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Previous: SYNC RESEARCH INC, SC 13D, 1997-12-05 |
Next: ECHOSTAR COMMUNICATIONS CORP, 10-Q/A, 1997-12-05 |
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------------
AMENDMENT NO. 1
TO
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
--------------------------------------
Date of Report (Date of earliest event reported) October 8, 1997
Waters Corporation
--------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
- --------------------------------------------------------------------------------
Delaware 0-14010 13-3668640
- -------- (Commission (IRS Employer
(State or other File Number) Identification No.)
jurisdiction
of incorporation)
- --------------------------------------------------------------------------------
34 Maple Street
Milford, Massachusetts 01757
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (508) 478-2000
Not Applicable
- --------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
Exhibit Index on page 35
Page 1 of 35 pages
<PAGE>
INTRODUCTORY NOTES
On September 23, 1997, Water Corporation, along with its wholly owned
subsidiary, Waters Technologies Corporation, (collectively referred to herein as
the "Company"), completed its acquisition of Micromass Limited and its
subsidiaries (collectively referred to herein as "Micromass"), a British
company. Pursuant to the transaction, the Company purchased 100% of the capital
stock of Micromass from Micromass management, Micromass Employee Share Scheme
Limited, and certain funds of Schroder Ventures for aggregate consideration of
(Pounds) 109 million ($175.9 million) consisting of cash, stock and notes. /1/
The Acquisition was financed through drawings on the revolving credit facility
under the Company's Amended and Restated Credit Agreement, dated as of June 16,
1997, as amended by the First Amendment dated September 4, 1997, by and among
the Company, Bankers' Trust Company and other Lenders party thereto (the "Credit
Agreement").
On October 8, 1997, Waters Corporation filed a Current Report on Form 8-K to
report the Acquisition. The purpose of this Amendment No. 1 to Current Report on
Form 8-K, filed on Form 8-K/A, is to file the additional financial statements of
Micromass Limited and file the pro forma financial statements required by Item
7(b).
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) Financial Statements of Business Acquired.
Financial Statements of Micromass Limited are included herein
beginning on page F-1.
(b) Proforma Financial Information.
UNAUDITED PRO FORMA FINANCIAL DATA
The following unaudited pro forma consolidated statements of continuing
operations for the nine-month period ending September 30, 1997 and for the year
ending December 31, 1996 give effect to the Micromass Limited Acquisition. An
unaudited pro forma balance sheet of the Company is not required since the
Micromass Limited Acquisition was included in the Company's 10Q filing for the
third quarter of 1997. The Micromass Limited historical results in the pro forma
consolidated statement of continuing operations for the year ending December 31,
1996 include the operational results of predecessor entities.
The unaudited pro forma financial data are based on the historical consolidated
financial statements for the Company and Micromass Limited and the assumptions
and adjustments described in the accompanying notes. The unaudited pro forma
statements of continuing operations do not (i) purport to represent what the
Company's results of operations actually would have been if the events described
above had occurred as of the dates indicated or what such results will be for
any future periods or (ii) give effect to certain non-recurring charges which
resulted from these events. Future non-recurring charges related to the
Micromass Limited Acquisition include approximately $33 million of revaluation
of acquired inventory which will be taken as a charge over the fourth quarter of
1997 and the first quarter of 1998. The unaudited pro forma financial data are
based upon assumptions that the Company believes are reasonable and should be
read in conjunction with the Consolidated Financial Statements and accompanying
notes thereto included elsewhere in this report.
/1/ Dollar conversions are based on an exchange rate as of September 23, 1997 of
1.6140.
<PAGE>
WATERS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF CONTINUING OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Micromass Micromass
Waters Corporation Limited Limited
Historical Historical Acquisition Pro
September 30, 1997 September 30, 1997 Adjustments Forma
------------------ ------------------ ----------- --------
<S> <C> <C> <C> <C>
Net Sales $313,715 $76,159 $389,874
Cost of sales 115,066 53,444 168,510
Revaluation of acquired inventory 0 0
-------- ------- ------- --------
Gross profit 198,649 22,715 0 221,364
Selling, general and administrative expenses 116,993 2,252 119,245
Research and development expenses 17,851 5,724 23,575
Goodwill and purchased technology, net 4,216 734 1,515 (b) 6,465
Expensed in-process research and development 55,000 (55,000)(a) 0
-------- ------- ------- --------
Operating income 4,589 14,005 53,485 72,079
Interest expense, net 8,317 2,534 5,461 (c) 16,312
Unrealized loss on future cash flow hedges 1,128 1,128
-------- ------- ------- --------
Income from continuing operations
before income taxes (3,728) 10,343 48,024 54,639
Provision for income taxes 10,254 4,006 (3,332)(d) 10,928
-------- ------- ------- --------
Income from continuing operations (13,982) 6,337 51,356 43,711
Less: Accretion of and 6% dividend on preferred stock 705 1,842 (1,842)(e) 705
-------- ------- ------- --------
Income from continuing operations
available to common stockholders $(14,687) $ 4,495 $53,198 $ 43,006
======== ======= ======= ========
Income per common share from
continuing operations ($0.46) $1.33
Weighted average number of common shares 31,912 375 (f) 32,287
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statement of Continuing
Operations.
<PAGE>
WATERS CORPORATION
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF CONTINUING OPERATIONS
(In thousands, except per share data)
<TABLE>
<CAPTION>
Micromass Micromass
Waters Corporation Limited Limited
Historical Historical Acquisition Pro
December 31, 1996 December 31, 1996 Adjustments Forma
------------------ ------------------ ----------- --------
<S> <C> <C> <C> <C>
Net Sales $391,113 $96,637 $487,750
Cost of sales 145,254 72,418 217,672
Revaluation of acquired inventory 6,100 6,100
-------- ------- ------- --------
Gross profit 239,759 24,219 0 263,978
Selling, general and administrative expenses 148,513 3,367 151,880
Research and development expenses 20,898 7,754 28,652
Goodwill and purchased technology, net 5,219 758 2,241 (b) 8,218
Expensed in-process research and development 19,300 19,300
-------- ------- ------- --------
Operating income 45,829 12,340 (2,241) 55,928
Interest expense, net 14,740 2,798 7,862 (c) 25,400
Unrealized (gain) on future cash flow hedges (1,153) (1,153)
-------- ------- ------- --------
Income from continuing operations
before income taxes 31,089 10,695 (10,103) 31,681
Provision for income taxes 11,230 3,107 (2,921)(d) 11,416
-------- ------- ------- --------
Income from continuing operations 19,859 7,588 (7,182) 20,265
Extraordinary loss/(gain) 22,264 (285) 21,979
-------- ------- ------- --------
Net income (2,405) 7,873 (7,182) (1,714)
Less: Accretion of and 6% dividend on preferred stock 921 4,498 (4,498)(e) 921
-------- ------- ------- --------
Income from continuing operations
available to common stockholders $ (3,326) $ 3,375 $(2,684) $ (2,635)
======== ======= ======= ========
Income per common share from
continuing operations ($0.11) ($0.08)
Weighted average number of common shares 31,628 375 (f) 32,003
</TABLE>
See Notes to Unaudited Pro Forma Consolidated Statement
of Continuing Operations.
<PAGE>
WATERS CORPORATION
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF CONTINUING OPERATIONS
(Dollars in thousands)
The unaudited Pro Forma Consolidated Statements of Continuing Operations are
based on the following assumptions and adjustments:
(a) The Unaudited Pro Forma Statement of Continuing Operations excludes the
nonrecurring charge related to the write-off of in-process research and
development from the Micromass Limited acquisition in 1997.
(b) Reflects the elimination of Micromass historical goodwill amortization
amounting to $734 and $758 for 1997 and 1996 Periods, respectively,
incurred as a stand alone company and incremental amortization of $2,249
and $2,999 for 1997 and 1996 Periods, respectively, for goodwill and other
intangibles arising from the Micromass acquisition over a ten to forty year
amortization period.
(c) Represents the elimination of Micromass historical interest expense amounts
of $2,534 and $2,798 for 1997 and 1996 Periods, respectively, incurred as a
stand alone company and incremental interest expense of $7,995 and $10,660
for 1997 and 1996 Periods, respectively, resulting from borrowings under
the Bank Credit Agreement totaling approximately $164,000 to fund the
Micromass Acquisition (assuming an interest rate of 6.5% per annum).
(d) Adjustment to income tax expense is to reflect the estimated income tax
effects of certain pro forma adjustments. The Company's pro forma effective
income tax rate is lower than the U.S. federal statutory rate due to net
operating loss carryforwards offset by the effect of nondeductible
acquisition related amortization.
(e) Represents the elimination of $1,842 and $4,498 for 1997 and 1996,
respectively, of Micromass historical accretion of redeemable preference
shares.
(f) Represents 375,000 shares issued as part of the Micromass Limited
Acquisition for 1997 and 1996.
<PAGE>
(c) Exhibits.
2.1 Agreement for the Sale and Purchase of Micromass Limited dated as of
September 12, 1997, between Micromass Limited, Schroder UK Buy-Out Fund III
Trust I and Others, Waters Corporation and Waters Technologies Corporation.
(Incorporated by reference to the Registrant's Current Report on Form 8-K,
filed October 8, 1997.)
23.1 Consent of KPMG.
<PAGE>
MICROMASS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
REPORT OF INDEPENDENT AUDITORS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF MICROMASS LIMITED
We have audited the accompanying consolidated balance sheets of Micromass
Limited at September 30, 1997 and at December 31, 1996 and the related
consolidated profit and loss account, cash flow statement, reconciliation of
movements in shareholders' funds and statement of total recognised gains and
losses for the period from January 1, 1997 to September 30, 1997 and March 29,
1996 to December 31, 1996 and the combined profit and loss account, cash flow
statement, reconciliation of movement in shareholders funds and statement of
total recognised gains and losses of the Mass Spectrometry business of Fisons
Plc for the period from January 1, 1996 to March 29, 1996. These financial
statements are set out on pages 2 to 25 and are the responsibility of the
directors of Micromass Limited. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with United Kingdom generally accepted
auditing standards, which do not differ in any significant respect from United
States of America generally accepted auditing standards. Those standards
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free from material misstatement. An audit
also includes assessing the accounting principles used and significant estimates
by the directors, as well as evaluating the overall presentation of the
financial statements. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Micromass Limited
and its subsidiaries at September 30, 1997 and at December 31, 1996 and the
results of their operations and their cash flows for the period from January 1,
1997 to September 30, 1997 and March 29, 1996 to December 31, 1996 in conformity
with accounting principles generally accepted in the United Kingdom. In our
opinion, the combined financial statements referred to above present fairly, in
all material respects, the combined results of the operations and cash flows of
the Mass Spectrometry business of Fisons Plc for the period from January 1, 1996
to March 29, 1996 in conformity with accounting principles generally accepted in
the United Kingdom.
As discussed in Note 26 to the financial statements, effective March 29, 1996,
Micromass Limited acquired the trade and assets of the Mass Spectrometry
business of Fisons Plc in a business combination accounted for as a purchase.
As a result of this acquisition, the combined financial information for the
period prior to acquisition is presented on a different basis from that for the
consolidated financial information for the periods after the acquisition and,
therefore, is not comparable in all respects. Certain costs and expenses
presented in the combined financial statements represent allocations and the
present directors' best estimates of the costs of services provided to the
predecessor entities by Fisons Plc. As a result, the combined financial
statements presented may not be indicative of the financial position or results
of operations that would have been achieved had the predecessor business
operated as a non-affiliated entity.
Accounting principles generally accepted in the United Kingdom vary in certain
significant respects from accounting principles generally accepted in the United
States of America. Application of accounting principles generally accepted in
the United States of America would have affected the combined results of
operations for the period from January 1, 1997 to September 30, 1997 and for the
period from January 1, 1996 to December 31, 1996 and total shareholders' funds
at September 30, 1997 and at December 31, 1996 to the extent summarised in note
28 to the financial statements.
26 November 1997
KPMG
Chartered Accountants
and Registered Auditors
Manchester, England
F-1
<PAGE>
MICROMASS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
GROUP ENTITIES
Note 9 MONTHS TO 9 months to 3 months to
30 SEPTEMBER 31 December 29 March
1997 1996 1996
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
TURNOVER FROM CONTINUING OPERATIONS 2 46,712 50,619 7,991
Cost of sales (32,780) (35,666) (8,440)
-------- -------- -------
GROSS PROFIT/(LOSS) 13,932 14,953 (449)
Distribution costs (1,159) (1,279) (283)
Administrative expenses (4,183) (4,569) (919)
-------- -------- -------
OPERATING PROFIT/(LOSS) FROM CONTINUING OPERATIONS 3-5 8,590 9,105 (1,651)
Other interest receivable and similar income 410 373 -
Interest payable and similar charges 6 (1,964) (2,052) -
-------- -------- -------
PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION 7,036 7,426 (1,651)
Tax on profit on ordinary activities 7 (2,617) (1,896) -
-------- -------- -------
Retained profit/(loss) for the financial period 17 4,419 5,530 (1,651)
Net additional finance costs of non-equity
shareholders (1,130) (2,700) -
-------- -------- -------
Profit/(loss) for the period for equity shareholders 3,289 2,830 (1,651)
======== ======== =======
</TABLE>
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
GROUP ENTITIES
9 MONTHS TO 9 months to 3 months to
30 SEPTEMBER 31 December 29 March
1997 1996 1996
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
RETAINED PROFIT/(LOSS) FOR THE FINANCIAL PERIOD 4,419 5,530 (1,651)
Currency translation differences on foreign
currency, net investments and related loans 185 (169) -
------ ------ -------
Total gains and losses recognised 4,604 5,361 (1,651)
====== ====== =======
</TABLE>
F-2
<PAGE>
MICROMASS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
Consolidated balance sheet
<TABLE>
<CAPTION>
Note 30 SEPTEMBER 31 December
1997 1996
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C>
FIXED ASSETS
Intangible assets 8 11,239 11,689
Tangible assets 9 4,562 3,826
------- -------
15,801 15,515
CURRENT ASSETS
Stocks 11 13,051 10,304
Debtors 12 14,494 19,348
Cash at bank and in hand 4,281 11,309
------- -------
31,826 40,961
CREDITORS: amounts falling
due within one year 13 (27,964) (23,309)
-------- --------
NET CURRENT ASSETS 3,862 17,652
------- -------
TOTAL ASSETS LESS CURRENT LIABILITIES 19,663 33,167
CREDITORS: amounts falling
due after more than one year 14 - (11,474)
Provision for liabilities and charges 15 (3,374) (4,008)
-------- -------
NET ASSETS 16,289 17,685
======= =======
CAPITAL AND RESERVES
Called up share capital (equity and non equity) 16-17 80 124
Share premium 17 12,198 12,200
Capital redemption reserve 17 2,500 2,700
Profit and loss account 17 1,511 2,661
------- -------
TOTAL SHAREHOLDERS' FUNDS 17 16,289 17,685
======= =======
Equity shareholders' funds 7,647 4,172
Non-equity shareholders' funds 8,642 13,513
------- -------
TOTAL SHAREHOLDERS' FUNDS 16,289 17,685
======= =======
</TABLE>
F-3
<PAGE>
MICROMASS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED CASH FLOW STATEMENT
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
GROUP ENTITIES
Note 9 MONTHS TO 9 months to 3 months to
30 SEPTEMBER 31 December 29 March
1997 1996 1996
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES 21 14,850 17,436 (811)
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE 23A (984) (927) -
TAXATION - (1,769) (10) -
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT 23B (1,556) (522) (840)
ACQUISITIONS AND DISPOSALS 23C - (31,099) -
------ ------- -----
CASH INFLOW/(OUTFLOW) BEFORE USE OF LIQUID
RESOURCES AND FINANCING 10,541 (15,122) (1,651)
FINANCING :- REDEMPTION OF SHARES 23D (6,000) - -
:- ISSUE OF SHARES 23D - 12,324 -
:- (DECREASE)/INCREASE IN DEBT 23D (11,658) 14,802 1,600
-------- ------- -------
(DECREASE)/INCREASE IN CASH IN THE PERIOD (7,117) 12,004 (51)
======== ======= ======
</TABLE>
F-4
<PAGE>
MICROMASS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
GROUP ENTITIES
9 MONTHS TO 9 months to 3 months to 29
30 SEPTEMBER 31 December March
1997 1996 1996
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
PROFIT/(LOSS) FOR THE FINANCIAL PERIOD 4,419 5,530 (1,651)
New share capital subscribed - 12,375 -
Share issue costs - (51) -
Exchange adjustments 185 (169) -
Preference share redemption (6,000) - -
------- ------ ------
NET DECREASE IN SHAREHOLDERS' FUNDS (1,396) 17,685 (1,651)
Opening shareholders' funds 17,685 - 25,951
-------- ------- -------
CLOSING SHAREHOLDERS' FUNDS 16,289 17,685 24,300
======= ======= =======
</TABLE>
F-5
<PAGE>
MICROMASS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
NOTES
(forming part of the non-statutory financial statements)
1 ACCOUNTING POLICIES
The following accounting policies have been applied consistently in
dealing with items which are considered material in relation to the group's
financial statements.
BASIS OF PREPARATION
The non-statutory financial statements have been prepared in accordance
with applicable accounting standards and under the historical cost
accounting rules. These non-statutory financial statements have been
prepared at the request of the directors.
BASIS OF CONSOLIDATION
The combined financial statements of the predecessor entities comprise
the acquired business of Fisons Plc until 29 March 1996. Since then, the
consolidated financial statements of the successor group consolidate the
accounts of Micromass Limited and its subsidiary undertakings (as set out
in note 10).
As discussed in Note 26 to the financial statements, effective March 29,
1996, Micromass Limited acquired the trade and assets of the Mass
Spectrometry business of Fisons Plc in a business combination accounted for
under the acquisition method. As a result of this acquisition and the
application of acquisition revaluation adjustments, the consolidated
financial information for the period prior to acquisition is presented on a
different basis from that for the combined financial information for the
periods after the acquisition and, therefore, is not comparable in all
respects. Under the acquisition method of accounting, the results of
subsidiary and associated undertakings acquired or disposed of in the
period are included in the consolidated profit and loss account from the
date effective control passes. Goodwill arising on acquisition of a
business (representing the excess of the fair value of the consideration
given over the fair value of the separable net assets acquired) is
capitalised and shown as an intangible asset on the balance sheet. This
asset is then depreciated over its expected useful life to the business,
which has been estimated at 20 years.
The predecessor entity is not a separate legal entity, it has not been
separately financed and has not necessarily been subject to full taxation.
The combined financial statements of the Mass Spectrometry business of
Fisons Plc have been prepared by aggregating the financial information
submitted to Fisons Plc for inclusion in its consolidated accounts relating
to each of the individual operations which comprise the Mass Spectrometry
business, and as if such a business had formed a discrete operation under
common management for the period presented. Furthermore, central
management and administrative charges reflect the cost structure of Fisons
Plc. Such costs have been allocated based on management's best estimates
of the costs of services provided to the predecessor entities by Fisons
Plc.
No tax has been provided for the predecessor entities because of their
tax loss position and no benefits or reliefs which arise as a result of
membership of a Fisons Plc tax group are expected. The tax position shown
in the combined financial statements is therefore not necessarily
representative of the tax position of the Mass Spectrometry business under
separate ownership. As a result, the combined financial statements may not
be indicative of the results of operations and cash flows that would have
been achieved had the predecessor entities operated as a stand alone
entity.
The results of foreign subsidiaries are consolidated in the financial
statements using an average exchange rate for the period. Assets and
liabilities are translated at the period end using the rate of exchange
ruling at the balance sheet date and the related translation adjustment is
recorded as a direct adjustment to shareholders funds.
F-6
<PAGE>
MICROMASS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
Notes (CONTINUED)
FIXED ASSETS AND DEPRECIATION
Depreciation is provided by the group to write off the cost less the
estimated residual value of tangible fixed assets by equal instalments over
their estimated useful economic lives as follows:
Leasehold improvements - 7 to 10 years
Plant and machinery - 5 to 8 years
Fixtures and fittings - 3 to 8 years
Demonstration instruments - 4 years
FOREIGN CURRENCIES
Transactions in foreign currencies are recorded using the rate of exchange
ruling at the date of the transaction. Monetary assets and liabilities
denominated in foreign currencies are translated using the rate of exchange
ruling at the balance sheet date and the gains or losses on translation are
included in the profit and loss account.
TURNOVER
Turnover represents the amounts (excluding value added tax) derived from
the provision of goods and services to customers during the period. Income
from sales is only recognised when instruments have been despatched from
the factories to customers or when service visits have been completed.
Income from sales of extended warranty or service contracts are spread over
the period of the contract.
LEASES
Where the group enters into a lease which entails taking substantially all
the risks and rewards of ownership of an asset, the lease is treated as a
`finance lease'. The asset is recorded in the balance sheet as a tangible
fixed asset and is depreciated over its estimated useful life or the term
of the lease, whichever is shorter. Future instalments under such leases,
net of finance charges, are included with creditors. Rentals payable are
apportioned between the finance element, which is charged to the profit and
loss account, and the capital element which reduces the outstanding
obligation for future instalments.
All other leases are accounted for as `operating leases' and the rental
charges are charged to the profit and loss account on a straight line basis
over the life of the lease.
PENSION COSTS
The group operates pension schemes providing benefits based on employee and
employer contributions made to the schemes. The assets of the schemes are
held separately from those of the group. Contributions to the schemes are
charged to the profit and loss account as they fall due for payment.
RESEARCH AND DEVELOPMENT EXPENDITURE
Expenditure on research and development is written off against profits in
the period in which it is incurred.
F-7
<PAGE>
MICROMASS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
NOTES (CONTINUED)
DEMONSTRATION INSTRUMENTS
Instruments which are held for demonstration purposes are capitalised
within fixed assets and depreciated at the rate of 25% per annum. On any
subsequent sale they are transferred into cost of sales at their net book
value.
STOCKS
Stocks are stated at the lower of cost and net realisable value and
recorded on a first in, first out basis. For work in progress and finished
goods manufactured by the company, cost is taken as production cost, which
includes an appropriate proportion of attributable overheads.
TAXATION
The charge for taxation is based on the profit for the period and takes
into account taxation deferred because of timing differences between the
treatment of certain items for taxation and accounting purposes. Provision
is made for deferred tax only to the extent that it is probable that an
actual liability will crystallise.
2 TURNOVER
No analysis of turnover by geographical market has been presented as the
directors feel this is prejudicial to the interests of the group.
All turnover and profit before taxation arises from the manufacture, sale
and service of mass spectrometry instruments.
3 PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
GROUP ENTITIES
9 MONTHS TO 9 months to 3 months to
30 SEPTEMBER 31 December 29 March
1997 1996 1996
(POUNDS)000 (Pounds)000 (Pounds)000
PROFIT/(LOSS) ON ORDINARY ACTIVITIES
BEFORE TAXATION IS STATED AFTER CHARGING
Auditors' remuneration
<S> <C> <C> <C>
Audit 53 66 -
Other services 200 5 -
Depreciation 870 1,005 379
Amortisation of goodwill 450 455 -
Hire of other assets- operating leases 215 179 50
- land and buildings 364 519 154
Research and development expenditure 3,511 3,558 1,186
====== ======= =======
</TABLE>
Fees paid to the auditors for non audit work, but not charged to the profit and
loss account in the 9 months to December 1996 totalled (Pounds)517,000.
F-8
<PAGE>
MICROMASS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
NOTES (CONTINUED)
4 REMUNERATION OF DIRECTORS
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
GROUP ENTITIES
9 MONTHS TO 9 months to 3 months to
30 SEPTEMBER 31 December 29 March
1997 1996 1996
(Pounds)000 (Pounds)000 (Pounds)000
DIRECTORS' EMOLUMENTS:
<S> <C> <C> <C>
Remuneration as executives 436 446 44
Pension contributions 9 9 2
Directors' fees 26 26 -
---- ---- ---
471 481 46
==== ==== ===
</TABLE>
The emoluments, excluding pension contributions, of the Chairman were
(Pounds)77,650 (9 months to 31 December 1996; (Pounds)85,448) and those of
the highest paid director were (Pounds)92,650 (which includes their accrued
bonus for the final period not yet paid) (9 months to 31 December 1996:
(Pounds)107,632).
Directors fees for the services of H Simon and C Parker of (Pounds)10,000
(1996: (Pounds)15,000) and (Pounds)7,500 (1996: (Pounds)11,250)
respectively were paid directly to Schroder Venture Advisors.
No payments were made in relation to the above services in the 3 months to
29 March 1996.
5 STAFF NUMBERS AND COSTS
The average number of persons employed by the group (including directors)
during the period, analysed by category, was as follows:
<TABLE>
<CAPTION>
NUMBER OF EMPLOYEES
SUCCESSOR PREDECESSOR
GROUP ENTITIES
9 MONTHS TO 9 months to 3 months to
30 SEPTEMBER 31 December 29 March
1997 1996 1996
<S> <C> <C> <C>
Production and engineering 220 180 194
Sales and marketing 142 124 119
Administration and finance 49 57 29
---- ---- ---
411 361 342
==== ==== ====
</TABLE>
F-9
<PAGE>
MICROMASS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
NOTES (CONTINUED)
<TABLE>
<CAPTION>
The aggregate payroll costs of these persons were as follows:
SUCCESSOR PREDECESSOR
GROUP ENTITIES
9 MONTHS TO 9 months to 3 months to
30 SEPTEMBER 31 December 29 March
1997 1996 1996
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Wages and salaries 9,045 8,045 2,325
Social security costs 679 693 175
Other pension costs (see note 20) 466 395 181
------- ------ ------
10,190 9,133 2,681
======= ====== ======
</TABLE>
6 INTEREST PAYABLE AND SIMILAR CHARGES
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
GROUP ENTITIES
9 MONTHS TO 9 months to 3 months to
30 SEPTEMBER 31 December 29 March
1997 1996 1996
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
On bank loans 1,964 1,600 -
On loan stock - 452 -
------ ------ ---
1,964 2,052 -
====== ====== ===
</TABLE>
Included within interest on bank loans are finance costs of
(Pounds)885,000, (9 months to 31 December 1996: (Pounds)514,000) associated
with the raising of acquisition finance. The finance costs have been
deferred and are being amortised over the term of the loan to give a
constant rate on the carrying amount of the debt in accordance with FRS 4.
7 TAXATION
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
GROUP ENTITIES
9 MONTHS TO 9 months to 3 months to
30 SEPTEMBER 31 December 29 March
1997 1996 1996
(POUNDS)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
UK corporation tax at 31% (1996: 33%) on the
profit for the period on ordinary activities 2,255 1,383 -
Overseas taxation 362 513 -
------ ------ ----
2,617 1,896 -
====== ====== ===
</TABLE>
F-10
<PAGE>
MICROMASS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
Notes (CONTINUED)
8 INTANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
9 MONTHS TO 30 9 months to 31
SEPTEMBER December
1997 1996
(Pounds)000 (Pounds)000
<S> <C> <C>
Goodwill brought forward/acquired on acquisition of the business 11,689 12,144
Amortised in period (450) (455)
------- -------
Balance at end of period 11,239 11,689
======= =======
</TABLE>
9 TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
LEASEHOLD PLANT AND FIXTURES DEMONSTRATION TOTAL
IMPROVEMENTS MACHINERY & FITTINGS INSTRUMENTS
MOTOR
VEHICLES
AND
COMPUTERS
(POUNDS)000 (POUNDS)000 (POUNDS)000 (POUNDS)000 (POUNDS)000
<S> <C> <C> <C> <C> <C>
Assets introduced on purchase of
business 313 554 1,006 2,522 4,395
Additions 25 125 447 1,717 2,314
Disposals - - (37) (2,042) (2,079)
Exchange adjustments (2) - (77) (70) (149)
---- ---- ------ ------- -------
At 1 January 1997 336 679 1,339 2,127 4,481
Additions 96 125 392 2,628 3,241
Disposals - - (18) (1,796) (1814)
Exchange adjustments 1 1 (12) (17) (27)
---- ---- ------ ------- -------
AT END OF PERIOD 433 805 1,701 2,942 5,881
---- ---- ------ ------- -------
DEPRECIATION
Charge for 9 month period to 31
December 1996 (55) (151) (330) (469) (1,005)
Disposals - - 10 337 347
Exchange adjustments - (2) 14 (9) 3
---- ---- ------ ------- -------
At 1 January 1997 (55) (153) (306) (141) (655)
Charge for period (62) (144) (332) (332) (870)
Disposals - - 6 192 198
Exchange adjustments (1) 2 4 3 8
---- ---- ------ ------- -------
AT END OF PERIOD (118) (295) (628) (278) (1,319)
---- ---- ------ ------- -------
NET BOOK VALUE
AT 30 SEPTEMBER 1997 315 510 1,073 2,664 4,562
==== ==== ====== ====== ======
At 31 December 1996 281 526 1,033 1,986 3,826
======= ======= ====== ====== ======
</TABLE>
F-11
<PAGE>
MICROMASS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
NOTES (CONTINUED)
10 SUBSIDIARY COMPANIES
<TABLE>
<CAPTION>
CALLED UP PERCENTAGE PRINCIPAL
ORDINARY OF SHARES ACTIVITY
SHARES OF (Pounds)1 EACH HELD
(Pounds)000
<S> <C> <C> <C>
Micromass UK Limited 1,100 100% Manufacture and
sale of mass
spectrometers
Micromass International 1,600 100% Intermediate holding
Limited company
The above subsidiary undertakings are registered in England and Wales. The companies below are registered
overseas and are held indirectly by Micromass Limited.
COUNTRY OF PERCENTAGE PRINCIPAL
REGISTRATION OF ORDINARY SHARES ACTIVITY
HELD
Micromass Inc USA 100%
Micromass BV Holland 100%
Micromass SARL France 100% Sale and service
Micromass GmbH Germany 100% of Mass Spectrometry
Micromass AB Sweden 100% Instruments
Micromass AG Switzerland 100%
Micromass (Canada) Inc. Canada 100%
</TABLE>
11 STOCKS
<TABLE>
<CAPTION>
1997 1996
(Pounds)000 (Pounds)000
<S> <C> <C>
Raw materials and consumables 3,006 3,256
Work in progress 5,320 4,292
Finished goods and goods for resale 4,725 2,756
------- -------
13,051 10,304
======= =======
</TABLE>
F-12
<PAGE>
MICROMASS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
Notes (CONTINUED)
12 DEBTORS
<TABLE>
<CAPTION>
AMOUNTS FALLING DUE Amounts falling due
WITHIN ONE YEAR within one year
1997 1996
(Pounds)000 (Pounds)000
<S> <C> <C>
Trade debtors 12,577 16,656
Prepayments and accrued income 89 523
Other debtors 1,828 2,169
------- ------
14,494 19,348
======= =======
</TABLE>
13 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1997 1996
(Pounds)000 (Pounds)000
<S> <C> <C>
Bank loans and overdrafts (see note 14) - 3,440
Trade creditors 7,265 6,344
Amounts owed to parent company
(see note 27) 4,130 -
Other creditors including taxation
and social security: 3,138 3,191
Corporation tax 2,756 1,942
Other taxes and social 1,866 1,001
security
Accruals and deferred income 8,809 7,391
------- -------
27,964 23,309
======= =======
</TABLE>
14 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1997 1996
(Pounds)000 (Pounds)000
<S> <C> <C>
Bank loans - 11,474
===== =======
</TABLE>
All the bank loans and overdrafts were repaid on 23 September 1997.
Included within the bank loans were capitalised FRS 4 finance issue costs
of (Pounds)NIL (at 31 December 1996: (Pounds)885,000). The gross figure for
bank loans is (Pounds)NIL (at 31 December 1996: (Pounds)12,358,000).
F-13
<PAGE>
MICROMASS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
Notes (CONTINUED)
The bank loans were secured by a fixed and floating charge over the assets
of the company and its subsidiaries including cross letters of guarantee
and keyman insurance, on certain directors.
The interest on the loans was paid at LIBOR plus bank margin which is
currently 2%. The interest rate was capped at 7.5% LIBOR.
15 PROVISIONS FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
WARRANTY AND
RELATED PROVISION
9 MONTHS TO 9 months to
30 SEPTEMBER 1997 31 December 1996
(POUNDS)000 (Pounds)000
<S> <C> <C>
At beginning of period 4,008 3,082
(Credit)/charge for the period in the
profit and loss account (421) 1,448
Amount utilized in period (213) (522)
------- -------
At end of period 3,374 4,008
======= ======
</TABLE>
<TABLE>
<CAPTION>
The amounts provided for deferred taxation and the amounts not provided are set
out below:
1997 1996
PROVIDED UNPROVIDED Provided Unprovided
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
Difference between accumulated depreciation
and amortisation and capital allowances
- (152) - (187)
Other timing differences - (39) - (75)
--- ----- --- -----
Deferred tax (asset) - (191) - (262)
=== ===== === =====
</TABLE>
F-14
<PAGE>
MICROMASS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
NOTES (CONTINUED)
16 CALLED UP SHARE CAPITAL
<TABLE>
<CAPTION>
1997 1996
EQUITY NON EQUITY Equity Non equity
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
Authorised
A Ordinary shares of 1p each 5 - 7 -
B Ordinary shares of 1p each 4 - 4 -
B Ordinary redeemable shares of 1p each 5 - 5 -
C Deferred shares 1p each 2 - - -
C Redeemable shares of 1p each - 2 - -
Preference shares - 62 - 108
--- --- --- ----
16 64 16 108
=== === === ====
1997 1996
EQUITY NON EQUITY Equity Non equity
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
Allotted, called up and fully paid
A Ordinary shares of 1p each 5 - 7 -
B Ordinary shares of 1p each 4 - 4 -
B Ordinary redeemable shares of 1p each 5 - 5 -
C Deferred shares of 1p each 2 - - -
C Redeemable shares of 1p each - 2 - -
Preference shares - 62 - 108
--- --- --- ----
16 64 16 108
=== === === ====
</TABLE>
RIGHTS ATTACHING TO THE SHARE CAPITAL
The A ordinary, B ordinary and B ordinary redeemable shares rank pari passu in
respect of dividend rights and returns of capital. The B ordinary redeemable
shares can be redeemed by the company for (Pounds)1 each on a listing or sale
dependent on the level of returns previously received by the B ordinary
shareholders. The B ordinary shareholders have the right to nominate two
directors of the company.
On 10 September 1997 the company increased its authorised share capital by the
creation of 205,652 new C redeemable shares of 1p. At the same time the
authorised shares capital of the company was altered by the redesignation of
205,652 A ordinary shares to C deferred shares also of 1p each.
The holders of the C deferred shares are entitled to receive dividends parri
passu with the A ordinary shareholders. The holders of the C redeemable shares
are not entitled to any dividend or to any participation in the profits of the
company. The holders of all classes of C share have the same voting rights as
the A shareholders. The company has the right to redeem all C redeemable shares
immediately prior to a listing or sale at the same value as for an A share less
one penny.
The company following the passing of an ordinary resolution can allot to any
class of shareholder further shares of that particular class or, for the C
deferred shares, C redeemable shares.
F-15
<PAGE>
MICROMASS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
NOTES (continued)
On the 10 September 1997 the company announced a scrip dividend in respect of
the C deferred shares. Each shareholder was offered the choice of a dividend of
10 pence on each share or one C redeemable share. All the shareholders took up
the C redeemable shares. The nominal value of the scrip dividend of
(Pounds)2,056 was funded out of the share premium account.
The preference shares carry rights to a dividend and a return of capital in
priority to any other class of share. No dividends are payable on the shares
until 31 March 1999. After this date the rate of dividend increases until 1
September 1999 and thereafter when a dividend of 16.09% is payable on the
shares. The shares can be redeemed at any time by the company or in full on a
sale or listing. If not redeemed early the shares are redeemable in any event in
two instalments on 1 April 2002 and 1 April 2003. Whenever the shares are
redeemed they are entitled to be redeemed at the level which gives the holders
an internal rate of return, on 1.46 times their original investment, of between
22.5% and 25% depending on the date of redemption.
On 29 August 1997 the company redeemed 4,623,768 preference shares in accordance
with memorandum and articles at a cost of (Pounds)5,999,999.
F-16
<PAGE>
MICROMASS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
Notes (continued)
17 SHARE CAPITAL AND RESERVES
<TABLE>
<CAPTION>
SHARE SHARE CAPITAL PROFIT/ TOTAL
CAPITAL PREMIUM REDEMPTION LOSS
RESERVE ACCOUNT
(POUNDS)000 (POUNDS)000 (POUNDS)000 (POUNDS)000 (POUNDS)000
<S> <C> <C> <C> <C> <C>
At 1 January 1996 - - - 25,951 25,951
Loss for the period - - - (1,651) (1,651)
----- ----- ----- ------- -------
At 29 March 1996 - - - 24,300 24,300
===== ===== ===== ======= =======
Shares issued in period 124 12,251 - - 12,375
Profit retained for the period for
equity shareholders - - - 5,530 5,530
Transfer to capital redemption reserve
- - 2,700 (2,700) -
Share issue costs - (51) - - (51)
Exchange adjustments - - - (169) (169)
----- ----- ----- ------- -------
At 1 January 1997 124 12,200 2,700 2,661 17,685
Profit retained for the period for equity
shareholders - - - 4,419 4,419
Transfer to capital redemption reserve - - 1,130 (1,130) -
Redemption of preference shares (46) - (1,330) (4,624) (6,000)
Scrip dividend 2 (2) - - -
Exchange adjustments - - - 185 185
----- ----- ----- ------- -------
AT 30 SEPTEMBER 1997 80 12,198 2,500 1,511 16,289
===== ===== ===== ======= =======
</TABLE>
The appropriation from equity to non-equity interests relates to the rights
attached to the preference shares as detailed in note 16. This transfer is
being spread over the terms of the shares in accordance with FRS 4.
The capital redemption reserve arises from the requirements contained
within the articles of association of the company which state that an
annual transfer to the capital redemption reserve of a minimum of (Pounds)3
million per annum to cover the premium payable on redemption of the
preference shares must be made. With regards to the maximum level of
premium payable on such a redemption, the directors have decided that a
transfer to the capital redemption reserve of (Pounds)1.13 million
should be made to cover the premium accruing on these shares at 30
September 1997. In accordance with FRS 4 this transfer equates to the
finance cost of the preference shares for the period and has been charged
to the profit and loss account as an appropriation from equity to non-
equity interests.
F-17
<PAGE>
MICROMASS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
NOTES (CONTINUED)
18 CONTINGENT LIABILITIES
The Group has issued on its behalf, during the normal course of trading,
bank guarantees in respect of advance payments, performance bonds and
warranties. The value of outstanding bank guarantees at 30 September 1997
was (Pounds)4,811,477 (at 31 December 1996: (Pounds)5,691,000).
19 COMMITMENTS
(i) There are no capital commitments, either contracted or authorised but
not contracted.
(ii) Annual commitments under non-cancellable operating leases at 30
September 1997 are as follows:
<TABLE>
<CAPTION>
LAND AND OTHER TOTAL
BUILDINGS
(Pounds)000 (Pounds)000 (Pounds)000
Operating leases which expire:
<S> <C> <C> <C>
Within one year - 29 29
In the second to
fifth years inclusive - 217 217
Over five years 397 - 397
---- ---- ----
397 246 643
==== ==== ====
</TABLE>
20 PENSION SCHEME
The Group in the UK has established and operates a money purchase pension
scheme with defined contribution levels covering the majority of its
employees, including directors. Contributions to this scheme are
independently administered by an insurance company. In its overseas
subsidiaries the company continues to support a variety of schemes of the
money purchase type.
The pension cost charge represents contributions payable by the Group to
the scheme and amounts to (Pounds)466,000 (9 months to 31 December 1996:
(Pounds)395,000; 3 months to 29 March 1996: (Pounds)181,000). Contributions
of (Pounds)20,000 (9 months to 31 December 1996: (Pounds)19,000) were
payable to the scheme at the end of the period.
F-18
<PAGE>
MICROMASS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
NOTES (CONTINUED)
21 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW/(OUTFLOW) FROM
OPERATING ACTIVITIES
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
GROUP ENTITIES
9 MONTHS TO 9 months to 3 months to
30 SEPTEMBER 31 December 29 March
1997 1996 1996
(POUNDS)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Operating profit 8,590 9,105 (1,651)
Profit on disposal of fixed assets (11) (59) -
Depreciation charge / goodwill amortisation charge 1,320 1,460 379
(Increase)/Decrease in stocks (2,726) 470 (1,731)
Decrease/(Increase) in debtors 4,835 (3,053) 2,150
Increase in creditors 2,842 9,513 42
-------- -------- -------
NET CASH INFLOW/(OUTFLOW) FROM OPERATING ACTIVITIES 14,850 17,436 (811)
======= ======= ======
</TABLE>
22 (A) Reconciliation of net cash flow to movement in net debt for the periods
to 30 September 1997 December 1996.
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
GROUP ENTITIES
9 MONTHS TO 30 9 months to 31 3 months to 29
SEPTEMBER December March
1997 1996 1996
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Increase in cash in the period (7,117) 12,004 -
Net cash outflow/(inflow) from decrease/(increase) in
debt 11,658 (14,802) (1,651)
------- -------- -------
Change in net debt resulting from cash flows 4,541 (2,798) (1,651)
FRS 4 finance cost adjustment (885) (813) -
Translation difference 100 6 -
------- ------- -------
Movement in net debt in the period 3,756 (3,605) (1,651)
Net debt at beginning of period (3,605) - -
Adjustment on sale - - 1,651
------- ------- -------
Cash/(net debt) 151 (3,605) -
======= ======= =======
</TABLE>
F-19
<PAGE>
MICROMASS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
NOTES (CONTINUED)
23 (A) RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
GROUP ENTITIES
9 MONTHS TO 9 months to 3 months to
30 SEPTEMBER 31 December 29 March
1997 1996 1996
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Interest received 420 372 -
Interest paid (1,404) (1,299) -
------- ------- ----
(984) (927) -
======= ======= ====
</TABLE>
23 (B) CAPITAL EXPENDITURE
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
GROUP ENTITIES
9 MONTHS TO 9 months to 3 months to
30 SEPTEMBER 31 December 29 March
1997 1996 1996
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Payments to acquire tangible fixed assets (3,241) (2,314) (1,291)
Receipts from sale of tangible fixed assets 1,685 1,792 451
------- ------- ------
(1,556) (522) (840)
======= ====== ======
</TABLE>
23 (C) ACQUISITIONS AND DISPOSALS
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
GROUP ENTITIES
9 MONTHS TO 9 months to 3 months to
30 SEPTEMBER 31 December 29 March
1997 1996 1996
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Payment to acquire business - (31,099) -
======= ====== ======
</TABLE>
F-20
<PAGE>
MICROMASS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
NOTES (CONTINUED)
23 (D) FINANCING
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
GROUP ENTITIES
9 MONTHS TO 9 MONTHS TO 3 MONTHS TO
30 SEPTEMBER 1997 31 DECEMBER 1996 29 MARCH 1996
(POUNDS)000 (POUNDS)000 (POUNDS)000
<S> <C> <C> <C>
Issue of ordinary share capital - 12,324 -
New loans 4,130 21,613 -
Repayment of loan note - (5,000) -
Repayment of bank loan (15,788) (1,811) -
Loan from predecessor holding company - - 1,600
Redemption of preference shares (6,000) - -
-------- ------- ------
(17,658) 27,126 1,600
-------- ------- ------
</TABLE>
24 ANALYSIS OF NET CASH/(DEBT)
<TABLE>
<CAPTION>
AT 1 CASH FISONS AT 29 CASH AT 1 CASH NON CASH
JANUARY FLOWS TRANSFER MARCH FLOWS JANUARY FLOWS CHANGES
1996 1996 1997
(Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cash 51 (1,651) 1,600 - 11,309 11,309 (7,117) -
Debt due within 1
year - 1,651 (1,651) - (3,440) (3,440) (690) -
Debt due greater
than 1 year - - - - (11,474) (11,474) 12,348 (885)
--- ------- ------ --- -------- -------- ------- -----
51 - (51) - (3,605) (3,605) 4,541 (885)
=== ======= ====== === ======== ======== ======= =====
</TABLE>
<TABLE>
<CAPTION>
EXCHANGE AT 30
MOVEMENT SEPTEMBER 1997
(POUNDS)000 (POUNDS)000
<S> <C> <C>
Cash 89 4,281
Debt due within 1 year - (4,130)
Debt due greater than 1 year 11 -
-------- -------
100 151
======== =======
</TABLE>
F-21
<PAGE>
MICROMASS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
NOTES (CONTINUED)
25 ANALYSIS OF CHANGES IN FINANCING DURING THE PERIOD
<TABLE>
<CAPTION>
SHARE CAPITAL LOAN
(INCLUDING SHARE OBLIGATIONS
PREMIUM)
(Pounds)000 (Pounds)000
<S> <C> <C>
Balance at 1 January 1996 - -
Movements - -
------- -------
Balance at 29 March 1996 - -
Cash inflow from share issues 12,375 -
New loans taken out - 23,000
Share issue costs (51) -
Adjustment re FRS4 - (1,387)
Repayments of loans - (6,699)
------- -------
Balance at 1 January 1997 12,324 14,914
Effect of foreign exchange differences - (11)
Repayment of loans - (15,788)
Adjustment re FRS4 - 885
Loan from parent undertaking - 4,130
Redemption of preference shares (46) -
------- -------
Balance at end of period 12,278 4,130
======= =======
</TABLE>
The FRS 4 adjustment in the loans taken out relates to loan issue costs
paid in the prior period.
26 ACQUISITION OF BUSINESSES
On 29 March 1996 Micromass Limited and its subsidiaries purchased the
trade and assets of the Mass Spectrometry business of Fisons Plc. The
consideration was (Pounds)31,099,000 (including (Pounds)482,000 of
expenses).
The table below sets out the adjustments made in the accounts to the
amounts paid for the assets;
<TABLE>
<CAPTION>
BOOK REVALUATION FAIR VALUE
VALUE TO GROUP
(Pounds)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Tangible fixed assets 5,041 (646) 4,395
Stocks 15,081 (4,179) 10,902
Debtors 17,246 - 17,246
Creditors (8,666) - (8,666)
Provisions and liabilities (4,402) (520) (4,922)
-------- ------- -------
Net assets 24,300 (5,345) 18,955
======== ======= =======
Total consideration paid:
Cash (including expenses) 31,099
-------
Goodwill arising 12,144
=======
</TABLE>
F-22
<PAGE>
MICROMASS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
NOTES (CONTINUED)
Fixed assets and stocks were revalued downwards as items were identified
during the acquisition as having book values greater than their fair values
under FRS 7. Provisions were created for specific products which were
acquired as part of the Sale and Purchase Agreement with Fisons Plc.
27 ULTIMATE HOLDING COMPANY
On 12 September 1997 the shareholders of the company contracted with Waters
Corporation of United States of America to sell all of their shares in the
company for (Pounds)109,000,000. This sale completed on 23 September 1997.
The ultimate holding company is Waters Corporation, a company incorporated
in the United States. Copies of the accounts are available from their
registered office.
28 SUMMARY OF DIFFERENCES BETWEEN UK AND US GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES
The group's consolidated financial statements are prepared in accordance
with generally accepted accounting principles in the United Kingdom ("UK
GAAP"), which differ in certain respects from generally accepted accounting
principles in the United States ("US GAAP"). Differences which have a
significant effect on the consolidated net profit and shareholders' funds
of the group are set out below. While this is not a comprehensive summary
of all differences between UK and US GAAP, other differences would not
have a significant effect on the consolidated net profit or total
shareholders' funds of the group.
EFFECT ON NET PROFIT/(LOSS) OF DIFFERENCES BETWEEN UK AND US GAAP
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
GROUP ENTITIES
NOTE 9 MONTHS ENDED 9 months ended 3 months
30 SEPTEMBER 31 December ended
1997 1996 29 March
1996
(POUNDS)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C> <C>
Net profit/(loss) in conformity with UK GAAP 3,289 2,830 (1,651)
US GAAP adjustments:
Foreign exchange forward contracts (b) (692) 692 -
Deferred taxes (c) (71) 262 -
Tax effect of US GAAP adjustments 231 (231) -
------ ------ -------
Net profit/(loss) in conformity with US GAAP 2,757 3,553 (1,651)
====== ====== =======
</TABLE>
F-23
<PAGE>
MICROMASS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
NOTES (CONTINUED)
CUMULATIVE EFFECT ON TOTAL SHAREHOLDERS' FUNDS OF DIFFERENCES BETWEEN UK AND US
GAAP
<TABLE>
<CAPTION>
NOTE 30 SEPTEMBER 31 December
1997 1996
(Pounds)000 (Pounds)000
<S> <C> <C> <C>
Total shareholders' funds in conformity with UK GAAP 16,289 17,685
US GAAP adjustments:
Redeemable preference shares (a) (8,642) (13,513)
Foreign exchange forward contracts (b) - 692
Deferred taxes (c) 191 262
Tax effect of US GAAP adjustments - (231)
------- -------
Total shareholders' funds in conformity with US GAAP 7,838 4,895
======= ======
</TABLE>
In accordance with best practice the differences have been shown as gross
of tax with the related taxation shown separately.
(a) REDEEMABLE PREFERENCE SHARES
Under UK GAAP, preference shares with mandatory redemption features or
redeemable at the option of the security holders would be classified as a
component of total shareholders' funds. US GAAP requires such redeemable
preference shares be classified outside of shareholders funds.
(b) FOREIGN CURRENCY HEDGING
The group entered into forward exchange contracts which, under UK GAAP, are
treated as hedges of anticipated transactions. The matching principle is
used to match the gain or loss under these hedging contracts to the foreign
currency transactions or profits to which they relate. Under US GAAP these
instruments are not regarded as hedges and any unrealised gain or loss on
hedges of anticipated transactions which are not firmly committed must be
valued at the period end at market rates and recognised in the profit and
loss account of the current period. Following the Waters acquisition no
such anticipating hedging techniques are undertaken, in accordance with
instructions from the parent company.
(d) DEFERRED TAXES
Under UK GAAP, deferred taxes are accounted for to the extent that it is
considered probable that a liability or asset will crystallise in the
foreseeable future. Under US GAAP, deferred taxes are accounted for on all
timing differences and a valuation allowance is established in respect of
those deferred tax assets where it is more likely than not that some
portion will remain unrealised. Deferred tax also arises in relation to the
tax effect of other US GAAP adjustments.
(e) CASH FLOWS
Under UK GAAP the Group complies with the Financial Reporting Standard No 1
"Cash Flow Statements" (FRS 1) as revised October 1996, the objective and
principles of which are similar to those set out in SFAS 95 "Statement of
Cash Flows" (SFAS 95). The principal difference between the two standards
is in respect of classification. Under FRS 1, the Group presents its cash
flows for (a) operating activities; (b) returns on investments and
servicing of finance; (c) taxation; (d) capital expenditure and financial
investments; (e) acquisitions and disposals; (f) dividends to Ordinary
Shareholders; (g) management of liquid resources; and (h) financing
activities.
F-24
<PAGE>
MICROMASS LIMITED
CONSOLIDATED FINANCIAL STATEMENTS
Notes (CONTINUED)
SFAS 95 requires only three categories of cash flow activity (a) operating;
(b) investing; (c) financing.
Cash flows arising from taxation and returns on investments and servicing
of finance under FRS 1 would be included as operating activities under SFAS
95; dividend payments would be included as a financing activity under SFAS
95 and cash flows from capital expenditure, and financial investment, and,
acquisitions and disposals would be included as investing activities under
SFAS 95.
Set out below is a summary of the statements of cash flows under US GAAP
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
GROUP ENTITIES
9 MONTHS ENDED 9 months ended 3 months ended
30 SEPTEMBER 31 December 29 March
1997 1996 1996
(POUNDS)000 (Pounds)000 (Pounds)000
<S> <C> <C> <C>
Net cash provided by (used in) operating activities 12,097 16,499 (811)
Net cash used in investing activities (1,556) (31,621) (840)
Net cash provided/(used) by financing activities (17,658) 27,126 1,600
Exchange movement 89 (695) -
-------- -------- ------
Net increase/(decrease) in cash and cash equivalents under
US GAAP (7,028) 11,309 (51)
======== ======== ------
</TABLE>
F-25
<PAGE>
Micromass Limited
Consolidated financial statements
(US Dollars)
CONSOLIDATED PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
SUCCESSOR PREDECESSOR
GROUP ENTITIES
9 MONTHS TO 9 months to 3 months to
30 SEPTEMBER 31 December 29 March
1997 1996 1996
$000 $000 $000
<S> <C> <C> <C>
Net sales 76,159 84,331 12,306
Cost of sales (53,444) (59,420) (12,998)
------- ------- -------
GROSS PROFIT/(LOSS) 22,715 24,911 (692)
Selling, general and administrative expenses (2,252) (3,342) (25)
Goodwill and purchased technology amortization (734) (758) -
Research and development (5,724) (5,928) (1,826)
------- ------- -------
OPERATING INCOME /(LOSS) 14,005 14,883 (2,543)
Interest expense, net (2,534) (2,798) -
Unrealized (losses)/gains on future cash flow hedges (1,128) 1,153 -
------- ------- -------
Income/(loss) from continuing operations before
taxes 10,343 13,238 (2,543)
Provision for taxes (4,006) (3,107) -
------- ------- -------
INCOME/(LOSS) BEFORE EXTRAORDINARY ITEM 6,337 10,131 (2,543)
Extraordinary gain on early retirement of debt - 285 -
------- ------- -------
NET (LOSS)/INCOME 6,337 10,416 (2,543)
Less: Accretion of redeemable Preference Shares (1,842) (4,498) -
------- ------- -------
Net income/(loss) available to common stockholders 4,495 5,918 (2,543)
======= ======= =======
</TABLE>
F-26
<PAGE>
Micromass Limited
Consolidated financial statements
(US Dollars)
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
30 SEPTEMBER 31 December
1997 1996
$000 $000
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents 6,916 19,350
Accounts receivable, less allowances for doubtful
accounts of $2,795,000 and $2,423,000 at September
30, 1997 and at 31 December 1996, respectively 23,269 32,210
Inventories 21,083 17,630
Other current assets 453 2,132
------- -------
TOTAL CURRENT ASSETS 51,721 71,322
Property, plant and equipment, net 7,369 6,546
Other assets 1,514
Goodwill, less accumulated amortization of $1,475,000
and $758,000 at September 30, 1997 and at December
31, 1996, respectively 18,155 20,000
------- -------
TOTAL ASSETS 77,245 99,382
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Notes payable and current portion of long term debt - 5,886
Accounts payable 11,735 10,854
Deferred revenue - 1,132
Accrued retirement plan contribution 32 33
Accrued income taxes 4,452 3,323
Accrued other taxes 3,014 1,712
Other current liabilities 24,718 23,799
Amounts owed to Parent Compay 6,672 -
------- -------
TOTAL CURRENT LIABILITIES 50,623 46,739
Long term debt - 21,146
------- -------
Total liabilities 50,623 67,885
------- -------
Redeemable preferred stock 13,960 23,121
Stockholders' equity:
Common stock 24 24
Additional paid in capital 2,281 2,281
Retained earnings 10,413 5,918
Translation adjustment (56) 153
------- -------
Total shareholders' equity 12,662 8,376
------- -------
Total liabilities and shareholders' equity 77,245 99,382
======= =======
</TABLE>
F-27
<PAGE>
Micromass Limited
Consolidated financial statements
(US Dollars)
ACCOUNTING POLICY
The results have been translated into US dollars using an average exchange rate
for the period.
Assets and liabilities are translated at the period end using the rate of
exchange ruling at the balance sheet date and the related translation adjustment
is recorded as a direct adjustment to shareholders' funds.
<TABLE>
<CAPTION>
PROFIT AND LOSS BALANCE SHEET
AVERAGE RATE CLOSING RATE HISTORIC RATE
<S> <C> <C> <C>
31 March 1996 1.5400 1.5265 1.5258
31 December 1996 1.6660 1.7110 1.5258
30 September 1997 1.6304 1.6154 1.5258
</TABLE>
F-28
<PAGE>
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
WATERS CORPORATION
Dated: December 5, 1997 By: /s/ Philip S. Taymor
---------------------------------------
Philip S. Taymor
Senior Vice President
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
Exhibit No. Document Page
- ------------- -------------------------------------------------- ------------
2.1 Agreement for the Sale and Purchase of Micromass
Limited dated as of September 12, 1997, between
Micromass Limited, Schroder UK Buy-Out Fund
III Trust I and Others, Waters Corporation and
Waters Technologies Corporation. (Incorporated by
reference to the Registrant's Current Report on Form 8-
K, filed October 8, 1997.)
23.1 Consent of KPMG.
<PAGE>
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
To The Board of Directors of Micromass Limited
We consent to the incorporation by reference in the Waters Corporation Form S-8
registration statement, File No. 33-80677 dated December 20, 1995 in the Waters
Corporation Form S-8 registration statement, File No. 333-1436 dated February
15, 1996, in the Waters Corporation Form S-8 registration statement File No.
....... dated July 16, 1996 and in the Waters Corporation Form S-8 registration
statement, File No.........dated December 19, 1996 of our report on the
consolidated financial statements of Micromass Limited and its subsidiaries
(including its predecessor entities) at September 30, 1997 and at December 31,
1996 and the results of their operations and their cash flows for the periods
from January 1, 1997 to September 30, 1997, March 29, 1996 to December 31, 1996
and January, 1, 1996 to March, 28 1996 included in Waters Corporation Form 8-K/A
dated December 5, 1997.
KPMG
Chartered Accountants
and Registered Auditors
Manchester, England December 5, 1997
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