders,
. 1,000,000 common shares of AWP (the successor in interest to APW Ltd.)
(the "APW Common Shares") issued to its senior secured lenders which
represents 100% of the outstanding common shares of AWP after the
consummation of the Plan,
. Warrants to purchase up to 60,606 APW Common Shares at an exercise
price of $448.95 per share issued to the current equity holders of APW
Ltd., and
. Warrants to purchase up to 303,030 APW Common Shares at an exercise
price of $0.02 per share issued to lenders under the Credit Facility
(defined below).
As of July 31, 2002, there were approximately 40.8 million common shares
of APW Ltd. outstanding. Under the Plan, holders of APW Ltd. common shares
received (a) warrants representing the right to purchase 60,606 APW Common
Shares as stated above and (b) retain existing common shares in APW Ltd. (which
as a practical matter will be liquidated and no distribution is expected to
shareholders). Subsequent to the effective date of the Plan, APW Ltd. will be
dissolved, liquidated or wound-up by joint provisional liquidators in connection
with a proceeding in Bermuda or otherwise pursuant to applicable Bermuda law,
and no assets are expected to be distributed to current shareholders.
After the consummation of the Plan, AWP Ltd. (as successor to APW Ltd.)
is expected to have approximately 1.8 million authorized common shares, par
value $0.02 per share, of which 1,000,000 common shares will be outstanding. All
such 1,000,000 shares will be issued as of the consummation of the Plan.
The board of directors of AWP Ltd. (as successor to APW Ltd.) after
consummation of the Plan are to consist of: Richard G. Sim, W. Peter Douglas,
Christopher S. Brothers, Stephen A. Kaplan, Michael P. Harmon, J. Richard Budd
and Toni J. Smith.
In addition, the Plan provides for a new management incentive plan for
issuance of options to purchase to key employees or the opportunity for such key
employees to purchase 10% of the APW Common Shares on a fully diluted basis (or
151,515 shares).
The Credit Facility
Concurrent with the Chapter 11 filing, the Company entered into a new $110
million debtor-in-possession credit facility ("Credit Facility") to provide for
the payment of permitted pre-petition claims, working capital needs, letters of
credit and other general corporate purposes. The Credit Facility requires that
we maintain certain financial covenants and restrict liens, indebtedness,
capital expenditures, dividend payments and sale of assets. Upon emergence from
the Chapter 11 proceeding, the Credit Facility will be extended until November
15, 2003 with respect to $90.0 million of the Credit Facility and May 15, 2004
with respect to $20.0 million of the Credit Facility.
Fresh Start Accounting
As a result of the bankruptcy, the Company will adopt fresh start
accounting pursuant to guidance provided by the American Institute of Certified
Public Accountant's Statement of Position 90-7, "Financial Reporting by Entities
in Reorganization under the Bankruptcy Code", as of July 31, 2002. In accordance
with the principles of fresh start accounting, the Company will adjust the
carrying values of its assets and liabilities to their fair values as of July
31, 2002. The application of fresh start accounting will result in material
changes to the carrying values of the Company's assets and liabilities.
Going Concern
Following its emergence from the Chapter 11 proceeding, the ability of APW
Ltd., the successor company, to continue as a going concern is predicated upon,
among other things, compliance with the provisions of the Credit Facility and
the term loan agreement related to the $100 million in new secured notes issued
under the Plan and the ability to generate cash flows from operations and obtain
19
financing sources sufficient to satisfy our future obligations.
Significant Accounting Policies
Financial Reporting Release No. 60, which was recently released by the
Securities and Exchange Commission, requires all companies to include a
discussion of critical accounting policies or methods used in the preparation of
financial statements. These policies and methods are the most important to the
portrayal of the Company's financial condition and results, and require
management's most difficult, subjective and complex judgments. The following is
a brief discussion of the more significant accounting policies and methods used
by APW Ltd.
General
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the dates of the financial
statements and the reported amounts of revenues and expenses during the
reporting periods. The most significant estimates and assumptions relate to the
recoverability of long-lived assets including goodwill and other intangibles,
the realization of deferred income taxes and the adequacy of restructuring
reserves. Actual amounts could differ significantly from these estimates.
Recoverability of long-lived assets, goodwill and other intangible assets
We periodically assess the impairment of long-lived assets, goodwill and
other identifiable intangible assets under SFAS No. 121 and Accounting
Principles Board Opinion No. 17 whenever events or changes in circumstances
indicate that the carrying value may not be recoverable. Factors we consider
important which could trigger an impairment review include the following:
.. significant underperformance relative to expected historical or forecasted
future operating results;
.. significant changes in the manner of our use of the acquired assets or the
strategy for our overall business;
.. commitments by management to close certain facilities that are made as part of
a company-wide restructuring initiative;
.. significant negative industry or economic trends;
.. significant decline in our stock price for a sustained period; and
.. our market capitalization relative to net book value.
Upon the existence of one or more of the above indicators of impairment,
we estimate the future undiscounted cash flows and compare such estimates to the
related asset book value. If it is determined that these estimated future
undiscounted cash flows will not be sufficient to enable the recovery of the
related asset book value, we measure any impairment based on a projected
discounted cash flow method using a discount rate determined by our management
to be commensurate with the risk inherent in our current business model.
Prospectively, we must continue to assess the recoverability of the
Company's long-lived assets, goodwill and other intangibles. In so doing, we
will be required to make assumptions regarding estimated future cash flows and
other factors to determine the fair value of the respective assets. While we
believe our estimates are reasonable, if our estimates or their related
assumptions change in the future, we may be required to record additional
impairment charges. Assumptions we make regarding estimated future cash flow
include: (i) future revenue growth (and mix); (ii) future composition of cost of
products sold and operating expenses; and (iii) future capital expenditure
requirements.
Accounting for income taxes
As part of the process of preparing our consolidated financial statements,
we are required to estimate our income taxes in each of the tax jurisdictions in
which we operate. This process involves us estimating our current tax liability
together with assessing temporary differences resulting from differing treatment
of items for tax and book purposes. These differences result in deferred tax
assets and liabilities, which are included within our consolidated balance
sheet.
Significant management judgment is required in determining our provision
for income taxes, deferred tax assets and liabilities and any related valuation
allowance recorded against our net deferred tax assets. Generally accepted
accounting principles require that we record a valuation allowance against our
deferred tax assets if it is "more likely than not" that we will not be able to
utilize them to offset future taxes.
Restructuring Reserves
Restructuring charges as presented in our Condensed Consolidated Statement
of Operations are comprised of severance and lease exit costs. These charges are
recognized in accordance with Emerging Issues Task Force ("EITF") 94-3 and Staff
Accounting Bulleting ("SAB") 100. Our accruals for lease exit obligations
stemming from closed facilities are based on management's best estimate of the
total future cash flows required to exit such facilities. Actual costs could
differ materially due to factors such as our ability to secure subleases, the
creditworthiness of sub-lessees and our success at negotiating early termination
agreements with our lessors. These factors are significantly dependent on the
general health of the economy and the resultant demand for commercial property.
20
Net Sales
Net sales for the fiscal 2002 first quarter were $219.8 million compared
to $359.7 million in the fiscal 2001 first quarter, a decrease of 38.9%. Net
sales in the fiscal 2002 first quarter were negatively impacted by the broad
based slow down in the technology sector which has resulted in reduced demand
for some of our customers products and in turn has negatively impacted the
demand those customers have for our products and services. In addition to the
broad based slow down in the technology sector, the terrorist attacks that took
place on September 11, 2001, which were unprecedented events creating many
economic and political uncertainties, have had an immediate adverse impact on
our business.
Our fiscal 2002 first quarter sales were influenced by the inclusion of
acquisitions completed in the second quarter of fiscal 2001. Excluding these
acquisitions, net sales decreased 44.4% in the fiscal 2002 first quarter when
compared to sales in the fiscal 2001 first quarter.
Geographic Sales
Three Months Ended
November 30,
-------------------------
2001 2000 Change
------------------------------------
(In millions)
Americas $ 132.7 $ 223.6 (40.7%)
Europe and Asia 87.1 136.1 (36.0%)
------------------------------------
Total $ 219.8 $ 359.7 (38.9%)
====================================
Net sales in the Americas for the fiscal 2002 first quarter were $132.7
million compared to $223.6 million in the fiscal 2001 first quarter, a decrease
of 40.7%. Our fiscal 2002 first quarter sales were influenced by the inclusion
of acquisitions completed in the second quarter of fiscal 2001. Excluding these
acquisitions, net sales decreased 50% in the fiscal 2002 first quarter when
compared to net sales in the fiscal 2001 first quarter. Net sales in Europe and
Asia for the fiscal 2002 first quarter were $87.1 million compared to $136.1
million in the fiscal 2001 first quarter, a decrease of 36.0%.
Gross Profit
Gross profit for the fiscal 2002 first quarter was $20.9 million compared
to $89.1 million in the fiscal 2001 first quarter, a decrease of 76.5%. As a
percentage of net sales, the fiscal 2002 first quarter gross profit was 9.5%
compared to 24.8% in the fiscal 2001 first quarter. The decrease in gross profit
as a percentage of net sales is primarily a result of a combination of factors:
1) $9.6 million of costs related to facility closures (primarily equipment
write-offs); 2) under-absorption of costs resulting from the broad based slow
down in the technology sector which significantly reduced sales volumes; and 3)
a shift in sales mix to programs with increased levels of systems integration,
which typically have lower margins.
Operating Expenses
Operating expenses in the fiscal 2002 first quarter were $40.1 million
compared to $56.0 million in the fiscal 2001 first quarter. As a percentage of
net sales, operating expenses were 18.3% for the fiscal 2002 first quarter,
compared to 15.6% for the fiscal 2001 first quarter. Our operating expenses
consist primarily of engineering, selling, marketing, finance, information
technology and general administrative expenses. Operating expenses have
been reduced by $15.9 million from the fiscal 2001 first quarter. The
reduction in operating expenses is primarily due to the restructuring and cost
reduction efforts we have made. Although operating expenses have been reduced
from the
21
fiscal 2001 first quarter, operating expenses as a percentage of net
sales increased due to the under-absorption of costs resulting from the broad
based slow down in the technology sector which significantly reduced sales
volumes.
Amortization of Intangible Assets
Amortization of intangible assets (amortization) in the fiscal 2002 first
quarter was $6.3 million compared to $6.0 million in the fiscal 2001 first
quarter, an increase of 5%. Amortization as a percentage of net sales increased
to 2.9% in the fiscal 2002 first quarter compared to 1.7% in the fiscal 2001
first quarter.
Restructuring and Other Charges
A restructuring charge totaling $10.0 million was recorded during the
fiscal 2002 first quarter. The restructuring charge relates to the
rationalization of seven facilities and the involuntary termination of both
salaried and hourly employees. Severance costs associated with the involuntary
termination of employees totaled $6.4 million. Lease exit costs resulting from
facility closures totaled $3.6 million. In addition to the restructuring charge
totaling $10.0 million, we incurred $9.6 million of other costs related to
facility closures. Of the $19.6 million in restructuring and facility closure
costs, only $1.9 million of costs that relate to employee retention and facility
closures, other than lease exit, are incremental cash costs that would not have
been incurred in the next 12 months without undertaking the restructuring
actions.
Beginning in fiscal 2001 and continuing in the fiscal 2002 first quarter,
management developed formal plans to exit certain facilities and involuntarily
terminate employees. Management's plans to exit certain facilities included the
identification of duplicate manufacturing and sales facilities for closure and
the transfer of the related operations to other facilities. Management currently
anticipates that the facility closures and all related activities will be
substantially complete within one year of the commitment dates of the respective
exit plans.
Operating Earnings (Loss)
We incurred an operating loss of $35.6 million in the fiscal 2002 first
quarter compared to operating earnings of $24.4 million in the fiscal 2001 first
quarter. The operating loss was primarily due to: 1) $10.0 million restructuring
charge; 2) $9.6 million of costs related to facility closures (primarily
equipment write-offs); and 3) reduced sales volumes, driven by the broad based
slow down in the technology sector, which resulted in the under-absorption of
costs during the fiscal 2002 first quarter.
Net Financing Costs
Net financing costs in the fiscal 2002 first quarter were $14.5 million
compared to $6.5 million in the fiscal 2001 first quarter. Included in the
fiscal 2002 first quarter net financing costs is $1.4 million of amortization
related to capitalized fees associated with amending the credit facilities
during fiscal 2001. The increase in our net financing costs, excluding the $1.4
million in amortized fees, is a result of the increase in our outstanding
indebtedness to fund acquisitions in the second quarter of fiscal 2001, capital
expenditures, restructuring activities and operations.
Income Tax Expense (Benefit)
We recorded an income tax benefit in the fiscal 2002 first quarter of
$12.5 million compared to income tax expense of $5.9 million in the fiscal 2001
first quarter. Our effective income tax rate was 25.1% for the fiscal 2002 first
quarter compared to 33.7% for the fiscal 2001 first quarter. The decrease in the
effective tax rate in the fiscal 2002 first quarter compared to the fiscal 2001
first quarter is a result of only recognizing the benefit from a portion of the
net operating loss we incurred in the fiscal 2002 first quarter.
22
Liquidity and Capital Resources
Cash Flows
Cash and cash equivalents totaled $5.6 million at November 30, 2001 and
$6.2 million at August 31, 2001.
Net cash used in operating activities in the fiscal 2002 first quarter was
$8.9 million compared to $29.1 million used in the fiscal 2001 first quarter.
The net use of cash in the fiscal 2002 first quarter was primarily due to
restructuring related payments totaling $7.4 million.
Net cash used in investing activities for the fiscal 2002 first quarter
was $3.6 million compared to $29.7 million for the fiscal 2001 first quarter.
The net use of cash for the fiscal 2002 first quarter was primarily due to
capital expenditures of $5.9 million offset by $2.7 million in proceeds on the
sale of equipment.
Net cash provided by financing activities for the fiscal 2002 first
quarter was $12.4 million compared to $61.0 million provided in the fiscal 2001
first quarter. The net cash provided by financing activities for the fiscal 2002
first quarter primarily came from net borrowings on our long-term debt facility
of $31.5 million, which was offset by $5.7 in payments on short-term borrowings
and a reduction in sold receivables of $13.4 million.
Capitalization
Debt at November 30, 2001 totaled $646.5 million, an increase of
approximately $25.1 million from August 31, 2001. The increase in debt was
primarily due to restructuring costs, capital expenditures and the $13.4 million
decrease in receivables sold under the accounts receivable facility.
To reduce the risk of interest rate increases, we may periodically enter
into interest rate swap agreements. Our current interest rate swap activity is
limited to one agreement and is not significant.
Liquidity
On September 27, 2001, our lenders amended certain debt covenants
associated with our Multi-Currency Credit Agreement, UK Revolving Credit
Agreement and the Accounts Receivable Facility (collectively,"credit
facilities"). These revised covenants were established based upon our financial
forecasts prior to the events of September 11, 2001. Throughout the fiscal 2002
first quarter, we experienced a significant decline in net sales compared to
prior periods and compared to our financial forecasts that were the basis for
the financial covenants set forth in the September 27, 2001 amendment. Such
declines are related to a number of factors, certain of which were impacted by
the terrorist attacks that took place in the United States on September 11,
2001. Those terrorist attacks were unprecedented events that have created many
economic and political uncertainties. On December 13, 2001, our lenders again
amended certain debt covenants associated with our credit facilities to reflect
our revised financial forecasts as of that point in time. The revisions in the
covenants were considered necessary due to the magnitude of the decline in the
fiscal 2002 first quarter actual results compared to prior periods and our
forecasts. In addition, the amendment repriced the outstanding warrants issued
in conjunction with the May 15, 2001 amendment to the closing price of our
common stock on December 10, 2001 of $1.98 and eliminates the previous reduction
provision if we met repayment targets by August 31, 2002. We also issued
warrants for 9.9% of the common stock outstanding on December 13, 2001
(approximately 4.1 million shares) at a price of $0.01. These $0.01 warrants are
cancelled if the credit facilities are repaid by July 31, 2002 (entirely
cancelled) or September 30, 2002 (49.5% cancelled).
If the decline in net sales continues or we experience a significant change
in our cost structure, we may not be able to comply with the covenants which
were agreed to with our lenders as of December 13, 2001. Further, such covenants
contemplate the sale of one of our divisions during the three months ending
February 28, 2002 (fiscal 2002 second quarter). We are in negotiations with
another independent party concerning the sale of one of our divisions and are
still negotiating some key material terms, including price, and those
negotiations are ongoing. Nonetheless, there can be no assurances that the
transaction will be consummated. If the transaction is not consummated with any
party, we may violate a financial covenant and will have to consider a number of
measures available to us in the event of a covenant violation, which are
discussed below.
23
Our management plans to continue to aggressively pursue additional revenue
opportunities within our core customer markets. We adopted several restructuring
plans during fiscal 2001 and the fiscal 2002 first quarter in an effort to
reduce costs in the wake of declining net sales experienced during fiscal 2001
and the fiscal 2002 first quarter. These programs resulted in restructuring
charges during fiscal 2001 and the fiscal 2002 first quarter and have provided
cost savings that are expected to continue into the future. Management plans to
consider additional cost-reduction programs, as necessary, to further align our
cost base with net sales.
While our revised financial forecasts reflect management's best estimates,
there can be no assurances that our fiscal 2002 financial forecasts, which are
the basis of the current financial covenants, will be achieved. If our actual
operating performance does not substantially meet the fiscal 2002 financial
forecasts associated with the amended covenants, we may have difficulty
achieving compliance with certain debt covenants in our amended credit
facilities. Our actual sales for the month of December 2001 were less than the
December 2001 forecasted sales that are the basis of our most recent financial
covenants, but still in compliance with the sales covenant. If we fail to comply
with debt covenants for any reason, we may have to consider a number of the
following measures: (a) obtain a waiver of default for the violated covenant(s);
(b) obtain an amendment of the covenants in the existing credit facilities; (c)
seek additional sources of debt financing, which likely would be subject to
obtaining necessary lender consents; (d) seek additional equity financing or
other strategic alternatives; (e) restructure our obligations and/or the
business; or (f) consider a combination of the foregoing. Given the
circumstances, we are evaluating our alternatives. There can be no assurances
that the aforementioned alternatives would be available to us in the future. If
this were the case, a future violation of debt covenants would cause a material
adverse effect on our ability to continue in our present form and to achieve our
intended business objectives.
As a result of the restatement for the year ended August 31, 2001, the
Company believes that it would have been in default of certain debt covenants as
of August 31, 2001, unless the Company had obtained waivers or the Company's
lenders had amended the debt covenants. Accordingly, the Company has classified
borrowings under the Revolving Multi-Currency Credit Agreement and the U.K.
Facility Agreement as a current liability as of November 30, 2001 in the
restated consolidated financial statements.
In December 2001, we received notification from the lessor of two of our
aircraft that the lease contracts ("contracts") for the two aircraft will be
terminated effective March 4, 2002. In conjunction with the termination, the
lease terms of the contracts would require us to pay the lessor approximately
$12.3 million for the two aircraft, as defined by the contracts, and, in
exchange, the lessor would convey all of its rights, title and interest in the
two aircraft to us. We are actively working with the lessor to identify a third
party which would purchase and/or lease the two aircraft, thereby eliminating
our $12.3 million payment obligation. We have obtained an estimate of the fair
market value of the two aircraft. Based on the estimated fair market value of
the two aircraft and our ongoing discussions with the lessor, we do not believe
that we will incur a loss in connection with the termination of the contracts,
and therefore no such loss provision has been recorded by us. If the estimated
fair market value of the two aircraft changes or we and the lessor are unable to
identify a third party purchaser or lessee of the two aircraft, we may incur a
loss in connection with the termination of the contracts. If we were to incur a
loss in conjunction with the termination of the contracts, we, under the current
terms of our credit facilities, may fail to be in compliance with a debt
covenant. If we were to fail to comply with this debt covenant, we would then
have to consider the aforementioned measures available to us in the event of our
failure to comply with a debt covenant.
At November 30, 2001 and December 31, 2001, we had $24.0 million and
$10.3 million, respectively, of borrowings available under our two credit
facilities and $5.6 million in cash at November 30, 2001. To provide additional
liquidity, we have been extending payables beyond their normal payment terms. At
November 30, 2001 and December 31, 2001, although we sold all eligible accounts
receivable under our accounts receivable facility, we had the availability to
sell an incremental $35.4 million and $32.3 million, respectively.
New Accounting Pronouncements
In June 2001, SFAS No. 141, "Business Combinations" and SFAS No. 142,
"Goodwill and Other Intangible Assets" were issued. The statements eliminate the
pooling-of-interests method of accounting for business combinations and require
that goodwill and certain intangible assets not be amortized. Instead, these
assets will be reviewed for impairment annually with any related losses
recognized in earnings when incurred. SFAS No. 141 was effective for us as of
July 31, 2001. SFAS No. 142 will be effective for us on September 1, 2002 for
existing goodwill and intangible assets. We are currently evaluating the impact
of SFAS No. 142.
In June 2001, SFAS No. 143, "Accounting for Asset Retirement Obligations"
was issued. SFAS No. 143 sets forth the financial accounting and reporting to be
followed for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. SFAS No. 143 requires entities
to record the fair value of a liability for an asset retirement obligation in
the period in which it is incurred if a reasonable estimate of fair value can be
made. The associated asset retirement costs are to be capitalized as part of the
carrying amount of the long-lived asset. Subsequently, the recorded liability
will be accreted to its present value and the capitalized costs will be
depreciated. We are required to adopt SFAS No. 143 on September 1, 2002. We are
currently evaluating the impact of SFAS No. 143.
In August 2001, SFAS No. 144, "Accounting for the Impairment or Disposal
of Long-Lived Assets" was issued. SFAS No. 144 modifies and expands the
financial accounting and reporting for the impairment or disposal of long-lived
assets other than goodwill, which is specifically addressed by SFAS No. 142.
SFAS No. 144 maintains the requirement that an impairment loss be recognized for
a long-lived asset to be held and used if its carrying value is not recoverable
from its undiscounted cash flows, with the recognized impairment being the
difference between the carrying amount and fair value of the asset. With respect
to long-lived assets to be disposed of other than by sale, SFAS No. 144 requires
that the asset be considered held and used until it is actually disposed of but
requires that its depreciable life be revised in accordance with APB Opinion No.
20, "Accounting Changes." SFAS No. 144 also requires that an impairment loss be
recognized at the date a long-lived asset is exchanged for a similar productive
asset. We will be required to adopt SFAS No. 144 on September 1, 2002. We are
currently evaluating the impact of SFAS No. 144.
24
Seasonality
Due to the shortened number of business days in the second quarter of our
fiscal year (from December 1 to February 28), we typically experience lower
sales volumes in the second quarter of each fiscal year as compared to the other
quarters in the fiscal year.
25
Forward-looking Statements and Cautionary Factors
- -------------------------------------------------
Certain statements contained in this document, as well as statements in
other Company communications, which are not historical facts, are
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995 that involve risks and uncertainties. The terms
"anticipate", "believe", "estimate", "expect", "objective", "plan", "project"
and similar expressions are intended to identify forward-looking statements.
Such forward-looking statements are subject to inherent risks and uncertainties
that may cause actual results or events to differ materially from those
contemplated by such forward-looking statements. In addition to the assumptions
and other factors referred to specifically in connection with such statements,
factors that may cause actual results or events to differ materially from those
contemplated by such forward-looking statements include, without limitation,
general economic conditions, market conditions in the computer, semiconductor,
telecommunication, and electronic industries in North America, South America,
Europe and Asia, market acceptance of existing and new products, successful
integration of acquisitions, competitive product and pricing pressures, foreign
currency risk, interest rate risk, the Company's ability to access capital
markets and other factors that may be referred to in APW Ltd.'s reports filed
with the Securities and Exchange Commission from time to time.
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
- -------------------------------------------------------------------
We are exposed to market risk from changes in foreign exchange and
interest rates and, to a lesser extent, commodities. To reduce such risks, we
selectively use financial instruments.
Currency Risk - We have significant international operations. In most
-------------
instances, our products are produced at manufacturing facilities located near
the customer. As a result, significant volumes of finished goods are
manufactured in countries for sale into those markets. For goods purchased from
our affiliates, we denominate the transaction in the functional currency of the
producing operation.
We have adopted the following guidelines to manage our foreign exchange
exposures:
(i) increase the predictability of costs associated with goods whose
purchase price is not denominated in the functional currency of the
buyer;
(ii) minimize the cost of hedging through the use of naturally offsetting
positions (borrowing in local currency), netting, pooling; and
(iii) where possible, sell product in the functional currency of the
producing operation.
Our identifiable foreign exchange exposures result primarily from the
anticipated purchase of product from affiliates and third-party suppliers along
with the repayment of intercompany loans with foreign subsidiaries denominated
in foreign currencies. We periodically identify naturally occurring offsetting
positions and then purchase hedging instruments to protect against anticipated
exposures. Based on our overall currency rate exposure, including derivative
financial instruments and nonfunctional currency denominated receivables and
payables, a near-term 10% appreciation or depreciation of the U.S. dollar would
not have a significant effect on our financial position, results of operations
and cashflows over the next fiscal year.
Interest Rate Risk - We periodically enter into interest rate swaps to
------------------
stabilize financing costs by minimizing the effect of potential interest rate
increases on floating-rate debt in a rising interest rate environment. Under
these agreements, we contract with a counter party to exchange the difference
between a fixed rate and a floating rate applied to the notional amount of the
swap. The effective portion of any gain or loss due to a change in the fair
value is initially recorded as a component of other comprehensive income (loss)
and subsequently reclassified into earnings when the hedged exposure affects
earnings. The fair value of our interest rate swap agreements was a liability of
$2.9 million and $2.4 million at November 30, 2001 and August 31, 2001,
respectively. A seventy-two (10% of our weighted average interest rate)
basis-point change in interest rates on average long-term borrowings would have
impacted net interest expense by approximately $1.2 million for the three months
ended November 30,2001.
Commodity Prices - We are exposed to fluctuation in market prices for
----------------
steel. Therefore, we have established a program for centralized negotiation of
steel prices. This program allows APW Ltd. to take advantage of economies of
scale as well as to cap pricing. All business units are able to purchase steel
under this arrangement. In general, the contracts lock steel pricing for 18
months and enable APW Ltd. to pay less if market prices fall.
26
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
- --------------------------
The Company understands that it, and two of its senior executives have been
sued in connection with alleged violations of Federal securities laws which
preceded a drop in the price of its common stock ending on March 20, 2001. The
complaint, which is captioned Stewart Norman Hicks v. APW Ltd., et al., was
filed on December 10, 2001. The complaint alleges violations of the Federal
securities laws and seeks certification of a plaintiff class consisting of all
purchasers of the Company's common stock between September 26, 2000 and March
20, 2001, inclusive. The complaint does not quantify the damages. The Company
also understands that two additional suits containing similar allegations have
been filed. The Company has not yet been served with the complaints and,
therefore, cannot evaluate the merits of the claims.
Item 6 - Exhibits and Reports on Form 8-K
- -----------------------------------------
(a) Exhibit 99.1 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted
Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.
(b) Exhibit 99.2 Certification Pursuant to 18 U.S.C. Section 1350, As Adopted
Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002.
(c) Reports on Form 8-K
On December 21, 2001, the Company filed a Current Report on Form 8-K dated
December 13, 2001, reporting under Item 5 the Company's renegotiations of its
Multi-Currency Credit Agreement, Facility Agreement with the Royal Bank of
Scotland and Receivables Purchasing Agreement.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused Amendment No. 2 to this report to be signed on its
behalf by the undersigned thereunto duly authorized.
APW Ltd. n/k/a BQX Ltd. (in provisional liquidation)
---------------------------------------------------
(Registrant)
Date: November 12, 2002 By: /s/ Richard D. Carroll
------------------------------------
Richard D. Carroll
Vice President and Chief Financial Officer
(Principal Financial Officer and duly
authorized to sign on behalf of the
Registrant)
27
CERTIFICATIONS
Chief Executive Officer
I, Richard G. Sim Certify that:
1. I have reviewed this quarterly report on Form 10-Q/A (Amendment No. 2) of APW
Ltd. (n/k/a BQX Ltd.);
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.
Date: November 12, 2002
/s/ Richard G. Sim
- --------------------
Richard G. Sim
President and Chief Executive Officer
28
Chief Financial Officer
I, Richard D. Carroll Certify that:
1. I have reviewed this quarterly report on Form 10-Q/A (Amendment No. 2) of APW
Ltd. (n/k/a BQX Ltd.);
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report; and
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report.
Date: November 12, 2002
/s/ Richard D. Carroll
- ------------------------
Richard D. Carroll
Vice President and Chief Financial Officer
29