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Previous: SAC TECHNOLOGIES INC, PRE 14A, 1999-09-13 |
Next: FLORIDA PANTHERS HOLDINGS INC, 424B3, 1999-09-13 |
<PAGE> 1
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): JUNE 30, 1999
LASON, INC.
---------------------------------------
Exact name of Registration as Specified in its Charter
DELAWARE 0-21407 38-3214743
- ----------------------------- ------------------ ----------------------
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification Number)
1305 STEPHENSON HIGHWAY
TROY, MICHIGAN 48083
- ----------------------------------------- -------------
(Address of Principal Executive Offices) (Zip Code)
(248) 597-5800
---------------------------------------
(Registrant's Telephone Number, Including Area Code)
<PAGE> 2
Pursuant to Item 7(a)(4) of the instructions to Form 8-K, this current report on
Form 8-K/A amends and restates, in its entirety, the Current Report on Form 8-K
(date of report: June 30, 1999), which was filed with the Securities and
Exchange Commission on July 15, 1999.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On June 30, 1999, Lason, Inc. (the "Company") acquired all of
the outstanding shares of stock of M-R Group plc, a United
Kingdom publicly-held company ("M-R"), effected by means of a
Scheme of Arrangement ("Scheme of Arrangement") negotiated at
arm's length under Section 425 of the Companies Act 1985, under
the laws of the United Kingdom. M-R is a leading United Kingdom
document and data management company.
Under the Scheme of Arrangement, M-R shareholders received
approximately 3.1 million shares of Lason common stock
(including shares to be issued upon exercise of outstanding M-R
options). The shares of Lason common stock were issued in a
ratio of 5.376 shares of common stock of the Company for every
100 M-R shares. On June 30, 1999, the closing price per share
of common stock of the Company on the NASDAQ National Market
System was $49.625. The shares of the common stock of Lason
issued to M-R shareholders who are not affiliates (under United
States securities laws) will be freely tradeable under the
Securities Act of 1933, as amended, by virtue of Section
3(a)(10) thereof.
The merger was accounted for as a pooling-of-interests for
United States accounting purposes. In connection with the
pooling-of-interests, each of the Directors of M-R, the M-R
Group Employees' Share Ownership Plan Trust and the Directors
of the Company entered into Affiliate Agreements pursuant to
which they have agreed not to deal in the common stock of the
Company until the Company has published consolidated financial
results covering at least thirty days of operations of M-R and
the Company.
The Company is not aware of any material relationship that
existed between the Company, its officers and directors, on one
hand, and M-R, its officers, directors and its shareholders, on
the other hand, prior to the merger with M-R.
The Company intends to continue the utilization of the assets
of M-R in a manner consistent with that of their historical
usage, namely, providing a variety of data and document
management services including scanning and conversion, digital
information storage and retrieval, and micrographic and data
management services.
ITEM 5. OTHER EVENTS
As disclosed in Item 2 of this Form 8-K/A, the Company merged
with M-R Group plc on June 30, 1999. The merger was accounted
for as a "pooling of interests". The following table sets forth
the combined results of operations, of the Company and M-R
Group plc, for the quarters stated. In the opinion of
management, all adjustments necessary to fairly present the
data for such periods are included. Results for interim periods
are not necessarily indicative of results to be expected for
the full year. Additionally, such results are unaudited, and do
not represent a complete presentation in accordance with
generally accepted accounting principles. For further
information, including information on adjustments made to the
consolidated financial statements of M-R refer to Item 7 of
this Form 8-K/A and to the condensed consolidated financial
statements (unaudited) and notes thereto included in the
Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1999 filed with the Securities and Exchange Commission
on August 16, 1999.
1
<PAGE> 3
<TABLE>
<CAPTION>
QUARTER ENDED:
------------------------------------------------------------------------
June 30, Mar. 31, Dec. 31, Sept. 30, June 30, Mar. 31,
1999 1999 1998 1998 1998 1998
----------- ----------- ----------- ----------- ---------- ----------
(Unaudited, in thousands except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Revenues, net of postage $ 142,105 $ 131,063 $ 113,802 $ 96,943 $ 86,510 $ 65,112
Cost of revenues 87,921 82,268 72,007 62,983 52,197 40,117
--------- --------- --------- --------- --------- ---------
Gross profit 54,184 48,795 41,795 33,960 34,313 24,995
Selling, general and administrative expenses 32,699 30,257 25,551 22,520 20,221 16,375
Compensatory stock option expense (income) 71 1,448 140 (694) 414 405
Amortization of intangibles 3,354 2,737 2,271 1,826 1,480 1,096
Merger-related charges 30,800 288 - - - -
--------- --------- --------- --------- --------- ---------
Income (loss) from operations (12,740) 14,065 13,833 10,308 12,198 7,119
Net interest expense 2,822 2,191 1,034 1,764 1,517 608
--------- --------- --------- --------- --------- ---------
Income (loss) before income taxes (15,562) 11,874 12,799 8,544 10,681 6,511
Provision (credit) for income taxes (5,127) 4,679 4,488 3,253 4,111 2,261
--------- --------- --------- --------- --------- ---------
Net income (loss) $ (10,435) $ 7,195 $ 8,311 $ 5,291 $ 6,570 $ 4,250
========= ========= ========= ========= ========= =========
Income (loss) per share:
Basic $ (0.59) $ 0.41 $ 0.47 $ 0.34 $ 0.45 $ 0.28
========= ========= ========= ========= ========= =========
Diluted $ (0.59) $ 0.38 $ 0.44 $ 0.32 $ 0.43 $ 0.28
========= ========= ========= ========= ========= =========
</TABLE>
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of M-R:
The report of Deloitte & Touche, M-R's independent auditors,
dated September 10, 1999.
Audited balance sheets of M-R Group plc as of June 30, 1998, and
related statements of consolidated profit and loss, total
recognized gains and losses, and consolidated cash flow for the
year then ended.
Notes to financial statements.
Condensed consolidated balance sheet of M-R Group plc as of
March 31, 1999 (unaudited).
Condensed statements of consolidated profit and loss for the
nine months ended March 31, 1999 and 1998 (unaudited).
(b) Pro Forma Financial Information:
Unaudited condensed consolidated balance sheet as of June 30,
1999.
Unaudited condensed consolidated statements of income for the
three and six months ended June 30, 1999.
Unaudited proforma condensed consolidated statements of income
for the years ended December 31, 1998, 1997 and 1996.
Notes to unaudited proforma condensed consolidated financial
information.
2
<PAGE> 4
(c) Exhibits:
2.15 Transaction Agreement between Lason, Inc. and
M-R Group plc dated March 25, 1999, is hereby
incorporated by reference to Exhibit 2.15 of
registrant's From 10-Q filed on May 17, 1999,
Commission File No. 0-21407.
2.16 Amendment Agreement between Lason, Inc. and
M-R Group plc dated April 30, 1999 is hereby
incorporated by reference to Exhibit 2.16 of
registrant's Form 10-Q filed on May 17, 1999,
Commission File No. 0-21407.
2.17 Amendment Agreement between Lason, Inc. and
M-R Group plc dated May 13, 1999 is hereby
incorporated by reference to Exhibit 2.17 of
registrant's Form 10-Q filed on May 17, 1999,
Commission File No. 0-21407.
23.1 Consent of Deloitte & Touche
3
<PAGE> 5
CONSOLIDATED PROFIT AND LOSS ACCOUNT
YEAR ENDED 30 JUNE 1998
<TABLE>
<CAPTION>
Note 1998
Pound Sterling 000
--------------------
<S> <C> <C>
Turnover:
Continuing operations 38,847
Acquisitions 7,856
--------------------
46,703
Discontinued operations 119
--------------------
Total turnover 2 46,822
Cost of sales (23,949)
--------------------
Gross profit 22,873
Net operating expenses 3 (17,054)
Operating profit:
Continuing operations 5,325
Acquisitions 480
--------------------
5,805
Discontinued operations 14
--------------------
Total operating profit 5,819
Income from interest in associated undertakings 253
Other interest receivable and similar income 5 345
Interest payable and similar charges 6 (101)
Profit on sale of business 14 586
--------------------
Profit ordinary activities before taxation 2,7 6,902
Tax on profit on ordinary activities 8 (1,937)
--------------------
Profit on ordinary activities after taxation 4,965
Dividends 10 (2,177)
--------------------
Retained profit for the financial year, transferred to reserves 24 2,788
--------------------
Earnings per 10p ordinary share 11 9.2P
--------------------
Earnings per 10p ordinary share excluding post tax profit on sale of business 11 8.5P
--------------------
</TABLE>
4
<PAGE> 6
STATEMENT OF TOTAL RECOGNIZED GAINS AND LOSSES
YEAR ENDED 30 JUNE 1998
<TABLE>
<CAPTION>
1998
Pound Sterling 000
----------------------
<S> <C>
STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES
Profit on ordinary activities after taxation 4,965
Revaluation of investment property -
Foreign exchange translation differences on net
investment in subsidiaries 30
----------------------
Total recognised gains and losses for the year 4,995
----------------------
RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Profit on ordinary activities after taxation 4,965
Dividends (2,177)
----------------------
2,788
Revaluation of investment property -
Goodwill written off on acquisitions (5,064)
Goodwill written back on disposal 112
Shares issued 51
Foreign exchange translation differences 30
----------------------
Net (reduction)/addition to shareholders' funds (2,083)
Opening shareholders' funds 20,570
----------------------
Closing shareholders' funds 18,487
----------------------
</TABLE>
5
<PAGE> 7
CONSOLIDATED BALANCE SHEET
30 JUNE 1998
<TABLE>
<CAPTION>
1998
FIXED ASSETS Note Pound Sterling 000
---------------------
<S> <C> <C>
Tangible assets 12 12,433
Investments properties 13 370
Investments held as fixed assets 14 2,810
---------------------
15,613
---------------------
CURRENT ASSETS
Stocks 15 860
Debtors
Due within one year 16 15,577
Due after more than one year 16 640
Cash at bank and in hand 4,490
---------------------
21,567
CREDITORS FALLING DUE WITHIN ONE YEAR 17 16,920
---------------------
NET CURRENT ASSETS 4,647
---------------------
TOTAL ASSETS LESS CURRENT LIABILITIES 20,260
CREDITORS FALLING DUE AFTER MORE THAN ONE YEAR 18 1,370
PROVISIONS FOR LIABILITIES AND CHARGES 20 403
---------------------
18,487
---------------------
CAPITAL AND RESERVES
Called up share capital 21 5,582
Share premium account 21 5,455
Investment property revaluation reserve 22 (85)
Other reserves 23 (17,162)
Profit and loss account 24 24,697
---------------------
Equity shareholders' funds 18,487
---------------------
</TABLE>
These financial statements were approved by the Board of Directors on 9
October 1998.
Signed on behalf of the Board of Directors
/s/ Colin Haylock
- -------------------
Colin Haylock
Director
6
<PAGE> 8
COMPANY BALANCE SHEET
30 JUNE 1998
<TABLE>
<CAPTION>
1998
FIXED ASSETS Note Pound Sterling
000
---------------
<S> <C> <C>
Tangible assets 12 2,710
Investment properties 13 370
Investments held as fixed assets 14 24,400
-----------
27,480
-----------
CURRENT ASSETS
Debtors 16 7,956
Cash at bank and in hand 1,456
-----------
9,412
CREDITORS FALLING DUE WITHIN ONE YEAR 17 4,115
-----------
NET CURRENT ASSETS 5,297
-----------
TOTAL ASSETS LESS CURRENT LIABILITIES 32,777
CREDITORS FALLING DUE AFTER MORE THAN ONE YEAR 18 -
PROVISIONS FOR LIABILITIES AND CHARGES 20 490
-----------
32,287
-----------
CAPITAL AND RESERVES
Called up share capital 21 5,582
Share premium account 21 5,455
Investment property revaluation reserve 22 (85)
Other reserves 23 14,268
Profit and loss account 24 7,067
-----------
Equity shareholders' funds 32,287
-----------
</TABLE>
These financial statements were approved by the Board of Directors on 9
October 1998.
Signed on behalf of the Board of Directors
/s/ Colin Haylock
- ------------------
Colin Haylock
Director
7
<PAGE> 9
CONSOLIDATED CASH FLOW STATEMENT
YEAR ENDED 30 JUNE 1998
<TABLE>
<CAPTION>
1998
Note Pound Sterling 000
-------------------
<S> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES 1 8,030
Returns on investments and servicing of finance 2 244
Taxation paid 2 (1,477)
Net cash outflow from capital expenditure
and financial investment 2 (4,985)
Net cash outflow from acquisitions and disposals 2 (5,364)
Equity dividends paid (2,140)
-------------------
NET CASH OUTFLOW BEFORE USE OF LIQUID RESOURCES AND FINANCING (5,692)
NET CASH OUTFLOW FROM FINANCING 2 (695)
-------------------
DECREASE IN CASH 4 (6,387)
-------------------
</TABLE>
8
<PAGE> 10
NOTES TO CONSOLIDATED CASH FLOW STATEMENT
YEAR ENDED 30 JUNE 1998
1 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
1998
Pound Sterling 000
-------------------
<S> <C>
Operating Profit 5,819
Depreciation charges 2,549
Profit on sale of tangible fixed assets (221)
Foreign exchange movements 1
Decrease in stocks 35
Increase in debtors (2,719)
Increase in creditors 2,741
Decrease in provisions for liabilities and charges (175)
------------------
Net cash inflow from operating activities 8,030
------------------
2 ANALYSIS OF CASH FLOWS FOR HEADING NETTED IN THE CASH FLOW STATEMENT
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received 345
Interest paid (32)
Interest element of finance lease rental payments (69)
------------------
Net cash inflow from returns on investments and servicing of finance 244
------------------
TAXATION
UK corporation tax paid (including advance corporation tax) (1,015)
Overseas tax paid (462)
------------------
Taxation paid (1,477)
------------------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Payments to acquire tangible fixed assets (4,412)
Purchase of own shares (1,049)
Sale of tangible fixed assets 476
------------------
Net cash outflow from capital expenditure and financial investment (4,985)
------------------
ACQUISITIONS AND DISPOSALS
Purchase of subsidiary undertakings (4,944)
Net overdrafts acquired (707)
Loans acquired (500)
Cash at bank and in hand acquired 37
Sale of business 750
------------------
Net cash outflow from acquisitions and disposals (5,364)
------------------
</TABLE>
9
<PAGE> 11
NOTES TO CONSOLIDATED CASH FLOW STATEMENT
YEAR ENDED 30 JUNE 1998
2 ANALYSIS OF CASH FLOWS FOR HEADING NETTED IN THE CASH FLOW STATEMENT
(continued)
<TABLE>
<CAPTION>
1998
FINANCING Pound Sterling 000
-------------------
<S> <C>
Capital element of finance lease rental payments (746)
------
Cash outflow from movement in debt financing (746)
Share options exercised 51
------
Net cash outflow from financing (695)
------
3 ANALYSIS OF NET FUNDS
<CAPTION>
Other non-cash
Acquisitions movements including
1998 Cash flow (excl. net cash) Foreign exchange 1997
Pound Sterling 000 Pound Sterling 000 Pound Sterling 000 Pound Sterling 000 Pound Sterling 000
--------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cash at bank and in hand 4,490 (6,387) - 1 10,876
Finance leases (1,725) 746 (142) (1,812) (517)
--------------------------------------------------------------------------------------------------------
2,765 (5,641) (142) (1,811) 10,359
--------------------------------------------------------------------------------------------------------
4 RECONCILIATION OF NET CASH FLOW TO MOVEMENTS IN NET FUNDS
<CAPTION>
1998
Pound Sterling 000
-----------------------
<S> <C>
Net cash outflow (6,387)
Effect of foreign exchange differences 1
-----------
Decrease in cash in the period (6,386)
Cash outflow from increase in debt and finance leasing (1,208)
-----------
Movement in net debt in the year (7,594)
Net cash at the start of the year 10,359
-----------
Net cash at the end of the year 2,765
-----------
</TABLE>
10
<PAGE> 12
NOTES TO THE ACCOUNTS
YEAR ENDED 30 JUNE 1998
1. ACCOUNTING POLICIES
The financial statements are prepared in accordance with applicable accounting
standards. The particular accounting policies adopted are described below.
ACCOUNTING CONVENTION
The financial statements are prepared under the historical cost convention as
modified by the revaluation of investment properties.
BASIS OF CONSOLIDATION
The group financial statements consolidate the results of the company and its
subsidiaries for the year ended 30 June 1998.
GOODWILL
Goodwill, including goodwill on consolidation, which represents the difference
between the consideration and the aggregate of the fair value of separable net
assets at the date of acquisition, is written off immediately against reserves.
PENSION COSTS
Retirement benefits to employees are substantially provided by defined
contribution pension schemes. Contributions payable to the pension schemes in
respect of each accounting period are charged to the profit and loss account.
TANGIBLE FIXED ASSETS
Depreciation is provided in equal annual instalments over the estimated useful
lives of the assets and is calculated on the cost or valuation of the assets.
The following annual rates are used:
Freehold buildings 2% - 3%
Long leasehold buildings. over the period of the lease
Plant and equipment 15% - 33%
Motor vehicles 25%
Improvements to leasehold premises 20% or over the primary period of
the lease
No depreciation is provided on freehold land.
DEFERRED TAXATION
Deferred taxation is provided at the anticipated tax rates on timing differences
arising from the inclusion of items of income and expenditure in taxation
computations in periods different from those in which they are included in the
financial statements to the extent that it is probable that a liability or asset
will crystallise in the future.
STOCKS AND WORK IN PROGRESS
Stocks and work in progress are stated at the lower of cost and net realisable
value. Cost represents materials, direct labour and production overheads.
11
<PAGE> 13
NOTES TO THE ACCOUNTS
YEAR ENDED 30 JUNE 1998
1 ACCOUNTING POLICIES (continued)
EQUIPMENT RENTALS
Income from equipment on rental is credited to the profit and loss account as it
becomes receivable.
LEASES
Assets held under finance leases and the related lease obligations are recorded
in the balance sheet at the fair value of the leased assets at the inception of
the leases. The excess of the lease payments over the recorded lease obligations
is treated as finance charges which are amortised over each lease term to give a
constant rate of charge on the remaining balance of the obligation.
Rental costs under operating leases are charged to the profit and loss account
in equal annual installments over the periods of the leases.
FOREIGN EXCHANGE
Transactions of UK companies denominated in foreign currencies are translated
into sterling at the rates ruling at the dates of the transactions or, where
appropriate, the rates of exchange fixed under the terms of forward exchange
contracts. Monetary assets and liabilities denominated in foreign currencies at
the balance sheet date are translated at the rates ruling at that date, or where
appropriate at the rates of exchange fixed under the terms of forward exchange
contracts. These translation differences are dealt with in the profit and loss
account.
The financial statements of foreign subsidiaries are translated into sterling at
the closing rate of exchange and the difference arising from the translation of
the opening net investment in the subsidiaries at the closing rate is taken
direct to reserves.
RESEARCH AND DEVELOPMENT EXPENDITURE
Research and development expenditure is written off during the year in which it
is incurred.
INVESTMENTS
Investments held as fixed assets are stated at cost less provision for permanent
diminution in value. Investments held as current assets are stated at the lower
of cost and market value.
INVESTMENT PROPERTIES
Investment properties are revalued annually by the directors and every three
years by an external professional valuer. The aggregate surplus or deficit is
transferred to the investment property revaluation reserve. No depreciation is
provided in respect of investment properties; this constitutes a departure from
the statutory rules requiring fixed assets to be depreciated over their useful
economic lives and is necessary to enable the financial statements to give a
true and fair view.
12
<PAGE> 14
NOTES TO THE ACCOUNTS
YEAR ENDED 30 JUNE 1998
2 SEGMENTAL INFORMATION
The group's turnover, profit before taxation and net assets arise from its
principal activities. The analyses of turnover, profit before taxation and net
assets are stated below:
<TABLE>
<CAPTION>
1998
Pound Sterling 000
------------------
<S> <C>
BY GEOGRAPHICAL SEGMENT:
TURNOVER BY DESTINATION:
United Kingdom 32,263
United States of America 11,905
Europe 1,757
Other 778
------
46,703
Discontinued operations 119
------
46,822
------
TURNOVER BY ORIGIN:
United Kingdom 35,995
United States of America 10,708
------
46,703
Discontinued operations 119
------
46,822
------
PROFIT BEFORE TAXATION:
United Kingdom 5,588
United States of America 1,300
------
6,888
Discontinued operations 14
------
6,902
------
NET ASSETS:
United Kingdom 14,836
United States of America 3,651
------
18,487
------
</TABLE>
13
<PAGE> 15
NOTES TO THE ACCOUNTS
YEAR ENDED 30 JUNE 1998
2 SEGMENTAL INFORMATION (continued)
Turnover and profit before taxation relating to discontinued operations occurred
in the United States of America and related to integrated services activities.
BY CLASS OF BUSINESS SECTOR:
<TABLE>
<CAPTION>
1998
POUND STERLING 000
------------------
<S> <C>
TURNOVER:
Integrated services 38,566
Strategic services 3,178
Software 5,078
------------------
46,822
------------------
PROFIT BEFORE TAXATION:
Integrated services 6,094
Strategic services 13
Software 795
------------------
6,902
------------------
NET ASSETS:
Integrated services 18,160
strategic services 500
Software (173)
------------------
18,487
------------------
3 ANALYSIS OF NET OPERATING EXPENSES
Continuing operations:
<CAPTION>
1998
NET OPERATING EXPENSES: POUND STERLING 000
<S> <C>
Distribution costs 5,258
Administrative expenses 12,136
Other operating income (340)
----------------
17,054
----------------
</TABLE>
14
<PAGE> 16
NOTES TO THE ACCOUNTS
YEAR ENDED 30 JUNE 1998
4 DIRECTORS AND EMPLOYEES
<TABLE>
<CAPTION>
1998
POUND STERLING 000
<S> <C>
Directors' emoluments:
Fees 40
Other emoluments 704
--------------------
744
--------------------
</TABLE>
<TABLE>
<CAPTION>
COMPENSATION
BASIC FOR LOSS
SALARY FEES OF OFFICE
Pound Sterling 000 Pound Sterling 000 Pound Sterling 000
YEAR ENDED 30 JUNE 1998
<S> <C> <C> <C>
T G S Clarke 62 -- --
M J Enright 58 -- 71
C Haylock 190 -- --
J A Heaford -- 20 --
M C Hooper 23 -- --
PJ O'Connor 100 -- --
P B Rhodes -- 20 --
D Saul 100 -- --
----------------------------------------------------------
533 40 71
----------------------------------------------------------
<CAPTION>
OTHER
PENSION BENEFITS TOTAL
Pound Sterling 000 Pound Sterling 000 Pound Sterling 000
YEAR ENDED 30 JUNE 1998
<S> <C> <C> <C>
T G S Clarke 12 6 80
M J Enright 6 7 142
C Haylock 21 13 224
J A Heaford -- -- 20
M C Hooper 2 2 27
PJ O'Connor 10 6 116
P B Rhodes -- -- 20
D Saul 10 5 115
----------------------------------------------------------
61 39 744
----------------------------------------------------------
</TABLE>
15
<PAGE> 17
NOTES TO THE ACCOUNTS
YEAR ENDED 30 JUNE 1998
4 DIRECTORS AND EMPLOYEES (continued)
SHARE OPTIONS HELD BY THE EXECUTIVE DIRECTORS WHICH WERE ACQUIRED FOR NOMINAL
SUMS WERE:
<TABLE>
<CAPTION>
DATE OF GRANT EXERCISE PERIOD OPTION NUMBER GRANTED LAPSED NUMBER
PRICE AT IN IN AT
(PENCE) 1 JULY 1997 YEAR YEAR 30 JUNE 1998
<S> <C> <C> <C> <C> <C> <C>
M J Enright
22.02.96 22.02.99 - 21.02.06 84.5 200,000 - (200,000) -
29.4.97 29.04.00 - 28.04.07 91.5 100.000 - (100,000) -
29.4.97 * 29.04.02 - 28.04.04 91.5 300,000 - (300,000) -
-----------------------------------------------------
600,000 - (600,000) -
-----------------------------------------------------
C Haylock
23.06.95 23.06.98 - 22.06.05 76.5 400,000 - - 400,000
29.04.97 29.04.00 - 28.04.07 91.5 450,000 - - 450,000
29.04.97 * 29.04.02 - 28.04.04 91.5 750,000 - - 750,000
-----------------------------------------------------
1,600,000 - - 1,600,000
-----------------------------------------------------
P J O'Connor
10.11.94 10.11.97 - 09.11.07 114.0 15,000 - - 15,000
22.02.96 22.02.99 - 21.02.06 90.0 75,000 - - 75,000
14.10.96 14.10.99 - 13.10.06 83.5 110,000 - - 110,000
29.04.97 29.04.00 - 28.04.07 91.5 100,000 - 100,000
29.04.97 * 29.04.02 - 28.04.04 91.5 300,000 - - 300,000
-----------------------------------------------------
600,000 - - 600,000
-----------------------------------------------------
D Saul
14.10.96 14.10.99 - 13.10.06 83.5 150,000 - - 150,000
29.04.97 29.04.00 - 28.04.07 91.5 125,000 - - 125,000
29.04.97 * 29.04.02 - 28.04.04 91.5 275,000 - - 275,000
-----------------------------------------------------
550,000 - - 550,000
-----------------------------------------------------
M C Hooper
10.11.94 10.11.97 - 09.11.07 114.0 10,000 - - 10,000
23.02.96 23.02.99 - 22.02.06 90.0 25,000 - - 25,000
20.11.97 20.11.00 - 19.11.07 108.5 - 12,500 - 12,500
20.11.97 * 20.11.02 - 19.11.04 108.5 - 12,500 - 12,500
22.01.98 22.04.01 - 21.04.08 130.5 - 125,000 - 125,000
22.01.98 * 22.04.03 - 21.04.05 130.5 - 125,000 - 125,000
-----------------------------------------------------
35,000 275,000 - 310,000
-----------------------------------------------------
T G S Clarke
20.11.97 20.11.00 - 19.11.07 108.5 - 125,000 - 125,000
20.11.97 * 20.11.02 - 19.11.04 108.5 - 125,000 - 125,000
-------------------------------------------------------
- 250,000 - 250,000
-------------------------------------------------------
</TABLE>
*These options granted are "Super" options as detailed in the Report of the
Remuneration Committee included in the M-R Group plc 1998 Annual Report &
Accounts previously issued. The mid-market share price of the above share
options at 30 June 1998 was 153.5p. The high and low share price for the year to
30 June 1998 were 165.5p and 85.5p respectively.
16
<PAGE> 18
NOTES TO THE ACCOUNTS
YEAR ENDED 30 JUNE 1998
<TABLE>
<CAPTION>
4 DIRECTORS AND EMPLOYEES (continued)
1998
POUND STERLING 000
EMPLOYEE COSTS DURING THE YEAR: -------------------
<S> <C>
Wages and salaries 15,408
Social security costs 1,361
Pension contributions (Note 27) 393
-------------
17,162
-------------
Average number of persons employed: NO.
Production 984
Sales and distribution 75
Administration 81
-------------
1,140
-------------
<CAPTION>
5 OTHER INTEREST RECEIVABLE AND SIMILAR INCOME
POUND STERLING 000
-------------------
<S> <C>
Bank interest 345
-------------
<CAPTION>
6 INTEREST PAYABLE AND SIMILAR CHARGES
<S> <C>
Bank overdrafts and other borrowings 32
Finance charges -- finance leases 69
-------------
101
-------------
</TABLE>
17
<PAGE> 19
NOTES TO THE ACCOUNTS
YEAR ENDED 30 JUNE 1998
7 PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
<TABLE>
<CAPTION>
1998
PROFIT ON ORDINARY ACTIVITIES IS AFTER CHARGING/(CREDITING): Pound Sterling 000
-------------------
<S> <C>
Depreciation:
Owned assets 2,369
Assets held under finance leases 180
Rentals under operating leases:
Hire of plant and equipment 986
Other operating leases 862
Profit on sale of fixed assets:
Plant and machinery (221)
Motor vehicles -
Auditors' remuneration:
Audit 106
Taxation 44
Other services 6
--------------
</TABLE>
8 TAX ON PROFIT ON ORDINARY ACTIVITIES
<TABLE>
<S> <C>
THE TAX CHARGE COMPRISES:
United Kingdom corporation tax at 31.5% 1,432
Overseas taxation 620
Deferred taxation (119)
Associated companies 65
--------------
1,998
Adjustment in respect of prior years (61)
--------------
1,937
--------------
</TABLE>
The tax charge for the year is low due to the availability of trading losses
brought forward.
9 PROFIT FOR THE FINANCIAL YEAR
As permitted by Section 230 of the Companies Act 1985, the profit and loss
account of the parent company is not presented as part of these financial
statements. The parent company's profit after taxation for the financial year
amounted to Pound Sterling 1,456,000.
10 DIVIDENDS PAID AND PROPOSED
An interim dividend of 1.35p per share was paid on 7 April 1998.
The directors have proposed a final dividend of 2.7p per share
making a total for the year of 4.05p which, together with the
related tax credit, is equivalent to a total gross dividend of 5.4p per share.
The dividend on the shares held in the Employees' Share Option Scheme Trust has
been waived.
18
<PAGE> 20
NOTES TO THE ACCOUNTS
YEAR ENDED 30 JUNE 1998
11. EARNINGS PER 10P ORDINARY SHARE
The calculation of earnings per share is based on the profit on ordinary
activities after taxation of Pound Sterling 4,965,000 and on the weighted
average of 54,233,000 ordinary shares in issue during the year.
The calculation of earnings per share excluding the post tax profit on sale of
business of Pound Sterling 343,000 is based on the profit on ordinary activities
after taxation of Pound Sterling 4,622,000.
12 TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
FREEHOLD LONG SHORT PLANT
LAND AND LEASEHOLD LEASEHOLD AND
BUILDINGS BUILDINGS IMPROVEMENTS EQUIPMENT
Pound Sterling 000 Pound Sterling 000 Pound Sterling 000 Pound Sterling 000
-----------------------------------------------------------------------------------
GROUP
<S> <C> <C> <C> <C>
COST:
At 1 July 1997 426 2,453 2,291 18,094
Additions -- -- 264 5,551
Additions on acquisition -- -- -- 5,412
Disposals -- -- (9) (1,711)
On disposal of business -- -- (64) (206)
Foreign exchange translation 1 -- (1) 13
----------------------------------------------------------------------------------
AT 30 June 1998 427 2,453 2,481 27,153
----------------------------------------------------------------------------------
ACCUMULATED DEPRECIATION:
At 1 July 1997 105 183 1,600 14,379
Additions on acquisition -- -- -- 4,139
Charge for 12 21 213 1,987
Disposals -- -- (9) (1,461)
On disposal of business -- -- (55) (176)
Foreign exchange translation -- -- 2 10
----------------------------------------------------------------------------------
AT 30 June 1998 117 204 1,751 18,878
----------------------------------------------------------------------------------
NET BOOK VALUE:
AT 30 JUNE 1998 310 2,249 730 8,275
----------------------------------------------------------------------------------
<CAPTION>
MOTOR
VEHICLES TOTAL
Pound Sterling 000 Pound Sterling 000
-----------------------------------------
GROUP
<S> <C> <C>
COST:
At 1 July 1997 1,214 24,478
Additions 409 6,224
Additions on acquisition 47 5,459
Disposals (67) (1,787)
On disposal of business -- (270)
Foreign exchange translation -- 13
-----------------------------------------
AT 30 June 1998 1,603 34,117
-----------------------------------------
ACCUMULATED DEPRECIATION:
At 1 July 1997 444 16,711
Additions on acquisition 36 4,175
Charge for 316 2,549
Disposals (62) (1,532)
On disposal of business -- (231)
Foreign exchange translation -- 12
-----------------------------------------
AT 30 June 1998 734 21,684
-----------------------------------------
NET BOOK VALUE:
AT 30 JUNE 1998 869 12,433
-----------------------------------------
</TABLE>
All tangible fixed assets are valued under the historical cost convention.
The net book value of the group's plant and machinery includes Pound Sterling
2,098,000 and the net book value of the group's motor vehicles includes Pound
Sterling 134,000 in respect of assets held under finance leases and hire
purchase contracts. Included in freehold land and buildings is land valued at
Pound Sterling 71,000 which is not depreciated.
19
<PAGE> 21
NOTES TO THE ACCOUNTS
YEAR ENDED 30 JUNE 1998
12 TANGIBLE FIXED ASSETS (continued)
<TABLE>
<CAPTION>
LONG PLANT
LEASEHOLD AND MOTOR
BUILDINGS EQUIPMENT VEHICLES TOTAL
POUND STERLING 000 POUND STERLING 000 POUND STERLING 000 POUND STERLING 000
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMPANY
COST:
At 1 July 1997 2,452 415 248 3,115
Additions - 210 92 302
Intra-group transfers - 27 (29) (2)
---------------------------------------------------------------------------------------
AT 30 JUNE 1998 2,452 652 311 3,415
---------------------------------------------------------------------------------------
ACCUMULATED DEPRECIATION:
At 1 July 1997 181 319 37 537
Charge for year 22 53 68 143
lntra-group transfers - 16 9 25
---------------------------------------------------------------------------------------
AT 30 JUNE 1998 203 388 114 705
---------------------------------------------------------------------------------------
NET BOOK VALUE:
AT 30 JUNE 1998 2,249 264 197 2,710
---------------------------------------------------------------------------------------
</TABLE>
All tangible fixed assets are valued under the historical cost convention.
While the valuation of the long leasehold buildings in 1991 indicated a market
value which is below cost, this valuation has not been reflected in the accounts
since, in the opinion of the directors, there is no intention to realise the
property, and its original cost is recoverable in full from use within the
business. Consequently, this fall in market value represents a temporary
diminution in value to the business.
13 INVESTMENT PROPERTIES
<TABLE>
<CAPTION>
GROUP COMPANY
POUND STERLING 000 POUND STERLING 000
------------------------------------------
<S> <C> <C>
Valuation at 30 June 1998 370 370
------------------------------------------
</TABLE>
The properties were valued by a firm of professional chartered surveyors, George
Trollope at Pound Sterling 370,000 in the year to 30 June 1997. In the opinion
of the directors, this valuation is fairly stated.
20
<PAGE> 22
NOTES TO THE ACCOUNTS
YEAR ENDED 30 JUNE 1998
14 INVESTMENTS HELD AS FIXED ASSETS
<TABLE>
<CAPTION>
GROUP COMPANY
1998 1998
POUND STERLING 000 POUND STERLING 000
-----------------------------------------
<S> <C> <C>
Shares in group undertakings:
Subsidiaries -- 22,217
Own shares 2,183 2,183
Other investments 7 --
Interests in associated undertakings 620 --
-----------------------------------------
2,810 24,400
-----------------------------------------
</TABLE>
Shares in group undertakings are valued at cost less provision for permanent
diminution in value.
Additional information in respect of investments of the group for which there
have been movements during the year:
On 13 November 1997 the group entered into a conditional agreement to acquire
the entire issued share capital of PCL Group plc. The acquisition was completed
on 13 November 1997 for a total consideration of Pound Sterling 4,654,000
including acquisition expenses.
An analysis of net assets/(liabilities) acquired is as follows:
<TABLE>
<CAPTION>
BOOK FAIR
VALUE REVALUATIONS VALUE
Pound Sterling 000 Pound Sterling 000 Pound Sterling 000
----------------------------------------------------------------
<S> <C> <C> <C>
Tangible fixed assets 1,259 -- 1,259
Other investments 7 -- 7
Current assets 3,303 -- 3,303
Cash less bank loans (1,207) -- (1,207)
Creditors due within one year (3,153) -- (3,153)
Creditors due after more than one year (23) -- (23)
----------------------------------------------------
TOTAL NET ASSETS ACQUIRED 186 -- 186
----------------------------------------------------
Total Consideration 4,654
-----
TOTAL GOODWILL 4,468
-----
</TABLE>
On 12 May 1998 Memex Incorporated, an indirectly held subsidiary of the group,
entered into a conditional agreement to acquire the entire issued share capital
of Applied MicroTechnology Incorporated for a maximum total consideration of
$l,000,000, of which $440,000 was paid in cash on 12 May 1998 with up to a
maximum of $560,000 being deferred.
21
<PAGE> 23
NOTES TO THE ACCOUNTS
YEAR ENDED 30 JUNE 1998
14 INVESTMENTS HELD AS FIXED ASSETS (continued)
An analysis of net assets/(liabilities) acquired is as follows:
<TABLE>
<CAPTION>
BOOK FAIR
VALUE REVALUATION VALUE
POUND STERLING 000 POUND STERLING 000 POUND STERLING 000
---------------------------------------------------------------
<S> <C> <C> <C>
Tangible fixed assets 25 - 25
Stocks 7 - 7
Debtors 206 - 206
Cash at bank and in hand 37 - 37
Creditors due within one year (248) - (248)
---------------------------------------------------------------
TOTAL NET ASSETS ACQUIRED 27 - 27
---------------------------------------------------------------
Total cash consideration and acquisition expenses 290
Contingent consideration payable in cash 333
-----------------
623
-----------------
TOTAL GOODWILL 596
-----------------
The acquisitions have been accounted for by the acquisition method of accounting
and a total goodwill of Pound Sterling 5,064,000 has been written off to Merger
& other reserves (Note 23).
On 31 August 1997 the group disposed of Fort Knox Secured Data, the US box
storage division, for a total consideration of $1,350,000.
An analysis of the net assets/(liabilities) disposed of is as follows:
<CAPTION>
FAIR
VALUE
POUND STERLING 000
<S> <C>
Tangible fixed assets 39
Stocks 4
Debtors 9
---------------
52
Goodwill written back 112
Total consideration net of disposal expenses 750
---------------
PROFIT ON SALE OF BUSINESS 586
---------------
</TABLE>
Other investments represent the 10p ordinary shares in M-R Group plc held by the
Employees' Share Option Scheme Trust. The Trust purchased 200,000 shares on 20
November 1997. 100,000 shares on 2 December 1997. 440,000 shares on 8 April 1998
and 110,000 shares on 9 April 1998. The total ownership of the Trust at 30 June
1998 was 2,076,842 shares which are listed on a recognised investment exchange
and their market value at 1 September 1998 was Pound Sterling 2,856,000. The
final dividend of 2.7p per share has been waived.
22
<PAGE> 24
NOTES TO THE ACCOUNTS
YEAR ENDED 30 JUNE 1998
14 INVESTMENTS HELD AS FIXED ASSETS (continued)
<TABLE>
<CAPTION>
GROUP
1998
INTERESTS IN ASSOCIATED UNDERTAKINGS: Pound Sterling 000
<S> <C>
Cost of acquisition 14
Group's share of undistributed post acquisition profits:
At 1 July 1997 419
Profits retained for the year to 30 June 1998 187
---------------------
Balance at 30 June 1998 620
---------------------
<CAPTION>
SHARES IN GROUP COMPANIES: COMPANY
Pound Sterling 000
------------------
<S> <C>
AT 30 JUNE 1998 24,400
------------------
</TABLE>
The following companies were the principal subsidiaries and associated companies
at 30 June 1998:
<TABLE>
<CAPTION>
TYPE OF CLASS OF % SHARE
BUSINESS SHARE EQUITY HELD
--------------------------------------------------
<S> <C> <C> <C>
M-R Data Management Limited* Microfilming Ordinary 100
Digitisation
M-R DPTS Limited* Digitisation Ordinary 100
Preference 100
Memex Technology Limited Information Ordinary 100
Retrieval Systems Preference 100
MR-Microrite Systems Limited * Laser Printing Ordinary 100
PCL Group plc* Data Computing Ordinary 100
MR Group Systems Limited * Systems Integration Ordinary 100
Database Management
Consultancy
M-R Technologies Incorporated Microfilming Ordinary 100
(formerly Computer Microfilm Corporation) Laser Printing
Digitisation
Escrow
Woodlands-DPTS Limited + Seismic Data Ordinary 50
</TABLE>
* Directly held subsidiaries
+ Associated company
23
<PAGE> 25
NOTES TO THE ACCOUNTS
YEAR ENDED 30 JUNE 1998
14 INVESTMENTS HELD AS FIXED ASSETS (continued)
Only the principal subsidiaries and associates are shown as the list of
companies within the group would be of excessive length.
M-R Technologies Inc. (formerly Computer Microfilm Corporation), its immediate
parent company MR-Data Management Incorporated, Memex Incorporated and AMT
Incorporated are incorporated in the United States of America.
Precise Capture Limited, whose intermediate parent company is PCL Group plc, is
incorporated and registered in Mauritius.
All other subsidiaries and associates are incorporated in Great Britain and
registered in England and Wales with the exception of Memex Technology Limited,
Memex Information Holdings Limited and ASAP Limited which are registered in
Scotland.
All companies operate principally in the country of their incorporation.
15 STOCKS
<TABLE>
<CAPTION>
GROUP COMPANY
1998 1998
POUND POUND
STERLING 000 STERLING 000
---------------------------------
<S> <C> <C>
Raw materials and consumables 667 -
Work in progress 141 -
Finished goods and goods for resale 52 -
---------------------------------
860 -
---------------------------------
16 DEBTORS
Trade debtors 13,584 232
Amounts owed by subsidiaries - 7,492
Other debtors 785 122
UK corporation tax 147 91
Prepayments and accrued income 1,061 19
---------------------------------
Debtors due within one year 15,577 7,956
---------------------------------
Debtors due after more than one year:
Advance corporation tax 362 -
Deferred tax asset 278 -
---------------------------------
640 -
---------------------------------
</TABLE>
Details of the deferred tax asset are shown in note 20.
24
<PAGE> 26
NOTES TO THE ACCOUNTS
YEAR ENDED 30 JUNE 1998
17 CREDITORS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
GROUP COMPANY
1998 1998
POUND STERLING 000 POUND STERLING 000
-----------------------------------------
<S> <C> <C>
Obligations under finance leases 355 --
Trade creditors 6,461 689
Amounts owed to subsidiaries -- 1,764
Other creditors 1,202 50
Taxation and social security 3,728 46
Accruals and deferred income 3,723 115
Dividends 1,451 1,451
-----------------------------------------
16,920 4,115
-----------------------------------------
18 CREDITORS FALLING DUE AFTER MORE THAN ONE YEAR
Obligations under finance leases 1,370 --
-----------------------------------------
1,370 --
-----------------------------------------
</TABLE>
25
<PAGE> 27
NOTES TO THE ACCOUNTS
YEAR ENDED 30 JUNE 1998
19 OBLIGATIONS UNDER FINANCE LEASES
<TABLE>
<CAPTION>
GROUP COMPANY
1998 1998
Pound Sterling 000 Pound Sterling 000
------------------ ------------------
Repayable as follows:
<S> <C> <C>
Within one year 397 --
Between two and five years 1,571 --
----------------------------------------
1,968 --
Finance charges allocated to future periods (243) --
----------------------------------------
1,725 --
----------------------------------------
Within one year 355 --
Between two and five years 1,370 --
----------------------------------------
1,725 --
----------------------------------------
20 PROVISIONS FOR LIABILITIES AND CHARGES
Deferred taxation (a) -- 87
Deferred consideration on acquisitions (b) 403 403
----------------------------------------
Total provisions for liabilities and charges 403 490
----------------------------------------
</TABLE>
(a)The amounts of deferred taxation provided
and unprovided in the accounts are:
<TABLE>
<CAPTION>
PROVIDED UNPROVIDED
1998 1998
GROUP Pound Sterling 000 Pound Sterling 000
----------------------------------------
<S> <C> <C>
Capital allowances in excess of depreciation 641 (100)
Other timing differences (919) (100)
Unutilised losses -- (88)
----------------------------------------
(278) (288)
----------------------------------------
</TABLE>
26
<PAGE> 28
NOTES TO THE ACCOUNTS
YEAR ENDED 30 JUNE 1998
20 PROVISIONS FOR LIABILITIES AND CHARGES (continued)
<TABLE>
<CAPTION>
PROVIDED UNPROVIDED
1998 1998
COMPANY POUND STERLING 000 Pound Sterling 000
-----------------------------------------------------------------------------
<S> <C> <C>
Capital allowances in excess of depreciation 87 --
-----------------------------------------------------------------------------
</TABLE>
The movements during the year were:
<TABLE>
<CAPTION>
GROUP COMPANY
POUND STERLING 000 POUND STERLING 000
---------------------------------------
<S> <C> <C>
Balance at 1 July 1997 (166) 64
Exchange differences (6) --
Profit and loss transfer (106) 23
---------------------------------------
BALANCE AT 30 JUNE 1998 (278) 87
---------------------------------------
</TABLE>
The deferred tax asset is shown in note 16.
(b) Deferred consideration on acquisitions:
<TABLE>
<CAPTION>
MEMEX
POUND STERLING 000
------------------
<S> <C>
Balance at 1 July 1997 538
Applied in year (135)
-----------------
BALANCE AT 30 JUNE 1998 403
-----------------
</TABLE>
27
<PAGE> 29
NOTES TO THE ACCOUNTS
YEAR ENDED 30 JUNE 1998
21 CALLED UP SHARE CAPITAL AND SHARE PREMIUM
<TABLE>
<CAPTION>
SHARE CAPITAL POUND STERLING 000
------------------
Authorised:
<S> <C>
72,000,000 ordinary shares of 10p each 7,200
------------------
Issued:
55,900,000 ordinary shares of 10p each
AT 3O JUNE 1997 AND 30 JUNE 1998 5,590
------------------
Allotted and fully paid:
At 30 June 1997 5,577
Allotted 50,000 shares under November 1994 and February 1996 approved share option schemes 5
------------------
AT 30 JUNE 1998 5,582
------------------
SHARE PREMIUM ACCOUNT
At 30 June 1997 5,409
Premium on shares issued during the year 46
------------------
AT 30 JUNE 1998 5,455
------------------
</TABLE>
Under the company's employee share option scheme employees held options at 30
June 1998 for 10p ordinary shares as follows:
<TABLE>
<CAPTION>
OPTION PRICE OPTION
DATE OF GRANT NUMBER OF SHARES PER SHARE EXERCISE PERIOD
-----------------------------------------------------------
<S> <C> <C> <C>
09.11.89 79,301 174.67p 09.11.92 - 08.11.99
10.11.94 175,000 114.Op l0.ll.97 - 09.ll.04
23.06.95 400,000 76.5p 23.06.98 - 22.06.05
23.02.96 207,500 90.0p 23.02.99 - 22.02.06
14.10.96 410,000 83.5p 14.10.99 - 13.10.06
29.04.97 800,000 91.5p 29.04.00 - 28.04.07
29.04.97 1,600,000 91.5P 29.04.02 - 28.04.04
20.11.97 330,000 108.5p 20.11.00 - 19.11.07
20.11.97 325,000 108.5p 20.11.02 - 19.11.04
22.04.98 287,500 130.5p 22.04.01 - 21 04.08
22.04.98 287,500 130.5p 22.04.03 - 21.04.05
----------------------------------------------------------
4,901,801
----------------------------------------------------------
</TABLE>
28
<PAGE> 30
NOTES TO THE ACCOUNTS
YEAR ENDED 30 JUNE 1998
22 INVESTMENT PROPERTY REVALUATION RESERVE
<TABLE>
<CAPTION>
Group Company
Pound Sterling 000 Pound Sterling 000
-------------------------------------------
<S> <C> <C>
AT 30 JUNE 1998 (85) (85)
-------------------------------------------
This reserve is not distributable.
23 OTHER RESERVES
<CAPTION>
Capital Merger Foreign
reserve on and other exchange
consolidation reserves reserves Total
Pound Sterling 000 Pound Sterling 000 Pound Sterling 000 Pound Sterling 000
---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
GROUP
At 1 July 1997 19 (11,650) (609) (12,240)
Goodwill written off on acquisitions -- (5,064) -- (5,064)
Goodwill written back on disposal -- 112 -- 112
Foreign exchange translation difference -- -- 30 30
---------------------------------------------------------------------------------------
AT 30 JUNE 1998 19 (16,602) (579) (17,162)
---------------------------------------------------------------------------------------
COMPANY
---------------------------------------------------------------------------------------
AT 30 JUNE 1998 -- 14,268 -- 14,268
---------------------------------------------------------------------------------------
</TABLE>
The goodwill written off in the accounting periods to 30 June 1998, under the
accounting policies set out in note 1, amounted to Pound Sterling 31,900,000.
The above reserves are not distributable.
24 PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
GROUP COMPANY
Pound Sterling 000 Pound Sterling 000
---------------------------------------------
<S> <C> <C>
At 1 July 1997 21,909 7,788
Retained profit/(loss) for the financial year 2,788 (721)
---------------------------------------------
AT 30 JUNE 1998 24,697 7,067
---------------------------------------------
</TABLE>
The whole balance on the profit and loss account of the parent company is
distributable.
29
<PAGE> 31
NOTES TO THE ACCOUNTS
YEAR ENDED 30 JUNE 1998
25 CONTINGENT LIABILITIES
The company has given a joint and several guarantee to the bankers of certain
subsidiaries in respect of borrowings. At 30 June 1998 these borrowings were
Pound Sterling nil.
26 OPERATING LEASE COMMITMENTS
At 30 June 1998 the group was committed to making the following payments during
the next year in respect of operating leases:
<TABLE>
<CAPTION>
LAND AND
BUILDINGS OTHER
POUND STERLING 000 POUND STERLING 000
-------------------------------------------
<S> <C> <C>
Leases which expire:
Within one year 627 849
Within two to five years 1,996 1,435
After five years 1,307 22
-------------------------------------------
3,930 2,306
-------------------------------------------
</TABLE>
27 PENSION CONTRIBUTIONS
Certain companies in the group operate defined contribution schemes. The assets
of the schemes are held separately from those of the companies in independently
administered funds. The pension cost charge represents contributions payable by
the companies to the funds and amounted to Pound Sterling 393,000. There were
outstanding contributions at the balance sheet date of Pound Sterling 41,000.
28 CAPITAL COMMITMENTS
<TABLE>
<CAPTION>
GROUP COMPANY
1998 1998
POUND STERLING 000 POUND STERLING 000
------------------------------------------------
<S> <C> <C>
Contracted for but not provided
in the financial statements 213 213
------------------------------------------------
</TABLE>
29 RELATED PARTY DISCLOSURE
On 26 January 1998 the group made an interest free cash advance of Pound
Sterling 25,000 to Mr D Saul, a main board director. The advance was for the
deferred consideration of Pound Sterling 25,000 owing to Mr Saul on the
acquisition of Kalexis Limited in August 1996, which crystallised on 9 August
1998 on the completion of two years service with the group by Mr Saul.
30
<PAGE> 32
30 RECONCILIATION TO UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES.
As discussed in note 1, the financial statements are prepared in accordance with
accounting principles generally accepted in the United Kingdom, and in
accordance with the United Kingdom Companies Act 1985. Differences between such
accounting policies and those generally accepted in the United States include
certain reclassifications and adjustments, the most significant of which are as
follows:
- - For options granted under share option schemes, no compensation expense is
recorded in the financial statements of M-R. Certain options granted under
the executive schemes are considered compensatory under United States
accounting principles, due to performance vesting criteria included in the
option scheme. Accordingly, compensation expense is required to be recorded
under accounting principles generally accepted in the United States, based
on the market value of the underlying shares of common stock at the end of
each accounting period. The effect on total equity is nil, as such amounts
would be credited directly to paid-in-capital in accordance with United
States accounting policies.
- - As discussed in note 1, goodwill is written off immediately against
reserves, in the Capital and Reserves section of the consolidated balance
sheet. In accordance with United States accounting principles, such
goodwill would be included as an asset, and amortized over the period of
expected benefit.
- - Under accounting principles generally accepted in the United States,
investment properties would be recorded at cost, and depreciated over the
estimated useful life. Such properties are carried at fair value and not
depreciated in the accompanying statements (see note 1).
- - Certain deferred tax assets and liabilities, which would be recorded in
accordance with United States accounting principles as realization is more
likely than not, are not recorded in the accompanying statements due to the
long term nature of the timing differences.
- - Investments in own shares, classified as fixed assets as disclosed in note
14, would be classified as treasury shares in accordance with United States
accounting principles.
31
<PAGE> 33
The following reconciles historical profit after taxation to profit after
taxation that would be recorded in accordance with accounting principles
generally accepted in the United States:
<TABLE>
<CAPTION>
YEAR
ENDED
JUNE 30, 1998
----------------
(pounds sterling 000)
<S> <C>
Shown in the financial statements 4,965
Compensatory option expense (512)
Goodwill amortization expense (281)
Depreciation expense on investment property (15)
Income tax differences (495)
Other 33
------------
In accordance with United States accounting principles 3,695
------------
</TABLE>
The following reconciles historical equity shareholders' funds with that which
would be recorded in accordance with accounting principles generally accepted in
the United States:
<TABLE>
<CAPTION>
JUNE 30,
1998
---------------
(pounds sterling 000)
<S> <C>
Shown in the financial statements 18,487
Goodwill written back on 31,676
Cumulative goodwill amortization (23,435)
Writeup of investment property to original cost 85
Cumulative depreciation on investment property (243)
Income tax differences 268
Investment in own shares (2,183)
---------------
In accordance with United States accounting principles 24,655
---------------
</TABLE>
32
<PAGE> 34
M-R GROUP plc
CONDENSED CONSOLIDATED FINANCIAL INFORMATION
INTRODUCTION The following presents unaudited financial information of M-R Group
plc as of and for the nine months ended March 31, 1999. As discussed in notes 1
and 30 to the audited annual financial statements, the financial statements are
prepared in accordance with accounting principles generally accepted in the
United Kingdom, and in accordance with the United Kingdom Companies Act 1985.
Differences between such accounting policies and those generally accepted in the
United States include certain reclassifications and adjustments, the most
significant of which are as follows:
- - For options granted under share option schemes, no compensation expense is
recorded in the unaudited condensed consolidated financial statements of
M-R presented below. Certain options granted under the executive schemes
are considered compensatory under United States accounting principles, due
to performance vesting criteria included in the option scheme. Accordingly,
compensation expense is required to be recorded under accounting principles
generally accepted in the United States, based on the market value of the
underlying shares of common stock at the end of each accounting period. The
impact on total equity is nil, as such amounts would be credited directly
to paid-in-capital in accordance with United States accounting principles.
- - Goodwill is written off immediately against reserves, in the Capital and
Reserves section of the unaudited condensed consolidated balance sheet
presented below. In accordance with United States accounting principles,
such goodwill would be included as an asset, and amortized over the period
of expected benefit.
- - Under accounting principles generally accepted in the United States,
investment properties would be recorded at cost, and depreciated over the
estimated useful life. Such properties are carried at fair value and not
depreciated in the accompanying unaudited condensed consolidated financial
statements.
- - Certain deferred tax assets and liabilities, which would be recorded in
accordance with United States accounting principles as realization is more
likely than not, are not recorded in the accompanying unaudited condensed
consolidated financial statements due to the long term nature of the timing
differences.
- - Investments in own shares, included as fixed assets in the accompanying
unaudited condensed financial statements, would be classified as treasury
shares in accordance with United States accounting principles.
- - Costs related to software development activity are expensed as incurred in
the accompanying unaudited condensed consolidated financial statements. In
accordance with accounting principles generally accepted in the United
States, certain direct costs are capitalized and amortized over the
economic life of the related asset. Such costs incurred by M-R were not
material prior to July 1, 1998.
33
<PAGE> 35
The following reconciles historical profit after taxation to profit after
taxation that would be recorded in accordance with accounting principles
generally accepted in the United States (pounds sterling 000):
<TABLE>
<CAPTION>
NINE MONTHS
ENDED MARCH 31,
---------------
1999 1998
---- ----
<S> <C> <C>
Shown in the financial statements 1,785 2,901
Capitalization of direct software development costs 264 -
Compensatory option expense (421) (303)
Goodwill amortization expense (321) (184)
Depreciation expense on investment property (11) (11)
Income tax differences 277 (304)
Other - 33
------------ ------------
In accordance with United States accounting principles 1,573 2,132
------------ ------------
</TABLE>
The following reconciles historical equity shareholders' funds with that which
would be recorded in accordance with accounting principles generally accepted in
the United States (pounds sterling 000):
<TABLE>
<CAPTION>
MARCH 31,
1999
-----------------
<S> <C>
Shown in the financial statements 19,592
Cumulative software capitalized 264
Goodwill written back on 31,676
Cumulative goodwill amortization (23,756)
Write up of investment property to original cost 85
Cumulative depreciation on investment property (254)
Income tax differences 545
Investment in own shares (2,183)
-----------------
In accordance with United States accounting principles 25,969
-----------------
</TABLE>
34
<PAGE> 36
M-R GROUP plc
CONDENSED CONSOLIDATED BALANCE SHEET
(unaudited)
<TABLE>
<CAPTION>
March 31,
1999
---------
Pound Sterling 000
<S> <C>
FIXED ASSETS
Tangible assets 14,069
Investment properties 370
Investments held as fixed assets 2,873
--------
17,312
--------
CURRENT ASSETS
Stocks 1,103
Debtors 18,205
Cash at bank and in hand 1,129
--------
20,437
Creditors falling due within one year 15,472
--------
Net current assets 4,965
--------
Total assets less current liabilities 22,277
Creditors falling due after more than one year 2,235
Provisions for liabilities and charges 450
--------
19,592
========
CAPITAL & RESERVES
Called up share capital 5,584
Share premium account 5,472
Investment property revaluation reserves (85)
Other reserves (17,137)
Profit and loss account 25,758
--------
Equity shareholders' funds 19,592
========
</TABLE>
M-R GROUP plc
CONDENSED CONSOLIDATED PROFIT AND LOSS ACCOUNT
(unaudited)
<TABLE>
<CAPTION>
Nine months ended March 31,
---------------------------
1999 1998
---- ----
Pound Sterling 000
<S> <C> <C>
Turnover - Continuing operations 39,580 32,262
Cost of sales (23,063) (16,924)
-------- --------
Gross profit 16,517 15,338
Net operating expenses (13,893) (12,331)
-------- --------
Operating profit 2,624 3,007
Income from interest in associated undertakings 63 198
Interest receivable (payable) (100) 236
Profit on sale of business -- 588
-------- --------
Profit on ordinary activities before taxation 2,587 4,029
Tax on profit on ordinary activities (802) (1,128)
-------- --------
Profit on ordinary activities after taxation 1,785 2,901
======== ========
</TABLE>
35
<PAGE> 37
LASON, INC.
UNAUDITED PROFORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
On June 30, 1999 Lason, Inc. (the "Company") acquired all of the outstanding
shares of stock of M-R Group plc, a United Kingdom publicly held company
("M-R"), effected by means of a Scheme of Arrangement.
Under the Scheme of Arrangement, M-R shareholders received approximately 3.1
million shares of Lason common stock (including shares to be issued upon
exercise of outstanding M-R stock options).
The merger was accounted for as a pooling of interests. Accordingly, the
Company's condensed consolidated financial information is restated as if the
companies had been combined for all periods presented. M-R's fiscal year end
was June 30. It's financial information has been recast to conform to Lason's
December 31 calendar year end for all periods presented.
The Company's actual condensed consolidated financial statements, restated to
reflect its merger, as presented in the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1999, filed with the Securities and Exchange
Commission on August 16, 1999 have been presented in lieu of proforma financial
information for the respective interim periods. Part I, Item 1 and the
footnotes to the unaudited condensed consolidated financial statements
contained in the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 1999 and the notes to the proforma condensed consolidated
income statements included herein should be referred to for additional
information related to the merger.
36
<PAGE> 38
LASON, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET
JUNE 30, 1999
(in thousands)
<TABLE>
<CAPTION>
<S> <C>
ASSETS
Cash and cash equivalents $ 8,153
Accounts receivable (net) 132,296
Supplies 13,780
Other current assets 32,717
-----------
TOTAL CURRENT ASSETS 186,946
Property and equipment, net 97,486
Intangibles, net 350,398
Other assets 41,774
-----------
TOTAL ASSETS $ 676,604
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 27,994
Other current liabilities 63,241
-----------
TOTAL CURRENT LIABILITIES 91,235
Revolving credit line borrowings 194,000
Other liabilities 26,546
-----------
TOTAL LIABILITIES 311,781
-----------
STOCKHOLDERS' EQUITY
Common stock 178
Preferred stock -
Additional paid-in-capital 331,771
Retained earnings 32,426
Treasury stock (at cost) (3,579)
Accumulated other comprehensive income 4,027
-----------
TOTAL STOCKHOLDERS' EQUITY 364,823
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 676,604
===========
</TABLE>
37
<PAGE> 39
LASON, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE AND SIX MONTHS ENDED JUNE 30, 1999
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------- -------------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues, net of postage $ 142,105 $ 86,510 $ 273,168 $ 151,622
Cost of revenues 87,921 52,197 170,189 92,314
--------- -------- --------- ------------
Gross Profit 54,184 34,313 102,979 59,308
Selling, general and administrative expenses 32,699 20,221 62,956 36,596
Compensatory stock option expense 71 414 1,519 819
Amortization of intangibles 3,354 1,480 6,091 2,576
Merger-related charges 30,800 - 31,088 -
--------- -------- --------- ------------
Income (loss) from operations (12,740) 12,198 1,325 19,317
Net interest expense 2,822 1,517 5,013 2,125
--------- -------- --------- ------------
Income (loss) before income taxes (15,562) 10,681 (3,688) 17,192
Provision (credit) for income taxes (5,127) 4,111 (448) 6,372
--------- -------- --------- ------------
Net income (loss) $ (10,435) $ 6,570 $ (3,240) $ 10,820
========== ========= ========= ============
Basic income (loss) per share $ (0.59) $ 0.45 $ (0.18) $ 0.74
========== ========= ========= ============
Diluted income (loss) per share $ (0.59) $ 0.43 $ (0.18) $ 0.71
========== ========= ========= ============
</TABLE>
LASON, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1998
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA AS
LASON M-R ADJUSTMENTS ADJUSTED
---------------------------------------- ------------
<S> <C> <C> <C> <C>
Revenues, net of postage $ 279,756 $ 82,611 $ - $ 362,367
Cost of revenues 181,149 46,457 (302)(A) 227,304
---------------------------------------- ------------
Gross Profit 98,607 36,154 302 135,063
Selling, general and administrative expenses 57,232 27,410 25 (B) 84,667
Compensatory stock option expense 279 - (14)(C) 265
Amortization of intangibles 6,030 643 (D) 6,673
----------------------------------------- ------------
Income (loss) from operations 35,066 8,744 (352) 43,458
Net interest expense 4,929 (6) - 4,923
----------------------------------------- ------------
Income (loss) before income taxes 30,137 8,750 (352) 38,535
Provision (credit) for income taxes 11,902 2,378 (167)(E) 14,113
----------------------------------------- ------------
Net income (loss) $ 18,235 $ 6,372 $ (185) $ 24,422
Net income (loss) per share: ========================================= ============
Basic $ 1.56
============
Diluted $ 1.48
============
</TABLE>
38
<PAGE> 40
LASON, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1997
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA AS
LASON M-R ADJUSTMENTS ADJUSTED
------------------------------------ ---------------
<S> <C> <C> <C> <C>
Revenues, net of postage $ 120,337 $ 67,508 $ - $ 187,845
Cost of revenues 80,846 35,976 - 116,822
------------------------------------ ---------------
Gross Profit 39,491 31,532 - 71,023
Selling, general and administrative
expense 21,364 22,972 25 (B) 44,361
Compensatory stock option expense 221 - 183 (C) 404
Amortization of intangibles 2,477 - 551 (D) 3,028
(Gain) on sale of business - (976) (55)(D) (1,031)
------------------------------------ ---------------
Income (loss) from operations 15,429 9,536 (704) 24,261
Net interest expense 1,249 (723) - 526
------------------------------------ ---------------
Income (loss) before income taxes 14,180 10,259 (704) 23,735
Provision (credit) for income taxes 5,110 2,775 1,169 (E) 9,054
------------------------------------ ---------------
Net income (loss) $ 9,070 $ 7,484 $ (1,873) $ 14,681
==================================== ===============
Net income (loss) per share: ---------------
Basic $ 1.16
===============
Diluted $ 1.13
===============
</TABLE>
39
<PAGE> 41
LASON, INC.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1996
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
PRO FORMA
PRO FORMA AS
LASON M-R ADJUSTMENTS ADJUSTED
---------------------------------------- ---------------
<S> <C> <C> <C> <C>
Revenues, net of postage $ 69,937 $ 59,365 $ - $ 129,302
Cost of revenues 47,587 31,267 - 78,854
---------------------------------------- ---------------
Gross Profit 22,350 28,098 - 50,448
Selling, general and administrative expenses 12,699 20,965 23 (B) 33,687
Compensatory stock option expense 936 - - 936
Amortization of intangibles 1,121 - 905 (D) 2,026
---------------------------------------- ---------------
Income (loss) from operations 7,594 7,133 (928) 13,799
Net interest expense 1,760 (661) - 1,099
---------------------------------------- ---------------
Income (loss) before income taxes 5,834 7,794 (928) 12,700
Provision (credit) for income taxes 2,103 2,641 54 (E) 4,798
---------------------------------------- ---------------
Net income (loss) $ 3,731 $ 5,153 $ (982) $ 7,902
======================================== ===============
Net income (loss) per share: ---------------
Basic $ 0.84
===============
Diluted $ 0.81
===============
</TABLE>
40
<PAGE> 42
LASON, INC.
NOTES TO UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL INFORMATION
On June 30, 1999, Lason, Inc. ("Lason" or the "Company") acquired all of the
outstanding shares of stock of M-R Group plc ("M-R"), a leading document and
data management company headquartered in the United Kingdom. In connection with
the merger, the Company issued approximately 3.1 million new shares of its
common stock in exchange for all the outstanding common stock of M-R. M-R
shareholders received 5.376 new shares of Lason common stock for every 100 M-R
shares held. For further information on the terms of the merger, refer to Item 2
of this Form 8-K/A and to Part I, Item 1 of the Quarterly Report on Form 10-Q
for the quarter ended June 30, 1999, filed with the Securities and Exchange
Commission on August 16, 1999.
The merger was accounted for as a pooling of interests. Accordingly, the
Company's condensed consolidated financial information is restated as if the
companies had been combined for all periods presented. Prior to the merger,
there were no material transactions between Lason and M-R.
INCOME STATEMENTS
The accompanying unaudited pro forma condensed consolidated statements of income
for the years ended December 31, 1998, 1997, and 1996 have been prepared by
combining the historical results of operations of Lason and M-R. Certain
reclassifications were made to M-R's financial statements to conform to Lason's
presentation. In addition, M-R's results of operations were previously stated
based on M-R's fiscal year of June 30; accordingly, results of M-R have been
recast to retroactively report M-R's results as if M-R had a calendar year for
all periods presented. The results of M-R were converted from pounds sterling to
United States dollars using the average spot rate during each quarter. Finally,
the following pro forma adjustments were made:
(A) An adjustment was made to capitalize costs related to certain software
development activities in accordance with accounting principles
generally accepted in the United States. Such costs were expensed in
M-R's historical financial statements.
(B) Certain investment property is recorded at fair value, and not
depreciated, in M-R's historical balance sheet. Accordingly, an
adjustment is made to record depreciation expense for the periods
presented.
(C) Certain stock options previously issued by M-R were not compensatory
under accounting principles in the United Kingdom, but are compensatory
under United States generally accepted accounting principles due to the
variable nature of the stock option plan. Accordingly, an adjustment
was made to record the expense required under United States generally
accepted accounting principles for the periods presented. The options
were all settled as of the effective date of the merger.
(D) An adjustment was made to record amortization expense related to
goodwill associated with companies purchased by M-R during previous
periods. Such goodwill was included in M-R's historical balance sheet
as a component of equity in "other reserves" and was not amortized.
(E) An adjustment was made to income tax expense in accordance with
SFAS No. 109, "Accounting for Income Taxes". Additionally, an
adjustment was made to record the tax benefit on the merger-related
charges.
41
<PAGE> 43
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: September 13, 1999 LASON, INC.
By: /s/ William J. Rauwerdink
----------------------------
William J. Rauwerdink
Its: Executive Vice President
<PAGE> 44
EXHIBIT INDEX
Exhibit Description
- --------------------
2.15 Transaction Agreement between Lason, Inc. and M-R Group
plc dated March 25, 1999, is hereby incorporated by reference
to Exhibit 2.15 of registrant's From 10-Q filed on May 17,
1999, Commission File No. 0-21407.
2.16 Amendment Agreement between Lason, Inc. and M-R Group
plc dated April 30, 1999 is hereby incorporated by reference
to Exhibit 2.16 of registrant's Form 10-Q filed on May 17,
1999, Commission File No. 0-21407.
2.17 Amendment Agreement between Lason, Inc. and M-R Group
plc dated May 13, 1999 is hereby incorporated by reference to
Exhibit 2.17 of registrant's Form 10-Q filed on May 17, 1999,
Commission File No. 0-21407.
23.1 Consent of Deloitte & Touche
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