<PAGE>
FORM 8-K/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: July 15, 1998
CHANNELL COMMERCIAL CORPORATION
(Exact name of Registrant as specified in its charter)
DELAWARE 0-28582 95-2453261
- -------- --------------------- ----------
(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation or Identification No.)
organization)
26040 Ynez Road, Temecula, California
(Address of principal executive offices)
92591
(Zip Code)
(909) 694-9160
(Registrant's telephone number, including area code)
<PAGE>
Item 7 of the Registrant's Current Report on Form 8-K, event date May 1, 1998,
is amended to read in its entirety as follows:
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
Item 7 (a). Financial Statements of Business Acquired
INDEX TO FINANCIAL STATEMENTS TO CURRENT REPORT ON FORM 8-K/A
Report of BDO STOY HAYWARD, Chartered Accountants and Registered Auditors
Consolidated Profit and Loss Accounts for each of the three years ended December
31, 1997, 1996 and 1995, and for the three months ended March 31, 1998 and 1997
(unaudited)
Consolidated Balance Sheets as of December 31, 1997 and 1996, and March 31, 1998
(unaudited)
Consolidated Cash Flow Statements for each of the three years ended December 31,
1997, 1996 and 1995, and for the three months ended March 31, 1998 and 1997
(unaudited)
Notes Forming Part of the Financial Statements for the years ended December 31,
1997, 1996 and 1995, and for the three months ended March 31, 1998 and 1997
(unaudited)
(i)
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
Report and Financial Statements
Years Ended 31 December
1997, 1996 AND 1995
BDO
BDO Stoy Hayward
Chartered Accountants
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
CONTENTS
PAGE:
1 Reports of the auditors
4 Consolidated profit and loss accounts
5 Statement of total recognised gains and losses
6 Consolidated balance sheets
7 Consolidated cash flow statements
8 Notes forming part of the financial statements
- --------------------------------------------------------------------------------
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
REPORT OF THE AUDITORS
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS OF A.C. EGERTON (HOLDINGS) PLC
We have audited the financial statements on pages 5 to 28 which have been
prepared under the accounting policies set out on pages 9 to 11.
Respective responsibilities of directors and auditors
As described on page 2 the company's directors are responsible for the
preparation of the financial statements. It is our responsibility to form
an independent opinion, based on our audit, on those statements and to
report our opinion to you.
Basis of opinion
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis,
of evidence relevant to the amounts and disclosures in the financial
statements. It also includes an assessment of the significant estimates
and judgements made by the directors in the preparation of the financial
statements, and of whether the accounting policies are appropriate to the
company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial
statements are free from material misstatement, whether caused by fraud or
other irregularity or error. In forming our opinion we also evaluated the
overall adequacy of the presentation of information in the financial
statements.
Opinion
In our opinion the financial statements give a true and fair view of the
state of the affairs of the group and the company as at 31 December 1997
and of the profit of the group for the year ended 31 December 1997 and have
been properly prepared in accordance with the Companies Act 1985.
BDO STOY HAYWARD
Chartered Accountants
and Registered Auditors
London
16 April 1998
1
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
REPORT OF THE AUDITORS
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS OF A.C. EGERTON (HOLDINGS) PLC
We have audited the financial statements on pages 5 to 31 which have been
prepared under the accounting policies set out on pages 10 to 12.
Respective responsibilities of directors and auditors
As described on page 2 the company's directors are responsible for the
preparation of the financial statements. It is our responsibility to form
an independent opinion, based on our audit, on those statements and to
report our opinion to you.
Basis of opinion
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis,
of evidence relevant to the amounts and disclosures in the financial
statements. It also includes an assessment of the significant estimates
and judgements made by the directors in the preparation of the financial
statements, and of whether the accounting policies are appropriate to the
company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial
statements are free from material misstatement, whether caused by fraud or
other irregularity or error. In forming our opinion we also evaluated the
overall adequacy of the presentation of information in the financial
statements.
Opinion
In our opinion the financial statements give a true and fair view of the
state of the affairs of the group and the company as at 31 December 1996
and of the profit of the group for the year then ended and have been
properly prepared in accordance with the Companies Act 1985.
BDO STOY HAYWARD
Chartered Accountants
and Registered Auditors
London
12 June 1997
2
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
REPORT OF THE AUDITORS
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS OF A.C. EGERTON (HOLDINGS) PLC
We have audited the financial statements on pages 3 to 28 which have been
prepared under the accounting policies set out on pages 8 to 10.
Respective responsibilities of directors and auditors
As described on page 2 the company's directors are responsible for the
preparation of the financial statements. It is our responsibility to form
an independent opinion, based on our audit, on those statements and to
report our opinion to you.
Basis of opinion
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis,
of evidence relevant to the amounts and disclosures in the financial
statements. It also includes an assessment of the significant estimates
and judgements made by the directors in the preparation of the financial
statements, and of whether the accounting policies are appropriate to the
company's circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial
statements are free from material misstatement, whether caused by fraud or
other irregularity or error. In forming our opinion we also evaluated the
overall adequacy of the presentation of information in the financial
statements.
Opinion
In our opinion the financial statements give a true and fair view of the
state of the affairs of the group and the company as at 31 December 1995
and of the profit of the group for the year then ended and have been
properly prepared in accordance with the Companies Act 1985.
BDO STOY HAYWARD
Chartered Accountants
and Registered Auditors
London
10 June 1996
3
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED
Years ended 31 December 31 March
Note 1997 1996 1995 1998 1997
(as restated) (Unaudited)
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C> <C>
TURNOVER 2 20,838,594 20,337,126 18,912,180 3,944,411 5,923,776
Change in stocks of finished
goods and work in progress (18,296) (172,244) 38,828 (37,453) (71,683)
---------- ---------- ---------- --------- ---------
20,820,298 20,164,882 18,951,008 3,906,958 5,852,093
Own work capitalised - 134,723 204,596 21,403 23,000
---------- ---------- ---------- --------- ---------
20,820,298 20,299,605 19,155,604 3,928,361 5,875,093
Other operating income 3 57,356 90,098 148,275 33,386 6,506
---------- ---------- ---------- --------- ---------
20,877,654 20,389,703 19,303,879 3,961,747 5,881,599
Operating charges 4 19,827,750 19,338,850 18,689,573 3,915,650 5,327,609
---------- ---------- ---------- --------- ---------
PROFIT FROM OPERATIONS 1,049,904 1,050,853 614,306 46,097 553,990
Interest receivable 28,105 1,421 12,406 23,751 45,461
---------- ---------- ---------- --------- ---------
1,078,009 1,052,274 626,712 69,848 599,451
Interest payable and
similar charges 6 (492,713) (414,385) (308,258) (145,566) (196,426)
Exceptional item
Profit on sale of subsidiary - - 72,743 - -
---------- ---------- ---------- --------- ---------
PROFIT/(LOSS) ON ORDINARY ACTIVITIES
BEFORE TAXATION 585,296 637,889 391,197 (75,718) 403,025
Taxation on ordinary activities 7 210,335 195,553 174,687 - 123,552
---------- ---------- ---------- --------- ---------
PROFIT/(LOSS) ON ORDINARY ACTIVITIES
AFTER TAXATION 374,961 442,336 216,510 (75,718) 279,473
Minority interests - - 739 - -
---------- ---------- ---------- --------- ---------
PROFIT FOR THE PERIOD 374,961 442,336 217,249 (75,718) 279,473
Dividends - 152,688 76,343 4,581 -
---------- ---------- ---------- --------- ---------
RETAINED PROFIT FOR
THE PERIOD 17 374,961 289,648 140,906 (80,299) 279,473
========== ========== ========== ========= =========
</TABLE>
All results in 1997 relate to continuing operations.
The notes on pages 8 to 27 form part of these financial statements
4
<PAGE>
A C EGERTON (HOLDINGS) PLC
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED 31 DECEMBER
Note 1997 1996 1995
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C>
PROFIT FOR THE FINANCIAL YEAR 374,961 442,336 217,249
Currency translation differences on
foreign currency net investments 19 (299,633) (48,302) (34,211)
Revaluation of property and fixed assets 19 30,000 (48,000) (111,000)
-------- ------- --------
TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR 105,328 346,034 72,038
======== ======= ========
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
PROFIT FOR THE FINANCIAL YEAR 374,961 442,336 217,249
Dividends - 152,688 76,343
--------- --------- ---------
374,961 289,648 140,906
Other recognised gains and losses
relating to the year (net) (269,633) (96,302) (145,211)
--------- --------- ---------
Net additions to shareholders' funds 105,328 193,346 (4,305)
Opening shareholders' funds (see below) 5,974,962 5,781,616 5,785,921
--------- --------- ---------
CLOSING SHAREHOLDERS' FUNDS 6,080,290 5,974,962 5,781,616
========= ========= =========
OPENING SHAREHOLDERS' FUNDS
AS ORIGINALLY STATED 6,038,640 5,878,081 5,785,921
Prior year adjustment (see note 19) (63,678) (96,465) -
--------- --------- ---------
5,974,962 5,781,616 5,785,921
========= ========= =========
</TABLE>
The notes on pages 8 to 27 form part of these financial statements
5
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
31 December 31 March 1998
Note 1997 1996 (Unaudited)
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C>
FIXED ASSETS
Intangible assets 8 104,286 121,674 93,455
Tangible assets 9 6,022,888 6,251,542 5,762,028
Assets under construction 111,831 71,024 145,892
--------- --------- ---------
6,239,005 6,444,240 6,001,375
--------- --------- ---------
CURRENT ASSETS
Stocks 11 2,855,524 3,183,626 2,910,523
Debtors 12 3,384,986 4,458,588 2,747,715
Cash at bank and in hand 2,375,907 1,430,305 2,457,987
--------- --------- ---------
8,616,417 9,072,519 8,116,225
CREDITORS: AMOUNTS FALLING DUE
WITHIN ONE YEAR 13 8,519,933 9,203,128 7,930,051
--------- --------- ---------
NET CURRENT ASSETS/(LIABILITIES) 96,484 (130,609) 186,174
--------- --------- ---------
TOTAL ASSETS LESS CURRENT LIABILITIES 6,335,489 6,313,631 6,187,549
--------- --------- ---------
CREDITORS: AMOUNTS FALLING DUE AFTER
MORE THAN ONE YEAR 14 101,754 75,189 34,194
PROVISIONS FOR LIABILITIES AND CHARGES 15 153,445 263,480 153,364
--------- --------- ---------
255,199 338,669 187,558
--------- --------- ---------
6,080,290 5,974,962 5,999,991
========= ========= =========
CAPITAL AND RESERVES
Called up share capital 16 50,896 50,896 50,896
Revaluation reserve 17 831,830 792,938 831,830
Capital reserves 17 389,524 389,524 389,524
Profit and loss account 17 4,808,040 4,741,604 4,727,741
--------- --------- ---------
EQUITY INTERESTS 6,080,290 5,974,962 5,999,991
========= ========= =========
</TABLE>
The notes on pages 8 to 27 form part of these financial statements
6
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
CONSOLIDATED CASH FLOW STATEMENTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three months
Years ended 31 December ended 31 March
Note 1997 1996 1995 1998 1997
(Unaudited)
(Pounds) (Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C> <C> <C>
NET CASH INFLOW FROM OPERATING
ACTIVITIES 18 2,611,441 2,134,105 1,397,526 312,196 69,927
---------- ---------- ---------- -------- --------
RETURNS ON INVESTMENTS AND
SERVICING OF FINANCE
Interest received 28,105 1,421 12,406 23,751 45,461
Interest paid (492,713) (414,385) (308,258) (145,566) (196,426)
---------- ---------- ---------- -------- --------
NET CASH OUTFLOW FROM
RETURNS ON INVESTMENTS
AND SERVICING OF FINANCE (464,608) (412,964) (295,852) (121,815) (150,965)
---------- ---------- ---------- -------- --------
TAXATION PAID (281,992) (31,242) (546,581) (27,284) -
---------- ---------- ---------- -------- --------
CAPITAL EXPENDITURE
Payments to acquire tangible
fixed assets (1,329,489) (1,058,195) (1,559,575) (89,165) (165,989)
Payments to acquire intangible
fixed assets (115,000) (99,735) (166,650) (21,403) (59,193)
Receipts from sales of fixed assets 261,665 17,900 54,450 - -
Sale of subsidiary - - 136,483 - -
---------- ---------- ---------- -------- --------
NET CASH OUTFLOW FROM CAPITAL
EXPENDITURE (1,182,824) (1,140,030) (1,535,292) (110,568) (225,182)
---------- ---------- ---------- -------- --------
EQUITY DIVIDENDS PAID (152,688) - (76,343) - -
---------- ---------- ---------- -------- --------
NET CASH INFLOW/(OUTFLOW) BEFORE MANAGEMENT
OF LIQUID RESOURCES AND FINANCING 529,329 549,869 (1,056,542) 52,529 (306,220)
---------- ---------- ---------- -------- --------
FINANCING
Repayment of capital
on finance leases 21 (21,881) (15,125) (20,134) (7,214) (7,000)
Repayment of loans and chattel
mortgages 21 (44,916) (99,025) (4,624) (22,458) (7,486)
---------- ---------- ---------- -------- --------
NET CASH OUTFLOW FROM FINANCING (66,797) (114,150) (24,758) (29,672) (14,486)
---------- ---------- ---------- -------- --------
INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS 19,21 462,532 435,719 (1,081,300) 22,857 (320,706)
========== ========== ========== ======== ========
</TABLE>
The notes on pages 8 to 27 form part of these financial statements
7
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
NOTES FORMING PART OF THE FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1 ACCOUNTING POLICIES
The financial statements have been prepared under the historical cost
convention as modified by the revaluation of certain assets, and are in
accordance with applicable accounting standards. The following principal
accounting policies have been applied:
Basis of consolidation
The consolidated financial statements incorporate the financial statements
of the parent company and its subsidiary undertakings.
Results of subsidiary undertakings are incorporated from the date of
acquisition.
Goodwill represents the excess of purchase consideration over the fair
value of the underlying net assets of subsidiary undertakings at the time
of acquisition. Goodwill arising on consolidation is capitalised,
classified as an intangible asset and amortised over its estimated
economic useful life.
Capital reserve represents the excess of the net asset values of
subsidiary undertakings over the purchase consideration at the time of
acquisition and is added to reserves at that time.
Turnover
Turnover comprises sales to external customers for goods and services
provided, exclusive of value added tax, or local sales tax where
appropriate.
Depreciation
Depreciation is calculated to write off the cost or valuation of fixed
assets over their expected useful lives. At 31 December 1996 the
directors reassessed the value and lives of a number of the groups fixed
assets and from January 1997 depreciation has been calculated at the
following rates:
<TABLE>
<S> <C>
Goodwill - over 5 years, straight line
Assets in the course of construction
Plant and machinery - 10 - 25% per annum
Fixtures, fittings and office equipment - 10 - 25% per annum
Mould and press tools - 10 - 25% per annum
Motor vehicles - 25% per annum
Patents - 10% reducing balance
</TABLE>
Previously plant and machinery, fixtures, fittings and office equipment, and
mould and press tools were depreciated at 15% reducing balance, and motor
vehicles at 25% reducing balance.
No depreciation is provided on freehold and long leasehold properties as the
group's policy is to maintain the properties in good condition so as to
prolong their useful lives, and any depreciation involved would not be
material. The cost of such maintenance is systematically charged to the
profit and loss account. In the opinion of the directors, this accounting
policy ensures that the financial statements show a true and fair view.
8
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
1 ACCOUNTING POLICIES (Continued)
Depreciation (Continued)
Where properties have been revalued and valuation is less than book value,
the difference is charged to the revaluation reserve to the extent that
valuation exceeds cost. Where valuation is less than cost, the deficit
below cost is charged to the profit and loss account.
Leased plant and equipment
Where fixed assets are financed by leasing agreements which give rights
approximating to ownership ('finance leases'), the amount representing the
outright purchase price of such assets is included in fixed assets.
Depreciation is provided at rates designed to write off this net cost over
the shorter of the lease period and the anticipated useful lives of the
assets. The capital element of the future rentals is treated as a
liability and the interest element is charged to the profit and loss
account over the period of the leases in proportion to the balances
outstanding.
Rentals in respect of operating leases are charged directly to the profit
and loss account on a straight line basis over the period of the lease.
Stock and work in progress
Stock and work in progress is stated at the lower of cost and net
realisable value.
In the case of raw materials and consumable stores, cost represents
purchase price, including transport and handling costs, less trade
discounts, calculated on a first-in, first-out basis. In the case of work
in progress and finished goods, cost consists of direct materials, direct
labour and attributable production costs and other attributable overheads.
Net realisable value represents estimated selling price (less trade
discounts) less any further costs to completion and any further costs to
be incurred in marketing, selling and distribution.
Investments
Investments in subsidiaries are stated at cost. Permanent diminutions in
value and provisions are charged to the profit and loss account.
Pensions
Payments to individuals personal schemes are charged to the profit and
loss account as they fall due.
Unaudited financial statements
The consolidated balance sheet as of 31 March 1998 and the related
consolidated statements of profit and loss accounts and cash flow for the
three months ended March 31, 1998 and 1997 were prepared from the
company's books and records without audit. However, in the opinion of
management, such information includes all adjustments (consisting of
normal accruals) which are necessary to properly reflect the consolidated
financial position at March 31, 1998 and 1997. The results of operations
for the three months ended March 31, 1998 are not necessarily indicative
of the results to be expected for the year.
9
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
1 ACCOUNTING POLICIES (Continued)
Deferred taxation
Provision, using the liability method, is made for deferred taxation to
the extent that it is likely to become payable in the foreseeable future.
Research and development
Expenditure on pure and applied research is written off in the year in
which it is incurred.
Development expenditure is written off in the year in which it is incurred
except where it is separately identifiable and relates to a clearly
defined project whose outcome can be assessed as profitable with
reasonable certainty. In these circumstances, the expenditure is
capitalised as an intangible asset and amortised over the life of the
product up to a maximum of three years from the date that production
commences.
Foreign currency
Profit and loss accounts and assets and liabilities of foreign subsidiary
undertakings are translated into sterling at the rates of exchange ruling
on the balance sheet date. Exchange differences which arise from
translation of the opening net investment in foreign subsidiary
undertakings are taken to reserves.
All other differences are taken to the profit and loss account with the
exception of differences on foreign equity investments, which are taken
directly to reserves to the extent of the exchange difference arising on
the net investment in these enterprises.
Foreign currency transactions of individual companies are translated at
the rates ruling when they occurred. Foreign currency monetary assets and
liabilities are translated at the rates ruling at the balance sheet dates.
Any differences are taken to the profit and loss account.
Adjustments to comparatives
Assets in the course of construction are included in fixed assets.
Previously assets in the course of construction were included within stock
and work in progress in the financial statements, and the comparatives
have been adjusted accordingly.
10
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
2 SEGMENTAL ANALYSIS AND CORRESPONDING AMOUNTS
CLASS OF BUSINESS
<TABLE>
<CAPTION>
YEARS ENDED 31 DECEMBER
1997 1996 1995
(POUNDS) (POUNDS) (POUNDS)
<S> <C> <C> <C>
a) Turnover (net of intercompany trading)
Manufacture and distribution of
telecommunications and electrical equipment 19,352,280 19,201,501 17,698,775
Manufacture of glass reinforced products 1,486,314 1,135,625 1,213,405
---------- ---------- ----------
20,838,594 20,337,126 18,912,180
========== ========== ==========
b) Trading profits/(losses)
Manufacture and distribution of
telecommunications and electrical equipment 1,036,274 1,291,325 592,693
Installation of telecommunications
and data equipment - (23,459) 5,991
Manufacture of glass reinforced products 44,289 (74,188) 15,622
---------- ---------- ----------
1,080,563 1,193,678 614,306
Exceptional item (30,659) (142,825) -
---------- ---------- ----------
1,049,904 1,050,853 614,306
========== ========== ==========
c) Net assets/(liabilities)
Manufacture and distribution of
telecommunications and electrical equipment 8,345,168 8,267,334 8,016,507
Installation of telecommunications
and data equipment (2,444,283) (2,444,283) (2,423,444)
Manufacture of glass reinforced products 179,405 151,911 188,553
---------- ---------- ----------
6,080,290 5,974,962 5,781,616
========== ========== ==========
</TABLE>
11
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
2 SEGMENTAL ANALYSIS AND CORRESPONDING AMOUNTS (Continued)
GEOGRAPHICAL REGIONS
<TABLE>
<CAPTION>
YEARS ENDED 31 DECEMBER
1997 1996 1995
(POUNDS) (POUNDS) (POUNDS)
<S> <C> <C> <C>
a) Turnover - by origin
United Kingdom 16,492,371 14,834,127 14,447,128
Australasia 4,346,223 5,502,999 4,465,052
---------- ---------- ----------
20,838,594 20,337,126 18,912,180
========== ========== ==========
Turnover - by destination
United Kingdom 4,860,393 5,463,008 6,068,387
Europe 2,986,125 2,271,789 2,570,023
Asia, Africa and Middle East 6,556,822 5,769,343 4,332,153
American Continent 2,177,380 1,360,224 1,476,565
Australasia 4,257,874 5,472,762 4,465,052
---------- ---------- ----------
20,838,594 20,337,126 18,912,180
========== ========== ==========
b) Trading profits/(losses)
United Kingdom - before exceptional item 745,973 202,535 19,851
Australasia 334,590 991,143 594,455
Exceptional item (30,659) (142,825) -
---------- ---------- ----------
1,049,904 1,050,853 614,306
========== ========== ==========
c) Net assets/(liabilities)
United Kingdom 4,129,587 3,941,391 4,437,493
Australasia 1,950,703 2,033,571 1,344,123
---------- ---------- ----------
6,080,290 5,974,962 5,781,616
========== ========== ==========
</TABLE>
12
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
2 SEGMENTAL ANALYSIS AND CORRESPONDING AMOUNTS (Continued)
CORRESPONDING AMOUNTS
The analysis between continuing and discontinued operations for the
years ended 31 December 1996 and 1995 is shown below.
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER 1996 CONTINUING DISCONTINUED TOTAL
(POUNDS) (POUNDS) (POUNDS)
<S> <C> <C> <C>
Turnover 20,337,126 - 20,337,126
Change in stocks of finished goods
and work in progress 172,244 - 172,244
---------- ------------- ----------
20,164,882 - 20,164,882
Own work capitalised 134,723 - 134,723
---------- ------------- ----------
20,299,605 - 20,299,605
Other operating income 90,098 - 90,098
---------- ------------- ----------
20,389,703 - 20,389,703
Operating charges 19,315,391 23,459 19,338,850
---------- ------------- ----------
Profit/(loss) from operations 1,074,312 (23,459) 1,050,853
========== ============= ==========
YEAR ENDED 31 DECEMBER 1995
Turnover 18,511,327 400,853 18,912,180
Change in stocks of finished goods
and work in progress (42,715) 3,887 (38,828)
---------- ------------- ----------
18,554,042 396,966 18,951,008
Own work capitalised 204,596 - 204,596
---------- ------------- ----------
18,758,638 396,966 19,155,604
Other operating income 133,102 15,173 148,275
---------- ------------- ----------
18,891,740 412,139 19,303,879
Operating charges 18,275,234 414,339 18,689,573
---------- ------------- ----------
Profit/(loss) from operations 616,506 (2,200) 614,306
========== ============= ==========
</TABLE>
13
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
3 OTHER OPERATING INCOME
<TABLE>
<CAPTION>
YEARS ENDED 31 DECEMBER
1997 1996 1995
(POUNDS) (POUNDS) (POUNDS)
<S> <C> <C> <C>
Rents receivable 23,734 16,667 28,729
Sundry income 33,622 73,431 119,546
---------- ---------- ----------
57,356 90,098 148,275
========== ========== ==========
4 OPERATING CHARGES
Raw materials and consumables 8,439,260 8,830,690 8,194,317
Other external charges 3,790,673 3,645,379 3,702,873
Staff costs (note 5) 6,219,525 5,673,059 5,650,278
Depreciation and amortisation 1,298,402 1,046,897 1,142,105
Devaluation of fixed assets - 142,825 -
Loss on sale of fixed assets 49,231 - -
Redundancy costs 30,659 - -
---------- ---------- ----------
19,827,750 19,338,850 18,689,573
========== ========== ==========
Included in operating charges are:
Auditors' remuneration
- audit services 68,000 30,000 40,000
- non-audit services 8,384 16,097 17,103
Depreciation of owned assets 1,121,278 841,036 839,384
Depreciation of assets held
under finance lease contracts 44,736 42,233 53,838
Amortisation of intangible assets 132,388 163,628 248,883
Exchange losses/(gains) 60,493 (35,029) (81,640)
Hire of other assets - operating leases 184,045 195,460 81,070
========== ========== ==========
</TABLE>
14
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
5 STAFF COSTS
<TABLE>
<CAPTION>
YEARS ENDED 31 DECEMBER
1997 1996 1995
(POUNDS) (POUNDS) (POUNDS)
<S> <C> <C> <C>
Staff costs for all employees,
including the directors, consists of:
Wages and salaries 5,566,366 5,135,345 5,076,168
Social security costs 550,523 473,234 545,978
Pension costs 195,064 138,218 121,727
--------- --------- ---------
6,311,953 5,746,797 5,743,873
Less: Capitalised development cost (92,428) (73,738) (93,595)
--------- --------- ---------
6,219,525 5,673,059 5,650,278
========= ========= =========
The average number of employees during the year
including directors was as follows: NUMBER NUMBER NUMBER
Office, administration and management 88 76 106
Production 307 293 280
--------- --------- ---------
395 369 386
========= ========= =========
Staff costs include the following
directors' emoluments: (Pounds) (Pounds) (Pounds)
Remuneration and pension contributions 336,695 319,212 312,094
========= ========= =========
Remuneration, excluding pension contributions
of the chairman and highest paid director 177,450 166,321 159,387
Payments to pension scheme - - -
========= ========= =========
</TABLE>
15
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
6 INTEREST PAYABLE AND SIMILAR CHARGES
<TABLE>
<CAPTION>
YEARS ENDED 31 DECEMBER
1997 1996 1995
(POUNDS) (POUNDS) (POUNDS)
<S> <C> <C> <C>
Bank loans and overdrafts 298,598 320,240 294,753
Hire purchase interest and finance lease charges 13,771 8,256 11,049
Other interest 180,344 85,889 2,456
-------- ------- -------
492,713 414,385 308,258
======== ======= =======
</TABLE>
7 TAXATION
The tax charge comprises:
<TABLE>
<S> <C> <C> <C>
UK corporation tax
- on profit for the year at current rates 167,837 (48,000) (63,933)
- (over)/underprovision in respect of prior years (885) 12,026 2,427
Overseas taxation - on profit for the year 148,821 268,758 221,149
- Overprovision in respect prior years 2,095 (71,251) (11,648)
Transfer to/(from) deferred tax (107,533) 34,020 26,692
-------- ------- -------
210,335 195,553 174,687
======== ======= =======
</TABLE>
16
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
8 INTANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
KNOW HOW DEFERRED GOODWILL
AND DEVELOPMENT ARISING ON
PATENTS EXPENDITURE CONSOLIDATION TOTAL
(POUNDS) (POUNDS) (POUNDS) (POUNDS)
<S> <C> <C> <C> <C>
Cost
At 1 January 1997 58,776 750,273 23,917 832,966
Purchased and capitalised in year - 115,000 - 115,000
Elimination of amounts fully amortised - - - -
------ ------- ------ -------
At 31 December 1997 58,776 865,273 23,917 947,966
Capitalised during the period - 21,403 - 21,403
------ ------- ------ -------
At 31 March 1998 (unaudited) 58,776 886,676 23,917 969,369
------ ------- ------ -------
Amortisation
At 1 January 1997 56,710 640,233 14,349 711,292
Charge during year 477 127,128 4,783 132,388
Elimination of amounts fully amortised - - - -
------ ------- ------ -------
At 31 December 1997 57,187 767,361 19,132 843,680
Charge during the period 39 30,999 1,196 32,234
------ ------- ------ -------
At 31 March 1998 (unaudited) 57,226 798,360 20,328 875,914
------ ------- ------ -------
Net book value
At 31 December 1997 1,589 97,912 4,785 104,286
====== ======= ====== =======
At 31 December 1996 2,066 110,040 9,568 121,674
====== ======= ====== =======
At 31 March 1998 (unaudited) 1,550 88,316 3,589 93,455
====== ======= ====== =======
</TABLE>
Deferred development expenditure represents costs incurred on the
development of products and equipment whose benefit will accrue to future
years.
17
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
9 TANGIBLE FIXED ASSETS FREEHOLD AND IMPROVEMENTS PLANT, EQUIPMENT FIXTURES,
LONG LEASEHOLD TO LEASEHOLD MOULDS AND FITTINGS AND MOTOR
PROPERTY PROPERTY PRESS TOOLS OFFICE EQUIPMENT VEHICLES TOTAL
(POUNDS) (POUNDS) (POUNDS) (POUNDS) (POUNDS) (POUNDS)
<S> <C> <C> <C> <C> <C> <C>
Cost or valuation
At 1 January 1997 1,711,559 466,510 6,881,087 487,552 187,285 9,733,993
Prior year adjustment
(note 19) - - (63,678) - - (63,678)
--------- ------- --------- ------- -------- ----------
1,711,559 466,510 6,817,409 487,552 187,285 9,670,315
Additions - 15,004 1,280,090 81,266 42,110 1,418,470
Disposals (281,559) - (300,968) (2,700) (104,471) (689,698)
Difference on exchange - (27,842) (300,511) (46,182) (14,258) (388,793)
Revaluation 30,000 - - - - 30,000
--------- ------- --------- ------- -------- ----------
At 31 December 1997 1,460,000 453,672 7,496,020 519,936 110,666 10,040,294
Additions (unaudited) - - 31,247 8,467 - 39,714
Difference on exchange
(unaudited) - 1,102 12,441 1,525 322 15,390
--------- ------- --------- ------- -------- ----------
At 31 March 1998
(unaudited) 1,460,000 454,774 7,539,708 529,928 110,988 10,095,398
--------- ------- --------- ------- -------- ----------
Depreciation
At 1 January 1997 - 317,679 2,791,301 214,979 94,814 3,418,773
Charge for year - 33,163 1,028,243 80,321 24,287 1,166,014
Disposals - - (324,421) (458) (53,923) (378,802)
Difference on exchange - (5,993) (157,414) (18,801) (6,371) (188,579)
--------- ------- --------- ------- -------- ----------
At 31 December 1997 - 344,849 3,337,709 276,041 58,807 4,017,406
Charge during period
(unaudited) - 6,572 285,213 19,761 4,418 315,964
--------- ------- --------- ------- -------- ----------
At 31 March 1998
(unaudited) - 351,421 3,622,922 295,802 63,225 4,333,370
--------- ------- --------- ------- -------- ----------
Net book value
At 31 December 1997 1,460,000 108,823 4,158,311 243,895 51,859 6,022,888
========= ======= ========= ======= ======== ==========
At 31 December 1996 1,711,559 148,831 4,026,108 272,573 92,471 6,251,542
========= ======= ========= ======= ======== ==========
At 31 March 1998
(unaudited) 1,460,000 103,353 3,916,786 234,126 47,763 5,762,028
========= ======= ========= ======= ======== ==========
</TABLE>
18
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
9 TANGIBLE FIXED ASSETS (Continued)
<TABLE>
<CAPTION>
FREEHOLD AND IMPROVEMENTS PLANT, EQUIPMENT FIXTURES,
LONG LEASEHOLD TO LEASEHOLD MOULDS AND FITTINGS AND MOTOR
PROPERTY PROPERTY PRESS TOOLS OFFICE EQUIPMENT VEHICLES TOTAL
(POUNDS) (POUNDS) (POUNDS) (POUNDS) (POUNDS) (POUNDS)
<S> <C> <C> <C> <C> <C> <C>
Analysis of cost or
valuation
of fixed assets:
At cost - 453,672 2,891,187 386,379 110,666 3,841,904
At valuation 1,460,000 - 4,604,833 133,557 - 6,198,390
--------- -------- --------- ------- ------- ----------
1,460,000 453,672 7,496,020 519,936 110,666 10,040,294
========= ======= ========= ======= ======= ==========
</TABLE>
The net book value of fixed assets includes (Pounds)236,412 (1996 -
(Pounds)210,318) in respect of assets held under finance leases and hire
purchase contracts.
The historical cost of the revalued property is (Pounds)674,562.
19
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
10 INVESTMENTS
The principal trading subsidiary companies are as follows:
COUNTRY OF HOLDING
COMPANY REGISTRATION % PRINCIPAL ACTIVITIES
<S> <C> <C> <C>
A.C. Egerton Limited England 100 Manufacture of telecommunications
equipment and light engineering
Egerton Australia Pty Limited Australia 100 Manufacture and distribution of
telecommunications equipment
Egerton (GRP) Limited England 100 Manufacture of glass reinforced
products
<CAPTION>
11 STOCKS
31 DECEMBER 31 MARCH
1997 1996 1998
(UNAUDITED)
(Pounds) (Pounds) (Pounds)
<S> <C> <C> <C>
Raw materials and consumables 1,184,318 1,335,979 1,073,161
Work in progress 619,724 655,911 677,491
Finished goods 1,051,482 1,191,736 1,159,871
---------- --------- ----------
2,855,524 3,183,626 2,910,523
========== ========= ==========
</TABLE>
The replacement value of stock is, in the opinion of the directors, not
materially different from the amount stated in the financial statements.
20
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
12 DEBTORS
<TABLE>
<CAPTION>
31 DECEMBER 31 MARCH
1997 1996 1998
(UNAUDITED)
(POUNDS) (POUNDS) (POUNDS)
<S> <C> <C> <C>
Trade debtors 3,013,752 3,805,176 2,603,861
Corporation tax debtor - 57,084 -
Other debtors 94,946 400,522 61,480
Prepayments 276,288 147,678 82,369
ACT recoverable - 48,128 -
--------- --------- ---------
3,384,986 4,458,588 2,747,710
========= ========= =========
</TABLE>
Included within other debtors at 31 December 1997 is amounts due from
directors as follows:
<TABLE>
<S> <C> <C> <C> <C>
Mr R F Thompson (Pounds)9,568 (1996 - (Pounds)33,326) Maximum outstanding in year (Pounds)33,326
Mr P J Cousins (Pounds)8,689 (1996 - (Pounds)Nil) Maximum outstanding in year (Pounds)8,689
Mr C S Thompson (Pounds) 66 (1996 - (Pounds)Nil) Maximum outstanding in year (Pounds)66
</TABLE>
13 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
31 DECEMBER 31 MARCH
1997 1996 1998
(UNAUDITED)
(POUNDS) (POUNDS) (POUNDS)
<S> <C> <C> <C>
Chattels mortgage (note 16) 22,458 44,916 -
Bank loans and overdrafts 5,489,346 4,950,853 5,548,569
Trade creditors 1,790,986 2,365,041 1,423,721
Obligations under finance leases and
hire purchase contracts 76,907 27,397 137,253
Other creditors including
taxation and social security 318,638 566,890 193,682
Dividends proposed - 152,688 4,581
Corporation tax 217,831 330,006 190,628
Accruals and deferred income 603,767 765,337 431,617
--------- --------- ---------
8,519,933 9,203,128 7,930,051
========= ========= =========
</TABLE>
The bank loans and overdrafts are secured by way of fixed and floating
charges over the assets of the company and the group (note 25).
21
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
14 CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
31 DECEMBER 31 MARCH
1997 1996 1998
(UNAUDITED)
(POUNDS) (POUNDS) (POUNDS)
<S> <C> <C> <C>
Chattels mortgage - 22,458 -
Obligations under finance leases
and hire purchase contracts 101,754 52,731 34,194
-------- -------- -------
101,754 75,189 34,194
======== ======== =======
</TABLE>
During 1994 and 1996 the group acquired a number of assets under Chattel
mortgage agreements repayable over three years. There is a fixed charge
secured on these assets.
15 PROVISION FOR LIABILITIES AND CHARGES
<TABLE>
<CAPTION>
31 DECEMBER 31 MARCH
1997 1996 1998
(UNAUDITED)
(POUNDS) (POUNDS) (POUNDS)
<S> <C> <C> <C>
These comprise:
Deferred taxation 153,445 263,480 153,445
======== ======= =========
Deferred taxation movements
At beginning of year 263,480 228,630 153,445
Transfer to/(from) profit and loss account (107,533) 34,020 -
Exchange movement (2,502) 830 (81)
-------- ------- ---------
At end of period 153,445 263,480 153,364
======== ======= =========
Analysis of group provision PROVIDED UNPROVIDED
31.12.97 31.12.96 31.3.98 31.12.97 31.12.96 31.3.98
(UNAUDITED) (UNAUDITED
(POUNDS) (POUNDS) (POUNDS) (POUNDS) (POUNDS) (POUNDS)
Accelerated capital
allowances 187,691 201,877 187,691 330,695 361,461 330,695
Short term timing differences (34,246) 61,603 (34,327) - - -
------- ------- ------- -------- ------- --------
153,445 263,480 153,364 330,695 361,461 330,695
Taxation on revaluation surplus - - - 249,000 249,000 249,000
-------- ------- ------- --------- -------- --------
153,445 263,480 153,364 579,695 610,461 579,695
======== ======= ======= ======== ======== ========
</TABLE>
22
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
15 PROVISION FOR LIABILITIES AND CHARGES (Continued)
The unprovided deferred tax on revaluation surplus arises in the holding
company and is the only unprovided deferred tax in that company apart from
unprovided accelerated capital allowances of (Pounds)161,000. No provision
has been made because it is currently the company's intention to reinvest
any disposal proceeds of the properties concerned and as such, any taxable
gain would qualify for rollover relief under current legislation.
No deferred tax provision is made for earnings retained overseas.
16 SHARE CAPITAL
<TABLE>
<CAPTION>
31 DECEMBER 31 MARCH
1997 1996 1998
(UNAUDITED)
(POUNDS) (POUNDS) (POUNDS)
<S> <C> <C> <C>
Authorised
250,000 ordinary shares of (Pounds)1 each 250,000 250,000 250,000
======= ======= =======
Allotted, called up and fully paid
Ordinary shares of (Pounds)1 each 50,896 50,896 50,896
======= ======= =======
</TABLE>
Under the terms of the dividend declared on 27 March 1998, shareholders could
elect to receive the dividend in the form of 1p ordinary shares.
23
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
17 RESERVES
<TABLE>
<CAPTION>
CAPITAL RESERVES
CAPITAL RESERVE CAPITAL PROFIT
ARISING ON REDEMPTION REVALUATION AND LOSS
CONSOLIDATION RESERVE RESERVE ACCOUNT
(POUNDS) (POUNDS) (POOUNDS) (POUNDS)
<S> <C> <C> <C> <C>
At 1 January 1996
- as originally stated 385,122 4,402 853,438 4,584,223
Prior year adjustment - - - (96,465)
--------------- ---------- ------- ---------
At 1 January 1996 - as restated 385,122 4,402 853,438 4,487,758
Exchange differences on
retranslation of net investment
in subsidiary undertakings - - - (48,302)
Revaluation of properties - - (98,000) -
Revaluation of moulds and tools
in Egerton (GRP) Limited - - 50,000 -
Profit for year - - - 353,326
Transfer between reserves - - (12,500) 12,500
--------------- ---------- ------- ---------
At 31 December 1996
- as originally stated 385,122 4,402 792,938 4,805,282
Prior year adjustment - - - (63,678)
--------------- ---------- ------- ---------
At 31 December 1996 - as restated 385,122 4,402 792,938 4,741,604
Exchange differences on
retranslation of net investment
in subsidiary undertakings - - - (299,633)
Profit for year - - - 374,961
Transfer between reserves - - 8,892 (8,892)
Revaluation of fixed assets in the year - - 30,000 -
--------------- ---------- ------- ---------
At 31 December 1997 385,122 4,402 831,830 4,808,040
Loss for the period (unaudited) - - - (75,718)
Proposed dividend (unaudited) - - - (4,581)
--------------- ---------- ------- ---------
At 31 March 1998 (unaudited) 385,122 4,402 831,830 4,727,741
=============== ========== ======= =========
</TABLE>
The prior year adjustments for the years ended 31 December 1996 and 1995
comprises of charges of (Pounds)63,678 and (Pounds)96,465, respectively, being
the errors on the 1996 fixed assets revaluation and the 1995 tax charge and
intangible assets amortisation, respectively.
24
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
18 RECONCILIATION OF OPERATING SURPLUS TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
YEARS ENDED 31 DECEMBER
1997 1996 1995
(POUNDS) (POUNDS) (POUNDS)
<S> <C> <C> <C>
Operating profit 1,049,904 1,050,853 614,306
Depreciation charge 1,166,014 884,429 893,222
Amortisation charge 132,388 163,628 248,883
(Profit)/loss on disposal 49,231 (7,290) 1,171
Decrease in stocks 195,531 96,338 (418,079)
(Increase)/decrease in debtors 826,935 (485,376) 481,663
Increase/(decrease) in creditors (813,733) 285,174 (415,292)
Net exchange (loss)/gain 5,171 3,524 (8,348)
Exceptional items - 142,825 -
---------- ---------- ----------
Net cash inflow from operating
activities 2,611,441 2,134,105 1,397,526
========== ========== ==========
</TABLE>
19 ANALYSIS OF CHANGES IN CASH DURING THE PERIOD
<TABLE>
<S> <C> <C> <C>
At 1 January (3,520,548) (3,955,408) (2,372,779)
Net cash movement 462,532 435,719 (1,081,300)
Exchange gain/(loss) (55,423) (859) (9,621)
Eliminated on disposal of subsidiary - - 8,292
Reclassification of bank loan - - (500,000)
---------- ---------- ----------
At 31 December (3,113,439) (3,520,548) (3,955,408)
========== ========== ==========
</TABLE>
25
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
20 ANALYSIS OF THE BALANCES OF CASH AND CASH EQUIVALENTS AS SHOWN IN THE
BALANCE SHEET
<TABLE>
<CAPTION>
31 DECEMBER 31 MARCH
1997 1996 1998
(UNAUDITED)
(POUNDS) (POUNDS) (POUNDS)
<S> <C> <C> <C>
Bank and cash balances 2,375,907 1,430,305 2,457,987
Bank overdrafts (5,489,346) (4,950,853) (5,548,569)
---------- ---------- ----------
(3,113,439) (3,520,548) (3,090,582)
========== ========== ==========
</TABLE>
21 ANALYSIS OF CHANGES IN FINANCING DURING THE YEAR
<TABLE>
<CAPTION>
YEARS ENDED 31 DECEMBER
1997 1996 1995
(POUNDS) (POUNDS) (POUNDS)
<S> <C> <C> <C>
Loans and finance lease obligations at 1 January 147,502 247,398 774,885
Finance lease payments (21,881) (15,125) (20,134)
Loan repayments (44,916) (99,025) (4,624)
Exchange gain/(loss) (9,374) (1,626) (2,729)
Inception of new finance leases 129,788 15,880 -
Reclassification of bank loan - - (500,000)
------- ------- --------
Loan and finance lease obligation at 31 December 201,119 147,502 247,398
======= ======= ========
</TABLE>
22 CONTINGENT LIABILITIES
Banking facilities
The company has provided unlimited multilateral guarantees in respect of
group banking facilities. At 31 December 1997, this facility had been
utilised to the extent of (Pounds)3,068,491 (1996 - (Pounds)3,638,830).
This facility is secured by fixed and floating charges over the group's
assets.
The company has also given an unlimited guarantee in favour of National
Australia Bank Limited in connection with its Australian subsidiary.
Value added tax
The company is party to a group value added tax registration, and is
therefore jointly and severally liable with all other group companies
for the total tax liability. At 31 December 1997, there was no liability
due by the group (1996 - (Pounds)Nil).
Performance bonds
In the normal course of its business, the group is obliged to enter into
performance guarantee bonds on behalf of overseas customers. At the
balance sheet date the amount guaranteed amounted to (Pounds)288,832
(1996- (Pounds)336,327).
26
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
23 DIRECTORS INTERESTS IN TRANSACTIONS
During the year the company disposed of certain fixed assets to Timeless
Properties Ltd, a company in which R F Thompson, P J Cousins, and C S
Thompson have interests for (Pounds)238,239 giving rise to a loss to the
company of (Pounds)54,357. In the opinion of the directors the transaction
took place at arms length commercial values. In addition R F Thompson and
P J Cousins acquired their company cars from the company in the year
giving rise to a loss on book value of (Pounds)1,039.
24 CAPITAL COMMITMENTS
<TABLE>
<CAPTION>
1997 1996 1995
(POUNDS) (POUNDS) (POUNDS)
<S> <C> <C> <C>
The commitments of the company and of the group
at 31 December to capital expenditure is as follows:
Contracted but not provided - 38,133 58,594
====== ====== ======
</TABLE>
25 COMMITMENTS UNDER OPERATING LEASES
<TABLE>
<CAPTION>
1997 1996 1995
LAND AND LAND AND LAND AND
BUILDINGS OTHER BUILDINGS OTHER BUILDINGS OTHER
(POUNDS) (POUNDS) (POUNDS) (POUNDS) (POUNDS) (POUNDS)
<S> <C> <C> <C> <C> <C> <C>
Operating leases which expire:
Within one year 137,293 25,124 39,000 14,339 149,394 34,760
In one to two years 101,243 - 115,206 - 113,707 -
In two to five years 25,496 67,431 148,545 109,482 268,129 68,069
In more than five years - - 288,000 - - -
------- ------ ------- ------- ------- -------
264,032 92,555 590,751 123,821 531,230 102,829
======= ====== ======= ======= ======= =======
</TABLE>
26 PENSIONS
The previous pension scheme (a Defined Benefit Scheme) was terminated on 5
April 1992.
Under the terms of the termination, no new members have been admitted to
the scheme since 5 April 1992 and the assets of the fund have been
transferred to existing employees' personal pension schemes on an accrued
benefits basis. Where payments have been made to retired employees,
annuities have been purchased so as to protect their entitlement. Any
surplus was allocated to the members of the scheme on an accrued benefits
basis.
Payments to individuals' personal schemes are charged as they fall due.
27
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
27 RECONCILIATION TO US ACCOUNTING PRINCIPLES
Basis of reconciliation
The following is a summary of the material adjustments to profit and
shareholders' equity which would be required if US Generally Accepted
Accounting Principles (GAAP) had been applied instead of UK GAAP.
A summary consolidated statement of cash flows is set out below in
accordance with the classification of items and the definition of cash
under US GAAP.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED 31 DECEMBER 31 MARCH
1997 1996 1995 1998 1997
(UNAUDITED) (UNAUDITED)
(POUNDS) (POUNDS) (POUNDS) (POUNDS) (POUNDS)
<S> <C> <C> <C> <C> <C>
Profit/(loss) attributable to shareholders'
under UK GAAP 374,961 442,336 217,249 (75,718) 279,473
US GAAP adjustments:
Capitalised research and development 12,605 59,110 77,450 9,635 -
Depreciation on buildings (11,402) (11,402) (23,902) (4,063) (5,976)
Profit on disposal of buildings 82,720 - - - -
Deferred taxation 8,891 (10,475) (15,145) - -
Exchange gains 33,321 57,788 (8,940) - -
------- ------- ------- ------- -------
Net income under US GAAP 501,096 537,357 246,712 (70,146) 273,497
======= ======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
AT 31 DECEMBER AT 31 MARCH
1997 1996 1998
(UNAUDITED)
CAPITAL AND RESERVES (POUNDS) (POUNDS) (POUNDS)
<S> <C> <C> <C>
Equity interests under UK GAAP 6,080,290 5,974,962 5,999,991
Capitalised research and development (99,501) (112,106) (89,865)
Revaluation of fixed assets (831,830) (792,938) (831,830)
Capital reserve arising on consolidation (385,122) (385,122) (385,122)
Deferred taxation (352,570) (361,461) (352,570)
Accumulated depreciation on buildings (213,040) (293,250) (217,103)
Accrued dividends - 152,688 -
--------- --------- ---------
Shareholders' equity under US GAAP 4,198,227 4,182,773 4,123,501
========= ========= =========
</TABLE>
<TABLE>
<CAPTION>
THREE MONTHS
YEARS ENDED 31 DECEMBER ENDED 31 MARCH
1997 1996 1995 1998 1997
(UNAUDITED) (UNAUDITED)
STATEMENT OF CASH FLOWS (POUNDS) (POUNDS) (POUNDS) (POUNDS) (POUNDS)
<S> <C> <C> <C> <C> <C>
Net cash provided by operating activities 1,809,418 1,689,040 53,764 163,097 (51,853)
Net cash used in investing activities (1,182,824) (1,140,030) (1,535,292) (110,568) (225,182)
Net cash provided by financing activities 319,008 436,786 917,448 29,551 271,566
--------- --------- --------- ------- -------
Increase/(decrease) in cash and cash equivalents 945,602 985,796 (564,080) 82,080 (5,469)
========= ========= ========= ======= =======
</TABLE>
28
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
27 RECONCILIATION TO US ACCOUNTING PRINCIPLES (CONTINUED)
Capitalised research and development costs
Under UK GAAP, research and development costs may be capitalised. Under
US GAAP, these costs are written off directly to net income.
Tangible fixed assets
Under UK GAAP, freehold and long leasehold land and buildings are
revalued to market value with the revaluation taken to reserves and no
depreciation is recorded. All tangible fixed assets under US GAAP are
recorded at historical cost and depreciated over their estimated useful
lives.
Negative goodwill
Under UK GAAP, negative goodwill arising on consolidation is part of
reserves. Under US GAAP, negative goodwill is immediately written off
against identifiable long-lived assets.
Deferred taxation
Under UK GAAP, deferred taxation is only accounted for to the extent
that it is probable that taxation liabilities or benefits will
crystallise. Under US GAAP deferred taxation is accounted for on all
temporary differences and a valuation adjustment is established in
respect of those deferred taxation assets where it is more likely than
not that some portion will not be realised.
Ordinary dividends
Under UK GAAP, ordinary dividends proposed are provided for in the year
in respect of which they are recommended by the Board of Directors for
approval by the shareholders. Under US GAAP, such dividends are not
provided for until declared by the Board of Directors.
Foreign currency translation
Under UK GAAP, results of foreign subsidiaries have been translated at
the closing rate at the balance sheet date. Under US GAAP, the results
of foreign subsidiaries are translated at an average rate during the
period.
Consolidated statement of cash flows
The US GAAP cash flow statement reports changes in cash and cash
equivalents, which includes short-term highly liquid investments. Only
three categories of cash flow are reported, being: operating activities
(including tax and interest); investing activities (being capital
expenditure, acquisitions and disposals together with cash flows from
available for sale current asset investments); and financing activities
(including dividends paid).
29
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
NOTES FORMING PART OF THE FINANCIAL STATEMENTS (CONTINUED)
- --------------------------------------------------------------------------------
27 RECONCILIATION TO US ACCOUNTING PRINCIPLES (CONTINUED)
Recent FASB pronouncements
FAS 130, Reporting Comprehensive Income, FAS 131 on disclosure of
segmental information and FAS 132, Employers' Disclosures about Pensions
and other Post - retirement Benefits will become effective in 1998. The
adoption of these Statements will not significantly affect the Group's
existing disclosures. FAS 133, Accounting for Derivative Instruments and
Hedging Activities, will become effective in 1999 and will not
significantly affect the Group's disclosures.
30
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
- -------------------------------------------------------------------------------
The pages which follow do not
form part of the statutory
financial statements of the company
31
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
DETAILED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 1997
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
(Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C>
Service charges receivable 600,622 646,096
Rents receivable 282,746 275,675
Miscellaneous income 698 317
Dividends receivable - 500,000
-------- ---------
884,066 1,422,088
Property expenses
Rent, rates and water and maintenance 92,195 100,025
Administrative expenses
Insurance 7,399 8,688
Motor expenses 13,090 11,505
Travel and entertaining 9,765 11,564
Audit and accountancy 40,204 13,416
Sundry expenses 87,146 29,296
Bank charges and interest 321,945 265,793
Staff costs 380,132 310,560
Depreciation and amortisation 2,513 8,203
Printing and stationery 521 1,571
Telephone and fax 381 1,317
Patent amortisation 302 210
Loss on sale of assets 55,396 -
-------- -------
918,794 662,123
-------- ---------
OPERATING (LOSS)/PROFIT (126,923) 659,940
Interest receivable 450 -
-------- ---------
CARRIED FORWARD (126,473) 659,940
</TABLE>
32
<PAGE>
A.C. EGERTON (HOLDINGS) PLC
DETAILED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 DECEMBER 1997 (CONTINUED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
(Pounds) (Pounds) (Pounds) (Pounds)
<S> <C> <C> <C> <C>
BROUGHT FORWARD (126,473) 659,940
Interest payable (loan) (76,260) (85,241)
-------- --------
(LOSS)/PROFIT BEFORE TAXATION (202,733) 574,699
Taxation (441) (9,375)
-------- --------
(202,292) 584,074
Profit on sale of subsidiary - -
Provision required against subsidiary undertaking - (9,274)
Dividends payable - (152,688)
-------- --------
(LOSS)/PROFIT FOR THE YEAR (202,292) 422,112
======== ========
</TABLE>
33
<PAGE>
Item 7 (b). Pro Forma Financial Information
Pro forma financial information that would be required pursuant to
Article 11 of Regulation S-X
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma condensed balance sheet at March 31,
1998, gives effect to Channell Commercial Corporation's ("Channell") acquisition
on May 1, 1998 of all of the outstanding share capital of A.C. Egerton
(Holdings) Plc ("Egerton"), a public limited company incorporated in England and
Wales, in a transaction accounted for as a purchase business combination
("Egerton acquisition"). Under this method of accounting, the assets and
liabilities of the acquired company are recorded at fair value as of the date of
the acquisition.
The following unaudited pro forma condensed combined statements of income
for the year ended December 31, 1997, and the three months ended March 31, 1998,
have been prepared as if the acquisition had occurred on January 1, 1997.
The unaudited pro forma condensed combined financial information is based
on the consolidated financial statements of Channell giving effect to the
Egerton acquisition under the assumptions and adjustments outlined in the
accompanying notes to unaudited pro forma condensed combined balance sheet and
statements of income. Such pro forma adjustments are based upon available
information and upon certain assumptions that the Company's management believes
are reasonable under the circumstances. The unaudited pro forma condensed
combined balance sheet and statements of income are provided for comparative
purposes only and do not purport to represent the results that would have been
obtained had the Egerton acquisition occurred on the date indicated or that may
be achieved in the future.
The unaudited pro forma condensed combined balance sheet and statements of
income and accompanying notes should be read in conjunction with the
consolidated financial statements of Channell contained in Channell's Annual
Report on Form 10-K for the year ended December 31, 1997, and Channell's Form
10-Q for the three months ended March 31, 1998, and Egerton's audited
consolidated financial statements for the years ended December 31, 1997, 1996
and 1995, and for the three months ended March 31, 1998 and 1997 (unaudited),
included in this Form 8-K/A. For purposes of the pro forma condensed combined
financial statements the accounts of Egerton have been adjusted to reflect the
items necessary to reconcile United Kingdom generally accepted accounting
principles (UK GAAP) to United States generally accepted accounting principles
(US GAAP) as set forth in Egerton's audited historical financial statements
referred to above, and currency amounts in pounds sterling have been translated
to US Dollars based upon average exchange rates in effect during the respective
periods for the unaudited pro forma condensed combined statements of income and
the exchange rate in effect as of the date of the unaudited pro forma condensed
balance sheet.
Page 34 of 41
<PAGE>
Channell Commercial Corporation
Pro Forma Condensed Combined
Balance Sheet
March 31, 1998
(Unaudited)
(amounts in thousands)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
Channell Egerton Adjustments Combined
----------- ---------- ------------ -----------
<S> <C> <C> <C> <C>
ASSETS
Cash $ 3,354 $ 4,142 $ -- $ 7,496
Investments 11,708 -- (10,200) 1,508
Accounts Receivable, Net 10,345 4,630 -- 14,975
Inventory 8,593 4,903 -- 13,496
Deferred Income Taxes 868 -- -- 868
Prepaid Expenses 177 3 -- 180
----------- ---------- ------------ -----------
CURRENT ASSETS 35,045 13,678 (10,200) 38,523
Goodwill 1,615 4 18,872 20,491
Property, Plant and Equipment 15,752 7,539 1,360 24,651
Deferred Income Taxes 483 -- -- 483
Other Assets 371 -- -- 371
----------- ---------- ------------ -----------
$ 53,266 $ 21,221 $ 10,032 $ 84,519
=========== ========== ============ ===========
LIABILITIES AND CAPITAL
Bank Overdraft $ -- $ 9,350 $ -- $ 9,350
Accounts Payable 2,767 2,399 -- 5,166
Current Portion of Term Debt 133 -- -- 133
Lease Obligations 226 231 -- 457
Accrued Expenses 1,025 1,062 1,275 3,362
Current Taxes Payable 1,138 322 -- 1,460
----------- ---------- ------------ -----------
CURRENT LIABILITIES 5,289 13,364 1,275 19,928
Long-Term Debt 267 57 16,361 16,685
Lease Obligations 271 -- -- 271
Deferred Income Tax -- 853 -- 853
Capital:
Common Stock 92 86 (86) 92
Paid-in-Capital 27,991 2,057 (2,057) 27,991
Retained Earnings 19,356 4,804 (5,461) 18,699
----------- ---------- ------------ -----------
47,439 6,947 (7,604) 46,782
----------- ---------- ------------ -----------
$ 53,266 $ 21,221 $ 10,032 $ 84,519
=========== ========== ============ ===========
</TABLE>
Page 35 of 41
<PAGE>
CHANNELL COMMERCIAL CORPORATION
Notes to Unaudited Pro Forma Condensed Combined Balance Sheet
March 31, 1998
(amounts in thousands)
NOTE A. SOURCES AND USES OF FUNDS
<TABLE>
<CAPTION>
Sources:
--------
<S> <C>
Bank borrowings $ 16,361
Decrease in Channell investments 10,200
Increase in Channell accrued expenses 1,275
--------
$ 27,836
========
Uses:
-----
Purchase of Egerton shares $ 26,561
Egerton acquisition costs 1,275
--------
$ 27,836
========
</TABLE>
NOTE B. ALLOCATION OF PURCHASE PRICE AND CALCULATION OF GOODWILL
<TABLE>
<S> <C>
Purchase of Egerton shares $ 26,561
Egerton acquisition costs 1,275
Adjustment of property, plant and
equipment to fair value (1,360)
Egerton book equity (7,604)
---------
Calculated goodwill $ 18,872
=========
</TABLE>
The above allocation of the Egerton purchase price is tentative pending
completion of fair value determinations for the net assets acquired. The
allocation may change with the completion of these determinations.
Page 36 of 41
<PAGE>
Channell Commercial Corporation
Pro Forma Condensed Combined
Statement of Income
Year Ended December 31, 1997
(Unaudited)
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
Channell Egerton Combined Adjustments Combined
---------- ----------- -------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Net Sales $ 59,943 $ 34,145 $ 94,088 $ -- $ 94,088
Cost of Goods Sold 35,032 22,097 57,129 -- 57,129
----------- ----------- --------- ----------- -----------
Gross Margin 24,911 12,048 36,959 -- 36,959
Commission Income 606 606 -- 606
----------- ----------- --------- ----------- -----------
25,517 12,048 37,565 -- 37,565
Operating Expenses
General and Administrative 4,077 7,965 12,042 944 12,986
Selling 7,251 1,870 9,121 -- 9,121
Research and Development 1,009 435 1,444 -- 1,444
----------- ----------- --------- ----------- -----------
12,337 10,270 22,607 944 23,551
Income from Operations 13,180 1,778 14,958 (944) 14,014
Interest Income (Expense), Net 879 (763) 116 (2,003) (1,887)
Other Income -- 136 136 -- 136
----------- ----------- --------- ----------- -----------
Income Before Income Taxes 14,059 1,151 15,210 (2,947) 12,263
Income Taxes 5,589 330 5,919 -- 5,919
----------- ----------- --------- ----------- -----------
Net Income $ 8,470 $ 821 $ 9,291 ($ 2,947) $ 6,344
=========== =========== ========= =========== ===========
Net Income Per Share
Basic $ 0.69
===========
Diluted $ 0.68
===========
</TABLE>
Page 37 of 41
<PAGE>
Channell Commercial Corporation
Pro Forma Condensed Combined
Statement of Income
Three Months Ended March 31, 1998
(Unaudited)
(amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Historical Historical Pro Forma Pro Forma
Channell Egerton Combined Adjustments Combined
-------------- ------------ ----------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
Net Sales $ 15,704 $ 6,636 $ 22,340 $ -- $ 22,340
Cost of Goods Sold 9,290 4,683 13,973 -- 13,973
------------- ----------- ---------- ------------- ---------------
Gross Margin 6,414 1,953 8,367 -- 8,367
Commission Income 80 54 134 -- 134
------------- ----------- ---------- ------------- ---------------
6,494 2,007 8,501 -- 8,501
Operating Expenses
General and
Administrative 1,404 1,313 2,717 236 2,953
Selling 2,219 442 2,661 -- 2,661
Research and
Development 378 124 502 -- 502
------------- ----------- ---------- ------------- ---------------
4,001 1,879 5,880 236 6,116
Income from Operations 2,493 128 2,621 (236) 2,385
Interest Income (Expense),
Net 152 (244) (92) (501) (593)
------------- ----------- ---------- ------------- ---------------
Income Before Income
Taxes 2,645 (116) 2,529 (737) 1,792
Income Taxes 1,098 -- 1,098 -- 1,098
------------- ----------- ---------- ------------- ---------------
Net Income $ 1,547 ($ 116) $ 1,431 ($ 737) $ 694
============= =========== ========== ============= ===============
Net Income Per Share
Basic $ 0.08
===============
Diluted $ 0.08
===============
</TABLE>
Page 38 of 41
<PAGE>
CHANNELL COMMERCIAL CORPORATION
Notes to Unaudited Pro Forma Condensed Combined Statements of Income
Year Ended December 31, 1997, and Three Months Ended March 31, 1998
(amounts in thousands)
NOTE A. AMORTIZATION OF GOODWILL
Reflects the amortization of goodwill in the amount of $18,872 over an
estimated twenty-year life.
NOTE B. INTEREST EXPENSE
Reflects interest expense on borrowings in the amount of $16,361 at an
interest rate of 8.5 % per annum plus the estimated interest income that
would have been earned on the investments redeemed in the amount of
$10,200, which yielded approximately 6% per annum.
NOTE C. NET INCOME PER SHARE
Basic net income per share information has been calculated on the basis of
9,237 shares of Channell common stock outstanding throughout both periods.
Diluted earnings per share is applicable to the year ended December 31,
1997 only, accordingly, the effect of dilutive stock options have been
added to reflect 9,291 shares outstanding.
Page 39 of 41
<PAGE>
Item 7 (c) Index of Exhibits
2 Share Purchase Agreement dated as of May 1, 1998, between A.C.
Egerton (Holdings) PLC and Channell Commercial Corporation
(incorporated by reference to Exhibit 1 of the Registrant's
Current Report on Form 8-K, event date May 18, 1998).
99 Credit Agreement dated as of May 1, 1998, between Channell
Commercial Corporation and Fleet National Bank (incorporated by
reference to Exhibit 99 of the Registrant's Current Report on
Form 8-K, event date May 18, 1998).
Page 40 of 41
<PAGE>
SIGNATURES
----------
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 thereunto duly authorized.
CHANNELL COMMERCIAL CORPORATION
(Registrant)
Dated: July 15, 1998 By: /s/ Gary W. Baker
-----------------------
Gary W. Baker
Chief Financial Officer
Page 41 of 41
