SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
Information furnished as at May 14, 1999
Intertek Testing Services Limited
(REGISTRANT)
25 Savile Row
London, W1X 1AA
England
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE)
(Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F)
Form 20-F|X| Form 40-F
(Indicate by check mark whether the registrant by furnishing the information
contained in this form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934)
Yes No |X|
SCHEDULE OF INFORMATION CONTAINED IN THIS REPORT
Intertek Testing Services Limited financial statements for the three months to
March 31, 1999
Pages 1 - 43
INTERTEK TESTING SERVICES LIMITED
GENERAL
BUSINESS DESCRIPTION
Intertek Testing Services is a leading international group engaged in the
testing, inspection and certification of manufactured goods and commodities. At
March 31, 1999, ITS had 226 testing laboratories and 486 inspection offices in
83 countries.
ITS is comprised of five operating divisions, each focusing on the testing,
inspection and certification of different manufactured goods and commodities. A
description of each of the divisions is given below. In this report, the
divisions are given the well established trade names under which they operate.
The Environmental Testing Division ("Environmental"), which focused on the
analysis of water, soil and air samples for toxic substances, was discontinued
in August 1998. Central Costs comprising the overheads of the central head
office and non-operating holding companies are allocated to operating divisions
in proportion to their share of total revenues.
CALEB BRETT provides independent verification of the quantity and quality of
crude oil, petroleum products and chemicals and, to a lesser extent,
agricultural produce. It is a joint leader in the market for testing and
inspecting petroleum and chemicals.
ETL SEMKO tests and certifies electrical and electronic products, building
products, heating and ventilation and air conditioning equipment to ensure they
meet with applicable safety and performance standards. ETL Semko also certifies
the quality of management systems to standards such as ISO 9000. This division
was previously known as Conformity Assessment. The new name represents the
combined trade marks of ETL in North America and Semko in Sweden.
LABTEST is one of the largest international providers of testing and inspection
services of textiles, toys and other consumer products. This division was
previously known as Consumer Goods. The new name adopts the trade name under
which the division has operated for many years.
FOREIGN TRADE STANDARDS ("FTS") provides inspection and testing services to
government standards organisations to ensure that imports of specified products
meet their safety and other national standards. FTS also provides independent
pre-shipment inspection ("PSI") services to the governments of developing
countries to assist them in the enforcement of customs duties and exchange
controls. This division has changed its name from Foreign Trade SUPERVISION to
Foreign Trade STANDARDS to reflect the dominance of standards testing in the
division.
BONDAR CLEGG provides a laboratory testing service for samples from exploration
and producing mines, principally of gold but also of copper, zinc and other
minerals. This division was previously referred to as Minerals. The name of the
division was changed to adopt the trade name of the division.
2
RESULTS OF OPERATIONS
The following table shows for the three months to March 31, 1998 ("Q1 98") and
the three months to March 31, 1999 ("Q1 99"), revenues and operating income by
the major divisions of Intertek Testing Services Limited (the "Company") and its
subsidiaries (collectively "ITS"), as well as revenues by geographic area,
expressed in thousands of pounds sterling ("pounds000"), 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
operating divisions in proportion to their share of total revenues.
Q1 98 Q1 99
pounds000 pounds000
REVENUES BY DIVISION
Caleb Brett 27,992 31,125
ETL Semko 21,045 21,911
Labtest 13,231 16,484
Foreign Trade Standards 14,205 15,003
Bondar Clegg 4,076 2,568
------------------------------------
CONTINUING OPERATIONS 80,549 87,091
Discontinued operation 2,610 -
------------------------------------
TOTAL 83,159 87,091
------------------------------------
------------------------------------
OPERATING INCOME/(LOSS) BEFORE EXCEPTIONAL ITEMS
Caleb Brett 2,881 2,623
ETL Semko 2,297 2,560
Labtest 2,396 3,313
Foreign Trade Standards 1,390 1,612
Bondar Clegg (7) (749)
------------------------------------
CONTINUING OPERATIONS 8,957 9,359
Discontinued operation (948) -
------------------------------------
TOTAL 8,009 9,359
------------------------------------
------------------------------------
REVENUES BY GEOGRAPHICAL AREA
Americas 35,390 34,877
Europe, Africa and Middle East 29,079 32,631
Asia and Far East 16,080 19,583
------------------------------------
CONTINUING OPERATIONS 80,549 87,091
Discontinued operation 2,610 -
------------------------------------
TOTAL 83,159 87,091
------------------------------------
------------------------------------
TOTAL REVENUES 83,159 87,091
Operating costs (74,832) (75,873)
Share of operating (loss)/profit in associates (301) 11
------------------------------------
OPERATING INCOME 8,026 11,229
------------------------------------
------------------------------------
- ------------------------------------------------------------------------------------------------------
OPERATING INCOME BEFORE EXCEPTIONAL ITEMS
Continuing operations 8,957 9,359
Discontinued operation (948) -
------------------------------------
8,009 9,359
EXCEPTIONAL ITEMS CREDITED TO OPERATING INCOME
Continuing operations 17 1,870
------------------------------------
OPERATING INCOME AFTER EXCEPTIONAL ITEMS 8,026 11,229
- ------------------------------------------------------------------------------------------------------
3
RESULTS OF OPERATIONS AT COMPARABLE EXCHANGE RATES
Although for the purposes of reporting obligations, the Accounts of ITS are
reported in pounds sterling ("GBP" or "pounds"), over 50% of ITS' revenues are
denominated in U.S. dollars ("USD") or currencies linked to the U.S. dollar,
such as the Hong Kong dollar ("HKD"). ITS' borrowings, interest payments and
debt repayments are also denominated mainly in USD and HKD. Each of ITS' 150
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 ITS are shown in GBP. It is not ITS' policy to hedge
this exposure.
The results of overseas operations are translated into GBP at the cumulative
average exchange rates ("CAR") for the period. Therefore, the comparison of ITS'
results between periods can be affected by fluctuations in exchange rates which
are unrelated to the underlying operational performance of its businesses. The
following table sets forth, for the periods indicated, the growth rates of
revenues and operating income of ITS' main business divisions at actual exchange
rates for the period and at prior year ("comparable") exchange rates for the
period.
GROWTH RATES AT ACTUAL AND COMPARABLE EXCHANGE RATES
--------------------- ---------------------- ----------------------
Q1 98 Q1 99 % GROWTH
poundsm % poundsm % Actual Compa-
rable
---------- ---------- ----------- ---------- ---------- -----------
REVENUES
Caleb Brett 28.0 34 31.1 36 11.1 12.1
ETL Semko 21.1 25 21.9 25 3.8 3.3
Labtest 13.2 16 16.5 19 25.0 25.0
Foreign Trade Standards 14.2 17 15.0 17 5.6 4.2
Bondar Clegg 4.1 5 2.6 3 (36.6) (34.1)
---------- ---------- ----------- ---------- ---------- -----------
CONTINUING OPERATIONS 80.6 97 87.1 100 8.1 8.2
Discontinued operation 2.6 3 - - (100.0) (100.0)
---------- ---------- ----------- ---------- ---------- -----------
TOTAL 83.2 100 87.1 100 4.7 4.8
---------- ---------- ----------- ---------- ---------- -----------
---------- ---------- ----------- ---------- ---------- -----------
OPERATING INCOME/(LOSS) BEFORE
EXCEPTIONAL ITEMS:
Caleb Brett 2.9 36 2.7 29 (6.9) (6.9)
ETL Semko 2.3 29 2.6 28 13.0 13.0
Labtest 2.4 30 3.3 35 37.5 37.5
Foreign Trade Standards 1.4 18 1.6 17 14.3 14.3
Bondar Clegg - - (0.8) (9) - -
---------- ---------- ----------- ---------- ---------- -----------
CONTINUING OPERATIONS 9.0 113 9.4 100 4.4 4.4
Discontinued operation (1.0) (13) - - (100.0) (100.0)
---------- ---------- ----------- ---------- ---------- -----------
TOTAL 8.0 100 9.4 100 17.5 17.5
---------- ---------- ----------- ---------- ---------- -----------
---------- ---------- ----------- ---------- ---------- -----------
The Actual percentage growth represents the percentage increase or decrease of
one quarter over the prior quarter where each quarter is translated into GBP at
the CAR applicable to each of those quarters.
The Comparable percentage growth represents the percentage increase or decrease
of one quarter over the prior quarter where both quarters are translated into
GBP at the CAR applicable to the earlier of the two quarters.
4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS FOR THE THREE MONTHS TO MARCH 31, 1999 COMPARED WITH THREE MONTHS TO
MARCH 31, 1998
OPERATING AND FINANCIAL REVIEW
A discussion of ITS' performance for Q1 98 compared to Q1 99 is given below,
followed by a detailed review of the performance of each division.
REVENUES
Q1 98 Q1 99 GROWTH
poundsm poundsm poundsm
-------------- ------------- --------------
CONTINUING OPERATIONS 80.6 87.1 6.5
Actual growth % 8.1%
Comparable growth % 8.2%
-------------- ------------- --------------
Revenues in Q1 are adversely affected by the Chinese New Year holiday which
reduces all activity in the Asia Pacific region. In Q1 99, ITS' total revenues
for continuing business grew by 8.1% or pounds6.5 million, from pounds80.6
million in Q1 98 to pounds87.1 million in Q1 99.
All continuing divisions contributed to the growth in ITS revenues, apart from
Bondar Clegg. The Environmental Testing division was sold in August 1998 and its
revenues of pounds2.6 million for Q1 98 are shown as a discontinued operation.
REVENUES BY LOCATION Q1 98 Q1 99 GROWTH
poundsm poundsm poundsm
-------------- ------------- --------------
Americas 35.4 34.9 (0.5)
Europe, Africa and Middle East 29.1 32.6 3.5
Asia and Far East 16.1 19.6 3.5
-------------- ------------- --------------
TOTAL CONTINUING OPERATIONS 80.6 87.1 6.5
-------------- ------------- --------------
The decline in revenues in the Americas was attributable to the decline in
revenues in Bondar Clegg and FTS. The decline in FTS was compensated by
increases in revenues in the other regions but Bondar Clegg revenues declined in
every region.
OPERATING COSTS BEFORE EXCEPTIONAL ITEMS
Q1 98 Q1 99 GROWTH
poundsm poundsm poundsm
-------------- ------------- --------------
CONTINUING OPERATIONS 71.6 77.7 6.1
Actual growth % 8.6%
Comparable growth % 8.9%
-------------- ------------- --------------
Operating costs in continuing operations increased by pounds6.1 million in Q1
99 over Q1 98.
From January 1, 1998, ITS adopted Financial Reporting Standard 10 in relation to
goodwill arising on acquisitions. This has resulted in an increase in operating
costs of pounds0.2 million in Q1 99 for goodwill amortisation which was largely
attributable to the acquisitions undertaken by Caleb Brett after March 1998. The
cost reduction programme in Bondar Clegg continued and restructuring costs of
approximately pounds0.2 million were incurred in Q1 99.
5
OPERATING INCOME BEFORE EXCEPTIONAL ITEMS
Q1 98 Q1 99 GROWTH
poundsm poundsm poundsm
-------------- ------------- --------------
CONTINUING OPERATIONS 9.0 9.4 0.4
Actual growth % 4.4%
Comparable growth % 4.4%
Operating margin % 11.2% 10.8% (0.4)%
-------------- ------------- --------------
Operating income from continuing operations increased by pounds0.4 million in
Q1 99 over Q1 98.
Operating income in Q1 99 increased over Q1 98 in all divisions apart from Caleb
Brett and Bondar Clegg. The decline in Caleb Brett in Q1 99 was due to goodwill
amortisation of pounds0.2 million. The operating margin for continuing
businesses suffered in Q1 99 due to the loss sustained by Bondar Clegg. The
Environmental Testing division generated an operating loss of pounds1.0 million
in Q1 98 and this is shown as a discontinued operation.
EXCEPTIONAL INCOME/(COSTS)
OPERATING EXCEPTIONAL ITEMS Q1 98 Q1 99
poundsm poundsm
-------------- -------------
FTS
Provision against Nigerian invoices (4.7) (5.1)
Payments from Nigerian Government 4.7 8.9
-------------- -------------
Sub total -- 3.8
Restructuring costs -- (2.0)
-------------- -------------
-- 1.8
-------------- -------------
CALEB BRETT
Provision against Nigerian invoices -- (0.3)
Payments from Nigerian Government -- 0.4
-------------- -------------
-- 0.1
-------------- -------------
TOTAL OPERATING EXCEPTIONAL INCOME -- 1.9
-------------- -------------
Due to the irregular nature of the payments received from the Nigerian
Government for the PSI programmes in the FTS division, 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 payments are received. In Q1
98, invoices totalling pounds4.7 million were issued and payments of pounds4.7
million received in settlement of prior period invoices, therefore the
exceptional charge for the invoices was offset by the exceptional credit for the
cash resulting in a nil charge. In Q1 99, invoices totalling pounds5.1 million
were issued and payments totalling pounds8.9 million were received from the
Nigerian Government in settlement of FTS invoices up to March 1998, resulting in
a net exceptional credit of pounds3.8 million.
6
In January 1999, FTS adopted a policy of only carrying out PSI work for the
Nigerian Government if FTS was first paid by the exporter of the goods, on the
understanding that FTS would refund the money to the exporter when FTS is paid
by the Nigerian Government. During Q1 99 invoices totalling pounds5.1 million
were issued for PSI work and payments of pounds3.7 million were collected from
exporters. These payments are held as accounts payable in the balance sheet at
March 31, 1999. The debt due from the Nigerian Government at March 31, 1999 was
pounds20.2 million before deducting payments from exporters and pounds16.5
million after deducting payments from exporters. Discussions are continuing with
representatives of the Nigerian Government regarding the payment of the
remaining debt.
The Nigerian Government terminated all PSI programmes on March 31, 1999. FTS
expects to lose annual revenues of approximately pounds21.5 million from that
date as a result of the termination of these programmes and the division is
being restructured at an expected cost of pounds2.0 million.
Caleb Brett also carried out inspections for the Nigerian Government which were
related to oil exports. Payments of pounds0.4 million were received from the
Nigerian Government in Q1 99 settling invoices up to March 1998. Invoices
totalling pounds0.3 million were issued in Q1 99 resulting in a net exceptional
credit to the profit and loss account of pounds0.1 million. These invoices are
not subject to payments from exporters. The debt due to Caleb Brett was
pounds1.7 million at March 31, 1999. A payment of pounds1.0 million was
received on May 13, 1999 from the Nigerian Government in settlement of invoices
up to September 1998. Discussions are continuing with representatives of the
Nigerian Government regarding the payment of the remaining debt.
The oil export monitoring scheme was also cancelled by the Nigerian Government
on March 31, 1999 and Caleb Brett no longer performs inspections under this
programme.
NON-OPERATING EXCEPTIONAL ITEMS
Q1 98 Q1 99
poundsm poundsm
-------------- -------------
ETL SEMKO
Proceeds from disposal -- 3.3
Less attributable goodwill -- (1.1)
-------------- -------------
TOTAL NON-OPERATING EXCEPTIONAL ITEMS -- 2.2
-------------- -------------
ETL Semko disposed of a non-core activity in the U.S. in February 1999 for a net
consideration of pounds3.3 million. After deducting attributable goodwill of
pounds1.1 million, this disposal generated an exceptional credit of pounds2.2
million in Q1 99. The disposal proceeds of pounds3.3 million will be used to
prepay ITS' Senior Term A Loan in June 1999.
7
NET INTEREST EXPENSE
Q1 98 Q1 99 GROWTH
poundsm poundsm poundsm
-------------- ------------- --------------
CONTINUING OPERATIONS 7.4 8.1 0.7
Actual growth % 9.5%
-------------- ------------- --------------
Net interest expense increased by pounds0.7 million in Q1 99 over Q1 98. This
increase was principally due to the additional Parent Subordinated PIK
Debentures issued during 1998 and increased usage of the Revolving Credit
Facility.
INCOME TAXES
Q1 98 Q1 99 GROWTH
poundsm poundsm poundsm
-------------- ------------- --------------
INCOME TAX CHARGE 0.3 0.9 0.6
-------------- ------------- --------------
A tax charge of pounds0.9 million was made against income in Q1 99 compared to
a charge of pounds0.3 million in Q1 98. In Q1 98 and Q1 99, the tax charge was
calculated by applying the estimated tax rate for the full year to the income
before tax for the quarter before adjusting for exceptional items. The estimated
tax rate for the full year 1999 has increased over the estimated tax rate for
the full year 1998 to reflect the final tax rate for the full year 1998.
Exceptional items have been tax effected, as appropriate.
8
OPERATING AND FINANCIAL REVIEW BY DIVISION
A discussion of the performance of each of the operating divisions for Q1 98
compared to Q1 99 is given below.
CALEB BRETT
OPERATING RESULTS Q1 98 Q1 99 GROWTH
poundsm poundsm poundsm
-------------- ------------- --------------
REVENUES 28.0 31.1 3.1
Actual growth % 11.1%
Comparable growth % 12.1%
OPERATING INCOME 2.9 2.7 (0.2)
Actual growth % (6.9)%
Comparable growth % (6.9)%
Operating margin % 10.4% 8.7% (1.7)%
-------------- ------------- --------------
At actual rates, revenues from Caleb Brett increased by pounds3.1 million in Q1
99 over Q1 98 and operating income decreased by pounds0.2 million in Q1 99 over
Q1 98. The revenues increased in Q1 99 due to the acquisitions made during the
year ended December 31, 1998. Excluding the acquisitions, revenues increased by
pounds1.3 million in Q1 99 over Q1 98. In 1998, there was increased demand for
petroleum inspection and testing because oil companies increased their
inventories whilst the oil price was low. In Q1 99, the oil companies utilised
their inventories and the demand for testing and inspection services reduced.
In some instances, Caleb Brett has also had to reduce its prices in order to
satisfy the demands of the oil companies cost cutting measures. Furthermore, in
Hong Kong, the ban on transhipping cargo into China which was introduced in 1998
has strengthened, causing a reduction in hydrocarbon inspection and testing and
in surveys of damaged cargo. Caleb Brett is responding to these factors by
reducing costs in the countries affected. The oil price increased at the end of
Q1 99 and the demand for petroleum inspection and testing increased.
The Europe, Africa and Middle East region performed well in Q1 99. Revenues
increased by pounds2.5 million or 26.5% in Q1 99 over Q1 98 and operating
income increased by pounds0.2 million in Q1 99 over Q1 98. This was partly due
to the acquisitions made after Q1 98 which contributed pounds1.8 million to
revenues and pounds0.2 million to operating income in Q1 99. Operating costs
increased by pounds0.2 million in Q1 99 due to the amortisation of goodwill
arising on these acquisitions.
Caleb Brett completed a small infill acquisition in Australia at a cost of
pounds0.1 million in Q1 99.
ETL SEMKO (FORMERLY CONFORMITY ASSESSMENT)
OPERATING RESULTS Q1 98 Q1 99 GROWTH
poundsm poundsm poundsm
-------------- ------------- --------------
REVENUES 21.1 21.9 0.8
Actual growth % 3.8%
Comparable growth % 3.3%
OPERATING INCOME 2.3 2.6 0.3
Actual growth % 13.0%
Comparable growth % 13.0%
Operating margin % 10.9% 11.9% 1.0%
-------------- ------------- --------------
9
At actual rates, revenues from ETL Semko increased by pounds0.8 million in Q1
99 over Q1 98 and operating income increased by pounds0.3 million in Q1 99 over
Q1 98. ETL Semko experienced a small decrease in revenues in the Americas region
in Q1 99 over Q1 98 partly due to delays in telecommunication testing caused by
some clients experiencing technical problems due to the rapid development of
technology in the telecommunications industry and partly due to the disposal of
the Compliance Engineering magazine, which was sold in February 1999 for
pounds3.3 million. Revenues in Europe and Asia increased due to both market
growth and expanded market share. Operating income increased in all regions in
Q1 99 over Q1 98. In Q1 99, ITS bought the remaining 50% share of GS3, the semi
conductor business in the U.S., from its joint venture partner, at a cost of
pounds0.6 million and a new electrical testing facility was opened in Taiwan.
LABTEST (FORMERLY CONSUMER GOODS)
OPERATING RESULTS Q1 98 Q1 99 GROWTH
poundsm poundsm poundsm
-------------- ------------- --------------
REVENUES 13.2 16.5 3.3
Actual growth % 25.0%
Comparable growth % 25.0%
OPERATING INCOME 2.4 3.3 0.9
Actual growth % 37.5%
Comparable growth % 37.5%
Operating margin % 18.2% 20.0% 1.8%
-------------- ------------- --------------
At actual rates, revenues from Labtest increased by pounds3.3 million in Q1 99
over Q1 98 and operating income increased by pounds0.9 million in Q1 99 over Q1
98. Over 60% of Labtest revenues are generated in Asia and Q1 is particularly
affected by the Chinese New Year holidays. Textile testing continued to expand
with the opening of a new textile testing laboratory in France in Q1 99 and the
establishment of a laboratory in San Francisco. Sales offices were opened in
Italy and Spain in Q1 99 and a new Risk Assessment Management programme for
McDonalds commenced in March 1999.
One of the Labtest's largest textile customers accounting for about 2% of
revenues of the division has indicated that it will be undertaking a cost
cutting exercise in 1999. Labtest will adjust its cost base accordingly.
FOREIGN TRADE STANDARDS
OPERATING RESULTS Q1 98 Q1 99 GROWTH
poundsm poundsm poundsm
------------- ------------- --------------
REVENUES 14.2 15.0 0.8
Actual growth % 5.6%
Comparable growth % 4.2%
OPERATING INCOME BEFORE EXCEPTIONALS 1.4 1.6 0.2
Actual growth % 14.3%
Comparable growth % 14.3%
Operating margin % 9.9% 10.7% 0.8%
------------- ------------- --------------
At actual rates, revenues from FTS increased by pounds0.8 million in Q1 99 over
Q1 98 and operating income increased by pounds0.2 million in Q1 99 over Q1 98.
10
The standards testing programme with the Saudi Arabian Standards Organisation
continued to grow. Revenues increased pounds0.3 million in Q1 99 over Q1 98. A
new standards testing programme with the Government of Uzbekistan commenced in
Q1 99, although due to delayed implementation and start-up costs it has not yet
generated any significant operating income.
As previously reported, the Government of Nigeria terminated all pre-shipment
inspection programmes on March 31, 1999. The FTS division was restructured in Q1
99 and ITS intends to make further cost reductions. The cost of the
restructuring is expected to be pounds2.0 million and this was charged as an
exceptional cost in Q1 99.
BONDAR CLEGG (FORMERLY MINERALS)
OPERATING RESULTS Q1 98 Q1 99 DECREASE
poundsm poundsm poundsm
-------------- ------------- --------------
REVENUES 4.1 2.6 (1.5)
Actual growth % (36.6)%
Comparable growth % (34.1)%
OPERATING LOSS -- (0.8) (0.8)
-------------- ------------- --------------
At actual rates, revenues from Bondar Clegg decreased by pounds1.5 million in
Q1 99 over Q1 98 and the operating loss increased by pounds0.8 million in Q1 99
over Q1 98.
The demand for minerals testing has not improved, partly due to the low price of
gold. The cost reduction programme is continuing and restructuring costs of
pounds0.2 million were incurred in Q1 99. The future of Bondar Clegg is under
review by ITS management.
DISCONTINUED OPERATION
OPERATING RESULTS Q1 98 Q1 99 DECREASE
poundsm poundsm poundsm
-------------- ------------- --------------
REVENUES 2.6 -- (2.6)
OPERATING LOSS (1.0) -- 1.0
-------------- ------------- --------------
The Environmental Testing division was sold in August 1998.
11
FINANCIAL CONDITION AND LIQUIDITY
At March 31, 1999, ITS had cash of pounds23.1 million and net borrowings of
pounds302.3 million compared to cash of pounds16.8 million and net borrowings
of pounds295.8 million at December 31, 1998.
ITS reported cash inflow from operating activities of pounds13.9 million in Q1
99 and pounds5.5 million in Q1 98. Net cash inflow from operating activities
includes operating income after operating exceptionals, before depreciation and
other non-cash items, as well as working capital movements. The increase in net
cash inflow from operating activities in Q1 99 is attributable to the payments
received from the Nigerian Government of pounds9.3 million and payments from
Nigerian exporters of pounds3.7 million.
Expenditure on tangible fixed assets amounted to pounds2.1 million in Q1 99 and
pounds2.4 million in Q1 98. ITS' investment in tangible fixed assets was
primarily in laboratory equipment and information technology.
During Q1 99, the cash outflow on acquisitions was pounds3.6 million and
pounds0.2 million in Q1 98. The cash outflow in Q1 99 included the payment of
pounds2.9 million for deferred consideration on an acquisition made in 1998,
and pounds0.7 million for acquisitions made in Q1 99. ITS received pounds3.3
million for the disposal of its Compliance Engineering magazine in Q1 99.
At March 31, 1999, ITS had total borrowings of pounds312.7 million less
unamortised debt issuance costs of pounds10.4 million. An analysis of
borrowings is given in the table below.
BORROWINGS December 31, 1998 March 31, 1999
poundsm poundsm
----------------------- -------------------
Senior Subordinated Notes 120.9 124.5
Senior Term Loan A 73.7 75.4
Senior Term Loan B 35.1 35.3
Senior Revolving Credit Facility 16.3 13.5
Parent Subordinated PIK Debentures 59.2 63.1
Other borrowings 1.4 0.8
----------------------- -------------------
TOTAL BORROWINGS 306.6 312.7
Debt issuance costs (10.8) (10.4)
----------------------- -------------------
NET BORROWINGS 295.8 302.3
----------------------- -------------------
----------------------- -------------------
In Q1 99, ITS paid net interest of pounds0.4 million on the Revolving Credit
Facility and other borrowings. The interest on the Parent Subordinated PIK
Debentures for the period November 8, 1998 to February 1, 1999 of pounds1.9
million was funded by a further issue of Parent Subordinated PIK Debentures on
February 1, 1999.
Apart from a small amount of the Revolving Credit Facility, all the borrowings
are denominated in currencies other than GBP so the outstanding amount in GBP is
affected by exchange rate fluctuations. The apparent increases in the Senior
Subordinated Notes and the Senior Term Loans are caused by currency
fluctuations. The Parent Subordinated PIK Debentures increased by pounds1.9
million due to the issue of new debentures and pounds2.0 million due to
currency fluctuations. Repayments of pounds2.8 million against the Revolving
Credit Facility and pounds0.6 million against other borrowings were made in Q1
99.
On April 26, 1999, ITS completed an equity offer which raised pounds20.0
million. The cash will be used to fund acquisitions and working capital. Revised
banking arrangements were also effective from April 26, 1999. These principally
provide for delayed repayment of the Senior Term A Loans, but some of the
repayments from the Nigerian Government and some of the proceeds from disposals
will result in earlier repayments. The proceeds of pounds3.3 million received
from the disposal of the Compliance Engineering magazine will be used to prepay
the Senior Term A Loans when the next capital repayments fall due on June 15,
1999.
ITS paid dividends of pounds0.6 million to minority shareholders in Q1 99 and
pounds0.4 million in Q1 98.
12
Subject to the provisions of the agreement under which the loans to finance the
acquisition of the business were made, and subject to certain exceptions and
applicable law, there are no restrictions on the ability of: (a) the Company or
any of its direct and indirect subsidiaries from paying dividends or making any
other distributions or loans or advances to Intertek Finance plc, the issuer of
the Senior Subordinated Notes or (b) the direct and indirect subsidiaries of the
Company from paying dividends or making any other distributions or loans or
advances to the Company.
GENERAL
The financial statements have been prepared in accordance with U.K. GAAP which
differs in certain significant respects from U.S. GAAP. The most significant
differences between U.S. GAAP and U.K. GAAP are described in Note 12 to the
Consolidated Financial Statements of ITS.
EXCHANGE RATES
Exchange rates used for translating local currencies into GBP for significant
currencies in which ITS operates are shown in the following table.
CUMULATIVE AVERAGE EXCHANGE RATES USED TO TRANSLATE INCOME AND COSTS INTO GBP
Three months to Three months to
March 31, 1998 March 31, 1999
------------------ -------------------
U.S. Dollar 1.66 1.65
Hong Kong Dollar 12.8 12.8
Swedish Kroner 13.2 13.1
------------------ -------------------
Revenues and operating income for Q1 98 have been translated into GBP using the
cumulative average exchange rate for the three months to March 31, 1998.
Revenues and operating income for Q1 99 have been translated into GBP using the
cumulative average exchange rate for the three months to March 31, 1999.
To remove the effects of currency exchange rate movements when comparing the
revenues and operating income for Q1 98 and Q1 99, the results on page 4 show
the percentage growth of Q1 99 over Q1 98 at both actual exchange rates and
comparable exchange rates.
13
INVESTIGATIONS BY THE U.S. ENVIRONMENTAL PROTECTION AGENCY
Two of ITS' subsidiary corporations are currently involved in investigations by
the U.S. Environmental Protection Agency ("EPA"). Details of each investigation
are given below:
CALEB BRETT USA, INC.
In February 1997, Caleb Brett through its routine quality assurance and quality
control procedures, discovered evidence of false testing results at the Caleb
Brett laboratory in Linden, New Jersey which involved testing of gasoline to
certain standards set by the EPA.
Caleb Brett promptly reported its findings to the EPA. This matter has been
referred to the U.S. Department of Justice by the EPA, and civil and criminal
investigations are underway.
Caleb Brett requested inclusion in the EPA's Voluntary Disclosure Program. Under
this program it may be possible to foreclose criminal, but not civil penalties.
As part of the co-operation with the EPA, Caleb Brett appointed a Compliance
Director and introduced more stringent compliance protocols which have been
presented to the EPA. These compliance procedures are now fully implemented.
It is not yet possible to estimate the cost of any civil or criminal penalties
arising from this matter, however, on the basis of currently available
information, the directors consider that the outcome is unlikely to have a
material effect on the financial position of ITS. Possible rights of recovery
against Inchcape plc under the Share Purchase Deed are being pursued.
INTERTEK TESTING SERVICES ENVIRONMENTAL LABORATORIES, INC.
In December 1997, Intertek Testing Services Environmental Laboratories, Inc.
("ITS Environmental") discovered certain discrepancies in reported testing
results at its facility in Richardson, near Dallas, Texas ("Dallas"). A further
investigation by the Quality Assurance/Quality Control department of ITS
Environmental revealed that technicians at the Dallas facility had at various
times manually integrated data and improperly calibrated test equipment in a way
that may have skewed the accuracy of the test results that have been reported,
but not necessarily the basic data recorded in the testing equipment.
ITS Environmental promptly reported these discrepancies to the EPA and to
clients. Civil and criminal investigations are under way. A government
investigation at the ITS Environmental facility uncovered evidence of false
reporting beyond that initially discovered and disclosed by ITS Environmental.
ITS Environmental has requested inclusion in the EPA's Voluntary Disclosure
Program. Under this program it may be possible to foreclose criminal but not
civil penalties. If the actions of ITS Environmental that were disclosed to the
EPA are found to qualify for the immunities available under its Voluntary
Disclosure Program, the protection of this program may not extend to improper
actions subsequently discovered.
In August 1998, ITS Environmental sold its laboratory business in Burlington,
Vermont U.S.A. and St. Helens, U.K. and stopped commercial operations at the
laboratory in Dallas. These actions resulted in the discontinuation of business
at ITS Environmental. This sale has not relieved ITS Environmental of any
liability it may face as a result of these investigations or otherwise.
Although commercial operations have been discontinued in Dallas, the facility is
being used to reprocess the original data. During the past few months, ITS
Environmental has developed an effective data screening and reprocessing method.
The reprocessing effort is aimed at providing clients with data of known
quality.
14
ITS Environmental continues to co-operate fully with the government
investigation. To date, no action has been brought against ITS Environmental by
the EPA or any other party. At this time, it is not possible to estimate the
cost of any civil or criminal penalties arising from this matter. However, on
the basis of currently available information, the directors consider that the
outcome is unlikely to have a material effect on the financial position of ITS.
Possible rights of recovery against Inchcape plc under the Share Purchase Deed
are being pursued.
INFORMATION TECHNOLOGY
STATE OF READINESS
The date change from 1999 to 2000 may impair the function of ITS' internal
computer network and related systems, its testing equipment and any other system
or device in which the year is represented by two digits rather than by four. A
full review has been undertaken for all major IT systems to ensure they will
operate effectively in the Year 2000. It is expected that the modifications
identified in that review will have been completed by September 1999.
ITS has established a Year 2000 team made up of the members of ITS' IT Steering
Committee to cover (i) internal systems, (ii) test equipment and facilities,
(iii) suppliers and (iv) legal issues. ITS' IT Steering Committee reports
regularly to the ITS Board.
To date, ITS has contacted approximately 3,000 of its customers in connection
with Year 2000 issues. All key subcontractors and suppliers are being audited
under ITS' Year 2000 program. ITS has also implemented procedures to access the
Year 2000 readiness of its key suppliers. These procedures include testing of
critical components and obtaining confirmation from key suppliers. ITS currently
expects its key subcontractors and suppliers will be Year 2000 compliant in all
material respects by mid-year 1999.
COSTS
The total cost (both revenue and capital) of remedial and replacement work for
both IT systems and non-IT systems is currently estimated at pounds2.0 million
in 1999. These estimates have been calculated in accordance with SEC Guidelines,
which require the full cost of projects to be disclosed as estimated Year 2000
costs, where the replacement of a non-compliant system has been accelerated.
RISKS
There can be no assurance that ITS' efforts (or the efforts of its customers and
suppliers) will be successful in limiting the vulnerability of the ITS systems
and equipment to the problems associated with the transition to the Year 2000,
or that, if such problems occur, they will not have a material adverse effect on
ITS before they can be resolved. However, management presently believes that it
is unlikely that the failure of any individual system will have a material
effect on the operation of ITS. In the event of a systems breakdown at a
particular site, work can usually be transferred to another site in ITS.
CONTINGENCY PLANS
ITS currently believes that the most reasonably likely worst case scenario is
that there will be some localised disruptions of systems that will affect
individual business processes, facilities or supplies for a short time rather
than systemic or long-term problems affecting its business operations as a
whole. Through its contingency planning, ITS will continue to identify systems,
or other aspects of its business or that of its suppliers, that it believes
would be most likely to experience Year 2000 problems, as well as those business
operations in which a localised disruption could have the potential for causing
a wider problem by interrupting the flow of products, materials or data to other
operations. ITS' contingency planning will focus on minimising the scope and
duration of any disruptions by having sufficient personnel, inventory and other
resources in place to permit a flexible, real-time response to specific problems
as they may arise at individual locations around the world.
15
EURO
On January 1, 1999, eleven of the European Union member states, including seven
countries where ITS operations are located, established fixed conversion rates
between their existing countries and adopted one common currency, the Euro. The
conversion to the Euro eliminates currency exchange rate risk among the eleven
member countries.
The currencies of the eleven member states remain legal tender in the
participating countries during a three year transition period from January 1,
1999 through January 1, 2002. Effective January 1, 1999 the Euro is traded on
currency exchanges and is available for non cash transactions during the three
year transitional period. Beginning on January 1, 2002, the European Central
Bank will issue Euro-denominated bills and coins for use in cash transactions.
On or before July 1, 2002 the participating countries will withdraw all bills
and coins and use the Euro as their legal currency.
ITS' operating units affected by the Euro have established plans to address the
issues raised by the conversion. These issues, amongst others, include such
matters as pricing, continuity of contracts, accounting and financial reporting,
taxation, treasury activities and computer systems. ITS anticipates that the
operating units will convert their local records to the Euro during the three
year transition period.
At this time, although no immediate problems have been identified, there can be
no assurance that the harmonisation of currencies in Europe will not have a
material adverse impact on the results of operations, financial position or
liquidity of its European businesses.
SUBSEQUENT EVENTS
On April 26, 1999, ITS completed an equity offer which raised pounds20.0
million. The cash will be used to fund acquisitions and working capital. Revised
banking arrangements became effective from the same date.
On May 13, 1999, ITS received pounds1.0 million from the Nigerian Government in
settlement of Caleb Brett invoices through to September 1998.
16
INTERTEK TESTING SERVICES LIMITED
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
-----------------------------------
NOTES Three months Three months
to March 31, to March 31,
1998 1999
pounds000 pounds000
-----------------------------------
REVENUES
Continuing operations 80,549 87,091
Discontinued operation 2,610 -
-----------------------------------
GROUP REVENUES 3 83,159 87,091
Operating costs (74,832) (75,873)
-----------------------------------
GROUP OPERATING INCOME 8,327 11,218
Share of operating (loss)/profit in associates (301) 11
-----------------------------------
TOTAL OPERATING INCOME 8,026 11,229
- --------------------------------------------------------------------------------------------------------------------
Operating income/(loss) before exceptional items
Continuing operations 8,957 9,359
Discontinued operation (948) -
-----------------------------------
3 8,009 9,359
Exceptional items credited to operating income
Continuing operations 4 17 1,870
-----------------------------------
TOTAL OPERATING INCOME 8,026 11,229
- --------------------------------------------------------------------------------------------------------------------
NON-OPERATING EXCEPTIONAL ITEMS 4 - 2,244
-----------------------------------
INCOME ON ORDINARY ACTIVITIES BEFORE NET INTEREST 8,026 13,473
Net interest expense 5 (7,401) (8,069)
-----------------------------------
INCOME BEFORE TAXATION 625 5,404
Taxation 6 (342) (933)
-----------------------------------
INCOME AFTER TAXATION 283 4,471
Minority interests (714) (762)
-----------------------------------
NET (LOSS)/INCOME FOR THE GROUP AND ITS SHARE OF ASSOCIATES (431) 3,709
-----------------------------------
-----------------------------------
The accompanying notes on page F-5 to F-27 are an integral part of these
financial statements.
F-1
INTERTEK TESTING SERVICES LIMITED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
------------------------------------
NOTES December 31, March 31,
1998 1999
pounds000 pounds000
------------------------------------
ASSETS
CURRENT ASSETS
Cash 11 16,772 23,065
Trade receivables 67,516 66,157
Inventories 3,662 3,649
Other current assets 15,241 19,112
Deferred taxation asset 1,348 1,318
------------------------------------
TOTAL CURRENT ASSETS 104,539 113,301
Goodwill 13,074 13,365
Property, plant and equipment, net 45,951 45,760
Investments 231 223
------------------------------------
TOTAL ASSETS 163,795 172,649
------------------------------------
------------------------------------
LIABILITIES AND SHAREHOLDERS' DEFICIT
CURRENT LIABILITIES
Borrowings (including current portion of long term borrowings) 7 22,209 26,621
Accounts payable, accrued liabilities and deferred income 70,952 77,981
Income taxes payable 5,368 5,262
------------------------------------
TOTAL CURRENT LIABILITIES 98,529 109,864
Long term borrowings 7 273,564 275,656
Provisions for liabilities and charges 8,518 5,965
Minority interests 4,592 5,083
SHAREHOLDERS' DEFICIT
Ordinary shares 336 336
Redeemable preference shares 86,657 86,657
Shares to be issued 2,793 2,793
Premium in excess of par value 3,018 3,018
Retained deficit (314,212) (316,723)
------------------------------------
TOTAL SHAREHOLDERS' DEFICIT 8 (221,408) (223,919)
------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT 163,795 172,649
------------------------------------
------------------------------------
The accompanying notes on page F-5 to F-27 are an integral part of these
financial statements.
F-2
INTERTEK TESTING SERVICES LIMITED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
-----------------------------------
NOTES Three months Three months
to March 31, to March 31,
1998 1999
pounds000 pounds000
-----------------------------------
Total operating cash inflow 9 5,536 13,872
Returns on investments and servicing of finance 10 (144) (993)
Taxation (1,584) (1,037)
Capital expenditure and financial investment 10 (2,447) (2,017)
Acquisitions and disposal 10 (199) (307)
-----------------------------------
Cash inflow before financing 1,162 9,518
Financing 10 -- (3,360)
-----------------------------------
INCREASE IN CASH IN THE PERIOD 1,162 6,158
-----------------------------------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
INCREASE IN CASH IN THE PERIOD 1,162 6,158
Cash inflow from increase in debt 1,080 3,401
-----------------------------------
Change in net debt resulting from cash flows 2,242 9,559
Debt issued in lieu of interest payment (1,707) (1,960)
Other non-cash movements (1,511) (478)
Exchange adjustments (953) (7,332)
-----------------------------------
Movement in net debt in the period (1,929) (211)
Net debt at the start of the period (252,151) (279,001)
-----------------------------------
NET DEBT AT THE END OF THE PERIOD (254,080) (279,212)
-----------------------------------
-----------------------------------
The accompanying notes on page F-5 to F-27 are an integral part of these
financial statements.
F-3
INTERTEK TESTING SERVICES LIMITED
CONSOLIDATED STATEMENTS OF TOTAL RECOGNISED GAINS AND LOSSES
(Unaudited)
----------------------------------
Three months Three months
to March 31, to March 31,
1998 1999
pounds000 pounds000
----------------------------------
Net (loss)/income (431) 3,709
Exchange adjustments (3,321) (6,220)
----------------------------------
TOTAL RECOGNISED GAINS AND LOSSES (3,752) (2,511)
----------------------------------
----------------------------------
There is no material difference between income before taxation, and net income
for the financial periods, as stated in the statements of operations and their
historical cost equivalents.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' DEFICIT
(Unaudited)
-----------------------------------------------------------------------------------
Ordinary Redeemable Shares to be Premium in Retained Total
shares preference issued excess of deficit
shares par value
pounds000 pounds000 pounds000 pounds000 pounds000 pounds000
-----------------------------------------------------------------------------------
BALANCE AT JANUARY 1, 1998 318 81,815 2,793 2,857 (294,549) (206,766)
Net loss -- -- -- - (431) (431)
Exchange adjustments -- -- -- - (3,321) (3,321)
-----------------------------------------------------------------------------------
BALANCE AT MARCH 31, 1998 318 81,815 2,793 2,857 (298,301) (210,518)
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
BALANCE AT JANUARY 1, 1999 336 86,657 2,793 3,018 (314,212) (221,408)
Net income -- -- -- -- 3,709 3,709
Exchange adjustments -- -- -- -- (6,220) (6,220)
-----------------------------------------------------------------------------------
BALANCE AT MARCH 31, 1999 336 86,657 2,793 3,018 (316,723) (223,919)
-----------------------------------------------------------------------------------
-----------------------------------------------------------------------------------
Included in Retained deficit is pounds275.6 million which represents goodwill
written off to reserves prior to December 1997 (at March 31, 1998: pounds273.5
million).
The accompanying notes on page F-5 to F-27 are an integral part of these
financial statements.
F-4
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
The accompanying consolidated financial statements of the Company and its
subsidiaries at March 31, 1999 and for the three months to March 31, 1999 are
unaudited. In the opinion of the Directors, all adjustments (consisting of
normal recurring adjustments) necessary for a fair presentation of the financial
statements have been included. The results of these periods are not necessarily
indicative of results for the entire year and have been prepared in conformity
with accounting principles generally accepted in the United Kingdom ("U.K.
GAAP") and are presented under the historical cost convention. These principles
differ in certain material respects from generally accepted accounting
principles in the United States ("U.S. GAAP") - see note 12.
For the purpose of these condensed consolidated financial statements, certain
information and disclosures normally included in financial statements prepared
in accordance with accounting principles generally accepted in the United
Kingdom have been condensed or omitted. These unaudited statements should be
read in conjunction with the audited financial statements and notes as of, and
for the year ended December 31, 1998.
2. ACCOUNTING POLICIES
The significant accounting policies adopted by the Company are as follows:
BASIS OF CONSOLIDATION
The consolidated financial statements of the Company include the financial
statements of the Company and its subsidiaries.
The acquisition method of accounting has been adopted. Under this method, the
results of subsidiaries acquired or sold are included in the consolidated
statement of income of the Company from, or up to, the date control passes.
The consolidated statements of income of the Company include their respective
shares of income from associated undertakings. The consolidated balance sheet of
the Company includes interests in associates at their respective shares of the
net tangible assets.
USE OF ESTIMATES
Preparation of financial statements in conformity with U.K. GAAP requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses for an accounting period. Such estimates and assumptions could change
in the future as more information becomes known or circumstances alter, such
that the group's actual results may differ from the amounts reported and
disclosed in the financial statements.
FOREIGN CURRENCIES
The results of operations and cash flows of overseas subsidiaries and associated
undertakings are translated into 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.
The difference between net income/(loss) translated at average and at closing
rates of exchange is included in the statement of total recognised gains and
losses as a movement in shareholders' equity/(deficit). Exchange differences
arising from the retranslation to closing rates of exchange of opening
shareholders' equity, long-term foreign currency borrowings used to finance
foreign currency investments, and foreign currency borrowings that provide a
hedge against shareholders' equity are also reflected as movements in
shareholders' equity/(deficit). All other exchange differences are dealt with in
operations.
PROPERTY, PLANT AND EQUIPMENT AND DEPRECIATION
Property, plant and equipment are stated at cost less depreciation, which is
provided, except for freehold land, on a straight line basis over the estimated
useful lives of the assets, mainly at the following annual rates:
Freehold buildings and long leasehold land and buildings............................ 2%
Short leasehold land and buildings............................................. term of lease
Plant, machinery and equipment................................................. 10% - 33.3%
F-5
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ACCOUNTING POLICIES (CONTINUED)
LEASES
Assets held under capital leases are treated as if they had been purchased at
the present value of the minimum lease payments. This cost is included in
property, plant and equipment, and depreciation is provided over the shorter of
the lease term or the estimated useful life. The corresponding obligations under
these leases are included within borrowings. The finance charge element of
rentals payable is charged to operations to produce a constant rate of interest.
Operating lease rentals are charged to operations on a straight line basis over
the periods of the leases.
INVENTORIES
Inventories and work in progress are stated at the lower of cost or net
realisable value. Cost comprises expenditure incurred in the normal course of
business in bringing inventories and work in progress to their present location
and condition.
REVENUES
Revenues represent the total amount receivable for services provided and goods
sold, excluding sales-related taxes and intra-group transactions. Revenue is
recognised when the relevant service is completed or goods delivered.
TAXATION
Deferred taxation is provided using the liability method at current taxation
rates on timing differences to the extent that the directors consider that it is
probable that a liability or asset will crystallise.
PENSION BENEFITS
Liabilities under defined contribution pension schemes are charged to operations
when incurred. ITS has a number of defined benefit pension schemes for which
contributions are based on triennial actuarial valuations. Pension charges in
operations have been calculated at a substantially level percentage of current
and expected future pensionable payroll, with variations from regular cost
spread over the expected remaining service lives of employees.
GOODWILL
Purchased goodwill in respect of acquisitions since 1 January 1998 is
capitalised in accordance with the requirements of FRS 10: Goodwill and
Intangible Assets, and is amortised on a straight line basis over its estimated
useful life, which is up to 20 years. Purchased goodwill in respect of
acquisitions before 1 January 1998 was written off to reserves in the year of
acquisition in accordance with the accounting standard then in force. When a
subsequent disposal occurs any goodwill previously written off to reserves is
written back through the profit and loss account.
DERIVATIVE FINANCIAL INSTRUMENTS
ITS uses various derivative financial instruments to manage its exposure to
foreign exchange and interest rate risks. Derivative financial instruments are
considered hedges if they meet certain criteria. A forward exchange contract is
considered a hedge of an identifiable foreign currency commitment if such
contract is designated as, and is effective as, a hedge of a firm foreign
currency commitment. An interest rate swap agreement is considered a "synthetic
alteration" (and accounted for like a hedge) when the agreement is designated
with a specific liability and it alters the interest rate characteristics of
such liability. An interest rate cap agreement must also meet the same criteria
as an interest rate swap to be considered hedges of a specific liability.
Derivative financial instruments failing to meet the aforementioned criteria are
accounted for at fair value with the resulting unrealised gains and losses
included in the statement of operations.
FORWARD EXCHANGE CONTRACTS. Forward exchange contracts are designated as hedges
of firm foreign currency commitments. Gains and losses on such contracts are
deferred and recognised in income or as an adjustment of the carrying amount
when the hedged transaction occurs.
INTEREST RATE CAP AGREEMENTS. Interest rate cap agreements are accounted for
under the accruals basis. Amounts receivable under the agreement are accrued
when due as a reduction of interest charges. Premiums paid for purchased
interest rate cap agreements are amortised to interest charges over the term of
the caps.
INTEREST RATE SWAPS. Interest rate swap agreements are designated to change the
interest rate characteristics of floating-rate borrowings. Accordingly, these
agreements are accounted for under the settlement basis. The interest
differential between the amounts received and amount paid is recognised as an
adjustment to interest charges over the term of the swap.
F-6
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
3. SEGMENT INFORMATION
ITS comprises five divisions which are organised as follows: (1) Caleb Brett,
which tests and inspects crude oil, petroleum, chemical and agricultural
products; (2) ETL SEMKO (formerly Conformity Assessment), which tests and
certifies electrical and electronic products, building products, heating and
ventilation and air conditioning equipment; (3) Labtest (formerly Consumer
Goods), which tests textiles, fabrics, footwear, toys and consumer products; (4)
Foreign Trade Standards, which provides standards testing and preshipment
inspection work to governments and (5) BONDAR CLEGG (formerly Minerals), which
analyses minerals. The Environmental Testing Division which operated principally
in the US and UK was sold in August 1998 and is disclosed as a discontinued
operation. The accounting policies of the divisions are the same as those
described in The Summary of Accounting Policies.
---------------- -----------------
Three months Three months to
to March 31, March 31,
1998 1999
pounds000 pounds000
---------------- -----------------
REVENUES
Caleb Brett 27,992 31,125
ETL Semko 21,045 21,911
Labtest 13,231 16,484
Foreign Trade Standards 14,205 15,003
Bondar Clegg 4,076 2,568
---------------- -----------------
TOTAL CONTINUING OPERATIONS 80,549 87,091
Discontinued operation 2,610 --
---------------- -----------------
TOTAL 83,159 87,091
---------------- -----------------
OPERATING INCOME/(LOSS) BEFORE EXCEPTIONAL ITEMS
Caleb Brett 2,881 2,618
ETL Semko 2,297 2,560
Labtest 2,396 3,313
Foreign Trade Standards 1,390 1,615
Bondar Clegg (7) (758)
---------------- -----------------
TOTAL CONTINUING OPERATIONS 8,957 9,348
Discontinued operation (948) --
---------------- -----------------
TOTAL 8,009 9,348
---------------- -----------------
OPERATING EXCEPTIONAL ITEMS BY DIVISION
Caleb Brett -- 77
Foreign Trade Standards 17 1,793
---------------- -----------------
TOTAL CONTINUING OPERATIONS 17 1,870
---------------- -----------------
NON-OPERATING EXCEPTIONAL ITEMS
ETL Semko -- 2,244
---------------- -----------------
UNALLOCATED COSTS
Cash, borrowings and income tax are managed centrally and are therefore not
allocated to the divisions. Interest expense and income and income tax expense
are therefore not allocated to the divisions.
F-7
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEGMENT INFORMATION (CONTINUED)
---------------- -----------------
Three months Three months to
to March 31, March 31,
1998 1999
pounds000 pounds000
---------------- -----------------
REVENUES BY GEOGRAPHICAL ORIGIN
Americas 35,390 34,877
Europe, Africa and Middle East 29,079 32,631
Asia and Far East 16,080 19,583
---------------- -----------------
TOTAL CONTINUING OPERATIONS 80,549 87,091
Discontinued operation 2,610 -
---------------- -----------------
TOTAL 83,159 87,091
---------------- -----------------
REVENUES FROM SIGNIFICANT COUNTRIES OF ORIGIN
United States 27,691 28,273
United Kingdom 15,003 15,347
Hong Kong 8,314 8,744
Others (each under 10% of total) 29,541 34,727
---------------- -----------------
TOTAL CONTINUING OPERATIONS 80,549 87,091
Discontinued operation 2,610 -
---------------- -----------------
TOTAL 83,159 87,091
---------------- -----------------
OPERATING INCOME/(LOSS) BEFORE EXCEPTIONAL ITEMS
Americas 2,426 1,921
Europe, Africa and Middle East 2,753 2,375
Asia and Far East 3,778 5,063
---------------- -----------------
TOTAL CONTINUING OPERATIONS 8,957 9,359
Discontinued operation (948) --
---------------- -----------------
TOTAL 8,009 9,359
---------------- -----------------
OPERATING INCOME/(LOSS) BEFORE EXCEPTIONAL ITEMS
FROM SIGNIFICANT COUNTRIES
United States 2,404 1,890
Hong Kong 1,359 2,217
United Kingdom 856 413
Others (each under 10% of total) 4,338 4,839
---------------- -----------------
TOTAL CONTINUING OPERATIONS 8,957 9,359
Discontinued operation (948) --
---------------- -----------------
TOTAL 8,009 9,359
---------------- -----------------
F-8
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SEGMENT INFORMATION (CONTINUED)
---------------- -----------------
Three months Three months to
to March 31, March 31,
1998 1999
pounds000 pounds000
---------------- -----------------
REVENUES BY GEOGRAPHICAL DESTINATION
Americas 38,934 35,673
Europe, Africa and Middle East 30,287 31,568
Asia and Far East 11,328 19,850
---------------- -----------------
TOTAL CONTINUING OPERATIONS 80,549 87,091
Discontinued operation 2,610 --
---------------- -----------------
TOTAL 83,159 87,091
---------------- -----------------
REVENUES FROM SIGNIFICANT DESTINATION COUNTRIES
United States 30,311 27,268
United Kingdom 6,363 4,452
Others (each under 10% of total) 43,875 55,371
---------------- -----------------
TOTAL CONTINUING OPERATIONS 80,549 87,091
Discontinued operation 2,610 --
---------------- -----------------
TOTAL 83,159 87,091
---------------- -----------------
4. EXCEPTIONAL ITEMS
---------------- -----------------
Three months Three months to
to March 31, March 31,
1998 1999
pounds000 pounds000
---------------- -----------------
EXCEPTIONAL ITEMS CREDITED/(CHARGED) TO OPERATING INCOME
Foreign Trade Standards
Nigeria 17 3,793
Restructuring - (2,000)
---------------- -----------------
17 1,793
Caleb Brett -- 77
---------------- -----------------
TOTAL OPERATING EXCEPTIONAL ITEMS 17 1,870
---------------- -----------------
NON-OPERATING EXCEPTIONAL ITEMS
ETL Semko - gain on disposal -- 2,244
---------------- -----------------
TOTAL NON-OPERATING EXCEPTIONAL ITEMS -- 2,244
---------------- -----------------
Due to the irregular nature of payments received from the Nigerian Government
for pre-shipment inspection work carried out by FTS, in 1997, ITS adopted a
policy of making full provision against invoices issued to this client and only
reversing the provision when cash is received. The exceptional credit of
pounds3.8 million for FTS comprises cash received in the three months to March
31, 1999 of pounds8.9 million less invoices raised in the three months to March
31, 1999 of pounds5.1 million. The tax effect of the exceptional credit to
income is nil (period from January 1 to March 31, 1998: tax charge of nil).
The exceptional charge to operating income of pounds2.0 million in respect of
FTS is a result of restructuring this division following the termination of the
PSI programmes in Nigeria. The tax effect of this exceptional charge is nil.
F-9
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
EXCEPTIONAL ITEMS (CONTINUED)
The Caleb Brett division also provided testing services to the Nigeria
Government and the policy of making full provision against invoices issued to
this client and only reversing the provision when cash is received has also been
adopted. The exceptional credit of pounds0.1 million for Caleb Brett comprises
cash received in the three months to March 31, 1999 of pounds0.4 million less
invoices raised in the three months to March 31, 1999 of pounds0.3 million. The
tax effect of the exceptional credit to income is nil (period from January 1 to
March 31, 1998: tax charge of nil).
The non-operating exceptional credit of pounds2.2 million resulted from the
disposal of a non-core activity in the U.S. in the ETL Semko division. This
credit was after deducting attributable goodwill of pounds1.1 million from the
disposal proceeds of pounds3.3 million. The tax effect of this exceptional
credit is nil.
5. NET INTEREST EXPENSE
---------------- -----------------
Three months Three months to
to March 31, March 31,
1998 1999
pounds000 pounds000
---------------- -----------------
INTEREST EXPENSE AND OTHER CHARGES
Senior Subordinated Notes 3,139 3,147
Parent Subordinated PIK Debentures 1,704 1,931
Senior Term Loan A 1,570 1,427
Senior Term Loan B 709 747
Senior Revolver -- 281
Other borrowings 73 186
Amortisation of debt issuance costs 431 478
---------------- -----------------
INTEREST EXPENSE 7,626 8,197
INTEREST INCOME
On bank balances (225) (128)
---------------- -----------------
NET INTEREST EXPENSE 7,401 8,069
---------------- -----------------
6. TAXATION
The taxation charges on income before taxation and exceptional items for the
three month periods ended March 31, 1998 and March 31, 1999 have been calculated
based on the estimated effective tax rates for the relevant full years.
Exceptional items have been tax effected as appropriate.
F-10
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
7. BORROWINGS
---------------- -----------------
December 31, March 31,
1998 1999
pounds000 pounds000
-----------------------------------
DUE IN LESS THAN ONE YEAR
Senior Term Loan A 4,821 12,660
Senior Revolver 16,333 13,526
Other borrowings 1,055 435
-----------------------------------
TOTAL DUE IN LESS THAN ONE YEAR 22,209 26,621
-----------------------------------
DUE IN MORE THAN ONE YEAR
Senior Subordinated Notes 116,257 120,108
Senior Term Loan A 65,302 59,413
Senior Term Loan B 34,053 34,313
Parent Subordinated PIK Debentures 57,568 61,458
Other borrowings 384 364
-----------------------------------
TOTAL DUE IN MORE THAN ONE YEAR 273,564 275,656
-----------------------------------
MATURITY OF BORROWINGS
------------------------------------------------------------------------------------------
Senior Senior Senior Senior Parent Other Total
Subordinated Term Term Revolver Subordinated borrowings borrowings
Notes Loan A Loan B PIK Debentures
pounds000 pounds000 pounds000 pounds000 pounds000 pounds000 pounds000
------------------------------------------------------------------------------------------
Due in less than one year -- 13,498 -- 13,526 -- 435 27,459
Due in one to two years -- 18,092 -- -- -- 207 18,299
Due in 2 and 5 years -- 43,855 -- -- -- 148 44,003
Due in over 5 years 124,540 -- 35,308 -- 63,075 9 222,932
------------------------------------------------------------------------------------------
124,540 75,445 35,308 13,526 63,075 799 312,693
Debt issuance costs (4,432) (3,372) (995) (1,617) -- (10,416)
------------------------------------------------------------------------------------------
NET BORROWINGS 120,108 72,073 34,313 13,526 61,458 799 302,277
------------------------------------------------------------------------------------------
F-11
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
8. RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' DEFICIT
---------------- -----------------
Three months Three months to
to March 31, March 31,
1998 1999
pounds000 pounds000
---------------- -----------------
Total recognised gains and losses for the (3,752) (2,511)
period
Opening shareholders' deficit (206,766) (221,408)
---------------- -----------------
CLOSING SHAREHOLDERS' DEFICIT (210,518) (223,919)
---------------- -----------------
9. RECONCILIATION OF OPERATING INCOME TO OPERATING CASH FLOWS
-----------------------------------
Three months to Three months to
March 31, March 31,
1998 1999
pounds000 pounds000
-----------------------------------
Operating income 8,026 11,229
Depreciation charge 2,790 2,851
Goodwill amortisation -- 184
Loss on sale of fixed assets 244 33
(Increase)/decrease in inventories (421) 58
Increase in receivables and prepayments (2,688) (1,885)
Decrease in payables (2,094) (382)
Cash payments from exporters -- 3,740
Decrease in other provisions (295) (1,945)
-----------------------------------
5,562 13,883
Equity income of associates (26) (11)
-----------------------------------
TOTAL OPERATING CASH INFLOW 5,536 13,872
-----------------------------------
F-12
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
10. ANALYSIS OF CASH FLOWS
-----------------------------------
Three months Three months
to March 31, to March 31,
1998 1999
pounds000 pounds000
-----------------------------------
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Net interest paid 279 (374)
Dividends paid to minorities (423) (619)
-----------------------------------
TOTAL RETURNS ON INVESTMENTS AND SERVICING OF FINANCE (144) (993)
-----------------------------------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of property, plant and equipment (2,442) (2,050)
Sale of property, plant and equipment (5) 33
-----------------------------------
TOTAL CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT (2,447) (2,017)
-----------------------------------
ACQUISITIONS AND DISPOSAL
Purchase of subsidiary undertakings (199) (3,579)
Sale of business -- 3,272
-----------------------------------
TOTAL ACQUISITIONS AND DISPOSAL (199) (307)
-----------------------------------
FINANCING
Repayment of other loans -- (3,372)
Cash subscribed by minorities -- 12
-----------------------------------
TOTAL FINANCING -- (3,360)
-----------------------------------
11. ANALYSIS OF NET DEBT
------------------------------------------------------------------------------------------
At January Cash flow Debt issued in Other non-cash Exchange At March 31,
1, 1999 lieu of changes adjustments 1999
interest payment
pounds000 pounds000 pounds000 pounds000 pounds000 pounds000
------------------------------------------------------------------------------------------
NET CASH
Cash in hand and at bank 16,772 6,158 -- -- 135 23,065
------------------------------------------------------------------------------------------
DEBT
Debt due within one year (22,209) 3,401 -- (7,506) (307) (26,621)
Debt due after one year (273,564) -- (1,960) 7,028 (7,160) (275,656)
------------------------------------------------------------------------------------------
(295,773) 3,401 (1,960) (478) (7,467) (302,277)
------------------------------------------------------------------------------------------
TOTAL NET DEBT (279,001) 9,559 (1,960) (478) (7,332) (279,212)
------------------------------------------------------------------------------------------
F-13
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
12. SUMMARY OF DIFFERENCES BETWEEN U.K. AND U.S. GAAP
The consolidated financial statements are prepared in conformity with U.K. GAAP.
These accounting principles differ in certain material respects from U.S. GAAP.
Described below are the material differences between U.K. GAAP and U.S. GAAP
affecting the net income/(loss) and shareholders' equity/(deficit) which are set
forth in the tables that follow.
GOODWILL AND OTHER INTANGIBLE ASSETS
Under U.K. GAAP, purchased goodwill in respect of acquisitions since January 1,
1998 is capitalised in accordance with the requirements of FRS 10, Goodwill and
intangible assets. Purchased goodwill in respect of acquisitions before January
1, 1998 was written off to reserves in the year of acquisition. Positive
goodwill is amortised to nil over equal instalments over its estimated useful
life, generally not exceeding 20 years. Under U.S. GAAP, goodwill and
identifiable intangibles are capitalised and are written off over their
estimated useful lives, generally not exceeding 40 years. U.S. GAAP goodwill and
identifiable intangibles are being written off over periods not exceeding 20
years.
REDEEMABLE PREFERENCE SHARES
Under U.K. GAAP, preference shares with mandatory redemption features or
redeemable at the option of the security holders would be classified as a
component of shareholders' equity. U.S. GAAP requires such redeemable preference
shares not to be classified as shareholders' equity.
PENSION COSTS -- DEFINED BENEFIT PLANS
Under U.K. GAAP, the cost of providing pension benefits is expensed over the
average expected service lives of eligible employees on the basis of a constant
percentage of current and estimated future earnings. Under U.S. GAAP, Statement
of Financial Accounting Standards (SFAS) No. 87, "Employers' Accounting for
Pensions", requires that pension costs be determined based on a comparison of
the projected benefit obligation with the market value of the underlying plan
assets and other unrecognised gains and losses assessed on an actuarial basis.
As a result of this difference in methodology, the U.S. GAAP pension expense can
be significantly different from that determined under U.K. GAAP and tends to be
more sensitive to changing economic conditions.
COMPENSATED ABSENCES
Under U.S. GAAP, compensated absences, being an employee's paid holiday
entitlements, are accrued as earned. For companies that do not allow employees
to carry compensated absences over from one year to the next, no accrual is
required. U.K. GAAP does not require provision to be made.
DEFERRED TAXATION
Under U.K. GAAP, deferred taxation is provided using the liability method to the
extent that it is considered probable that a liability or asset will crystallise
in the foreseeable future. Under U.S. GAAP, deferred taxation is provided on all
temporary differences and carryforwards. Deferred tax assets are recognised to
the extent that it is more likely than not that they will be realised. Where
doubt exists as to whether a deferred tax asset will be realised, an appropriate
valuation allowance is established. In addition, deferred taxes on other U.S.
GAAP differences is provided.
F-14
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF DIFFERENCES BETWEEN U.K. AND U.S. GAAP (CONTINUED)
EFFECT OF MATERIAL DIFFERENCES BETWEEN U.K. AND U.S. GAAP AND ADDITIONAL
DISCLOSURES
(A) NET INCOME/(LOSS)
---------------- -----------------
Three months Three months to
to March 31, March 31,
1998 1999
pounds000 pounds000
---------------- -----------------
NET (LOSS)/INCOME REPORTED UNDER U.K. GAAP (431) 3,709
Goodwill amortisation (3,420) (2,911)
Amortisation of goodwill on disposal -- 122
Covenants not to compete amortisation (3,132) (3,152)
Pensions (33) (53)
Compensated absences (352) (97)
---------------- -----------------
NET LOSS IN CONFORMITY WITH U.S. GAAP (7,368) (2,382)
---------------- -----------------
Continuing operations (6,510) (2,382)
Discontinued operation (858) --
---------------- -----------------
NET LOSS IN CONFORMITY WITH U.S. GAAP (7,368) (2,382)
---------------- -----------------
(B) SHAREHOLDERS' DEFICIT
The approximate effects on shareholders' deficit of material differences between
U.K. and U.S. GAAP are as follows:
---------------- -----------------
December 31, March 31,
1998 1999
pounds000 pounds000
---------------- -----------------
SHAREHOLDERS' DEFICIT REPORTED UNDER U.K. GAAP (221,408) (223,919)
Goodwill 204,136 204,849
Covenants not to compete 9,286 7,235
Redeemable preference shares (86,657) (86,657)
Pensions 994 941
Compensated absences (685) (782)
---------------- -----------------
SHAREHOLDERS' DEFICIT IN CONFORMITY WITH U.S. GAAP (94,334) (98,333)
---------------- -----------------
The following table reconciles shareholders' deficit under U.S. GAAP:
SHAREHOLDERS' DEFICIT AT BEGINNING OF PERIOD (46,465) (94,334)
Issue of shares 179 --
Net loss for the period (45,239) (2,382)
Exchange adjustments (2,809) (1,617)
---------------- -----------------
SHAREHOLDERS' DEFICIT AT END OF PERIOD (94,334) (98,333)
---------------- -----------------
F-15
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF DIFFERENCES BETWEEN U.K. AND U.S. GAAP (CONTINUED)
(C) CASH FLOWS
The statements of cash flows prepared in accordance with U.K. GAAP present
substantially the same information as that required under U.S. GAAP. Under U.S.
GAAP however, there are certain differences from U.K. GAAP with regard to
classification of items within the cash flow statement and with regard to the
definition of cash.
Under U.K. GAAP, cash flows are presented separately for operating activities,
returns on investments and servicing of finance, taxation, capital expenditure
and financial investment, acquisitions and disposals, equity dividends paid,
management of liquid resources and financing. Under U.S. GAAP, three categories
of cash flow activity are reported, those being operating activities, investing
activities and financing activities. Cash flows from taxation and returns on
investments and servicing of finance would, with the exception of dividends
paid, be included as operating activities under U.S. GAAP. Capital expenditure
and financial investment, acquisitions and disposals and management of liquid
resources would be included as investing activities. The payment of dividends
would be included under financing activities under U.S.
GAAP.
Set out below is a summary of the statements of cash flows under U.S. GAAP.
---------------- -----------------
Three months Three months
to March 31, to March 31,
1998 1999
pounds000 pounds000
---------------- -----------------
Net cash provided by operating activities 3,222 12,317
Net cash used in investing activities (2,629) (2,324)
Net cash provided by/(used in) financing activities 689 (3,979)
---------------- -----------------
1,282 6,014
Effect of exchange rate changes (725) 135
---------------- -----------------
NET INCREASE IN CASH BY CONTINUING OPERATIONS 557 6,149
---------------- -----------------
Increase in cash by continuing operations 557 6,149
(Decrease)/increase in cash by discontinued operation (120) 144
---------------- -----------------
437 6,293
Cash at beginning of period 25,153 16,772
---------------- -----------------
CASH AT END OF PERIOD 25,590 23,065
---------------- -----------------
(D) COMPREHENSIVE INCOME
The company has adopted SFAS No. 130, "Reporting Comprehensive Income", which
established standards for the reporting and presentation of comprehensive
income/(loss) and its components in a full set of financial statements. The
Company's comprehensive income/(loss) differs from net income only by the amount
of the foreign currency exchange adjustments charged to shareholders' deficit
for the period. Comprehensive income for the three months to March 31, 1998 and
the three months to March 31, 1999 is equal to the total recognised gains and
losses shown on the consolidated statement of total recognised gains and losses.
Accumulated other comprehensive loss was pounds6.8 million and pounds8.8
million at March 31, 1998 and March 31, 1999, respectively.
F-16
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
13. ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES
Intertek Finance plc ("the Issuer") is a wholly owned direct subsidiary of the
Company and the Issuer has issued the Notes which are fully and unconditionally
guaranteed on a senior subordinated basis by the Company and certain of its
wholly owned direct subsidiaries: Intertek Testing Services UK Limited, Testing
Holdings USA Inc., Yickson Enterprises Limited, Kite Overseas Holdings BV, ITS
Holding Limited, Testing Holdings Sweden AB, Testing Holdings France EURL,
Testing Holdings Germany GmbH (collectively, the "Guarantor subsidiaries" and,
together with the Company, the "Guarantors"). In addition, each of the
Guarantor's guarantee is itself guaranteed by each other Guarantor, fully and
unconditionally, on a senior subordinated basis. Subject to the provisions of
the agreement under which the loans to finance the acquisition of the business
were made, certain exceptions and applicable law, there are no restrictions on
the ability of: (a) the Company or any of its direct and indirect subsidiaries
from paying dividends or making any other distributions or loans or advances to
the Issuer or (b) the direct and indirect subsidiaries of the Company from
paying dividends or making any other distribution or loans or advances to the
Company.
Separate financial statements and other disclosures concerning the Issuer and
the Guarantors are not presented because management has determined that they are
not material to the investors. In lieu of the separate guarantor financial
statements, management has presented audited consolidating financial
information. The audited consolidating financial information presented below has
been segregated between (a) the Issuer, (b) the Guarantors and (c) the
non-Guarantor subsidiaries.
F-17
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
STATEMENTS OF OPERATIONS
Three months to March 31, 1999
-------------------------------------------------------------------
Intertek Guarantors Non Consolidation Consolidated
Finance plc -Guarantor adjustments totals
subsidiaries
pounds000 pounds000 pounds000 pounds000 pounds000
-------------------------------------------------------------------
TOTAL GROUP REVENUES -- -- 102,767 (15,676) 87,091
Operating income/(costs) 52 2 (91,603) 15,676 (75,873)
Equity income of associated companies -- -- 11 -- 11
-------------------------------------------------------------------
OPERATING INCOME 52 2 11,175 -- 11,229
Non-operating exceptional items -- -- 2,244 -- 2,244
-------------------------------------------------------------------
INCOME BEFORE INTEREST 52 2 13,419 -- 13,473
Net interest receivable/(payable) 11 (3,707) (4,373) -- (8,069)
-------------------------------------------------------------------
INCOME BEFORE TAXATION 63 3,705 9,046 -- 5,404
Taxation (3) 177 (1,107) -- (933)
-------------------------------------------------------------------
INCOME/(LOSS) AFTER TAXATION 60 (3,528) 7,939 -- 4,471
Minority interests -- -- (762) -- (762)
Dividends from/(to) group companies -- 508 (508) -- --
-------------------------------------------------------------------
NET INCOME/(LOSS) 60 (3,020) 6,669 -- 3,709
-------------------------------------------------------------------
-------------------------------------------------------------------
STATEMENTS OF OPERATIONS
Three months to March 31, 1998
-------------------------------------------------------------------
Intertek Guarantors Non Consolidation Consolidated
Finance plc -Guarantor adjustments totals
subsidiaries
pounds000 pounds000 pounds000 pounds000 pounds000
-------------------------------------------------------------------
TOTAL GROUP REVENUES -- -- 96,430 (13,271) 83,159
Operating income/(costs) (2) (40) (88,061) 13,271 (74,832)
Equity income of associated companies -- -- (301) -- (301)
-------------------------------------------------------------------
OPERATING INCOME/(LOSS) (2) (40) 8,068 -- 8,026
Net interest receivable/(payable) 21 (5,795) (1,627) -- (7,401)
-------------------------------------------------------------------
INCOME/(LOSS) BEFORE TAXATION 19 (5,835) 6,441 -- 625
Taxation (52) 259 (549) -- (342)
-------------------------------------------------------------------
INCOME/(LOSS) AFTER TAXATION (33) (5,576) 5,892 -- 283
Minority interests -- -- (714) -- (714)
Dividends from/(to) group companies -- 169 (169) -- --
-------------------------------------------------------------------
NET INCOME/(LOSS) (33) (5,407) 5,009 -- (431)
-------------------------------------------------------------------
-------------------------------------------------------------------
F-16
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
BALANCE SHEETS
March 31, 1999
---------------------------------------------------------------
Intertek Guarantors Non-Guarantor Consolidation Consolidated
Finance plc subsidiaries adjustments totals
pounds000 pounds000 pounds000 pounds000 pounds000
---------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash 6 (40) 23,099 -- 23,065
Trade receivables -- -- 66,157 -- 66,157
Inventories -- -- 3,649 -- 3,649
Other current assets 125,691 254,853 237,212 (598,644) 19,112
Deferred taxation asset -- -- 1,318 -- 1,318
---------------------------------------------------------------
TOTAL CURRENT ASSETS 125,697 254,813 331,435 (598,644) 113,301
Goodwill -- -- 13,365 -- 13,365
Property, plant and equipment, net -- -- 45,760 -- 45,760
Investments in subsidiary undertakings -- 334,939 71,630 (406,569) --
Other investments -- -- 223 -- 223
---------------------------------------------------------------
TOTAL ASSETS 125,697 589,752 462,413 (1,005,213) 172,649
---------------------------------------------------------------
---------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT)
CURRENT LIABILITIES
Borrowings (including current portion of long term
borrowings) -- 26,665 (44) -- 26,621
Accounts payable, accrued liabilities and deferred
income 5,529 211,718 459,378 (598,644) 77,981
Income taxes payable (80) (3,399) 8,741 -- 5,262
---------------------------------------------------------------
TOTAL CURRENT LIABILITIES 5,449 234,984 468,075 (598,644) 109,864
Long term borrowings 120,108 156,934 (1,386) -- 275,656
Provisions for liabilities and charges -- -- 5,965 -- 5,965
Minority interests -- -- 5,083 -- 5,083
SHAREHOLDERS' EQUITY/(DEFICIT)
Ordinary shares 50 103,880 203,093 (306,687) 336
Redeemable preference shares -- 86,657 -- -- 86,657
Shares to be issued -- 2,793 -- -- 2,793
Premium in excess of par value -- 26,659 812 (24,453) 3,018
Retained earnings/(deficit) 90 (22,155) (219,229) (75,429) (316,723)
---------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY/(DEFICIT) 140 197,834 (15,324) (406,569) (223,919)
---------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT) 125,697 589,752 462,413 (1,005,213) 172,649
---------------------------------------------------------------
---------------------------------------------------------------
F-19
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
BALANCE SHEETS
December 31, 1998
---------------------------------------------------------------
Intertek Guarantors Non-Guarantor Consolidation Consolidated
Finance plc subsidiaries adjustments totals
pounds000 pounds000 pounds000 pounds000 pounds000
---------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash 6 (6,691) 23,457 -- 16,772
Trade receivables -- -- 67,516 -- 67,516
Inventories -- -- 3,662 -- 3,662
Other current assets 122,087 257,595 216,069 (580,510) 15,241
Deferred taxation asset -- -- 1,348 -- 1,348
---------------------------------------------------------------
TOTAL CURRENT ASSETS 122,093 250,904 312,052 (580,510) 104,539
Goodwill -- -- 13,074 -- 13,074
Property, plant and equipment, net -- -- 45,951 -- 45,951
Investments in subsidiary undertakings -- 332,581 71,226 (403,807) --
Other investments -- -- 231 -- 231
---------------------------------------------------------------
TOTAL ASSETS 122,093 583,485 442,534 (984,317) 163,795
---------------------------------------------------------------
---------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT)
CURRENT LIABILITIES
Borrowings (including current portion of long term
borrowings) -- 21,154 1,055 -- 22,209
Accounts payable, accrued liabilities and deferred
income 5,723 204,430 441,309 (580,510) 70,952
Income taxes payable (83) (3,119) 8,570 -- 5,368
---------------------------------------------------------------
TOTAL CURRENT LIABILITIES 5,640 222,465 450,934 (580,510) 98,529
Long term borrowings 116,257 159,205 (1,898) -- 273,564
Provisions for liabilities and charges -- -- 8,518 -- 8,518
Minority interests -- -- 4,592 -- 4,592
SHAREHOLDERS' EQUITY/(DEFICIT)
Ordinary shares 50 100,962 196,398 (297,074) 336
Redeemable preference shares -- 86,657 -- -- 86,657
Shares to be issued -- 2,793 -- -- 2,793
Premium in excess of par value -- 26,702 761 (24,445) 3,018
Retained earnings/(deficit) 146 (15,299) (216,771) (82,288) (314,212)
---------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY/(DEFICIT) 196 201,815 (19,612) (403,807) (221,408)
---------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY/(DEFICIT) 122,093 583,485 442,534 (984,317) 163,795
---------------------------------------------------------------
---------------------------------------------------------------
F-20
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
STATEMENTS OF CASH FLOWS
Three months to March 31, 1999
---------------------------------------------------------------
Intertek Guarantors Non-Guarantor Consolidation Consolidated
Finance plc subsidiaries adjustments totals
pounds000 pounds000 pounds000 pounds000 pounds000
---------------------------------------------------------------
Total operating cash inflow/(outflow) 52 (2,770) 16,590 -- 13,872
Returns on investments and servicing of finance 3,677 (502) (4,168) -- (993)
Taxation -- (94) (943) -- (1,037)
Capital expenditure and financial investment -- -- (2,017) -- (2,017)
Acquisitions and disposals -- -- (307) -- (307)
----------------------------------------------------------------
CASH INFLOW/(OUTFLOW) BEFORE FINANCING 3,729 (3,366) 9,155 -- 9,518
Financing (3,729) 10,023 (9,654) -- (3,360)
----------------------------------------------------------------
INCREASE/(DECREASE) IN CASH IN THE PERIOD -- 6,657 (499) -- 6,158
----------------------------------------------------------------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN
NET DEBT
INCREASE/(DECREASE) IN CASH IN THE PERIOD -- 6,657 (499) -- 6,158
Cash inflow from increase in debt -- 2,817 584 -- 3,401
----------------------------------------------------------------
Change in net debt resulting from cash flows -- 9,474 85 -- 9,559
Debt issued in lieu of interest payment -- (1,960) -- -- (1,960)
Other non-cash movements (144) 398 (732) -- (478)
Exchange movements (3,707) (4,501) 876 -- (7,332)
----------------------------------------------------------------
MOVEMENT IN NET DEBT IN THE PERIOD (3,851) 3,411 229 -- (211)
NET DEBT AT THE START OF THE PERIOD (116,251) (187,050) 24,300 -- (279,001)
----------------------------------------------------------------
NET DEBT AT THE END OF THE PERIOD (120,102) (183,639) 24,529 -- (279,212)
----------------------------------------------------------------
----------------------------------------------------------------
F-21
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
STATEMENTS OF CASH FLOWS
Three months to March 31, 1998
---------------------------------------------------------------
Intertek Guarantors Non-Guarantor Consolidation Consolidated
Finance plc subsidiaries adjustments totals
pounds000 pounds000 pounds000 pounds000 pounds000
---------------------------------------------------------------
Total operating cash (outflow)/inflow (2,793) 7,762 567 -- 5,536
Returns on investments and servicing of finance 21 (4,088) 3,923 -- (144)
Taxation -- -- (1,584) -- (1,584)
Capital expenditure and financial investment -- -- (2,447) -- (2,447)
Acquisitions and disposals -- -- (199) -- (199)
----------------------------------------------------------------
CASH (OUTFLOW)/INFLOW BEFORE FINANCING (2,772) 3,674 260 -- 1,162
Financing 2,772 (3,673) 901 -- --
----------------------------------------------------------------
INCREASE IN CASH IN THE PERIOD -- 1 1,161 -- 1,162
----------------------------------------------------------------
RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN
NET DEBT
INCREASE IN CASH IN THE PERIOD -- 1 1,161 -- 1,162
Cash inflow from increase in debt -- -- 1,080 -- 1,080
----------------------------------------------------------------
Change in net debt resulting from cash flows -- 1 2,241 -- 2,242
Debt issued in lieu of interest payment -- (1,707) -- -- (1,707)
Other non-cash movements (142) (306) (1,063) -- (1,511)
Exchange movements (732) 298 (519) -- (953)
----------------------------------------------------------------
MOVEMENT IN NET DEBT IN THE PERIOD (874) (1,714) 659 -- (1,929)
NET DEBT AT THE START OF THE PERIOD (116,502) (160,449) 24,800 -- (252,151)
----------------------------------------------------------------
NET DEBT AT THE END OF THE PERIOD (117,376) (162,163) 25,459 -- (254,080)
----------------------------------------------------------------
----------------------------------------------------------------
F-22
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
STATEMENTS OF OPERATIONS
Three months to March 31, 1999
------------------------------------------------------------------------------------------
Intertek Testing Kite ITS Intertek Testing Yickson Testing Testing Guarantor
Testing Holdings Overseas Holding Testing Holdings Enterprise Holdings Holdings subsidiaries
Services USA Holdings Limited Services Sweden Limited France Germany Total
Ltd Inc BV UK Ltd AB EURL GmbH
pounds pounds pounds pounds pounds pounds pounds pounds pounds pounds
000 000 000 000 000 000 000 000 000 000
------------------------------------------------------------------------------------------
REVENUES FROM CONTINUING OPERATIONS -- -- -- -- -- -- -- -- -- --
Operating income/(costs) 14 -- 1 -- (8) -- (4) (1) -- 2
------------------------------------------------------------------------------------------
OPERATING (INCOME)/INCOME FROM 14 -- 1 -- (8) -- (4) (1) -- 2
CONTINUING OPERATIONS
Net interest (payable)/receivable (1,933) (134) (85) -- (817) (533) (39) (32) (134) (3,707)
------------------------------------------------------------------------------------------
(LOSS)/INCOME BEFORE TAXATION (1,919) (134) (84) -- (825) (533) (43) (33) (134) (3,705)
Taxation -- (56) -- -- 245 -- (10) -- (2) 177
------------------------------------------------------------------------------------------
(LOSS)/INCOME AFTER TAXATION (1,919) (190) (84) -- (580) (533) (53) (33) (136) (3,528)
Dividends from group companies -- 508 -- -- -- -- -- -- -- 508
------------------------------------------------------------------------------------------
NET (LOSS)/INCOME (1,919) 318 (84) -- (580) (533) (53) (33) (136) (3,020)
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS
Three months to March 31, 1998
------------------------------------------------------------------------------------------
Intertek Testing Kite ITS Intertek Testing Yickson Testing Testing Guarantor
Testing Holdings Overseas Holding Testing Holdings Enterprise Holdings Holdings subsidiaries
Services USA Holdings Limited Services Sweden Limited France Germany Total
Ltd Inc BV UK Ltd AB EURL GmbH
pounds pounds pounds pounds pounds pounds pounds pounds pounds pounds
000 000 000 000 000 000 000 000 000 000
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REVENUES FROM CONTINUING OPERATIONS -- -- -- -- -- -- -- -- -- --
Operating income/(costs) (35) -- 3 -- -- (2) (6) -- -- (40)
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OPERATING INCOME/(LOSS) FROM (35) -- 3 -- -- (2) (6) -- -- (40)
CONTINUING OPERATIONS
Net interest (payable)/receivable (1,675) (2,654) (35) 2 (915) (451) 16 (15) (68) (5,795)
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(LOSS)/INCOME BEFORE TAXATION (1,710) (2,654) (32) 2 (915) (453) 10 (15) (68) (5,835)
Taxation -- (36) -- (1) 260 -- (3) 39 -- 259
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(LOSS)/INCOME AFTER TAXATION (1,710) (2,690) (32) 1 (655) (453) 7 24 (68) (5,576)
Dividends from group companies -- 169 -- -- -- -- -- -- -- 169
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NET (LOSS)/INCOME (1,710) (2,521) (32) 1 (655) (453) 7 24 (68) (5,407)
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F-23
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
BALANCE SHEETS
March 31, 1999
------------------------------------------------------------------------------------------
Intertek Testing Kite ITS Intertek Testing Yickson Testing Testing Guarantor
Testing Holdings Overseas Holding Testing Holdings Enterprise Holdings Holdings subsidiaries
Services USA Holdings Limited Services Sweden Limited France Germany Total
Ltd Inc BV UK Ltd AB EURL GmbH
pounds pounds pounds pounds pounds pounds pounds pounds pounds pounds
000 000 000 000 000 000 000 000 000 000
------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash (67) -- 15 1 5 1 5 -- -- (40)
Other current assets 63,518 94,873 1,936 4,351 577 4,342 84,552 704 -- 254,853
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TOTAL CURRENT ASSETS 63,451 94,873 1,951 4,352 582 4,343 84,557 704 -- 254,813
Investments in subsidiary undertakings 128,624 98,550 5,693 3,696 64,418 24,466 -- 3,481 6,011 334,939
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TOTAL ASSETS 192,075 193,423 7,644 8,048 65,000 28,809 84,557 4,185 6,011 589,752
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Borrowings (including current portion
of long term borrowings) 13,526 -- 640 612 4,205 981 6,701 -- -- 6,665
Accounts payable, accrued liabilities
and deferred income 40,821 98,086 3,275 1,343 13,136 3,881 47,046 2,754 1,376 211,718
Income taxes (receivable)/payable (1,148) (553) -- 5 (1,528) -- 2 (17) (160) (3,399)
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TOTAL CURRENT LIABILITIES 53,199 97,533 3,915 1,960 15,813 4,862 53,749 2,737 1,216 234,984
Long term borrowings 61,458 -- 3,038 2,912 33,560 20,281 30,751 -- 4,934 156,934
SHAREHOLDERS' EQUITY
Ordinary shares 336 95,763 1,393 3,659 -- 1,812 -- 900 17 103,880
Redeemable preference shares 86,657 -- -- -- -- -- -- -- -- 86,657
Shares to be issued 2,793 -- -- -- -- -- -- -- -- 2,793
Premium in excess of par value 3,018 -- -- -- 22,709 -- 50 -- 882 26,659
Retained (deficit)/earnings (15,386) 127 (702) (483) (7,082) 1,854 7 548 (1,038) (22,155)
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TOTAL SHAREHOLDERS' EQUITY/(DEFICIT) 77,418 95,890 691 3,176 15,627 3,666 57 1,448 (139) 197,834
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TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY 192,075 193,423 7,644 8,048 65,000 28,809 84,557 4,185 6,011 589,752
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F-24
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
BALANCE SHEETS
December 31, 1998
------------------------------------------------------------------------------------------
Intertek Testing Kite ITS Intertek Testing Yickson Testing Testing Guarantor
Testing Holdings Overseas Holding Testing Holdings Enterprise Holdings Holdings subsidiaries
Services USA Holdings Limited Services Sweden Limited France Germany Total
Ltd Inc BV UK Ltd AB EURL GmbH
pounds pounds pounds pounds pounds pounds pounds pounds pounds pounds
000 000 000 000 000 000 000 000 000 000
------------------------------------------------------------------------------------------
ASSETS
CURRENT ASSETS
Cash (6,824) -- 123 1 3 1 5 -- -- (6,691)
Other current assets 72,775 92,703 1,856 4,042 576 4,342 80,514 787 -- 257,595
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TOTAL CURRENT ASSETS 65,951 92,703 1,979 4,043 579 4,343 80,519 787 -- 250,904
Investments in subsidiary undertakings 128,624 95,617 5,983 3,510 64,418 24,466 -- 3,652 6,311 332,581
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TOTAL ASSETS 194,575 188,320 7,962 7,553 64,997 28,809 80,519 4,439 6,311 583,485
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Borrowings (including current portion
of long term borrowings) 16,333 -- 260 232 1,629 383 2,317 -- -- 21,154
Accounts payable, accrued liabilities
and deferred income 38,458 96,133 3,295 1,197 13,621 3,423 44,095 2,887 1,321 204,430
Income taxes (receivable)/payable (1,148) (536) -- 4 (1,283) -- 12 -- (168) (3,119)
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TOTAL CURRENT LIABILITIES 53,643 95,597 3,555 1,433 13,967 3,806 46,424 2,887 1,153 222,465
Long term borrowings 57,568 -- 3,595 3,174 34,899 20,819 33,983 -- 5,167 159,205
SHAREHOLDERS' EQUITY
Ordinary shares 336 92,913 1,463 3,476 -- 1,812 -- 944 18 100,962
Redeemable preference shares 86,657 -- -- -- -- -- -- -- -- 86,657
Shares to be issued 2,793 -- -- -- -- -- -- -- -- 2,793
Premium in excess of par value 3,018 -- -- -- 22,709 -- 49 -- 926 26,702
Retained (deficit)/earnings (9,440) (190) (651) (530) (6,578) 2,372 63 608 (953) (15,299)
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TOTAL SHAREHOLDERS' EQUITY/(DEFICIT) 83,364 92,723 812 2,946 16,131 4,184 112 1,552 (9) 201,815
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TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY 194,575 188,320 7,962 7,553 64,997 28,809 80,519 4,439 6,311 583,485
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F-25
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
STATEMENTS OF CASH FLOWS
Three months to March 31, 1999
------------------------------------------------------------------------------------------
Intertek Testing Kite ITS Intertek Testing Yickson Testing Testing Guarantor
Testing Holdings Overseas Holding Testing Holdings Enterprise Holdings Holdings subsidiaries
Services USA Holdings Limited Services Sweden Limited France Germany Total
Ltd Inc BV UK Ltd AB EURL GmbH
pounds pounds pounds pounds pounds pounds pounds pounds pounds pounds
000 000 000 000 000 000 000 000 000 000
------------------------------------------------------------------------------------------
Total operating cash (outflow)/inflow (2,762) -- 5 -- (8) -- (2) (3) -- (2,770)
Returns on investments and servicing
of finance (2,351) 495 (107) -- -- -- 1,491 (30) -- (502)
Taxation paid -- (56) -- -- -- -- (20) (18) -- (94)
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CASH (OUTFLOW)/INFLOW BEFORE FINANCING (5,113) 439 (102) -- (8) -- 1,469 (51) -- (3,366)
Financing 11,870 (439) -- -- 10 -- (1,469) 51 -- 10,023
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INCREASE/(DECREASE) IN CASH 6,757 -- (102) -- 2 -- -- -- -- 6,657
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RECONCILIATION OF NET CASH FLOW TO
MOVEMENT IN NET DEBT
INCREASE/(DECREASE) IN CASH 6,757 -- (102) -- 2 -- -- -- -- 6,657
Cash inflow from increase in debt 2,817 -- -- -- -- -- -- -- 2,817
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Change in net debt resulting from
cash flows 9,574 -- (102) -- 2 -- -- -- -- 9,474
Debt issued in lieu of interest (1,960) -- -- -- -- -- -- -- -- (1,960)
payment
Other non-cash movements (29) -- (9) (3) 401 (66) 118 -- (14) 398
Exchange adjustments (1,911) -- 180 (115) (1,638) 6 (1,270) -- 247 (4,501)
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Movement in net debt in the period 5,674 -- 69 (118) (1,235) (60) (1,152) -- 233 3,411
Net debt at start of period (80,725) -- (3,732) (3,405) (36,525) (21,201) (36,295) -- (5,167) (187,050)
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NET DEBT AT END OF PERIOD (75,051) -- (3,663) (3,523) (37,760) (21,261) (37,447) -- (4,934) (183,639)
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F-26
INTERTEK TESTING SERVICES LIMITED
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
ISSUER, GUARANTOR AND NON-GUARANTOR COMPANIES (CONTINUED)
STATEMENTS OF CASH FLOWS
Three months to March 31, 1998
------------------------------------------------------------------------------------------
Intertek Testing Kite ITS Intertek Testing Yickson Testing Testing Guarantor
Testing Holdings Overseas Holding Testing Holdings Enterprise Holdings Holdings subsidiaries
Services USA Holdings Limited Services Sweden Limited France Germany Total
Ltd Inc BV UK Ltd AB EURL GmbH
pounds pounds pounds pounds pounds pounds pounds pounds pounds pounds
000 000 000 000 000 000 000 000 000 000
------------------------------------------------------------------------------------------
Total operating cash inflow/(outflow) 47 2,144 56 60 826 446 4,176 14 (7) 7,762
Returns on investments and servicing
of finance 32 (2,654) (35) 2 (915) (451) 16 (15) (68) (4,088)
Taxation received/(paid) -- -- -- -- -- -- -- -- -- --
Acquisitions and disposals -- -- -- -- -- -- -- -- -- --
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CASH INFLOW/(OUTFLOW) BEFORE FINANCING 79 (510) 21 62 (89) (5) 4,192 (1) (75) 3,674
Financing (79) 510 (19) (63) 90 5 (4,192) 1 74 (3,673)
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INCREASE/(DECREASE) IN CASH -- -- 2 (1) 1 -- -- -- (1) 1
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RECONCILIATION OF NET CASH FLOW TO
MOVEMENT IN NET DEBT
INCREASE/(DECREASE) IN CASH -- -- 2 (1) 1 -- -- -- (1) 1
Cash inflow from increase in debt -- -- -- -- -- -- -- -- -- --
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Change in net debt resulting from
cash flows -- -- 2 (1) 1 -- -- -- (1) 1
Debt issued in lieu of interest (1,707) -- -- -- -- -- -- -- -- (1,707)
payment
Other non-cash movements (24) -- (22) 22 (89) (53) (129) -- (11) (306)
Exchange adjustments (420) -- 135 (48) (238) 703 -- -- 166 298
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Movement in net debt in the period (2,151) -- 115 (27) (326) 650 (129) -- 154 (1,714)
Net debt at start of period (51,350) -- (3,865) (3,609) (38,122) (22,374) (36,397) -- (4,732) (160,449)
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NET DEBT AT END OF PERIOD (53,501) -- (3,750) (3,636) (38,448) (21,724) (36,526) -- (4,578) (162,163)
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F-27
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant certifies that it meets all of the requirements for filing on Form
6-K and has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorised.
INTERTEK TESTING SERVICES LIMITED
(Registrant)
By: /S/ WILLIAM SPENCER
--------------------------------
Name: William Spencer
Title: Director
Date: May 14, 1999
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant certifies that it meets all of the requirements for filing on Form
6-K and has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorised.
INTERTEK TESTING SERVICES LIMITED
(Registrant)
By:
-----------------------------------
Name: William Spencer
Title: Director
Date: May 14, 1999