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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 6-K
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REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
Information furnished as at August 14, 1998
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 six months ended
June 30, 1998
Pages 1-44
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INTERTEK TESTING SERVICES LIMITED
RESULTS BY OPERATION
(L IN THOUSANDS)
The following tables set forth, for the six months ended June 30, 1997 (the
"1997 Period"), the six months ended June 30, 1998 (the "1998 Period"), the
three months ended June 30, 1997 (the "1997 Quarter") and the three months ended
June 30, 1998 (the "1998 Quarter") revenues and operating income for the major
divisions of Intertek Testing Services Limited (the "Company") and its
subsidiaries (collectively the "Group" or "ITS"), as well as revenues by
geographic area, expressed in thousands of pounds sterling, except for
percentages. The geographic area relates to the area where the operation is
located, not the location of the clients. Overhead costs for the central head
office and non-operating holding companies ("Central Costs") are allocated to
divisions in proportion to their share of total revenues.
JANUARY 1, JANUARY 1,
1997 1998
TO TO
JUNE 30, 1997 JUNE 30, 1998
-------------- --------------
REVENUES BY DIVISION:
Consumer Goods................................................................. 27,467 30,048
Conformity Assessment.......................................................... 41,078 42,471
Caleb Brett.................................................................... 52,584 57,758
Foreign Trade Supervision...................................................... 24,174 30,235
Minerals....................................................................... 13,546 8,973
Environmental.................................................................. 8,459 4,700
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TOTAL OPERATING REVENUE........................................................ 167,308 174,185
------- -------
------- -------
OPERATING INCOME BEFORE EXCEPTIONAL ITEMS:
Consumer Goods................................................................. 6,480 7,644
Conformity Assessment.......................................................... 4,045 5,435
Caleb Brett.................................................................... 4,109 6,476
Foreign Trade Supervision...................................................... 1,840 2,990
Other Divisions................................................................ 1,721 (1,291)
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TOTAL OPERATING INCOME......................................................... 18,195 21,254
------- -------
------- -------
REVENUE BY GEOGRAPHICAL AREA:
Americas....................................................................... 76,630 77,342
Europe, Africa and Middle East................................................. 54,493 60,465
Asia and Far East.............................................................. 36,185 36,378
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TOTAL OPERATING REVENUE........................................................ 167,308 174,185
------- -------
------- -------
JANUARY 1, JANUARY 1,
1997 1998
TO TO
JUNE 30, 1997 JUNE 30, 1998
-------------- --------------
TOTAL REVENUES FROM CONTINUING OPERATIONS........................................ 167,308 174,185
Less : share of joint ventures' revenue.......................................... -- (656)
Group revenues from continuing operations........................................ 167,308 173,529
Operating costs.................................................................. (144,220) (165,611)
Share of operating profit in investments......................................... 44 2
-------------- --------------
OPERATING INCOME FROM CONTINUING OPERATIONS...................................... 23,132 7,920
Operating income before exceptional items........................................ 18,195 21,254
Exceptional items credited to/(charged against) income........................... 4,937 (13,334)
-------------- --------------
23,132 7,920
2
INTERTEK TESTING SERVICES LIMITED
RESULTS BY OPERATION
(L IN THOUSANDS)
APRIL 1, 1997 APRIL 1, 1998
TO TO
JUNE 30, 1997 JUNE 30, 1998
------------- -------------
REVENUES BY DIVISION:
Consumer Goods...................................................................... 15,758 15,451
Conformity Assessment............................................................... 22,806 22,792
Caleb Brett......................................................................... 27,684 29,766
Foreign Trade Supervision........................................................... 13,161 16,030
Minerals............................................................................ 7,572 4,897
Environmental....................................................................... 4,210 2,090
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TOTAL OPERATING REVENUE............................................................. 91,191 91,026
------ ------
------ ------
OPERATING INCOME BEFORE EXCEPTIONAL ITEMS:
Consumer Goods...................................................................... 4,466 5,248
Conformity Assessment............................................................... 2,003 3,138
Caleb Brett......................................................................... 2,425 3,595
Foreign Trade Supervision........................................................... 1,292 1,600
Other Divisions..................................................................... 966 (336)
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TOTAL OPERATING INCOME.............................................................. 11,152 13,245
------ ------
------ ------
REVENUE BY GEOGRAPHICAL AREA:
Americas............................................................................ 40,198 37,914
Europe, Africa and Middle East...................................................... 30,816 33,155
Asia and Far East................................................................... 20,177 19,957
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TOTAL OPERATING REVENUE............................................................. 91,191 91,026
------ ------
------ ------
APRIL 1, APRIL 1,
1997 1998
TO TO
JUNE 30, JUNE 30,
1997 1998
------------ ------------
TOTAL REVENUES FROM CONTINUING OPERATIONS........................................... 91,191 91,026
Less : share of joint ventures' revenue............................................. -- (329)
------------ ------------
Group revenues from continuing operations........................................... 91,191 90,697
Operating costs..................................................................... (73,629) (90,779)
Share of operating profit/(loss) in investments..................................... 17 (24)
------------ ------------
OPERATING INCOME / (LOSS)FROM CONTINUING OPERATIONS................................. 17,579 (106)
Operating income before exceptional items........................................... 11,152 13,245
Exceptional items credited to/(charged against) income.............................. 6,427 (13,351)
------------ ------------
17,579 (106)
3
RESULTS OF OPERATIONS AT PRIOR YEAR EXCHANGE RATES
Although for the purposes of reporting obligations, the Accounts of the
Group are reported in pounds sterling, over 50% of the Group's revenues are
denominated in U.S. dollars or currencies linked to the U.S. dollar, such as the
Hong Kong dollar. The Group's borrowings, interest payments and debt repayments
are also denominated mainly in U.S. dollars and Hong Kong dollars. Each of the
Group's 134 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 accounts of the Group are shown in pounds sterling.
It is not the Group's policy to hedge this exposure.
The results of overseas operations are translated into pounds sterling at
the cumulative average exchange rates for the period. Therefore, the comparison
of ITS's 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's main business divisions
at actual exchange rates for the period and at prior year exchange rates for the
period. Growth Rates at Actual and Prior Year Exchange Rates for the period.
GROWTH RATES AT ACTUAL AND PRIOR YEAR EXCHANGE RATES
% CHANGE
JANUARY 1, 1997 JANUARY 1, 1998 --------------------
TO TO PRIOR
JUNE 30, 1997 JUNE 30, 1998 ACTUAL YEAR
-------------------- -------------------- RATES RATES
L'000 % L'000 % (1) (2)
--------- --- --------- --- --------- ---------
REVENUES:
Consumer Goods............................................ 27,467 16 30,048 17 9.4 21.5
Conformity Assessment..................................... 41,078 25 42,471 25 3.4 7.3
Caleb Brett............................................... 52,584 32 57,758 33 9.8 19.4
Foreign Trade Supervision................................. 24,174 14 30,235 17 25.1 27.9
Other Divisions........................................... 22,005 13 13,673 8 (37.9) (9.4)
--------- --- --------- --- --------- ---------
167,308 100 174,185 100 4.1 14.2
--------- --- --------- --- --------- ---------
--------- --- --------- --- --------- ---------
OPERATING INCOME BEFORE EXCEPTIONAL ITEMS:
Consumer Goods............................................ 6,480 36 7,644 36 18.0 31.5
Conformity Assessment..................................... 4,045 22 5,435 26 34.4 39.7
Caleb Brett............................................... 4,109 23 6,476 30 57.6 80.2
Foreign Trade Supervision................................. 1,840 10 2,990 14 62.5 74.3
Other Divisions........................................... 1,721 9 (1,291) (6) (175.0) (173.5)
--------- --- --------- --- --------- ---------
18,195 100 21,254 100 16.8 29.3
--------- --- --------- --- --------- ---------
--------- --- --------- --- --------- ---------
- ------------------------
(1) Represents percentage change over the 1997 Period where the 1997 Period is
translated using cumulative average exchange rates for the period January 1,
1997 to June 30, 1997 and the 1998 Period is translated using cumulative
average exchange rates for the period January 1, 1998 to June 30, 1998.
(2) Represents percentage change over the 1997 Period where the 1997 Period and
the 1998 Period have been translated using cumulative average exchange rates
for the period January 1, 1997 to June 30, 1997.
4
GROWTH RATES AT ACTUAL AND PRIOR YEAR EXCHANGE RATES
% CHANGE
APRIL 1, 1997 APRIL 1, 1998 --------------------
TO TO PRIOR
JUNE 30, 1997 JUNE 30, 1998 ACTUAL YEAR
-------------------- -------------------- RATES RATES
L'000 % L'000 % (3) (4)
--------- --- --------- --- --------- ---------
REVENUES:
Consumer Goods.............................................. 15,758 17 15,451 17 (1.9) 9.0
Conformity Assessment....................................... 22,806 25 22,792 25 (0.1) 3.2
Caleb Brett................................................. 27,684 30 29,766 33 7.5 16.6
Foreign Trade Supervision................................... 13,161 15 16,030 18 21.8 24.5
Other Divisions............................................. 11,782 13 6,987 7 (40.7) (11.0)
--------- --- --------- --- --------- ---------
91,191 100 91,026 100 (0.2) 9.5
--------- --- --------- --- --------- ---------
--------- --- --------- --- --------- ---------
OPERATING INCOME BEFORE EXCEPTIONAL ITEMS:
Consumer Goods.............................................. 4,466 40 5,248 40 17.5 28.7
Conformity Assessment....................................... 2,003 18 3,138 22 56.7 61.2
Caleb Brett................................................. 2,425 22 3,595 28 48.2 65.6
Foreign Trade Supervision................................... 1,292 11 1,600 12 23.9 33.5
Other Divisions............................................. 966 9 (336) (2) (134.8) (133.0)
--------- --- --------- --- --------- ---------
11,152 100 13,245 100 18.8 29.1
--------- --- --------- --- --------- ---------
--------- --- --------- --- --------- ---------
- ------------------------
(3) Represents percentage change over the 1997 Quarter where the 1997 Quarter is
translated using cumulative average exchange rates for the period April 1,
1997 to June 30, 1997 and the 1998 Quarter is translated using cumulative
average exchange rates for the period April 1, 1998 to June 30, 1998.
(4) Represents percentage change over the 1997 Quarter where the 1997 Quarter
and the 1998 Quarter have been translated using cumulative average exchange
rates for the period April 1, 1997 to June 30, 1997.
5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS
GENERAL
BUSINESS DESCRIPTION
The Group has 444 offices and 210 laboratories and operates in 84 countries.
It is comprised of five functioning divisions, each focusing on a different area
of laboratory testing, inspection and certification. From January 1, 1998, the
Quality Systems Division was sub divided into Consumer Goods and Conformity
Assessment. Previously, Foreign Trade Supervision ("FTS") was included within
Other Divisions, and is now reported separately.
CONSUMER GOODS. Consumer Goods is focussed principally on the testing and
inspection of textiles, fabrics, footwear, toys and consumer products.
CONFORMITY ASSESSMENT. Conformity Assessment concentrates mainly on the
testing and certification of electrical and electronic products, building
products, heating and ventilation and air conditioning equipment. Conformity
Assessment also certifies the quality of management systems to standards such as
ISO -- 9000.
CALEB BRETT. Caleb Brett is the joint leader in the market for testing and
inspection of hydrocarbon commodities. Caleb Brett's primary business is
providing independent verification of the quantity and quality of crude oil,
petroleum and chemical products and, to a lesser extent, agricultural produce,
such as grain, cotton and sugar.
FOREIGN TRADE SUPERVISION. FTS provides preshipment inspection services to
governments to ensure that import duty is properly declared, that goods are
accurately described and comply with legal requirements.
OTHER DIVISIONS. The Group's two other divisions (collectively the "Other
Divisions") consist of Minerals, which provides a laboratory testing service for
samples from exploration and producing mines, principally of gold but also
copper, zinc and other metals through its subsidiary, Bondar Clegg, and
Environmental Testing, which undertakes analytical testing of samples to
determine the chemical composition of air, soil and water for environmental
purposes. In a press release dated July 17, 1998, it was announced that the
board of ITS decided to close its Environmental Testing Division. The two
environmental testing laboratories and other support facilities in the USA will
be closed or sold.
ASIA
Approximately 21% of ITS's revenue is generated by operations located in
Asia and the Far East, with over 50% of this revenue being generated in Hong
Kong. All divisions of ITS, other than Environmental Testing, have operations in
Asia. Approximately 56% of the Asian revenue is in Consumer Goods, 23% in Caleb
Brett and 21% in the other divisions. Management believes that the current
economic crisis in certain Asian countries has not had a material effect on
those operations. Because certain Asian currencies have weakened against pounds
sterling in the 1998 Period, the results of some Asian operations are lower in
the 1998 Period than the 1997 Period due to the effect of translating those
results into pounds sterling.
SIX MONTHS ENDED JUNE 30, 1998 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1997
REVENUES. The Group increased total revenues by 4.1% or L6.9 million, to
L174.2 million in the 1998 Period compared to L167.3 million in the 1997 Period.
After translating results at prior year exchange rates, revenues increased by
14.2%. The percentage of total revenue attributable to each division was 17%
Consumer Goods, 25% Conformity Assessment, 33% Caleb Brett, 17% FTS and 8% Other
Divisions in the 1998 Period and 16% Consumer Goods, 25% Conformity Assessment,
32% Caleb Brett, 14% FTS and 13% Other Divisions in the 1997 Period.
6
OPERATING COSTS. Total operating costs before exceptional items increased
L3.1 million or 2.1% from L149.2 million in the 1997 Period to L152.3 million in
the 1998 Period and there was an increase in the total operating margin of 1.3%
from 10.9% in the 1997 Period to 12.2% in the 1998 Period.
OPERATING INCOME BEFORE EXCEPTIONAL ITEMS. Total operating income before
exceptional items increased by 16.8% or L3.1 million to L21.3 million in the
1998 Period, from L18.2 million in the 1997 Period. After translating results at
prior year exchange rates, operating income before exceptional items increased
by 29.3%.
EXCEPTIONAL ITEMS. Due to the irregular nature of the payments received
from one of ITS's West African clients, in April 1997 ITS adopted a policy of
making full provision against all unpaid invoices relating to this client, and
income is only recognised once invoices are paid. In the 1997 Period, payments
totalling L9.4 million were received from this client, settling all invoices up
to the end of January 1997. This resulted in an exceptional credit of L4.9
million in the 1997 Period. In the 1998 Period, payments totalling L4.7 million
were received from this client, settling all invoices up to August 1997.
Invoices from September 1997 to date remain unpaid and full provision has been
made against these invoices. A provision of L10.7 million has been made against
unpaid invoices raised in the 1998 Period, resulting in an exceptional charge of
L6.0 million after crediting the cash received in the 1998 Period. Management
believes that further payments are expected.
An exceptional charge of L3.0 million has been made in the 1998 Period, to
provide for the legal and reprocessing costs which may be incurred by
Environmental Testing, as a result of the ongoing investigation by the
Environmental Protection Agency ("EPA"), into the data manipulation problems at
the Dallas, Texas laboratory.
An exceptional charge of L4.4 million has been made in the 1998 Period
relating to the operating costs associated with the closure of the Environmental
Testing Division. This charge includes full provision for all outstanding lease
obligations and staff redundancies as well as the cost of continuing to store
data for clients of Environmental Testing. ITS is currently in discussions
regarding the possible sale or sub-leasing of the operations and facilities. It
is not possible to estimate the cost to ITS of any civil or criminal penalties
resulting from the falsification of test results therefore no provision has been
made for these costs in the 1998 Period.
OPERATING INCOME. Total operating income after operating exceptional items
was L7.9 million in 1998 Period compared to L23.1 million in 1997 Period, a
decrease of L15.2 million or 65.8%.
NON-OPERATING EXCEPTIONAL COSTS. During the 1998 Period, an exceptional
charge of L2.4 million has been made for non-operating exceptional costs
relating to the closure of the Environmental Testing Division.
NET INTEREST EXPENSE. Net interest expense was L15.5 million in the 1998
Period and L15.1 million in the 1997 Period.
NET LOSS BEFORE TAXES. The loss before taxes and minority interests was
L10.1 million in the 1998 Period compared to net income of L8.0 million in the
1997 Period, a decrease in income of L18.1 million.
INCOME TAXES. A taxation charge of L2.7 million was made against income in
the 1998 Period compared to L1.8 million in the 1997 Period. For quarterly
reporting, the estimated tax rate for the full year is applied to the income
before taxation for the Period before adjusting for any operating or
non-operating exceptional items. The taxation charges on income before taxation
and exceptional items for the 1997 Period and 1998 Period have been calculated
based on the estimated effective tax rates for the relevant full years.
Exceptional items have been tax effected as appropriate.
NET INCOME / (LOSS) AFTER MINORITY INTERESTS. The net loss after minority
interest for ITS for the 1998 Period was L(14.1) million, compared to L4.8
million net income in the 1997 Period, a decrease in net income of L18.9
million.
7
CONSUMER GOODS. Consumer Goods saw an increase in revenues of L2.6 million,
or 9.4% to L30.0 million in the 1998 Period from L27.5 million in the 1997
Period. After translating results at prior year exchange rates, Consumer Goods
increased its revenues by 21.5%. The growth in Consumer Goods revenues is due
both to an expanding market, and the expansion of the ITS network into new
territories.
Operating Income in Consumer Goods increased L1.1 million, or 18.0% to L7.6
million in the 1998 Period from L6.5 million in the 1997 Period. After
translating results at prior year exchange rates, Consumer Goods increased its
operating income by 31.5%.
CONFORMITY ASSESSMENT. Conformity Assessment increased its revenues L1.4
million, or 3.4% to L42.5 million in the 1998 Period from L41.1 million in the
1997 Period. After translating results at prior year exchange rates, Conformity
Assessment increased its revenues by 7.3%. Management attributes these results,
in part, to the stabilisation of the electrical magnetic compatibility ("EMC")
testing market at a level below 1996, when a new directive was introduced. There
has also been growth in the electrical safety, telecom and building materials
testing sectors, partly due to the strong economy in the United States.
Conformity Assessment operating income increased L1.4 million, or 34.4% to
L5.5 million in the 1998 Period from L4.1 million in the 1997 Period. After
translating results at prior year exchange rates, Conformity Assessment
increased its operating income by 39.7%. The increase in profitability follows
cost reductions made in late 1997 to respond to the reduced volume of EMC
testing work.
CALEB BRETT. Caleb Brett increased its revenues L5.2 million, or 9.8%, to
L57.8 million in the 1998 Period from L52.6 million in the 1997 Period. After
translating results at prior year exchange rates, Caleb Brett increased its
revenues by 19.4%. The Group attributes these results to an increase in market
share, particularly in the inspection and testing of chemicals, and in the 1998
Period there was also an increase in the volume of outsourced work, whereby oil
companies have handed over the management of their laboratories to Caleb Brett
or subcontracted the oil samples to be tested by Caleb Brett. A small business
in Australia was acquired in March 1998 at a cost of L0.2 million.
In April 1998, Caleb Brett acquired the business of Van Sluys and Bayet
Group ("VSB") in Belgium for a purchase consideration of BEF 221 million (L3.6
million).
On June 2, 1998, Caleb Brett acquired a Norwegian company - West Lab
Services AS ("West Lab"), for approximately 73 million NOK (L6.0 million). Of
the total consideration of L6 million, L2.5 million is contingent on West Lab
achieving certain financial targets.
Caleb Brett's operating income increased L2.4 million, or 57.6%, to L6.5
million in the 1998 Period from L4.1 million in the 1997 Period. After
translating results at prior year exchange rates, Caleb Brett increased its
operating income by 80.2%. Operating income has increased in each geographic
region. The Americas have benefited from strong demand for oil and also from a
small acquisition made towards the end of 1997. Latin America and Europe have
improved operating income due to the effect of reductions in the cost base taken
in 1997 and income generated from new clients. Asia has continued to expand its
oil inspection and testing business.
FOREIGN TRADE SUPERVISION. Revenues for FTS increased L6.0 million, or
25.1%, to L30.2 million in the 1998 Period from L24.2 million in the 1997
Period. After translating results at prior year exchange rates, FTS revenues
increased by 27.9%. This revenue increase was due in part, to FTS obtaining two
new preshipment inspection ("PSI") programs.
Operating Income before exceptional items, from FTS increased L1.2 million
or 57.6% to L3.0 million in the 1998 Period from L1.8 million in the 1997
Period. After translating results at prior year exchange rates, FTS operating
income increased by 74.3%. This was due to the expansion of work in West Africa,
which commenced in June 1997, the continued growth of work in the Middle East
and the development of the PSI program in Southern Africa which commenced in
1997.
OTHER DIVISIONS. Revenues for Other Divisions decreased by L8.3 million or
37.9% to L13.7 million compared to L22.0 million in the 1997 Period. After
translating at prior year exchange rates, Other
8
Division's revenues decreased by 9.4%. Revenues from the Minerals division
decreased by L4.6 million or 33.8% to L9.0 million. This was mainly due to the
gold price, which was at a 17 year low during 1997, resulting in a reduction in
the level of exploration activity by gold mining companies towards the end of
1997 and continuing into the 1998 Period. Revenues from the Environmental
Testing division decreased by L3.8 million or 44.4% to L4.7 million compared to
L8.5 million in the 1997 Period. This was due to the closure of a loss making
laboratory in the United States in September 1997 and the continuing difficult
market conditions.
Operating income from Minerals decreased by L2.0 million or 81.6% to L0.5
million compared to L2.5 million in the 1997 Period. Reorganisation costs have
been incurred in the 1998 Period to reduce the cost base in the Minerals
division in North and South America to match the reduction in revenues. The
operating loss of Environmental increased by L1.0 million to L(1.8) million
compared to L(0.8) in the 1997 Period due to continuing difficult market
conditions.
THREE MONTHS ENDED JUNE 30, 1998 COMPARED WITH THREE MONTHS ENDED JUNE 30, 1997
REVENUES. The Group's revenues decreased 0.2% or L0.2 million, to L91.0
million in the 1998 Quarter compared to L91.2 million in the 1997 Quarter. After
translating results at prior year exchange rates, revenues increased by 9.5%.
The percentage of total revenue attributable to each division was 17% Consumer
Goods, 25% Conformity Assessment, 33% Caleb Brett, 18% FTS and 7% Other
Divisions in the 1998 Quarter and 17% Consumer Goods, 25% Conformity Assessment,
30% Caleb Brett, 15% FTS and 13% Other Divisions in the 1997 Quarter.
OPERATING COSTS. Total operating costs before exceptional items decreased
L2.7 million or 3.4% from L80.1 million in the 1997 Quarter to L77.4 million in
the 1998 Quarter and there was an increase in the total operating margin of 2.4%
from 12.2% in the 1997 Quarter to 14.6% in the 1998 Quarter.
OPERATING INCOME BEFORE EXCEPTIONAL ITEMS. Total operating income before
exceptional items increased by 18.8% or L2.0 million to L13.2 million in the
1998 Quarter from L11.2 million in the 1997 Quarter. After translating results
at prior year exchange rates, operating income before exceptional items
increased by 29.1%.
EXCEPTIONAL ITEMS. Due to the irregular nature of the payments received
from one of ITS's West African clients, in April 1997 ITS adopted a policy of
making full provision against all unpaid invoices relating to this client, and
income is only recognised once invoices are paid. In the 1997 Quarter, payments
totalling L9.4 million were received from this client, settling all invoices up
to the end of January 1997. This resulted in an exceptional credit of L6.4
million in the 1997 Quarter. In the 1998 Quarter, no payments were received from
this client resulting in an exceptional charge of L5.9 in the 1998 Quarter.
Management believes that further payments are expected.
An exceptional charge of L3 million has been made in the 1998 Quarter, to
provide for the legal and reprocessing costs which may be incurred by
Environmental Testing, as a result of the ongoing investigation by the EPA, into
the data manipulation problems at the Dallas, Texas laboratory.
An exceptional charge of L4.4 million has been made in the 1998 Quarter
relating to the operating costs associated with the closure of the Environmental
Testing Division. This charge includes full provision for all outstanding lease
obligations and staff redundancies as well as the cost of continuing to store
data for clients of Environmental Testing. ITS is currently in discussions
regarding the possible sale or sub-leasing of the operations and facilities.
It is not possible to estimate the cost to ITS of any civil or criminal
penalties resulting from the falsification of test results therefore no
provision has been made for these costs in the 1998 Quarter.
OPERATING INCOME / (LOSS). Total operating loss after operating exceptional
items was L(0.1) million in the 1998 Quarter compared to operating income of
L17.6 million in the 1997 Quarter, a decrease in income of L17.7 million.
9
NON-OPERATING EXCEPTIONAL COSTS. During the 1998 Quarter, an exceptional
charge of L2.4 million has been made for non-operating exceptional costs
relating to the closure of the Environmental Testing Division.
NET INTEREST EXPENSE. Net interest expense was L8.1 million in the 1998
Quarter and L7.7 million in the 1997 Quarter.
NET LOSS BEFORE TAXES. The loss before taxes and minority interests was
L(10.7) million in the 1998 Quarter compared to a net income of L9.9 million in
the 1997 Quarter, a decrease in income of L20.6 million.
INCOME TAXES. A taxation charge of L2.4 million was made against income in
the 1998 Quarter compared to L1.8 million in the 1997 Quarter. For quarterly
reporting, the estimated tax rate for the full year is applied to the income
before taxation for the Quarter before adjusting for the operating and non-
operating exceptional items. The taxation charges on income before taxation and
exceptional items for the 1997 Quarter and 1998 Quarter have been calculated
based on the estimated effective tax rates for the relevant full years.
Exceptional items have been tax effected as appropriate.
NET INCOME / (LOSS) AFTER MINORITY INTERESTS. The net loss after minority
interests for ITS for the 1998 Quarter was L(13.7) million, compared to L7.9
million net income in the 1997 Quarter, a reduction in income of L21.6 million.
CONSUMER GOODS. Consumer Goods saw a decrease in revenues of L0.3 million,
or 1.9% to L15.5 million in the 1998 Quarter from L15.8 million in the 1997
Quarter. After translating results at prior year exchange rates, Consumer Goods
increased its revenues by 9.0%. The volume of exports being tested, particularly
in textiles, was higher in the 1998 Quarter.
Operating Income in Consumer Goods increased L0.8 million, or 17.5% to L5.2
million in the 1998 Quarter from L4.4 million in the 1997 Quarter. After
translating results at prior year exchange rates, Consumer Goods increased its
operating income by 28.7%.
CONFORMITY ASSESSMENT. Conformity Assessment maintained its revenues at
L22.8 million, the 1998 Quarter and the 1997 Quarter. After translating results
at prior year exchange rates, Conformity Assessment increased its revenues by
3.2%. Management attributes these results, in part, to the stabilisation of the
electrical magnetic compatibility ("EMC") testing market and growth in the
electrical safety, telecom and building materials testing sectors, partly due to
the strong economy in the United States.
Conformity Assessment operating income increased L1.1 million, or 56.7% to
L3.1 million in the 1998 Quarter from L2.0 million in the 1997 Quarter. After
translating results at prior year exchange rates, Conformity Assessment
increased its operating income by 61.2%. The increase in profitability follows
cost reductions made in late 1997 to respond to the reduced volume of EMC
testing work.
CALEB BRETT. Caleb Brett increased its revenues L2.1 million, or 7.5%, to
L29.8 million in the 1998 Quarter from L27.7 million in the 1997 Quarter. On
June 2, 1998, Caleb Brett acquired a Norwegian company - West Lab Services AS
("West Lab"), for approximately 73 million NOK (L6.0 million). After translating
results at prior year exchange rates, Caleb Brett increased its revenues by
16.6%.
Caleb Brett's operating income increased L1.2 million, or 48.2%, to L3.6
million in the 1998 Quarter from L2.4 million in the 1997 Quarter. After
translating results at prior year exchange rates, Caleb Brett increased its
operating income by 65.6%. The Americas showed improved results, partly in Latin
America, where Brazil and Argentina were previously restructured to produce
improved operating margins.
FOREIGN TRADE SUPERVISION. Revenues for FTS increased L2.8 million, or
21.8%, to L16.0 million in the 1998 Quarter from L13.2 million in the 1997
Quarter. After translating results at prior year exchange rates, FTS revenues
increased by 24.5%. This was due to the expansion of work in West Africa, which
10
commenced in June 1997, the continued growth of work in the Middle East and the
development of the PSI program in Southern Africa, which commenced in 1997.
Operating Income from FTS increased L0.3 million, or 23.9%, to L1.6 million
in the 1998 Quarter from L1.3 million in the 1997 Quarter. After translating
results at prior year exchange rates, FTS operating income increased by 33.5%.
OTHER DIVISIONS. Revenues for Other Divisions decreased L4.8 million, or
40.7%, to L7.0 million in the 1998 Quarter from L11.8 million in the 1997
Quarter. After translating results at prior year exchange rates, Other
Division's revenues decreased by 11.0%. Revenues from the Minerals division
decreased by L2.7 million or 35.3% to L4.9 million compared to L7.6 million in
the 1997 Quarter. This was mainly due to the low gold price, which has reduced
the level of exploration activity by gold mining companies. Revenues from the
Environmental Testing division decreased by L2.1 million or 40.7% to L2.1
million compared to L4.2 million in the 1997 Quarter. This was due to the
closure of a loss making laboratory in the United States in September 1997.
Operating Income from Other Divisions decreased L1.3 million, or 134.8%, to
L(0.3) million in the 1998 Quarter from L1.0 million in the 1997 Quarter. After
translating results at prior year exchange rates, Other Division's operating
income decreased by 133.0%. Operating income from Minerals decreased by L0.9
million or 66.8% to L0.5 million compared to L1.4 million in the 1997 Quarter.
Reorganisation costs have been incurred in the 1998 Quarter to reduce the cost
base in the Minerals division in North and South America to match the reduction
in revenues. The operating loss of the Environmental Testing division increased
by L(0.4) million to L(0.8) million compared to L(0.4) million in the 1997
Quarter due to continuing difficult market conditions.
SUBSEQUENT EVENTS
In a press release dated July 17, 1998, ITS announced that it has decided to
close its Environmental Testing Division. This decision has been taken because
the returns from this division have been unsatisfactory. The two environmental
testing laboratories and other support facilities in the United States will be
closed or sold. ITS is currently in discussions regarding the possible sale or
sub-leasing of the operations and facilities. The press release stated that a
provision of L9 million would be made in the 1998 Period, to cover the costs of
closure. After a more detailed analysis of the closure costs, management believe
that a provision of L6.8 million is sufficient to cover the closure costs. The
results for the 1998 Period, therefore include L4.4 million as an operating
exceptional charge and L2.4 million as a non -- operating exceptional charge
making a total provision of L6.8 million.
On July 31, 1998, Caleb Brett acquired the net assets of Chemical and Marine
Services, in Australia for approximately L0.75 million.
A cash inflow of L5 million from a rights issue will be received by August
31, 1998.
INVESTIGATIONS BY THE U.S. ENVIRONMENTAL PROTECTION AGENCY
Two of the Group's subsidiary companies, Caleb Brett USA Inc. and Intertek
Testing Services Environmental Laboratories Inc. ("ITS Environmental") are
currently involved in investigations by the U.S. Environmental Protection Agency
("EPA").
In February of 1997 Caleb Brett USA Inc. through its routine Quality
Assurance and Quality Control procedures, discovered evidence of false testing
results at a Caleb Brett laboratory in Linden, New Jersey involving the testing
of gasoline for compliance with certain environmental standards on behalf of an
important customer. Separately, in December of 1997, ITS Environmental, again
through normal Quality Assurance and Quality Control system integrity checks,
discovered certain discrepancies in testing results at its facility in
Richardson, Texas involving testing of soil and water samples for the U.S. Air
Force. A further investigation by ITS revealed that lab technicians at the Texas
facility had at various times manually integrated data and improperly calibrated
test equipment in a way that skewed the accuracy of test results.
11
In each case, ITS promptly reported its findings to the EPA and, in the case of
the Texas facility, to the Air Force, the Army and the Department of Defence.
Both matters have been referred to the U.S. Department of Justice by the EPA,
and civil and criminal investigations are underway at both sites. The government
investigations at each facility have uncovered evidence of false reporting
beyond that initially discovered and disclosed by ITS.
ITS has requested inclusion in the EPA's and the Department of Defence's
policy on Voluntary Self-Policing and Self-Disclosure (the "Voluntary Disclosure
Programs") which, if accepted by the government, may foreclose criminal, but not
civil penalties for these actions. However, even if the actions that were
initially disclosed to the EPA were found to qualify for the immunities
available under its Voluntary Disclosure Program, the protection of such program
might not extend to improper actions subsequently discovered. The falsification
of test results could subject ITS to criminal and civil penalties and other
collateral consequences, including possible debarment.
ITS continues to co-operate fully with the government investigations and has
put in place stringent remedial and additional preventative programs. ITS has
established a reprocessing facility to provide clients with data of known
quality as rapidly as possible. The EPA is supportive of this data reprocessing
effort. An exceptional charge of L3.0 million has been made in the 1998 Period
results to cover all reprocessing costs and associated legal costs, including
the estimated future costs.
It is not possible to estimate the cost to ITS of any civil or criminal
penalties resulting from the falsification of test results. ITS has also not
taken into account the rights which it may have against Inchcape plc pursuant to
the agreement by which ITS's current shareholders purchased the business from
Inchcape plc.
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 the Group included herein.
EXCHANGE RATES
Exchange rates used for translating local currencies into pounds sterling
for the main currencies in which the Group operates are shown in the following
table.
Revenues and Operating Income for the 1997 Period have been translated into
pounds sterling using the cumulative average exchange rate for the six months to
June 30, 1997. Revenues and Operating Income for the 1998 Period have been
translated into pounds sterling using the cumulative average exchange rate for
the six months to June 30, 1998.
Revenues and Operating Income for the 1997 Quarter have been translated into
pounds sterling using the cumulative average exchange rate for the three months
to June 30, 1997. Revenues and Operating Income for the 1998 Quarter have been
translated into pounds sterling using the cumulative average exchange rate for
the three months to June 30, 1998.
EXCHANGE RATES TO POUNDS STERLING USED FOR TRANSLATION OF INCOME AND COSTS AT
CUMULATIVE AVERAGE RATE
THREE MONTHS SIX MONTHS THREE MONTHS SIX MONTHS
TO TO TO TO
JUNE 30, 1997 JUNE 30, 1997 JUNE 30, 1998 JUNE 30, 1998
----------------- --------------- ----------------- ---------------
U.S. Dollar........................................... 1.63 1.63 1.66 1.66
Hong Kong Dollar...................................... 12.6 12.6 12.9 12.8
Swedish Kroner........................................ 12.5 12.2 12.9 13.0
German Deutschmark.................................... 2.78 2.73 2.96 2.97
12
To remove the effects of currency exchange rate movements when comparing the
Revenues and Operating Income for the 1997 and 1998 Periods, the 1998 Period
results on page 4 are shown at the cumulative average exchange rates for the six
months to June 30, 1998 as well as the cumulative average exchange rates for the
six months to June 30, 1997
To remove the effects of currency exchange rate movements when comparing the
Revenues and Operating Income for the 1997 and 1998 Quarters, the 1998 Quarter's
results on page 5 are shown at the cumulative average exchange rates for the
three months to June 30,1998 as well as the cumulative average exchange rates
for the three months to June 30,1997.
FINANCIAL CONDITION AND LIQUIDITY
At June 30, 1998, ITS had cash and cash equivalents of L20.8 million
compared to L25.2 million at December 31, 1997.
ITS reported net cash inflow from operating activities of L14.1 million in
the 1998 Period and L22.6 million in the 1997 Period. Net cash inflow from
operating activities includes operating income, before depreciation and other
non-cash items, as well as working capital movements.
Expenditure on tangible fixed assets amounted to L5.4 million in the 1998
Period and L4.2 million in the 1997 Period. ITS's investment in tangible fixed
assets was primarily in laboratory equipment and information technology.
During the 1998 Period, the cash outflow on acquisitions was L7.2 million.
This comprised L3.6 million for VSB and L3.6 for West Lab. An additional payment
of L2.4 million may be paid in 1999, contingent on the results of West Lab.
At June 30, 1998, ITS had total borrowings of L302.4 million less
unamortised debt issuance costs of L11.9 million. ITS drew down approximately
L13 million on its Revolving Credit Facility to finance acquisitions and working
capital in the 1998 Period. The borrowings comprise L121.6 million Senior
Subordinated Notes, L13.0 million Senior Revolver, L76.3 million Senior Term A
Loans, L35.3 million Senior Term B Loans, L55.9 Parent Subordinated PIK
Debentures and L0.2 million other borrowings. Loan repayments on capital during
the period were L2.6 million on the Senior Term A loans and L0.7 on other
borrowings.
In the 1998 Period ITS paid interest of L6.3 million on the Senior
Subordinated Notes, L3.8 million on the Senior Term A Loans, L1.5 million on the
Senior Term B loans, L3.4 million on the Parent Subordinated PIK Debentures and
L0.3 million on other borrowings and received interest of L0.4 million on bank
balances. The interest on the Parent Subordinated PIK Debentures covered the
periods from November 8, 1997 to February 1, 1998 and February 2, 1998 to May 1,
1998 and was funded by further issues of Parent Subordinated PIK Debentures on
February 1, 1998 and May 1, 1998.
ITS paid dividends of L0.4 million to minority shareholders in the 1998
Period and L0.7 million the 1997 Period.
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 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 distribution or loans or
advances to the Company.
13
INTERTEK TESTING SERVICES LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(L IN THOUSANDS)
PERIOD FROM PERIOD FROM
JANUARY 1, 1997 JANUARY 1, 1998
TO TO
JUNE 30, 1997 JUNE 30, 1998
---------------------- ----------------------
NOTES (UNAUDITED)
Revenues: Group and share of joint ventures............... 3 167,308 174,185
Less: share of joint ventures' revenue.................... -- (656)
---------- ----------
GROUP REVENUE............................................. 167,308 173,529
Operating costs........................................... (144,220) (165,611)
---------- ----------
GROUP OPERATING INCOME.................................... 23,088 7,918
---------- ----------
Share of operating profit/(loss) in:
Joint ventures.......................................... -- (38)
Associates.............................................. 44 40
---------- ----------
44 2
---------- ----------
Total operating income................................ 23,132 7,920
---------- ----------
Operating income before exceptional items................. 3 18,195 21,254
Exceptional items credited to/(charged against) operating
Income.................................................. 4 4,937 (13,334)
---------- ----------
23,132 7,920
---------- ----------
Non-operating exceptional items........................... 4 -- (2,450)
---------- ----------
INCOME ON ORDINARY ACTIVITIES BEFORE NET INTEREST......... 23,132 5,470
Net interest expense
Group................................................... (15,081) (15,544)
Joint ventures.......................................... (8) 1
Associates.............................................. -- --
---------- ----------
5 (15,089) (15,543)
---------- ----------
INCOME/(LOSS) BEFORE TAXATION............................. 8,043 (10,073)
Taxation.................................................. 6 (1,789) (2,726)
---------- ----------
INCOME/(LOSS) AFTER TAXATION.............................. 6,254 (12,799)
Minority interests........................................ (1,468) (1,313)
---------- ----------
NET INCOME/(LOSS) FOR THE GROUP AND ITS SHARE OF
ASSOCIATES AND JOINT VENTURES........................... 4,786 (14,112)
---------- ----------
---------- ----------
The accompanying notes on pages F-7 to F-30 are an integral part of these
financial statements.
F-1
INTERTEK TESTING SERVICES LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS (CONTINUED)
(L IN THOUSANDS)
PERIOD FROM PERIOD FROM
APRIL 1, 1998 APRIL 1, 1997
TO TO
JUNE 30, 1998 JUNE 30, 1997
---------------------- ----------------------
(UNAUDITED)
Revenues: Group and share of joint ventures.................. 91,191 91,026
Less: share of joint ventures' revenue....................... -- (329)
---------- ----------
REVENUES FROM CONTINUING OPERATIONS.......................... 91,191 90,697
Operating costs.............................................. (73,629) (90,779)
---------- ----------
GROUP OPERATING INCOME /(LOSS) FROM CONTINUING OPERATIONS.... 17,562 (82)
Share of operating profit/(loss) in:
Joint ventures............................................. -- (38)
Associates................................................. 17 14
---------- ----------
17 (24)
---------- ----------
Total operating income/(loss) from continuing
operations............................................... 17,579 (106)
---------- ----------
Operating income before exceptional items.................... 11,152 13,245
Exceptional items credited to/(charged against) operating
Income..................................................... 6,427 (13,351)
---------- ----------
17,579 (106)
---------- ----------
Non-operating exceptional items.............................. -- (2,450)
INCOME/(LOSS) ON ORDINARY ACTIVITIES BEFORE NET INTEREST..... 17,579 (2,556)
Net interest expense
Group...................................................... (7,657) (8,142)
Joint ventures............................................. (8) --
Associates................................................... -- --
---------- ----------
(7,665) (8,142)
---------- ----------
INCOME/(LOSS)BEFORE TAXATION................................. 9,914 (10,698)
Taxation..................................................... (1,789) (2,384)
---------- ----------
INCOME/(LOSS)AFTER TAXATION.................................. 8,125 (13,082)
Minority interests........................................... (252) (599)
---------- ----------
NET INCOME/(LOSS) FOR THE GROUP AND ITS SHARE OF ASSOCIATES
AND JOINT VENTURES......................................... 7,873 (13,681)
---------- ----------
---------- ----------
The accompanying notes on pages F-7 to F-30 are an integral part of these
financial statements.
F-2
INTERTEK TESTING SERVICES LIMITED
CONSOLIDATED BALANCE SHEETS
(L IN THOUSANDS)
DECEMBER 31, JUNE 30,
NOTES 1997 1998
----- --------------------- ---------------------
(UNAUDITED)
ASSETS
CURRENT ASSETS
Cash and cash equivalents........................................... 11 25,153 20,829
Trade receivables................................................... 60,483 59,190
Inventories......................................................... 2,650 2,968
Other current assets................................................ 12,063 22,731
Deferred taxation asset............................................. 286 369
---------- ----------
TOTAL CURRENT ASSETS................................................ 100,635 106,087
Goodwill............................................................ -- 4,997
Property, plant and equipment, net.................................. 44,460 43,318
Investments
Investments in joint ventures:
Share of gross assets........................................... -- 556
Share of gross liabilities...................................... -- (279)
--- ---
-- 277
Investments in associates........................................... 184 184
--- ---
184 461
---------- ----------
TOTAL ASSETS........................................................ 145,279 154,863
---------- ----------
---------- ----------
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Borrowings (including current portion of long term borrowings)...... 7 5,268 19,744
Accounts payable, accrued liabilities and deferred income........... 60,019 63,133
Income taxes payable................................................ 3,323 3,340
---------- ----------
TOTAL CURRENT LIABILITIES........................................... 68,610 86,217
Long term borrowings................................................ 7 272,036 270,709
Provisions for liabilities and charges.............................. 7,095 16,038
Minority interests.................................................. 4,304 4,234
SHAREHOLDERS' DEFICIT
Ordinary shares..................................................... 318 318
Redeemable preference shares........................................ 81,815 81,815
Shares to be issued................................................. 2,793 2,793
Premium in excess of par value...................................... 2,857 2,857
Retained deficit.................................................... (294,549) (310,118)
---------- ----------
TOTAL SHAREHOLDERS' DEFICIT......................................... 8 (206,766) (222,335)
---------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT......................... 145,279 154,863
---------- ----------
---------- ----------
The accompanying notes on pages F-7 to F-30 are an integral part of these
financial statements.
F-3
INTERTEK TESTING SERVICES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(L IN THOUSANDS)
PERIOD FROM
JANUARY 1, PERIOD FROM
1997 JANUARY 1,
TO 1998
JUNE 30, 1997 TO
NOTES (RESTATED) JUNE 30, 1998
----- -------------- --------------
(UNAUDITED)
Cash inflow from operating activities.................................... 9 22,566 14,146
Returns on investments and servicing of finance.......................... 10 (15,165) (15,180)
Taxation................................................................. (3,862) (2,227)
Capital expenditure and financial investment............................. 10 (4,142) (5,303)
Acquisitions and disposals............................................... 10 (1,655) (7,453)
-------------- --------------
CASH OUTFLOW BEFORE FINANCING............................................ (2,258) (16,017)
Financing................................................................ 10 2,692 13,143
-------------- --------------
INCREASE/(DECREASE) IN CASH IN THE PERIOD................................ 434 (2,874)
-------------- --------------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT.................. 11
INCREASE/(DECREASE) IN CASH IN THE PERIOD................................ 434 (2,874)
Debt issued in lieu of interest payment.................................. (2,912) (3,389)
Change in net debt resulting from cash flows............................. 304 (10,395)
Other non-cash movements................................................. (84) (645)
Exchange adjustments..................................................... (3,666) (170)
-------------- --------------
MOVEMENT IN NET DEBT IN THE PERIOD....................................... (5,924) (17,473)
NET DEBT AT THE START OF THE PERIOD...................................... (235,390) (252,151)
-------------- --------------
NET DEBT AT THE END OF THE PERIOD........................................ (241,314) (269,624)
-------------- --------------
-------------- --------------
The accompanying notes on pages F-7 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
(L IN THOUSANDS)
PERIOD FROM PERIOD FROM
JANUARY 1, 1997 JANUARY 1, 1998
TO TO
JUNE 30, 1997 JUNE 30, 1998
--------------- ---------------
(UNAUDITED)
Net income/(loss)............................................................... 4,786 (14,112)
Exchange adjustments............................................................ (5,422) (1,457)
------ -------
TOTAL RECOGNISED GAINS AND LOSSES............................................... (636) (15,569)
------ -------
------ -------
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.
The accompanying notes on pages F-7 to F-30 are an integral part of these
financial statements.
F-5
INTERTEK TESTING SERVICES LIMITED
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT
(L IN THOUSANDS)
(UNAUDITED)
------------------------------------------------------------------------------
REDEEMABLE PREMIUM IN
ORDINARY PREFERENCE SHARES TO EXCESS OF PAR RETAINED
SHARES SHARES BE ISSUED VALUE DEFICIT TOTAL
------------- ----------- ----------- ------------- ---------- ----------
BALANCE AT JANUARY 1, 1997....................... 318 81,815 2,793 2,857 (286,664) (198,881)
Net income....................................... -- -- -- -- 4,786 4,786
Exchange adjustments............................. -- -- -- -- (5,422) (5,422)
--- ----------- ----- ----- ---------- ----------
BALANCE AT JUNE 30, 1997......................... 318 81,815 2,793 2,857 (287,300) (199,517)
--- ----------- ----- ----- ---------- ----------
--- ----------- ----- ----- ---------- ----------
BALANCE AT JANUARY 1, 1998....................... 318 81,815 2,793 2,857 (294,549) (206,766)
Net loss......................................... -- -- -- -- (14,112) (14,112)
Exchange adjustments............................. -- -- -- -- (1,457) (1,457)
--- ----------- ----- ----- ---------- ----------
BALANCE AT JUNE 30, 1998......................... 318 81,815 2,793 2,857 (310,118) (222,335)
--- ----------- ----- ----- ---------- ----------
--- ----------- ----- ----- ---------- ----------
Included in Retained deficit is L270,486 which represents goodwill written
off to reserves prior to December 1997 (at June 30, 1997: L287,174).
The accompanying notes on pages F-7 to F-30 are an integral part of these
financial statements.
F-6
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(L IN THOUSANDS)
1. BASIS OF PREPARATION
The accompanying consolidated financial statements of the Company and its
subsidiaries at June 30, 1998, and for the six months ended June 30, 1997 and
1998, and the three months ended June 30, 1997 and 1998 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 therein. 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 thereto
as of, and for the year ended December 31, 1997.
2. ACCOUNTING POLICIES
The significant accounting policies adopted by the Company are as follows:
BASIS OF CONSOLIDATION AND COMBINATION
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
statements of income of the Company from, or up to, the date control passes.
The consolidated statements of income of the Company include shares of
income from associated undertakings. The consolidated balance sheets of the
Company include 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 sterling at the average of the month
end rates of exchange for the period. Assets and liabilities in foreign
currencies are translated into sterling at closing rates of exchange except
where rates are fixed under contractual arrangements.
F-7
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(L IN THOUSANDS)
2. ACCOUNTING POLICIES (CONTINUED)
The difference between net income translated at average and at closing rates
of exchange is included in the statement of total recognized gains and losses as
a movement in shareholders' equity. 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.
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%
term of
Short leasehold land and buildings............................ lease
Plant, machinery and equipment................................ 10%-33.3%
Permanent diminutions in value of individual properties below cost are
charged to operations; however deficits which the Directors consider to be
temporary in nature, are recognised in the revaluation reserve and may be offset
against other surpluses.
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 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 recognized 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.
F-8
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(L IN THOUSANDS)
2. ACCOUNTING POLICIES (CONTINUED)
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. Other
post-retirement benefits are accounted for on a similar basis to defined benefit
pension schemes.
GOODWILL
Purchased goodwill arising on consolidation in respect of acquisitions
before January 1, 1998 when FRS 10 Goodwill and intangible assets was adopted,
was written off to reserves in the year of acquisition. When a subsequent
disposal occurs any goodwill previously written off to reserves is written back
through the profit and loss account. Purchased goodwill arising on consolidation
in respect of acquisitions since January 1, 1998 is capitalised. Positive
goodwill is amortised to nil by equal annual instalments over its estimated
useful life, generally not exceeding 20 years.
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 income.
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-9
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(L IN THOUSANDS)
2. ACCOUNTING POLICIES (CONTINUED)
CHANGES IN PRESENTATION OF FINANCIAL INFORMATION
FRS 1 "Cash flow statements" has been revised in 1996 to change the format
for reporting cash flows. The revised format has been adopted in preparing these
financial statements. The comparative figures have been restated accordingly.
3. SEGMENT INFORMATION
ITS comprises five divisions which are organised as follows: (1) Consumer
Goods, which tests textiles, fabrics, footwear, toys and consumer products; (2)
Conformity Assessment, which tests and certifies electrical and electronic
products, building products, heating and ventilation and air conditioning
equipment. (3) Caleb Brett, which tests crude oil, petroleum, chemical and
agricultural products; (4) Foreign Trade Supervision, which provides preshipment
inspection services to governments; (5) Other Divisions which comprises,
Minerals, which analyses metals and Environmental Testing, which analyses water,
soil and air samples for toxic substances. The accounting policies of the
divisions are the same as those described in the summary of accounting policies.
BY DIVISION
PERIOD FROM PERIOD FROM
JANUARY 1, JANUARY 1,
1997 1998
TO TO
JUNE 30, 1997 JUNE 30, 1998
-------------- --------------
REVENUES
Consumer Goods............................................... 27,467 30,048
Conformity Assessment........................................ 41,078 42,471
Caleb Brett.................................................. 52,584 57,758
Foreign Trade Supervision.................................... 24,174 30,235
Minerals and Environmental Testing........................... 22,005 13,673
------- -------
Total........................................................ 167,308 174,185
------- -------
OPERATING INCOME BEFORE EXCEPTIONAL ITEMS
Consumer Goods............................................... 6,480 7,644
Conformity Assessment........................................ 4,045 5,435
Caleb Brett.................................................. 4,109 6,476
Foreign Trade Supervision.................................... 1,840 2,990
Minerals and Environmental Testing........................... 1,721 (1,291)
------- -------
Total........................................................ 18,195 21,254
------- -------
OPERATING EXCEPTIONAL ITEMS
Foreign Trade Supervision.................................... 4,937 (4,782)
Caleb Brett.................................................. -- (1,160)
Environmental Testing........................................ -- (7,392)
------- -------
Total........................................................ 4,937 (13,334)
------- -------
F-10
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(L IN THOUSANDS)
3. SEGMENT INFORMATION (CONTINUED)
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.
PERIOD FROM PERIOD FROM
JANUARY 1, JANUARY 1,
1997 1998
TO TO
JUNE 30, 1997 JUNE 30, 1998
-------------- --------------
REVENUES BY GEOGRAPHIC ORIGIN
Americas..................................................... 76,630 77,342
Europe, Africa and Middle East............................... 54,493 60,465
Asia and Far East............................................ 36,185 36,378
------- -------
Total........................................................ 167,308 174,185
------- -------
REVENUES FROM SIGNIFICANT COUNTRIES OF ORIGIN
United States................................................ 59,515 59,493
United Kingdom............................................... 24,861 28,246
Hong Kong.................................................... 15,880 18,806
Others (each under 10% of total)............................. 67,052 67,640
------- -------
Total........................................................ 167,308 174,185
------- -------
OPERATING INCOME BEFORE EXCEPTIONAL ITEMS BY GEOGRAPHIC
ORIGIN
Americas..................................................... 4,814 4,663
Europe, Africa and Middle East............................... 6,226 5,727
Asia and Far East............................................ 7,155 10,864
------- -------
Total........................................................ 18,195 21,254
------- -------
OPERATING INCOME BEFORE EXCEPTIONAL ITEMS FROM SIGNIFICANT
COUNTRIES
United States................................................ 4,075 3,627
Hong Kong.................................................... 3,544 4,744
United Kingdom............................................... 2,585 1,371
Others (each under 10% of total)............................. 7,991 11,512
------- -------
Total........................................................ 18,195 21,254
------- -------
REVENUES BY GEOGRAPHIC AREA OF DESTINATION
Americas..................................................... 74,984 74,472
Europe, Africa and Middle East............................... 56,139 63,335
Asia and Far East............................................ 36,185 36,378
------- -------
Total........................................................ 167,308 174,185
------- -------
F-11
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(L IN THOUSANDS)
3. SEGMENT INFORMATION (CONTINUED)
PERIOD FROM PERIOD FROM
JANUARY 1, JANUARY 1,
1997 1998
TO TO
JUNE 30, 1997 JUNE 30, 1998
-------------- --------------
REVENUES FROM SIGNIFICANT DESTINATION COUNTRIES
United States................................................ 57,869 56,623
Hong Kong.................................................... 15,880 18,806
United Kingdom............................................... 10,417 18,507
Others (each under 10% of total)............................. 83,142 80,249
------- -------
Total........................................................ 167,308 174,185
------- -------
4. EXCEPTIONAL ITEMS
PERIOD FROM PERIOD FROM
JANUARY 1, JANUARY 1,
1997 1998
TO TO
JUNE 30, 1997 JUNE 30, 1998
-------------- --------------
EXCEPTIONAL ITEMS CREDITED TO/(CHARGED AGAINST) OPERATING
INCOME:
OPERATING EXCEPTIONAL CHARGES:
Foreign Trade Supervision.................................... 4,937 (4,782)
Caleb Brett.................................................. -- (1,160)
Environmental Testing -- Legal and reprocessing costs........ -- (3,000)
Environmental Testing -- Loss on closure..................... -- (4,392)
------- -------
4,937 (13,334)
------- -------
NON OPERATING EXCEPTIONAL CHARGES:
Environmental Testing -- Loss on disposal of fixed assets.... -- (2,450)
------- -------
-- (2,450)
------- -------
ITS provides foreign trade supervision services to a major client in West
Africa. At a meeting of the board of directors held on April 27, 1997, a
decision was taken to provide against all unpaid invoices relating to this
client. The exceptional credit/(charge) to operating income in respect of
Foreign Trade Supervision relate to this West African client. The tax effect of
this exceptional item to income is a credit of L1,482 (period from January 1,
1997 to June 30, 1997: tax charge of L1,530).
ITS also provides testing services in its Caleb Brett division to this major
client in West Africa. In view of the accounting policy followed for this client
in the Foreign Trade Supervision division, all unpaid invoices relating to this
client in the Caleb Brett division have also been provided against. The tax
effect of this exceptional item to income is a credit of L360.
The exceptional charge of L3,000 relates to the legal and reprocessing costs
which may be incurred by Environmental Testing, as a result of the ongoing
investigation by the Environmental Protection Agency
F-12
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(L IN THOUSANDS)
4. EXCEPTIONAL ITEMS (CONTINUED)
into the data manipulation problems at the Dallas, Texas laboratory. It is not
possible to estimate the cost to ITS of any civil or criminal penalties
resulting from the falsification of test results therefore no provision has been
made for these costs.
The exceptional charge of L4,392 relates to the operating costs associated
with the closure of the Environmental Testing Division. This charge includes
full provision for all outstanding lease obligations and staff redundancies as
well as the cost of continuing to store data for clients of Environmental
Testing.
The non-operating exceptional charge of L2,450 relates to the loss on
disposal of fixed assets expected to result from the closure of the
Environmental Testing Division.
5. NET INTEREST EXPENSE
PERIOD FROM PERIOD FROM
JANUARY 1, JANUARY 1,
1997 1998
TO TO
JUNE 30, 1997 JUNE 30, 1998
-------------- --------------
INTEREST PAYABLE AND OTHER CHARGES:
Senior Subordinated Notes.................................... 6,418 6,093
Parent Subordinated PIK Debentures........................... 3,144 3,478
Senior Term Loan A........................................... 3,246 3,728
Senior Term Loan B........................................... 1,604 1,534
Senior Revolver.............................................. -- 115
Other borrowings............................................. 291 155
Amortisation of debt issuance costs.......................... 971 852
------- -------
Interest payable............................................. 15,674 15,955
INTEREST RECEIVABLE:
On bank balances............................................. (585) (412)
------- -------
15,089 15,543
------- -------
6. TAXATION
The taxation charges on income before taxation and exceptional items for the
six month periods ended June 30, 1997 and June 30, 1998 have been calculated
based on the estimated effective tax rates for the relevant full years.
Exceptional items have been tax effected as appropriate.
F-13
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(L IN THOUSANDS)
7. BORROWINGS
DECEMBER 31, JUNE 30,
1997 1998
-------------- --------------
DUE IN LESS THAN ONE YEAR:
Senior Term Loan A........................................... 4,438 6,522
Senior Revolver.............................................. -- 13,036
Other borrowings............................................. 830 186
------- -------
5,268 19,744
------- -------
DECEMBER 31, JUNE 30,
1997 1998
-------------- --------------
DUE IN MORE THAN ONE YEAR:
Senior Subordinated Notes.................................... 116,517 116,751
Senior Term Loan A........................................... 70,547 65,819
Senior Term Loan B........................................... 34,136 33,858
Parent Subordinated PIK Debentures........................... 50,791 54,234
Other borrowings............................................. 45 47
------- -------
272,036 270,709
------- -------
MATURITY OF BORROWINGS:
PARENT BANK LOANS,
SENIOR SENIOR SENIOR SUBORDINATED CAPITAL LEASES
SUBORDINATED SENIOR TERM TERM PIK AND OTHER TOTAL
NOTES REVOLVER LOAN A LOAN B DEBENTURES BORROWINGS BORROWINGS
------------ ----------- --------- --------- ------------- --------------- -----------
Due in less than one year........ -- 13,036 6,952 -- -- 186 20,174
Due in 2-5 years................. -- -- 69,383 -- -- 35 69,418
Due in over 5 years.............. 121,557 -- -- 35,268 55,929 12 212,766
------------ ----------- --------- --------- ------ --- -----------
121,557 13,036 76,335 35,268 55,929 233 302,358
Fees............................. (4,806) -- (3,994) (1,410) (1,695) -- (11,905)
------------ ----------- --------- --------- ------ --- -----------
116,751 13,036 72,341 33,858 54,234 233 290,453
------------ ----------- --------- --------- ------ --- -----------
8. RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' DEFICIT
PERIOD FROM PERIOD FROM
JANUARY 1, JANUARY 1,
1997 1998
TO TO
JUNE 30, 1997 JUNE 30, 1998
-------------- --------------
TOTAL RECOGNISED GAINS AND LOSSES FOR THE PERIOD............. (636) (15,569)
OPENING SHAREHOLDERS' DEFICIT................................ (198,881) (206,766)
-------------- --------------
CLOSING SHAREHOLDERS' DEFICIT................................ (199,517) (222,335)
-------------- --------------
F-14
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(L IN THOUSANDS)
9. RECONCILIATION OF OPERATING PROFIT TO OPERATING CASH FLOWS
PERIOD FROM PERIOD FROM
JANUARY 1, JANUARY 1,
1997 1998
TO TO
JUNE 30, 1997 JUNE 30, 1998
-------------- --------------
Operating profit............................................. 23,088 7,918
Depreciation charge.......................................... 5,988 5,764
Goodwill amortisation........................................ -- 31
Loss on sale of fixed assets................................. 908 318
Decrease/(increase) in inventories........................... 106 (477)
Increase in receivables and prepayments...................... (6,831) (6,433)
Decrease in payables......................................... 2,675 395
(Decrease)/increase in provisions............................ (3,368) 6,630
-------------- --------------
NET CASH INFLOW FROM OPERATING ACTIVITIES.................... 22,566 14,146
-------------- --------------
10. ANALYSIS OF CASH FLOWS
PERIOD FROM PERIOD FROM
JANUARY 1, JANUARY 1,
1997 1998
TO TO
JUNE 30, 1997 JUNE 30, 1998
-------------- --------------
RETURNS ON INVESTMENT AND SERVICING OF FINANCE
Net interest paid............................................ (14,504) (14,737)
Dividends paid to minorities................................. (661) (443)
-------------- --------------
(15,165) (15,180)
-------------- --------------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of property, plant and equipment.................... (4,197) (5,374)
Sale of property, plant and equipment........................ 55 71
-------------- --------------
(4,142) (5,303)
-------------- --------------
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertakings.......................... 2,673 (7,228)
Acquisition provision payments............................... (4,328) (225)
-------------- --------------
(1,655) (7,453)
-------------- --------------
FINANCING
Issue of long term debt...................................... 2,912 3,389
Issue of short term debt..................................... -- 13,036
Repayment of other loans..................................... (220) (3,282)
-------------- --------------
2,692 13,143
-------------- --------------
F-15
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(L IN THOUSANDS)
11. ANALYSIS OF NET DEBT
DEBT ISSUED IN
AT JANUARY LIEU OF
1, INTEREST OTHER NON- EXCHANGE AT JUNE 30,
1998 CASH FLOW PAYMENT CASH CHANGES ADJUSTMENTS 1998
------------ ----------- --------------- ------------- ----------- -----------
NET CASH
Cash in hand and at bank................ 25,153 (2,874) -- (297) (1,153) 20,829
------------ ----------- ------ ------ ----------- -----------
DEBT
Debt due within one year................ (5,268) (10,395) -- (4,372) 291 (19,744)
Debt due after one year................. (272,036) -- (3,389) 4,024 692 (270,709)
------------ ----------- ------ ------ ----------- -----------
(277,304) (10,395) (3,389) (348) 983 (290,453)
------------ ----------- ------ ------ ----------- -----------
TOTAL NET DEBT.......................... (252,151) (13,269) (3,389) (645) (170) (269,624)
------------ ----------- ------ ------ ----------- -----------
12. SUMMARY OF DIFFERENCES BETWEEN U.K. AND U.S. GAAP
The consolidated financial statements are prepared in conformity with
accounting principles generally accepted in the United Kingdom ("U.K. GAAP").
These accounting principles differ in certain material respects from accounting
principles generally accepted in the United States ("U.S. GAAP"). Described
below are the material differences between U.K. GAAP and U.S. GAAP affecting the
net income/(loss) and shareholders' deficit which are set forth in the tables
that follow.
GOODWILL AND OTHER INTANGIBLE ASSETS
Under U.K. GAAP, purchased goodwill arising on consolidation in respect of
acquisitions before January 1, 1998 when FRS 10 Goodwill and intangible assets
was adopted, was written off to reserves in the year of acquisition. Purchased
goodwill arising on consolidation in respect of acquisitions since January 1,
1998 is capitalised. Positive goodwill is amortised to nil by equal annual
instalments over its estimated useful life. 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 within shareholders' deficit.
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.
F-16
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(L IN THOUSANDS)
12. SUMMARY OF DIFFERENCES BETWEEN U.K. AND U.S. GAAP (CONTINUED)
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 accounted for 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 recognized 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 are provided. No U.S. adjustment
is presented in the reconciliation because the directors have established a
valuation allowance for the unrecorded deferred tax assets. 12. 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)
The approximate effects on net loss of material differences between U.K. and
U.S. GAAP are as follows:
PERIOD FROM PERIOD FROM
JANUARY 1, JANUARY 1,
1997 1998
TO TO
JUNE 30, 1997 JUNE 30, 1998
-------------- --------------
NET INCOME/(LOSS) REPORTED UNDER U.K. GAAP................... 4,786 (14,112)
Goodwill amortisation........................................ (6,152) (6,874)
Covenants not to compete amortisation........................ (6,666) (6,265)
Pensions..................................................... 74 (66)
Compensated absences......................................... 291 (206)
-------------- --------------
NET LOSS REPORTED UNDER U.S. GAAP............................ (7,667) (27,523)
-------------- --------------
Continuing operations........................................ (6,850) (15,849)
Discontinued operations...................................... (817) (11,674)
-------------- --------------
NET LOSS REPORTED UNDER U.S. GAAP............................ (7,667) (27,523)
-------------- --------------
The closure of the Environmental Division is treated as discontinued
operations under U.S. GAAP.
F-17
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(L IN THOUSANDS)
12. SUMMARY OF DIFFERENCES BETWEEN U.K. AND U.S. GAAP (CONTINUED)
(B) SHAREHOLDERS' DEFICIT
The approximate effects on shareholders' deficit of material differences
between U.K. and U.S. GAAP are as follows:
DECEMBER 31, JUNE 30,
1997 1998
-------------- --------------
SHAREHOLDERS' DEFICIT REPORTED UNDER U.K. GAAP............... (206,766) (222,335)
Goodwill..................................................... 217,498 206,744
Covenants not to compete..................................... 21,796 15,580
Redeemable preference shares................................. (81,815) (81,815)
Pensions..................................................... 1,207 1,141
Compensated absences......................................... (408) (634)
-------------- --------------
SHAREHOLDERS' DEFICIT REPORTED UNDER U.S. GAAP............... (48,488) (81,319)
-------------- --------------
The following table reconciles shareholders' deficit under U.S. GAAP:
PERIOD FROM
JANUARY 1,
YEAR ENDED 1998
DECEMBER TO
31, 1997 JUNE 30, 1998
-------------- --------------
SHAREHOLDERS' DEFICIT AT BEGINNING OF PERIOD................. (5,263) (48,488)
Net loss for the period...................................... (28,096) (27,523)
Exchange adjustments......................................... (15,129) (5,308)
-------------- --------------
SHAREHOLDERS' DEFICIT AT END OF PERIOD....................... (48,488) (81,319)
-------------- --------------
(C) CASH FLOWS
The statements of cash flow 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.
F-18
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(L IN THOUSANDS)
12. SUMMARY OF DIFFERENCES BETWEEN U.K. AND U.S. GAAP (CONTINUED)
Set out below is a summary of the statements of cash flows under U.S. GAAP:
PERIOD FROM
JANUARY 1, PERIOD FROM
1997 JANUARY 1,
TO 1998
JUNE 30, 1997 TO
(RESTATED ) JUNE 30, 1998
-------------- --------------
Net cash provided by operating activities.................... 4,200 (2,818)
Net cash outflow from investing activities................... (5,797) (12,756)
Net cash inflow from financing activities.................... 2,031 12,700
-------------- --------------
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS UNDER
U.S. GAAP.................................................. 434 (2,874)
Effect of exchange rate changes.............................. 205 (1,450)
-------------- --------------
NET INCREASE/(DECREASE) IN CASH UNDER U.K. GAAP.............. 639 (4,324)
-------------- --------------
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 unaudited financial information. The
unaudited financial information presented below has been segregated between (a)
the Issuer, (b) the Guarantors and (c) the non-Guarantor subsidiaries.
F-19
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(L IN THOUSANDS)
13. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
STATEMENTS OF OPERATIONS
PERIOD FROM JANUARY 1 TO JUNE 30, 1998
-----------------------------------------------------------------------
NON --
INTERTEK GUARANTOR CONSOLIDATION CONSOLIDATED
FINANCE PLC GUARANTORS SUBSIDIARIES ADJUSTMENTS TOTALS
--------------- ----------- ----------- ------------- -------------
REVENUES: group and share of joint
ventures................................... -- -- 204,261 (30,076) 174,185
Less: share of joint ventures' revenues...... -- -- (656) -- (656)
--- ----------- ----------- ------------- -------------
REVENUES FROM CONTINUING OPERATIONS.......... -- -- 203,605 (30,076) 173,529
Operating costs.............................. (2) 96 (195,781) 30,076 (165,611)
--- ----------- ----------- ------------- -------------
OPERATING INCOME FROM CONTINUING
OPERATIONS................................. (2) 96 7,824 -- 7,918
Share of operating profit in:
Joint ventures............................... -- -- (38) -- (38)
Associates................................... -- -- 40 -- 40
--- ----------- ----------- ------------- -------------
TOTAL OPERATING INCOME....................... (2) 96 7,826 -- 7,920
Non-operating exceptional items.............. -- -- (2,450) -- (2,450)
--- ----------- ----------- ------------- -------------
Income on ordinary activities before net
interest................................... (2) 96 5,376 -- 5,470
Net interest payable......................... 42 (11,848) (3,737) (15,543)
--- ----------- ----------- ------------- -------------
Income/(loss) before taxation................ 40 (11,752) 1,639 -- (10,073)
Taxation..................................... (101) 401 (3,026) -- (2,726)
--- ----------- ----------- ------------- -------------
Income/(loss) after taxation................. (61) (11,351) (1,387) -- (12,799)
Minority interest............................ -- -- (1,313) -- (1,313)
Dividends from group companies............... -- 169 (169) -- --
--- ----------- ----------- ------------- -------------
NET INCOME/(LOSS)............................ (61) (11,182) (2,869) -- (14,112)
--- ----------- ----------- ------------- -------------
--- ----------- ----------- ------------- -------------
PERIOD FROM APRIL 1 TO JUNE 30, 1998
-------------------------------------------------------------------------
NON --
INTERTEK GUARANTOR CONSOLIDATION CONSOLIDATED
FINANCE PLC GUARANTORS SUBSIDIARIES ADJUSTMENTS TOTALS
--------------- ------------- ----------- ------------- -------------
REVENUES: group and share of joint
ventures................................... -- -- 107,831 (16,805) 91,026
LESS: share of joint ventures' revenues...... -- -- (329) -- (329)
--
------ ----------- ------------- -------------
Revenues from continuing operations.......... -- -- 107,502 (16,805) 90,697
Operating costs.............................. -- 136 (107,720) 16,805 (90,779)
--
------ ----------- ------------- -------------
Operating income from continuing
operations................................. -- 136 (218) -- (82)
Share of operating profit in:
Joint ventures............................. -- -- (38) -- (38)
Associates................................. -- -- 14 -- 14
--
------ ----------- ------------- -------------
Total operating income....................... -- 136 (242) -- (106)
Non-operating exceptional items.............. -- -- (2,450) -- (2,450)
--
------ ----------- ------------- -------------
Income on ordinary activities before net
interest................................... -- 136 (2,692) -- (2,556)
Net interest payable......................... 21 (6,053) (2,110) -- (8,142)
--
------ ----------- ------------- -------------
Income/(loss) before taxation................ 21 (5,917) (4,802) -- (10,698)
Taxation..................................... (49) 142 (2,477) -- (2,384)
--
------ ----------- ------------- -------------
Income/(loss) after taxation................. (28) (5,775) (7,279) -- (13,082)
Minority interest............................ -- -- (599) -- (599)
Dividends from group companies............... -- -- -- -- --
--
------ ----------- ------------- -------------
Net income/(loss)............................ (28) (5,775) (7,878) -- (13,681)
--
--
------ ----------- ------------- -------------
------ ----------- ------------- -------------
F-20
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(L IN THOUSANDS)
13. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
STATEMENTS OF OPERATIONS
PERIOD FROM JANUARY 1 TO JUNE 30, 1997
-----------------------------------------------------------------------
NON --
INTERTEK GUARANTOR CONSOLIDATION CONSOLIDATED
FINANCE PLC GUARANTORS SUBSIDIARIES ADJUSTMENTS TOTALS
--------------- ----------- ----------- ------------- -------------
REVENUES: group and share of joint
ventures................................... -- -- 184,099 (16,791) 167,308
Less: share of joint ventures' revenues...... -- -- -- -- --
--- ----------- ----------- ------------- -------------
Revenues from continuing operations.......... -- -- 184,099 (16,791) 167,308
Operating costs.............................. 674 830 (162,515) 16,791 (144,220)
--- ----------- ----------- ------------- -------------
Operating income from continuing
operations................................. 674 830 21,584 -- 23,088
Share of operating profit in:
Joint ventures............................. -- -- -- -- --
Associates................................. -- -- 44 -- 44
--- ----------- ----------- ------------- -------------
INCOME ON ORDINARY ACTIVITIES BEFORE NET
INTEREST................................... 674 830 21,628 -- 23,132
Net interest payable......................... (32) (12,264) (2,793) -- (15,089)
--- ----------- ----------- ------------- -------------
INCOME/(LOSS) BEFORE TAXATION................ 642 (11,434) 18,835 -- 8,043
Taxation..................................... (5) 760 (2,544) -- (1,789)
--- ----------- ----------- ------------- -------------
INCOME/(LOSS) AFTER TAXATION................. 637 (10,674) 16,291 -- 6,254
Minority interest............................ -- -- (1,468) -- (1,468)
--- ----------- ----------- ------------- -------------
NET INCOME/(LOSS)............................ 637 (10,674) 14,823 -- 4,786
--- ----------- ----------- ------------- -------------
--- ----------- ----------- ------------- -------------
PERIOD FROM APRIL 1 TO JUNE 30, 1997
-----------------------------------------------------------------------
NON --
INTERTEK GUARANTOR CONSOLIDATION CONSOLIDATED
FINANCE PLC GUARANTORS SUBSIDIARIES ADJUSTMENTS TOTALS
--------------- ----------- ----------- ------------- -------------
REVENUES: group and share of joint
ventures................................... -- -- 100,205 (9,014) 91,191
Less: share of joint ventures' revenues...... -- -- -- -- --
--- ----------- ----------- ------------- -------------
REVENUES FROM CONTINUING OPERATIONS.......... -- -- 100,205 (9,014) 91,191
Operating costs.............................. 337 511 (83,491) 9,014 (73,629)
--- ----------- ----------- ------------- -------------
OPERATING INCOME FROM CONTINUING
OPERATIONS................................. 337 511 16,714 -- 17,562
Share of operating profit in:
Joint ventures............................. -- -- -- -- --
Associates................................. -- -- 17 -- 17
--- ----------- ----------- ------------- -------------
INCOME ON ORDINARY ACTIVITIES BEFORE NET
INTEREST................................... 337 511 16,731 -- 17,579
Net interest payable......................... (16) (6,132) (1,517) -- (7,665)
--- ----------- ----------- ------------- -------------
INCOME/(LOSS) BEFORE TAXATION................ 321 (5,621) 15,214 -- 9,914
Taxation..................................... (3) 380 (2,166) -- (1,789)
--- ----------- ----------- ------------- -------------
INCOME/(LOSS) AFTER TAXATION................. 318 (5,241) 13,048 -- 8,125
Minority interest............................ -- -- (252) -- (252)
Dividends from group companies............... -- -- -- -- --
--- ----------- ----------- ------------- -------------
NET INCOME/(LOSS)............................ 318 (5,241) 12,796 -- 7,873
--- ----------- ----------- ------------- -------------
--- ----------- ----------- ------------- -------------
F-21
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(L IN THOUSANDS)
13. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
BALANCE SHEETS
JUNE 30, 1998
-------------------------------------------------------------------
NON --
INTERTEK GUARANTOR CONSOLIDATION CONSOLIDATED
FINANCE PLC GUARANTORS SUBSIDIARIES ADJUSTMENTS TOTALS
----------- ----------- ----------- ------------- -------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents.................... 16 702 20,111 -- 20,829
Trade receivables............................ -- -- 59,190 -- 59,190
Inventories.................................. -- -- 2,968 -- 2,968
Other current assets......................... 120,136 145,050 225,068 (467,523) 22,731
Deferred tax................................. -- -- 369 -- 369
----------- ----------- ----------- ------------- -------------
TOTAL CURRENT ASSETS......................... 120,152 145,752 307,706 (467,523) 106,087
Goodwill..................................... -- -- 4,997 -- 4,997
Property, plant and equipment, net........... -- -- 43,318 -- 43,318
Investments in subsidiary undertakings....... -- 389,797 252,174 (641,971) --
Other investments............................ -- -- 461 -- 461
----------- ----------- ----------- ------------- -------------
TOTAL ASSETS................................. 120,152 535,549 608,656 (1,109,494) 154,863
----------- ----------- ----------- ------------- -------------
----------- ----------- ----------- ------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY/
(DEFICIT)
CURRENT LIABILITIES
Borrowings (including current portion of long
term borrowings)........................... -- 15,677 4,067 -- 19,744
Accounts payable, accrued liabilities and
deferred income............................ 3,184 214,388 313,084 (467,523) 63,133
Income taxes payable......................... 404 (3,586) 6,522 -- 3,340
----------- ----------- ----------- ------------- -------------
TOTAL CURRENT LIABILITIES.................... 3,588 226,479 323,673 (467,523) 86,217
Long term borrowings......................... 116,751 157,791 (3,833) -- 270,709
Provisions for liabilities and charges....... -- -- 16,038 -- 16,038
Minority interests........................... -- -- 4,234 -- 4,234
SHAREHOLDERS' EQUITY/(DEFICIT)
Ordinary shares.............................. 50 101,573 268,004 (369,309) 318
REDEEMABLE preference shares................. -- 81,815 -- -- 81,815
Shares to be issued.......................... -- 2,793 -- -- 2,793
Premium in excess of par value............... -- 26,485 8,465 (32,093) 2,857
Retained (deficit)/earnings.................. (237) (61,387) (7,925) (240,569) (310,118)
----------- ----------- ----------- ------------- -------------
TOTAL SHAREHOLDERS' EQUITY/(DEFICIT)......... (187) 151,279 268,544 (641,971) (222,335)
----------- ----------- ----------- ------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY/(DEFICIT)........................... 120,152 535,549 608,656 (1,109,494) 154,863
----------- ----------- ----------- ------------- -------------
----------- ----------- ----------- ------------- -------------
F-22
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(L IN THOUSANDS)
13. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
BALANCE SHEETS
DECEMBER 31, 1997
---------------------------------------------------------------------
NON --
INTERTEK GUARANTOR CONSOLIDATION CONSOLIDATED
FINANCE PLC GUARANTORS SUBSIDIARIES ADJUSTMENTS TOTALS
----------- ----------- ------------- ------------- -------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents.................... 15 (537) 25,675 -- 25,153
Trade receivables............................ -- -- 60,483 -- 60,483
Inventories.................................. -- -- 2,650 -- 2,650
Other current assets......................... 120,006 228,622 193,466 (530,031) 12,063
Deferred taxation asset...................... -- -- 286 -- 286
----------- ----------- ------------- ------------- -------------
TOTAL CURRENT ASSETS......................... 120,021 228,085 282,560 (530,031) 100,635
Property, plant and equipment, net........... -- -- 44,460 -- 44,460
Investments in subsidiary undertakings....... -- 389,550 311,978 (701,528) --
Other investments............................ -- -- 184 -- 184
----------- ----------- ------------- ------------- -------------
TOTAL ASSETS................................. 120,021 617,635 639,182 (1,231,559) 145,279
----------- ----------- ------------- ------------- -------------
----------- ----------- ------------- ------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY/
(DEFICIT)
CURRENT LIABILITIES
Borrowings (including current portion of long
term borrowings)........................... -- 4,438 830 -- 5,268
Accounts payable, accrued liabilities and
deferred income............................ 3,389 264,755 321,906 (530,031) 60,019
Income taxes payable......................... 242 (3,628) 6,709 -- 3,323
----------- ----------- ------------- ------------- -------------
TOTAL CURRENT LIABILITIES.................... 3,631 265,565 329,445 (530,031) 68,610
Long term borrowings......................... 116,517 155,474 45 -- 272,036
Provisions for liabilities and charges....... -- -- 7,095 -- 7,095
Minority interests........................... -- -- 4,304 -- 4,304
Shareholders' equity/(deficit)
Ordinary shares.............................. 50 101,739 267,499 (368,970) 318
Redeemable preference shares................. -- 81,815 -- -- 81,815
Shares to be issued.......................... -- 2,793 -- -- 2,793
Premium in excess of par value............... -- 26,494 8,456 (32,093) 2,857
Retained (deficit)/earnings.................. (177) (16,245) 22,338 (300,465) (294,549)
----------- ----------- ------------- ------------- -------------
TOTAL SHAREHOLDERS' EQUITY/(DEFICIT)......... (127) 196,596 298,293 (701,528) (206,766)
----------- ----------- ------------- ------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY/(DEFICIT)........................... 120,021 617,635 639,182 (1,231,559) 145,279
----------- ----------- ------------- ------------- -------------
----------- ----------- ------------- ------------- -------------
F-23
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(L IN THOUSANDS)
13. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
STATEMENTS OF CASH FLOWS
PERIOD FROM JANUARY 1 TO JUNE 30, 1998
---------------------------------------------------------------------
NON --
INTERTEK GUARANTOR CONSOLIDATION CONSOLIDATED
FINANCE PLC GUARANTORS SUBSIDIARIES ADJUSTMENTS TOTALS
----------- ----------- ------------- ------------- -------------
Cash inflow from operating activities........ 45 (2,731) 16,832 -- 14,146
Returns on investments and servicing of
finance.................................... (105) (7,506) (7,569) -- (15,180)
Taxation..................................... 61 472 (2,760) -- (2,227)
Capital expenditure and financial
investment................................. -- (1,090) (4,213) -- (5,303)
Acquisitions and disposals................... -- -- (7,453) -- (7,453)
----------- ----------- ------------- ------------- -------------
CASH INFLOW/(OUTFLOW) BEFORE FINANCING....... 1 (10,855) (5,163) -- (16,017)
Financing.................................... -- 12,094 1,049 -- 13,143
----------- ----------- ------------- ------------- -------------
INCREASE/(DECREASE) IN CASH IN THE PERIOD.... 1 1,239 (4,114) -- (2,874)
----------- ----------- ------------- ------------- -------------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT
IN NET DEBT
INCREASE/(DECREASE) IN CASH IN THE PERIOD.... 1 1,239 (4,114) -- (2,874)
Debt issued in lieu of interest payment...... -- (3,389) -- -- (3,389)
Change in net debt resulting from cash
flows...................................... -- (8,697) (1,698) -- (10,395)
Other non-cash movements..................... -- 5,394 (6,039) -- (645)
Exchange movements........................... -- 932 (1,102) -- (170)
----------- ----------- ------------- ------------- -------------
MOVEMENT IN NET DEBT IN THE PERIOD........... 1 (4,521) (12,953) -- (17,473)
NET DEBT AT THE START OF THE PERIOD.......... (116,736) (168,245) 32,830 -- (252,151)
----------- ----------- ------------- ------------- -------------
NET DEBT AT THE END OF THE PERIOD............ (116,735) (172,766) 19,877 -- (269,624)
----------- ----------- ------------- ------------- -------------
STATEMENTS OF CASH FLOWS
PERIOD FROM JANUARY 1 TO JUNE 30, 1997
(RESTATED)
---------------------------------------------------------------------
NON --
INTERTEK GUARANTOR CONSOLIDATION CONSOLIDATED
FINANCE PLC GUARANTORS SUBSIDIARIES ADJUSTMENTS TOTALS
----------- ----------- ------------- ------------- -------------
Cash inflow from operating activities........ 1,159 11,226 10,181 -- 22,566
Returns on investments and servicing of
finance.................................... (1,510) (11,531) (2,124) -- (15,165)
Taxation..................................... -- -- (3,862) -- (3,862)
Capital expenditure and financial
investment................................. -- -- (4,142) -- (4,142)
Acquisitions and disposals................... -- (3,115) 1,460 -- (1,655)
----------- ----------- ------ ------------- -------------
CASH INFLOW/(OUTFLOW) BEFORE FINANCING....... (351) (3,420) 1,513 -- (2,258)
Financing.................................... 3,497 (1,776) 971 -- 2,692
----------- ----------- ------ ------------- -------------
INCREASE/(DECREASE) IN CASH IN THE PERIOD.... 3,146 (5,196) 2,484 -- 434
----------- ----------- ------ ------------- -------------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT
IN NET DEBT
INCREASE/(DECREASE) IN CASH IN THE PERIOD.... 3,146 (5,196) 2,484 -- 434
Debt issued in lieu of interest payment...... -- (2,912) -- -- (2,912)
Change in net debt resulting from cash
flows...................................... (5,958) 3,215 3,047 -- 304
Other non-cash movements..................... (1,108) 2,036 (1,012) -- (84)
Exchange movements........................... (5) 760 (4,421) -- (3,666)
----------- ----------- ------ ------------- -------------
MOVEMENT IN NET DEBT IN THE PERIOD........... (3,925) (2,097) 98 -- (5,924)
NET DEBT AT THE START OF THE PERIOD.......... (111,457) (157,383) 33,450 -- (235,390)
----------- ----------- ------ ------------- -------------
NET DEBT AT THE END OF THE PERIOD............ (115,382) (159,480) 33,548 -- (241,314)
----------- ----------- ------ ------------- -------------
F-24
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(L IN THOUSANDS)
13. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
STATEMENTS OF OPERATIONS
PERIOD FROM JANUARY 1 TO JUNE 30, 1998
------------------------------------------------------------------------
INTERTEK TESTING INTERTEK
TESTING HOLDINGS KITE ITS TESTING TESTING
SERVICES USA OVERSEAS HOLDING SERVICES UK HOLDINGS
LTD INC HOLDINGS BV LIMITED LIMITED SWEDEN AB
--------- --------- ----------- ------- ----------- ----------
Revenues from continuing
operations
Operating costs............... 103 -- 4 (1) -- (4)
-- --
--------- --------- ----------- -----
Operating (loss)/income from
continuing operations....... 103 -- 4 (1) -- (4)
Net interest
(payable)/receivable........ (3,581) (5,337) (88) (20) (1,838) (779)
-- --
--------- --------- ----------- -----
(Loss)/income before
taxation.................... (3,478) (5,337) (84) (21) (1,838) (783)
Taxation...................... -- (103) -- 10 514 --
-- --
--------- --------- ----------- -----
(Loss)/income after
taxation.................... (3,478) (5,440) (84) (11) (1,324) (783)
Dividends from group
companies................... -- 169 -- -- -- --
-- --
--------- --------- ----------- -----
Net (loss)/income............. (3,478) (5,271) (84) (11) (1,324) (783)
-- --
-- --
--------- --------- ----------- -----
--------- --------- ----------- -----
TESTING TESTING
YICKSON HOLDINGS HOLDINGS GUARANTOR
ENTERPRISES FRANCE GERMANY SUBSIDIARIES
LIMITED EURL GMBH TOTAL
------------ --------- -------- -------------
Revenues from continuing
operations
Operating costs............... (6) -- -- 96
-- --
-------- -------------
Operating (loss)/income from
continuing operations....... (6) -- -- 96
Net interest
(payable)/receivable........ 31 (30) (206) (11,848)
-- --
-------- -------------
(Loss)/income before
taxation.................... 25 (30) (206) (11,752)
Taxation...................... (4) (16) -- 401
-- --
-------- -------------
(Loss)/income after
taxation.................... 21 (46) (206) (11,351)
Dividends from group
companies................... -- -- -- 169
-- --
-------- -------------
Net (loss)/income............. 21 (46) (206) (11,182)
-- --
-- --
-------- -------------
-------- -------------
PERIOD FROM APRIL 1 TO JUNE 30, 1998
-----------------------------------------------------------------
INTERTEK TESTING KITE INTERTEK
TESTING HOLDINGS OVERSEAS ITS TESTING TESTING
SERVICES USA HOLDINGS HOLDING SERVICES HOLDINGS
LTD INC BV LIMITED UK LIMITED SWEDEN AB
-------- -------- -------- ------- ---------- ---------
Revenues from continuing operations
Operating costs.................... 138 -- 1 (1) -- (2)
-- --
-------- -------- ----- ---------
Operating income/(loss) from
continuing operations............ 138 -- 1 (1) -- (2)
Net interest (payable)/receivable.. (1,906) (2,683) (53) (22) (923) (328)
-- --
-------- -------- ----- ---------
(Loss)/income before taxation...... (1,768) (2,683) (52) (23) (923) (330)
Taxation........................... -- (67) -- 11 254 --
-- --
-------- -------- ----- ---------
Net (loss)/income.................. (1,768) (2,750) (52) (12) (669) (330)
-- --
-- --
-------- -------- ----- ---------
-------- -------- ----- ---------
TESTING TESTING
YICKSON HOLDINGS HOLDINGS GUARANTOR
ENTERPRISES FRANCE GERMANY SUBSIDIARIES
LIMITED EURL GMBH TOTAL
----------- -------- ------- ------------
Revenues from continuing operations
Operating costs.................... -- -- -- 136
-- --
------- ------
Operating income/(loss) from
continuing operations............ -- -- -- 136
Net interest (payable)/receivable.. 15 (15) (138) (6,053)
-- --
------- ------
(Loss)/income before taxation...... 15 (15) (138) (5,917)
Taxation........................... (1) (55) -- 142
-- --
------- ------
Net (loss)/income.................. 14 (70) (138) (5,775)
-- --
-- --
------- ------
------- ------
F-25
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(L IN THOUSANDS)
13. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
STATEMENTS OF OPERATIONS
PERIOD FROM JANUARY 1 TO JUNE 30, 1997
-------------------------------------------------------------------------------------------------
INTERTEK TESTING INTERTEK
TESTING HOLDINGS KITE TESTING TESTING YICKSON
SERVICES USA OVERSEAS ITS HOLDING SERVICES UK HOLDINGS ENTERPRISES
LTD INC HOLDINGS BV LIMITED LIMITED SWEDEN AB LIMITED
----------- ----------- ----------- ----------- ------------- ------------- ---------------
REVENUES FROM CONTINUING
OPERATIONS..................... -- -- -- -- -- -- --
--
----------- ----------- ----- ----- ------ ------
Operating costs.................. 1,101 79 (10) (65) (264) -- (8)
--
----------- ----------- ----- ----- ------ ------
OPERATING (LOSS)/INCOME FROM
CONTINUING OPERATIONS.......... 1,101 79 (10) (65) (264) -- (8)
Net interest
(payable)/receivable........... (3,243) (5,401) (147) (148) (1,895) (1,196) 18
--
----------- ----------- ----- ----- ------ ------
(LOSS)/INCOME BEFORE TAXATION.... (2,142) (5,322) (157) (213) (2,159) (1,196) 10
TAXATION......................... -- 45 -- 121 600 -- (6)
--
----------- ----------- ----- ----- ------ ------
NET (LOSS)/INCOME................ (2,142) (5,277) (157) (92) (1,559) (1,196) 4
--
--
----------- ----------- ----- ----- ------ ------
----------- ----------- ----- ----- ------ ------
TESTING TESTING
HOLDINGS HOLDINGS GUARANTOR
FRANCE GERMANY SUBSIDIARIES
EURL GMBH TOTAL
------------- ----------- -----------
REVENUES FROM CONTINUING
OPERATIONS..................... -- -- --
--
----- -----------
Operating costs.................. (3) -- 830
--
----- -----------
OPERATING (LOSS)/INCOME FROM
CONTINUING OPERATIONS.......... (3) -- 830
Net interest
(payable)/receivable........... -- (252) (12,264)
--
----- -----------
(LOSS)/INCOME BEFORE TAXATION.... (3) (252) (11,434)
TAXATION......................... -- -- 760
--
----- -----------
NET (LOSS)/INCOME................ (3) (252) (10,674)
--
--
----- -----------
----- -----------
PERIOD FROM APRIL 1 TO JUNE 30, 1997
-------------------------------------------------------------------------------------------------
INTERTEK TESTING INTERTEK
TESTING HOLDINGS KITE TESTING TESTING YICKSON
SERVICES USA OVERSEAS ITS HOLDING SERVICES UK HOLDINGS ENTERPRISES
LTD INC HOLDINGS BV LIMITED LIMITED SWEDEN AB LIMITED
----------- ----------- ----------- ----------- ------------- ------------- ---------------
REVENUES FROM CONTINUING
OPERATIONS..................... -- -- -- -- -- -- --
--
----------- ----------- ----- ----- ------ -----
Operating costs.................. 646 40 (5) (33) (131) -- (4)
--
----------- ----------- ----- ----- ------ -----
OPERATING INCOME/(LOSS) FROM
CONTINUING OPERATIONS.......... 646 40 (5) (33) (131) -- (4)
Net interest
(payable)/receivable........... (1,622) (2,701) (74) (74) (946) (598) 9
--
----------- ----------- ----- ----- ------ -----
(LOSS)/INCOME BEFORE TAXATION.... (976) (2,661) (79) (107) (1,077) (598) 5
Taxation......................... -- 23 -- 61 299 -- (3)
--
----------- ----------- ----- ----- ------ -----
NET (LOSS)/INCOME................ (976) (2,638) (79) (46) (778) (598) 2
--
--
----------- ----------- ----- ----- ------ -----
----------- ----------- ----- ----- ------ -----
TESTING TESTING
HOLDINGS HOLDINGS GUARANTOR
FRANCE GERMANY SUBSIDIARIES
EURL GMBH TOTAL
------------- ----------- -----------
REVENUES FROM CONTINUING
OPERATIONS..................... -- -- --
--
----- -----------
Operating costs.................. (2) -- 511
--
----- -----------
OPERATING INCOME/(LOSS) FROM
CONTINUING OPERATIONS.......... (2) -- 511
Net interest
(payable)/receivable........... -- (126) (6,132)
--
----- -----------
(LOSS)/INCOME BEFORE TAXATION.... (2) (126) (5,621)
Taxation......................... -- -- 380
--
----- -----------
NET (LOSS)/INCOME................ (2) (126) (5,241)
--
--
----- -----------
----- -----------
F-26
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(L IN THOUSANDS)
13. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
BALANCE SHEETS
JUNE 30, 1998
---------------------------------------------------------------------------------------------
INTERTEK TESTING INTERTEK
TESTING HOLDINGS KITE TESTING TESTING YICKSON
SERVICES USA OVERSEAS ITS HOLDING SERVICES UK HOLDINGS ENTERPRISES
LTD INC HOLDINGS BV LIMITED LIMITED SWEDEN AB LIMITED
----------- ----------- ----------- ----------- ------------- ----------- -------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents........ 679 -- 4 1 -- -- --
Other current assets............. 60,833 102 1,890 4,123 28 2,727 75,281
----------- ----------- ----- ----- ------ ----------- ------
TOTAL CURRENT ASSETS............. 61,512 102 1,894 4,124 28 2,727 75,281
Investments in subsidiary
undertakings................... 130,664 150,070 6,580 3,696 64,418 25,022 --
----------- ----------- ----- ----- ------ ----------- ------
TOTAL ASSETS..................... 192,176 150,172 8,474 7,820 64,446 27,749 75,281
----------- ----------- ----- ----- ------ ----------- ------
----------- ----------- ----- ----- ------ ----------- ------
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES
Borrowings(including current
portion of long term
borrowings).................... 13,036 -- 136 126 863 214 1,302
Accounts payable, accrued
liabilities and deferred
income......................... 45,627 106,780 3,801 955 10,934 2,544 40,012
Income taxes
(receivable)/payable........... (1,713) (497) (31) (3) (1,358) -- 16
----------- ----------- ----- ----- ------ ----------- ------
TOTAL CURRENT LIABILITIES........ 56,950 106,283 3,906 1,078 10,439 2,758 41,330
Long term borrowings............. 54,234 -- 3,591 3,401 36,571 21,484 33,766
SHAREHOLDERS' EQUITY
Ordinary shares.................. 318 93,469 1,372 3,659 -- 1,853 --
Redeemable preference shares..... 81,815 -- -- -- -- -- --
Shares to be issued.............. 2,793 -- -- -- -- -- --
Premium in excess of par value... 2,857 -- -- -- 22,709 -- 49
Retained (deficit)/earnings...... (6,791) (49,580) (395) (318) (5,273) 1,654 136
----------- ----------- ----- ----- ------ ----------- ------
TOTAL SHAREHOLDERS' EQUITY....... 80,992 43,889 977 3,341 17,436 3,507 185
----------- ----------- ----- ----- ------ ----------- ------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY........... 192,176 150,172 8,474 7,820 64,446 27,749 75,281
----------- ----------- ----- ----- ------ ----------- ------
----------- ----------- ----- ----- ------ ----------- ------
TESTING TESTING
HOLDINGS HOLDINGS GUARANTOR
FRANCE GERMANY SUBSIDIARIES
EURL GMBH TOTAL
----------- ----------- -----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents........ -- 18 702
Other current assets............. 26 40 145,050
----- ----- -----------
TOTAL CURRENT ASSETS............. 26 58 145,752
Investments in subsidiary
undertakings................... 3,417 5,930 389,797
----- ----- -----------
TOTAL ASSETS..................... 3,443 5,988 535,549
----- ----- -----------
----- ----- -----------
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES
Borrowings(including current
portion of long term
borrowings).................... -- -- 15,677
Accounts payable, accrued
liabilities and deferred
income......................... 2,646 1,089 214,388
Income taxes
(receivable)/payable........... -- -- (3,586)
----- ----- -----------
TOTAL CURRENT LIABILITIES........ 2,646 1,089 226,479
Long term borrowings............. -- 4,744 157,791
SHAREHOLDERS' EQUITY
Ordinary shares.................. 885 17 101,573
Redeemable preference shares..... -- -- 81,815
Shares to be issued.............. -- -- 2,793
Premium in excess of par value... -- 870 26,485
Retained (deficit)/earnings...... (88) (732) (61,387)
----- ----- -----------
TOTAL SHAREHOLDERS' EQUITY....... 797 155 151,279
----- ----- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY........... 3,443 5,988 535,549
----- ----- -----------
----- ----- -----------
F-27
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(L IN THOUSANDS)
13. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
BALANCE SHEETS
DECEMBER 31, 1997
---------------------------------------------------------------------------------------------
INTERTEK TESTING INTERTEK
TESTING HOLDINGS KITE TESTING TESTING YICKSON
SERVICES USA OVERSEAS ITS HOLDING SERVICES UK HOLDINGS ENTERPRISES
LTD INC HOLDINGS BV LIMITED LIMITED SWEDEN AB LIMITED
----------- ----------- ----------- ----------- ------------- ----------- -------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents........ (559) -- -- 1 2 -- --
Other current assets............. 118,686 28,295 1,883 4,107 33 3,808 71,810
----------- ----------- ----- ----- ------ ----------- ------
TOTAL CURRENT ASSETS............. 118,127 28,295 1,883 4,108 35 3,808 71,810
Investments in subsidiary
undertakings................... 130,656 150,069 5,549 3,804 64,418 25,604 --
----------- ----------- ----- ----- ------ ----------- ------
TOTAL ASSETS..................... 248,783 178,364 7,432 7,912 64,453 29,412 71,810
----------- ----------- ----- ----- ------ ----------- ------
----------- ----------- ----- ----- ------ ----------- ------
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES
Borrowings (including current
portion of long term
borrowings).................... -- -- 218 200 1,494 411 2,115
Accounts payable, accrued
liabilities and deferred
income......................... 116,335 96,336 2,537 732 7,325 2,661 35,276
Income taxes
(receivable)/payable........... (1,970) (581) -- 6 (1,039) -- 12
----------- ----------- ----- ----- ------ ----------- ------
TOTAL CURRENT LIABILITIES........ 114,365 95,755 2,755 938 7,780 3,072 37,403
Long term borrowings............. 50,791 -- 3,647 3,410 36,630 21,963 34,282
SHAREHOLDERS' EQUITY
Ordinary shares.................. 318 93,469 1,376 3,767 -- 1,896 --
Redeemable preference shares..... 81,815 -- -- -- -- -- --
Shares to be issued.............. 2,793 -- -- -- -- -- --
Premium in excess of par value... 2,857 -- -- -- 22,709 -- 49
Retained earnings/(deficit)...... (4,156) (10,860) (346) (203) (2,666) 2,481 76
----------- ----------- ----- ----- ------ ----------- ------
TOTAL SHAREHOLDERS' EQUITY....... 83,627 82,609 1,030 3,564 20,043 4,377 125
----------- ----------- ----- ----- ------ ----------- ------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY........... 248,783 178,364 7,432 7,912 64,453 29,412 71,810
----------- ----------- ----- ----- ------ ----------- ------
----------- ----------- ----- ----- ------ ----------- ------
TESTING TESTING
HOLDINGS HOLDINGS GUARANTOR
FRANCE GERMANY SUBSIDIARIES
EURL GMBH TOTAL
----------- ----------- -----------
ASSETS
CURRENT ASSETS
Cash and cash equivalents........ -- 19 (537)
Other current assets............. -- -- 228,622
----- ----- -----------
TOTAL CURRENT ASSETS............. -- 19 228,085
Investments in subsidiary
undertakings................... 3,459 5,991 389,550
----- ----- -----------
TOTAL ASSETS..................... 3,459 6,010 617,635
----- ----- -----------
----- ----- -----------
LIABILITIES AND SHAREHOLDERS'
EQUITY
CURRENT LIABILITIES
Borrowings (including current
portion of long term
borrowings).................... -- -- 4,438
Accounts payable, accrued
liabilities and deferred
income......................... 2,660 893 264,755
Income taxes
(receivable)/payable........... (56) -- (3,628)
----- ----- -----------
TOTAL CURRENT LIABILITIES........ 2,604 893 265,565
Long term borrowings............. -- 4,751 155,474
SHAREHOLDERS' EQUITY
Ordinary shares.................. 896 17 101,739
Redeemable preference shares..... -- -- 81,815
Shares to be issued.............. -- -- 2,793
Premium in excess of par value... -- 879 26,494
Retained earnings/(deficit)...... (41) (530) (16,245)
----- ----- -----------
TOTAL SHAREHOLDERS' EQUITY....... 855 366 196,596
----- ----- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY........... 3,459 6,010 617,635
----- ----- -----------
----- ----- -----------
F-28
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(L IN THOUSANDS)
13. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
STATEMENTS OF CASH FLOWS
PERIOD FROM JANUARY 1 TO JUNE 30, 1998
-----------------------------------------------------------------------------------------
INTERTEK TESTING INTERTEK
TESTING HOLDINGS KITE TESTING TESTING YICKSON
SERVICES USA OVERSEAS ITS HOLDING SERVICES UK HOLDINGS ENTERPRISES
LTD INC HOLDINGS BV LIMITED LIMITED SWEDEN AB LIMITED
----------- ----------- ----------- ----------- ----------- ----------- -----------
CASH FLOW STATEMENT
Net cash inflow/(outflow) from
operating activities........... (10,188) 1,119 164 149 2,506 996 1,266
Returns on investments and
servicing of finance........... (3,561) (1,100) (32) (23) (1,840) (779) 36
Taxation received/(paid)......... 257 (19) -- -- 195 -- --
Acquisitions and disposals....... -- -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
................................. (13,492) -- 132 126 861 217 1,302
Financing........................ 14,730 -- (128) (126) (863) (217) (1,302)
----------- ----------- ----------- ----------- ----------- ----------- -----------
INCREASE/(DECREASE) IN CASH...... 1,238 -- 4 -- (2) -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
Reconciliation of net cash flow
to movement in net debt
Increase/(decrease) in cash in
the period..................... 1,238 -- 4 -- (2) -- --
Debt issued in lieu of interest
payment........................ (3,389) -- -- -- -- -- --
Change in net debt resulting from
cash flows..................... (11,341) -- 136 126 863 217 1,302
Other non-cash movements......... -- -- 199 157 1,272 956 2,534
Exchange movements............... -- -- 41 5 -- 533 302
----------- ----------- ----------- ----------- ----------- ----------- -----------
Movement in net debt in the
period......................... (13,492) -- 380 288 2,133 1,706 4,138
Net debt at the start of the
period......................... (53,099) -- (4,103) (3,814) (39,567) (23,404) (39,206)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Net debt at the end of the
period......................... (66,591) -- (3,723) (3,526) (37,434) (21,698) (35,068)
----------- ----------- ----------- ----------- ----------- ----------- -----------
TESTING TESTING
HOLDINGS HOLDINGS GUARANTOR
FRANCE GERMANY SUBSIDIARIES
EURL GMBH TOTAL
------------- ----------- -----------
CASH FLOW STATEMENT
Net cash inflow/(outflow) from
operating activities........... (38) 205 (3,821)
Returns on investments and
servicing of finance........... (1) (206) (7,506)
Taxation received/(paid)......... 39 -- 472
Acquisitions and disposals....... -- -- --
--- ----------- -----------
................................. -- (1) (10,855)
Financing........................ -- -- 12,094
--- ----------- -----------
INCREASE/(DECREASE) IN CASH...... -- (1) 1,239
--- ----------- -----------
Reconciliation of net cash flow
to movement in net debt
Increase/(decrease) in cash in
the period..................... -- (1) 1,239
Debt issued in lieu of interest
payment........................ -- -- (3,389)
Change in net debt resulting from
cash flows..................... -- -- (8,697)
Other non-cash movements......... -- 276 5,394
Exchange movements............... -- 51 932
--- ----------- -----------
Movement in net debt in the
period......................... -- 326 (4,521)
Net debt at the start of the
period......................... -- (5,052) (168,245)
--- ----------- -----------
Net debt at the end of the
period......................... -- (4,726) (172,766)
--- ----------- -----------
F-29
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(L IN THOUSANDS)
13. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
STATEMENTS OF CASH FLOWS
PERIOD FROM JANUARY 1 TO JUNE 30, 1997
(RESTATED)
-----------------------------------------------------------------------------------------
INTERTEK TESTING INTERTEK
TESTING HOLDINGS KITE TESTING TESTING YICKSON
SERVICES USA OVERSEAS ITS HOLDING SERVICES UK HOLDINGS ENTERPRISES
LTD INC HOLDINGS BV LIMITED LIMITED SWEDEN AB LIMITED
----------- ----------- ----------- ----------- ----------- ----------- -----------
CASH FLOW STATEMENT
Net cash inflow from operating
activities..................... 1,322 3,655 150 83 1,802 868 3,167
Returns on investments and
servicing of finance........... (2,206) (3,655) (114) (111) (1,595) (891) (2,752)
Taxation......................... -- -- -- -- -- -- --
Acquisitions and disposals....... (3,115) -- -- -- -- -- --
----------- ----------- ----------- ----------- ----------- ----------- -----------
(3,999) -- 36 (28) 207 (23) 415
Financing........................ (1,150) -- (38) (31) (204) 23 (412)
----------- ----------- ----------- ----------- ----------- ----------- -----------
INCREASE IN CASH................. (5,149) -- (2) (59) 3 -- 3
----------- ----------- ----------- ----------- ----------- ----------- -----------
RECONCILIATION OF NET CASH FLOW
TO MOVEMENT IN NET DEBT
Increase in cash in the period... (5,149) -- (2) (59) 3 -- 3
Debt issued in lieu of interest
payment........................ (2,912) -- -- -- -- -- --
Cash inflow from increase in
debt........................... 2,960 -- 385 (202) (1,510) 2,431 (1,284)
Other non-cash movements......... 1,431 -- 2 2 (72) (94) 784
Exchange movements............... 45 -- -- 121 600 -- (6)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Movement in net debt in the
period......................... (3,625) -- 385 (138) (979) 2,337 (503)
Net debt at the start of the
period......................... (43,915) -- (4,474) (3,524) (37,600) (24,806) (37,754)
----------- ----------- ----------- ----------- ----------- ----------- -----------
NET DEBT AT THE END OF THE
PERIOD......................... (47,540) -- (4,089) (3,662) (38,579) (22,469) (38,257)
----------- ----------- ----------- ----------- ----------- ----------- -----------
TESTING TESTING
HOLDINGS HOLDINGS GUARANTOR
FRANCE GERMANY SUBSIDIARIES
EURL GMBH TOTAL
------------- ----------- -----------
CASH FLOW STATEMENT
Net cash inflow from operating
activities..................... -- 179 11,226
Returns on investments and
servicing of finance........... -- (207) (11,531)
Taxation......................... -- -- --
Acquisitions and disposals....... -- -- (3,115)
--- ----------- -----------
-- (28) (3,420)
Financing........................ -- 36 (1,776)
--- ----------- -----------
INCREASE IN CASH................. -- 8 (5,196)
--- ----------- -----------
RECONCILIATION OF NET CASH FLOW
TO MOVEMENT IN NET DEBT
Increase in cash in the period... -- 8 (5,196)
Debt issued in lieu of interest
payment........................ -- -- (2,912)
Cash inflow from increase in
debt........................... -- 435 3,215
Other non-cash movements......... -- (17) 2,036
Exchange movements............... -- -- 760
--- ----------- -----------
Movement in net debt in the
period......................... -- 426 (2,097)
Net debt at the start of the
period......................... -- (5,310) (157,383)
--- ----------- -----------
NET DEBT AT THE END OF THE
PERIOD......................... -- (4,884) (159,480)
--- ----------- -----------
F-30
SIGNATURES
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
8-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: August 14, 1998