SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
Information furnished as at November 16, 1999
Intertek Testing Services Limited
(REGISTRANT)
25 Savile Row
London, W1X 1AA
England
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
(Indicate by check mark whether the registrant files or will file annual
reports under cover of Form 20-F or Form 40-F)
Form 20-F/X/ Form 40-F
(Indicate 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/
Schedule of Information contained in this report
Intertek Testing Services Limited financial statements for the nine months to
September 30, 1999
Pages 1-49
INTERTEK TESTING SERVICES LIMITED
GENERAL
BUSINESS DESCRIPTION
Intertek Testing Services Limited (the "Company") and its subsidiaries
(collectively "ITS") is a leading international group engaged in the testing,
inspection and certification of manufactured goods and commodities. At
September 30, 1999, ITS had 239 testing laboratories and 476 inspection offices
in 85 countries.
ITS is comprised of five operating divisions, each focusing on the testing,
inspection and certification of manufactured goods and commodities. A
description of each of the divisions is given below. In this report, the
divisions are described by the well established trade names under which they
operate. The Environmental Testing division ("Environmental"), which focused on
the analysis of water, soil and air samples for toxic substances, was
discontinued in August 1998.
CALEB BRETT provides independent verification of the quantity and quality of
crude oil, petroleum products and chemicals and, to a lesser extent,
agricultural produce. It is a joint leader in the market for testing and
inspecting petroleum and chemicals.
ETL SEMKO tests and certifies electrical and electronic products, building
products, heating and ventilation and air conditioning equipment to ensure they
meet with applicable safety and performance standards. ETL SEMKO also certifies
the quality of management systems to standards such as ISO 9000. This division
was previously known as Conformity Assessment. The name, ETL SEMKO, represents
the combined trade names of ETL in North America and SEMKO in Sweden.
LABTEST is one of the largest international providers of testing and inspection
services of textiles, toys, household goods and other consumer products. This
division was previously referred to as Consumer Goods. Labtest is the trade
name under which the division has operated for many years.
FOREIGN TRADE STANDARDS ("FTS") provides inspection and testing services to
government standards organisations to ensure that imports of specified products
meet their safety and other national standards. FTS also provides independent
pre-shipment inspection services to the governments of developing countries to
assist them in the enforcement of customs duties and exchange controls.
BONDAR CLEGG provides a laboratory testing service of minerals exploration
samples and samples from producing mines, principally of gold but also of
copper, zinc and other minerals. This division was previously referred to as
Minerals. Bondar Clegg is the trade name of the division.
2
RESULTS OF OPERATIONS
The following tables show for the nine months to September 30, 1998 ("9M 98"),
the nine months to September 30, 1999 ("9M 99"), the three months to September
30, 1998 ("Q3 98") and the three months to September 30, 1999 ("Q3 99"),
revenues and operating income by the major divisions of ITS, as well as
revenues by geographic area, expressed in thousands of pounds sterling
("L000"), except for percentages. Geographic area relates to the area where
each ITS operation is located, not the location of our clients. Overhead costs
for the central head office and non-operating holding companies are allocated
to operating divisions in proportion to their share of total revenues.
9M 98 9M 99
L000 L000
REVENUES BY DIVISION
Caleb Brett 90,213 100,820
ETL SEMKO 64,124 65,787
Labtest 46,241 56,961
Foreign Trade Standards 47,063 37,386
Bondar Clegg 13,026 8,565
-------------- --------------
CONTINUING OPERATIONS 260,667 269,519
Discontinued operation 5,517 -
-------------- --------------
TOTAL 266,184 269,519
============== ==============
OPERATING INCOME/(LOSS) BEFORE EXCEPTIONAL
ITEMS
Caleb Brett 8,826 9,318
ETL SEMKO 7,705 8,421
Labtest 11,713 15,484
Foreign Trade Standards 4,553 2,275
Bondar Clegg 359 (1,977)
-------------- --------------
CONTINUING OPERATIONS 33,156 33,521
Discontinued operation (2,463) -
-------------- --------------
TOTAL 30,693 33,521
============== ==============
REVENUES BY GEOGRAPHIC AREA
Americas 111,342 111,711
Europe, Africa and Middle East 92,594 89,475
Asia and Far East 56,731 68,333
-------------- --------------
CONTINUING OPERATIONS 260,667 269,519
Discontinued operation 5,517 -
-------------- --------------
TOTAL 266,184 269,519
============== ==============
TOTAL REVENUES 266,184 269,519
Operating costs (250,122) (228,255)
Share of operating (loss)/profit from
associates (821) 242
-------------- --------------
OPERATING INCOME 15,241 41,506
============== ==============
- --------------------------------------------------------------------------------
OPERATING INCOME/(LOSS) BEFORE EXCEPTIONAL
ITEMS
Continuing operations 33,156 33,521
Discontinued operation (2,463) -
-------------- --------------
30,693 33,521
EXCEPTIONAL ITEMS (CHARGED)/CREDITED TO
OPERATING INCOME
Continuing operations (11,452) 10,860
Discontinued operation (4,000) (2,875)
-------------- --------------
OPERATING INCOME AFTER EXCEPTIONAL ITEMS 15,241 41,506
- --------------------------------------------------------------------------------
3
RESULTS OF OPERATIONS
Q3 98 Q3 99
L000 L000
REVENUES BY DIVISION
Caleb Brett 32,455 36,158
ETL SEMKO 21,653 22,111
Labtest 16,193 19,732
Foreign Trade Standards 16,828 9,860
Bondar Clegg 4,053 2,934
-------------- --------------
CONTINUING OPERATIONS 91,182 90,795
Discontinued operation 817 -
-------------- --------------
TOTAL 91,999 90,795
============== ==============
OPERATING INCOME/(LOSS) BEFORE EXCEPTIONAL
ITEMS
Caleb Brett 2,350 3,278
ETL SEMKO 2,271 2,553
Labtest 4,069 5,118
Foreign Trade Standards 1,563 (362)
Bondar Clegg (102) (655)
-------------- --------------
CONTINUING OPERATIONS 10,151 9,932
Discontinued operation (712) -
-------------- --------------
TOTAL 9,439 9,932
============== ==============
REVENUES BY GEOGRAPHIC AREA
Americas 37,995 38,185
Europe, Africa and Middle East 32,834 28,414
Asia and Far East 20,353 24,196
-------------- --------------
CONTINUING OPERATIONS 91,182 90,795
Discontinued operation 817 -
-------------- --------------
TOTAL 91,999 90,795
============== ==============
TOTAL REVENUES 91,999 90,795
Operating costs (84,511) (80,514)
Share of operating (loss)/profit from
associates (167) 16
-------------- --------------
OPERATING INCOME 7,321 10,297
============== ==============
- --------------------------------------------------------------------------------
OPERATING INCOME/(LOSS) BEFORE EXCEPTIONAL
ITEMS
Continuing operations 10,151 9,932
Discontinued operation (712) -
-------------- --------------
9,439 9,932
EXCEPTIONAL ITEMS (CHARGED)/CREDITED TO
OPERATING INCOME
Continuing operations (5,510) 3,240
Discontinued operation 3,392 (2,875)
-------------- --------------
OPERATING INCOME AFTER EXCEPTIONAL ITEMS 7,321 10,297
- --------------------------------------------------------------------------------
4
RESULTS OF OPERATIONS AT COMPARABLE EXCHANGE RATES
Although for the purposes of reporting obligations, the financial statements of
ITS are reported in pounds sterling ("GBP" or "L"), over 50% of ITS' revenues
are denominated in U.S. dollars or currencies linked to the U.S. dollar, such
as the Hong Kong dollar. ITS' borrowings, interest payments and debt repayments
are also denominated mainly in U.S. dollars and Hong Kong dollars. Each of ITS'
152 subsidiaries worldwide prepares financial statements in the currency most
appropriate to its business, usually the currency of the country in which such
subsidiary is domiciled. Where material transaction exposure from currency rate
movements exists, appropriate forward foreign exchange contracts are undertaken
to minimise this exposure. A translation exposure exists to the extent that the
consolidated financial statements of ITS are shown in GBP. It is not ITS'
policy to hedge this exposure.
The results of overseas operations are translated into GBP at the cumulative
average exchange rates for the period. Therefore, the comparison of ITS'
results between periods can be affected by fluctuations in exchange rates which
are unrelated to the underlying operational performance of its businesses. The
following table sets forth, for the periods indicated, the growth rates of
revenues and operating income of ITS' main business divisions at actual
exchange rates for the period and at prior year ("comparable") exchange rates
for the period.
GROWTH RATES AT ACTUAL AND COMPARABLE EXCHANGE RATES
9M 98 9M 99 % GROWTH
Lm % Lm % Actual Comparable
------------- ------------- ------------- ------------- ------------- -------------
REVENUES
Caleb Brett 90.2 34 100.8 37 11.8 11.4
ETL SEMKO 64.1 24 65.8 24 2.7 1.1
Labtest 46.3 17 57.0 21 23.1 22.0
Foreign Trade Standards 47.1 18 37.4 15 (20.6) (22.3)
Bondar Clegg 13.0 5 8.5 3 (34.6) (30.8)
------------- ------------- ------------- ------------- ------------- -------------
CONTINUING OPERATIONS 260.7 98 269.5 100 3.4 2.5
Discontinued operation 5.5 2 - - (100.0) (100.0)
------------- ------------- ------------- ------------- ------------- -------------
TOTAL 266.2 100 269.5 100 1.2 0.4
============= ============= ============= ============= ============= =============
OPERATING INCOME/(LOSS) BEFORE EXCEPTIONAL ITEMS
Caleb Brett 8.8 29 9.3 28 5.7 5.7
ETL SEMKO 7.7 25 8.4 25 9.1 7.8
Labtest 11.7 38 15.5 46 32.5 29.9
Foreign Trade Standards 4.6 15 2.3 7 (50.0) (54.3)
Bondar Clegg 0.4 1 (2.0) (6) (600.0) (575.0)
------------- ------------- ------------- ------------- ------------- -------------
CONTINUING OPERATIONS 33.2 108 33.5 100 0.9 (0.6)
Discontinued operation (2.5) (8) - - (100.0) (100.0)
------------- ------------- ------------- ------------- ------------- -------------
TOTAL 30.7 100 33.5 100 9.1 7.5
============= ============= ============= ============= ============= =============
The Actual percentage growth represents the percentage increase or decrease of
one period over the prior period where each period is translated into GBP at
the cumulative average exchange rates applicable to each of those periods.
The Comparable percentage growth represents the percentage increase or decrease
of one period over the prior period where both periods are translated into GBP
at the cumulative average exchange rates applicable to the earlier of the two
periods.
5
GROWTH RATES AT ACTUAL AND COMPARABLE EXCHANGE RATES
Q3 98 Q3 99 % GROWTH
Lm % Lm % Actual Comparable
------------- ------------- ------------- ------------- ------------- -------------
Revenues
Caleb Brett 32.5 35 36.2 40 11.4 9.5
ETL SEMKO 21.7 24 22.1 24 1.8 (0.9)
Labtest 16.2 18 19.7 22 21.6 20.4
Foreign Trade Standards 16.8 18 9.9 11 (41.1) (43.5)
Bondar Clegg 4.0 4 2.9 3 (27.5) (25.0)
------------- ------------- ------------- ------------- ------------- -------------
CONTINUING OPERATIONS 91.2 99 90.8 100 (0.4) (2.3)
Discontinued operation 0.8 1 - - (100.0) (100.0)
------------- ------------- ------------- ------------- ------------- -------------
TOTAL 92.0 100 90.8 100 (1.3) (3.2)
============= ============= ============= ============= ============= =============
OPERATING INCOME/(LOSS) BEFORE EXCEPTIONAL ITEMS
Caleb Brett 2.4 25 3.3 33 37.5 33.3
ETL SEMKO 2.2 23 2.6 26 18.2 13.6
Labtest 4.0 43 5.1 52 27.5 22.5
Foreign Trade Standards 1.6 17 (0.4) (4) (125.0) (125.0)
Bondar Clegg (0.1) (1) (0.7) (7) (600.0) (500.0)
------------- ------------- ------------- ------------- ------------- -------------
CONTINUING OPERATIONS 10.1 107 9.9 100 (2.0) (5.0)
Discontinued operation (0.7) (7) - - (100.0) (100.0)
------------- ------------- ------------- ------------- ------------- -------------
TOTAL 9.4 100 9.9 100 5.3 2.1
============= ============= ============= ============= ============= =============
The Actual percentage growth represents the percentage increase or decrease of
one period over the prior period where each period is translated into GBP at
the cumulative average exchange rates applicable to each of those periods.
The Comparable percentage growth represents the percentage increase or decrease
of one period over the prior period where both periods are translated into GBP
at the cumulative average exchange rates applicable to the earlier of the two
periods.
6
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OPERATING AND FINANCIAL REVIEW
A discussion of ITS' financial condition and results of operations for Q3 98
compared to Q3 99 and 9M 98 compared to 9M 99 is given below, followed by a
detailed review of the performance of each division.
REVENUES
Q3 98 Q3 99 GROWTH 9M 98 9M 99 GROWTH
Lm Lm Lm Lm Lm Lm
------------ ------------ ------------ ------------ ------------ ------------
CONTINUING OPERATIONS 91.2 90.8 (0.4) 260.7 269.5 8.8
Actual growth % (0.4) 3.4
Comparable growth % (2.3) 2.5
------------ ------------ ------------ ------------ ------------ ------------
Revenues in Q3 99 and 9M 99 were impacted by the termination of the Nigerian
inspection programmes on March 31, 1999. This accounted for a decrease in
revenues of L7.8 million in Q3 99 compared to Q3 98 and L11.8 million in 9M 99
compared to 9M 98. Excluding Nigeria, revenues increased L7.4 million in Q3 99
compared to Q3 98 and L20.6 million in 9M 99 compared to 9M 98. At actual
exchange rates, revenues in Caleb Brett, ETL SEMKO and Labtest increased in Q3
99 and 9M 99 compared to the same periods in 1998, while revenues in FTS and
Bondar Clegg decreased in Q3 99 and 9M 99 compared to the same periods in 1998.
These changes are explained in the detailed review of the performance in each
division which follows.
The Environmental Testing division was sold in August 1998, and its revenues of
L0.8 million for Q3 98 and L5.5 million for 9M 98 are excluded from the above
table.
REVENUES BY GEOGRAPHIC AREA
Q3 98 Q3 99 GROWTH 9M 98 9M 99 GROWTH
Lm Lm Lm Lm Lm Lm
------------ ------------ ------------ ------------ ------------ ------------
Americas 38.0 38.2 0.2 111.4 111.7 0.3
Europe, Africa and Middle East 32.8 28.4 (4.4) 92.6 89.5 (3.1)
Asia and Far East 20.4 24.2 3.8 56.7 68.3 11.6
------------ ------------ ------------ ------------ ------------ ------------
TOTAL CONTINUING OPERATIONS 91.2 90.8 (0.4) 260.7 269.5 8.8
============ ============ ============ ============ ============ ============
The decrease in revenues in Q3 99 compared to Q3 98 and 9M 99 compared to 9M 98
in the Europe, Africa and Middle East region is due to the cessation of the
Nigerian inspection programmes. The Labtest division that is predominantly
based in Asia and the Far East is largely responsible for the growth in
revenues in that region. Growth in revenues in the Americas has been reduced by
the decline in the Bondar Clegg division which principally operates in this
region.
OPERATING COSTS BEFORE EXCEPTIONAL ITEMS
Q3 98 Q3 99 GROWTH 9M 98 9M 99 GROWTH
Lm Lm Lm Lm Lm Lm
------------ ------------ ------------ ------------ ------------ ------------
CONTINUING OPERATIONS 81.1 80.9 (0.2) 227.5 236.0 8.5
Actual growth % (0.2) 3.7
Comparable growth % (2.0) 3.0
------------ ------------ ------------ ------------ ------------ ------------
The cost reduction programme in Bondar Clegg continued, and restructuring costs
of approximately L0.7 million were incurred in 9M 99, of which L0.3 million was
incurred in Q3 99. Several new laboratories were opened in 9M 99, mainly in
Labtest, and start up costs have been incurred in advance of revenues being
generated. In Caleb Brett, additional costs have been incurred in 9M 99 to
integrate acquisitions made in 1998 and 1999 into the ITS group.
7
OPERATING INCOME BEFORE EXCEPTIONAL ITEMS
Q3 98 Q3 99 GROWTH 9M 98 9M 99 GROWTH
Lm Lm Lm Lm Lm Lm
------------ ------------ ------------ ------------ ------------ ------------
CONTINUING OPERATIONS 10.1 9.9 (0.2) 33.2 33.5 0.3
Actual growth % (2.0) 0.9
Comparable growth % (5.0) (0.6)
Operating margin % 11.1 10.9 (0.2) 12.7 12.4 (0.3)
------------ ------------ ------------ ------------ ------------ ------------
Operating income growth in Q3 99 and 9M 99 has been reduced by the loss of the
Nigerian inspection programmes in FTS and Caleb Brett and a decline of the
Bondar Clegg division due to the decline in the demand for gold testing.
Excluding the impact of the loss of operating income from Nigeria, growth in
operating income at actual exchange rates was L2.5 million in Q3 99 over Q3 98
and L3.6 million in 9M 99 over 9M 98.
The discontinued Environmental Testing division generated operating losses of
L0.7 million in Q3 98 and L2.5 million in 9M 98. These losses are excluded from
the above table.
EXCEPTIONAL INCOME/(COSTS)
OPERATING EXCEPTIONAL ITEMS
Q3 98 Q3 99 GROWTH 9M 98 9M 99 GROWTH
Lm Lm Lm Lm Lm Lm
---------- ---------- ---------- ---------- ---------- ----------
FTS
Provision against Nigerian invoices (5.2) - 5.2 (14.7) (7.4) 7.3
Payments from Nigerian government - 3.4 3.4 4.7 19.4 14.7
---------- ---------- ---------- ---------- ---------- ----------
Sub total (5.2) 3.4 8.6 (10.0) 12.0 22.0
Restructuring costs - (0.1) (0.1) - (2.2) (2.2)
---------- ---------- ---------- ---------- ---------- ----------
(5.2) 3.3 8.5 (10.0) 9.8 19.8
---------- ---------- ---------- ---------- ---------- ----------
CALEB BRETT
Provision against Nigerian invoices (0.3) - 0.3 (1.5) (0.4) 1.1
Payments from Nigerian government - - - - 1.5 1.5
---------- ---------- ---------- ---------- ---------- ----------
(0.3) - 0.3 (1.5) 1.1 2.6
---------- ---------- ---------- ---------- ---------- ----------
DISCONTINUED OPERATION 3.4 (2.9) (6.3) (4.0) (2.9) 1.1
---------- ---------- ---------- ---------- ---------- ----------
TOTAL (COSTS)/INCOME (2.1) 0.4 2.5 (15.5) 8.0 23.5
========== ========== ========== ========== ========== ==========
In April 1997, due to the irregular nature at that time of the payments
received from the Nigerian Government for the inspection programmes in the FTS
division, ITS adopted a policy of making full provision against all unpaid
invoices relating to this client, and income is now recognised once payments
are received. The amount of invoices raised, provisions established and
payments received by FTS and Caleb Brett in each of the periods under review
are set out above.
L3.4 million was received from the Nigerian Government in Q3 99 bringing the
total payments received in 9M 99 to L20.9 million. Due to the size of the debt
outstanding at December 31, 1998, ITS collected payments from exporters for
inspections carried out during Q1 99. These payments which amounted to L4.7
million, are held as advance payments in the balance sheet and will be repaid
to exporters when the Nigerian Government pays ITS in respect of the shipments
concerned. Net of exporter receipts, the remaining debt amounts to L8.5 million
for invoices raised since September 1998.
Following the termination of the inspection programmes in Nigeria, the FTS
division was restructured at a cost of L0.1 million in Q3 99 and L2.2 million
in 9M 99.
Although the Environmental division was discontinued in August 1998, as
discussed on page 15, the EPA investigation is ongoing. A provision of L2.9
million was made in Q3 99 for legal fees and the cost of the Dallas facility.
8
NON-OPERATING EXCEPTIONAL ITEMS
Q3 98 Q3 99 GROWTH 9M 98 9M 99 GROWTH
Lm Lm Lm Lm Lm Lm
---------- ---------- ---------- ---------- ---------- ----------
ETL SEMKO
Proceeds from disposals - 0.2 0.2 - 3.7 3.7
Less net assets - (0.1) (0.1) - (0.1) (0.1)
Less attributable goodwill - - - - (1.1) (1.1)
---------- ---------- ---------- ---------- ---------- ----------
Total - 0.1 0.1 - 2.5 2.5
DISCONTINUED OPERATION - - - (2.5) - 2.5
---------- ---------- ---------- ---------- ---------- ----------
TOTAL NON-OPERATING EXCEPTIONAL ITEMS - 0.1 0.1 (2.5) 2.5 5.0
========== ========== ========== ========== ========== ==========
In Q1 99, ETL SEMKO disposed of a non-core activity in the U.S. for a net
consideration of L3.3 million. After deducting goodwill of L1.1 million, this
disposal generated an exceptional credit of L2.2 million in Q1 99. The disposal
proceeds of L3.3 million were used to prepay ITS' Senior Term A Loan in June
1999.
In Q2 99, ETL SEMKO sold 51% of its Quality Management business in Sweden for
L0.2 million. This generated an exceptional credit of L0.2 million. The
disposal proceeds of L0.2 million will be used to prepay ITS' Senior Term A
Loan in December 1999.
In Q3 99, ETL SEMKO sold 20% of its interest in a testing and certification
facility in the U.K. for a net consideration of L0.2 million. This generated an
exceptional credit of L0.1 million which will be used to prepay ITS' Senior
Term A Loan in December 1999.
NET INTEREST EXPENSE
Q3 98 Q3 99 GROWTH 9M 98 9M 99 GROWTH
Lm Lm Lm Lm Lm Lm
---------- ---------- ---------- ---------- ---------- ----------
CONTINUING OPERATIONS 7.9 8.1 0.2 23.4 24.3 0.9
Actual growth % 2.5 3.8
---------- ---------- ---------- ---------- ---------- ----------
The increase in net interest expense in 9M 99 compared to 9M 98 is due to the
accumulation of capitalised interest on the Parent Subordinated PIK Debentures
and interest on loans originating in certain companies acquired in 1998, offset
by a reduction in interest on the Senior Term A Loans caused by the repayment
of principal.
INCOME TAXES
Q3 98 Q3 99 GROWTH 9M 98 9M 99 GROWTH
Lm Lm Lm Lm Lm Lm
---------- ---------- ---------- ---------- ---------- ----------
INCOME TAX CHARGE 1.6 0.1 (1.5) 4.3 5.4 1.1
---------- ---------- ---------- ---------- ---------- ----------
The tax charges for Q3 98, 9M 98, Q3 99 and 9M 99 were calculated by applying
to those periods the estimated tax rate for the full year concerned before
adjusting for exceptional items. Exceptional items have been tax effected as
appropriate. The actual tax rate for the full year 1998 was 69% and the
estimated tax rate for the full year 1999 is 58%.
9
OPERATING AND FINANCIAL REVIEW BY DIVISION
A discussion of the performance of each of the operating divisions for Q3 98
compared to Q3 99 and 9M 98 compared to 9M 99 is given below. The operating
income by division given below is before exceptional items.
CALEB BRETT
OPERATING RESULTS Q3 98 Q3 99 GROWTH 9M 98 9M 99 GROWTH
Lm Lm Lm Lm Lm Lm
---------- ---------- ---------- ---------- ---------- ----------
REVENUES 32.5 36.2 3.4 90.2 100.8 10.6
Actual growth % 11.4 11.8
Comparable growth % 9.5 11.4
OPERATING INCOME 2.4 3.3 0.9 8.8 9.3 0.5
Actual growth % 37.5 5.7
Comparable growth % 33.3 5.7
Operating margin % 7.4 9.1 1.7 9.8 9.2 (0.6)
---------- ---------- ---------- ---------- ---------- ----------
Revenues and operating income in Q3 99 and 9M 99 increased over the same
periods in 1998. The increase in 9M 99 over 9M 98 was partly due to the
acquisitions made during the latter part of 1998 which accounted for
approximately L6.0 million of the increase in 9M 99 over 9M 98.
The cancellation of an oil export monitoring scheme by the Nigerian Government
on March 31, 1999 resulted in the loss of revenues and operating income in Q3
99 and 9M 99. However, this has been partly offset by the revenues and
operating income from a new agricultural inspection contract with the European
Union which commenced in March 1999.
Operating income in the Asia Pacific region improved in Q3 99 compared to Q2 99
and increased over Q3 98, however this region continued to suffer from
difficult trading conditions in a number of countries. These include the
ongoing Chinese crude oil embargo on transhipments from Hong Kong, adverse
weather conditions in Australia which resulted in the dry docking of a major
offshore oil platform, and severe price competition in certain countries. The
other regions continued to report steady growth in operating income in Q3 99
compared to Q3 98.
ETL SEMKO
OPERATING RESULTS Q3 98 Q3 99 GROWTH 9M 98 9M 99 GROWTH
Lm Lm Lm Lm Lm Lm
---------- ---------- ---------- ---------- ---------- ----------
REVENUES 21.7 22.1 0.4 64.1 65.8 1.7
Actual growth % 1.8 2.7
Comparable growth % (0.9) 1.1
OPERATING INCOME 2.2 2.6 0.4 7.7 8.4 0.7
Actual growth % 18.2 9.1
Comparable growth % 13.6 7.8
Operating margin % 10.1 11.8 1.7 12.0 12.8 0.8
---------- ---------- ---------- ---------- ---------- ----------
In Q2 99, the Quality Management businesses (primarily ISO 9000) owned 100% by
ITS in Sweden and 51% in Germany were sold to a company in Germany in which ITS
has a 49% share. The change in management control resulting from this
transaction has led to a change in the accounting treatment of these
businesses. Prior to Q2 99, the revenues and operating income from these
businesses were included within the ITS Group revenues and operating income.
From Q2 99 onwards, revenues are excluded from the group revenues and ITS'
share of the operating income is reported as income from associates. Because of
this change in accounting, revenues in Europe are L1.7 million lower in Q3 99
compared to Q3 98 and L3.1 million lower in 9M 99 compared to 9M 98. In
addition, the disposal of the Compliance Engineering magazine business in Q1 99
has resulted in reduced revenues in both Europe and the United States in Q3 99
and 9M 99 compared to Q3 98 and 9M 98. Despite these changes, at actual
exchange rates, ETL SEMKO reported increased revenues and operating income in
Q3 99 compared to Q3 98 and 9M 99 compared to 9M 98. This is attributable to
increased conformity assessment testing in the telecom and building materials
markets in the U.S. and increasing business in Europe and Asia. The following
acquisitions have also contributed to growth in 9M 99 over 9M 98.
10
In Q1 99, ITS bought the remaining 50% share of GS3, the semi-conductor
business in the U.S., from its joint venture partner at a cost of L0.6 million.
This acquisition has contributed to the growth in 9M 99 over 9M 98. The new
electrical testing facility which opened in Taiwan in Q1 99 has been fully
accredited in that country to carry out electrical safety and electro magnetic
compatibility work and has performed in line with management's expectations.
However, disruption to industry caused by the recent earthquake in Taiwan may
reduce testing work for the rest of the year.
In Q2 99, ITS completed the acquisition of a new business in Germany at cost of
L0.5 million. In Q3 99, ETL SEMKO completed the acquisition of the
electrotechnical safety and electro magnetic compatibility testing business of
ERA Technology Ltd in the U.K. for a net consideration of L1.4 million. The
acquisition was carried out in conjunction with the British Electrotechnical
Approvals Board ("BEAB"), which is a consumer product safety certification body
in the U.K. The new business has been merged with ITS' existing
electrotechnical, gas and electro magnetic compatibility testing business in
the U.K. to create a market-leading testing and certification facility in the
U.K. BEAB has a 20% stake in this U.K. business.
LABTEST
OPERATING RESULTS Q3 98 Q3 99 GROWTH 9M 98 9M 99 GROWTH
Lm Lm Lm Lm Lm Lm
---------- ---------- ---------- ---------- ---------- ----------
REVENUES 16.2 19.7 3.5 46.3 57.0 10.7
Actual growth % 21.6 23.1
Comparable growth % 20.4 22.0
OPERATING INCOME 4.0 5.1 1.1 11.7 15.5 3.8
Actual growth % 27.5 32.5
Comparable growth % 22.5 29.9
Operating margin % 24.7 25.9 1.2 25.3 27.2 1.9
---------- ---------- ---------- ---------- ---------- ----------
The strong growth in Labtest continued with increased revenues and operating
income in Q3 99 and 9M 99 over the comparable periods in 1998. Textile testing
continued to expand and new textile testing laboratories were opened in France,
San Francisco and India in 9M 99. The growth in textile testing is due to
increased sourcing by American and European retailers from Asia and developing
country manufacturers, a greater demand for new designs and buyers becoming
more quality conscious. The growth in toy testing in 9M 99 over 9M 98 has been
mainly in Hong Kong and Taiwan, which have benefited from new McDonald's
programs. In response to increased demand for toy testing, a new laboratory was
opened in Los Angeles in Q3 99. Other new Labtest operations were opened in
Spain and South Africa in Q3 99. Start up costs for these facilities of L0.2
million reduced operating income in Q3 99 and the earthquakes in Turkey and
Taiwan also had a negative effect on this quarter and may reduce revenues and
operating income in those countries for the remainder of the year.
FOREIGN TRADE STANDARDS
OPERATING RESULTS Q3 98 Q3 99 GROWTH 9M 98 9M 99 GROWTH
Lm Lm Lm Lm Lm Lm
---------- ---------- ---------- ---------- ---------- ----------
REVENUES 16.8 9.9) (6.9) 47.1 37.4 (9.7)
Actual growth % (41.1) (20.6)
Comparable growth % (43.5) (22.3)
OPERATING INCOME/(LOSS) 1.6 (0.4) (2.0) 4.6 2.3 (2.3)
Actual growth % (125.0) (50.0)
Comparable growth % (125.0) (54.3)
Operating margin % 9.5 (4.0) (13.5) 9.8 6.1 (3.7)
---------- ---------- ---------- ---------- ---------- ----------
The standards testing programme with the Saudi Arabian Standards Organisation
continued to grow. Revenues from that programme increased L1.2 million in 9M 99
over 9M 98.
The decrease in revenues and operating income in Q3 99 compared to Q3 98 was
due to the termination of the inspection programmes in Nigeria on March 31,
1999. The Nigerian programmes generated revenues of L17.8 million in 9M 98, of
which L6.4 million was generated in Q3 98, compared to L8.6 million in 9M 99
and Lnil in Q3 99. Full year 1999 revenues will be reduced by L15.7 million
compared to 1998 due to the cessation of these programmes. The FTS division was
restructured in 9M 99 at a cost of L2.2 million. These costs are reported as
exceptional and are not included in the operating income in the table above.
11
The new Government in Nigeria re-introduced inspection programmes on September
1, 1999. FTS will participate in a smaller part of the new programme with
expected annual revenues of about L6.0 million. Activity in Q3 99 was minimal
and revenues of about L1.0 million are expected in Q4 99.
In August 1999, the former Soviet republic of Georgia appointed ITS exclusively
to undertake pre-shipment inspections for all imports into that country. The
new programme is for pre-shipment inspection and customs reform and will
include a product testing requirement which may create some testing
opportunities for ETL SEMKO. The programme is for three years and is expected
to generate approximately L5.0 million in revenues in the first year and L1.0
million in Q4 99.
The inspection programme in Ghana which was expected to end in December 1999
has been renewed until March 2000 and may be extended further.
BONDAR CLEGG
OPERATING RESULTS Q3 98 Q3 99 GROWTH 9M 98 9M 99 GROWTH
Lm Lm Lm Lm Lm Lm
---------- ---------- ---------- ---------- ---------- ----------
REVENUES 4.0 2.9 (1.1) 13.0 8.5 (4.5)
Actual growth % (27.5) (34.6)
Comparable growth % (25.0) (30.8)
OPERATING (LOSS)/INCOME (0.1) (0.7) (0.6) 0.4 (2.0) (2.4)
---------- ---------- ---------- ---------- ---------- ----------
Restructuring costs of L0.6 million were incurred in 9M 99, of which L0.3
million were incurred in Q3 99. ITS is in discussion with a third party
regarding its acquisition of the Bondar Clegg business. Non-binding terms for
the sale of the Bondar Clegg business have been agreed with such third party
and preliminary due diligence has commenced. Notwithstanding these discussions,
ITS has decided to continue restructuring the Bondar Clegg division to further
reduce costs in line with decreased revenues caused by the decline in demand
for gold testing.
DISCONTINUED OPERATION
OPERATING RESULTS Q3 98 Q3 99 GROWTH 9M 98 9M 99 GROWTH
Lm Lm Lm Lm Lm Lm
---------- ---------- ---------- ---------- ---------- ----------
REVENUES 0.8 - (0.8) 5.5 - (5.5)
OPERATING LOSS (0.7) - 0.7 (2.5) - 2.5
---------- ---------- ---------- ---------- ---------- ----------
The Environmental Testing division was sold in August 1998 for L1.9 million.
After restructuring costs, a loss of L1.4 million was incurred as a non-
operating exceptional charge.
FINANCIAL CONDITION AND LIQUIDITY
At September 30, 1999, ITS had cash of L26.4 million compared to L16.8 million
at December 31, 1998.
ITS reported cash inflow from operating activities of L45.1 million in 9M 99
compared to L21.6 million in 9M 98 -- an increase of L23.5 million. Net cash
inflow from operating activities includes operating income after operating
exceptionals, before depreciation and other non-cash items, as well as working
capital movements. The increase in net cash inflow from operating activities in
9M 99 is primarily attributable to the payments received from the Nigerian
Government of L20.9 million and payments from Nigerian exporters of L4.7
million offset by L2.2 million of restructuring costs.
Expenditure on tangible fixed assets amounted to L9.3 million in 9M 99 compared
to L8.6 million in 9M 98. ITS' investment in tangible fixed assets was
primarily in laboratory equipment and information technology.
On April 26, 1999, ITS completed an equity offering which raised L20.0 million.
The cash is being used to fund acquisitions and working capital. ITS also
amended its banking arrangements with effect from April 26, 1999. The
amendments provide, among other things, for delayed repayment of the Senior
Term A Loans. However, ITS will apply some of the cash received from the
Nigerian Government and some of the proceeds from disposals to repay the Senior
Term A Loans earlier than required.
ITS reported cash outflow on acquisitions of L6.5 million in 9M 99 compared to
L8.7 million in 9M 98. Cash outflow in 9M 99 included the payment of L2.8
million for deferred consideration on an acquisition made in 1998, and L3.7
million for acquisitions made in 9M 99. ITS received L3.3 million for the
disposal of its
12
Compliance Engineering magazine business in 9M 99 and L0.2 million for the
disposal of its controlling share in ETL SEMKO's Quality Assurance business in
July 1999. ITS also received L0.2 million from the sale of its 20% stake in a
testing and certification facility in the U.K.
At September 30, 1999, ITS had total borrowings of L294.1 million less
unamortised debt issuance costs of L10.5 million. The following table sets
forth an analysis of borrowings:
BORROWINGS
December 31, 1998 September 30, 1999
Lm Lm
------------------------ ------------------------
Senior Subordinated Notes 120.9 123.8
Senior Term Loan A 73.7 68.0
Senior Term Loan B 35.1 35.0
Senior Revolving Credit Facility 16.3 -
Parent Subordinated PIK Debentures 59.2 66.7
Other borrowings 1.4 0.6
------------------------ ------------------------
TOTAL BORROWINGS 306.6 294.1
Debt issuance costs (10.8) (10.5)
------------------------ ------------------------
NET BORROWINGS 295.8 283.6
======================== ========================
In 9M 99, ITS paid net interest of L11.4 million, comprising L6.5 million for
the Senior Subordinated Notes, L2.9 million for Senior Term Loan A, L1.6
million for Senior Term Loan B and L0.4 million on the Revolving Credit
Facility and other borrowings. The interest of L6.2 million on the Parent
Subordinated PIK Debentures covering the periods November 8, 1998 to February
1, 1999, February 2, 1999 to May 1, 1999 and May 2, 1999 to August 1, 1999 and
was funded by further issuances of Parent Subordinated PIK Debentures on
February 1, 1999, May 1, 1999 and August 1, 1999.
Apart from a small amount of the Revolving Credit Facility, all ITS' borrowings
are denominated in currencies other than GBP so the outstanding amounts in non-
GBP currency are affected by exchange rate fluctuations versus GBP. In addition
to the scheduled Senior Term Loan A capital repayments of L3.3 million which
were made on June 15,1999, the proceeds of L3.3 million received from the
disposal of the Compliance Engineering magazine business were used to prepay
the Senior Term A Loans, making total Term A Loan repayments of L6.6 million in
9M 99. In accordance with the amended Senior Facility Agreement, L5.0 million
of the payments received from the Nigerian Government and the proceeds received
from the disposal of ETL SEMKO's Quality Management business will be used to
prepay the Senior Term Loans on December 15, 1999. Repayments of L16.4 million
were made in 9M 99 to clear the drawings against the Revolving Credit Facility,
leaving L23.9 million available to draw. Refinancing fees of L1.2 million were
paid in 9M 99.
ITS paid dividends of L1.6 million to minority shareholders in 9M 99 compared
to L1.3 million in 9M 98.
Subject to the provisions of the agreement under which the loans to finance the
acquisition of the business were made, and subject to certain exceptions and
applicable law, there are no restrictions on the ability of: (a) the Company or
any of its direct and indirect subsidiaries from paying dividends or making any
other distributions or loans or advances to Intertek Finance plc, the issuer of
the Senior Subordinated Notes or (b) the direct and indirect subsidiaries of
the Company from paying dividends or making any other distributions or loans or
advances to the Company.
GENERAL
The financial statements have been prepared in accordance with U.K. GAAP which
differs in certain significant respects from U.S. GAAP. The most significant
differences between U.S. GAAP and U.K. GAAP are described in Note 12 to the
Consolidated Financial Statements of ITS.
EXCHANGE RATES
Exchange rates used for translating local currencies into pounds sterling for
the significant currencies in which ITS operates are shown in the following
table.
13
CUMULATIVE AVERAGE EXCHANGE RATES USED TO TRANSLATE INCOME AND COSTS INTO GBP
Three months to Nine months to Three months to Nine months to
September 30, 1998 September 30, 1998 September 30, 1999 September 30, 1999
------------------ ------------------ ------------------ ------------------
U.S. Dollar 1.66 1.66 1.61 1.62
Hong Kong Dollar 12.9 12.9 12.5 12.6
Swedish Kronor 13.3 13.1 13.3 13.3
------------------ ------------------ ------------------ ------------------
Revenues and operating income for 9M 98 have been translated into GBP using the
cumulative average exchange rate for the nine months to September 30, 1998.
Revenues and operating income for 9M 99 have been translated into GBP using the
cumulative average exchange rate for the nine months to September 30, 1999.
Revenues and operating income for Q3 98 have been translated into GBP using the
cumulative average exchange rate for the three months to September 30, 1998.
Revenues and operating income for Q3 99 have been translated into GBP using the
cumulative average exchange rate for the three months to September 30, 1999.
To remove the effects of currency exchange rate movements when comparing the
revenues and operating income for different periods, the results on pages 5 and
6 show the percentage growth of Q3 99 over Q3 98 and 9M 99 over 9M 98 at both
actual exchange rates and comparable exchange rates.
Because the value of the GBP has weakened against the U.S. dollar and against
the Hong Kong dollar, the growth in revenues and operating income at actual
exchange rates is higher than the growth at comparable exchange rates.
INVESTIGATIONS BY THE U.S. ENVIRONMENTAL PROTECTION AGENCY
Two of ITS' subsidiary corporations are currently involved in investigations by
the U.S. Environmental Protection Agency ("EPA"). Details of each investigation
are given below:
CALEB BRETT USA, INC.
In February 1997, Caleb Brett, through its routine quality assurance and
quality control procedures, discovered evidence of false testing results at the
Caleb Brett laboratory in Linden, New Jersey, which involved testing of
gasoline to certain standards set by the EPA.
Caleb Brett promptly reported its findings to the EPA and requested inclusion
in the EPA's Voluntary Disclosure Program. This matter was referred to the U.S.
Department of Justice by the EPA, and civil and criminal investigations are
underway.
In September 1999, the Department of Justice announced that three laboratory
supervisors pleaded guilty to criminal charges that they participated in a
scheme to falsify chemical analyses of gasoline. The Department of Justice also
announced that Caleb Brett is not presently considered a target of this ongoing
investigation.
As part of the co-operation with the EPA, Caleb Brett appointed a Compliance
Director and introduced more stringent compliance protocols which have been
presented to the EPA. These compliance procedures are now fully implemented.
It is not yet possible to estimate the cost of any civil or criminal penalties
arising from this matter, however, on the basis of currently available
information, the directors consider that the outcome is unlikely to have a
material adverse effect on the financial position, results of operations or
future cash flows of ITS. Possible rights of recovery against Inchcape plc
under the Share Purchase Deed are being pursued.
INTERTEK TESTING SERVICES ENVIRONMENTAL LABORATORIES, INC.
In December 1997, Intertek Testing Services Environmental Laboratories, Inc.
("ITS Environmental") discovered certain discrepancies in reported testing
results at its facility in Richardson, near Dallas, Texas ("Dallas"). A further
investigation by the Quality Assurance/Quality Control department of ITS
Environmental revealed that technicians at the Dallas facility had at various
times manually integrated data and improperly calibrated test equipment in a
way that may have skewed the accuracy of the test results that have been
reported, but not necessarily the basic data recorded in the testing equipment.
14
ITS Environmental promptly reported these discrepancies to the EPA and to
clients. Civil and criminal investigations are under way. A government
investigation at the ITS Environmental facility uncovered evidence of false
reporting beyond that initially discovered and disclosed by ITS Environmental.
ITS Environmental has requested inclusion in the EPA's Voluntary Disclosure
Program and was advised in August 1999 that it has not been accepted in this
program. ITS Environmental has requested that the EPA reconsider this decision.
Under this program it may be possible to foreclose criminal but not civil
penalties. If the actions of ITS Environmental that were disclosed to the EPA
are found to qualify for the immunities available under its Voluntary
Disclosure Program, the protection of this program may not extend to improper
actions subsequently discovered.
In August 1998, ITS Environmental sold its laboratory business in Burlington,
Vermont U.S.A. and St. Helens, U.K. and stopped commercial operations at the
laboratory in Dallas. These actions resulted in the discontinuation of business
at ITS Environmental. This sale has not relieved ITS Environmental of any
liability it may face as a result of these investigations or otherwise.
Since commercial operations discontinued in August 1998, the facility has been
used to reprocess the original data. ITS Environmental developed what it
believed to be an effective data screening and reprocessing method. The
reprocessing effort was aimed at providing clients with data of known quality.
The EPA have advised ITS Environmental that the reprocessing is not acceptable
to the EPA for clean up or compliance purposes. Nevertheless, ITS Environmental
believes that it can establish the scientific integrity of the reprocessing
work.
ITS Environmental continues to co-operate fully with the government
investigation. To date, no action has been brought against ITS Environmental by
the EPA or any other party. At this time, it is not possible to estimate the
cost of any civil or criminal penalties arising from this matter. However, on
the basis of currently available information, the directors consider that the
outcome is unlikely to have a material adverse effect on the financial position
of ITS. Possible rights of recovery against Inchcape plc under the Share
Purchase Deed are being pursued.
INFORMATION TECHNOLOGY
STATE OF READINESS
The date change from 1999 to 2000 may impair the function of ITS' internal
computer network and related systems, its testing equipment and any other
system or device in which the year is represented by two digits rather than by
four. A full review and remediation effort has been undertaken for all major IT
systems to ensure they will operate effectively during the transition period
and into the Year 2000. The modifications identified in the review are over 95%
complete and 100% compliance is expected by the end of 1999. Some divisions
have already achieved full compliance and others have a few remaining
remediation projects to complete.
ITS has established a Year 2000 team made up of the members of ITS' IT Steering
Committee to cover (i) internal systems, (ii) test equipment and facilities,
(iii) suppliers and (iv) legal issues. ITS' IT Steering Committee reports
regularly to the ITS Board.
To date, ITS has contacted approximately 3,000 of its customers in connection
with Year 2000 issues. All key subcontractors and suppliers are being audited
by ITS under its Year 2000 program. ITS has also implemented procedures to
assess the Year 2000 readiness of its key suppliers. These procedures include
testing of critical components and obtaining confirmation from key suppliers.
ITS currently expects its key subcontractors and suppliers will be Year 2000
compliant in all material respects.
COSTS
The total cost (both revenue and capital) of remedial and replacement work for
both IT systems and non-IT systems is currently estimated at L2.9 million in
1999. These estimates have been calculated in accordance with SEC Guidelines,
which require the full cost of projects to be disclosed as estimated Year 2000
costs where the replacement of a non-compliant system has been accelerated.
RISKS
There can be no assurance that ITS' efforts (or the efforts of its customers
and suppliers) will be successful in limiting the vulnerability of the ITS
systems and equipment to the problems associated with the transition to the
Year 2000, or that, if such problems occur, they will not have a material
adverse effect on ITS before they can be resolved. However, management
presently believes that it is unlikely that the failure of any individual
system will have a material effect on the operation of ITS. In the event of a
systems breakdown at a particular site, work can
15
usually be transferred to another site in ITS. In addition, risks due to supply
failure for normal consumable items are being addressed by a build up in
inventory of these consumables as appropriate.
CONTINGENCY PLANS
ITS currently believes that the most reasonably likely worst case scenario is
that there will be some localised disruptions of systems that will affect
individual business processes, facilities or supplies for a short time rather
than systemic or long-term problems affecting its business operations as a
whole. Through its contingency planning, ITS will continue to identify systems,
or other aspects of its business or that of its suppliers, that it believes
would be most likely to experience Year 2000 problems, as well as those
business operations in which a localised disruption could have the potential
for causing a wider problem by interrupting the flow of products, materials or
data to other operations. ITS' contingency plans focus on minimising the scope
and duration of any disruptions by having sufficient personnel, inventory and
other resources in place to permit a flexible, real-time response to specific
problems as they may arise at individual locations around the world. Each
division will have a core team of senior IT and management personnel on stand-
by during the period December 31, 1999 to January 5, 2000 to ensure that any
issues are dealt with immediately.
EURO
On January 1, 1999, eleven of the European Union member states, including seven
countries where ITS operations are located, established fixed conversion rates
between their existing countries and adopted one common currency, the Euro. The
conversion to the Euro eliminates currency exchange rate risk among the eleven
member countries.
The currencies of the eleven member states remain legal tender in the
participating countries during a three year transition period from January 1,
1999 through January 1, 2002. Effective January 1, 1999 the Euro is traded on
currency exchanges and is available for non-cash transactions during the three
year transitional period. Beginning on January 1, 2002, the European Central
Bank will issue Euro-denominated bills and coins for use in cash transactions.
On or before July 1, 2002 the participating countries will withdraw all bills
and coins and use the Euro as their legal currency.
ITS' operating units affected by the Euro have established plans to address the
issues raised by the conversion. These issues, amongst others, include such
matters as pricing, continuity of contracts, accounting and financial
reporting, taxation, treasury activities and computer systems. ITS anticipates
that the operating units will convert their local records to the Euro during
the three year transition period.
At this time, although no immediate problems have been identified, there can be
no assurance that the harmonisation of currencies in Europe will not have a
material adverse impact on the results of operations, financial position or
liquidity of its European businesses.
16
INTERTEK TESTING SERVICES LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
--------------------------------------
Nine months to Nine months to
NOTES September 30, 1998 September 30, 1999
L000 L000
---------------- ----------------
REVENUES
Continuing operations 260,667 269,519
Discontinued operation 5,517 -
---------------- ----------------
GROUP REVENUES 3 266,184 269,519
Operating costs (250,122) (228,255)
---------------- ----------------
GROUP OPERATING INCOME 16,062 41,264
Share of operating (loss)/profit in associates (821) 242
---------------- ----------------
TOTAL OPERATING INCOME 15,241 41,506
- ------------------------------------------------------------------------------------------------------------------------------------
Operating income/(loss) before exceptional items
Continuing operations 33,156 33,521
Discontinued operation (2,463) -
---------------- ----------------
3 30,693 33,521
Exceptional items (charged)/credited to operating income 4
Continuing operations (11,452) 10,860
Discontinued operation (4,000) (2,875)
---------------- ----------------
TOTAL OPERATING INCOME 15,241 41,506
- ------------------------------------------------------------------------------------------------------------------------------------
NON-OPERATING EXCEPTIONAL ITEMS 4 (2,539) 2,484
---------------- ----------------
INCOME ON ORDINARY ACTIVITIES BEFORE NET INTEREST 12,702 43,990
Net interest expense 5 (23,449) (24,312)
---------------- ----------------
(LOSS)/INCOME BEFORE TAXATION (10,747) 19,678
Taxation 6 (4,333) (5,359)
---------------- ----------------
(LOSS)/INCOME AFTER TAXATION (15,080) 14,319
Minority interests (1,872) (2,418)
---------------- ----------------
NET (LOSS)/INCOME FOR THE GROUP AND ITS SHARE OF ASSOCIATES (16,952) 11,901
================ ================
The accompanying notes on pages F-6 to F-30 are an integral part of these
financial statements.
F-1
INTERTEK TESTING SERVICES LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
------------------------------------
Three Three
months to months to
September 30, September 30,
1998 1999
L000 L000
---------------- ----------------
REVENUES
Continuing operations 91,182 90,795
Discontinued operation 817 -
---------------- ----------------
GROUP REVENUES 91,999 90,795
Operating costs (84,511) (80,514)
---------------- ----------------
GROUP OPERATING INCOME 7,488 10,281
Share of operating (loss)/profit in
associates (167) 16
---------------- ----------------
TOTAL OPERATING INCOME 7,321 10,297
---------------- ----------------
- --------------------------------------------------------------------------------
Operating income/(loss) before
exceptional items
Continuing operations 10,151 9,932
Discontinued operation (712) -
---------------- ----------------
9,439 9,932
Exceptional items (charged)/credited to
operating income
Continuing operations (5,510) 3,240
Discontinued operation 3,392 (2,875)
---------------- ----------------
TOTAL OPERATING INCOME 7,321 10,297
- --------------------------------------------------------------------------------
NON-OPERATING EXCEPTIONAL ITEMS (89) 74
---------------- ----------------
INCOME ON ORDINARY ACTIVITIES BEFORE
NET INTEREST 7,232 10,371
Net interest expense (7,906) (8,053)
---------------- ----------------
(LOSS)/INCOME BEFORE TAXATION (674) 2,318
Taxation (1,607) (59)
---------------- ----------------
(LOSS)/INCOME AFTER TAXATION (2,281) 2,259
Minority interests (559) (895)
---------------- ----------------
NET (LOSS)/INCOME FOR THE GROUP AND ITS
SHARE OF ASSOCIATES (2,840) 1,364
================ ================
The accompanying notes on pages F-6 to F-30 are an integral part of these
financial statements.
F-2
INTERTEK TESTING SERVICES LIMITED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
------------------------------------
December 31, September 30,
1998 1999
NOTES L000 L000
---------------- ----------------
ASSETS
CURRENT ASSETS
Cash 11 16,772 26,391
Trade receivables 67,516 65,559
Inventories 3,662 3,512
Other current assets 15,241 20,084
Deferred taxation asset 1,348 1,336
---------------- ----------------
TOTAL CURRENT ASSETS 104,539 116,882
Goodwill 13,074 14,552
Property, plant and equipment, net 45,951 47,120
Investments 231 546
---------------- ----------------
TOTAL ASSETS 163,795 179,100
================ ================
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Borrowings (including current portion of long term borrowings) 7 22,209 10,201
Accounts payable, accrued liabilities and deferred income 70,952 72,929
Income taxes payable 5,368 5,398
---------------- ----------------
TOTAL CURRENT LIABILITIES 98,529 88,528
Long term borrowings 7 273,564 273,416
Provisions for liabilities and charges 8,518 6,735
Minority interests 4,592 5,634
SHAREHOLDERS' DEFICIT
Ordinary shares 336 808
Redeemable preference shares 86,657 105,478
Shares to be issued 2,793 2,793
Premium in excess of par value 3,018 3,635
Retained deficit (314,212) (307,927)
---------------- ----------------
TOTAL SHAREHOLDERS' DEFICIT 8 (221,408) (195,213)
---------------- ----------------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT 163,795 179,100
================ ================
The accompanying notes on pages F-6 to F-30 are an integral part of these
financial statements.
F-3
INTERTEK TESTING SERVICES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
------------------------------------
Nine months to Nine months to
NOTES September 30, 1998 September 30, 1999
L000 L000
---------------- ----------------
Total operating cash inflow 9 21,619 45,056
Returns on investments and servicing of finance 10 (12,708) (12,996)
Taxation (4,467) (4,461)
Capital expenditure and financial investment 10 (8,536) (9,131)
Acquisitions and disposals 10 (7,318) (2,799)
---------------- ----------------
Cash (outflow)/inflow before financing (11,410) 15,669
Financing 10 13,641 (4,424)
---------------- ----------------
INCREASE IN CASH IN THE PERIOD 2,231 11,245
---------------- ----------------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
INCREASE IN CASH IN THE PERIOD 2,231 11,245
Cash (outflow)/inflow from increase in debt (8,385) 24,870
---------------- ----------------
Change in net debt resulting from cash flows (6,154) 36,115
Debt issued in lieu of interest payment (5,097) (6,030)
Acquisitions and disposals - (1,601)
Other non-cash movements (2,383) (1,523)
Exchange adjustments 3,403 (5,186)
---------------- ----------------
Movement in net debt in the period (10,231) 21,775
Net debt at the start of the period (252,151) (279,001)
---------------- ----------------
NET DEBT AT THE END OF THE PERIOD (262,382) (257,226)
================ ================
The accompanying notes on pages F-6 to F-30 are an integral part of these
financial statements.
F-4
INTERTEK TESTING SERVICES LIMITED
CONSOLIDATED STATEMENTS OF TOTAL RECOGNISED GAINS AND LOSSES
(Unaudited)
------------------------------------
Nine months to Nine months to
September 30,1998 September 30,1999
L000 L000
---------------- ----------------
Net (loss)/income (16,952) 11,901
Exchange adjustments 2,084 (5,616)
---------------- ----------------
TOTAL RECOGNISED GAINS AND LOSSES (14,868) 6,285
================ ================
There is no material difference between income before taxation, and net income
for the financial periods, as stated in the statements of operations and their
historical cost equivalents.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT
(Unaudited)
-----------------------------------------------------------------------------------------
Redeemable Premium in
Ordinary preference Shares to be excess of par Retained
shares shares issued value deficit Total
L000 L000 L000 L000 L000 L000
----------- ----------- ------------ ------------ ------------ ------------
BALANCE AT JANUARY 1, 1998 318 81,815 2,793 2,857 (294,549) (206,766)
Net loss - - - - (16,952) (16,952)
Issue of shares - 4,860 - 169 - 5,029
Exchange adjustments - - - - 2,084 2,084
----------- ----------- ------------ ------------ ------------ ------------
BALANCE AT SEPTEMBER 30, 1998 318 86,675 2,793 3,026 (309,417) (216,605)
=========== =========== ============ ============ ============ ============
BALANCE AT JANUARY 1, 1999 336 86,657 2,793 3,018 (314,212) (221,408)
Net income - - - - 11,901 11,901
Issue of shares 472 18,821 - 617 - 19,910
Exchange adjustments - - - - (5,616) (5,616)
----------- ----------- ------------ ------------ ------------ ------------
BALANCE AT SEPTEMBER 30, 1999 808 105,478 2,793 3,635 (307,927) (195,213)
=========== =========== ============ ============ ============ ============
Included in Retained deficit is L272.6 million which represents goodwill
written off to reserves prior to December 1997 (September 30, 1998: L265.9
million).
The accompanying notes on pages F-6 to F-30 are an integral part of these
financial statements.
F-5
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
The accompanying consolidated financial statements of the Company and its
subsidiaries at September 30, 1999, for the nine months to September 30, 1999
and for the three months to September 30, 1999 are unaudited. In the opinion of
the Directors, all adjustments (consisting of normal recurring adjustments)
necessary for a fair presentation of the financial statements have been
included. The results of these periods are not necessarily indicative of
results for the entire year and have been prepared in conformity with
accounting principles generally accepted in the United Kingdom ("U.K. GAAP")
and are presented under the historical cost convention. These principles differ
in certain material respects from generally accepted accounting principles in
the United States ("U.S. GAAP") -- see note 12.
For the purpose of these condensed consolidated financial statements, certain
information and disclosures normally included in financial statements prepared
in accordance with accounting principles generally accepted in the United
Kingdom have been condensed or omitted. These unaudited statements should be
read in conjunction with the audited financial statements and notes as of and
for the year ended December 31, 1998.
2. ACCOUNTING POLICIES
The significant accounting policies adopted by the Company are as follows:
BASIS OF CONSOLIDATION
The consolidated financial statements of the Company include the financial
statements of the Company and its subsidiaries.
The acquisition method of accounting has been adopted. Under this method, the
results of subsidiaries acquired or sold are included in the consolidated
statement of income of the Company from, or up to, the date control passes.
The consolidated statements of income of the Company include their respective
shares of income from associated undertakings. The consolidated balance sheet
of the Company includes interests in associates at their respective shares of
the net tangible assets.
USE OF ESTIMATES
Preparation of financial statements in conformity with U.K. GAAP 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 for an accounting period. Such estimates and assumptions could
change in the future as more information becomes known or circumstances alter,
such that the group's actual results may differ from the amounts reported and
disclosed in the financial statements.
FOREIGN CURRENCIES
The results of operations and cash flows of overseas subsidiaries and
associated undertakings are translated into pounds sterling at the average of
the month-end rates of exchange for the period. Assets and liabilities in
foreign currencies are translated into pounds sterling at closing rates of
exchange except where rates are fixed under contractual arrangements.
The difference between net income/(loss) translated at average and at closing
rates of exchange is included in the statement of total recognised gains and
losses as a movement in shareholders' equity/(deficit). Exchange differences
arising from the retranslation to closing rates of exchange of opening
shareholders' equity, long-term foreign currency borrowings used to finance
foreign currency investments, and foreign currency borrowings that provide a
hedge against shareholders' equity are also reflected as movements in
shareholders' equity/(deficit). All other exchange differences are dealt with
in operations.
PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION
Property, plant and equipment are stated at cost less depreciation, which is
provided, except for freehold land, on a straight line basis over the estimated
useful lives of the assets, mainly at the following annual rates:
Freehold buildings and long leasehold land and buildings 2%
Short leasehold land and buildings term of lease
Plant, machinery and equipment 10% -- 33.3%
F-6
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ACCOUNTING POLICIES (CONTINUED)
LEASES
Assets held under capital leases are treated as if they had been purchased at
the present value of the minimum lease payments. This cost is included in
property, plant and equipment, and depreciation is provided over the shorter of
the lease term or the estimated useful life. The corresponding obligations
under these leases are included within borrowings. The finance charge element
of rentals payable is charged to operations to produce a constant rate of
interest. Operating lease rentals are charged to operations on a straight line
basis over the periods of the leases.
INVENTORIES
Inventories and work in progress are stated at the lower of cost or net
realisable value. Cost comprises expenditure incurred in the normal course of
business in bringing inventories and work in progress to their present location
and condition.
REVENUES
Revenues represent the total amount receivable for services provided and goods
sold, excluding sales-related taxes and intra-group transactions. Revenue is
recognised when the relevant service is completed or goods delivered.
TAXATION
Deferred taxation is provided using the liability method at current taxation
rates on timing differences to the extent that the directors consider that it
is probable that a liability or asset will crystallise.
PENSION BENEFITS
Liabilities under defined contribution pension schemes are charged to
operations when incurred. ITS has a number of defined benefit pension schemes
for which contributions are based on triennial actuarial valuations. Pension
charges in operations have been calculated at a substantially level percentage
of current and expected future pensionable payroll, with variations from
regular cost spread over the expected remaining service lives of employees.
GOODWILL
Purchased goodwill in respect of acquisitions since January 1, 1998 is
capitalised in accordance with the requirements of FRS 10: Goodwill and
Intangible Assets, and is amortised on a straight line basis over its estimated
useful life, which is up to 20 years. Purchased goodwill in respect of
acquisitions before January 1, 1998 was written off to reserves in the year of
acquisition in accordance with the accounting standard then in force. When a
subsequent disposal occurs any goodwill previously written off to reserves is
written back through the profit and loss account.
DERIVATIVE FINANCIAL INSTRUMENTS
ITS uses various derivative financial instruments to manage its exposure to
foreign exchange and interest rate risks. Derivative financial instruments are
considered hedges if they meet certain criteria. A forward exchange contract is
considered a hedge of an identifiable foreign currency commitment if such
contract is designated as, and is effective as, a hedge of a firm foreign
currency commitment. An interest rate swap agreement is considered a "synthetic
alteration" (and accounted for like a hedge) when the agreement is designated
with a specific liability and it alters the interest rate characteristics of
such liability. An interest rate cap agreement must also meet the same criteria
as an interest rate swap to be considered hedges of a specific liability.
Derivative financial instruments failing to meet the aforementioned criteria
are accounted for at fair value with the resulting unrealised gains and losses
included in the statement of operations.
FORWARD EXCHANGE CONTRACTS. Forward exchange contracts are designated as hedges
of firm foreign currency commitments. Gains and losses on such contracts are
deferred and recognised in income or as an adjustment of the carrying amount
when the hedged transaction occurs.
INTEREST RATE CAP AGREEMENTS. Interest rate cap agreements are accounted for
under the accruals basis. Amounts receivable under the agreement are accrued
when due as a reduction of interest charges. Premiums paid for purchased
interest rate cap agreements are amortised to interest charges over the term of
the caps.
INTEREST RATE SWAPS. Interest rate swap agreements are designated to change the
interest rate characteristics of floating-rate borrowings. Accordingly, these
agreements are accounted for under the settlement basis. The interest
differential between the amounts received and amount paid is recognised as an
adjustment to interest charges over the term of the swap.
F-7
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. SEGMENT INFORMATION
ITS comprises five divisions which are organised as follows: (1) Caleb Brett,
which tests and inspects crude oil, petroleum, chemical and agricultural
products; (2) ETL SEMKO, which tests and certifies electrical and electronic
products, building products, heating and ventilation and air conditioning
equipment; (3) Labtest, which tests textiles, fabrics, footwear, toys and
consumer products; (4) Foreign Trade Standards, which provides standards
testing and preshipment inspection work to governments and (5) Bondar Clegg,
which analyses minerals. The Environmental Testing division which operated
principally in the U.S. and U.K. was sold in August 1998 and is disclosed as a
discontinued operation. The accounting policies of the divisions are the same
as those described in the summary of accounting policies.
Nine months to Nine months to
September 30, 1998 September 30, 1999
L000 L000
------------------ ------------------
REVENUES
Caleb Brett 90,213 100,820
ETL SEMKO 64,124 65,787
Labtest 46,241 56,961
Foreign Trade Standards 47,063 37,386
Bondar Clegg 13,026 8,565
------------------ ------------------
TOTAL CONTINUING OPERATIONS 260,667 269,519
Discontinued operation 5,517 -
------------------ ------------------
TOTAL 266,184 269,519
================== ==================
OPERATING INCOME/(LOSS) BEFORE
EXCEPTIONAL ITEMS
Caleb Brett 8,826 9,318
ETL SEMKO 7,705 8,421
Labtest 11,713 15,484
Foreign Trade Standards 4,553 2,275
Bondar Clegg 359 (1,977)
------------------ ------------------
TOTAL CONTINUING OPERATIONS 33,156 33,521
Discontinued operation (2,463) -
------------------ ------------------
TOTAL 30,693 33,521
================== ==================
OPERATING EXCEPTIONAL ITEMS BY
DIVISION
Caleb Brett (1,478) 1,098
Foreign Trade Standards (9,974) 9,762
------------------ ------------------
Total continuing operations (11,452) 10,860
Discontinued operation (4,000) (2,875)
------------------ ------------------
TOTAL (15,452) 7,985
================== ==================
NON-OPERATING EXCEPTIONAL ITEMS
ETL SEMKO - 2,484
------------------ ------------------
TOTAL CONTINUING OPERATIONS - 2,484
Discontinued operation (2,539) -
------------------ ------------------
TOTAL (2,539) 2,484
================== ==================
UNALLOCATED COSTS
Cash, borrowings and income tax are managed centrally and are therefore not
allocated to the divisions. Interest expense and income and income tax expense
are therefore not allocated to the divisions.
F-8
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEGMENT INFORMATION (CONTINUED)
Nine Nine
months to months to
September 30, September 30,
1998 1999
L000 L000
REVENUES BY GEOGRAPHIC ORIGIN
Americas 111,342 111,711
Europe, Africa and Middle East 92,594 89,475
Asia and Far East 56,731 68,333
-------------- --------------
TOTAL CONTINUING OPERATIONS 260,667 269,519
Discontinued operation 5,517 -
-------------- --------------
TOTAL 266,184 269,519
============== ==============
REVENUES FROM SIGNIFICANT COUNTRIES OF
ORIGIN
United States 89,832 89,146
United Kingdom 42,594 40,699
Hong Kong 29,193 30,727
Others (each under 10% of total) 99,048 108,947
-------------- --------------
TOTAL CONTINUING OPERATIONS 260,667 269,519
Discontinued operation 5,517 -
-------------- --------------
TOTAL 266,184 269,519
============== ==============
OPERATING INCOME/(LOSS) BEFORE EXCEPTIONAL
ITEMS
Americas 7,679 7,671
Europe, Africa and Middle East 8,291 5,630
Asia and Far East 17,186 20,220
-------------- --------------
TOTAL CONTINUING OPERATIONS 33,156 33,521
Discontinued operation (2,463) -
-------------- --------------
TOTAL 30,693 33,521
============== ==============
OPERATING INCOME/(LOSS) BEFORE EXCEPTIONAL
ITEMS FROM SIGNIFICANT COUNTRIES
United States 7,270 6,283
United Kingdom 2,634 (514)
Hong Kong 7,854 9,176
Others (each under 10% of total) 15,398 18,576
-------------- --------------
TOTAL CONTINUING OPERATIONS 33,156 33,521
Discontinued operation (2,463) -
-------------- --------------
TOTAL 30,693 33,521
============== ==============
REVENUES BY GEOGRAPHIC DESTINATION
Americas 107,231 115,239
Europe, Africa and Middle East 96,705 85,655
Asia and Far East 56,731 68,625
-------------- --------------
TOTAL CONTINUING OPERATIONS 260,667 269,519
Discontinued operation 5,517 -
-------------- --------------
TOTAL 266,184 269,519
============== ==============
F-9
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEGMENT INFORMATION (CONTINUED)
Nine Nine
months to months to
September 30, September 30,
1998 1999
L000 L000
-------------- --------------
REVENUES FROM SIGNIFICANT DESTINATION
COUNTRIES
United States 85,721 87,889
United Kingdom 27,523 14,996
Hong Kong 29,193 30,167
Others (each under 10% of total) 118,230 136,467
-------------- --------------
TOTAL CONTINUING OPERATIONS 260,667 269,519
Discontinued operation 5,517 -
-------------- --------------
TOTAL 266,184 269,519
============== ==============
4. EXCEPTIONAL ITEMS
Nine Nine
months to months to
September 30, September 30,
1998 1999
L000 L000
-------------- --------------
EXCEPTIONAL ITEMS (CHARGED)/CREDITED TO
OPERATING INCOME
Foreign Trade Standards
Nigeria (9,974) 11,955
Restructuring - (2,193)
-------------- --------------
(9,974) 9,762
Caleb Brett (1,478) 1,098
-------------- --------------
TOTAL CONTINUING OPERATIONS (11,452) 10,860
Discontinued operation (4,000) (2,875)
-------------- --------------
TOTAL OPERATING EXCEPTIONAL ITEMS (15,452) 7,985
============== ==============
NON-OPERATING EXCEPTIONAL ITEMS
ETL SEMKO -- gain on disposals - 2,484
-------------- --------------
TOTAL CONTINUING OPERATIONS - 2,484
-------------- --------------
Discontinued operation -- loss on disposal
of fixed assets (458) -
Discontinued operation -- loss on closure (2,081) -
-------------- --------------
TOTAL NON-OPERATING EXCEPTIONAL ITEMS (2,539) 2,484
============== ==============
Due to the irregular nature of payments received from the Nigerian Government
for pre-shipment inspection work carried out by FTS, in 1997, ITS adopted a
policy of making full provision against invoices issued to this client and only
reversing the provision when cash is received. The exceptional credit of L12.0
million for FTS comprises cash received in the nine months to September 30,
1999 of L19.4 million less invoices raised in the nine months to September 30,
1999 of L7.4 million. The tax effect of the exceptional credit to income is nil
(period from January 1 to September 30, 1998: tax charge of nil).
F-10
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
EXCEPTIONAL ITEMS (CONTINUED)
The exceptional charge to operating income of L2.2 million in respect of FTS is
a result of restructuring this division following the termination of the
inspection programmes in Nigeria. The tax effect of this exceptional charge is
nil.
The Caleb Brett division also provided testing services to the Nigerian
Government and the policy of making full provision against invoices issued to
this client and only reversing the provision when cash is received has also
been adopted. The exceptional credit of L1.1 million for Caleb Brett comprises
cash received in the nine months to September 30, 1999 of L1.5 million less
invoices raised in the nine months to September 30, 1999 of L0.4 million. The
tax effect of the exceptional credit to income is nil (period from January 1 to
September 30, 1998: tax charge of nil).
ETL SEMKO disposed of a non-core activity in the U.S., which generated an
exceptional credit of L2.2 million. This credit was after deducting
attributable goodwill of L1.1 million from the disposal proceeds of L3.3
million. The tax effect of this exceptional credit is nil.
ETL SEMKO sold 51% of its Quality Management business in Sweden for L0.2
million. This generated an exceptional credit of L0.2 million. The tax effect
of this exceptional credit is L0.1 million.
ETL SEMKO sold 20% of its stake in a testing and certification facility in the
U.K. for L0.2 million. This generated an exceptional credit of L0.1 million.
The tax effect of this exceptional credit is nil.
5. NET INTEREST EXPENSE
Nine Nine
months to months to
September 30, September 30,
1998 1999
L000 L000
-------------- --------------
INTEREST EXPENSE AND OTHER CHARGES
Senior Subordinated Notes 9,227 9,617
Parent Subordinated PIK Debentures 5,327 6,152
Senior Term Loan A 5,227 4,190
Senior Term Loan B 2,336 2,245
Senior Revolver 342 365
Other borrowings 108 667
Amortisation of debt issuance costs 1,452 1,523
-------------- --------------
INTEREST EXPENSE 24,019 24,759
INTEREST INCOME
On bank balances (570) (447)
-------------- --------------
NET INTEREST EXPENSE 23,449 24,312
============== ==============
6. TAXATION
The taxation charges on income before taxation and exceptional items for the
nine month periods ended September 30, 1998 and September 30, 1999 have been
calculated based on the estimated effective tax rates for the relevant full
years. Exceptional items have been tax effected as appropriate.
F-11
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7. BORROWINGS
September 30,
December 31, 1998 1999
L000 L000
---------------- ----------------
DUE IN LESS THAN ONE YEAR
Senior Term Loan A 4,821 9,886
Senior Revolver 16,333 -
Other borrowings 1,055 315
---------------- ----------------
TOTAL DUE IN LESS THAN ONE YEAR 22,209 10,201
---------------- ----------------
DUE IN MORE THAN ONE YEAR
Senior Subordinated Notes 116,257 119,640
Senior Term Loan A 65,302 54,571
Senior Term Loan B 34,053 33,803
Parent Subordinated PIK Debentures 57,568 65,122
Other borrowings 384 280
---------------- ----------------
TOTAL DUE IN MORE THAN ONE YEAR 273,564 273,416
================ ================
MATURITY OF BORROWINGS
Parent
Senior Subordinated
Subordinated Senior Term Senior Term PIK Other Total
Notes Loan A Loan B Debentures borrowings borrowings
L000 L000 L000 L000 L000 L000
------------- ------------- ------------- ------------- ------------- -------------
Due in less than one year - 10,751 - - 315 11,066
Due in one to two years - 21,405 - - 134 21,539
Due in 2 to 5 years - 35,869 35,006 - 137 71,012
Due in over 5 years 123,780 - - 66,683 9 190,472
------------- ------------- ------------- ------------- ------------- -------------
123,780 68,025 35,006 66,683 595 294,089
Debt issuance costs (4,140) (3,568) (1,203) (1,561) - (10,472)
------------- ------------- ------------- ------------- ------------- -------------
NET BORROWINGS 119,640 64,457 33,803 65,122 595 283,617
============= ============= ============= ============= ============= =============
F-12
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8. RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' DEFICIT
Nine months to Nine months to
September 30, September 30,
1998 1999
L000 L000
---------------- ----------------
Total recognised gains and losses for the
period (14,868) 6,285
Issue of ordinary share capital - 1,089
Issue of redeemable preference shares 5,029 18,821
Opening shareholders' deficit (206,766) (221,408)
---------------- ----------------
CLOSING SHAREHOLDERS' DEFICIT (216,605) (195,213)
================ ================
9. RECONCILIATION OF OPERATING INCOME TO OPERATING CASH FLOWS
Nine months to Nine months to
September 30, September 30,
1998 1999
L000 L000
---------------- ----------------
Operating income 12,717 41,506
Depreciation charge 8,400 8,476
Goodwill amortisation 188 622
Loss on sale of fixed assets 636 68
(Increase)/decrease in inventories (599) 129
Increase in receivables and prepayments (12,748) (4,816)
Increase/(decrease) in payables 8,561 (3,924)
Cash payments from exporters - 4,696
Increase/(decrease) in other provisions 4,464 (1,875)
---------------- ----------------
21,619 44,882
Equity income of associates - (242)
Less dividends received from associates - 416
---------------- ----------------
TOTAL OPERATING CASH INFLOW 21,619 45,056
================ ================
F-13
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10. ANALYSIS OF CASH FLOWS
Nine months to Nine months to
September 30, September 30,
1998 1999
L000 L000
---------------- ----------------
RETURNS ON INVESTMENTS AND SERVICING OF
FINANCE
Net interest paid (11,455) (11,437)
Dividends paid to minorities (1,253) (1,559)
---------------- ----------------
TOTAL RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE (12,708) (12,996)
================ ================
CAPITAL EXPENDITURE AND FINANCIAL
INVESTMENT
Purchase of property, plant and equipment (8,603) (9,286)
Sale of property, plant and equipment 67 155
---------------- ----------------
TOTAL CAPITAL EXPENDITURE AND FINANCIAL
INVESTMENT (8,536) (9,131)
================ ================
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertakings (8,702) (6,511)
Acquisition provision payments (581) -
Sale of business 1,965 3,712
---------------- ----------------
TOTAL ACQUISITIONS AND DISPOSALS (7,318) (2,799)
================ ================
FINANCING
Issue/(repayment) of short term debt 10,992 (16,364)
Issue of ordinary shares - 1,089
Issue of redeemable preference shares 5,029 18,821
Repayment of other loans (2,380) (8,506)
Cash subscribed by minorities - 536
---------------- ----------------
TOTAL FINANCING 13,641 (4,424)
================ ================
11. ANALYSIS OF NET DEBT
Debt issued
At Acquisitions in lieu of Other At
January 1, and interest non-cash Exchange September 30,
1999 Cash flow disposals payment changes adjustments 1999
L000 L000 L000 L000 L000 L000 L000
------------ ------------ ------------ ------------ ------------ ------------ ------------
NET CASH
Cash in hand and at bank 16,772 11,245 (1,601) - - (25) 26,391
------------ ------------ ------------ ------------ ------------ ------------ ------------
DEBT
Debt due within one year (22,209) 24,870 - - (12,755) (107) (10,201)
Debt due after one year (273,564) - - (6,030) 11,232 (5,054) (273,416)
------------ ------------ ------------ ------------ ------------ ------------ ------------
(295,773) 24,870 - (6,030) (1,523) (5,161) (283,617)
------------ ------------ ------------ ------------ ------------ ------------ ------------
TOTAL NET DEBT (279,001) 36,115 (1,601) (6,030) (1,523) (5,186) (257,226)
============ ============ ============ ============ ============ ============ ============
F-14
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12. SUMMARY OF DIFFERENCES BETWEEN U.K. AND U.S. GAAP
The consolidated financial statements are prepared in conformity with U.K.
GAAP. These accounting principles differ in certain material respects from U.S.
GAAP. Described below are the material differences between U.K. GAAP and U.S.
GAAP affecting the net income/(loss) and shareholders' equity/(deficit) which
are set forth in the tables that follow.
GOODWILL AND OTHER INTANGIBLE ASSETS
Under U.K. GAAP, purchased goodwill in respect of acquisitions since January 1,
1998 is capitalised in accordance with the requirements of FRS 10, Goodwill and
intangible assets. Purchased goodwill in respect of acquisitions before January
1, 1998 was written off to reserves in the year of acquisition. Positive
goodwill is amortised to nil over equal instalments over its estimated useful
life, generally not exceeding 20 years. Under U.S. GAAP, goodwill and
identifiable intangibles are capitalised and are written off over their
estimated useful lives, generally not exceeding 40 years. U.S. GAAP goodwill
and identifiable intangibles are being written off over periods not exceeding
20 years.
REDEEMABLE PREFERENCE SHARES
Under U.K. GAAP, preference shares with mandatory redemption features or
redeemable at the option of the security holders would be classified as a
component of shareholders' equity. U.S. GAAP requires such redeemable
preference shares not to be classified as shareholders' equity.
PENSION COSTS -- DEFINED BENEFIT PLANS
Under U.K. GAAP, the cost of providing pension benefits is expensed over the
average expected service lives of eligible employees on the basis of a constant
percentage of current and estimated future earnings. Under U.S. GAAP, Statement
of Financial Accounting Standards (SFAS) No. 87, "Employers' Accounting for
Pensions", requires that pension costs be determined based on a comparison of
the projected benefit obligation with the market value of the underlying plan
assets and other unrecognised gains and losses assessed on an actuarial basis.
As a result of this difference in methodology, the U.S. GAAP pension expense
can be significantly different from that determined under U.K. GAAP and tends
to be more sensitive to changing economic conditions.
COMPENSATED ABSENCES
Under U.S. GAAP, compensated absences, being an employee's paid holiday
entitlements, are accrued as earned. For companies that do not allow employees
to carry compensated absences over from one year to the next, no accrual is
required. U.K. GAAP does not require provision to be made.
DEFERRED TAXATION
Under U.K. GAAP, deferred taxation is provided using the liability method to
the extent that it is considered probable that a liability or asset will
crystallise in the foreseeable future. Under U.S. GAAP, deferred taxation is
provided on all temporary differences and carryforwards. Deferred tax assets
are recognised to the extent that it is more likely than not that they will be
realised. Where doubt exists as to whether a deferred tax asset will be
realised, an appropriate valuation allowance is established. In addition,
deferred taxes on other U.S. GAAP differences is provided.
F-15
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF DIFFERENCES BETWEEN U.K. AND U.S. GAAP (CONTINUED)
EFFECT OF MATERIAL DIFFERENCES BETWEEN U.K. AND U.S. GAAP AND ADDITIONAL
DISCLOSURES
(A) NET INCOME/(LOSS)
Nine months to Nine months to
September 30, 1998 September 30, 1999
L000 L000
---------------- ----------------
NET (LOSS)/INCOME REPORTED UNDER U.K.
GAAP (16,952) 11,901
Goodwill amortisation (9,749) (8,836)
Covenants not to compete amortisation (9,398) (9,630)
Pensions (99) (159)
Compensated absences (215) (129)
---------------- ----------------
NET LOSS IN CONFORMITY WITH U.S. GAAP (36,413) (6,853)
---------------- ----------------
Continuing operations (26,753) (3,978)
Discontinued operation (9,660) (2,875)
---------------- ----------------
NET LOSS IN CONFORMITY WITH U.S. GAAP (36,413) (6,853)
---------------- ----------------
(B) SHAREHOLDERS' DEFICIT
The approximate effect on shareholders' deficit of material differences between
U.K. and U.S. GAAP are as follows:
December 31, 1998 September 30, 1999
L000 L000
---------------- ----------------
SHAREHOLDERS' DEFICIT REPORTED UNDER
U.K. GAAP (221,408) (195,213)
Goodwill 204,136 196,794
Covenants not to compete 9,286 -
Redeemable preference shares (86,656) (105,478)
Pensions 994 835
Compensated absences (686) (787)
---------------- ----------------
SHAREHOLDERS' DEFICIT IN CONFORMITY
WITH U.S. GAAP (94,334) (103,849)
---------------- ----------------
The following table reconciles
shareholders' deficit under U.S. GAAP:
SHAREHOLDERS' DEFICIT AT BEGINNING OF
PERIOD (46,465) (94,334)
Issue of shares 179 1,089
Net loss for the period (45,239) (6,853)
Exchange adjustments (2,809) (3,751)
---------------- ----------------
SHAREHOLDERS' DEFICIT AT END OF PERIOD (94,334) (103,849)
---------------- ----------------
F-16
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF DIFFERENCES BETWEEN U.K. AND U.S. GAAP (CONTINUED)
(C) CASH FLOWS
The statements of cash flows prepared in accordance with U.K. GAAP present
substantially the same information as that required under U.S. GAAP. Under U.S.
GAAP however, there are certain differences from U.K. GAAP with regard to
classification of items within the cash flow statement and with regard to the
definition of cash.
Under U.K. GAAP, cash flows are presented separately for operating activities,
returns on investments and servicing of finance, taxation, capital expenditure
and financial investment, acquisitions and disposals, equity dividends paid,
management of liquid resources and financing. Under U.S. GAAP, three categories
of cash flow activity are reported, those being operating activities, investing
activities and financing activities. Cash flows from taxation and returns on
investments and servicing of finance would, with the exception of dividends
paid, be included as operating activities under U.S. GAAP. Capital expenditure
and financial investment, acquisitions and disposals and management of liquid
resources would be included as investing activities. The payment of dividends
would be included under financing activities under U.S. GAAP.
Set out below is a summary of the statements of cash flows under U.S. GAAP.
Nine months to Nine months to
September 30, 1998 September 30, 1999
L000 L000
---------------- ----------------
Net cash provided by operating
activities 5,236 30,256
Net cash used in investing activities (17,182) (13,531)
Net cash provided by/(used in)
financing activities 12,364 (8,337)
---------------- ----------------
418 8,388
Effect of exchange rate changes (1,842) (25)
---------------- ----------------
NET (DECREASE)/INCREASE IN CASH BY
CONTINUING OPERATIONS (1,424) 8,363
---------------- ----------------
(Decrease)/increase in cash by
continuing operations (1,424) 8,363
Increase in cash by discontinued
operation 1,648 1,256
---------------- ----------------
224 9,619
Cash at beginning of period 25,153 16,772
---------------- ----------------
CASH AT END OF PERIOD 25,377 26,391
---------------- ----------------
(D) COMPREHENSIVE INCOME
The company has adopted SFAS No. 130, "Reporting Comprehensive Income", which
established standards for the reporting and presentation of comprehensive
income/(loss) and its components in a full set of financial statements. The
Company's comprehensive income/(loss) differs from net income only by the
amount of the foreign currency exchange adjustments charged to shareholders'
deficit for the period. Comprehensive income for the nine months to September
30, 1998 and the nine months to September 30, 1999 is equal to the total
recognised gains and losses shown on the consolidated statement of total
recognised gains and losses. Accumulated other comprehensive losses were L1.4
million and L8.2 million at September 30, 1998 and September 30, 1999,
respectively.
F-17
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES
Intertek Finance plc ("the Issuer") is a wholly owned direct subsidiary of the
Company and the Issuer has issued the Notes which are fully and unconditionally
guaranteed on a senior subordinated basis by the Company and certain of its
wholly owned direct subsidiaries: Intertek Testing Services UK Limited, Testing
Holdings USA Inc., Yickson Enterprises Limited, Kite Overseas Holdings BV, ITS
Holding Limited, Testing Holdings Sweden AB, Testing Holdings France EURL,
Testing Holdings Germany GmbH (collectively, the "Guarantor subsidiaries" and,
together with the Company, the "Guarantors"). In addition, each of the
Guarantor's guarantee is itself guaranteed by each other Guarantor, fully and
unconditionally, on a senior subordinated basis. Subject to the provisions of
the agreement under which the loans to finance the acquisition of the business
were made, certain exceptions and applicable law, there are no restrictions on
the ability of: (a) the Company or any of its direct and indirect subsidiaries
from paying dividends or making any other distributions or loans or advances to
the Issuer or (b) the direct and indirect subsidiaries of the Company from
paying dividends or making any other distribution or loans or advances to the
Company.
Separate financial statements and other disclosures concerning the Issuer and
the Guarantors are not presented because management has determined that they
are not material to the investors. In lieu of the separate guarantor financial
statements, management has presented audited consolidating financial
information. The audited consolidating financial information presented below
has been segregated between (a) the Issuer, (b) the Guarantors and (c) the non-
Guarantor subsidiaries.
F-18
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
STATEMENTS OF OPERATIONS
Nine months to September 30, 1999
Intertek Non-Guarantor Consolidation Consolidated
Finance plc Guarantors subsidiaries adjustments totals
L000 L000 L000 L000 L000
--------------- --------------- --------------- --------------- ---------------
TOTAL GROUP REVENUES - - 309,115 (39,596) 269,519
Operating income/(costs) 90 63 (268,004) 39,596 (228,255)
Equity income of associated companies - - 242 - 242
--------------- --------------- --------------- --------------- ---------------
OPERATING INCOME 90 63 41,353 - 41,506
Non-operating exceptional items - (1,226) 3,710 - 2,484
--------------- --------------- --------------- --------------- ---------------
INCOME/(LOSS) BEFORE INTEREST 90 (1,163) 45,063 - 43,990
Net interest receivable/(payable) 59 (10,848) (13,523) - (24,312)
--------------- --------------- --------------- --------------- ---------------
INCOME/(LOSS) BEFORE TAXATION 149 (12,011) 31,540 - 19,678
Taxation (18) 969 (6,310) - (5,359)
--------------- --------------- --------------- --------------- ---------------
INCOME/(LOSS) AFTER TAXATION 131 (11,042) 25,230 - 14,319
Minority interests - - (2,418) - (2,418)
Dividends from/(to) group companies - 517 (517) - -
--------------- --------------- --------------- --------------- ---------------
NET INCOME/(LOSS) 131 (10,525) 22,295 - 11,901
=============== =============== =============== =============== ===============
STATEMENTS OF OPERATIONS
Three months to September 30, 1999
Intertek Non-Guarantor Consolidation Consolidated
Finance plc Guarantors subsidiaries adjustments totals
L000 L000 L000 L000 L000
--------------- --------------- --------------- --------------- ---------------
TOTAL GROUP REVENUES - - 100,887 (10,092) 90,795
Operating (costs)/income (49) 6 (90,563) 10,092 (80,514)
Equity income of associated companies - - 16 - 16
--------------- --------------- --------------- --------------- ---------------
OPERATING (LOSS)/INCOME (49) 6 10,340 - 10,297
Non-operating exceptional items - (194) 268 - 74
--------------- --------------- --------------- --------------- ---------------
(LOSS)/INCOME BEFORE INTEREST (49) (188) 10,608 - 10,371
Net interest receivable/(payable) 22 (3,426) (4,649) - (8,053)
--------------- --------------- --------------- --------------- ---------------
(LOSS)/INCOME BEFORE TAXATION (27) (3,614) 5,959 - 2,318
Taxation 35 233 (327) - (59)
--------------- --------------- --------------- --------------- ---------------
INCOME/(LOSS) AFTER TAXATION 8 (3,381) 5,632 - 2,259
Minority interests - - (895) - (895)
Dividends from/(to) group companies - 3 (3) - -
--------------- --------------- --------------- --------------- ---------------
NET INCOME/(LOSS) 8 (3,378) 4,734 - 1,364
=============== =============== =============== =============== ===============
F-19
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
STATEMENTS OF OPERATIONS
Nine months to September 30, 1998
Intertek Finance Non-Guarantor Consolidation Consolidated
plc Guarantors subsidiaries adjustments totals
L000 L000 L000 L000 L000
---------------- ---------------- ---------------- ---------------- ----------------
TOTAL GROUP REVENUES - - 314,243 (48,059) 266,184
Operating income/(costs) 66 92 (298,339) 48,059 (250,122)
Equity income of associated
companies - - (821) - (821)
---------------- ---------------- ---------------- ---------------- ----------------
OPERATING INCOME 66 92 15,083 - 15,241
Non-operating exceptional items - - (2,539) - (2,539)
---------------- ---------------- ---------------- ---------------- ----------------
INCOME BEFORE INTEREST 66 92 12,544 - 12,702
Net interest (payable)/receivable (14) (17,954) (5,481) - (23,449)
---------------- ---------------- ---------------- ---------------- ----------------
INCOME/(LOSS) BEFORE TAXATION 52 (17,862) 7,063 - (10,747)
Taxation (103) 611 (4,841) - (4,333)
---------------- ---------------- ---------------- ---------------- ----------------
(LOSS)/INCOME AFTER TAXATION (51) (17,251) 2,222 - (15,080)
Minority interests - - (1,872) - (1,872)
Dividends from/(to) group
companies - 169 (169) - -
---------------- ---------------- ---------------- ---------------- ----------------
NET (LOSS)/INCOME (51) (17,082) 181 - (16,952)
================ ================ ================ ================ ================
STATEMENTS OF OPERATIONS
Three months to September 30, 1998
Intertek Finance Non-Guarantor Consolidation Consolidated
plc Guarantors subsidiaries adjustments totals
L000 L000 L000 L000 L000
---------------- ---------------- ---------------- ---------------- ----------------
TOTAL GROUP REVENUES - - 109,982 (17,983) 91,999
Operating income/(costs) 68 (4) (102,558) 17,983 (84,511)
Equity income of associated
companies - - (167) - (167)
---------------- ---------------- ---------------- ---------------- ----------------
OPERATING INCOME/(LOSS) 68 (4) 7,257 - 7,321
Non-operating exceptional items - - (89) - (89)
---------------- ---------------- ---------------- ---------------- ----------------
INCOME/(LOSS) BEFORE INTEREST 68 (4) 7,168 - 7,232
Net interest (payable)/receivable (56) (6,106) (1,744) - (7,906)
---------------- ---------------- ---------------- ---------------- ----------------
INCOME/(LOSS) BEFORE TAXATION 12 (6,110) 5,424 - (674)
Taxation (2) 210 (1,815) - (1,607)
---------------- ---------------- ---------------- ---------------- ----------------
INCOME/(LOSS) AFTER TAXATION 10 (5,900) 3,609 - (2,281)
Minority interests - - (559) - (559)
---------------- ---------------- ---------------- ---------------- ----------------
NET INCOME/(LOSS) 10 (5,900) 3,050 - (2,840)
================ ================ ================ ================ ================
F-20
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
BALANCE SHEETS
September 30, 1999
Intertek Finance Non-Guarantor Consolidation Consolidated
plc Guarantors subsidiaries adjustments totals
L000 L000 L000 L000 L000
---------------- ---------------- ---------------- ---------------- ----------------
ASSETS
CURRENT ASSETS
Cash 7 (710) 27,094 - 26,391
Trade receivables - - 65,559 - 65,559
Inventories - - 3,512 - 3,512
Other current assets 126,512 265,516 260,222 (632,166) 20,084
Deferred taxation asset - - 1,336 - 1,336
---------------- ---------------- ---------------- ---------------- ----------------
TOTAL CURRENT ASSETS 126,519 264,806 357,723 (632,166) 116,882
Goodwill - - 14,552 - 14,552
Property, plant and equipment,
net - - 47,120 - 47,120
Investments in subsidiary
undertakings - 335,054 68,699 (403,753) -
Other investments - - 546 - 546
---------------- ---------------- ---------------- ---------------- ----------------
TOTAL ASSETS 126,519 599,860 488,640 (1,035,919) 179,100
================ ================ ================ ================ ================
LIABILITIES AND SHAREHOLDERS'
EQUITY/(DEFICIT)
CURRENT LIABILITIES
Borrowings (including current
portion of long term borrowings) - 10,253 (52) - 10,201
Accounts payable, accrued
liabilities and deferred income 6,709 227,825 470,561 (632,166) 72,929
Income taxes payable (65) (4,176) 9,639 - 5,398
---------------- ---------------- ---------------- ---------------- ----------------
TOTAL CURRENT LIABILITIES 6,644 233,902 480,148 (632,166) 88,528
Long term borrowings 119,640 155,376 (1,600) - 273,416
Provisions for liabilities and
charges - - 6,735 - 6,735
Minority interests - - 5,634 - 5,634
SHAREHOLDERS' EQUITY/(DEFICIT)
Ordinary shares 50 104,874 193,188 (297,304) 808
Redeemable preference shares - 105,478 - - 105,478
Shares to be issued - 2,793 - - 2,793
Premium in excess of par value - 27,239 849 (24,453) 3,635
Retained earnings/(deficit) 185 (29,802) (196,314) (81,996) (307,927)
---------------- ---------------- ---------------- ---------------- ----------------
TOTAL SHAREHOLDERS' EQUITY/
(DEFICIT) 235 210,582 (2,277) (403,753) (195,213)
---------------- ---------------- ---------------- ---------------- ----------------
TOTAL LIABILITIES AND
SHAREHOLDERS'
EQUITY/(DEFICIT) 126,519 599,860 488,640 (1,035,919) 179,100
================ ================ ================ ================ ================
F-21
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
BALANCE SHEETS
December 31, 1998
Intertek Finance Non-Guarantor Consolidation Consolidated
plc Guarantors subsidiaries adjustments totals
L000 L000 L000 L000 L000
----------------- ----------------- ----------------- ----------------- -----------------
ASSETS
CURRENT ASSETS
Cash 6 (6,691) 23,457 - 16,772
Trade receivables - - 67,516 - 67,516
Inventories - - 3,662 - 3,662
Other current assets 122,087 257,595 216,069 (580,510) 15,241
Deferred taxation asset - - 1,348 - 1,348
----------------- ----------------- ----------------- ----------------- -----------------
TOTAL CURRENT ASSETS 122,093 250,904 312,052 (580,510) 104,539
Goodwill - - 13,074 - 13,074
Property, plant and equipment,
net - - 45,951 - 45,951
Investments in subsidiary
undertakings - 332,581 71,226 (403,807) -
Other investments - - 231 - 231
----------------- ----------------- ----------------- ----------------- -----------------
TOTAL ASSETS 122,093 583,485 442,534 (984,317) 163,795
================= ================= ================= ================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT)
CURRENT LIABILITIES
Borrowings (including current
portion of long term
borrowings) - 21,154 1,055 - 22,209
Accounts payable, accrued
liabilities and deferred
income 5,723 204,430 441,309 (580,510) 70,952
Income taxes payable (83) (3,119) 8,570 - 5,368
----------------- ----------------- ----------------- ----------------- -----------------
TOTAL CURRENT LIABILITIES 5,640 222,465 450,934 (580,510) 98,529
Long term borrowings 116,257 159,205 (1,898) - 273,564
Provisions for liabilities and
charges - - 8,518 - 8,518
Minority interests - - 4,592 - 4,592
SHAREHOLDERS' EQUITY/(DEFICIT)
Ordinary shares 50 100,962 196,398 (297,074) 336
Redeemable preference shares - 86,657 - - 86,657
Shares to be issued - 2,793 - - 2,793
Premium in excess of par value - 26,702 761 (24,445) 3,018
Retained earnings/(deficit) 146 (15,299) (216,771) (82,288) (314,212)
----------------- ----------------- ----------------- ----------------- -----------------
TOTAL SHAREHOLDERS' EQUITY/
(DEFICIT) 196 201,815 (19,612) (403,807) (221,408)
----------------- ----------------- ----------------- ----------------- -----------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY/
(DEFICIT) 122,093 583,485 442,534 (984,317) 163,795
================= ================= ================= ================= =================
F-22
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
STATEMENTS OF CASH FLOWS
Nine months to September 30, 1999
Intertek Non-Guarantor Consolidation Consolidated
Finance plc Guarantors subsidiaries adjustments totals
L000 L000 L000 L000 L000
------------- ------------- ------------- ------------- -------------
Total operating cash (outflow)/inflow (120) (1,143) 46,319 - 45,056
Returns on investments and servicing of finance 2,237 (147) (15,086) - (12,996)
Taxation - (94) (4,367) - (4,461)
Capital expenditure and financial investment - - (9,131) - (9,131)
Acquisitions and disposals - (1,314) (1,485) - (2,799)
------------- ------------- ------------- ------------- -------------
CASH INFLOW/(OUTFLOW) BEFORE FINANCING 2,117 (2,698) 16,250 - 15,669
Financing (2,116) 8,686 (10,994) - (4,424)
------------- ------------- ------------- ------------- -------------
INCREASE IN CASH IN THE PERIOD 1 5,988 5,256 - 11,245
------------- ------------- ------------- ------------- -------------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN
NET DEBT
INCREASE IN CASH IN THE PERIOD 1 5,988 5,256 - 11,245
Cash inflow from increase in debt - 22,875 1,995 - 24,870
------------- ------------- ------------- ------------- -------------
Change in net debt resulting from cash flows 1 28,863 7,251 - 36,115
Debt issued in lieu of interest payment - (6,030) - - (6,030)
Acquisitions and disposals - - (1,601) - (1,601)
Other non-cash movements (436) 213 (1,300) - (1,523)
Exchange movements (2,947) (2,335) 96 - (5,186)
------------- ------------- ------------- ------------- -------------
MOVEMENT IN NET DEBT IN THE PERIOD (3,382) 20,711 4,446 - 21,775
NET DEBT AT THE START OF THE PERIOD (116,251) (187,050) 24,300 - (279,001)
------------- ------------- ------------- ------------- -------------
NET DEBT AT THE END OF THE PERIOD (119,633) (166,339) 28,746 - (257,226)
============= ============= ============= ============= =============
F-23
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
STATEMENTS OF CASH FLOWS
Nine months to September 30, 1998
Intertek Non-Guarantor Consolidation Consolidated
Finance plc Guarantors subsidiaries adjustments totals
L000 L000 L000 L000 L000
------------- ------------- ------------- ------------- -------------
Total operating cash (outflow)/inflow (2,006) (6,063) 29,688 - 21,619
Returns on investments and servicing of finance 1,946 (7,645) (7,009) - (12,708)
Taxation 61 880 (5,408) - (4,467)
Capital expenditure and financial investment - - (8,536) - (8,536)
Acquisitions and disposals - (1,133) (6,185) - (7,318)
------------- ------------- ------------- ------------- -------------
CASH INFLOW/(OUTFLOW) BEFORE FINANCING 1 (13,961) 2,550 - (11,410)
Financing - 13,414 227 - 13,641
------------- ------------- ------------- ------------- -------------
INCREASE/(DECREASE) IN CASH IN THE PERIOD 1 (547) 2,777 - 2,231
------------- ------------- ------------- ------------- -------------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN
NET DEBT
INCREASE/(DECREASE) IN CASH IN THE PERIOD 1 (547) 2,777 - 2,231
Cash (outflow)/inflow from increase in debt - (8,385) - - (8,385)
------------- ------------- ------------- ------------- -------------
Change in net debt resulting from cash flows 1 (8,932) 2,777 - (6,154)
Debt issued in lieu of interest payment - (5,097) - - (5,097)
Other non-cash movements (352) (1,266) (765) - (2,383)
Exchange movements 2,145 3,272 (2,014) - 3,403
------------- ------------- ------------- ------------- -------------
MOVEMENT IN NET DEBT IN THE PERIOD 1,794 (12,023) (2) - (10,231)
NET DEBT AT THE START OF THE PERIOD (116,502) (160,449) 24,800 - (252,151)
------------- ------------- ------------- ------------- -------------
NET DEBT AT THE END OF THE PERIOD (114,708) (172,472) 24,798 - (262,382)
============= ============= ============= ============= =============
F-24
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
STATEMENTS OF OPERATIONS
Nine months to September 30, 1999
Intertek Kite Intertek Testing
Testing Testing Overseas ITS Testing Holdings Yickson
Services Holdings Holdings Holding Services Sweden Enterprises
Ltd USA Inc BV Limited UK Ltd AB Limited
L000 L000 L000 L000 L000 L000 L000
-------- -------- -------- -------- -------- -------- --------
REVENUES FROM CONTINUING OPERATIONS - - - - - - -
Operating income/(costs) 109 - (11) - (21) - (11)
-------- -------- -------- -------- -------- -------- --------
OPERATING INCOME/(LOSS) FROM CONTINUING OPERATIONS 109 - (11) - (21) - (11)
Non-operating exceptional items (1,226) - - - - - -
-------- -------- -------- -------- -------- -------- --------
LOSS BEFORE INTEREST (1,117) - (11) - (21) - (11)
Net interest (payable)/receivable (5,528) (529) (250) 9 (2,459) (1,563) (93)
-------- -------- -------- -------- -------- -------- --------
(LOSS)/INCOME BEFORE TAXATION (6,645) (529) (261) 9 (2,480) (1,563) (104)
Taxation - 249 - (4) 738 - (14)
-------- -------- -------- -------- -------- -------- --------
(LOSS)/INCOME AFTER TAXATION (6,645) (280) (261) 5 (1,742) (1,563) (118)
Dividends from group companies - 517 - - - - -
-------- -------- -------- -------- -------- -------- --------
NET (LOSS)/INCOME (6,645) 237 (261) 5 (1,742) (1,563) (118)
======== ======== ======== ======== ======== ======== ========
Testing Testing
Holdings Holdings Guarantor
France Germany subsidiaries
EURL GmbH Total
L000 L000 L000
-------- -------- -------
REVENUES FROM CONTINUING OPERATIONS - - -
Operating income/(costs) (3) - 63
-------- -------- -------
OPERATING INCOME/(LOSS) FROM CONTINUING OPERATIONS (3) - 63
Non-operating exceptional items - - (1,226)
-------- -------- --------
LOSS BEFORE INTEREST (3) - (1,163)
Net interest (payable)/receivable (94) (341) (10,848)
-------- -------- --------
(LOSS)/INCOME BEFORE TAXATION (97) (341) (12,011)
Taxation - - 969
-------- -------- --------
(LOSS)/INCOME AFTER TAXATION (97) (341) (11,042)
Dividends from group companies - - 517
-------- -------- --------
NET (LOSS)/INCOME (97) (341) (10,525)
======== ======== ========
F-25
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
STATEMENTS OF OPERATIONS
Three months to September 30, 1999
Intertek Kite Intertek Testing
Testing Testing Overseas ITS Testing Holdings Yickson
Services Holdings Holdings Holding Services Sweden Enterprises
Ltd USA Inc BV Limited UK Ltd AB Limited
L000 L000 L000 L000 L000 L000 L000
-------- -------- -------- -------- -------- -------- --------
REVENUES FROM CONTINUING OPERATIONS - - - - - - -
Operating (costs)/income (2) - (3) - 15 - (2)
-------- -------- -------- -------- -------- -------- --------
OPERATING (LOSS)/INCOME FROM CONTINUING OPERATIONS (2) - (3) - 15 - (2)
Non-operating exceptional items (194) - - - - - -
-------- -------- -------- -------- -------- -------- --------
(LOSS)/INCOME BEFORE INTEREST (196) - (3) - 15 - (2)
Net interest (payable)/receivable (1,602) (258) (90) (3) (804) (505) (23)
-------- -------- -------- -------- -------- -------- --------
(LOSS)/INCOME BEFORE TAXATION (1,798) (258) (93) (3) (789) (505) (25)
Taxation - 1 - 2 231 - (3)
-------- -------- -------- -------- -------- -------- --------
(LOSS)/INCOME AFTER TAXATION (1,798) (257) (93) (1) (558) (505) (28)
Dividends from group companies - 3 - - - - -
-------- -------- -------- -------- -------- -------- --------
NET (LOSS)/INCOME (1,798) (254) (93) (1) (558) (505) (28)
======== ======== ======== ======== ======== ======== ========
Testing Testing
Holdings Holdings Guarantor
France Germany subsidiaries
EURL GmbH Total
L000 L000 L000
-------- -------- --------
REVENUES FROM CONTINUING OPERATIONS - - -
Operating (costs)/income (2) - 6
-------- -------- --------
OPERATING (LOSS)/INCOME FROM CONTINUING OPERATIONS (2) - 6
Non-operating exceptional items - - (194)
-------- -------- --------
(LOSS)/INCOME BEFORE INTEREST (2) - (188)
Net interest (payable)/receivable (32) (109) (3,426)
-------- -------- --------
(LOSS)/INCOME BEFORE TAXATION (34) (109) (3,614)
Taxation - 2 233
-------- -------- --------
(LOSS)/INCOME AFTER TAXATION (34) (107) (3,381)
Dividends from group companies - - 3
-------- -------- --------
NET (LOSS)/INCOME (34) (107) (3,378)
======== ======== ========
F-26
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
STATEMENTS OF OPERATIONS
Nine months to September 30, 1998
Intertek Kite Intertek Yickson
Testing Testing Overseas ITS Testing Testing Enter-
Services Holdings Holdings Holding Services Holdings prises
Ltd USA Inc BV Limited UK Ltd Sweden AB Limited
L000 L000 L000 L000 L000 L000 L000
--------- --------- --------- --------- --------- --------- ---------
REVENUES FROM CONTINUING OPERATIONS - - - - - - -
Operating income/(costs) 75 - 7 (6) 30 (5) (9)
--------- --------- --------- --------- --------- --------- ---------
OPERATING INCOME/(LOSS) FROM CONTINUING OPERATIONS 75 - 7 (6) 30 (5) (9)
Net interest (payable)/receivable (5,403) (7,669) (166) 15 (2,763) (1,545) (2)
--------- --------- --------- --------- --------- --------- ---------
(LOSS)/INCOME BEFORE TAXATION (5,328) (7,669) (159) 9 (2,733) (1,550) (11)
Taxation (8) (103) - (4) 742 - -
--------- --------- --------- --------- --------- --------- ---------
(LOSS)/INCOME AFTER TAXATION (5,336) (7,772) (159) 5 (1,991) (1,550) (11)
Dividends from group companies - 169 - - - - -
--------- --------- --------- --------- --------- --------- ---------
NET (LOSS)/INCOME (5,336) (7,603) (159) 5 (1,991) (1,550) (11)
========= ========= ========= ========= ========= ========= =========
Testing Testing Guarantor
Holdings Holdings sub-
France Germany sidiaries
EURL GmbH Total
L000 L000 L000
--------- --------- ---------
REVENUES FROM CONTINUING OPERATIONS - - -
Operating income/(costs) - - 92
--------- --------- ---------
OPERATING INCOME/(LOSS) FROM CONTINUING OPERATIONS - - 92
Net interest (payable)/receivable (45) (376) (17,954)
--------- --------- ---------
(LOSS)/INCOME BEFORE TAXATION (45) (376) (17,862)
Taxation (16) - 611
--------- --------- ---------
(LOSS)/INCOME AFTER TAXATION (61) (376) (17,251)
Dividends from group companies - - 169
--------- --------- ---------
NET (LOSS)/INCOME (61) (376) (17,082)
========= ========= =========
STATEMENTS OF OPERATIONS
Three months to September 30, 1998
Intertek Kite Intertek Yickson
Testing Testing Overseas ITS Testing Testing Enter-
Services Holdings Holdings Holding Services Holdings prises
Ltd USA Inc BV Limited UK Ltd Sweden AB Limited
L000 L000 L000 L000 L000 L000 L000
--------- --------- --------- --------- --------- --------- ---------
REVENUES FROM CONTINUING OPERATIONS - - - - - - -
Operating (costs)/income (28) - 3 (5) 30 (1) (3)
--------- --------- --------- --------- --------- --------- ---------
OPERATING (LOSS)/INCOME FROM CONTINUING OPERATIONS (28) - 3 (5) 30 (1) (3)
Net interest (payable)/receivable (1,822) (2,332) (78) 35 (925) (766) (33)
--------- --------- --------- --------- --------- --------- ---------
(LOSS)/INCOME BEFORE TAXATION (1,850) (2,332) (75) 30 (895) (767) (36)
Taxation (8) - - (14) 228 - 4
--------- --------- --------- --------- --------- --------- ---------
NET (LOSS)/INCOME (1,858) (2,332) (75) 16 (667) (767) (32)
========= ========= ========= ========= ========= ========= =========
Testing Testing Guarantor
Holdings Holdings sub-
France Germany sidiaries
EURL GmbH Total
L000 L000 L000
--------- --------- ---------
REVENUES FROM CONTINUING OPERATIONS - - -
Operating (costs)/income - - (4)
--------- --------- ---------
OPERATING (LOSS)/INCOME FROM CONTINUING OPERATIONS - - (4)
Net interest (payable)/receivable (15) (170) (6,106)
--------- --------- ---------
(LOSS)/INCOME BEFORE TAXATION (15) (170) (6,110)
Taxation - - 210
--------- --------- ---------
NET (LOSS)/INCOME (15) (170) (5,900)
========= ========= =========
F-27
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
BALANCE SHEETS
September 30, 1999
Intertek Kite Intertek Testing
Testing Testing Overseas ITS Testing Holdings
Services Holdings Holdings Holding Services Sweden
Ltd USA Inc BV Limited UK Ltd AB
L000 L000 L000 L000 L000 L000
--------- --------- --------- --------- --------- ---------
ASSETS
CURRENT ASSETS
Cash (1,487) - 6 761 3 1
Other current assets 71,592 95,733 1,987 3,833 - 4,342
--------- --------- --------- --------- --------- ---------
TOTAL CURRENT ASSETS 70,105 95,733 1,993 4,594 3 4,343
Investments in subsidiary undertakings 129,808 97,949 5,454 3,757 64,418 24,466
--------- --------- --------- --------- --------- ---------
TOTAL ASSETS 199,913 193,682 7,447 8,351 64,421 28,809
========= ========= ========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Borrowings (including current portion of long term borrowings) (88) - 248 440 1,020 400
Accounts payable, accrued liabilities and deferred income 43,641 99,312 3,580 1,717 19,294 5,251
Income taxes (receivable)/payable (1,148) (852) - 9 (2,021) -
--------- --------- --------- --------- --------- ---------
TOTAL CURRENT LIABILITIES 42,405 98,460 3,828 2,166 18,293 5,651
Long term borrowings 65,122 - 3,128 2,878 31,820 20,515
SHAREHOLDERS' EQUITY
Ordinary shares 808 95,179 1,332 3,720 - 1,812
Redeemable preference shares 105,478 - - - - -
Shares to be issued 2,793 - - - - -
Premium in excess of par value 3,635 - - - 22,709 -
Retained (deficit)/earnings (20,328) 43 (841) (413) (8,401) 831
--------- --------- --------- --------- --------- ---------
TOTAL SHAREHOLDERS' EQUITY 92,386 95,222 491 3,307 14,308 2,643
--------- --------- --------- --------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 199,913 193,682 7,447 8,351 64,421 28,809
========= ========= ========= ========= ========= =========
Testing Testing Guarantor
Yickson Holdings Holdings sub-
Enterprises France Germany sidiaries
Limited EURL GmbH Total
L000 L000 L000 L000
--------- --------- --------- ---------
ASSETS
CURRENT ASSETS
Cash 6 - - (710)
Other current assets 87,359 670 - 265,516
--------- --------- --------- ---------
TOTAL CURRENT ASSETS 87,365 670 - 264,806
Investments in subsidiary undertakings - 3,446 5,756 335,054
--------- --------- --------- ---------
TOTAL ASSETS 87,365 4,116 5,756 599,860
========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Borrowings (including current portion of long term borrowings) 8,233 - - 10,253
Accounts payable, accrued liabilities and deferred income 51,860 2,810 360 227,825
Income taxes (receivable)/payable 6 (17) (153) (4,176)
--------- --------- --------- ---------
TOTAL CURRENT LIABILITIES 60,099 2,793 207 233,902
Long term borrowings 27,214 - 4,699 155,376
SHAREHOLDERS' EQUITY
Ordinary shares - 861 1,162 104,874
Redeemable preference shares - - - 105,478
Shares to be issued - - - 2,793
Premium in excess of par value 50 - 845 27,239
Retained (deficit)/earnings 2 462 (1,157) (29,802)
--------- --------- --------- ---------
TOTAL SHAREHOLDERS' EQUITY 52 1,323 850 210,582
--------- --------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 87,365 4,116 5,756 599,860
========= ========= ========= =========
F-28
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
BALANCE SHEETS
December 31, 1998
Intertek Kite Intertek Testing
Testing Testing Overseas ITS Testing Holdings
Services Holdings Holdings Holding Services Sweden
Ltd USA Inc BV Limited UK Ltd AB
L000 L000 L000 L000 L000 L000
--------- --------- --------- --------- --------- ---------
ASSETS
CURRENT ASSETS
Cash (6,824) - 123 1 3 1
Other current assets 72,775 92,703 1,856 4,042 576 4,342
--------- --------- --------- --------- --------- ---------
TOTAL CURRENT ASSETS 65,951 92,703 1,979 4,043 579 4,343
Investments in subsidiary undertakings 128,624 95,617 5,983 3,510 64,418 24,466
--------- --------- --------- --------- --------- ---------
TOTAL ASSETS 194,575 188,320 7,962 7,553 64,997 28,809
========= ========= ========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Borrowings (including current portion of long term borrowings) 16,333 - 260 232 1,629 383
Accounts payable, accrued liabilities and deferred income 38,458 96,133 3,295 1,197 13,621 3,423
Income taxes (receivable)/payable (1,148) (536) - 4 (1,283) -
--------- --------- --------- --------- --------- ---------
TOTAL CURRENT LIABILITIES 53,643 95,597 3,555 1,433 13,967 3,806
Long term borrowings 57,568 - 3,595 3,174 34,899 20,819
SHAREHOLDERS' EQUITY
Ordinary shares 336 92,913 1,463 3,476 - 1,812
Redeemable preference shares 86,657 - - - - -
Shares to be issued 2,793 - - - - -
Premium in excess of par value 3,018 - - - 22,709 -
Retained (deficit)/earnings (9,440) (190) (651) (530) (6,578) 2,372
--------- --------- --------- --------- --------- ---------
TOTAL SHAREHOLDERS' EQUITY/(DEFICIT) 83,364 92,723 812 2,946 16,131 4,184
--------- --------- --------- --------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 194,575 188,320 7,962 7,553 64,997 28,809
========= ========= ========= ========= ========= =========
Testing Testing Guarantor
Yickson Holdings Holdings sub-
Enterprises France Germany sidiaries
Limited EURL GmbH Total
L000 L000 L000 L000
--------- --------- --------- ---------
ASSETS
CURRENT ASSETS
Cash 5 - - (6,691)
Other current assets 80,514 787 - 257,595
--------- --------- --------- ---------
TOTAL CURRENT ASSETS 80,519 787 - 250,904
Investments in subsidiary undertakings - 3,652 6,311 332,581
--------- --------- --------- ---------
TOTAL ASSETS 80,519 4,439 6,311 583,485
========= ========= ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Borrowings (including current portion of long term borrowings) 2,317 - - 21,154
Accounts payable, accrued liabilities and deferred income 44,095 2,887 1,321 204,430
Income taxes (receivable)/payable 12 - (168) (3,119)
--------- --------- --------- ---------
TOTAL CURRENT LIABILITIES 46,424 2,887 1,153 222,465
Long term borrowings 33,983 - 5,167 159,205
SHAREHOLDERS' EQUITY
Ordinary shares - 944 18 100,962
Redeemable preference shares - - - 86,657
Shares to be issued - - - 2,793
Premium in excess of par value 49 - 926 26,702
Retained (deficit)/earnings 63 608 (953) (15,299)
--------- --------- --------- ---------
TOTAL SHAREHOLDERS' EQUITY/(DEFICIT) 112 1,552 (9) 201,815
--------- --------- --------- ---------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 80,519 4,439 6,311 583,485
========= ========= ========= =========
F-29
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
STATEMENTS OF CASH FLOWS
Nine months to September 30, 1999
Intertek Kite Intertek Testing
Testing Testing Overseas ITS Testing Holdings
Services Holdings Holdings Holding Services Sweden
Ltd USA Inc BV Limited UK Ltd AB
L000 L000 L000 L000 L000 L000
--------- --------- --------- --------- --------- ---------
Total operating cash (outflow)/inflow (1,640) - (4) (2) 522 -
Returns on investments and servicing of finance (160) 651 (200) 663 (1,558) (815)
Taxation - (57) - - - -
Acquisitions (1,184) - (8) - - -
--------- --------- --------- --------- --------- ---------
CASH (OUTFLOW)/INFLOW BEFORE FINANCING (2,984) 594 (212) 661 (1,036) (815)
Financing 8,321 (594) 103 98 1,036 815
--------- --------- --------- --------- --------- ---------
INCREASE/(DECREASE) IN CASH 5,337 - (109) 759 - -
--------- --------- --------- --------- --------- ---------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
INCREASE/(DECREASE) IN CASH 5,337 - (109) 759 - -
Cash inflow from increase in debt 16,277 - 148 215 4,564 228
--------- --------- --------- --------- --------- ---------
Change in net debt resulting from cash flows 21,614 - 39 974 4,564 228
Debt issued in lieu of interest payment (6,030) - - - - -
Other non-cash movements 88 - (6) (37) 97 59
Exchange adjustments (1,468) - 329 (89) (973) -
--------- --------- --------- --------- --------- ---------
Movement in net debt in the period 14,204 - 362 848 3,688 287
Net debt at start of period (80,725) - (3,732) (3,405) (36,525) (21,201)
--------- --------- --------- --------- --------- ---------
NET DEBT AT END OF PERIOD (66,521) - (3,370) (2,557) (32,837) (20,914)
========= ========= ========= ========= ========= =========
Testing Testing Guarantor
Yickson Holdings Holdings sub-
Enterprises France Germany sidiaries
Limited EURL GmbH Total
L000 L000 L000 L000
--------- --------- --------- ---------
Total operating cash (outflow)/inflow (12) (5) (2) (1,143)
Returns on investments and servicing of finance 1,301 (29) - (147)
Taxation (20) (17) - (94)
Acquisitions - (122) - (1,314)
--------- --------- --------- ---------
CASH (OUTFLOW)/INFLOW BEFORE FINANCING 1,269 (173) (2) (2,698)
Financing (1,268) 173 2 8,686
--------- --------- --------- ---------
INCREASE/(DECREASE) IN CASH 1 - - 5,988
--------- --------- --------- ---------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
INCREASE/(DECREASE) IN CASH 1 - - 5,988
Cash inflow from increase in debt 1,443 - - 22,875
--------- --------- --------- ---------
Change in net debt resulting from cash flows 1,444 - - 28,863
Debt issued in lieu of interest payment - - - (6,030)
Other non-cash movements (1) - 13 213
Exchange adjustments (589) - 455 (2,335)
--------- --------- --------- ---------
Movement in net debt in the period 854 - 468 20,711
Net debt at start of period (36,295) - (5,167) (187,050)
--------- --------- --------- ---------
NET DEBT AT END OF PERIOD (35,441) - (4,699) (166,339)
========= ========= ========= =========
F-30
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
STATEMENTS OF CASH FLOWS
Nine months to September 30, 1998
Intertek Kite Intertek
Testing Testing Overseas ITS Testing Testing
Services Holdings Holdings Holding Services Holdings
Ltd USA Inc BV Limited UK Ltd Sweden AB
L000 L000 L000 L000 L000 L000
--------- --------- --------- --------- --------- ---------
Total operating cash (outflow)/inflow (17,465) 6,827 1,360 127 2,248 1,155
Returns on investments and servicing of finance 412 (6,865) (122) (3) (1,681) (943)
Taxation 489 38 32 - 280 -
Capital expenditure and financial investment (9) - (1,124) - - -
--------- --------- --------- --------- --------- ---------
CASH (OUTFLOW)/INFLOW BEFORE FINANCING (16,573) - 146 124 847 212
Financing 16,021 - (142) (124) (848) (211)
--------- --------- --------- --------- --------- ---------
(DECREASE)/INCREASE IN CASH (552) - 4 - (1) 1
--------- --------- --------- --------- --------- ---------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
(DECREASE)/INCREASE IN CASH (552) - 4 - (1) 1
Cash (outflow)/inflow from increase in debt (10,992) - 142 124 848 211
--------- --------- --------- --------- --------- ---------
Change in net debt resulting from cash flows (11,544) - 146 124 847 212
Debt issued in lieu of interest payment (5,097) - - - - -
Other non-cash movements (82) - (42) (233) (289) (184)
Exchange adjustments 976 - (143) 243 699 835
--------- --------- --------- --------- --------- ---------
Movement in net debt in the period (15,747) - (39) 134 1,257 863
Net debt at start of period (51,350) - (3,863) (3,609) (38,122) (22,374)
--------- --------- --------- --------- --------- ---------
NET DEBT AT END OF PERIOD (67,097) - (3,902) (3,475) (36,865) (21,511)
========= ========= ========= ========= ========= =========
Yickson Testing Testing Guarantor
Enter- Holdings Holdings sub-
prises France Germany sidiaries
Limited EURL GmbH Total
L000 L000 L000 L000
--------- --------- --------- ---------
Total operating cash (outflow)/inflow (524) 13 196 (6,063)
Returns on investments and servicing of finance 1,807 (54) (196) (7,645)
Taxation - 41 - 880
Capital expenditure and financial investment - - - (1,133)
--------- --------- --------- ---------
CASH (OUTFLOW)/INFLOW BEFORE FINANCING 1,283 - - (13,961)
Financing (1,282) - - 13,414
--------- --------- --------- ---------
(DECREASE)/INCREASE IN CASH 1 - - (547)
--------- --------- --------- ---------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
(DECREASE)/INCREASE IN CASH 1 - - (547)
Cash (outflow)/inflow from increase in debt 1,282 - - (8,385)
--------- --------- --------- ---------
Change in net debt resulting from cash flows 1,283 - - (8,932)
Debt issued in lieu of interest payment - - - (5,097)
Other non-cash movements (373) - (63) (1,266)
Exchange adjustments 828 - (166) 3,272
--------- --------- --------- ---------
Movement in net debt in the period 1,738 - (229) (12,023)
Net debt at start of period (36,398) - (4,733) (160,449)
--------- --------- --------- ---------
NET DEBT AT END OF PERIOD (34,660) - (4,962) (172,472)
========= ========= ========= =========
F-31
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant certifies that it meets all of the requirements for filing on Form
6-K and has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorised.
INTERTEK TESTING SERVICES LIMITED
(Registrant)
By: /s/ WILLIAM SPENCER
-------------------
Name: William Spencer
Title: Director
Date: November 16, 1999