<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
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): August 17, 1998
HUSSMANN INTERNATIONAL, INC.
--------------------------------------------------
(Exact name of registrant as specified in its charter)
COMMISSION FILE NUMBER: 01-13407
--------
Delaware 43-1791715
- --------------------------------- -------------------
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
12999 St. Charles Rock Road, Bridgeton, Missouri 63044-2483
- ------------------------------------------------ ----------
(Address of principal executive offices) (Zip Code)
(314) 291-2000
--------------------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE> 2
HUSSMANN INTERNATIONAL, INC.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On August 17, 1998, Hussmann International, Inc. (the "Company"), completed its
acquisition of a 65% interest in McAlpine Refrigeration Ltd. (McAlpine) and
Triangle Refrigeration (Australia) Pty. Limited (Triangle), collectively
McAlpine Investments Ltd. ("MIL"). This Form 8-K/A sets forth the financial
statements and pro forma financial information required to be filed in
connection with this acquisition.
MIL is engaged in the sale, installation, manufacturing and service of
commercial refrigeration products for the retail food industries in New Zealand,
Australia and various island nations throughout the South Pacific. Manufacturing
capabilities include walk-in cooler panels and high quality specialty display
cases.
MIL has its headquarters located in Auckland, New Zealand and has operations in
New Zealand (McAlpine) and Australia (Triangle). MIL also has a branch office in
Shanghai, China. MIL has been an independent distributor and licensee of the
Company for several years.
The Company paid approximately US$3.7 million in cash for its 65% interest. The
purchase price was based on arm's-length negotiations and was paid from cash
on-hand. The acquisition will be accounted for under the purchase method of
accounting.
The tangible assets of MIL consist primarily of accounts receivable,
inventories, and machinery and equipment. The Company intends to continue to use
such assets in the operation of the businesses formerly operated by MIL.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of business acquired.
The audited consolidated statements of financial position of McAlpine
Refrigeration, Ltd. at June 30, 1998 and 1997 and the related consolidated
statements of financial performance, movements in equity and cash flow for the
years then ended.
The audited consolidated balance sheet of Triangle Refrigeration (Australia)
Pty. Limited at June 30, 1998 and 1997 and the consolidated profit and loss
statements and the consolidated statement of cash flows for the years then
ended.
(b) Pro forma financial information.
Introduction to Unaudited Pro Forma Combined Condensed Financial Statements.
Unaudited Pro Forma Combined Condensed Statement of Operations for the year
ended December 31, 1997.
Unaudited Pro Forma Combined Condensed Statement of Operations for the six
month period ended June 30, 1998.
Unaudited Pro Forma Combined Condensed Balance Sheet at June 30, 1998.
2
<PAGE> 3
(c) Exhibits
Exhibit
Number
- -------
2 The Agreement Relating to Hussmann McAlpine
Limited dated August 17, 1998 between Hussmann Netherlands B.V. and
Barry Edward Brill and Allan Francis Cotter, Phillip Joseph Miller,
Howard James Small, and Robert Charles Todd and Kevin Stainer
(incorporated by reference to Exhibit 2 to the Form 8-K filed with the
Securities and Exchange Commission on August 31, 1998).
23a Consent of Independent Auditors - Deloitte Touche Tohmatso as
independent auditors for McAlpine Refrigeration Ltd.
23b Consent of Independent Auditors - Byrons Chartered Accountants as
independent auditors for Triangle Refrigeration (Australia) Pty.
Limited.
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.
HUSSMANN INTERNATIONAL, INC.
/s/ Michael D. Newman
---------------------
Michael D. Newman
Senior Vice President
and Chief Financial Officer
Dated: October 30, 1998
3
<PAGE> 4
Hussmann International, Inc.
Index
Item 7. (a)
Financial Statements of Business Acquired
McAlpine Refrigeration, Limited
(All dollar amounts are in NZ $'s):
Page No.
--------
Consolidated Statement of Financial Performance and Movements 7
in Equity for the years ended June 30, 1998 and 1997
Consolidated Statement of Financial Position as at June 30, 8
1998 and 1997
Consolidated Statement of Cash Flow for the years ended June 10
30, 1998 and 1997
Notes to and Forming Part of the Consolidated Financial 12
Statements for the years ended June 30, 1998 and 1997
Triangle Refrigeration (Australia) Pty. Limited
(All dollar amounts are in AUS $'s):
Consolidated Profit and Loss Statement for the years ended 35
June 30, 1998 and 1997
36
Consolidated Balance Sheets as at June 30, 1998 and 1997
Consolidated Statement of Cash Flow for the years ended June 37
30, 1998 and 1997
Notes to and Forming Part of the Combined Financial 38
Statements for the years ended June 30, 1998 and 1997
Item 7. (b)
Pro Forma Financial Information
(All dollar amounts are in U.S. $'s):
Introduction to Unaudited Pro forma Combined Condensed 59
Financial Statements
Unaudited Pro Forma Combined Condensed Statement of Earnings 60
for the year ended December 31, 1997
Unaudited Pro Forma Combined Condensed Statement of Earnings 61
for the six month period ended June 30, 1998
Unaudited Pro Forma Combined Condensed Balance Sheet at June 62
30, 1998
Notes to Unaudited Pro Forma Combined Condensed Financial 63
Statements
4
<PAGE> 5
MCALPINE REFRIGERATION LIMITED
DIRECTORY
DIRECTORS
- ---------
H J Small
A F Cotter
P J Miller
R C Todd
SECRETARY
- ---------
J E Hird
REGISTERED OFFICE
- -----------------
11-17 Walls Road
Penrose
AUCKLAND
AUDITORS
- --------
Deloitte Touche Tohmatsu
AUCKLAND
BANKERS
- -------
ASB Bank Limited
SOLICITORS
- ----------
Russell McVeagh McKenzie Bartleet & Co
AUCKLAND
5
<PAGE> 6
MCALPINE REFRIGERATION LIMITED
ANNUAL REPORT
Your Directors have pleasure in submitting their 1998 Annual Report.
PRINCIPAL ACTIVITIES
- --------------------
The Group's principal activities during the period were the importing,
manufacture, distribution, installation, contracting and servicing of
commercial refrigeration equipment in New Zealand, Australia and for export.
<TABLE>
<CAPTION> 12 MONTHS
CONSOLIDATED RESULTS AND DISTRIBUTIONS 1998
$
<S> <C>
Net Deficit for the year before share of
associated companies profits (3,551,428)
Share of associate company results (3,622)
------------
Total Consolidated Net Surplus/(Deficit) for the year (3,555,050)
Retained Surplus brought forward (1,017,084)
Revaluation on Disposed Assets 7,900
Dividend paid -
------------
Accumulated Deficit carried forward ($4,564,234)
============
</TABLE>
The state of the Group's affairs is satisfactory. The Directors recommend that
no final dividend be paid.
SECTION 211 COMPANIES ACT 1993
- ------------------------------
The Shareholders will be signing a resolution under Section 211 of the
Companies Act 1993 and therefore no statutory declarations will be required
under section 211 (a) and (d) to (j).
Director: __________________________ Date:_________________
Director: __________________________ Date:_________________
6
<PAGE> 7
MCALPINE REFRIGERATION LIMITED
CONSOLIDATED
STATEMENT OF FINANCIAL PERFORMANCE
FOR THE YEAR ENDED 30TH JUNE 1998
<TABLE>
<CAPTION>
12 Months 12 Months
Note 1998 1997
$ $
<S> <C> <C> <C>
REVENUE 39,978,974 38,449,127
============= ============
OPERATING SURPLUS/(DEFICIT) (3,557,776) (446,274)
Interest on Convertible Notes (306,452) (285,000)
------------- ------------
OPERATING SURPLUS/(DEFICIT) BEFORE
TAXATION 2 (3,864,228) (731,274)
Taxation expense/(benefit) 3 (312,800) (241,719)
------------- ------------
NET SURPLUS/(DEFICIT) AFTER TAXATION (3,551,428) (489,555)
Share of net surpluses/(deficit) of
associate companies 4 (3,622) (548,407)
------------- ------------
NET CONSOLIDATED SURPLUS/(DEFICIT) FOR THE YEAR (3,555,050) (1,037,962)
Retained Surplus/(Deficit) at beginning of the year (1,017,084) 1,517,289
Dividend Paid - (1,580,000)
Revaluation on Disposed Assets 7,900 83,589
------------- ------------
RETAINED SURPLUS/(DEFICIT) AT END OF THE YEAR ($4,564,234) ($1,017,084)
============= ============
</TABLE>
CONSOLIDATED STATEMENT OF MOVEMENTS IN EQUITY
FOR THE YEAR ENDED 30TH JUNE 1998
<TABLE>
<CAPTION>
1998 1997
$ $
<S> <C> <C> <C>
Equity at beginning of the year 4,652,954 3,299,943
Effect of Exchange Rate Change on Equity 5 (58,940) (91,660)
NET SURPLUS/(DEFICIT) AFTER TAXATION (3,555,050) (1,037,962)
Total Recognised Revenues and Expenses for the year (3,613,990) (1,129,622)
Transfer from Asset Revaluation Reserve 5 (7,900) (83,589)
Issue of 'B' Shares - 4,062,633
Transfer to Retained Surplus 5 7,900 83,589
Assets revalued 5 184,606 -
Dividend Paid 5 (600,000) (1,580,000)
------------ ------------
EQUITY AT END OF THE YEAR $623,570 $4,652,954
============ ============
</TABLE>
The accompanying notes on pages 12 to 29 form part of and are to be read in
conjunction with these financial statements.
7
<PAGE> 8
MCALPINE REFRIGERATION LIMITED
CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
AS AT 30TH JUNE 1998
<TABLE>
<CAPTION>
30 June 30 June
Note 1998 1997
$ $
<S> <C> <C> <C>
EQUITY
Share Capital 5 5,337,633 5,062,633
Reserves 5 (149,829) 607,405
Retained Surplus/(Deficit) (4,564,234) (1,017,084)
-------------- -------------
Total Equity 623,570 4,652,954
Convertible Notes 5 2,500,000 1,900,000
-------------- -------------
Total Shareholders' Interests 3,123,570 6,552,954
NON-CURRENT LIABILITIES 6 1,666,213 2,088,701
--------------- --------------
CURRENT LIABILITIES
Bank Overdraft 7 834,083 869,018
Accounts payable and accruals 9,959,771 7,051,648
Advance from Shareholders 649,833 445,283
Advances from related parties 15 2,191,945 1,372,711
Current portion of long-term liabilities 6 148,038 22,488
-------------- -------------
13,783,670 9,761,148
-------------- -------------
$ 18,573,453 $18,402,803
============== =============
</TABLE>
The accompanying notes on pages 12 to 29 form part of and are to be read in
conjunction with these financial statements.
8
<PAGE> 9
MCALPINE REFRIGERATION LIMITED
CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
AS AT 30TH JUNE 1998
(CONTINUED)
<TABLE>
<CAPTION>
30 JUNE 30 JUNE
NOTE 1998 1997
$ $
<S> <C> <C> <C>
NON CURRENT ASSETS
Fixed Assets 8(a) 1,606,749 1,780,209
Goodwill 8(b) 128,310 87,000
Deferred Taxation 9 230,667 185,756
Future Tax Benefit 9 896,323 323,341
----------- -----------
2,862,049 2,376,306
INVESTMENTS
Shares in Triangle Refrigeration 10(a) 496,464 3,439,620
Investments in associates 10(c) - 79,107
Advances to associates 10(d) 7,108 15,404
----------- -----------
503,572 3,534,131
CURRENT ASSETS
Cash 7 111,688 99,361
Receivables and Prepayments 11 8,630,831 6,187,571
Inventories 12 6,445,339 6,012,549
Taxation Receivable 9 19,974 192,889
----------- -----------
15,207,832 12,492,366
----------- -----------
$18,573,453 $18,402,803
=========== ===========
</TABLE>
For and on behalf of the Board
Director: Date:
---------------------- ----------------------
Director: Date:
---------------------- ----------------------
The accompanying notes on pages 12 to 29 form part of and are to be read in
conjunction with these financial statements
9
<PAGE> 10
MCALPINE REFRIGERATION LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30TH JUNE 1998
<TABLE>
<CAPTION>
12 Months 12 Months
NOTE 1998 1997
$ $
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Cash was provided from:
Receipts from customers 38,401,427 41,069,424
Interest received 2 8,479 8,225
Dividends received 44,006 -
----------- -----------
38,453,912 41,077,649
Cash was disbursed to:
Payments to suppliers and employees (37,529,813) (41,038,304)
Taxes paid (146,634) (363,239)
Interest paid (577,659) (283,101)
Subvention paid (14,228) (184,747)
----------- -----------
(38,268,334) (41,869,391)
Net cash inflow/(outflow) from ----------- -----------
operating activities 13 185,578 (791,742)
CASH FLOWS FROM INVESTING ACTIVITIES
Cash was provided from:
Proceeds from sale of fixed assets 3,800 1,103,383
Increase in loans and advances from
related parties 827,530 1,571,817
----------- -----------
831,330 2,675,200
Cash was applied to:
Purchase of fixed assets (63,052) (614,324)
Goodwill paid to acquire new business - (90,000)
Interest paid on leased assets (4,193) (1,248)
Purchase of shares in Contract Refrigeration (140,000) -
Increase in loans and advance in group company - -
----------- -----------
(207,245) (705,572)
----------- -----------
Net Cash Inflow/(Outflow) from Investing Activities 624,085 1,969,628
</TABLE>
The accompanying notes on pages 12 to 29 form part of and are to be read in
conjunction with these financial statements.
10
<PAGE> 11
MCALPINE REFRIGERATION LIMITED
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30TH JUNE 1998
(CONTINUED)
<TABLE>
<CAPTION>
12 Months 12 Months
NOTE 1998 1997
$ $
<S> <C> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES
Cash was provided from:
Proceeds of long term debt - 2,050,000
Convertible Notes 600,000 -
----------- -----------
600,000 2,050,000
Cash was applied to:
Repayment of long term debt (400,000) (1,300,000)
Convertible note interest paid (306,452) (356,250)
Dividend paid (600,000) (1,580,000)
----------- ----------
(1,306,452) (3,236,250)
----------- ----------
Net cash inflow/(outflow) from financing activities (706,452) (1,186,250)
----------- ----------
Net increase/(decrease) in cash 103,211 (8,364)
Add opening cash brought forward (769,657) (761,293)
Cash of Contract Refrigeration and
Air Conditioning (Otago) Ltd acquired (55,949) -
---------- ----------
Ending Cash (overdraft) Carried Forward (722,395) (769,657)
========== ==========
Cash balances in Statement of Financial Position
Cash 111,688 99,361
Bank Overdraft (834,083) (869,018)
---------- -----------
($722,395) ($769,657)
========== ===========
</TABLE>
The accompanying notes on pages 12 to 29 form part of and are to be read in
conjunction with these financial statements
11
<PAGE> 12
MCALPINE REFRIGERATION LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
1 STATEMENT OF ACCOUNTING POLICIES
GENERAL ACCOUNTING POLICIES
The reporting entity is McAlpine Refrigeration Limited and its subsidiaries and
associate companies.
The general accounting principles recognised as appropriate for the measurement
and reporting of net surplus and financial position on an historical cost basis,
with the exception that certain fixed assets have been revalued, are followed by
the Group. These financial statements have been prepared in accordance with the
Financial Reporting Act 1993 and the Companies Act 1993.
PARTICULAR ACCOUNTING POLICIES
The following particular accounting policies which materially affect the
measurement of net surplus/(deficit) and the financial position have been
applied:
(a) BASIS OF CONSOLIDATION - PURCHASE METHOD
The consolidated financial statements include the holding company and
its subsidiaries accounted for using the purchase method. All
significant intercompany transactions are eliminated on
consolidation.
(b) ASSOCIATE COMPANIES
These are companies in which the group holds material shareholdings and
in whose commercial and financial policy decisions it participates. The
accounts of associate companies have been reflected in the consolidated
accounts on an equity accounting basis which shows the group's share of
net surplus in the Consolidated Statement of Financial Performance and
its share of post acquistion increases or decreases in net assets, in the
Consolidated Statement of Financial Position.
(c) FIXED ASSETS
Fixed assets are included at cost except for assets purchased on 16th
December 1989 and 27th May 1993 which have been revalued. Certain
fixed assets were revalued in the current year as stated in Note 8(a).
All fixed assets are depreciated over their estimated useful lives
commencing from the time the asset is held ready for use.
(d) DEPRECIATION
Depreciation is provided on a straight line basis, at the following
rates:
Buildings 2%
Plant and Machinery 10%
Leasehold Building Improvements 20%
Motor Vehicles 20%
Furniture, Fixtures and Fittings 20%
12
<PAGE> 13
MCALPINE REFRIGERATION LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
1 STATEMENT OF ACCOUNTING POLICIES (Continued)
(e) RECEIVABLES
Receivables are stated at their estimated realisable value.
(f) RESEARCH AND DEVELOPMENT COSTS
Research and development costs are expensed in the period
incurred. Development costs are deferred where future benefits can
reasonably be expected to exceed those costs. Deferred development
costs are amortised over future periods on a basis related to
expected future revenue.
(g) INCOME TAX
The income tax expense charged to the consolidated Statement of
Financial Performance includes both the current year expense and
the income tax effects of timing differences calculated using
the liability method.
Tax effect accounting has been applied on a comprehensive basis to
all timing differences. A debit balance in the deferred tax
account, arising from timing differences or income tax benefits
from income tax losses, is only recognised if there is virtual
certainty of realisation.
(h) INVENTORIES
Inventories are stated at the lower of cost, determined on an
average cost basis, and net realisable value.
Profit on contracts are recorded using the percentage of
completion method of accounting. Work-in-progress is work
completed for which certification has not yet been received and
retentions not yet due for payment and is valued at a net
realisable value. Variations in cost and revisions in profit
estimates during the course of the work are reflected in the
accounting period in which the facts which require the revisions
become known. When estimates indicate a probable loss on a
contract, the full amount of the loss is immediately recognised.
13
<PAGE> 14
MCALPINE REFRIGERATION LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
1 STATEMENT OF ACCOUNTING POLICIES (Continued)
(i) LEASES
The group leases certain plant and equipment and land and buildings.
Finance leases, which effectively transfer to the entity substantially all
of the risks and benefits incident to ownership of the leased item, are
capitalised at the present value of the minimum lease payments. The leased
assets and corresponding liabilities are disclosed and the leased assets
are depreciated over the period the entity is expected to benefit from
their use.
Operating lease payments, where the lessors effectively retain
substantially all the risks and benefits of ownership of the leased items,
are included in the determination of the operating profit in equal
instalments over the lease term.
(j) FOREIGN CURRENCIES
Transactions in foreign currencies are converted at the New Zealand rate
of exchange ruling at the date of the transaction. Short term transactions
covered by forward exchange contracts are measured and reporting at the
forward rates specified in those contracts. At balance date foreign
monetary assets and liabilities are translated at the closing rate, and
exchange variations arising from these translations are
included in the Statement of Financial Performance.
The Financial Statements of Australian operations are translated at the
closing rate. The exchange difference arising from the translation of the
opening net investment at an exchange rate different from what at which
it was previously reported is taken to the foreign currency translation
reserve. The exchange difference on a hedging transaction undertaken to
establish the price of particular sales or purchases, together with any
costs associated with the hedge transaction, are deferred and included
in the measurement of the purchase or sale transaction.
(k) DIFFERENTIAL REPORTING
The Group qualifies for differential reporting exemptions as the entity is
not publicly accountable and there is no separation between the governing
body and the owners.
Differential reporting exemptions have been applied in respect of FRS No.
9, Information to be Dislosed in Financial Statements, FRS No. 31,
Disclosure of Information about Financial Instruments, SSAP 23, Financial
Reporting for Segments.
CHANGES IN ACCOUNTING POLICIES
There have been no changes in accounting policies. All policies have been
applied on a basis consistent with those used in previous years.
14
<PAGE> 15
MCALPINE REFRIGERATION LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
2. OPERATING SURPLUS/(DEFICIT) BEFORE TAXATION
<TABLE>
<CAPTION>
12 MONTHS 12 MONTHS
1998 1997
$ $
<S> <C> <C>
Operating Surplus/(Deficit) Before Taxation (3,864,228) (731,274)
========== ========
After Charging:
Auditors fees 46,462 39,167
Bad and Doubtful Debts 33,977 41,084
Depreciation 451,272 432,129
Directors Fees - 62,400
Foreign currency losses/(Gains) 660,525 67,711
Goodwill Amortised 28,466 3,000
Interest:
Bank Term Loan and Overdraft 254,001 157,983
Finance charges on finance leases 5,309 1,248
Interest on Convertible Notes 306,452 285,000
Other Interest - -
Related Parties 323,658 125,118
Loss/(Gain) on Sale of Fixed Assets 346 80,673
Merger Related Costs - 208,453
Rental and operating lease costs 1,551,542 1,405,940
Research and Development 129,994 76,809
Subvention payment 14,228 184,747
Warranty claims 193,513 50,882
Write down of Investment in Associate
(refer Note 10) 2,943,156 -
After Crediting:
Interest from loans and advances 8,479 8,225
Rent Received - 137,406
</TABLE>
15
<PAGE> 16
MCALPINE REFRIGERATION LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
3. TAXATION
<TABLE>
<CAPTION>
NOTE 12 MONTHS 12 MONTHS
1998 1997
$ $
<S> <C> <C> <C>
Operating Surplus/(Deficit) before
taxation (3,864,228) (731,274)
---------- ---------
Prima facie taxation (1,314,113) (262,144)
Plus/(Less) taxation effect of permanent
differences
Depreciation on Revalued Assets 19,436 48,730
Realised Capital Profits (330) --
Loss/(Gain) on Revalued Assets (1,239) (22,220)
Dividends Received (14,522) --
Non-deductible entertainment expenses 2,450 --
Non-deductible legal expenses
Amortisation of Goodwill 9,394 990
Write down of investment 971,241 --
Prior Period Adjustment 14,883 (7,075)
---------- ---------
($312,800) ($241,719)
---------- ---------
The taxation expense/(benefit) is
represented by:
Current Taxation 9 (259,191) (253,782)
Future Tax Benefit 9 (53,609) 12,063
---------- ---------
($312,800) ($241,719)
---------- ---------
</TABLE>
16
<PAGE> 17
MCALPINE REFRIGERATION LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
4. ASSOCIATE COMPANIES
<TABLE>
<CAPTION>
1998 1997
$ $
<S> <C> <C>
Share of surplus/(deficit) of Contract Refrigeration
and Air Conditioning (Otago) Ltd before taxation (5,406) (25,460)
Taxation 1,784 8,402
------- --------
Share of surplus/(deficit) of Contract Refrigeration
and Air Conditioning (Otago) Ltd ($3,622) ($17,058)
Share/(deficit) of Triangle Refrigeration
Australia Pty Ltd - (474,414)
Amortisation of goodwill on consolidation - (56,935)
------- --------
Share of surplus/(deficit) of associate companies ($3,622) ($548,407)
======= ========
</TABLE>
The share of associates surplus/(deficit) relates to Contract Refrigeration and
Air Conditioning (Otago) Ltd for the period 1 July 1997 to 30 September 1997.
On the 30th September 1997 the remaining shares were purchased resulting in a
100% subsidiary.
5. SHARE CAPITAL/RESERVES
<TABLE>
<CAPTION>
1998 1997
$ $
<S> <C> <C>
PAID UP CAPITAL
3,100,000 ordinary shares (fully paid) 5,337,633 5,062,633
---------- ----------
Total Paid Up capital $5,337,633 $5,062,633
========== ==========
</TABLE>
On 1st of December 1996, 1,000,000 Shares were issued to Triangle Refrigeration
Australia Pty Limited in consideration of receiving 4224 Shares in that
company. McAlpine Refrigeration Limited has a 20% (1997:50%) interest in
Triangle Refrigeration (Australia) Pty Limited. On 5 March 1998, Triangle
issued 12,763 shares to Parabel Enterprises Ltd, thereby diluting McAlpine's
interest in Triangle to 20%. On 22 May 1998 the company issued 1,100,000
ordinary fully paid shares to McAlpine Investments Ltd.
CONVERTIBLE NOTES
<TABLE>
<S> <C> <C>
Issued and paid up Convertible Notes of $1 each $2,500,000 $1,900,000
========== ==========
</TABLE>
These notes are held by McAlpine Finance Limited. They are convertible at the
option of the holder into ordinary shares. They are not to be repaid without
the prior consent of the ASB Bank. Interest equating to 15% p.a. was paid
during the period.
ASSET REVALUATION RESERVE
<TABLE>
<S> <C> <C>
Opening Balance 698,294 781,883
Assets revalued during the year 184,606 -
Shares issued (275,000) -
Dividend paid (600,000) -
Less Asset Revaluation Reserve relating to
assets sold during the year (7,900) (83,589)
--------- ----------
Closing Balance $ - $ 698,294
========= ==========
</TABLE>
17
<PAGE> 18
MCALPINE REFRIGERATION LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
$ $
5. SHARE CAPITAL/RESERVES, CON'T
FOREIGN CURRENCY TRANSLATION RESERVE
Opening Balance (90,889) 771
Translation of Overseas Subsidiary Reserves (58,940) 4
Translation of Overseas Associate Reserves - (91,664)
---------- ----------
Closing Balance $ (149,829) $ (90,889)
---------- ----------
Total Reserves $ (149,829) $ 607,405
========== ==========
</TABLE>
6. NON-CURRENT LIABILITIES
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
$ $
Term Loan-ASB Bank 1,650,000 2,050,000
Advance from Shareholders - -
Finance Leases 164,251 61,189
Advance-Parent Company - -
Deferred Income - -
---------- ----------
1,814,251 2,111,189
Less Current Portion
Term Loan-ASB Bank - -
Advance from Shareholders - -
Finance Leases (148,038) (22,488)
Advance-Parent Company - -
Deferred Income - -
---------- ----------
Total Non-Current Liabilities $1,666,213 $2,088,701
========== ==========
Interest Rates
AVERAGE INTEREST RATE
1998 1997
% P.A. % P.A.
Bank Term Loan 9.6 10.3
Bank Overdraft 12.5 12.5
Lease Liability 12.2 12.0
</TABLE>
Security:
The ASB Bank has a floating charge debenture over the assets
of the company and its subsidiaries to secure its advance.
Finance leases are secured over the assets to which they relate.
Repayment Terms:
The ASB Bank term loan of $1,650,000 is a revolving loan facility which
is subject to an annual review. This has been shown as a term liability
as it is not expected to be repaid within the next twelve months.
18
<PAGE> 19
MCALPINE REFRIGERATION LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
7. CASH/BANK OVERDRAFT
<TABLE>
<CAPTION>
1998 1997
$ $
<S> <C> <C>
Cash $111,688 $ 99,361
-------- --------
Bank Overdrafts $834,083 $869,018
-------- --------
</TABLE>
Security:
The ASB Bank has a floating charge debenture over the assets of the company and
its subsidiaries to secure its advance.
8. NON CURRENT ASSETS
(A) FIXED ASSETS
<TABLE>
<CAPTION>
NET
AT AT ACCUMULATED CARRYING
COST VALUATION DEPRECIATION VALUE
$ $ $ $
<S> <C> <C> <C> <C>
1998
Plant and Machinery 1,425,359 1,163,725 (1,403,251) 1,185,833
Furniture, Fixtures and Fittings 540,106 (357,542) 182,564
Leasehold Improvements 413,720 (205,689) 208,031
Motor Vehicles 143,206 (112,885) 30,321
---------- ---------- ----------- ----------
$2,522,391 $1,163,725 ($2,079,367) $1,606,749
---------- ---------- ----------- ----------
1997
Plant and Machinery 1,282,407 1,010,008 (1,121,115) 1,171,300
Furniture, Fixtures and Fittings 611,667 - (299,526) 312,141
Leasehold Improvements 342,030 - (88,622) 253,408
Motor Vehicles 151,284 - (107,924) 43,360
---------- ---------- ----------- ----------
$2,387,388 $1,010,008 ($1,617,187) $1,780,209
---------- ---------- ----------- ----------
</TABLE>
Assets purchased on 16th December 1989 were revalued to an amount which was less
than the values provided by a registered independent valuer.
These assets have a current book value of $143,303 (1997 $167,703).
Assets purchased on 29th May 1993 at a cost of $138,118 were revalued at
$991,401 by McAlpine Industries Limited, and transferred to this company at
1 April 1996, and were less than the values provided by a registered independent
valuer, REH & JN Hammonds. These assets have a current book value of $333,620
(1997 $407,324).
Certain assets purchased on 29th May 1993 with a book value of $167,884 were
revalued to $352,490 which is less than the values provided by a registered
independent valuer, REH & JN Hammonds in their report dated 29 May 1998.
19
<PAGE> 20
MCALPINE REFRIGERATION LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
8.(B) GOODWILL
<TABLE>
<CAPTION>
<S> <C> <C>
1998 1997
$ $
Purchase of Triumph Sheetmetals 90,000 90,000
less Amortised (21,000) (3,000)
Goodwill on consolidation of Contract
Refrigeration and Air Conditioning (Otago) Ltd 69,776 -
less amortised (10,466) -
--------- ---------
$ 128,310 $ 87,000
========= =========
</TABLE>
Goodwill is being amortised over 5 years.
9. TAXATION
<TABLE>
<CAPTION>
1998 1997
$ $
<S> <C> <C>
A. TAXATION PAYABLE/(RECEIVABLE)
Balance brought forward (516,226) 141,980
Transfer ex CRL Otago 47,609 -
Effect of exchange rate on
opening balance (33,157) (6)
Witholding tax transfer 1,325 (2,438)
Current year provision/(benefit)
(refer note 3) (259,191) (253,782)
Tax paid (247,500) (360,795)
Tax refunded 99,541 -
Deferred tax transfer (8,698) (41,185)
--------- ---------
Balance carried forward ($916,297) ($516,226)
========= =========
Represented By:
Current Tax Payable/(Receivable) (19,974) (192,885)
Future Tax Benefit (896,323) (323,341)
========= =========
B. DEFERRED TAXATION
Balance brought forward (185,756) (239,004)
Current year provision (53,609) 12,063
Transfer from provision for taxation 8,698 41,185
--------- ---------
Balance carried forward ($230,667) ($185,756)
========= =========
C. IMPUTATION ACCOUNT
Balance brought forward 72,080 487,235
Tax paid 147,959 360,616
Witholding tax paid 1,264 2,438
Imputation credits on dividend (295,522) (778,209)
--------- --------
Balance carried forward ($74,219) $ 72,080
========= ========
</TABLE>
20
<PAGE> 21
MCALPINE REFRIGERATION LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
10. INVESTMENTS
A. INVESTMENT IN TRIANGLE REFRIGERATION (AUSTRALIA) PTY LIMITED
<TABLE>
<CAPTION>
1998 1997
$ $
<S> <C> <C>
Shares in Triangle Refrigeration Limited -- at cost 4,062,633 4,062,633
Shares in subsidiaries (Unlisted) -- --
---------- ----------
$4,062,633 $4,062,633
Less 50% Share of
Subsequent increases/(decreases) in net assets (474,414) (474,414)
Amortisation of Goodwill on consolidation (56,935) (56,935)
Translation adjustment on opening equity (91,664) (91,664)
---------- ----------
(623,013) (623,013)
Less write down of investment to fair
market value (2,943,156) --
---------- ----------
$496,464 $3,439,620
========== ==========
</TABLE>
The investment in Triangle Refrigeration (Australia) Pty Ltd has been written
down to Director's fair market value as at 30 June 1998, being the amount it was
sold for subsequent to balance date. As a result no equity accounting
adjustment is necessary in the current year.
B. SUBSIDIARY COMPANIES: (100% OWNED)
McAlpine Industries Limited
McAlpine Australia Pty Limited
Trans Tasman Investments Limited
Contract Refrigeration and Air Conditioning (Otago) Limited
Contract Refrigeration and Air Conditioning (Otago) Ltd became a wholly owned
subsidiary on 30 September 1997 when the company purchased the 70% shareholding
not previously owned by it.
21
<PAGE> 22
MCALPINE REFRIGERATION LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
C. INVESTMENTS IN OTHER ASSOCIATE COMPANIES
<TABLE>
<CAPTION>
1998 1997
$ $
<S> <C> <C>
Investment in Contract Refrigeration &
A/Cond (Otago) -- 15,000
----- -------
-- 15,000
Share of associate companies increases
(decreases) in net assets
Contract Refrigeration & A/Cond (Otago) -- 64,107
----- -------
$ -- $79,107
===== =======
</TABLE>
<TABLE>
<CAPTION>
Percentage Held Balance
by Company Date
1998 1997
---- ----
<S> <C> <C> <C>
Contract Refrigeration & A/Cond
(Otago) Limited 100% 30% 31st Mar.
Koolzone (Asia) Ltd 50% 50% 31st Dec.
</TABLE>
D. ADVANCES TO ASSOCIATED PARTIES
<TABLE>
<CAPTION>
1998 1997
$ $
<S> <C> <C>
Contract Refrigeration & A/Cond
(Otago) Limited -- 8,296
Advill Holdings Limited 7,108 7,108
------ ------
$7,108 $15,404
====== =======
</TABLE>
22
<PAGE> 23
MCALPINE REFRIGERATION LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
11. RECEIVABLES AND PREPAYMENTS
<TABLE>
<CAPTION>
1998 1997
$ $
<S> <C> <C>
Trade Debtors 5,492,355 3,871,561
Provision for doubtful debts (156,383) (153,513)
---------- ---------
5,335,972 3,718,048
Trade receivables from associate companies 3,181,277 2,430,846
Prepayments 113,582 38,677
---------- ----------
$8,630,831 $6,187,571
========== ==========
</TABLE>
12. INVENTORIES
<TABLE>
<CAPTION>
1998 1997
$ $
<S> <C> <C>
Raw Materials 422,399 1,165,084
Work In Progress (238,223) 46,963
Finished Goods and Spare Parts 6,261,163 4,800,502
---------- ----------
$6,445,339 $6,012,549
========== ==========
</TABLE>
23
<PAGE> 24
MCALPINE REFRIGERATION LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
13. RECONCILIATION OF NET SURPLUS/(DEFICIT) AFTER TAXATION WITH CASH INFLOW FROM
OPERATING ACTIVITIES
<TABLE>
<CAPTION>
1998 1997
$ $
<S> <C> <C>
Net Surplus after taxation and including
share of retained surplus of associate (3,555,050) (1,037,962)
Add non-cash items:
Goodwill amortised 28,466 3,000
Depreciation 450,219 432,129
Effect of Exchange Rate Change on opening equity (58,940) -
Movement in deferred tax (44,911) 53,248
Write off of investment in associate 2,943,156 -
Share of associated company net deficit/(surplus) 3,622 548,408
----------- -----------
3,321,612 1,036,785
Add item classified as investing activity:
Net loss/(gain) on disposal 346 (80,673)
Interest on leased assets 4,193 1,248
Add item classified as financing activity:
Convertible note interest 306,452 285,000
Movement in working capital
Increase (Decrease) in accounts payable and accruals 2,482,599 (1,104,157)
Increase (Decrease) in other provisions 221,925 216,155
Increase (Decrease) in taxation payable (447,681) (658,206)
(Increase) Decrease in receivables and prepayments (1,518,607) 1,463,047
(Increase) Decrease in inventory (630,211) (912,979)
----------- ----------
Net cash inflow/(outflow) from operating activities $185,578 ($791,742)
=========== ==========
</TABLE>
24
<PAGE> 25
MCALPINE REFRIGERATION LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
14. CONTINGENT LIABILITIES AND LEASE COMMITMENTS
<TABLE>
<CAPTION>
1998 1997
$ $
<S> <C> <C>
a. Operating lease commitments
Lease commitments under non-cancellable operating leases.
- - Not later than one year 1,140,536 1,225,475
- - Later than one year and not later than two years 936,635 927,767
- - Later than two years and not later than five years 2,402,083 2,266,673
- - Later than five years 3,488,500 3,208,833
b. Capital Commitments
Estimated capital expenditure contracted for at
balance date but not provided for 20,000 -
c. Foreign Exchange Contracts
Contracts outstanding at balance date 3,945,530 2,724,732
d. Finance lease commitments
Lease commitments under non-cancellable finance leases.
- - Not later than one year 148,038 22,488
- - Later than one year and not later than two years 16,213 22,488
- - Later than two years and not later than five years - 16,213
- - Later than five years - -
</TABLE>
25
<PAGE> 26
MCALPINE REFRIGERATION LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
15. RELATED PARTY TRANSACTIONS
The following disclosure of related party transactions and balances is made:
a. McAlpine Industries Limited, McAlpine Australia Pty Limited, Trans
Tasman Investments Limited and Contract Refrigeration and Air Conditioning
(Otago) Ltd are wholly owned subsidiaries of McAlpine Refrigeration
Limited. Up until 30 September 1997 McAlpine Refrigeration Limited had a
30% investment in Contract Refrigeration and Air Conditioning (Otago)
Limited.
b. McAlpine Investments Limited owns 67.7% of the company and Triangle Pacific
Investments Pty Limited, a wholly owned subsidiary of Triangle
Refrigeration (Australia) Pty Limited, owns the remaining 32.3%.
c. McAlpine Finance Limited is wholly owned by the same shareholders who own
100% of McAlpine Investments Limited.
d. Wall Street Properties Limited and Parabel Enterprises Limited are both
100% owned by the shareholders of McAlpine Investments Limited.
e. Royale Properties Limited was 100% owned by the shareholders of McAlpine
Investments Limited up until the time of its sale on 22 September 1997.
f. Arrow Refrigeration Limited and Chillfreeze Rentals Limited are both
companies in which PJ Miller is a director and shareholder.
g. The company had balances outstanding with related parties as at 30 June
1998 as follows:
<TABLE>
<CAPTION>
NAME RELATIONSHIP BALANCE OUTSTANDING INTEREST
1998 1997 RATE
$ $
<S> <C> <C> <C> <C>
Owing by Contract Refrigeration & Air Conditioning (Otago) Ltd Associate Company -- 5,967 Nil
Owing by Triangle Refrigeration (Australia) Pty Ltd Associate Company 3,181,277 2,424,879 Nil
Owing by Arrow Refrigeration Ltd Related
Shareholder 2,699 --
Owing to Triangle Refrigeration (Australia) Pty Ltd Associate Company 72,007 --
Owing to Contract Refrigeration & Air Conditioning (Otago) Ltd Associate Company -- 506,703 Nil
The above balances are payable and receivable on normal trade terms.
Owing to Royale Properties Ltd Related -- 34,996 Nil
Owing to McAlpine Finance Ltd Related 2,112,693 1,330,471 15.00
Owing to Wall Street Properties Ltd Related 7,245 7,244 15.00
Owing by Contract Refrigeration & Air Conditioning (Otago) Ltd Associate Company -- 8,296 12.25
Owing by Advill Holdings Ltd Related 7,108 7,108 Nil
Shareholders
The above balances have no fixed terms of repayment.
</TABLE>
26
<PAGE> 27
MCALPINE REFRIGERATION LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
<TABLE>
<CAPTION>
1998 1997
$ $
<S> <C> <C>
15. RELATED PARTY TRANSACTIONS (Continued)
Sale of Goods to:
Contract Refrigeration & Air Conditioning
(Otago) Ltd - 82,185
Triangle Refrigeration (Australia)
Pty Ltd 5,354,993 2,663,601
Arrow Refrigeration Limited 118,980 -
Purchase of goods from:
Contract Refrigeration & Air Conditioning
(Otago) Ltd - 2,062,710
Triangle Refrigeration (Australia)
Pty Ltd - -
Arrow Refrigeration
Limited 136,727 -
Interest Paid to:
McAlpine Finance Ltd 251,132 80,620
Subvention payment to:
Royale Properties Limited 14,228 -
Wall Street Properties Ltd - 166,919
Parabel Enterprises Ltd - 17,828
Rent Paid to:
Wall Street Properties Ltd 562,000 562,000
Royale Properties Ltd 29,264 122,500
Parabel Enterprises Ltd 22,803 96,500
Sale of Property to:
Parabel Enterprises Ltd - 653,000
</TABLE>
27
<PAGE> 28
MCALPINE REFRIGERATION LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
16. OPERATING SEGMENT
The Group operates in New Zealand and Australia and is in the commercial
refrigeration industry.
17. SUBSEQUENT EVENT
Effective 17 August 1998 Hussmann International, Inc., a company incorporated in
the USA, acquired an effective 65% interest in the group.
18. UNITED STATES GAAP RECONCILIATION
The consolidated financial statements are prepared in accordance with generally
accepted accounting practice in New Zealand ("NZ GAAP") which differs in certain
significant respects from generally accepted accounting principles in the United
States ("US GAAP"). These differences and the approximate effect of the
adjustments necessary to restate Net Surplus/Deficit and Total Equity, are
detailed below:
(i) Revaluation
Under NZ GAAP certain fixed assets have been revalued as stated in Note 1(c).
Under US GAAP the revaluation of fixed assets is not allowable.
(ii) Currency Translation
Under NZ GAAP financial statements in foreign currencies are translated into New
Zealand currency at the rates exchange ruling at balance date. Under US GAAP the
average rate is used to translate Financial Performance amounts.
(iii) Disclosure
In addition, there are more detailed disclosure requirements under US GAAP which
do not have a significant impact on Net Surplus/Deficit or on Total Equity as
presented, but which would require adjustment if financial statements complying
with US GAAP were to be presented.
28
<PAGE> 29
MCALPINE REFRIGERATION LIMITED
NOTES TO AND FORMING PART OF THE
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
18. UNITED STATES GAAP RECONCILIATION (CONTINUED)
(iv) Reconciliation of Net Surplus/Deficit and Total Equity under US GAAP
(a) Net Surplus/(Deficit)
<TABLE>
<CAPTION>
12 months 12 months
ended ended
30 June 1998 30 June 1997
$ $
<S> <C> <C>
As reported in accordance with NZ GAAP (3,555,050) 1,085,699
Approximate US GAAP Adjustments
(i) Depreciation on revalued assets 83,296 76,346
(i) Surplus on sale of revalued assets 7,900 83,589
(ii) Translation of foreign currencies 17,210 (12,357)
---------- ---------
Approximate Net Surplus/Deficit in
accordance with US GAAP (3,446,644) 1,233,277
========== =========
</TABLE>
(b) Total Equity
<TABLE>
<CAPTION>
1998 1997
$ $
<S> <C> <C>
As reported in accordance with NZ GAAP 623,570 4,652,954
Approximate US GAAP Adjustments
(i) Book Value of revalued assets (588,339) (491,175)
-------- ----------
Approximate Net Surplus/Deficit in
accordance with US GAAP 35,231 4,161,779
======== =========
</TABLE>
29
<PAGE> 30
AUDIT REPORT
TO THE SHAREHOLDERS OF
McALPINE REFRIGERATION LIMITED
We have audited the financial report on pages 3 to 25. The financial report
provides information about the past financial performance and financial position
of McAlpine Refrigeration Limited group as at 30 June, 1998 and 1997. This
information is stated in accordance with the accounting policies set out on
pages 8 to 10.
Board of Directors' Responsibilities
The Board of Directors is responsible for the preparation of a financial report
which gives a true and fair view of the financial position of the group as at 30
June, 1998 and 1997, and of the results of their operations and cash flows for
the years ended 30 June, 1998 and 1997.
Auditors' Responsibilities
It is our responsibility to express an independent opinion on the financial
report presented by the Board of Directors and report our opinion to you.
Basis of Opinion
An audit includes examining, on a test basis, evidence relevant to the amounts
and disclosures in the financial report. It also includes assessing:
- -- the significant estimates and judgments made by the Board of Directors
in the preparation of the financial report, and
- -- whether the accounting policies are appropriate to the circumstances of the
group, consistently applied and adequately disclosed.
We conducted our audit in accordance with generally accepted auditing standards
in New Zealand, which are substantially similar to auditing standards generally
accepted in the United States. We planned and performed our audit so as to
obtain all the information and explanations which we considered necessary in
order to provide us with sufficient evidence to give reasonable assurance that
the financial report is free from material misstatements, whether caused by
fraud or error. In forming our opinion we also evaluated the overall adequacy of
the presentation of information in the financial report.
30
<PAGE> 31
Other than in our capacity as auditors and the provision of consultancy advice,
we have no relationship with or interests in McAlpine Refrigeration Limited or
any of its subsidiaries.
Unqualified Opinion
We have obtained all the information and explanations we have required.
In our opinion:
- -- proper accounting records have been kept by McAlpine Refrigeration
Limited as far as appears from our examination of those records; and
- -- the financial report on pages 3 to 25:
-- complies with generally accepted accounting practice;
-- gives a true and fair view of the financial position of the group
as at 30 June, 1998 and 1997, and the results of their operations and
cash flows for the years then ended.
Accounting principles generally accepted in New Zealand vary in certain
significant respects from generally accepted accounting principles in the United
States. Application of generally accepted accounting principles in the United
States would have affected stockholders equity as at 30 June, 1998 and 1997, and
the results of operations for the years then ended to the extent summarized in
note 18 to the financial report.
Our audit was completed on 23 October 1998 and our unqualified opinion is
expressed as at that date.
DELOITTE TOUCHE TOHMATSU
AUCKLAND, NEW ZEALAND CHARTERED ACCOUNTANTS
31
<PAGE> 32
TRIANGLE REFRIGERATION (AUSTRALIA) PTY LIMITED
AND SUBSIDIARY COMPANIES A.C.N. 003 188 761
DIRECTORS' REPORT
In accordance with a resolution of the Directors, the Directors of Triangle
Refrigeration (Australia) Pty Limited herewith submit the consolidated accounts
of the group for the year ended 30th June, 1998 and report as follows:-
The names of the Directors of Triangle Refrigeration (Australia) Pty Limited
holding office at the date of this report are:-
Kevin Stainer Howard Small
Mr. R Alborn resigned during the financial year. Messrs. L Pignone,
J Halakas and B Brill resigned subsequent to balance date.
The principal activities of the Group in the course of the financial year were
refrigeration engineers and air conditioning design, installation and service
and there were no significant changes in the nature of these activities during
that year.
After income tax benefit of $1,275,195 the group incurred a net loss of
$4,238,733.
No dividends have been paid or declared since the end of the previous financial
year.
The Directors recommend that the declaration of a dividend be deferred.
No director has received or become entitled to receive, during the financial
year, a benefit because of a contract made by the company, controlled entity or
a related body corporate with a director, a firm of which a director is a member
or an entity in which a director has a substantial financial interest other than
rent paid on normal commercial terms to a company in which a current director is
a member. This statement excludes a benefit included in the aggregate amount of
emoluments received or due and receivable by directors shown in the company's
accounts, or the fixed salary of a full-time employee of the company, controlled
entity or related body corporate.
The company has not, during or since the financial year, in respect of any
person who is or has been an officer or auditor of the company or a related body
corporate:-
- -- indemnified or made any relevant agreement for indemnifying against a
liability including costs and expenses in successfully defending legal
proceedings; or
- -- paid or agreed to pay a premium in respect of a contract insuring against a
liability for the costs or expenses to defend legal proceedings.
with the exception of the following:
32
<PAGE> 33
TRIANGLE REFRIGERATION (AUSTRALIA) PTY LIMITED
AND SUBSIDIARY COMPANIES A.C.N. 003 188 761
DIRECTORS' REPORT
During the financial year the holding company has paid premiums to insure past
and present directors against liabilities for costs and expenses incurred by
them in defending any legal proceedings arising out of their conduct while
acting in the capacity of director or officer of the group other than conduct
involving a wilful breach of duty in relation to the group. The total premium
paid for the group was $3,150.
FOR AND ON BEHALF OF THE BOARD
..............................
DIRECTOR
.............................. ........................................
DATE DIRECTOR
33
<PAGE> 34
TRIANGLE REFRIGERATION (AUSTRALIA) PTY LIMITED
AND SUBSIDIARY COMPANIES A.C.N. 003 188 761
STATEMENT BY DIRECTORS
In the opinion of the directors of the company:
1.(a) The accompanying financial statements are drawn up so as to give a true
and fair view of the results and cash flows of the Group for the
financial year; and
(b) At the date of this statement, there are reasonable grounds to believe
that the company will be able to pay its debts as and when they fall due.
2. The financial statements have been made out in accordance with applicable
Accounting Standards and Urgent Issues Group Consensus Views.
This statement is made in accordance with a resolution of the Board of Directors
and is signed for and on behalf of the directors by:
.........................
DIRECTOR
......................... .............................
DATE DIRECTOR
34
<PAGE> 35
TRIANGLE REFRIGERATION (AUSTRALIA) PTY LIMITED
AND SUBSIDIARY COMPANIES A.C.N. 003 188 761
PROFIT AND LOSS STATEMENT
FOR THE YEAR ENDED 30TH JUNE, 1998
<TABLE>
<CAPTION>
1997
$ NOTE $
<S> <C> <C>
OPERATING PROFIT (LOSS)
(1,068,992) BEFORE INCOME TAX 2 (3,744,083)
1,354,509 ABNORMAL ITEMS 2 (1,769,845)
- ---------- -----------
285,517 (5,513,928)
(320,381) INCOME TAX BENEFIT (EXPENSE) 3 1,275,195
- ----------- -----------
(34,864) NET PROFIT (LOSS) (4,238,733)
182,759 ACCUMULATED PROFITS (LOSSES) PRIOR YEAR 6,505
(141,390) TRANSFER TO CAPITAL REDEMPTION RESERVE -
- ----------- ----------
6,505 ACCUMULATED PROFITS (LOSSES) YEAR END (4,232,228)
========== ===========
</TABLE>
The accompanying notes form part of these financial statements
35
<PAGE> 36
TRIANGLE REFRIGERATION (AUSTRALIA) PTY LIMITED
AND SUBSIDIARY COMPANIES A.C.N. 003 188 761
BALANCE SHEET AS AT 30TH JUNE, 1998
<TABLE>
<CAPTION>
1997
$ NOTE $
<S> <C> <C> <C>
CURRENT ASSETS
196,549 Cash 4 1,596,684
2,156,605 Inventories 6 562,797
8,495,524 Receivables 5 8,750,079
- ----------- ----------
10,848,678 TOTAL CURRENT ASSETS 10,909,560
- ----------- ----------
NON-CURRENT ASSETS
3,552,367 Investments 7 1,447,828
3,581,202 Property Plant and Equipment 8 1,158,981
3,139,957 Intangibles 9 2,830,024
680,650 Other 10 1,767,573
- ----------- ----------
10,954,176 TOTAL NON-CURRENT ASSETS 7,204,406
- ----------- ----------
21,802,854 TOTAL ASSETS 18,113,966
- ----------- ----------
CURRENT LIABILITIES
7,077,903 Accounts Payable 11 9,063,073
2,841,484 Borrowings 12 2,538,162
1,176,990 Provisions 13 1,132,878
- ----------- ----------
11,096,377 TOTAL CURRENT LIABILITIES 12,734,113
- ----------- ----------
NON-CURRENT LIABILITIES
3,544,539 Borrowings 12 2,651,934
785,948 Other Provisions 13 590,648
- ----------- ----------
4,330,487 TOTAL NON-CURRENT LIABILITIES 3,242,582
- ----------- ----------
15,426,864 TOTAL LIABILITIES 15,976,695
- ---------- ----------
6,375,990 NET ASSETS 2,137,271
========== ==========
SHAREHOLDERS' EQUITY
8,448 Share Capital 14 21,121
6,361,037 Reserves 15 6,348,378
6,505 Accumulated Profits (Losses) (4,232,228)
- ---------- ----------
6,375,990 TOTAL SHAREHOLDERS' EQUITY 2,137,271
========== ==========
</TABLE>
The accompanying notes form part of these financial statements
36
<PAGE> 37
TRIANGLE REFRIGERATION (AUSTRALIA) PTY LIMITED
AND SUBSIDIARY COMPANIES A.C.N. 003 188 761
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30TH JUNE 1998
<TABLE>
<CAPTION>
1997
$ NOTE $
<S> <C> <C> <C>
Cash flows from operating activities
66,597,013 Cash receipts in the course of operations 66,927,779
(64,720,689) Cash payments in the course of operations (65,474,979)
38,012 Interest received 10,969
(249,816) Borrowing costs paid (226,786)
(869,718) Income tax paid -
- ------------ -----------
794,802 Net cash provided by operating activities 23(b) 1,236,983
- ------------ -----------
Cash flows from investing activities
(187,201) Purchase of investments -
(865,360) Payments for plant and equipment (150,261)
476,850 Proceeds from sale of non-current assets 2,028,986
- ----------- -----------
(575,711) Net cash provided by investing activities 1,878,725
- ------------ -----------
Cash flows from financing activities
(916,448) Lease payments (2,058,686)
(141,390) Redemption of preference shares -
50,000 Proceeds from borrowings -
(170,451) Repayment of borrowings -
- ------------ -----------
(1,178,289) Net cash used in financing activities (2,058,686)
- ------------ -----------
(959,198) Net increase/(decrease) in cash held 1,057,022
(768,557) Cash at the beginning of the financial year (1,727,755)
(1,727,755) Cash at the end of the financial year 23(a) (670,733)
</TABLE>
The accompanying notes form part of these financial statements
37
<PAGE> 38
TRIANGLE REFRIGERATION (AUSTRALIA) PTY LIMITED
AND SUBSIDIARY COMPANIES A.C.N. 003 188 761
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
NOTE 1 - STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES
The significant policies which have been adopted in the preparation of this
financial report are:
(A) Basis of Preparation
The financial report is a general purpose financial report which has been
prepared in accordance with Accounting Standards, Urgent Issues Group Consensus
Views and the Corporations Law.
It has been prepared on the basis of historical costs and except where stated,
does not take into account changing money values or current valuations of
non-current assets.
These accounting policies have been consistently applied by each entity in the
economic entity and, except where there is a change in accounting policy, are
consistent with those of the previous year.
Where necessary, comparative information has been reclassified to achieve
consistency in disclosure with current financial year amounts and other
disclosures, and has not been included where an accounting standard has been
initially adopted during the current financial year.
(B) Principles of Consolidation
The consolidated financial statements of the economic entity include the results
of the Company, being the chief entity, and its controlled entities. The results
of the Company are reported in an individual set of financial statements.
Where an entity either began or ceased to be controlled during the year, the
results are included only from the date control commenced or up to the date
control ceased.
The balances, and effects of transactions, between controlled entities included
in the consolidated financial statements have been eliminated.
(C) Goodwill
Goodwill, which represents the excess of the purchase consideration plus
incidental costs over the fair value of the identifiable net assets acquired on
the acquisition of a controlled entity, is amortised over the period of time
during which benefits are expected to arise.
Goodwill is amortised on a straight line basis over 20 years.
The unamortised balance of goodwill is reviewed at least each reporting date.
Where the balance exceeds the value of expected future benefits, the difference
is charged to the profit and loss account.
38
<PAGE> 39
TRIANGLE REFRIGERATION (AUSTRALIA) PTY LIMITED
AND SUBSIDIARY COMPANIES A.C.N. 003 188 761
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
NOTE 1 - STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
(D) Revenue Recognition
Sales Revenue
Sales revenue comprises revenue earned (net of returns, discounts and
allowances) from the provision of products or services to entities outside the
economic entity. Sales revenue is recognised when the goods are provided, or
when the fee in respect of services provided is receivable.
Interest Income
Interest income is recognized as it accrues.
Asset Sales
The gross proceeds of asset sales are included as revenue of the economic
entity. The profit or loss on disposal of assets is brought to account at the
date an unconditional contract of sale is signed.
Other Revenue
Revenue recognition policies for investments, and construction work in progress
are described in Accounting Policy Notes 1(I) and 1(K) respectively.
(E) Foreign Currency
Transactions
Foreign currency transactions are translated to Australian currency at the rates
of exchange ruling at the date of the transactions. Amounts receivable and
payable in foreign currencies at balance date are translated at the rate of
exchange ruling on that date.
Exchange differences relating to amounts payable and receivable in foreign
currencies are brought to account as exchange gains or losses in the profit and
loss account in the financial year in which the exchange rates change.
Hedges
The economic entity does not hedge foreign exchange exposure.
Translation of Controlled Foreign Entities
The balance sheets of overseas controlled entities that are self-sustaining
foreign operations are translated at the rates of exchange ruling at balance
date. The profit and loss accounts are translated at a weighted average rate for
the year. Exchange differences arising on translation are taken directly to
operating profit.
(F) Taxation
Income Tax
The economic entity adopts the liability method of tax effect accounting.
39
<PAGE> 40
TRIANGLE REFRIGERATION (AUSTRALIA) PTY LIMITED
AND SUBSIDIARY COMPANIES A.C.N. 003 188 761
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
NOTE 1 - STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
Income tax expense is calculated on operating profit adjusted for permanent
differences between taxable and accounting income. The tax effect of timing
differences, which arise from items being brought to account in different
periods for income tax and accounting purposes, is carried forward in the
balance sheet as a future income tax benefit or a provision for deferred income
tax.
Future income tax benefits are not brought to account unless realization of the
asset is assured beyond reasonable doubt. Future income tax benefits relating to
entities with tax losses are only brought to account when their realization is
virtually certain.
(G) Non-Current Assets
The carrying amounts of non-current assets, are reviewed to determine whether
they are in excess of their recoverable amounts at balance date. If the carrying
amount of a non-current asset exceeds the recoverable amount, the asset is
written down to the lower amount.
In assessing recoverable amounts of non-current assets the relevant cash flows
have not been discounted to their present value except where specifically
stated.
Certain non-current assets have been revalued. Such revaluations occur from time
to time and are not made in accordance with a policy of regular revaluation.
(H) Receivables
Trade Debtors
Trade debtors to be settled within 30 days are carried at amounts due. The
collectibility of debts is assessed at balance date and specific provision is
made for any doubtful accounts.
(I) Investments
Associates
An associate is an entity, other than a partnership, over which the economic
entity exercises significant influence and where the investment in that entity
has not been acquired with a view to disposal in the near future.
Investments in associates are carried at the lower of cost and recoverable
amount. In the case of interim dividends, dividends are brought to account in
the profit and loss account as they are received, and in the case of final
dividends after they have been declared by the associated company in a general
meeting.
40
<PAGE> 41
TRIANGLE REFRIGERATION (AUSTRALIA) PTY LIMITED
AND SUBSIDIARY COMPANIES A.C.N. 003 188 761
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
NOTE 1 - STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
(J) Inventories
Inventories are carried at the lower of cost and net realisable value.
Manufacturing Activities
Cost is based on the first-in, first-out principle and includes expenditure
incurred in acquiring the inventories and bringing them to their existing
condition and location. In the case of manufactured inventories and
work-in-progress, cost includes an appropriate share of both variable and fixed
costs. Fixed costs have been allocated on the basis of normal operating
capacity.
Net Realizable Value
Net realizable value is determined on the basis of each entity's normal selling
pattern. Expenses of marketing, selling and distribution to customers are
estimated and are deducted to establish net realisable value.
(K) Construction Work in Progress
Valuation
Construction work in progress is carried at cost plus profit recognised to date
based on the value of work completed, less progress billings and less provision
for foreseeable losses. Provision for the total loss on a contract is made as
soon as the loss is identified.
Cost includes both variable and fixed costs directly related to specific
contracts, and those which can be attributed to contract activity in general and
which can be allocated to specific contracts on a reasonable basis. Also
included are costs expected to be incurred under penalty clauses and
rectification provisions.
Where the outcome of a contract cannot be reliably estimated contract costs are
expensed as incurred. Where it is probable that the costs will be recovered,
revenue is only recognised to the extent of costs incurred.
Recognition of Profit
Profit is recognised on an individual contract basis using the percentage of
completion method when the stage of contract completion can be reliably
determined, costs to date can be clearly identified, and the following can be
reliably estimated:
- - total contact revenues to be received;
- - and cost to complete.
Profit recognition does not normally commence until a contract has commenced.
Stage of completion is measured by calculating the proportion that billings to
date represent of the total estimated billings for the contract.
41
<PAGE> 42
TRIANGLE REFRIGERATION (AUSTRALIA) PTY LIMITED
AND SUBSIDIARY COMPANIES A.C.N. 003 188 761
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
NOTE 1 - STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
(L) Plant and Equipment
Acquisition
Items of plant and equipment are initially recorded at cost and depreciated as
outlined below.
Depreciation and Amortization
Items of property, plant and equipment, including leasehold property are
depreciated/amortized using the diminishing value method over their estimated
useful lives.
The depreciation rates used for each class of asset are as follows:
Leasehold improvements 20%
Plant and equipment 20%
Leased plant and equipment 20%
Motor vehicles 22.5%
Office equipment 20%
Furniture and fittings 20%
Assets are depreciated or amortized from the date of acquisition.
Leased Plant and Equipment
Leases of plant and equipment under which the economic entity assumes
substantially all the risks and benefits of ownership are classified as finance
leases. Other leases are classified as operating leases.
Finance leases are capitalised. A lease asset and a lease liability equal to the
present value of the minimum lease payments are recorded at the inception of the
lease. Contingent rentals are written off as an expense of the accounting period
in which they are incurred. Capitalised lease assets are amortised on a straight
line basis over the term of the relevant lease or where it is likely the
economic entity will obtain ownership of the asset, the life of the asset. Lease
liabilities are reduced by repayments of principal. The interest components of
the lease payments are charged to the profit and loss account.
Payments made under operating leases are charged against profits in equal
instalments over the accounting periods covered by the lease term.
(M) Accounts Payable
Liabilities are recognised for amounts to be paid in the future for goods or
services received, whether or not billed to the Company or economic entity.
Trade accounts payable are normally settled within 60 days.
42
<PAGE> 43
TRIANGLE REFRIGERATION (AUSTRALIA) PTY LIMITED
AND SUBSIDIARY COMPANIES A.C.N. 003 188 761
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
NOTE 1 - STATEMENT OF SIGNIFICANT ACCOUNTING POLICIES (Cont'd)
(N) Bank Loans
Bank loans are carried on the balance sheet at their principal amount, subject
to set-off arrangements. Interest expense is accrued at the contracted rate and
included in "Other creditors".
(O) Employee Entitlements
Wages, Salaries, Annual leave and Long Service Leave
The provisions for employee entitlements to wages, salaries, annual leave and
long service leave represents the amount which the economic entity has a present
obligation to pay resulting from employees' services provided up to the balance
date. The provisions have been calculated at undiscounted amounts based on
current wage and salary rates and includes related on-costs.
Superannuation Plan
The company and other controlled entities contribute to a defined contribution
superannuation plan. Contributions are charged against income as they are made.
43
<PAGE> 44
TRIANGLE REFRIGERATION (AUSTRALIA) PTY LIMITED
AND SUBSIDIARY COMPANIES A.C.N. 003 188 761
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
NOTE 2 - OPERATING LOSS
<TABLE>
<CAPTION>
1997
$
<S> <C> <C>
$
Operating loss has been determined after:
a) Crediting as revenue:
66,474,706 Sales Revenue 66,768,994
Other Revenue
38,012 Interest - Other persons 10,969
476,850 Gross proceeds from sale of non-current assets 2,028,986
170,228 Sundry Income 126,939
14,109 Profit on disposal of non-current assets 98,461
- ---------- -----------
67,173,905 69,034,349
- ---------- -----------
b) Charging as expenses:
617,846 Amortisation of Leased Assets 272,851
229,094 Amortisation of Goodwill 251,060
30,276 Amortisation of Leasehold Improvements 40,134
Amortisation of Computer Software &
58,872 Training 58,873
Auditors Remuneration for:
75,850 Audit & Accounts 73,940
37,957 Other 63,780
932 Bad Debts 201,607
433,238 Depreciation 328,972
60,000 Provision for Doubtful Debts 220,000
Note: Bad Debts written off against Prov'n
Doubtful Debts totalled $252,277 (1997 nil)
97,030 Provision for Employee Entitlements (51,140)
249,816 Interest 226,786
229,239 Interest - Leased Assets 90,426
Lease rental expenses - operating leases 862,341
Abnormal Items
- - Provision for Diminution of Investment (2,104,539)
- - Income tax effect -
- ---------- ------------
- (2,104,539)
- ---------- -----------
1,289,305 - Change Policy Re Incomplete Contracts -
65,204 - Workers Comp. Refund Prior Year -
- - Foreign Exchange Gain 334,694
- - Income Tax Effect (120,490)
- ---------- -----------
1,354,509 214,204
========== ===========
1,354,509 Total abnormal items before income tax (1,769,845)
1,354,509 Total abnormal items after income tax (1,890,335)
</TABLE>
44
<PAGE> 45
TRIANGLE REFRIGERATION (AUSTRALIA) PTY LIMITED
AND SUBSIDIARY COMPANIES A.C.N. 003 188 761
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
NOTE 3 - INCOME TAX
<TABLE>
<CAPTION>
1997
$
<S> <C> <C>
Prima facie income tax payable (benefit) on $
102,786 operating profit (loss) at 36% (1,985,014)
ADD (DEDUCT) tax effect of:
82,474 Amortization of goodwill 90,230
Excess of lease payments over amortization
4,177 and interest on finance leases (7,171)
3,006 Amortization of leasehold improvements 5,025
Non deductible entertainment and
8,392 general expenses 4,848
49,868 Non deductible legal fees 3,731
2,437 Non deductible moving expenses 12,820
(5,803) Craft rebate (1,980)
Profit of overseas subsidiary not included
70,412 in income tax expense/benefit (159,103)
- Provision for diminution of investment 757,634
Tax losses not brought to account as
2,721 future tax benefit -
(89) Other 3,785
- ----------- ----------
320,381 INCOME TAX EXPENSE (BENEFIT) (1,275,195)
========== ==========
FUTURE INCOME TAX BENEFIT
Future income tax benefit comprises the estimated
future benefit, at 36% of:
Timing differences 313,420
Tax losses 1,454,153
---------
1,767,573
=========
</TABLE>
45
<PAGE> 46
TRIANGLE REFRIGERATION (AUSTRALIA) PTY LIMITED
AND SUBSIDIARY COMPANIES A.C.N. 003 188 761
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
NOTE 4 - CASH
<TABLE>
1997
$ $
<S> <C> <C>
32,625 Cash in Hand 21,030
112,761 Cash at Bank 1,535,129
51,163 Deposits Refundable 40,525
------- ---------
196,549 1,596,684
======= =========
</TABLE>
Interest rates at 30th June 1998 on cash accounts are 3.25%
NOTE 5 - RECEIVABLES
<TABLE>
<S> <C> <C>
Current
8,188,217 Trade Debtors 8,220,062
(290,000) Less Prov'n for Doubtful Debts (257,723)
381,112 Other Debtors 220,639
129,529 Prepayments 77,143
86,666 Loans to Other Related
Companies (Unsecured) 489,958
- --------- ---------
8,495,524 8,750,079
========= =========
</TABLE>
Loans to other related companies.
Details of loans to other related companies are set out in
Note 20.
Trade Debtors
The economic entity is materially exposed to concentrations of
credit risk related to an individual customer. The customer
represents 11% of the trade debtors balance at 30th June 1998.
NOTE 6 - INVENTORIES
<TABLE>
<S> <C> <C>
Inventories
2,643,457 Stock on Hand - at Cost 2,309,647
(486,852) Work in Progress (1,746,850)
--------- ----------
2,156,605 562,797
========= ==========
Construction Work in Progress comprises:
Contract costs incurred to date 17,809,546
Profit recognized to date 1,567,135
Less: Progress billings (21,123,531)
----------
Net construction work in progress (1,746,850)
==========
</TABLE>
46
<PAGE> 47
TRIANGLE REFRIGERATION (AUSTRALIA) PTY LIMITED
AND SUBSIDIARY COMPANIES A.C.N. 003 188 761
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
NOTE 7 - INVESTMENTS
<TABLE>
1997
$ $
<S> <C> <C> <C>
3,552,367 Shares in McAlpine Refrig. Ltd 3,552,367
Provision for Diminution of
- Investment (2,104,539)
- --------- ----------
3,552,367 1,447,828
========= ==========
</TABLE>
The directors believe the carrying amount of the interest in
unlisted shares is appropriate as it represents the undiscounted
future cash flows to be derived from the economic entity's interest
in the shares and therefore also represents the net fair value.
NOTE 8 - PROPERTY PLANT AND EQUIPMENT
<TABLE>
<S> <C> <C> <C>
432,258 Plant & Equipment - at Cost 439,249
251,142 Less Prov'n for Depreciation 293,553
- ---------- ---------
181,116 145,696
844,030 Motor Vehicles - at Cost 286,466
302,182 Less Prov'n for Depreciation 100,851
- ---------- --------
541,848 185,615
1,125,422 Office Equipment - at Cost 1,137,777
780,718 Less Prov'n for Depreciation 928,591
- ---------- --------
344,704 209,186
284,287 Furniture & Fittings - at Cost 294,310
161,493 Less Prov'n for Depreciation 192,142
- ---------- --------
122,794 102,168
113,607 Leasehold Improvements-at Cost 126,423
39,904 Less: Accumulated Amortisation 80,038
- ---------- --------
73,703 46,385
145,725 Small Tools - at Cost 155,595
111,040 Plant & Equipment-Under Lease 130,640
31,378 Less: Accumulated Amortisation 58,960
- ---------- --------
79,662 71,680
3,196,601 Motor Vehicles - Under Lease 514,102
1,104,951 Less: Accumulated Amortisation 271,446
- ---------- --------
2,091,650 242,656
- ---------- ---------
3,581,202 1,158,981
========== =========
</TABLE>
47
<PAGE> 48
TRIANGLE REFRIGERATION (AUSTRALIA) PTY LIMITED
AND SUBSIDIARY COMPANIES A.C.N. 003 188 761
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
NOTE 9 - INTANGIBLE ASSETS
<TABLE>
1997
$ $
<S> <C> <C> <C>
Computer Software, Training -
176,617 Carried Forward 176,617
(117,744) Less: Accumulated Amortisation (176,617)
4,148,757 Goodwill on Consolidation 4,148,757
(1,244,628) Less: Written Off (1,452,066)
608,073 Goodwill - at Cost 160,000
(431,118) Less: Written Off (26,667)
- ----------- ----------
3,139,957 2,830,024
========== =========
</TABLE>
NOTE 10 - OTHER ASSETS
<TABLE>
<S> <C> <C>
Other
680,650 Future Income Tax Benefits 1,767,573
========== =========
NOTE 11 - ACCOUNTS PAYABLE
Current
6,264,566 Trade Creditors 8,508,474
Service Contracts Invoiced
55,665 In Advance 85,191
40,600 Other Creditors --
717,072 Accrued Expenses 469,408
------- ---------
7,077,903 9,063,073
========= =========
NOTE 12 - BORROWINGS
Current
Hire Purchase Instalments
81,312 Within 12 months 81,311
Hire Purchase Charges -
(20,890) Not Yet Due (12,671)
1,924,304 Bank Overdraft - Secured 2,267,417
856,758 Lease Liability 202,105
- ---------- ---------
2,841,484 2,538,162
========== =========
</TABLE>
Hire Purchase
The economic entity has a hire purchase lease for its computer
system. The effective weighted average interest rate of this hire
purchase agreement is 10%
Lease Liabilities
The economic entity has finance leases for its motor vehicles. The
effective weighted average interest rate on the lease agreements is
9.84%.
48
<PAGE> 49
TRIANGLE REFRIGERATION (AUSTRALIA) PTY LIMITED
AND SUBSIDIARY COMPANIES A.C.N. 003 188 761
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
NOTE 12 - BORROWINGS (Cont'd)
<TABLE>
1997
$ $
<S> <C> <C> <C>
Non-Current
196,537 Hire Purchase Instalments 115,226
Hire Purchase Charges -
(17,413) Not Yet Due (4,743)
- Loan - McAlpines 429,220
2,000,000 Commercial Bills - Secured 2,000,000
1,365,415 Lease Liability 112,231
- --------- ---------
3,544,539 2,651,934
========= =========
Financing Arrangements:
The company has access to the following
lines of credit
Total facilities available:
Bank Overdraft 700,000
Bank Loans 2,000,000
---------
2,700,000
=========
Facilities utilized at balance date:
Bank Overdraft 732,288
Bank Loans 2,000,000
---------
2,732,288
=========
Facilities not utilized at balance date:
Bank Overdraft --
Bank Loans --
=========
</TABLE>
The facilities utilized at balance date exceed the facilities
available for the bank overdraft as a result of unpresented
cheques.
Bank Overdraft and Commercial Bill
The bank overdraft and commercial bill are secured by mortgage
debentures, guarantees from group companies and guarantees from
directors.
Interest on the bank overdraft is charged at prevailing market
rates being 7.95% at 30th June 1998. Interest on the
commercial bill is charged at the 30 day bank bill rate, being
5.84% at 30th June 1998.
The bank overdraft is payable on demand. The commercial
bill is not payable within the year. This is a facility that
is reviewed every 12 months, however, interest rates charged
on this facility are reviewed every 30 days.
Loan - McAlpines
Details of the loan from McAlpines are set out at Note 20.
49
<PAGE> 50
TRIANGLE REFRIGERATION (AUSTRALIA) PTY LIMITED
AND SUBSIDIARY COMPANIES A.C.N. 003 188 761
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
NOTE 13 - PROVISIONS
<TABLE>
1997
$ $
<S> <C> <C> <C>
Current
1,176,990 Provision for employee entitlements 1,132,878
========== =========
Non Current
499,307 Prov'n for Deferred Income Tax 311,035
286,641 Prov'n for Employee Entitlements 279,613
- ---------- -------
785,948 590,648
========== =========
NOTE 14 - ISSUED CAPITAL
Ordinary Shares of $1 Each
8,448 Fully Paid 21,121
========= =========
NOTE 15 - RESERVES
311,319 Capital Reserve 311,320
4,597,513 Share Premium Reserve 4,584,853
1,452,205 Capital Redemption Reserve 1,452,205
- --------- ---------
6,361,037 6,348,378
========= =========
Movements during the year:
Share Premium Reserve
1,049,370 Opening balance 4,597,513
Premium on issue of 4,224 shares of
3,548,143 $1 each fully paid --
Discount on issue of 12,673 shares of
-- $1 each fully paid (12,660)
- --------- ---------
4,597,513 Closing balance 4,584,853
- --------- ---------
Capital Redemption Reserve
1,310,815 Opening balance 1,452,205
141,390 Redemption of 141,390 shares --
- --------- ---------
1,452,205 Closing balance 1,452,205
========== =========
</TABLE>
50
<PAGE> 51
TRIANGLE REFRIGERATION (AUSTRALIA) PTY LIMITED
AND SUBSIDIARY COMPANIES A.C.N. 003 188 761
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
NOTE 16 - FINANCE LEASES & HIRE PURCHASE COMMITMENTS
<TABLE>
1997
$ $
<S> <C> <C>
(a) Future Finance Lease Commitments
1,043,935 - Not later than one year 225,737
- - Later than one year and not
962,659 later than two years 62,821
- Later than two years and not
520,417 later than five years 66,166
- ---------- ---------
2,527,011 Minimum lease payments 354,724
304,838 Deduct: Future finance charges 40,388
- ---------- ---------
2,222,173 Lease Liability Per Balance Sheet 314,336
========== =========
(b) Operating Lease Commitments
Operating leases contracted for but not
capitalised in the accounts
- - Not later than one year 1,042,933
- - Later than one year and not later
than two years 749,428
- - Later than two years and not later
than five years 316,167
- ---------- ---------
- 2,108,528
========== =========
(c) Future Hire Purchase Commitments
81,311 - Not later than one year 81,311
- Later than one year and not
81,311 later than two years 81,311
- Later than two years and not
115,226 later than five years 33,915
- ---------- ---------
277,848 Minimum hire purchase payments 196,537
38,302 Deduct: Future finance charges 17,413
- ---------- ---------
239,546 Hire Purchase Liability per Balance Sheet 179,124
========== =========
</TABLE>
51
<PAGE> 52
TRIANGLE REFRIGERATION (AUSTRALIA) PTY LIMITED
AND SUBSIDIARY COMPANIES A.C.N. 003 188 761
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
NOTE 17 - CONTINGENT LIABILITIES
Guarantees in respect of group companies' construction contracts and rental of
premises.
NOTE 18 - AMOUNTS PAYABLE/RECEIVABLE IN FOREIGN CURRENCIES
The economic entity is exposed to fluctuations in exchange rates from its
purchase and sale commitments denominated in foreign currencies. These foreign
exchange exposures are not hedged with forward foreign exchange contracts.
The Australia Dollar equivalents of unhedged amounts payable or receivable in
foreign currencies, calculated at year end exchange rates, are as follows:
<TABLE>
<CAPTION>
1998
United States Dollars $
<S> <C>
Amounts Receivable
Current 47,881
---------
Chinese RMB
Amounts Receivable
Current 1,265,098
=========
</TABLE>
NOTE 19 - DIRECTORS REMUNERATION
Directors Income:
The number of directors whose income from the company or related parties falls
within the following bands:
<TABLE>
<CAPTION>
No.
<S> <C>
$0 - $ 9,999 2
$ 70,000 - $ 79,999 1
$100,000 - $109,999 2
$180,000 - $189,999 1
</TABLE>
Total income paid or payable, or otherwise made available, to all directors from
the company or any related party.
<TABLE>
<S> <C>
475,244
=========
</TABLE>
52
<PAGE> 53
TRIANGLE REFRIGERATION (AUSTRALIA) PTY LIMITED
AND SUBSIDIARY COMPANIES A.C.N. 003 188 761
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
NOTE 20 - RELATED PARTIES
Directors:
The names of each person holding the position of director of the company during
the financial year are Messrs. K Stainer, L Pignone, J Halakas, H Small, B Brill
and R Alborn. Mr. R Alborn resigned as a director during the year. Messrs. L
Pignone, J Halakas and B Brill resigned as directors subsequent to balance date.
Details of director's remuneration are set out in Note 19.
Loans to Directors:
Loans to directors as at 30th June 1998 totalled $Nil.
During the year Malirum Pty Ltd, a company controlled by Messrs. K Stainer, L
Pignone, J Halakas and R Alborn repaid the outstanding balance on its loan of
$31,352.
Interest received on the loan totalled $5,349.
Other Transactions with the Company or Its Controlled Entities:
Malirum Pty Ltd also provides leased premises to the economic entity. All
dealings with the firm are in the ordinary course of business and on normal
commercial terms and conditions. Rent paid to Malirum Pty Ltd during the year
was $14,185.
From time to time some of the wives of directors of the company may be employed
by the company. This employment is on the same terms and conditions as those
entered into by other company employees.
Transactions with other related parties:
The economic entity has unsecured interest free loans payable to other related
parties (refer Note 12). The economic entity has unsecured interest free loans
receivable from other related parties (refer Note 5).
During the year the economic entity purchased materials at a cost of $4,516,937
from subsidiaries of the parent entity. The purchases were on normal terms and
conditions.
Ultimate parent entity:
At the date of this report the ultimate parent entity of the company is believed
to be Hussmann International Inc., a company incorporated in the United States
of America.
NOTE 21 - SUBSEQUENT EVENTS
Since 1st July 1998 the parent entity of the economic entity is controlled by
Hussmann International Inc., a company incorporated in the United States.
53
<PAGE> 54
TRIANGLE REFRIGERATION (AUSTRALIA) PTY LIMITED
AND SUBSIDIARY COMPANIES A.C.N. 003 188 761
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
NOTE 22 - SIGNIFICANT DIFFERENCES BETWEEN AUSTRALIAN AND UNITED STATES GAAP
(Cont'd)
(a) Statement of Cash Flows
Under both Australian and US GAAP, a Statement of Cash Flows, which discloses
cash flows from operating, investing, and financing activities, is required to
be presented. Under US GAAP, bank overdraft would be reclassified as a financing
activity rather than as a component of cash position.
(b) Abnormal Items
Under Australian GAAP, items of revenue and expense which are considered
abnormal by reason of their size and effect on the results for the year are
classified as abnormal items in the income statement. While such items may be
separately identified for purposes of US GAAP they would normally be shown as
part of continuing operations.
(c) Long Term Contracts
Under US GAAP, for contract accounting, "costs of uncompleted contracts in
excess of related billings" should be shown in the balance sheet as a current
asset, and "billings of uncompleted contracts in excess of related costs" should
be shown in liabilities. If costs exceed billings on some contracts, and
billings exceed costs on others, the contracts should be segregated so that the
figures on the asset side include only those contracts on which costs exceed
billings, and those on the liability side include only those on which billings
exceed costs.
(d) Investment in Affiliates
Under Australian GAAP, investments in affiliates are initially recorded at cost,
but may be revalued. Income from investments in affiliates is recognized only to
the extent of dividends received or receivable from post-acquisition profits of
the affiliate.
Under US GAAP, the equity method of accounting for an investment should be
followed by an investor whose investment in voting stock gives it the ability to
exercise significant influence over operating and financial policies of an
affiliate but who has less than a majority voting interest. The equity method of
accounting requires the investor to recognise its proportionate share of the
affiliate's net profit or loss for the period, while dividends received or
receivable are accounted for as reductions in the carrying value of the
investment.
The original investment in affiliates commenced on 1st December 1996.
54
<PAGE> 55
TRIANGLE REFRIGERATION (AUSTRALIA) PTY LIMITED
AND SUBSIDIARY COMPANIES A.C.N. 003 188 761
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
NOTE 22 - SIGNIFICANT DIFFERENCES BETWEEN AUSTRALIAN AND UNITED STATES GAAP
(Cont'd)
(e) Income Taxes
Accounting under Australian GAAP is equivalent in most major respects to US GAAP
SFAS 109, "Accounting for Income Taxes." Under Australian GAAP, deferred tax
assets related to temporary differences are brought to account when they are
"assured beyond a reasonable doubt". Net operating losses must pass a "virtual
certainty" threshold, which "will only be met in rare and exceptional
circumstances". Under US GAAP, a tax asset is recognized when it is "more likely
than not" that such tax asset would be realized. Where the full benefit of the
asset is not expected to be realized the US provide for a valuation allowance to
report the tax asset at the level of its expected realization.
(f) Reconciliation under US GAAP
The application of the above described generally accepted accounting principles
in the United States would have had the following approximate effect on Net
Earnings and Equity.
<TABLE>
<CAPTION>
1997 1998
$000 $000
<S> <C> <C>
(i) Net Earnings
(35) As reported in accordance with Australian GAAP (4,239)
Approximate US GAAP adjustments:
(830) Equity in loss of affiliates (172)
-- Reversal of Provision for Diminution of Investment
in affiliates 2,105
-- Permanent decline in carrying amount of Investment
in affiliates (1,103)
(865) Approximate Net Earnings (Loss) in accordance with
US GAAP (3,409)
(ii) Equity
6,376 As reported in accordance with Australian GAAP 2,137
Approximate US GAAP adjustments:
(830) Cumulative adjustments to Investments in affiliates --
5,546 Approximate Equity in Accordance with US GAAP 2,137
</TABLE>
55
<PAGE> 56
TRIANGLE REFRIGERATION (AUSTRALIA) PTY LIMITED
AND SUBSIDIARY COMPANIES A.C.N. 003 188 761
NOTES TO AND FORMING PART OF THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30TH JUNE 1998
NOTE 23 - NOTES TO THE STATEMENT OF CASH FLOWS
(A) Reconciliation of Cash
For the purpose of the Statement of Cash Flows, cash includes cash on hand and
at bank and short term deposits at call, net of outstanding bank overdrafts.
Cash as at the end of the financial year as shown in the Statement of Cash
Flows is reconciled to the related items in the balance sheets as follows:
<TABLE>
<CAPTION>
1997 Note
$
$
<S> <C> <C> <C>
196,549 Cash 4 1,596,684
(1,924,304) Bank overdraft 12 (2,267,417)
----------- ----------
(1,727,755) (670,733)
=========== ==========
</TABLE>
(B) Reconciliation of operating profit after income tax to net cash
provided by operating activities
<TABLE>
<S> <C> <C>
(34,864) Operating loss after income tax (4,238,733)
Add/(less) items classified as investing/
finance activities:
(14,109) (Profit)/loss on sale of non current assets (98,461)
229,239 Finance charges on capitalized leases 90,426
Add/(less) non-cash items:
936,088 Amortization 622,918
433,238 Depreciation 328,972
-- Write-down in value of investment 2,104,539
----------- ----------
Net cash provided by operating activities
1,549,592 before change in assets and liabilities (1,190,339)
</TABLE>
<TABLE>
<CAPTION>
$
<S> <C> <C>
Change in assets and liabilities:
460,883 (Increase)/decrease in inventories and WIP 1,593,808
47,508 (Increase)/decrease in prepayments 52,386
(156,528) (Increase)/decrease in trade/term debtors (64,122)
5,189 (Increase)/decrease in loans to McAlpine (403,292)
(498,923) (Decrease)/increase in accounts payable 1,985,184
97,030 (Decrease)/increase in provisions (51,140)
(160,614) (Increase)/decrease in other debtors 160,473
(88,844) (Increase)/decrease FITB (1,086,923)
409,227 (Decrease)/increase in DITL (188,272)
(869,718) (Decrease) in income tax payable --
-- (Decrease)/increase in loan from McAlpine 429,220
--------- ---------
Net cash provided by/(used in) operating
794,802 activities 1,236,983
========= =========
</TABLE>
56
<PAGE> 57
TRIANGLE REFRIGERATION (AUSTRALIA) PTY LIMITED
AND SUBSIDIARY COMPANIES A.C.N. 003 188 761
INDEPENDENT AUDIT REPORT TO THE MEMBERS
SCOPE
We have audited the financial statements of Triangle Refrigeration (Australia)
Pty Limited and Subsidiary Companies for the year ended 30th June, 1998,
consisting of the profit and loss account, balance sheet, statement of cash
flows, accompanying notes and the statement by directors, as set out on pages 5
to 25. The holding company's directors are responsible for the financial
statements. We have conducted an independent audit of the financial statements
in order to express an opinion on them to the members of the holding company.
Our audit has been conducted in accordance with Australian Auditing Standards,
which are substantially equivalent to generally accepted auditing standards in
the United States, to provide reasonable assurance whether the financial
statements are free of material misstatement. Our procedures included
examination, on a test basis, of evidence supporting the amounts and other
disclosures in the financial statements and the evaluation of significant
accounting estimates. These procedures have been undertaken to form an opinion
whether, in all material respects, the financial statements are presented fairly
in accordance with the Accounting Standards and other mandatory professional
reporting requirements and statutory requirements so as to present a view which
is consistent with our understanding of the economic entity's financial
position, the results of its operations and its cash flows.
Accounting principles generally accepted in Australia, vary in certain
significant respects from generally accepted accounting principles in the United
States. Application of generally accepted accounting principles in the United
States would have affected the results of operations for the year ended 30th
June 1998 and stockholders' equity as of 30th June 1998 to the extent summarized
in note 22 to the financial statements.
The audit opinion expressed in this report has been formed on the above basis.
57
<PAGE> 58
TRIANGLE REFRIGERATION (AUSTRALIA) PTY LIMITED
AND SUBSIDIARY COMPANIES A.C.N. 003 188 761
INDEPENDENT AUDIT REPORT TO THE MEMBERS
AUDIT OPINION
In our opinion the financial statements of Triangle Refrigeration (Australia)
Pty Limited and Subsidiary Companies for the year ended 30th June, 1998 are
properly drawn up:
so as to give a true and fair view of the state of affairs of the economic
entity at 30th June 1998 and the results and cash flows of the economic entity
for the financial year ended on that date and of the matters required by
Divisions 4, 4A and 4B of Part 3.6 of the Corporations Law to be dealt with in
the financial statements;
in accordance with the provisions of the Corporations Law; and
in accordance with applicable Accounting Standards and other mandatory
professional reporting requirements.
BYRONS
CHARTERED ACCOUNTANTS
Jeffrey P. Matchett -- Partner
..............................
DATE
58
<PAGE> 59
HUSSMANN INTERNATIONAL, INC.
INTRODUCTION TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The unaudited pro forma combined condensed financial statements as presented
herein have been prepared from the historical financial statements of Hussmann
International, Inc. (the "Company"), McAlpine Refrigeration Ltd.("McAlpine")
and Triangle Refrigeration (Australia) Pty. Limited ("Triangle"), collectively
McAlpine and Triangle are referred to as, McAlpine Investments, Ltd. ("MIL"),
for the periods noted.
On August 17, 1998, the Company acquired a 65% interest in MIL. The
acquisition was effected pursuant to the Agreement relating to Hussmann
McAlpine, Ltd. dated August 17, 1998 (the "Agreement"), which created Hussmann
McAlpine Limited ("HML"), a holding company, which in turn purchased all of the
shares of MIL. The Company owns 65% of HML and the former minority
shareholders of MIL or its subsidiaries own 35%. This acquisition has been
accounted for under the purchase method of accounting, and accordingly, the
purchase price has been allocated to the assets acquired and the liabilities
assumed of MIL based upon the Company's portion of their estimated fair market
value.
The following unaudited pro forma combined condensed statements of operations
for the year ended December 31, 1997 and for the six-month period ended June
30, 1998, represent the Company's results of operations as adjusted to give
effect to the acquisition of the 65% interest in MIL, as if the transaction had
occurred on January 1, 1997. The unaudited pro forma combined condensed
balance sheet as of June 30, 1998, gives effect to the acquisition as if it had
occurred on June 30, 1998. For pro forma presentation, due to the common
ownership of McAlpine and Triangle, the companies that constitute MIL are shown
on a combined basis. All significant intercompany transactions and balances
have been eliminated.
The unaudited pro forma combined condensed financial statements should be read
in conjunction with the Company's consolidated financial statements and notes
thereto previously filed as part of the Company's most recent annual and
quarterly reports on Forms 10-K and 10-Q for the periods ended December 31,
1997, and June 30, 1998, respectively.
The unaudited pro forma combined condensed information presented on the
following pages is for informational purposes only and is not necessarily
indicative of what the actual financial position or results of operations of
the Company would have been had the transactions actually occurred on the dates
indicated, nor does it purport to indicate the future financial position or
results of operations of the Company. Results of operations for the six months
ended June 30, 1998, may not be indicative of results of operations to be
expected for a full year. The pro forma adjustments are based upon available
information and assumptions believed to be reasonable in the circumstances.
There can be no assurance that such information and assumptions will not change
from those reflected in the pro forma financial statements and notes thereto.
59
<PAGE> 60
HUSSMANN INTERNATIONAL, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(Dollars in millions, except per share information)
<TABLE>
<CAPTION>
Historical
Historical Combined Pro Forma
Hussmann MIL Adjustments Eliminations As Adjusted
---------- ---------- ----------- ------------ -----------
<C> <C> <C> <C> <C> <C>
Sales and revenues $1,096.2 $64.2 -- ($4.5)(a) $1,155.9
Cost of goods sold 889.5 59.8 -- (3.6)(a) 945.7
--------- -------- ----------- ------------ -----------
Gross profit 206.7 4.4 -- (0.9) 210.2
Selling, general and
administrative expenses 114.4 5.1 -- -- 119.5
Amortization expense 1.5 0.1 0.6 (b) -- 2.1
(0.1)(b)
Non-recurring charges 47.8 0.2 -- -- 48.0
--------- -------- ----------- ------------ -----------
Operating income 43.0 (1.0) (0.5) (0.9) 40.6
Whitman charges 28.4 -- -- -- 28.4
Interest expense 18.9 0.5 0.1 (c) -- 19.3
(0.2)(c)
Other income, net 0.5 -- -- -- 0.5
--------- -------- ----------- ------------ -----------
Loss before income tax
expense (3.8) (1.5) (0.4) (0.9) (6.6)
Income tax expense
(benefit) 9.4 (0.4) -- (d) (0.3)(d) 8.7
--------- -------- ----------- ------------ -----------
Net loss before minority
interests (13.2) (1.1) (0.4) (0.6) (15.3)
Minority interest 0.4 -- 0.5 (e) -- 0.9
--------- -------- ----------- ------------ -----------
Net income (loss) ($12.8) ($1.1) 0.1 ($0.6) ($14.4)
========= ======== =========== ============ ===========
- -----------------------------------------------------------------------------------------------------
Pro forma shares outstanding
- - basic & diluted 50.731 50.731
Pro forma basic and diluted
earnings per share $(0.25) $(0.28)
- -----------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements
60
<PAGE> 61
HUSSMANN INTERNATIONAL, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF OPERATIONS
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1998
(Dollars in millions, except per share information)
<TABLE>
<CAPTION>
Historical
Historical Combined Pro Forma
Hussmann MIL Adjustments Eliminations As Adjusted
--------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Sales and revenues $538.8 $24.5 ($4.9)(f) ($2.0)(a) $ 556.4
Cost of goods sold 434.4 23.7 (4.5)(f) (2.0)(a) 451.6
--------- -------- ----------- ------------ -----------
Gross profit 104.4 0.8 (0.4) -- 104.8
Selling, general and
administrative expenses 62.8 2.6 -- -- 65.4
Amortization expense 0.5 0.1 0.3 (b) -- 0.8
(0.1)(b)
--------- -------- ----------- ------------ -----------
Operating income 41.1 (1.9) (0.6) -- 38.6
Whitman charges 1.5 -- -- -- 1.5
Interest expense 9.4 0.3 (0.1)(c) -- 9.7
0.1 (c)
Other income (expense),
net 0.3 -- -- 0.3
--------- -------- ----------- ------------ -----------
Income (loss) before
income tax expense 30.5 (2.2) (0.6) -- 27.7
Income tax expense
(benefit) 11.3 (0.8) (0.2)(d) -- 10.3
--------- -------- ----------- ------------ -----------
Net income (loss) before
minority interests 19.2 (1.4) (0.4) -- 17.4
Minority interest 0.6 -- 0.6 (e) -- 1.2
--------- -------- ----------- ------------ -----------
Net income (loss) $19.8 ($1.4) $0.2 -- $18.6
========= ======== ============ ============ ===========
- -----------------------------------------------------------------------------------------------------
Pro forma shares outstanding
- -- basic 50.872 50.872
Pro forma basic earnings
per share $0.39 $0.37
Pro forma shares outstanding
- -- diluted 52.147 52.147
Pro forma diluted earnings
per share $0.38 $0.36
- -----------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements
61
<PAGE> 62
HUSSMANN INTERNATIONAL, INC.
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
JUNE 30, 1998
(Dollars in millions)
<TABLE>
<CAPTION>
Historical
Historical Combined Pro forma
Hussmann MIL Adjustments Eliminations As Adjusted
---------- ---------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Current Assets
Cash and cash equivalents $ 26.6 $ 1.1 $(1.9)(f) - $25.8
Receivable, net 254.8 7.9 (0.2)(f) (2.6)(g) 259.9
Receivable from related parties - - - - -
Inventories 111.8 3.6 (1.3)(h) - 114.1
Other current assets 7.0 0.1 - - 7.1
------ ----- ---- ----- ------
Total current assets 400.2 12.7 (3.4) (2.6) 406.9
Property and equipment 163.6 1.2 (0.1)(f) - 164.7
Goodwill, net 23.9 1.9 4.3 (b) - 30.1
Deferred income taxes 2.6 1.7 0.5 (f) - 4.8
Other assets 27.5 - - - 27.5
------ ----- ---- ----- ------
Total assets $617.8 $17.5 $1.3 $(2.6) $634.0
====== ===== ==== ===== ======
Current Liabilities:
S/T debt and current portion of L/T debt $ 19.1 $ 0.3 - - $ 19.4
Accounts payable 102.9 10.6 - (2.6)(g) 110.9
Payable to related parties - 1.5 (0.6)(f) - 0.9
Income taxes payable 2.3 - - - 2.3
Accrued expenses 64.3 1.1 - - 65.4
------ ----- ---- ----- ------
Total current liabilities 188.6 13.5 (0.6) (2.6) 198.9
Loans and advances 244.8 2.1 0.8 (f) 247.7
Advances from related parties - - - - -
Deferred income taxes and other liabilities 19.7 0.5 - - 20.2
------ ----- ---- ----- ------
Total liabilities 453.1 16.1 0.2 (2.6) 466.8
Minority interest 9.1 - 2.5 (f) - 11.6
------ ----- ---- ----- ------
Shareholder equity 155.6 1.4 (1.4)(f) - 155.6
------ ----- ---- ----- ------
Total liabilities and shareholder equity $617.8 $17.5 $1.3 $(2.6) $634.0
====== ===== ==== ===== ======
</TABLE>
The accompanying notes are an integral part of these pro forma financial
statements
62
<PAGE> 63
HUSSMANN INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
(a) Represents the elimination of sales and revenues and cost of goods sold
between the Company and MIL resulting from the company's prior independent
distributor relationship with MIL.
(b) Represents the elimination of historical goodwill and the related
amortization and the entry to record goodwill and the related amortization
charge. The pro formas assume $6.2 million of goodwill related to the
acquisition is being amortized over 10 years. The allocation of the
purchase price has not yet been finalized.
(c) Represents the increase in interest expense associated with the promissory
note issued to Pupuke Holdings Limited (Pupuke) in the amount of
approximately $700,000, revised note due June 30, 2000 bearing interest at
an annual rate of 15%. the issuance of Pupuke promissory note is in
accordance with the Agreement, Clause 3.5(b). Also represents the
reduction in interest expense associated with the extinguishment of
McAlpine's 15% Convertible Notes held by a former related party. The
extinguishment of the Convertible Notes is in accordance with the
Agreement, Clause 3.5(a).
(d) To provide for income tax expense (benefit) on pre tax earnings using an
estimated combined statutory rate of 38% on all "taxable" items.
(e) To allocate net income (loss) to the accounts of the minority shareholders
of HML representing their 35% interests in the combined entity.
(f) Represents the adjustments necessary to account for the flow of
transactions outlined in the Agreement. The transactions include the
receipt of the purchase price, the extinguishment of debt, the issuance of
new debt, conforming journal entries to conform MIL's accounting
principles to those used by the Company, eliminate the historical
goodwill, record the estimated amount of new goodwill, and record the
appropriate amount of minority interest associated with the acquisition.
(g) To eliminate an amount owed to the Company by MIL resulting from the
Company's prior independent distributor relationship with MIL.
(h) To eliminate intercompany profit in inventory resulting from the Company's
prior independent distributor relationship with MIL.
63
<PAGE> 64
EXHIBIT INDEX
EXHIBIT
NUMBER
<TABLE>
<S> <C>
2 The Agreement Relating to Hussmann Mcalpine Limited dated August 17, 1998
between Hussmann Netherlands B.V. and Barry Edward Brill and Allan Francis
Cotter, Phillip Joseph Miller, Howard James Small, and Robert Charles Todd
and Kevin Stainer (incorporated by reference to Exhibit 2 to the Form 8-K
filed with the Securities and Exchange Commission on August 31, 1998).
23a Consent of Independent Auditors -- Deloitte Touche Tohmatso as independent
auditors for Mcalpine Refrigeration Ltd.
23b Consent of Independent Auditors -- Byrons Chartered Accountants as
independent auditors for Triangle Refrigeration (Australia) Pty. Limited.
</TABLE>
64
<PAGE> 1
Exhibit 23a
The Board of Directors
McAlpine Refrigeration Limited
We consent to the incorporation by reference in the prospects constituting part
of the registration statement on Form S-3 (No. 333-52987) and in the
registration statements on Form S-8 (Nos. 333-44623, 333-44799, and 333-58359)
and the inclusion of our report dated October 23rd, 1998, with respect to the
consolidated Statement of Financial Position of McAlpine Refrigeration Limited
and subsidiaries as of June 30, 1998 and 1997, and the related consolidated
Statements of Financial Performance and Cash Flows for each of the years in the
two year period ended June 30, 1998, which report appears in the Form 8-K/A of
Hussmann International Inc. dated October 30th, 1998.
DELOITTE TOUCHE TOHMATSU
AUCKLAND, NEW ZEALAND
Date: 30th October 1998
<PAGE> 1
Exhibit 23B
The Board of Directors
Triangle Refrigeration (Australia) Pty Ltd
171-175 Newton Road
Wetherill Park NSW 2164
We consent to the incorporation by reference in the prospects constituting part
of the registration statement on Form S-3 (No. 333-52987) and in the
registration statements on Form S-8 (Nos. 333-44623, 333-44799, and 333-58359)
and the inclusion of our report dated 22nd October 1998, with respect to the
consolidated balance sheets of Triangle Refrigeration (Australia) Pty Limited
and subsidiaries as of 30th June 1997 and 1998 and the related consolidated
profit and loss statement and cash flows for each of the years in the two year
period ended 30th June 1998 which report appears in the Form 8-K/A of Hussmann
International, Inc. dated 30th October 1998.
Byrons
Sydney, Australia
Dated: 30th October 1998
