<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report: August 26, 1997
TMP WORLDWIDE INC.
------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 0-21571 13-3906555
- ------------------ ------------------------- --------------------
(State of (Commission File No.) (I.R.S. Employer
Incorporation) Identification No.)
1633 Broadway, New York, New York 10019
- ----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 212-977-4200
------------
<PAGE>
Item 2. ACQUISITION OR DISPOSITION OF ASSETS.
On August 26, 1997, pursuant to the terms of the Agreement Relating To
The Entire Issued Share Capital of Austin Knight Limited (the "Agreement"), TMP
Worldwide Inc. ("TMP") purchased all of the outstanding capital stock of Austin
Knight Limited ("AK") from AK's existing approximately 40 shareholders for a
combination of cash and TMP notes aggregating approximately $47 million, net of
cash acquired (the "Purchase Price"). AK is the largest recruitment advertising
agency in the U.K. and the fifth largest agency in the U.S. TMP borrowed the
cash portion of the Purchase Price under its credit facility with BNY Financial
Corporation. TMP intends to repay such debt from the proceeds of TMP's
secondary public offering which TMP expects will close by the end of September
1997.
For the year ended September 30, 1996, AK had annual gross billings of
approximately $213.8 million. The pro forma impact of the acquisition is set
forth in Item 7 of this Report.
Item 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL STATEMENTS AND EXHIBITS.
(b) (i) Pro Forma Condensed Consolidated Information (incorporated
by reference to pages 20-24 of Amendment No. 1 to the Registration Statement on
Form S-1, dated September 2, 1997, File No. 333-31657).
(ii) Financial Statements of Austin Knight Limited (incorporated
by reference to pages F-28-F-56 of Amendment No. 1 to the Registration Statement
on Form S-1, dated September 2, 1997, File No. 333-31657).
(c) Exhibit 2.1 - Agreement Relating To The Entire Issued Share
Capital of Austin Knight Limited dated July 19, 1997, between AK Warranty and
Indemnity
2
<PAGE>
Limited and TMP Worldwide Inc. (incorporated by reference to TMP's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1997.)
Exhibit 23.1 - Consent of KPMG
Exhibit 99.1 - Pages 20-24 and F-28 - F-56 of Amendment No. 1 to
the Registration Statement on Form S-1, dated September 2, 1997 (File No.
333-31657).
3
<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 hereunto duly authorized.
TMP WORLDWIDE INC.
Dated: September 5, 1997 By: /s/Thomas G. Collison
--------------------------------
Thomas G. Collison
Vice Chairman
4
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Directors
Austin Knight Limited:
We consent to the inclusion of our report dated 4 February 1997 with respect
to the consolidated balance sheets of Austin Knight Limited and subsidiaries as
of 30 September 1995 and 1996 and the related consolidated profit and loss
account, cash flow statements, statements of movements in shareholders' funds
and statements of total recognised gains and losses for each of the years in
the two year period ended 30 September 1996, which report is incorporated by
reference in the Form 8-K of TMP Worldwide Inc. dated 5 September 1997.
Yours faithfully
/s/ KPMG
- ------------------
KPMG
Chartered Accountants
Registered Auditors
London, England
5 September 1997
<PAGE>
Exhibit 99.1
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
The Pro Forma Condensed Consolidated Financial Information (A) reflects
financial information with respect to the Company's (i) acquisition in August
1997 of all the outstanding stock of Austin Knight for a purchase price of
approximately $47.2 million, which includes $1.2 million payable to certain
selling shareholders of Austin Knight in the form of notes and is net of
approximately $11.5 million of cash acquired relating to the sale in July 1997
of real property by Austin Knight, (ii) acquisitions in 1997 (the "1997
Acquisitions") of seven companies, other than Austin Knight, for an aggregate
purchase price of approximately $17.9 million which includes the issuance of
48,935 shares of Common Stock, and (iii) acquisitions during 1996 of eleven
companies, including Neville Jeffress Australia Pty Limited ("Neville
Jeffress"), for an aggregate purchase price of approximately $25.1 million (the
"1996 Acquisitions"), (B) is adjusted for (i) the sale of 2,400,000 shares of
Common Stock offered hereby at an assumed public offering price of $20.00 per
share and the application of the net proceeds therefrom as described in "Use of
Proceeds", and (ii) the receipt of cash from the Principal Stockholder and
certain other Selling Stockholders in repayment of their net indebtedness to the
Company which was approximately $12.2 million at June 30, 1997 with proceeds
from their sale of Common Stock in this offering and (C) for the statement of
operations for the year ended December 31, 1996 only, is further adjusted for
the initial public offering of 4,147,408 shares of Common Stock and the
application of the $50.8 million net proceeds therefrom to reduce debt,
including debt incurred to finance the 1996 Acquisitions, as if such offering
occurred on January 1, 1996. The acquisitions are being accounted for under the
purchase method of accounting.
The financial statements of the foreign companies acquired and included in
the Pro Forma Condensed Consolidated Financial Information were translated at
the following exchange rates: with respect to Austin Knight and other United
Kingdom companies, British Pounds Sterling were translated to U.S. dollars at
the rate of 1.573, 1.634 and 1.665, respectively, with respect to the 1996
statement of operations, the 1997 statement of operations and the 1997 balance
sheet, Canadian dollars were translated to U.S. dollars at the rate of .734 and
.733, respectively, with respect to the 1996 statement of operations and the
1997 statement of operations, Dutch Guilders were translated to U.S. dollars at
the rate of .5907 and .5352, respectively, with respect to the 1996 statement of
operations and the 1997 statement of operations, Belgian Francs were translated
into U.S. dollars at the rate of .0322 and Australian dollars were translated
into U.S. dollars at the rate of .786 with respect to the 1996 statement of
operations.
The Pro Forma Condensed Consolidated Financial Information (i) gives effect
to the acquisition of Austin Knight, the 1997 Acquisitions and the 1996
Acquisitions, (ii) is based upon estimated allocations of the purchase prices
and (iii) includes all adjustments described in the notes hereto.
The Pro Forma Condensed Consolidated Statements of Operations were prepared
as if the above acquisitions, the Company's initial public offering (with
respect to the statement of operations for the year ended December 31, 1996
only) and this offering occurred as of January 1 for the periods presented. The
Pro Forma Condensed Consolidated Balance Sheet was prepared as if the
acquisition of Austin Knight, which closed during August 1997, and this offering
occurred on June 30, 1997. The Pro Forma Condensed Consolidated Financial
Information should be read in conjunction with the historical financial
statements and notes thereto included elsewhere in this Prospectus.
The Pro Forma Condensed Consolidated Statements of Operations for the year
ended December 31, 1996 and the six months ended June 30, 1997 do not include
any potential cost savings. The Company believes that it may be able to reduce
salaries and related costs and office and general expenses as it eliminates
duplication of overhead, particularly in the United Kingdom, Australia and
Canada. There can be no assurance that the Company will be successful in
effecting any such cost savings.
The Pro Forma Condensed Consolidated Financial Information is unaudited and
is not necessarily indicative of the consolidated results which actually would
have occurred if the above transactions and this offering had been consummated
at the beginning of the periods presented, nor does it purport to present the
future financial position and results of operations for future periods.
20
<PAGE>
TMP WORLDWIDE INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1997
(IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
TMP
WORLDWIDE AUSTIN
INC. KNIGHT(2) ADJUSTMENTS
--------- --------------- -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents............. $ 1,264 $ 606 $ --
Accounts receivable,
net..................... 203,509 45,411 --
Work-in-process........... 17,665 365 --
Prepaid and other......... 6,111 -- --
--------- ------- -----------
Total current assets.... 228,549 46,382 --
Receivable from Principal
Stockholder, net........... 11,611 -- --
Property and equipment,
net........................ 31,568 28,099 (23,172)(a)
Deferred income taxes....... 9,046 -- --
Intangibles, net............ 90,095 504 43,570(b)
Other assets................ 3,179 -- --
--------- ------- -----------
$ 374,048 $74,985 $ 20,398
--------- ------- -----------
--------- ------- -----------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......... $ 174,532 $29,737 $ --
Accrued expenses and other
current liabilities..... 28,682 6,202 3,000(b)
Deferred income taxes..... 10,420 -- --
Current portion of
long-term debt.......... 6,046 6,705 472(c)
--------- ------- -----------
Total current
liabilities........... 219,680 42,644 3,472
Long-term debt, less current
portion.................... 116,088 7,641 41,626(a,c)
Minority interests.......... 435 -- --
Stockholders' equity:
Common stock.............. 9 -- --
Class B common stock...... 15 -- --
Additional paid-in
capital................. 110,166 --
Foreign currency
translation
adjustment.............. 271 -- --
Deficit................... (72,616) -- --
Equity of Austin Knight... -- 24,700 (24,700)(d)
--------- ------- -----------
Total stockholders'
equity................ 37,845 24,700 (24,700)
--------- ------- -----------
$ 374,048 $74,985 $ 20,398
--------- ------- -----------
--------- ------- -----------
<CAPTION>
PRO FORMA
COMBINED
PRO FORMA OFFERING AS
COMBINED ADJUSTMENTS ADJUSTED(3)
----------- ----------- -----------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents............. $ 1,870 $ -- $ 1,870
Accounts receivable,
net..................... 248,920 -- 248,920
Work-in-process........... 18,030 -- 18,030
Prepaid and other......... 6,111 -- 6,111
----------- ----------- -----------
Total current assets.... 274,931 -- 274,931
Receivable from Principal
Stockholder, net........... 11,611 (11,611)(e) --
Property and equipment,
net........................ 36,495 -- 36,495
Deferred income taxes....... 9,046 -- 9,046
Intangibles, net............ 134,169 -- 134,169
Other assets................ 3,179 (554)(e) 2,625
----------- ----------- -----------
$ 469,431 $(12,165) $457,266
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable.......... $ 204,269 $ -- $204,269
Accrued expenses and other
current liabilities..... 37,884 -- 37,884
Deferred income taxes..... 10,420 -- 10,420
Current portion of
long-term debt.......... 13,223 -- 13,223
----------- ----------- -----------
Total current
liabilities........... 265,796 -- 265,796
Long-term debt, less current
portion.................... 165,355 (56,965)(e,f) 108,390
Minority interests.......... 435 -- 435
Stockholders' equity:
Common stock.............. 9 3(f,g) 12
Class B common stock...... 15 (1)(f,g) 14
Additional paid-in
capital................. 110,166 44,798(f) 154,964
Foreign currency
translation
adjustment.............. 271 -- 271
Deficit................... (72,616) -- (72,616)
Equity of Austin Knight... -- -- --
----------- ----------- -----------
Total stockholders'
equity................ 37,845 44,800 82,645
----------- ----------- -----------
$ 469,431 $(12,165) $457,266
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
See footnotes on next page.
21
<PAGE>
TMP WORLDWIDE INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
TMP 1997 AUSTIN
WORLDWIDE INC. ACQUISITIONS(1) KNIGHT(2) ADJUSTMENTS
-------------- --------------- -------------- -----------
<S> <C> <C> <C> <C>
Commissions and fees.............................. $100,619 $5,717 $29,063 $--
-------------- ------ ------- -----------
Operating expenses:
Salaries and related costs...................... 50,484 2,868 16,749 --
Office and general.............................. 36,285 1,939 8,012 282(h)
Amortization of intangibles..................... 2,849 -- -- 971(i)
-------------- ------ ------- -----------
Total operating expenses........................ 89,618 4,807 24,761 1,253
-------------- ------ ------- -----------
Operating income.................................. 11,001 910 4,302 (1,253)
Interest expense, net............................. (4,048) (87) (338) (2,291)(j,k)
Other income (expense), net....................... 3 (71) --_ --
-------------- ------ ------- -----------
Income before provision (benefit) for income
taxes, minority interests and equity in earnings
of affiliates................................... 6,956 752 3,964 (3,544)
Provision (benefit) for income taxes.............. 3,306 162 1,665 (1,026)(l)
Minority interests................................ 227 -- -- --
Equity in earnings of affiliates.................. (5) -- -- --
-------------- ------ ------- -----------
Net income........................................ 3,418 590 2,299 (2,518)
Preferred stock dividends......................... (123) -- -- --
-------------- ------ ------- -----------
Net income applicable to common and Class B common
stockholders.................................... $ 3,295 $ 590 $ 2,299 $(2,518)
-------------- ------ ------- -----------
-------------- ------ ------- -----------
Net income per common and Class B common share....
Weighted average number of common, Class B common
and common equivalent shares outstanding........
<CAPTION>
PRO FORMA
PRO FORMA OFFERING COMBINED
COMBINED ADJUSTMENTS AS ADJUSTED(3)
----------- ----------- --------------
<S> <C> <C> <C>
Commissions and fees.............................. $135,399 $-- $135,399
----------- ----------- --------------
Operating expenses:
Salaries and related costs...................... 70,101 -- 70,101
Office and general.............................. 46,518 -- 46,518
Amortization of intangibles..................... 3,820 -- 3,820
----------- ----------- --------------
Total operating expenses........................ 120,439 -- 120,439
----------- ----------- --------------
Operating income.................................. 14,960 -- 14,960
Interest expense, net............................. (6,764) 1,865(m) (4,899)
Other income (expense), net....................... (68) -- (68)
----------- ----------- --------------
Income before provision (benefit) for income
taxes, minority interests and equity in earnings
of affiliates................................... 8,128 1,865 9,993
Provision (benefit) for income taxes.............. 4,107 746(n) 4,853
Minority interests................................ 227 -- 227
Equity in earnings of affiliates.................. (5) -- (5)
----------- ----------- --------------
Net income........................................ 3,789 1,119 4,908
Preferred stock dividends......................... (123) -- (123)
----------- ----------- --------------
Net income applicable to common and Class B common
stockholders.................................... $ 3,666 $1,119 $ 4,785
----------- ----------- --------------
----------- ----------- --------------
Net income per common and Class B common share.... $ .15 $ .18
----------- --------------
----------- --------------
Weighted average number of common, Class B common
and common equivalent shares outstanding........ 24,037 26,437
----------- --------------
----------- --------------
</TABLE>
- ------------------------
(1) The Pro Forma Condensed Consolidated Statement of Operations for the six
months ended June 30, 1997 reflects the results of operations of seven
companies that were acquired during the period January 1, 1997 through June
30, 1997 for the portion of 1997 prior to acquisition.
(2) The Pro Forma Condensed Consolidated Balance Sheet includes the accounts of
Austin Knight as of June 30, 1997 as if it was acquired on June 30, 1997 and
the Pro Forma Condensed Consolidated Statement of Operations for the six
months ended June 30, 1997 includes the results of operations of Austin
Knight for the six months ended June 30, 1997.
(3) Adjusted to give effect to (i) the sale by the Company of 2,400 shares of
Common Stock at an assumed public offering price of $20.00 per share and
(ii) the repayment by the Principal Stockholder and certain other Selling
Stockholders of their approximately $12.2 million net indebtedness to the
Company and the application of the net proceeds from these transactions as
described in "Use of Proceeds" as if the offering and the repayment occurred
on June 30, 1997 with respect to the Pro Forma Condensed Consolidated
Balance Sheet and on January 1, 1997 with respect to the Pro Forma Condensed
Consolidated Statement of Operations.
22
<PAGE>
TMP WORLDWIDE INC.
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
(a) To eliminate $23,172 of real estate not being acquired and $5,110 of related
debt not being assumed, in connection with the acquisition of Austin Knight.
(b) To record intangible assets of $44,074 for the excess of cost of $50,208,
including $3,000 for additional acquisition costs, over the net book value
of $6,134 of Austin Knight and write off $504 of goodwill included in the
Austin Knight balance sheet.
(c) To reflect $47,208 of additional borrowings under the Company's financing
agreement and seller financed notes issued in connection with the
acquisition of Austin Knight.
(d) To eliminate $24,700 for the equity acquired with the acquisition of Austin
Knight.
(e) To record the receipt of $12,165 in cash from the Principal Stockholder and
certain other Selling Stockholders in repayment of their net indebtedness,
with proceeds from a portion of their sale hereby of 1,224 shares of Common
Stock, and the use of such cash to repay a portion of the Company's
borrowings used to finance the acquisition of Austin Knight.
(f) To reflect the use of the estimated net proceeds from the issuance of 2,400
shares of Common Stock in this offering as follows, see "Use of Proceeds":
<TABLE>
<S> <C>
Repayment of the balance borrowings used to finance the acquisition of Austin Knight............................. $ 33,843
Repayment of other borrowings outstanding under the Company's financing agreement................................ 10,957
---------
Estimated net proceeds........................................................................................... $ 44,800
---------
---------
</TABLE>
(g) To reclassify Class B Common Stock to Common Stock to reflect conversion by
the Principal Stockholder of 1,200 shares sold by him as part of this
offering.
(h) To record estimated occupancy costs related to Austin Knight in lieu of real
estate not being acquired as if such acquisition occurred on January 1,
1997.
(i) To record amortization of intangibles arising from the acquisition of Austin
Knight as if such acquisition occurred on January 1, 1997 and the
acquisitions completed between January 1 and June 30, 1997 for the portion
of 1997 prior to acquisition. Such amortization expense is based on a 30
year life and is computed as follows:
<TABLE>
<S> <C>
Intangibles of $44,074 arising from the acquisition of Austin Knight, amortized for six months..................... $ 735
Intangibles of $17,081 arising from the acquisitions completed between January 1 and June 30, 1997, amortized for
the period prior to acquisition................................................................................... 236
---------
$ 971
---------
---------
</TABLE>
(j) To record interest expense on borrowings under the Company's financing
agreement and seller financed notes issued in connection with the
acquisition of Austin Knight, as if such acquisitions occurred on January 1,
1997 and the acquisitions completed between January 1 and June 30, 1997 for
the portion of 1997 prior to acquisition. Interest on such acquisition debt
is determined as follows:
<TABLE>
<S> <C>
Debt of $47,208 arising from the acquisition of Austin Knight at 9.2% for six months.............................. $ 2,172
Debt of $16,812 arising from the acquisitions completed between January 1 and June 30, 1997 at 8.5% for the period
prior to acquisition............................................................................................. 351
---------
$ 2,523
---------
---------
</TABLE>
(k) To eliminate $232 of interest expense for debt of Austin Knight, repaid in
July 1997 in connection with the sale of real estate.
(l) To record the tax benefit on interest expense of $2,523 on borrowings for
the acquisition of Austin Knight, and acquisitions completed between January
1 and June 30, 1997 for the portion of 1997 prior to acquisition, at an
estimated tax rate of 40% and the net tax benefit on the $50 of net
additional costs related to the acquisition of Austin Knight (see Notes (i)
and (l) above) at 34%.
(m) Reflects the use of proceeds from this offering, including cash received
from the Principal Stockholder and certain other Selling Stockholders, as
described in "Use of Proceeds" and the reduction of interest expense
resulting from the reduction of debt less the interest income of $522 on the
indebtedness of the Principal Stockholder, as if such indebtedness was
repaid on January 1, 1997.
(n) Reflects the tax expense at 40% resulting from the net interest expense
savings of $1,865 resulting from the reduction of debt through the use of
proceeds. See Note (m) above.
23
<PAGE>
TMP WORLDWIDE INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
TMP
WORLDWIDE 1996 1997 AUSTIN
INC. ACQUISITIONS(1) ACQUISITIONS(2) KNIGHT(3)
--------- --------------- --------------- -----------
<S> <C> <C> <C> <C>
Commissions and fees.................... $162,631 $19,913 $22,787 $47,609
--------- --------------- --------------- -----------
Operating expenses:
Salaries and related costs............ 80,291 9,745 10,327 27,888
Office and general.................... 60,101 8,840 10,364 14,510
Amortization of intangibles........... 4,440 -- -- --
Special compensation.................. 52,019 -- -- --
--------- --------------- --------------- -----------
Total operating expenses.............. 196,851 18,585 20,691 42,398
--------- --------------- --------------- -----------
Operating income (loss)................. (34,220) 1,328 2,096 5,211
Interest expense, net................... (14,265) (104) (69) (615)
Other income (expense), net............. (164) 43 (134) --
--------- --------------- --------------- -----------
Income (loss) before provision (benefit)
for income taxes, minority interests
and equity in earnings of
affiliates............................ (48,649) 1,267 1,893 4,596
Provision (benefit) for income taxes.... 3,270 504 403 1,854
Minority interests...................... 434 (1) -- --
Equity in earnings of affiliates........ 114 -- -- --
--------- --------------- --------------- -----------
Net income (loss)....................... (52,239) 764 1,490 2,742
Preferred stock dividends............... (210) -- -- --
--------- --------------- --------------- -----------
Net income (loss) applicable to common
and Class B common stockholders....... $(52,449) $ 764 $ 1,490 $ 2,742
--------- --------------- --------------- -----------
--------- --------------- --------------- -----------
Net income per common and Class B common
share.................................
Weighted average number of common, Class
B common and common equivalent shares
outstanding...........................
<CAPTION>
PRO FORMA
PRO FORMA OFFERING COMBINED
ADJUSTMENTS COMBINED(4) ADJUSTMENTS AS ADJUSTED(5)
----------- ------------- ----------- --------------
<S> <C> <C> <C> <C>
Commissions and fees.................... $ -- $ 252,940 $-- $252,940
----------- ------------- ----------- --------------
Operating expenses:
Salaries and related costs............ -- 128,251 -- 128,251
Office and general.................... 544(a) 94,359 -- 94,359
Amortization of intangibles........... 2,546(b,c) 6,986 -- 6,986
Special compensation.................. (52,019)(d) -- -- --
----------- ------------- ----------- --------------
Total operating expenses.............. (48,929) 229,596 -- 229,596
----------- ------------- ----------- --------------
Operating income (loss)................. 48,929 23,344 -- 23,344
Interest expense, net................... (1,274)(e,f,g,h) (16,327 ) 4,758(l) (11,569)
Other income (expense), net............. -- (255 ) -- (255)
----------- ------------- ----------- --------------
Income (loss) before provision (benefit)
for income taxes, minority interests
and equity in earnings of
affiliates............................ 47,655 6,762 4,758 11,520
Provision (benefit) for income taxes.... (1,518)(i) 4,513 1,903(m) 6,416
Minority interests...................... (182)(j) 251 -- 251
Equity in earnings of affiliates........ -- 114 -- 114
----------- ------------- ----------- --------------
Net income (loss)....................... 49,355 2,112 2,855 4,967
Preferred stock dividends............... 105(k) (105 ) -- (105)
----------- ------------- ----------- --------------
Net income (loss) applicable to common
and Class B common stockholders....... $ 49,460 $ 2,007 $2,855 $ 4,862
----------- ------------- ----------- --------------
----------- ------------- ----------- --------------
Net income per common and Class B common
share................................. $ .08 $ .18
------------- --------------
------------- --------------
Weighted average number of common, Class
B common and common equivalent shares
outstanding........................... 24,580 26,980
------------- --------------
------------- --------------
</TABLE>
- ----------------------------------------
(1) Reflects the results of operations of the 1996 Acquisitions for the portion
of 1996 prior to acquisition.
(2) Reflects the results of operations of the 1997 Acquisitions as if they were
acquired on January 1, 1996.
(3) Reflects the acquisition of Austin Knight and includes the results of
operations of Austin Knight for the year ended December 31, 1996.
(4) Reflects the acquisition of Austin Knight, the 1996 Acquisitions and the
1997 Acquisitions, the application of the net proceeds of $50.8 million
received by the Company from its initial public offering as if such offering
occurred on January 1, 1996, and the amortization of goodwill resulting from
the exchange of Company stock in connection with the purchase of certain
minority interests.
(5) Adjusted to give effect to (i) the sale by the Company of 2,400 shares of
Common Stock at an assumed public offering price of $20.00 per share and
(ii) the repayment by the Principal Stockholder and certain other Selling
Stockholders of their $11.9 million net indebtedness to the Company, and the
application of the net proceeds from these transactions as described in "Use
of Proceeds," as if the offering and repayment occurred on January 1, 1996.
(a) To record estimated occupancy costs related to Austin Knight in lieu of real
estate not being acquired.
(b) To record amortization on $84,678 of intangibles arising from the
acquisition of Austin Knight, the 1996 Acquisitions, including Neville
Jeffress, for the period prior to acquisition and the 1997 Acquisitions,
over a period of 30 years.
(c) Reflects amortization over a 30 year period for the $1,620 in goodwill
resulting from the purchase of certain minority interests for Company stock
in connection with the initial public offering.
(d) To eliminate the nonrecurring, non-cash special compensation charge.
(e) To record interest on borrowings under the Company's financing agreement and
seller financed notes issued in connection with the 1996 Acquisitions for
the period prior to acquisition and the acquisition of Austin Knight and the
1997 Acquisitions. Interest on acquisition debt is determined as follows:
<TABLE>
<S> <C>
Debt of $47,208 arising from the acquisition of Austin Knight at 9.2% for twelve months............... $ 4,344
Debt of $24,491 arising from the 1996 Acquisitions for various periods at 8.5%........................ 2,082
Debt of $16,812 arising from the 1997 Acquisitions at 8.5% for twelve months.......................... 1,429
---------
$ 7,855
---------
---------
</TABLE>
(f) To eliminate the nonrecurring, non-cash special interest charge of $2,603.
(g) Reflects the reduction of interest expense of $3,528 resulting from the
reduction of borrowings through the use of proceeds received from the sale
of 4,147.4 shares of common stock at $14.00 per share (the initial public
offering) as if such transaction occurred on January 1, 1996.
(h) To eliminate $450 of interest for debt of Austin Knight not being assumed.
(i) To record the tax benefit on $35 of amortization expense for certain
intangibles and $4,324 of interest expense on borrowings in connection with
the acquisition of Austin Knight, the 1996 Acquisitions, and the 1997
Acquisitions, net of interest savings from the use of proceeds (see note
(g)) at an estimated tax rate of 40% and the net tax benefit on the $94 of
additional net costs related to the acquisition of Austin Knight (see notes
(a) and (h)) at 34% net of the tax expense at 40% on the adjustment for
minority interest (see note (j)).
(j) Reflects the elimination of the earnings attributable to the minority
interest of a subsidiary in the amount of $300 less the call premium of $118
payable on the redemption of the subsidiary's preferred stock.
(k) Reflects the elimination of the preferred stock dividend of $210 less the
call premium on the redemption of $105.
(l) Reflects the use of proceeds from this offering as described in "Use of
Proceeds."
(m) Reflects the tax expense at 40% resulting from the net interest expense
savings of $4,758 resulting from the reduction of debt through the use of
proceeds.
24
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Members of Austin Knight Limited
We have audited the accompanying consolidated balance sheets of Austin
Knight Limited and its subsidiaries as at 30 September 1995 and 1996 and the
related consolidated profit and loss accounts, cash flow statements, statements
of movements in shareholders' funds and statements of total recognised gains and
losses for each of the years in the two year period ended 30 September 1996.
These consolidated financial statements are the responsibility of the directors
of Austin Knight Limited. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United Kingdom which do not differ in any material respects from
generally accepted auditing standards in the United States of America. These
standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
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 Austin
Knight Limited and its subsidiaries at 30 September 1995 and 1996, and the
results of their operations and their cash flows for each of the years in the
two year period ended 30 September 1996, in conformity with generally accepted
accounting principles in the United Kingdom.
KPMG
Chartered Accountants
Registered Auditors
London, England
4 February 1997
F-28
<PAGE>
AUSTIN KNIGHT LIMITED AND ITS SUBSIDIARIES
CONSOLIDATED PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
YEAR ENDED 30
SEPTEMBER
----------------------
<S> <C> <C> <C>
1995 1996
NOTE L'000 L'000
----- ---------- ----------
TURNOVER............................................................... 2 123,118 134,444
Cost of Sales.......................................................... (110,403) (120,196)
---------- ----------
GROSS PROFIT........................................................... 12,715 14,248
Administrative expenses................................................ (9,796) (11,206)
Other operating income................................................. 378 473
---------- ----------
OPERATING PROFIT....................................................... 3 3,297 3,515
Exceptional Item....................................................... 6 -- (95)
Interest............................................................... 7 (539) (407)
---------- ----------
PROFIT on ordinary activities before taxation.......................... 2,758 3,013
TAXATION............................................................... 8 (1,098) (1,210)
---------- ----------
PROFIT for the financial year.......................................... 1,660 1,803
DIVIDENDS.............................................................. 9 (408) (445)
---------- ----------
RETAINED PROFIT for the financial year................................. 18 1,252 1,358
---------- ----------
---------- ----------
</TABLE>
There are no discontinued operations contained within the above results.
Details of the results of the acquisitions made during the year are shown in
note 3.
The notes on pages F-33 to F-48 form part of these financial statements.
F-29
<PAGE>
AUSTIN KNIGHT LIMITED AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AS AT 30 SEPTEMBER
--------------------
<S> <C> <C> <C>
1995 1996
NOTE L'000 L'000
--------- --------- ---------
FIXED ASSETS
Intangible assets...................................................... 10 498 419
Tangible assets........................................................ 11 16,131 16,923
Investments............................................................ 12 112 112
--------- ---------
16,741 17,454
--------- ---------
CURRENT ASSETS
Work-in-process........................................................ 270 193
Debtors................................................................ 13 24,547 24,444
Cash at bank and in hand............................................... 24 1,006 1,596
--------- ---------
25,823 26,233
CREDITORS: Amounts falling due within one year......................... 14 (24,490) (24,668)
--------- ---------
NET CURRENT ASSETS/(LIABILITIES)....................................... 1,333 1,565
--------- ---------
TOTAL ASSETS LESS CURRENT LIABILITIES.................................. 18,074 19,019
CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR................ 15 (4,495) (4,857)
PROVISION FOR LIABILITIES AND CHARGES.................................. 16 (308) (214)
--------- ---------
NET ASSETS............................................................. 13,271 13,948
--------- ---------
--------- ---------
CAPITAL AND RESERVES
Called up share capital................................................ 17 1,237 1,237
Share Premium Account.................................................. 18 87 87
Revaluation reserve.................................................... 18 5,396 5,396
Profit and loss account................................................ 18 6,551 7,228
--------- ---------
13,271 13,948
--------- ---------
--------- ---------
</TABLE>
The notes on pages F-33 to F-48 form part of these financial statements.
F-30
<PAGE>
AUSTIN KNIGHT LIMITED AND ITS SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENTS
<TABLE>
<CAPTION>
YEAR ENDED
30 SEPTEMBER,
--------------------
<S> <C> <C> <C>
1995 1996
NOTE L'000 L'000
--------- --------- ---------
NET CASH INFLOW FROM OPERATING ACTIVITIES.............................................. 21 2,906 6,184
--------- ---------
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest paid.......................................................................... (561) (433)
Interest received...................................................................... 34 50
Interest element of finance lease rental payments...................................... (24) (27)
Dividends paid......................................................................... (328) (416)
--------- ---------
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF FINANCE.................. (879) (826)
--------- ---------
TAXATION
ACT paid............................................................................... (60) (102)
UK corporation tax paid................................................................ (537) (668)
Overseas and other taxes paid.......................................................... (277) (581)
--------- ---------
TAX PAID............................................................................... (874) (1,351)
--------- ---------
INVESTING ACTIVITIES
Purchase of own shares................................................................. (118) --
Sale of shares under option............................................................ 11 --
Purchase of intangible assets.......................................................... 22 -- (78)
Purchase of subsidiaries............................................................... 23 (51) (632)
Purchase of tangible fixed assets...................................................... (1,024) (1,740)
Less: Inception of finance leases...................................................... 63 1,024
Proceeds from sales of fixed assets.................................................... 146 112
--------- ---------
NET CASH OUTFLOW FROM INVESTING ACTIVITIES............................................. (973) (1,314)
--------- ---------
NET CASH INFLOW/(OUTFLOW) BEFORE FINANCING............................................. 180 2,693
FINANCING
Additional loan repayable over 5 years................................................. -- 641
Issue of ordinary share capital........................................................ 118 --
--------- ---------
298 3,334
--------- ---------
--------- ---------
FINANCING
Repayment of loans..................................................................... 767 767
Capital element of finance lease.......................................................
Net rental payments.................................................................... 105 149
--------- ---------
NET CASH OUTFLOW FROM FINANCING........................................................ 872 916
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS....................................... 24 (574) 2,418
--------- ---------
298 3,334
--------- ---------
--------- ---------
</TABLE>
The notes on pages F-33 to F-48 form part of these financial statements.
F-31
<PAGE>
AUSTIN KNIGHT LIMITED AND ITS SUBSIDIARIES
RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
YEAR ENDED
30 SEPTEMBER,
--------------------
<S> <C> <C>
1995 1996
L'000 L'000
--------- ---------
Profit for the financial year.................................................................. 1,660 1,803
Dividends...................................................................................... (408) (445)
--------- ---------
1,252 1,358
Goodwill written off........................................................................... (51) (710)
Exchange adjustments........................................................................... 72 29
--------- ---------
1,273 677
New share capital subscribed................................................................... 118 --
Opening Shareholders' Funds.................................................................... 11,741 13,271
Prior year adjustments......................................................................... 139 --
--------- ---------
Closing Shareholders' Funds.................................................................... 13,271 13,948
--------- ---------
--------- ---------
</TABLE>
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
<TABLE>
<CAPTION>
YEAR ENDED
30 SEPTEMBER,
--------------------
<S> <C> <C>
1995 1996
L'000 L'000
--------- ---------
Profit for the financial year.................................................................... 1,660 1,803
Exchange adjustments............................................................................. 72 29
--------- ---------
Total recognised gains for the financial year.................................................... 1,732 1,832
Prior year adjustment............................................................................ 139 --
--------- ---------
Total gains recognised since the last Annual Report.............................................. 1,871 1,832
--------- ---------
--------- ---------
</TABLE>
The notes on pages F-33 to F-48 form part of these financial statements.
F-32
<PAGE>
AUSTIN KNIGHT LIMITED AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS
FOR THE YEARS ENDED 30 SEPTEMBER 1995 AND 1996
1. ACCOUNTING POLICIES
A. BASIS OF PREPARATION
The accounts have been prepared under the historical cost accounting rules
as modified by the revaluation of freehold property and in accordance with
applicable accounting standards.
B. TURNOVER AND RECOGNITION OF REVENUE
Turnover represents amounts receivable from clients, exclusive of sales
related taxes, in respect of charges for advertising placed, production work and
fees. Revenue in respect of advertising and production is recognized when the
work is completed. Fees are recognised over the period of the relevant
assignment.
C. CONSOLIDATION
The consolidated accounts of the Group incorporate the accounts of the
Company and its subsidiaries, together with the accounts of the Austin Knight
Limited Employees Trust.
In accordance with the Companies Act of 1985 S230, a separate profit and
loss account dealing with the results of Austin Knight Limited is not presented.
The amount of the consolidated profit for the financial year dealt with in the
accounts of the Company is L1,128,000 (1995 L1,149,000).
D. FOREIGN CURRENCIES
Exchange differences on transactions during the year are charged or credited
to the profit and loss account. The trading results and cash flow of overseas
subsidiaries are translated at the average exchange rate for the year. Assets
and liabilities are translated at exchange rates ruling at the year-end. On
consolidation, differences on exchange arising from the retranslation of the
opening net investment and from the translation of the profits or losses at
average rates are taken directly to reserves.
E. GOODWILL
Goodwill represents the amounts paid for subsidiary companies and acquired
businesses in excess of their net asset value. For acquisitions made on or
before 30 September 1992, the net book value of goodwill at that date is
amortised in equal monthly installments over a maximum period of 10 years. For
acquisitions after that date, goodwill is written off in full, directly to
reserves in the year of purchase.
F. DEPRECIATION
Tangible fixed assets are stated at historical cost or valuation less
accumulated depreciation. Depreciation is provided to write off the cost of
tangible fixed assets by equal monthly installments at the following rates:
FREEHOLD PROPERTY--Provision for depreciation on freehold buildings with an
estimated useful life of more than 50 years is not considered necessary since it
is the Company's policy to maintain its properties in good condition which
prolongs their useful lives and the Directors consider that the lives of these
properties and their residual values are such that any depreciation involved
would not be material. Costs of repairs and maintenance are charged against
revenue in the year in which they are incurred.
F-33
<PAGE>
AUSTIN KNIGHT LIMITED AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1995 AND 1996
1. ACCOUNTING POLICIES (CONTINUED)
INVESTMENT PROPERTIES--Provision for depreciation on freehold investment
properties is made when the Directors consider there has been a permanent
reduction in their realisable values.
FURNITURE AND EQUIPMENT--10% to 25% per annum according to the estimated
life of assets.
MOTOR VEHICLES--20% per annum.
G. WORK-IN-PROGRESS
Work-in-progress is valued at the lower of cost or net realisable value.
H. DEFERRED TAXATION
Provision is made for deferred taxation using the liability method in
respect of all material timing differences, to the extent that it is probable
that the liability or asset will crystallise in the foreseeable future.
I. LEASES
Leases are accounted for as finance leases where the Group enters into a
lease which entails taking substantially all the risks and rewards of ownership
of an asset. All other leases are accounted for as operating leases.
Assets acquired under finance leases are capitalised in the balance sheet
and are depreciated over their estimated useful lives. The capital element of
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
balance outstanding. Rentals payable under operating leases are charged to the
profit and loss account as incurred.
J. PENSIONS
Contributions are paid to the Group's pension schemes to secure and enhance
the benefits for personnel under the schemes in accordance with the
recommendations of independent actuaries.
Contributions are charged to the profit and loss account so as to spread the
cost of the provisions over the employees' working lives in accordance with
Statement of Standard Accounting Practice 24. Pension scheme surpluses or
deficits are amortised over the expected remaining service lives of employees.
2. TURNOVER
The turnover of the Group arose in the following geographical markets:
<TABLE>
<CAPTION>
1995 1996
L'000 L'000
--------- ---------
<S> <C> <C>
United Kingdom.......................................................... 76,908 82,473
United States........................................................... 27,566 33,942
Rest of world........................................................... 18,644 18,029
--------- ---------
123,118 134,444
--------- ---------
--------- ---------
</TABLE>
F-34
<PAGE>
AUSTIN KNIGHT LIMITED AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1995 AND 1996
3. OPERATING PROFIT
The operating profit is stated after including:
<TABLE>
<CAPTION>
1995 1996
L'000 L'000
--------- ---------
<S> <C> <C>
Depreciation of tangible fixed assets........................................ 995 665
Amortisation of intangibles.................................................. 70 68
Hire of plant and equipment.................................................. 629 724
Other rents payable.......................................................... 1,235 1,478
Directors' emoluments (Note 4):
Management remuneration--Salaries and benefits............................. 268 274
--Performance payments.............................. 27 29
Fees....................................................................... 36 36
Compensation for loss of office............................................ 25 --
Pension contributions...................................................... 26 27
Auditors' remuneration--in respect of audit.................................. 104 119
Auditors' remuneration--in respect of other work............................. 45 36
Rent receivable.............................................................. 363 473
</TABLE>
Operating profit also includes the following amounts relating to
acquisitions made during the year ended 30 September 1996:
<TABLE>
<CAPTION>
L'000
---------
<S> <C>
Turnover............................................................................... 655
Cost of sales.......................................................................... (487)
---
Gross profit........................................................................... 168
Administrative expenses................................................................ (137)
---
Operating profit arising from acquisitions............................................. 31
---
---
</TABLE>
4. DIRECTORS' EMOLUMENTS
The details of Directors' emoluments are set out in Note 26, Remuneration
Committee Report.
5. STAFF COSTS
Staff costs, which include Directors' emoluments, were:
<TABLE>
<CAPTION>
1995 1996
L'000 L'000
--------- ---------
<S> <C> <C>
Wages and salaries......................................................... 11,963 13,548
Social security costs...................................................... 971 1,253
Pension costs.............................................................. 525 611
--------- ---------
13,459 15,412
--------- ---------
--------- ---------
</TABLE>
The average number of employees including Directors during the year was 514
(1995:476).
F-35
<PAGE>
AUSTIN KNIGHT LIMITED AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1995 AND 1996
6. EXCEPTIONAL ITEM
This comprises solely the provisions necessary to reduce the Group's
investment properties to their estimated net realisable values.
7. INTEREST
<TABLE>
<CAPTION>
1995 1996
L'000 L'000
--- -----
<S> <C> <C>
INTEREST PAYABLE
On bank loan repayable over more than five years................................ 393 342
On overdrafts and other loans repayable wholly within five years................ 156 105
Finance leases.................................................................. 24 20
INTEREST RECEIVABLE............................................................. (34) (60)
--- ---
539 407
--- ---
--- ---
</TABLE>
8. TAXATION
The taxation on the profit on ordinary activities for the year was as
follows:
<TABLE>
<CAPTION>
1995 1996
L'000 L'000
--------- ---------
<S> <C> <C>
United Kingdom corporation tax at 33%........................................ 746 804
Overseas taxation............................................................ 410 494
Deferred taxation--charge/(credit)
UK......................................................................... 42 (235)
Overseas................................................................... (49) 110
Adjustments to prior years--charge/(credit).................................. (51) 37
--------- ---------
1,098 1,210
--------- ---------
--------- ---------
</TABLE>
9. DIVIDENDS
<TABLE>
<CAPTION>
1995 1996
L'000 L'000
--------- ---------
<S> <C> <C>
Interim dividend of 2.75p per 25p share (1995: 2.60p per 25p share) 128 136
Final dividend of 6.25p per 25p share (1995: 5.65p per 25p share) 280 309
--------- ---------
408 445
--------- ---------
--------- ---------
</TABLE>
F-36
<PAGE>
AUSTIN KNIGHT LIMITED AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1995 AND 1996
10. INTANGIBLE FIXED ASSETS--GOODWILL
<TABLE>
<CAPTION>
L'000
---------
<S> <C>
COST
At 1 October 1995..................................................................... 2,823
Exchange adjustments.................................................................. (18)
Addition on Acquisition of Business--see Note 22...................................... 78
Addition on Acquisition of Subsidiaries--see Note 23.................................. 632
---------
AT 30 September 1996.................................................................. 3,515
---------
AMORTISATION
At 1 October 1995..................................................................... 2,325
Charge for year....................................................................... 68
Written off to reserves............................................................... 710
Exchange adjustments.................................................................. (7)
---------
At 30 September 1996.................................................................. 3,096
---------
NET BOOK VALUES
At 30 September 1996.................................................................. 419
---------
---------
At 30 September 1995.................................................................. 498
---------
---------
</TABLE>
11. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
FREEHOLD FURNITURE/
PROPERTY EQUIPMENT MOTOR VEHICLES TOTAL
L'000 L'000 L'000 L'000
----------- ----------- ----------------- ---------
<S> <C> <C> <C> <C>
COST OR VALUATION
At 1 October 1995................................................ 14,472 5,447 513 20,432
Exchange adjustments............................................. -- 40 5 45
Additions........................................................ -- 1,719 26 1,745
Acquisitions..................................................... -- 61 -- 61
Disposals........................................................ -- (793) (92) (885)
----------- ----- --- ---------
At 30 September 1996............................................. 14,472 6,474 452 21,398
----------- ----- --- ---------
DEPRECIATION
At 1 October 1995................................................ -- 4,094 207 4,301
Exchange adjustments............................................. -- 25 1 26
Disposals........................................................ -- (616) (36) (652)
Acquisitions..................................................... -- 40 -- 40
Charge for the year.............................................. 95 585 80 760
----------- ----- --- ---------
At 30 September 1996............................................. 95 4,128 252 4,475
----------- ----- --- ---------
NET BOOK VALUES
At 30 September 1996............................................. 14,377 2,346 200 16,923
----------- ----- --- ---------
----------- ----- --- ---------
At 30 September 1995............................................. 14,472 1,353 306 16,131
----------- ----- --- ---------
----------- ----- --- ---------
</TABLE>
F-37
<PAGE>
AUSTIN KNIGHT LIMITED AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1995 AND 1996
11. TANGIBLE FIXED ASSETS (CONTINUED)
Included in freehold property are investment properties of L627,000 shown at
written down value (1995: L722,000). The remaining property was revalued to
L13.75 million in 1992 based upon a Directors' valuation having regard to
professional advice. Its historical cost is L8,385,000.
The net book value of tangible fixed assets includes an amount of L933,000
(1995:L127,000) in respect of assets held under finance leases and hire purchase
obligations. The depreciation to these assets in the year is L203,000 (1995:
L47,000).
12. INVESTMENTS
PRINCIPAL TRADING SUBSIDIARIES
<TABLE>
<CAPTION>
PERCENTAGE OF
COUNTRY OF INCORPORATION ORDINARY SHARE
AND OPERATION CAPITAL HELD
-------------------------------------- -----------------
<S> <C> <C>
Austin Knight Incorporated............ United States of America 100
Austin Knight Canada Incorporated..... Canada 100
Austin Knight Proprietary Limited..... Australia 100
Austin Knight Consulting Proprietary Australia
Limited............................. 100
Austin Knight France SA............... France 100
Austin Knight BV...................... Netherlands 100*
Carre Turenne SA...................... France 100**
Alliance Resource Humaines SA......... France 100***
Austin Knight International BV........ Netherlands 100
Austin Knight Investments Ltd......... Great Britain 100
</TABLE>
- ------------------------
* Held by subsidiary, Austin Knight International BV
** Held by subsidiary, Austin Knight Investments Limited
*** Held by subsidiary, Austin Knight France SA
The principal activities of the trading subsidiaries are recruitment and
legal advertising and human resource consultancy.
The results of all the above companies are included in the consolidated
results for the Group using the acquisition method of accounting.
Austin Knight Limited has given guarantees on behalf of certain subsidiary
companies. The contingent liability at 30 September 1996 under these guarantees
amounted to L512,000 (1995: L630,000) at the year-end rates of exchange.
F-38
<PAGE>
AUSTIN KNIGHT LIMITED AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1995 AND 1996
12. INVESTMENTS (CONTINUED)
OWN SHARES HELD
The Group includes 152,250 of its own shares which are held by the Austin
Knight Limited Employees Trust as an investment. They have been included at the
cost to the Trust.
The Austin Knight Limited Employees Trust exists for the benefit of the UK
employees and to incentivise the Directors and senior employees of the Group.
The Trust receives and holds shares in the Company either by means of a gift or
a purchase made at the then fair value price. It receives and invests the
dividends due on those shares and earns interest on its accumulated cash
balances. Periodically, options over the shares which it holds are granted to
individuals at the discretion of the Trustees based on recommendations by the
Board.
<TABLE>
<CAPTION>
L'000
---------
<S> <C> <C>
Shares at cost 1 October 1995 and at 30 September 1996..................... 112
</TABLE>
<TABLE>
<CAPTION>
1995 1996
L'000 L'000
--------- ---------
<S> <C> <C>
SUMMARY OF INVESTMENTS
Own shares held............................................................ 112 112
--------- ---------
Net book value............................................................. 112 112
--------- ---------
--------- ---------
</TABLE>
13. DEBTORS
<TABLE>
<CAPTION>
1995 1996
L'000 L'000
--------- ---------
<S> <C> <C>
Trade debtors.............................................................. 23,104 23,016
Other debtors.............................................................. 624 698
Prepayments and accrued income............................................. 819 730
--------- ---------
24,547 24,444
--------- ---------
--------- ---------
</TABLE>
14. CREDITORS--AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1995 1996
L'000 L'000
--------- ---------
<S> <C> <C>
Bank loans and overdrafts.................................................. 2,884 1,171
Trade creditors............................................................ 17,061 18,608
Obligations under finance leases and hire purchase contracts............... 99 333
Dividend payable........................................................... 280 309
Other creditors including taxation and social security..................... 2,231 2,140
Accruals and deferred income............................................... 1,935 2,107
--------- ---------
24,490 24,668
--------- ---------
--------- ---------
</TABLE>
F-39
<PAGE>
AUSTIN KNIGHT LIMITED AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1995 AND 1996
14. CREDITORS--AMOUNTS FALLING DUE WITHIN ONE YEAR (CONTINUED)
Details of the security given for the bank loan and overdrafts are shown in
Note 15.
Other creditors including taxation and social security comprise:
<TABLE>
<CAPTION>
1995 1996
L'000 L'000
--------- ---------
<S> <C> <C>
Corporation tax.............................................................. 1,070 917
Social security and other taxes.............................................. 289 937
Other creditors.............................................................. 872 286
--------- ---------
2,231 2,140
--------- ---------
--------- ---------
</TABLE>
15. CREDITORS--AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1995 1996
L'000 L'000
--------- ---------
<S> <C> <C>
Bank loans................................................................... 4,409 4,138
Finance lease and hire purchase obligations.................................. 58 700
Other creditors.............................................................. 28 19
--------- ---------
4,495 4,857
--------- ---------
--------- ---------
</TABLE>
The bank loans and overdrafts are secured by fixed and floating charges on
the freehold property and trade debtors of Austin Knight Limited and its UK and
French subsidiaries. The loans bear interest based upon LIBOR and its French
equivalent and are scheduled for repayment as follows:
<TABLE>
<CAPTION>
1995 1996
L'000 L'000
--------- ---------
<S> <C> <C>
Between one and two years.................................................... 767 891
Between two and five years................................................... 2,300 2,671
More than five years......................................................... 1,342 576
--------- ---------
4,409 4,138
--------- ---------
--------- ---------
Bank loan included in creditors due within one year.......................... 767 891
--------- ---------
</TABLE>
The finance lease and hire purchase obligations fall due as follows:
<TABLE>
<CAPTION>
1995 1996
L'000 L'000
----- -----
<S> <C> <C>
Between one and two years...................................................... 49 302
Between two and five years..................................................... 9 398
--
---
58 700
--
--
---
---
</TABLE>
All other creditors falling due after more than one year are payable within
five years.
F-40
<PAGE>
AUSTIN KNIGHT LIMITED AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1995 AND 1996
16. PROVISIONS FOR LIABILITIES AND CHARGES
The amounts provided for deferred taxation and other liabilities and charges
are as follows:
<TABLE>
<CAPTION>
DEFERRED
TAX OTHER
L'000 L'000
--------- ---------------
<S> <C> <C>
Provision at 1 October 1995............................................. 127 181
(Credit)/charge for the year in the profit and loss account
UK.................................................................. (235) --
Overseas............................................................ 110 33
Transfers........................................................... (2) --
--- ---
Provision at 30 September 1996.......................................... -- 214
--- ---
--- ---
</TABLE>
The amount of deferred taxation not provided is L221,000 and arises solely
on capital allowances.
The other provisions relate to pensions and other employee benefits.
17. CALLED UP SHARE CAPITAL
<TABLE>
<CAPTION>
1995 1996
L'000 L'000
--------- ---------
<S> <C> <C>
AUTHORISED
8,000,000 shares of 25p each (1995: 8,000,000 shares of 25p each)............ 2,000 2,000
--------- ---------
--------- ---------
ALLOTTED AND FULLY PAID
4,948,000 ordinary shares of 25p each (1995: 4,948,000 ordinary shares of 25p
each)...................................................................... 1,237 1,237
--------- ---------
--------- ---------
</TABLE>
18. RESERVES
<TABLE>
<CAPTION>
PROFIT AND LOSS REVALUATION SHARE
ACCOUNT RESERVE PREMIUM
L'000 L'000 L'000
--------------- ------------- -------------
<S> <C> <C> <C>
At 1 October 1995......................................................... 6,551 5,396 87
Goodwill written off...................................................... (710) -- --
Profit retained........................................................... 1,358 -- --
Exchange adjustments...................................................... 29 -- --
--
----- -----
At 30 September 1996...................................................... 7,228 5,396 87
--
--
----- -----
----- -----
</TABLE>
19. CAPITAL COMMITMENTS
Capital expenditure authorised and contracted for by the Board of Directors
at 30 September 1996, for which no provision has been made in these accounts,
was L73,000 (1995: L107,000).
F-41
<PAGE>
AUSTIN KNIGHT LIMITED AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1995 AND 1996
20. LEASE COMMITMENTS
The Group had the following annual commitments under operating leases:
<TABLE>
<CAPTION>
LAND AND BUILDINGS
OTHER
------------------------ -----------
<S> <C> <C> <C>
1995 1996 1995
L'000 L'000 L'000
--- --- ---
ON LEASES EXPIRING
Within 1 year....................................................................... 274 115 220
Within 2--5 years................................................................... 423 467 295
After 5 years....................................................................... 773 914 --
<CAPTION>
<S> <C>
1996
L'000
---
ON LEASES EXPIRING
Within 1 year....................................................................... 296
Within 2--5 years................................................................... 485
After 5 years....................................................................... --
</TABLE>
21. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM
OPERATING ACTIVITIES
<TABLE>
<CAPTION>
1995 1996
L'000 L'000
--------- ---------
<S> <C> <C>
Operating profit............................................................ 3,297 3,515
Depreciation................................................................ 995 665
Amortisation of intangible fixed assets..................................... 70 68
Loss on disposal of fixed assets............................................ 27 122
Decrease/(increase) in work-in-progress..................................... (94) 82
Decrease/(increase) in debtors.............................................. (2,935) 424
Increase in creditors....................................................... 1,546 1,308
--------- ---------
Net cash inflow from operating activities................................... 2,906 6,184
--------- ---------
--------- ---------
</TABLE>
22. PURCHASE OF INTANGIBLE ASSETS
This relates to the goodwill arising on the acquisition of Dawson
Advertising, a UK business in March 1996.
23. PURCHASE OF SUBSIDIARY UNDERTAKINGS
1. During the year, further payments of L101,700 were made under the terms
of the agreement for the purchase of Carre Turenne SA. These payments are
determined by the level of sales and profits earned from that Company's clients
since it joined the Group.
F-42
<PAGE>
AUSTIN KNIGHT LIMITED AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1995 AND 1996
23. PURCHASE OF SUBSIDIARY UNDERTAKINGS (CONTINUED)
2. In July 1996, the Company acquired, through its subsidiary, Austin Knight
France SA, the entire issued share capital of Alliance Resources Humaines SA, a
company registered in France. The consideration paid and assets acquired were as
follows:
<TABLE>
<CAPTION>
L'000
---------
<S> <C>
Total Paid............................................................................ 666
Cash Acquired......................................................................... (159)
---------
Net Payment........................................................................... 507
---------
Fixed Assets.......................................................................... 21
Debtors............................................................................... 409
Creditors............................................................................. (453)
---------
(23)
Goodwill.............................................................................. 530
---------
507
---------
---------
GOODWILL SUMMARY L,000
---------
Arising on the acquisition of Carre Turenne........................................... 102
Arising on the acquisition of Alliance RH............................................. 530
---------
632
---------
---------
</TABLE>
F-43
<PAGE>
AUSTIN KNIGHT LIMITED AND SUBSIDIARIES
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1995 AND 1996
24. CASH AND CASH EQUIVALENTS
Analysis of the balances as shown in the balance sheet and changes during
the current year:
<TABLE>
<CAPTION>
CHANGE
1995 1996 IN YEAR
L'000 L'000 L'000
--------- --------- ---------
<S> <C> <C> <C>
Analysis of Balances
Cash at bank and in hand...................................... 1,006 1,596 590
Bank loan and overdrafts...................................... (2,884) (1,171) 1,713
Less: Amounts repayable after three months.................... 767 891 124
--------- --------- ---------
(1,111) 1,316 2,427
--------- --------- ---------
--------- --------- ---------
L'000
---------
Analysis of Changes
Balance 1 October 1995........................................ (1,111)
Net cash inflow before the effect of exchange rate changes.... 2,418
Effect of exchange rate changes............................... 9
---------
Balance 30 September 1996..................................... 1,316
---------
---------
</TABLE>
<TABLE>
<CAPTION>
SHARE LOANS AND FINANCE
CAPITAL LEASE OBLIGATIONS
L'000 L'000
----------- -------------------
<S> <C> <C>
Analysis of changes in financing during the year
Balance 1 October 1995....................................... 1,324 5,332
Additional loan raised....................................... -- 641
Repayment of loan............................................ -- (767)
Finance lease repayments..................................... -- (149)
Finance lease inceptions (non-cash transaction).............. -- 1,024
Effect of exchange rate changes.............................. -- (19)
----- -----
Balance 30 September 1996.................................... 1,324 6,062
----- -----
----- -----
</TABLE>
25. PENSION SCHEMES
The two principal schemes of the Group are operated in the United Kingdom,
one a defined contribution scheme, the other a defined benefit scheme. The
defined contribution scheme is operated on the Group's behalf by an independent,
recognised pension provider. It is currently being wound up and the accrued
benefits transferred to other schemes not administered by the Group or the
individuals concerned.
The defined benefit scheme is trustee administered and the fund is
maintained by fund managers independently of the Group's finances. The funding
and accounting policies are identical and consist of providing for the
liabilities in respect of an individual in a systematic manner over the
individual's working lifetime.
F-44
<PAGE>
AUSTIN KNIGHT LIMITED AND SUBSIDIARIES
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1995 AND 1996
25. PENSION SCHEMES (CONTINUED)
The pension cost has been assessed in accordance with the advice of an
independent actuary and has been based on a valuation carried out as at 1 April
1996. The market value of the scheme's assets as at 1 April 1996 was
approximately L10.2 million and the level of funding approximately 100%.
The actuarial valuation at 1 April 1996 was carried out on the attained age
valuation method and the main actuarial assumptions adopted were:
<TABLE>
<S> <C>
Nominal return on investments....... 8.5% p.a.
Rate of salary increases............ 6.0% p.a.
Rate of pension increases........... 2.5% p.a. (for benefits related to service
prior to 1 April 1996).
4.0% p.a. (for service after 1 April 1996).
Rate of dividend increases.......... 4.0% p.a.
</TABLE>
26. REMUNERATION COMMITTEE REPORT
INTRODUCTION
This report of the Remuneration Committee, on behalf of the Board, sets out
Austin Knight Limited's policy on Executive Directors' remuneration and provides
details of the remuneration earned by the Directors in the 1995/96 financial
year. It also details their interests in the Company's shares.
The remuneration arrangements for all Executive Directors are determined by
the Remuneration Committee, which is also responsible for the operation of the
Executive Share Option Scheme.
The Company has considered the provisions of the Code of Best Practice of
the Greenbury Study Group on Directors' Remuneration. It complies with Section A
of the best practice provisions annexed to the Listing Rules of the London Stock
Exchange and the Remuneration Committee has given full consideration to the
provisions of Section B in framing its remuneration policy.
GENERAL POLICY ON EXECUTIVE REMUNERATION
The Remuneration Committee, when setting objectives on pay and benefits,
aims to ensure that remuneration packages offered are competitive and designed
to attract, retain and motivate executive directors and senior management of the
highest quality.
The main components of the remuneration package are set out below.
BASE SALARIES
Basic salaries are determined by the Remuneration Committee taking into
account the performance of the individual and information from independent
sources on the rates of salaries in the competitive market.
F-45
<PAGE>
AUSTIN KNIGHT LIMITED AND SUBSIDIARIES
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1995 AND 1996
26. REMUNERATION COMMITTEE REPORT (CONTINUED)
ANNUAL BONUS
The annual bonus scheme for Executive Directors is based on the profit
performance of the Group and its earnings per share.
SHARE OPTION SCHEME
Executive Directors, as members of senior management, are eligible share
options granted by the Austin Knight Limited Employees Trust. Periodically,
options are granted by the Trust at the discretion of the trustees based on
recommendations by the Board.
PENSION
Executive Directors are eligible to join the August Knight Pension and Life
Assurance Scheme. Pension contributions are paid to the Company's pension scheme
which is open to all senior employees and most other staff with more than two
years' service. The scheme provides a pension of one-sixtieth of final
pensionable salary for each year of pensionable service. It also provides the
usual pension related benefits including a lump sum of four times salary in the
event of death in service. Only base salary is pensionable.
CONTRACTS OF SERVICE
Details of individual Directors' contract terms are given in the table of
Directors' emoluments below.
DIRECTORS' EMOLUMENTS
Details of Directors' emoluments in 1996, with the comparison for the
previous year, are as follows:
<TABLE>
<CAPTION>
1995 1996
L'000 L'000
----- -----
<S> <C> <C>
Fees............................................................................ 36 36
Salaries and other benefits..................................................... 268 274
Performance payments............................................................ 27 29
Pension contributions........................................................... 26 27
--- ---
TOTAL........................................................................... 357 366
--- ---
--- ---
</TABLE>
F-46
<PAGE>
AUSTIN KNIGHT LIMITED AND SUBSIDIARIES
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1995 AND 1996
26. REMUNERATION COMMITTEE REPORT (CONTINUED)
The emoluments of individual Directors are set out below:
<TABLE>
<CAPTION>
CONTRACT
BASE PAYMENTS NOTICE
SALARY/ FOR PENSION PERIOD/
FEES BENEFITS PERFORMANCE CONTRIBUTIONS TOTAL EXPIRY DATE
--------- ----------- ------------- ------------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
K.G. Fordham................... 1996 50,000 14,028 -- -- 64,028 6 months
1995 50,000 13,539 -- -- 63,539
--------- --------- ----------- ------ ------ --------- ------------
J.R. Ratcliffe................. 1996 115,000 21,363 20,125 17,250 173,738 12 months
1995 105,060 21,424 20,000 15,750 162,234
--------- --------- ----------- ------ ------ --------- ------------
J.B. Gowshall.................. 1996 35,750 5,223 -- 5,363 46,336 Retired
1995 66,560 10,268 7,500 9,975 94,303 31.3.96
--------- --------- ----------- ------ ------ --------- ------------
R.A. Campbell.................. 1996 12,000 -- -- -- 12,000 30.11.97
1995 12,000 -- -- -- 12,000
--------- --------- ----------- ------ ------ --------- ------------
D.T. French.................... 1996 12,000 -- -- -- 12,000 30.11.98
1995 12,000 -- -- -- 12,000
--------- --------- ----------- ------ ------ --------- ------------
T.C. Mallott................... 1996 12,000 1,327 -- -- 13,327 30.11.97
1995 12,000 834 -- -- 12,834
--------- --------- ----------- ------ ------ --------- ------------
S.J. Cooney.................... 1996 27,000 4,670 8,750 4,050 44,470 6 months
1995 -- -- -- -- --
--------- --------- ----------- ------ ------ --------- ------------
--------- --------- ----------- ------ ------ --------- ------------
1996 263,750 46,611 28,875 26,663 365,899
1995 257,620 46,065 27,500 25,725 356,910
--------- --------- ----------- ------ ------ --------- ------------
--------- --------- ----------- ------ ------ --------- ------------
</TABLE>
In addition to the above payments, K.G. Fordham and T.C. Mallott receive a
pension from the Company's pension scheme in accordance with the terms of that
scheme. J.B. Gowshall has been retained as a consultant to the Company until 31
March 1997 for a fee of L10,000. He also receives a pension from the Company's
pension scheme.
Executive Directors may hold other non-executive directorships with the
prior written consent of the Board.
F-47
<PAGE>
AUSTIN KNIGHT LIMITED AND SUBSIDIARIES
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE YEARS ENDED 30 SEPTEMBER 1995 AND 1996
26. REMUNERATION COMMITTEE REPORT (CONTINUED)
The Director's interests in the 25p ordinary shares of the Company at 30
September 1996 and 1995 or date of appointment were as follows:
<TABLE>
<CAPTION>
BENEFICIAL NON-BENEFICIAL
---------------------------------------------- --------------------
<S> <C> <C> <C> <C> <C> <C>
1995 No. 1996 No. 1995 1996
of Share of Share No. of No. of
shares Options shares Options shares shares
--------- ----------- --------- ----------- --------- ---------
K.G. Fordham...................................... 468,224 -- 468,224 -- 704,320 704,320
J.R. Ratcliffe.................................... 88,200 25,000 88,200 35,000 -- --
J.B. Gowshall..................................... 3,000 12,000 -- -- -- --
D.T. French....................................... -- -- 8,000 -- 64,000 56,000
T.C. Mallott...................................... 92,032 -- 92,032 -- -- --
S.J. Cooney....................................... -- 2,000* -- 2,000 -- --
R.A. Campbell..................................... -- -- -- -- -- --
Trustee of the Austin Knight
Limited Employees Trust........................... -- -- -- -- 152,250 152,250
</TABLE>
- ------------------------
* Date of appointment.
On 1 September 1994, J.R. Ratcliffe was granted options over 25,000 ordinary
shares of 25p each at 95p per ordinary share exercisable between 1 September
1995 and 1 September 2001. On 28 November 1995, J.R. Ratcliffe and S.J. Cooney
were granted options on a further 10,000 and 2,000 ordinary shares,
respectively, at L1.30p per ordinary share , exercisable between 28 November
1998 and 28 November 2002. None of the Directors have any interests in the
shares of the other Group companies. No other Director has any rights to
subscribe for shares in the Company or any other Group company.
The trustee of the Austin Knight Limited Employees Trust is Austin Knight
Trustees Limited, a corporate Trustee, the Directors of which are K.G. Fordham,
R.A. Campbell and D.T. French.
F-48
<PAGE>
AUSTIN KNIGHT LIMITED AND ITS SUBSIDIARIES
CONSOLIDATED PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
NINE MONTHS ENDED 30
JUNE
----------------------
<S> <C> <C> <C>
(UNAUDITED)
<CAPTION>
1996 1997
NOTE L'000 L'000
----- ---------- ----------
<S> <C> <C> <C>
TURNOVER............................................................... 1 100,585 105,158
Cost of Sales.......................................................... (90,262) (93,297)
---------- ----------
GROSS PROFIT........................................................... 10,323 11,861
Administrative expenses................................................ (8,160) (9,291)
Other operating income................................................. 229 --
---------- ----------
OPERATING PROFIT....................................................... 2 2,392 2,570
Interest expense....................................................... 4 (340) (298)
---------- ----------
PROFIT on ordinary activities before taxation.......................... 2,052 2,272
TAXATION............................................................... 5 (839) (1,007)
---------- ----------
PROFIT for the financial period........................................ 1,213 1,265
DIVIDENDS.............................................................. (334) --
---------- ----------
RETAINED PROFIT for the financial period............................... 879 1,265
---------- ----------
---------- ----------
</TABLE>
The notes on pages F-53 to F-56 form part of these financial statements.
F-49
<PAGE>
AUSTIN KNIGHT LIMITED AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
AS AT 30 JUNE
1997
-----------------
<S> <C> <C>
(UNAUDITED)
<CAPTION>
NOTE L'000
--------- -----------------
<S> <C> <C>
FIXED ASSETS
Intangible assets.............................................................. 6 303
Tangible assets................................................................ 16,876
Investments.................................................................... 163
-------
17,342
-------
CURRENT ASSETS
Work-in-progress............................................................... 219
Debtors........................................................................ 27,274
Cash at bank and in hand....................................................... 364
-------
27,857
CREDITORS: Amounts falling due within one year................................. (25,614)
-------
NET CURRENT ASSETS/(LIABILITIES)............................................... 2,243
-------
TOTAL ASSETS LESS CURRENT LIABILITIES.......................................... 19,585
CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR........................ 7 (4,465)
PROVISION FOR LIABILITIES AND CHARGES.......................................... 8 (123)
-------
NET ASSETS..................................................................... 14,997
-------
-------
CAPITAL AND RESERVES
Called up share capital........................................................ 1,251
Share Premium Account.......................................................... 195
Revaluation reserve............................................................ 5,396
Profit and loss account........................................................ 8,155
-------
14,997
-------
-------
</TABLE>
The notes on pages F-53 to F-56 form part of these financial statements.
F-50
<PAGE>
AUSTIN KNIGHT LIMITED AND ITS SUBSIDIARIES
CONSOLIDATED CASH FLOW STATEMENTS*
<TABLE>
<CAPTION>
NINE MONTHS ENDED
30 JUNE,
--------------------
<S> <C> <C> <C>
(UNAUDITED)
<CAPTION>
1996 1997
--------- ---------
NOTE L'000 L'000
--------- --------- ---------
<S> <C> <C> <C>
NET CASH INFLOW (OUTFLOW) FROM OPERATING ACTIVITIES..................................... 9 4,719 (1,506)
--------- ---------
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest paid........................................................................... (373) (327)
Interest received....................................................................... 50 44
Interest element of finance lease rental payments....................................... (17) (15)
--------- ---------
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF FINANCE................... (340) (298)
--------- ---------
TAXATION
ACT paid................................................................................ (102) (111)
UK corporation tax paid................................................................. (668) (763)
Overseas and other taxes paid........................................................... (666) (210)
--------- ---------
TAX PAID................................................................................ (1,436) (1,084)
--------- ---------
CAPITAL EXPENDITURES
Purchase of own shares.................................................................. -- (122)
Sale of shares under option............................................................. -- 71
Purchase of intangible assets........................................................... (78) --
Purchase of tangible fixed assets....................................................... (1,450) (1,434)
Less: Inception of finance leases....................................................... 798 686
Proceeds from sales of fixed assets..................................................... 84 682
--------- ---------
NET CASH OUTFLOW FROM INVESTING ACTIVITIES.............................................. (646) (117)
--------- ---------
Dividends paid.......................................................................... (280) (309)
NET CASH INFLOW/(OUTFLOW) BEFORE FINANCING.............................................. 2,017 (3,314)
FINANCING
Issue of ordinary share capital......................................................... -- 122
--------- ---------
2,017 (3,192)
--------- ---------
--------- ---------
FINANCING
Repayment of loans...................................................................... 575 657
Net rental payments..................................................................... 91 202
--------- ---------
NET CASH OUTFLOW FROM FINANCING......................................................... 666 859
INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS........................................ 10 1,351 (4,051)
--------- ---------
2,017 (3,192)
--------- ---------
--------- ---------
</TABLE>
* Due to changes in Accounting Standards in the United Kingdom the information
on this page is presented in a format different than that presented elsewhere
in this document.
The notes on pages F-53 to F-56 form part of these financial statements.
F-51
<PAGE>
AUSTIN KNIGHT LIMITED AND ITS SUBSIDIARIES
RECONCILIATION OF MOVEMENT IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
NINE MONTHS ENDED
(UNAUDITED)
30 JUNE, 1997
-------------------
<S> <C>
L'000
Opening Shareholders' Funds................................................................... 13,948
------
Profit for the financial period............................................................... 1,265
Exchange adjustments.......................................................................... (338)
------
Total recognised gains for the financial period............................................... 927
New share capital subscribed.................................................................. 122
------
Closing Shareholders' Funds................................................................... 14,997
------
------
</TABLE>
The notes on pages F-53 to F-56 form part of these financial statements.
F-52
<PAGE>
AUSTIN KNIGHT LIMITED AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS
FOR THE NINE MONTHS ENDED 30 JUNE 1996 AND 1997
(UNAUDITED)
1. TURNOVER
The turnover at the Group arose in the following geographical markets:
<TABLE>
<CAPTION>
1996 1997
L'000 L'000
--------- ---------
<S> <C> <C>
United Kingdom.............................................................................. 61,631 64,191
United States............................................................................... 25,196 28,258
Rest of world............................................................................... 13,758 12,709
--------- ---------
100,585 105,158
--------- ---------
--------- ---------
</TABLE>
2. OPERATING PROFIT
The operating profit is stated after including:
<TABLE>
<CAPTION>
1996 1997
L'000 L'000
--------- ---------
<S> <C> <C>
Depreciation of tangible fixed assets........................................ 501 741
Amortisation of intangibles.................................................. 51 50
Hire of plant and equipment.................................................. 531 600
Other rents payable.......................................................... 842 857
Directors' emoluments
Management remuneration--Salaries and benefits............................. 223 203
--Performance payments.............................. 19 --
Fees....................................................................... 27 35
Pension contributions...................................................... 20 20
Auditors' remuneration--in respect of audit.................................. 89 98
Auditors' remuneration--in respect to other work............................. 27 65
Rent receivable.............................................................. 283 291
</TABLE>
3. STAFF COSTS
Staff costs, which include Directors' emoluments, were:
<TABLE>
<CAPTION>
1996 1997
L'000 L'000
--------- ---------
<S> <C> <C>
Wages and salaries......................................................... 9,975 11,118
Social security costs...................................................... 1,102 1,245
Pension costs.............................................................. 441 652
--------- ---------
11,518 13,015
--------- ---------
--------- ---------
</TABLE>
The average number of employees including Directors during the nine months
ended June 30, 1996 and 1997 were 510 and 531, respectively.
F-53
<PAGE>
AUSTIN KNIGHT LIMITED AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE NINE MONTHS ENDED 30 JUNE 1996 AND 1997
(UNAUDITED)
4. INTEREST
<TABLE>
<CAPTION>
1996 1997
L'000 L'000
----- -----
<S> <C> <C>
INTEREST PAYABLE
On bank loan repayable over more than five years............................... 285 250
On overdrafts and other loans repayable wholly within five years............... 88 77
Finance leases................................................................. 17 15
INTEREST RECEIVABLE............................................................ (50) (44)
--- ---
340 298
--- ---
--- ---
</TABLE>
5. TAXATION
The taxation on the profit on ordinary activities for the period was as
follows:
<TABLE>
<CAPTION>
1996 1997
L'000 L'000
--------- ---------
<S> <C> <C>
United Kingdom corporation tax at 33%........................................ 505 311
Overseas taxation............................................................ 334 607
Adjustments to prior years--charge........................................... -- 89
--------- ---------
839 1,007
--------- ---------
--------- ---------
</TABLE>
6. INTANGIBLE FIXED ASSETS--GOODWILL
<TABLE>
<CAPTION>
L'000
---------
<S> <C>
COST
At 1 October 1996..................................................................... 3,515
Exchange adjustments.................................................................. (126)
---------
AT 30 June 1997....................................................................... 3,389
---------
AMORTISATION
At 1 October 1996..................................................................... 3,096
Charge for period..................................................................... 50
Written off to reserves............................................................... --
Exchange adjustments.................................................................. (60)
---------
At 30 June 1997....................................................................... 3,086
---------
NET BOOK VALUE
At 30 June 1997....................................................................... 303
---------
---------
</TABLE>
F-54
<PAGE>
AUSTIN KNIGHT LIMITED AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE NINE MONTHS ENDED 30 JUNE 1996 AND 1997
(UNAUDITED)
7. CREDITORS--AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
<TABLE>
<CAPTION>
1997
L'000
---------
<S> <C>
Bank loans............................................................................ 3,402
Finance lease and hire purchase obligations........................................... 1,063
---------
4,465
---------
---------
</TABLE>
8. PROVISIONS FOR LIABILITIES AND CHARGES
The amounts provided for deferred taxation and other liabilities and charges
are as follows:
<TABLE>
<CAPTION>
L'000
-----
<S> <C>
Provision at 1 October 1996............................................................ 214
Credit for the period in the profit and loss account
Overseas........................................................................... (91)
---
Provision at 30 June 1997.............................................................. 123
---
---
</TABLE>
The amount of deferred taxation not provided is L221,000 and arises solely
on capital allowances.
The other provisions relate to pensions and other employee benefits.
9. RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM
OPERATING ACTIVITIES
<TABLE>
<CAPTION>
1996 1997
L'000 L'000
--------- ---------
<S> <C> <C>
Operating profit........................................................... 2,392 2,570
Depreciation............................................................... 501 741
Amortisation of intangible fixed assets.................................... 51 50
Loss on disposal of fixed assets........................................... 92 (13)
Decrease/(increase) in work-in-progress.................................... 71 (31)
Increase in debtors........................................................ (1,525) (3,735)
Increase/(decrease) in creditors........................................... 3,137 (1,088)
--------- ---------
Net cash inflow (outflow) from operating activities........................ 4,719 (1,506)
--------- ---------
--------- ---------
</TABLE>
F-55
<PAGE>
AUSTIN KNIGHT LIMITED AND ITS SUBSIDIARIES
NOTES TO THE ACCOUNTS (CONTINUED)
FOR THE NINE MONTHS ENDED 30 JUNE 1996 AND 1997
(UNAUDITED)
10. RECONCILIATION OF MOVEMENT TO NET DEBT
<TABLE>
<CAPTION>
30 SEPTEMBER OTHER
-------------------- CHANGE EXCHANGE NON CASH
1996 1997 IN PERIOD MOVEMENTS CASHFLOWS MOVEMENTS
--------- --------- ------------- ----------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
L000 L000 L000 L000 L000 L000
Cash at bank and in hand................... 1,596 364 (1,232) (18) (1,214) --
Overdrafts................................. (280) (3,158) (2,878) (41) (2,837) --
1,316 (2,794) (4,110) (59) (4,051) --
--
--------- --------- ------ ------ ---
Bank loans under 1 year.................... (891) (869) 22 22 -- --
Bank loans over 1 year..................... (4,138) (3,402) 736 79 657 --
Finance leases under 1 year................ (333) (504) (171) (16) -- (155)
Finance leases over 1 year................. (700) (1,063) (363) (34) 202 (531)
--
--------- --------- ------ ------ ---
(4,746) (8,632) (3,886) (8) (3,192) (686)
--
--
--------- --------- ------ ------ ---
--------- --------- ------ ------ ---
</TABLE>
F-56
