<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K/A
Amendment No. 1 to
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 of
the Securities Exchange Act of 1934
For the quarter ended October 31, 1997
BARBEQUES GALORE LIMITED
ACN 008 577 759
327 Chisholm Road, Auburn, New South Wales, 2144, Australia
Registrant's telephone number, including area code 61-2-9704-4177
--------------
[Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.]
Form 20-F X Form 40-F
----------- -----------
[Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.]
Yes No X
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<PAGE>
FORM 6K
For the Quarter Ended October 31, 1997
INDEX
<TABLE>
<CAPTION>
Page No.
--------
PART 1. FINANCIAL INFORMATION
<S> <C> <C>
ITEM 1. Condensed Consolidated Interim Financial Statements.............. 1
Condensed Consolidated Balance Sheets as of October 31, 1997 and
January 31, 1997................................................. 1
Condensed Consolidated Statements of Operations for the Three and
Nine Months Ended October 31 1997 and 1996....................... 2
Condensed Consolidated Statements of Cash Flows for the Three and
Nine Months Ended October 31, 1997 and 1996...................... 3
Notes to Condensed Consolidated Interim Financial Statements..... 4
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................ 5
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings................................................ 15
ITEM 2. Changes in Securities............................................ 15
ITEM 3. Defaults Upon Senior Securities.................................. 15
ITEM 4. Submission of Matters to a Vote of Security Holders.............. 15
ITEM 5. Other Information................................................ 15
ITEM 6. Exhibits and Reports on Form 8-K................................. 15
SIGNATURES.................................................................. 17
</TABLE>
<PAGE>
BARBEQUES GALORE LIMITED AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION> October 31
January 31 1997
1997 (Unaudited)
------ ------
In A$ thousands, except share and per share data
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents.............................................. 30 35
Accounts receivable, net............................................... 7,350 10,831
Receivables from affiliates............................................ 362 174
Inventories............................................................ 33,928 50,397
Deferred income taxes.................................................. 2,472 3,257
Prepaid expenses and other current assets.............................. 1,131 2,565
------ ------
Total current assets................................................... 45,273 67,259
Non-current assets:
Receivables from affiliates............................................ 696 772
Property, plant and equipment, net..................................... 18,348 19,299
Goodwill, net.......................................................... 1,476 1,426
Deferred income taxes.................................................. 871 796
Other non-current assets............................................... 1,306 1,453
------ ------
Total assets........................................................... 67,970 91,005
====== ======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Bank overdraft......................................................... 1,826 5,649
Accounts payable and accrued liabilities............................... 13,693 20,384
Payables to related parties............................................ 1,231 9
Current maturities of long-term debt................................... 2,964 11,835
Current portion of obligations under capital leases.................... 1,395 1,251
Income taxes payable................................................... 1,612 -
------ ------
Total current liabilities.............................................. 22,721 39,128
Non-current liabilities:
Long-term debt......................................................... 20,718 28,120
Convertible Notes...................................................... 10,042 10,042
Obligations under capital leases, excluding current portion............ 3,516 3,379
Other long-term liabilities............................................ 808 758
------ ------
Total liabilities...................................................... 57,805 81,427
------ ------
Shareholders' equity: Ordinary Shares, $3.64 par value;
27,437,853 authorized shares; 1,843,726 shares issued and outstanding.. 6,720 6,720
Additional paid-in capital............................................. 4,613 4,613
Foreign currency translation adjustment................................ 200 800
Retained deficit....................................................... (1,368) (2,555)
------ ------
Total shareholders' equity............................................. 10,165 9,578
------ ------
Total liabilities and shareholders' equity 67,970 91,005
====== ======
</TABLE>
1.
<PAGE>
BARBEQUES GALORE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
October 31 October 31 October 31 October 31
1996 1997 1996 1997
------ ------ ------ -------
In A$ thousands, except share and per share data
<S> <C> <C> <C> <C>
Net sales........................................... 35,255 43,539 94,875 113,933
Cost of goods sold, warehouse, distribution and
occupancy costs................................... 24,249 29,815 67,335 78,235
------ ------ ------ -------
Gross profit........................................ 11,006 13,724 27,540 35,698
------ ------ ------ -------
Selling, general and administrative expenses........ 10,088 12,384 28,400 34,116
Store pre-opening costs............................. 79 37 143 246
Relocation and closure costs........................ - - 875 -
------ ------ ------ -------
Operating income (loss)............................. 839 1,303 (1,878) 1,336
------ ------ ------ -------
Equity in income of affiliates, net of tax.......... 103 153 270 342
Interest expense.................................... 678 1,111 1,526 2,871
Other expenses (income)............................. 36 - 36 -
------ ------ ------ -------
Income (loss) before income taxes................... 228 345 (3,170) (1,193)
Income tax expense (benefit)........................ 98 143 (1,669) (506)
------ ------ ------ -------
Net income (loss)................................... 130 202 (1,501) (687)
====== ====== ====== =======
Earnings (loss) per share:
Net income (loss) per Ordinary Share and
ordinary share equivalent (A$ per share).......... 0.03 0.10 (0.33) (0.35)
====== ====== ====== =======
Weighted average shares outstanding (in thousands).. 4,541 1,939 4,541 1,939
====== ====== ====== =======
</TABLE>
2.
<PAGE>
BARBEQUES GALORE LIMITED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended Ended
October 31 October 31 October 31 October 31
1996 1997 1996 1997
------ ------ ------ -------
In A$ thousands, except share and per share data
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C> <C> <C>
Net income (loss)..................................... 130 202 (1,501) (687)
Non-cash charges, net................................. 249 2,351 1,580 2,923
Changes in operating assets and liabilities:
Receivables and prepaid expenses...................... (2,478) (3,742) (2,369) (4,528)
Inventories........................................... (3,239) (8,224) (3,715) (16,533)
Other assets.......................................... 33 (59) 12 (189)
Accounts payable and accrued liabilities.............. 3,663 4,213 2,919 5,291
------ ------ ------ -------
Net cash used in operating activities................. (1,642) (5,259) (3,074) (13,723)
------ ------ ------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property, plant and equipment... 42 1 801 76
Capital expenditures.................................. (1,233) (1,408) (4,959) (2,973)
Loan repayments received.............................. 97 335 277 385
------ ------ ------ -------
Net cash used in investing activities................. (1,094) (1,072) (3,881) (2,512)
------ ------ ------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of long-term debt........................... (1,148) (4,110) (7,456) (10,651)
Proceeds from long-term debt.......................... 7,883 12,284 12,465 25,303
Initial public offering costs......................... - (774) - (774)
Bank overdraft proceeds (repayments).................. (3,571) (535) 1,515 3,823
Principal payments under capital leases............... (423) (540) (759) (976)
Dividends paid........................................ - (1) (1,217) (500)
------ ------ ------ -------
Net cash provided by financing activities............. 2,741 6,324 4,548 16,225
------ ------ ------ -------
Effects of exchange rate fluctuations................. (6) 9 (6) 15
------ ------ ------ -------
Net increase (decrease) in cash and cash equivalents.. (1) 2 (2,413) 5
Cash and cash equivalents at beginning of period...... 29 33 2,441 30
------ ------ ------ -------
Cash and cash equivalents at end of period............ 28 35 28 35
====== ====== ====== =======
</TABLE>
3.
<PAGE>
BARBEQUES GALORE LIMITED AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1 BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements have been
prepared in conformity with generally accepted accounting principles in the
United States.
The information contained in the consolidated financial statements and
footnotes is condensed from that which would appear in the annual
consolidated financial statements. Accordingly, these condensed
consolidated financial statements should be reviewed in conjunction with
the consolidated financial statements and related notes contained in the
Registration Statement on Form F-1 for the fiscal year ended January 31,
1997, filed by Barbeques Galore Limited (the "Company") with the Securities
and Exchange Commission. The unaudited condensed consolidated financial
statements as of October 31, 1997 and for the three months and nine months
ended October 31, 1997 and 1996 include all adjustments (consisting of
normal recurring adjustments) considered necessary for a fair presentation.
The results of operations for interim periods are not necessarily
indicative of the results that may be expected for the entire year. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
2 INVENTORIES
The major classes of inventories are as follows:
<TABLE>
<CAPTION>
January 31, October 31,
1997 1997
(Unaudited)
------ ------
<S> <C> <C>
In A$ thousands
Finished goods.................. 29,470 44,907
Work in progress................ 1,778 1,598
Raw materials................... 3,116 4,392
------ ------
34,364 50,897
Less: Reserve for obsolescence.. (436) (500)
------ ------
33,928 50,397
====== ======
</TABLE>
3 EARNINGS (LOSS) PER SHARE
Earnings (loss) per share are computed by dividing net earnings (loss)
available to ordinary shareholders by the weighted average number of
ordinary shares and as appropriate, dilutive ordinary shares equivalents
outstanding for the period, as adjusted for an 18.223-for-one reverse stock
split. The calculation of fully diluted earnings per share did not differ
significantly from primary earnings per share and has therefore not been
presented.
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, Earnings Per Share, which specifies the computation, presentation and
disclosure requirements for earnings per share. This statement is
effective for both interim and annual reporting periods ending after
December 15, 1997. Had SFAS No. 128 been in effect, "basic" and "diluted"
earnings per share would not have been significantly different to those
reported in the Consolidated Statements of Operations and hence have not
been presented.
Pro forma supplementary earnings (loss) per share are computed by assuming
proceeds from the Offering (discussed in Note 4), which will be utilized to
repay debt subsequent to the public offering were utilized to repay the
debt at the beginning of the applicable period to which earnings (loss) per
share relates. The weighted average number of ordinary shares outstanding
is increased for the number of ordinary shares issued to enable repayment
of such debt. Pro forma supplementary earnings (loss) per share and
weighted average shares outstanding were:
4.
<PAGE>
BARBEQUES GALORE LIMITED AND SUBSIDIARIES
<TABLE>
<CAPTION>
Seven Months Nine Months
Ended Ended
January 31 1997 October 31 1997
<S> <C> <C>
Pro forma unaudited supplementary net income (loss)
per ordinary share and ordinary share
equivalent (A$ per share) 0.38 0.15
Pro forma unaudited weighted average shares outstanding
(in thousands) 5,153 3,986
===== =====
</TABLE>
4 SUBSEQUENT EVENTS
INITIAL PUBLIC OFFERING
In November 1997, the Company consummated an initial public offering (the
"Offering") of 1,500,000 ordinary shares, each represented by one American
Depositary Share ("ADS") at a price per share of US$11.00. In addition, a
further 200,000 ADS's were sold by certain shareholders of the company at a
price of US$11.00 per share.
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition and
Results of Operations contains forward-looking statements which involve risks
and uncertainties. The Company's actual results could differ materially from
those anticipated in these forward-looking statements as a result of certain
factors, including those set forth under "Risk Factors" at the end of this
section and elsewhere in the Company's prospectus dated November 7, 1997,
relevant to its Offering. Factors that could cause or contribute to such
differences include those discussed herein as well as those included in the
documents that the Company files from time to time with the Securities and
Exchange Commission.
OVERVIEW
Barbeques Galore believes that it is the leading specialty retail chain of
barbecue and barbecue accessory stores in Australia and the United States, based
on number of stores and sales volume. The Company's belief is based on its years
of experience in the barbecue retail industry as well as its contacts with other
industry retailers, suppliers and trade associations. The Company opened its
first store in Sydney, Australia in 1977 and opened its first U.S. store in Los
Angeles in 1980. Barbeques Galore stores carry a wide assortment of barbecues
and related accessories, a comprehensive line of fireplace products and, in
Australia, home heating products, camping equipment and outdoor furniture. As of
October 31, 1997, the Company owned and operated 32 stores in all six states in
Australia and 32 stores (including three U.S. Navy concession stores) in six
states in the United States. In addition, as of such date, there were 46
licensed stores in Australia and six franchised stores in the United States, all
of which operate under the "Barbeques Galore" name.
The company derives its revenue primarily from four categories: Australian
retail, United States retail (including royalties and sales to franchisees),
Australian licensing (including license fees and sales to licensees) and
Australian wholesale. These categories represented 47.6%, 27.5%, 11.1% and
13.0%, respectively, of the Company's net sales for the twelve months ended
January 31, 1997, representing a 15.1%, 13.6%, 7.2% and (14.5%) increase (or
decrease), over their respective net sales levels for the twelve months ended
January 31, 1996.
The Company believes the majority of its future growth will result from the
continuing expansion of its U.S. retail business, primarily through the opening
of new stores, and the refurbishment of its Australian store base. Through its
vertically integrated operations, the Company manufactures a proprietary line of
barbecues and home heaters for its retail stores and licensees as well as other
barbecue and home heater products for its wholesale customers.
RESULTS OF OPERATIONS
The following table sets forth consolidated operating results of the Company as
a percentage of net sales. The Company believes that a comparison of operating
results for the quarters ended October 31, 1996 and 1997 is more meaningful than
for the third quarter of 1997 against the first or second quarters, given the
degree of seasonality to which the Company's business is subject.
5.
<PAGE>
BARBEQUES GALORE LIMITED AND SUBSIDIARIES
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
October 31 October 31 October 31 October 31
In A$ thousands 1996 1997 1996 1997
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net Sales..................................... 100.0% 100.0% 100.0% 100.0%
Cost of goods sold, warehouse, distribution
and occupancy costs......................... 68.8 68.5 71.0 68.7
----- ----- ----- -----
Gross profit.................................. 31.2 31.5 29.0 31.3
Selling, general and administrative expenses.. 28.6 28.4 29.9 29.9
Store pre-opening costs....................... 0.2 0.1 0.2 0.2
Relocation - closure costs.................... - - 0.9 -
----- ----- ----- -----
Operating income (loss)....................... 2.4 3.0 (2.0) 1.2
Equity in income of affiliates, net of tax.... 0.3 0.4 0.3 0.3
Interest expense.............................. 1.9 2.6 1.6 2.5
Other expense (income)........................ 0.1 - - -
----- ----- ----- -----
Income (loss) before income tax............... 0.7 0.8 (3.3) (1.0)
Income tax expense (benefit).................. 0.3 0.3 (1.7) (0.4)
----- ----- ----- -----
Net income (loss)............................. 0.4 0.5 (1.6) (0.6)
===== ===== ===== =====
</TABLE>
THREE MONTHS ENDED OCTOBER 31, 1997 (UNAUDITED) COMPARED TO THREE MONTHS ENDED
OCTOBER 31, 1996 (UNAUDITED)
Net sales increased by approximately A$8.3 million, or 23.5%, to A$43.5 million
for the three months ended October 31, 1997 from A$35.3 million for the three
months ended October 31, 1996. No new stores were opened in the United States
during the three months ended October 31, 1997. In Australia, two stores were
refurbished, one relocated and one new store opened during this period.
Comparable store sales increased 14.5% and contributed A$2.66 million to the
increase in net sales. Comparable store sales increased 19.3% in the United
States and 7.2% in Australia. Increased sales also resulted from stores not
forming part of the comparative store sales including six new stores which
opened in the U.S. in the previous nine months. The balance of the increased
sales was primarily attributable to an A$2.1 million increase in Australian
wholesale sales, mainly to mass merchandisers.
Gross profit increased approximately A$2.7 million, or 24.7%, to A$13.7 million
for the three months ended October 31, 1997 from A$11.0 million for the three
months ended October 31, 1996. Gross margin (gross profit as a percentage of
sales) increased to 31.5% during the three months ended October 31, 1997 from
31.2% during the comparable period in 1996. The increase in gross margin was
primarily due to production efficiencies gained in the Australian manufacturing
operation. The increase was partially offset by a reduction in gross margin in
the United States as a result of change in product mix, newer stores with a
typically lower gross margin in their first year of operation and additional
warehouse and distribution costs incurred to support the new store expansion.
Selling, general and administrative expenses (which exclude store pre-opening
expenses) increased approximately A$2.3 million, or 22.8%, to A$12.4 million for
the three months ended October 31, 1997 from A$10.1 million for the three months
ended October 31, 1996. As a percentage of net sales, selling, general and
administrative expenses decreased to 28.4% during the three months ended October
31, 1997 from 28.6% during the comparable period in 1996. The decrease was
primarily due to improved operating leverage both in Australia and the United
States.
Store pre-opening expenses decreased by A$42,000 to A$37,000 due to the timing
of United States' store openings.
Operating income increased by A$464,000 to A$1.3 million for the three months
ended October 31, 1997 from A$839,000 for the three months ended October 31,
1996. As a percentage of net sales, operating income increased to 3.0% in the
three months ended October 31, 1997 from 2.4% in the comparable period in 1996.
6.
<PAGE>
BARBEQUES GALORE LIMITED AND SUBSIDIARIES
Income from affiliates increased A$50,000 to A$153,000 in the three months ended
October 31, 1996. This increase related mainly from an increase in profitability
of the Company's Taiwanese affiliate.
Interest expense increased by A$433,000 to A$1,111,000 in the three months ended
October 31, 1997 from A$678,000 in the three months October 31, 1996. The
increase related to financing the Company's capital reduction which took place
December 1996.
The company's effective tax rate was 41.5% in the three months ended October 31,
1997 and 43.0% in the three months ended October 31, 1996.
NINE MONTHS ENDED OCTOBER 31, 1997 (UNAUDITED) COMPARED TO NINE MONTHS ENDED
OCTOBER 31, 1996 (UNAUDITED)
Net sales increased by approximately A$19 million or 20.1%, to A$113.9 million
for the nine months ended October 31, 1997, from A$94.9 million for the nine
months ended October 31, 1996. Four new stores were opened in the United States
during the nine months ended October 31, 1997. In Australia, two stores were
refurbished, one relocated and one new store opened during this period.
Comparable store sales increased 13.3% and contributed A$8.4 million to the
increase in net sales. Comparable store sales increased 18.3% in the United
States and 6.5% in Australia. The increase in the United States was primarily
due to (i) heightened awareness of the Barbeques Galore name in both existing
and new markets, (ii) the effect of new stores opened in the United States and
Australia in the previous nine months, and (iii) an increase in Australian
wholesale sales, mainly to mass merchandisers.
Gross profit increased approximately A$8.2 million, or 29.6%, to A$35.7 million
for the nine months ended October 31, 1997, from A$27.5 million for the nine
months ended October 31, 1996. Gross margin (gross profit as a percentage of
sales) increased to 31.3% during the nine months ended October 31, 1997 from
29.0% during the comparable period in 1996. The increase in gross was primarily
due to production efficiencies gained from the relocation of the Company's
Australian manufacturing operations, partially offset by a minor reduction in
gross margin in the United States as a result of a change in sales mix.
Selling, general and administrative expenses increased approximately A$5.7
million, or 20.1%, to A$34.1 million for the nine months ended October 31, 1997
from A$28.4 million for the nine months ended October 31, 1996. As a percentage
of sales, selling, general and administrative expenses were 29.9% of net sales,
during the nine months to October 31, 1997, and the same percentage in the
comparable period in 1996.
Store pre-opening expenses increased by A$103,000 to A$246,000 due to the
opening of four new stores in the United States in the nine months ended October
31, 1997, versus two new stores in the previous period.
Operating income (loss) increased A$3.2 million to A$1.3 million for the nine
months ended October 31, 1997, from a loss of A$1.9 million for the nine months
ended October 31, 1996.
Income from affiliates increased A$72,000 to A$342,000 in the nine months ended
October 31, 1997 from A$270,000 in the nine months ended October 31, 1996. The
increase resulted mainly from an increase in profitability of the Company's
Taiwanese affiliate.
Interest expense increased by A$1.34 million to A$2.87 million in the nine
months to October 31, 1997 from A$1.53 million in the nine months ended October
31, 1996. The increase related to the financing of the Company's capital
reduction which took place in December 1996.
The Company's effective tax rate was 42.4% in the nine months ended October 31,
1997 compared to 52.6% in the nine months October 31, 1996. The difference is a
result of the mix of pre-tax earnings/losses between the Australian and United
States operations.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically financed its operations through cash flow from
operations and bank borrowings. In November 1997, the Company completed its
initial public offering (the "Offering") raising net proceeds of approximately
US$14 million (approximately A$20 million). A portion of these funds have been
used to fund (i) the repayment of approximately A$12 million (approximately
US$8.4 million) of indebtedness incurred under the credit facility between the
Company and the Australian and New Zealand Banking Group Limited ("ANZ"), and
(iii) the repayment of approximately US$1.8 million, being
7.
<PAGE>
Barbeques Galore Limited and Subsidiaries
all outstanding indebtedness under a term loan and revolving line of credit
facility with Merrill Lynch Business Financial Services, Inc. ("Merrill Lynch").
The remaining $3.8 million balance of the funds will be used to fund the
expansion of the Company's operations in the United States. The period under
review in this report precedes the capital raised from the Offering.
The Company has used cash flows from operations in the three months to October
31, 1997 of A$5.3 million and A$13.7 million respectively. The cash used by
operations primarily reflects the increase in inventory levels related to the
Company's pre-season build-up of inventories in Australia and the increased
number of stores in the United States.
Net cash flows used in investing activities in the three months and the nine
months ending October 31, 1997 were A$1.1 million and A$2.5 million
respectively. The cash flows used in investing activities have resulted
primarily from capital expenditures related to new store openings in the United
States and store refurbishments in Australia. The Company anticipates that it
will continue to incur significant capital commitments in connection with
further expansion.
The cash flows used in operations and investing activities have been largely
sourced from long term borrowings under the ANZ and Merrill Lynch facilities.
At October 31, 1997 the Company had working capital of A$28.1 million. At
October 31, 1997 the Company maintained minimal amounts in cash and cash
equivalents, relying instead on undrawn facilities under its borrowing
arrangements with ANZ and Merrill Lynch. As a consequence of the Offering the
Company is currently re-evaluating its funding and lines of credit arrangements
with ANZ.
The Company believes the proceeds raised from the Offering and the remaining ANZ
facilities are sufficient to meet its presently anticipated working capital and
capital expenditure requirements for at least the next twelve months.
Risk Factors
The following are certain factors that should be considered in evaluating the
business, financial conditions and results of operations of the Company.
However, these factors should not be considered to be exclusive, and readers are
urged to consider the statements made elsewhere herein.
IMPLEMENTATION OF GROWTH STRATEGY. The growth of the Company is dependent, in
large part, upon the Company's ability to successfully execute its Company-owned
store expansion program in the United States and its store refurbishment plan in
Australia. Pursuant to the U.S. store expansion program, the Company currently
plans to open approximately 10 new stores in 1997, of which five have been
opened and five are expected to open in the fourth quarter. The Company also
currently intends to open 15 to 20 new stores in the United States in each of
1998 and 1999. The Company expects to incur capital expenditures relating to
this program in the United States of approximately US$1.8 million in 1997 and
approximately US$2.6 million to US$3.2 million in each of 1998 and 1999.
Pursuant to the Company's Australian store refurbishment program, in 1997, the
Company plans to remodel five existing stores, open one new store, relocate one
store and close one store. The Company further intends to refurbish five stores
and open three new stores in 1998, and refurbish two stores and open two new
stores in 1999. The Company expects to incur capital expenditures relating to
this program in Australia of approximately A$2.5 million in 1997 and
approximately A$2.0 million to A$3.0 million in each of 1998 and 1999. The
proposed expansion is substantially more rapid than the Company's historical
growth. The success of these store expansion and refurbishment efforts will be
dependent upon, among other things, the identification of suitable markets and
sites for new stores, negotiation of leases on acceptable terms, construction or
renovation of sites, receipt of all necessary permits and governmental approvals
therefor, and, if necessary, obtaining additional financing for those sites. In
addition, the Company must be able to hire, train and retain competent managers
and personnel and manage the systems and operational components of its growth.
There can be no assurance that the Company will be able to locate suitable store
sites or enter into suitable lease agreements. In addition, there can be no
assurance that, as the Company opens new stores in these markets. The failure of
the Company to open new stores or relocate or remodel existing stores on a
timely basis, obtain acceptance in markets in which it currently has limited or
no presence, attract qualified management and personnel or appropriately adjust
operational systems and procedures would adversely affect the Company's future
operating results.
The success of the Company's growth strategy may also depend upon factors beyond
its immediate control. The Company has retained outside real estate consultants
to assist in site selection and lease negotiations, and may depend, to an
increasing extent, on the services of such consultants and other real estate
experts as it accelerates the rate of new store expansion. The failure of any
such consultants or experts to render needed services on a timely basis could
adversely affect
8.
<PAGE>
Barbeques Galore Limited and Subsidiaries
the Company's new store extension. Similarly, changes in national, regional or
local real estate and market conditions could limit the ability of the Company
to expand into target markets or sites.
As part of its growth strategy, the Company intends to open stores in new
markets where it will not initially benefit from knowledge of local market
conditions, pre-existing retail brand name recognition or marketing,
advertising, distribution and regional management efficiencies made possible by
its store networks in existing markets. Expansion into new markets may present
operating and marketing challenges that are different from those encountered in
the past by the Company in its existing markets. As a result of its expansion
program and its entry into new markets, primarily in the United States, and its
refurbishment program in Australia, the Company has experienced, and expects to
continue to experience, an increase in store pre-opening costs and
refurbishment-related expenses. There can be no assurance that the Company will
anticipate all of the challenges and changing demands that its expansion will
impose on its management or operations, and the failure to adapt thereto would
adversely affect the Company's implementation of its growth strategy.
If the Company determined to, or was required to, close a Barbeques Galore
store, the Company would attempt to sublet the vacated store space in order to
cover ongoing lease costs. Even if the Company were able to sublet such store,
the Company may incur significant costs in writing off leasehold improvements.
In addition, the Company's proposed expansion plans will result in increased
demand on the Company's managerial, operational and administrative resources. As
a result of the foregoing, there can be no assurance that the Company will be
able to successfully implement its growth strategies, continue to open new
stores or maintain or increase its current growth levels. The Company's failure
to achieve its expansion plan could have a material adverse effect on its future
business, operating results and financial condition.
EFFECT OF ECONOMIC CONDITIONS AND CONSUMER TRENDS. The success of the Company's
operations depends upon a number of factors related to consumer spending,
including future economic conditions affecting disposable consumer income such
as employment, business conditions, interest rates and taxation. If existing
economic conditions were to deteriorate, consumer spending may decline, thereby
adversely affecting the Company's business and results of operations. Such
effects may be exacerbated by the significant current regional concentration of
the Company's business in the Australian and Southern California markets.
The success of the Company depends on its ability to anticipate and respond to
changing merchandise trends and consumer demands in a timely manner. The Company
believes it has benefitted from a lifestyle trend toward consumers spending more
quality time together in outdoor family gatherings and social activities. Any
change in such trend could adversely affect consumer interest in the Company's
major product lines. Moreover, the Company's products must appeal to a broad
cross-section of consumers whose preferences (as to product features such as
colors, styles, finishes and fuel types) cannot always be predicted with
certainty and may change between sales seasons. If the Company misjudges either
the market for its merchandise or its customers' purchasing habits, it may
experience a material decline in sales or be required to sell inventory at
reduced margins. The Company could also suffer a loss of customer goodwill if
its manufacturing operations or stores do not adhere to its quality control or
service procedures or otherwise fail to ensure satisfactory quality of the
Company's products. These outcomes may have a material adverse effect on the
Company's business, operating results and financial condition.
MANAGEMENT OF OPERATIONAL CHANGES. The Company has identified a number of areas
for improvement in its operations which will have a significant impact on the
implementation of its growth strategy. The Company has, in recent years,
replaced or upgraded its management information systems and integrated its
central inventory management systems with point-of-sale terminals in Barbeques
Galore stores, and currently plans to introduce automated replenishment of store
inventory in Australia in the near term. The total expected capital expenditure
for such project is not expected to be significant (less than A$50,000). In the
United States, the Company intends to transfer its general ledger and accounts
payable functions from its existing computer system to its new and more powerful
system in the near future. The Company also plans to relocate its enameling
operations (which are currently located 10 miles away) to the same facilities as
its barbecue and home heater manufacturing operations adjacent to its Australian
headquarters, add an in-line powder coating operation and rearrange the
assembly, warehouse and Australian distribution operations to further improve
its production flow, inventory control and distribution management. These
changes are currently scheduled to occur in 1998. The planned relocation of the
Company's enameling operations and related changes will cost approximately
A$454,000 (of which A$369,000 has already been accrued), will require additional
capital expenditures of approximately A$2.2 million and will require the Company
to obtain a number of building, environmental and other governmental permits. In
addition, as the Company expands into new regions or accelerates the rate of its
U.S. store expansion, the Company may need additional warehouse capacity. In
order to meet such needs, the Company intends to secure another distribution
center or expand its current warehouse facilities in the United States or
utilize public warehousing space, in each case depending on availability and
cost at such
9.
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BARBEQUES GALORE LIMITED AND SUBSIDIARIES
time. There can be no assurance as to whether or when the Company will be able
to effect its systems upgrades, enameling plant relocation plans, any expansion
or replacement of distribution facilities, or any other necessary operational
changes that may arise, or that the Company will not incur cost overruns or
disruptions in its operations in connection therewith. The failure of the
Company to effect these and any other necessary operational changes on a timely
basis would adversely affect the ability of the Company to implement its growth
strategy and, therefore, its business, financial condition and operating
results.
COMPETITION. The retail and distribution markets for barbecues and the Company's
other product offerings are highly competitive in both the United States and
Australia. The Company's retail operations compete against a wide variety of
retailers, including mass merchandisers, discount or outlet stores, department
stores, hardware stores, home improvement centers, specialty patio, fireplace or
cooking stores, warehouse clubs and mail order companies. The Company's
manufacturing and wholesale operations compete with many other manufacturers and
distributors throughout the world, including high-volume manufacturers of
barbecues and home heaters. Barbeques Galore competes for retail customers
primarily based on its broad assortment of competitively priced, quality
products (including proprietary and exclusive products), convenience, customer
service and the attractive presentation of merchandise within its stores. Many
of the Company's competitors have greater financial, marketing, distribution and
other resources than the Company, and particularly in the United States, may
have greater name recognition than the Company. Furthermore, the lack of
significant barriers to entry into the Company's segment of the retail industry
may also result in new competition in the future.
SEASONALITY; WEATHER; FLUCTUATIONS IN RESULTS. The Company's business is subject
to substantial seasonal variations which have caused, and are expected to
continue to cause, its quarterly results of operations to fluctuate
significantly. Historically, the Company has realized a major portion of its net
sales and a substantial portion of its net income for the year during summer
months and holiday seasons when consumers are more likely to purchase barbecue
products, camping equipment and outdoor furniture. In anticipation of its peak
selling seasons (late spring and early summer), the Company substantially
increases its inventory levels and hires a significant number of part-time and
temporary employees. In non-peak periods, such as late winter and early fall,
the Company has regularly experienced monthly losses. Since the Company has
historically derived a greater portion of its sales from its larger Australian
store base, these seasonal trends have generally resulted in increased sales and
income during the Australian summer months of November through January and
substantially lower-than-average sales and income during the months of February,
March, May and July. The Company believes this is the general pattern associated
with its segment of the Australian retail industry and expects this pattern will
continue in the future. Partially offsetting the effects of seasonality, the
Company operates in both the Southern and Northern hemispheres, which have
opposite seasons, and offers fireplace products and (in Australia) home heaters
in the fall and winter months. However, sales of any of the Company's major
product lines (in particular, home heaters) may vary widely in peak seasons
depending on, among other things, prevailing weather patterns, local climate
conditions, actions by competitors and shifts in timing of holidays. The
Company's quarterly and annual results of operations may also fluctuate
significantly as a result of a variety of other factors, including the timing of
new store openings, releases of new products and changes in merchandise mix
throughout the year. The Company has in the past experienced quarterly losses,
particularly in its fiscal first quarter, and expects that it will experience
such losses in the future. Because of these fluctuations in operating results,
the results of operations in any quarter are not necessarily indicative of the
results that may be achieved for a full fiscal year or any future quarter. If
for any reason the Company's sales or gross margins during peak seasons or
periods were substantially below expectations, the Company's quarterly and
annual results would be adversely affected.
RELIANCE ON SYSTEMS. The Company relies upon its existing management information
systems in operating and monitoring all major aspects of the Company's business,
including sales, gross margins, warehousing, distribution, purchasing, inventory
control, financial, accounting and human resources. The Company's reliance upon
such systems will likely increase upon the anticipated introduction of automated
store replenishment in Australia. Any disruption in the operation of the
Company's management information systems, or the company's failure to continue
to upgrade, integrate or expend capital on such systems as its business expands,
could have a material adverse effect upon the Company's business operating
results and financial condition. Like many computer systems, the Company's Wang
computer system in Australia uses two digit data fields which recognize dates
using the assumption that the first two digits are "19" (i.e., the number 97 is
recognized as the year 1997). Therefore, in the Australian system, the Company's
date critical functions relating to the year 2000 and beyond, such as sales,
distribution, purchasing, inventory control, financial and human resource
systems, may be adversely affected unless changes are made to this computer
system. The Company expects to resolve these issues in a timely manner and is
currently engaged in a review of all existing computer systems in order to
implement the required changes, which may entail replacing the existing system.
The Company expects that upgrades to its computer systems with respect to the
year 2000 problem will require capital expenditures of approximately A$1.0
million. However, no assurance can be given that these issues can be resolved in
a cost-effective or timely manner or that the Company will not incur significant
expense in resolving these issues. The Company's newly installed computer system
in the United States has been designed to avoid the occurrence of such problems
with the year 2000.
10.
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BARBEQUES GALORE LIMITED AND SUBSIDIARIES
DEPENDENCE ON KEY EMPLOYEES. The Company's success is largely dependent on the
efforts and abilities of its executive officers, particularly, Sam Linz,
Chairman of the Board, Robert Gavshon, Deputy Chairman of the Board, John Price,
Head of Research and Product Development and Director, and Sydney Selati,
President of the Galore Group (USA), Inc. and Director. These individuals have
an average of 15 years of experience with the Company and have chief
responsibility for the development of the Company's current business and growth
strategies. The Company does not have employment contracts with any of its
executive officers. The loss of the services of these individuals or other key
employees could have a material adverse effect on the Company's business,
operating results and financial condition. The Company's success is also
dependent upon its ability to continue to attract and retain qualified employees
to meet the Company's needs for its new store expansion program in the United
States and its store refurbishment plans in Australia. In August 1997, the
Company appointed a chief operating officer for its U.S. operations to manage
daily operations in the United States, permitting Mr. Selati to concentrate on
the Company's U.S. growth strategy.
RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS; DEPENDENCE ON SIGNIFICANT
VENDORS AND SUPPLIERS. Barbeques Galore, with its headquarters, manufacturing,
enamelling, wholesale and non-U.S. store operations in Australia, transacts a
majority of its business in Australia and obtains a significant portion of its
merchandise, parts and raw materials from China, Taiwan, Indonesia, Thailand,
Italy and other markets outside of the United States and Australia. There are
risks inherent in doing business in international markets, including tariffs,
customs, duties and other trade barriers, difficulties in staffing and managing
foreign operations, political instability, expropriation, nationalization and
other political risks, foreign exchange controls, technology export and import
restrictions or prohibitions, delays from customs brokers or government
agencies, seasonal reductions in business activity, subjection to multiple
taxation regimes and potentially adverse tax consequences, any of which could
materially adversely affect the Company's business, operating results and
financial condition.
The Company purchases certain of its finished inventory and manufacturing parts
and all of its raw materials from numerous vendors and suppliers and generally
has no long-term purchase contracts with any vendor or supplier. During the
twelve months ended January 31, 1997, the Company purchased inventory from over
400 vendors in the United States, Australia and the Far East. In such period,
approximately 25% of the Company's merchandise purchases were obtained from the
Company's ten largest vendors. Although no vendor accounted for more than 5% of
the Company's merchandise purchases in such period (other than Horan's Steel
Pty Ltd., an Australian steel distributor ("Horan's Steel"), and Bromic Pty.
Ltd., an Australian gas components importer ("Bromic")), the Company considers
certain barbecue brands to be significant to its business, especially in the
United States. Also during such period, the Company purchased barbecue and home
heater parts from over 50 suppliers in Asia, Australia and North America.
Horan's Steel and Bromic supplied the Company with approximately 19% and 21%,
respectively, of the Company's factory parts and raw material purchases, and
approximately 73% of the Company's factory parts and raw material purchases were
obtained from the Company's ten largest suppliers. The Company's results of
operations could be adversely affected by a disruption in purchases from any of
these key vendors or suppliers or from volatility in the prices of such parts or
raw materials, especially the price of steel, which has fluctuated in the past.
In addition, some of the Company's key suppliers currently provide the Company
with certain incentives, such as volume and trade discounts as well as other
purchasing incentives. A reduction or discontinuance of these incentives could
have an adverse effect on the Company. Although the Company believes that its
relationship with its vendors and suppliers are good, any vendor or supplier
could discontinue selling to the Company at any time.
PRODUCT LIABILITY AND GOVERNMENTAL AND OTHER REGULATION. Many of the Company's
products use gas and flame and, consequently, are subject to regulation by
authorities in both the United States and Australia in order to protect
consumers, property and the environment. For example, the Company's products and
the personal use thereof are subject to regulations relating to, among other
things, the use of fire in certain locations (particularly restrictions
relating to the availability or frequency of use of wood heating in homes and
barbecues in apartments), restrictions on the sale or use of products that
enhance burning potential such as lighter fluid, restrictions on the use of gas
in specified locations (particularly restrictions relating to the use of gas
containers in confined spaces) and restrictions on the use of wood burning
heaters. Compliance with such regulations has not in the past had, and is not
anticipated to have, a material adverse effect on the Company's business,
operating results and financial condition. Nonetheless, such regulations have
had, and can be expected to have, an increasing influence on product claims,
manufacturing, contents, packaging and heater usage. In addition, failure of a
product could give rise to product liability claims if customers, employees or
third parties are injured or any of their property is damaged while using a
Company product. Such injury could be caused, for example, by a gas valve
malfunction, gas leak or an unanticipated flame-up resulting in injury to
persons and/or property. Even if such circumstances were beyond the Company's
control, the Company's business, operating results and financial condition could
be materially adversely affected. In the event of such an occurrence, the
Company could incur substantial litigation expense, receive adverse publicity,
suffer a loss of sales or all or any of the foregoing. Although the Company
maintains liability insurance in both Australia and the United States, there can
be no assurance that such insurance will provide sufficient coverage in any
particular case. In Australia, the limit of the Company's product liability
coverage is A$20 million. In the United States, the
11
<PAGE>
BARBEQUES GALORE LIMITED AND SUBSIDIARIES
Company's U.S. operating subsidiary is covered by a policy having general
liability coverage limited at US$12 million and third party liability coverage
limited at US$11 million. There is no assurance that certain jurisdictions in
which the Company operates will not impose additional restrictions on the sale
or use of the Company's products.
In addition, the Company's barbecue and home heater manufacturing and enameling
operations are subject to regulations governing product safety and quality, the
discharge of materials hazardous to the environment, water usage, workplace
safety and labor relations. The Company's distribution facilities are also
subject to workplace safety and labor relations regulations. The Company
believes that it is in substantial compliance with such regulations. The sale of
certain products by the Company may result in technical violations of certain of
the Company's leases which prohibit the sale of flammable materials in or on the
leased premises. As a barbecue and barbecue accessories store, the Company sells
lighter fluid, lighters, matches and similar products which may be considered
flammable when in contact with open flame or activated. The Company does not
store containers of gas for barbecue grills in its stores. The Company stores
matches, lighters and the like in closed containers or in displays where the
chance of activation is remote, and does not store such items near open flames.
Over the Company's operating history, the Company's landlords have been made
aware that the Company sells such products. To date, no landlord has terminated
or threatened termination of any lease due to such sales.
The foregoing regulations and restrictions could have a material adverse effect
on the Company's business, operating results or financial condition.
UNCERTAINTIES REGARDING MANUFACTURING AND DISTRIBUTION OF MERCHANDISE. The
Company manufactures a substantial portion of the barbecues and home heaters
sold in its stores and distributes merchandise to Barbeques Galore stores
primarily from its distribution centers located at its headquarters in Australia
and Irvine, California. Throughout the manufacturing process, the Company
utilizes heavy machinery and equipment to produce and assemble barbecues and
home heaters from parts and raw materials supplied from numerous third party
suppliers. In distributing merchandise, the Company relies upon third party sea
carriers to ship its manufactured products from Australia to the United States,
as well as third party surface freight carriers to transport all its merchandise
from its distribution centers and warehouses to stores. Accordingly, the Company
is subject to numerous risks associated with the manufacturing and distribution
of its merchandise, including supply interruptions, mechanical risks, labor
stoppages or strikes, inclement weather, import regulation, changes in fuel
prices, changes in the prices of parts and raw materials, economic dislocations
and geopolitical trends. In addition, the Company believes that, while its
distribution facilities are sufficient to meet Barbeques Galore's current needs,
the Company may need another distribution center or larger facilities in the
United States or Australia to support the further growth and expansion of
stores.
RISKS RELATED TO FRANCHISED AND LICENSED STORES. As of October 31, 1997, there
were 46 licensed stores in Australia and six franchised stores in the United
States, all of which are operated under the "Barbeques Galore" name by
independent licensees or franchisees who purchase proprietary and other store
products, and receive support services, from the Company. The licensees and
franchisees operate such stores pursuant to agreements which typically permit
licensees and franchisees to assign the agreements to their immediate family and
provide the licensees and franchisees with exclusive geographical sales
territories. The Company monitors its licensed and franchised stores to assure
their conformity to Barbeques Galore's standards and image and requires the
licensees and franchisees to comply with Barbeques Galore's merchandising and
advertising guidelines. Although the Company believes that its licensees and
franchisees are presently in substantial compliance with Company guidelines and
that its license and franchise arrangements have not been problematic in any
material respect in the past, serious or protracted failures by licensees or
franchisees to adhere to Company standards could adversely affect customer
loyalty and diminish the Company's brand name or reputation for quality products
and services, and could require the Company to devote significant management
attention and resources to enforcing its rights under such agreements.
Conversely, if the Company fails to provide adequate support services or
otherwise breaches its contractual obligations to any licensee or franchisee,
such failure or breach could result in termination of, or litigation relating
to, the relevant licensing or franchise agreement and the loss of fees and sales
revenue thereunder. The licensing agreements in Australia are terminable at will
(absent fraud) by the licensees only, generally upon sixty days' notice.
CURRENCY FLUCTUATIONS. The Company intends to publish its consolidated financial
statements in Australian dollars, but a substantial portion of the Company's
revenues and expenses are denominated in U.S. dollars and, to a lesser extent,
other foreign currencies. Accordingly, the Company is subject to risks of
currency exchange to the extent of currency fluctuations between the Australian
dollar and the U.S. dollar or other currencies in which the Company transacts
its business. This currency imbalance has resulted in, and may continue to
result in, foreign currency transaction gains and losses. In the past, the
Company's Australian operations have hedged a major portion of its imports
against exchange rate fluctuations with respect to the Australian dollar.
However, in its U.S. operations, the Company has not, and it currently does not,
actively hedge against exchange rate fluctuations, although it may elect to do
so in the future. Accordingly, changes in exchange rates may have a material
adverse effect on the Company's net sales, cost of goods sold, gross margin and
net income, any of
12.
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BARBEQUES GALORE LIMITED AND SUBSIDIARIES
which alone or in the aggregate may in turn have a material adverse effect on
the Company's business, operating results and financial condition.
RESTRICTIONS ON FOREIGN OWNERSHIP; ANTITAKEOVER RESTRICTIONS. Under Australian
law, foreign persons are prohibited from acquiring more than a limited
percentage of the shares in an Australian company without approval from the
Australian Treasurer or in certain other limited circumstances. These
limitations are set forth in the Australian Foreign Acquisitions and Takeovers
Act (the "Takeovers Act"). Under the Takeovers Act, as currently in effect, any
foreign person, together with associates, is prohibited from acquiring 15% or
more of the outstanding shares of the Company (or else the Treasurer may make an
order requiring the acquiror to dispose of those shares within a specified
period of time). In addition, if a foreign person acquires shares in the Company
and as a result the total holdings of all foreign persons and their associates
exceeds 40% in the aggregate without the approval of the Australian Treasurer,
then the Treasurer may make an order requiring the acquiror to dispose of those
shares within a specified time. The Company has been advised by its Australian
counsel, Freehill, Hollingdale & Page, that under current foreign investment
policy, however, it is unlikely that the Treasurer would make such an order
where the level of foreign ownership exceeds 40% in the ordinary course of
trading, unless the Treasurer finds that the acquisition is contrary to the
national interest. The same rule applies if the total holdings of all foreign
persons and their associates already exceeds 40% and a foreign person (or its
associate) acquires any further shares, including in the course of trading in
the secondary market of the American Depository Receipts. In addition, if the
level of foreign ownership exceeds 40% at any time, the Company would be
considered a foreign person under the Takeovers Act. In such event, the Company
would be required to obtain the approval of the Treasurer for the Company,
together with its associates, to acquire (i) more than 15% of an Australian
company or business with assets totaling over A$5 million or (ii) any direct or
indirect ownership interest in Australian residential real estate. In addition,
the percentage of foreign ownership of the Company would also be included in
determining the foreign ownership of any Australian company or business in which
it may choose to invest. Since the Company has no current plans for any such
acquisitions and only owns commercial property, any such approvals required to
be obtained by the Company as a foreign person under the Takeovers Act will not
affect the Company's current or future ownership or lease of property in
Australia. However, there would be no material tax consequence to shareholders
of the Company (including holders of ADSs) resulting from the Company being
deemed a foreign person under the Takeovers Act. The level of foreign ownership
of the Company's equity securities will be approximately 42%. The level of
foreign ownership could also increase in the future if existing Australian
investors decide to sell their shares into the U.S. market or if the Company
were to sell additional Ordinary Shares or ADSs in the future.
The Company has additionally provided that all stock options outstanding under
the Company's Executive Share Option Plan at such time as the Company becomes
subject to a takeover bid pursuant to which the offeror acquires at least thirty
percent (30%) of the outstanding Ordinary Shares of the Company shall become
immediately exercisable for a period of up to 120 days, measured from the date
the Board notifies the optionee of the takeover bid. Similarly, the Company has
provided that all stock options outstanding under the Company's 1997 Share
Option Plan at such time as the Company is acquired by merger or asset sale
pursuant to which such stock options are not assumed or replaced by the
successor corporation shall become immediately exercisable for a period of one
(1) year (or until the expiration of the stock option term, if earlier). There
are 203,038 Ordinary Shares underlying stock options outstanding pursuant to the
Executive Share Option Plan, which, barring acceleration, will become
exercisable on February 1, 1999 and 200,000 Ordinary Shares underlying stock
options to be granted concurrently with the Offering under the 1997 Share Option
Plan, which, barring acceleration, will become exercisable according to the
terms of the 1997 Share Option Plan. Such investment restrictions and dilutive
acceleration events could have a material adverse effect on the Company's
ability to raise capital as needed and could make more difficult or render
impossible attempts by certain entities (especially foreign entities, in the
case of the Takeovers Act) to acquire the Company, including attempts that might
result in a premium over market price to holders of ADSs.
The Memorandum and Articles of Association of the Company (collectively, the
"Articles") contain certain provisions that could impede any merger,
consolidation, takeover or other business combination involving the Company or
discourage a potential acquirer from making a tender offer or otherwise
attempting to obtain control of the Company. Provisions contained in the
Articles, among other things, (i) in effect divide the Board of Directors of the
Company into three classes, which serve for staggered three-year terms, (ii)
provide that the shareholders may amend or repeal special resolutions, including
changes to the Articles and extraordinary transactions, only by a vote of at
least 75% of the votes cast at a meeting at which a quorum is present, (iii)
require extended notice (of up to 21 days) for special resolutions considered by
the Board of Directors, and (iv) authorize the Board of Directors, without any
vote or action by shareholders of the Company, to issue, out of the Company's
authorized and unissued capital shares, shares in different classes, or with
special, preferred or deferred rights, which may relate to voting, dividend,
return of capital or any other matter. Although the Company currently has no
plans to issue any preferred shares, the rights of the holders of Ordinary
Shares or ADSs will be subject to, and may be adversely affected by, the rights
of the holders of any preferred or senior share that may be issued in the
future. The issuance of any preferred or senior shares, and the other provisions
of the Articles referred to above, could have the effect of making it more
difficult for a third party to acquire control of the Company.
13.
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BARBEQUES GALORE LIMITED AND SUBSIDIARIES
Australian law requires the transfer of shares in the Company to be made in
writing, and stamp duty at the rate of 0.6% is payable in relation to any
transfer of shares. No stamp duty will be payable in Australia on the transfer
of ADSs provided that any instrument by which the ADSs are transferred is
executed outside Australia.
In certain circumstances, nonresidents of Australia may be subject to Australian
tax on capital gains made on the disposal of shares or ADSs. The rate of
Australian tax on taxable gains realized by non-residents of Australia is 36%
for companies. For individuals, the rate of tax increases from 29% to a maximum
of 47%. These circumstances are described in "Certain Tax Considerations--
Australian Taxation," in the Prospectus of the Company dated November 7, 1997.
14.
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BARBEQUES GALORE LIMITED AND SUBSIDIARIES
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Not applicable.
ITEM 2. CHANGES IN SECURITIES
On November 7, 1997 the Company completed its initial public offering (the
"Offering"). As a part of the offer process the following changes in securities
occurred:
* Immediately prior to the consummation of the Offering, all
outstanding issued share capital of the Company was subject to a
18.223-for-1 reverse share split; as a result, the issued and
outstanding capital of the Company was reduced to 1,706,542 Ordinary
Shares of A$3.64 each.
* Immediately prior to the consummation of the Offering, all
outstanding convertible notes of the Company were converted into
1,197,926 Ordinary Shares of A$3.64 each.
* Pursuant to the Offering, the Company sold 1,500,000 American
Depositary Shares (ADSs) at a price of US$11.00 per share.
* Pursuant to the Offering, a further 200,000 ADSs were sold by certain
shareholders of the Company at a price of US$11.00 per share.
ITEM 3. DEFAULT UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company convened a duly noticed special meeting of shareholders on
October 7, 1997, at which a quorum was present. The shareholders voted
to authorize the effectiveness of a reverse share split of Ordinary
Shares of the Company to take effect immediately before consummation of
the offering; and to authorize the Pricing Committee of the Board of
Directors to determine the final ratio of such reverse share split. The
foregoing resolutions were approved with 1,736,281 votes cast for, and
0 votes cast against the resolution.
In addition, at the same meeting, the shareholders approved the 1997
Shares Option Plan, to serve as the successor to its previous equity
incentive plan. The foregoing resolution was approved with 1,736,281
votes cast for, and 0 votes cast against the resolution.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number
------
<C> <S>
3.1*........ Memorandum and Articles of Association.
4.1**....... Form of Specimen of American Depositary Receipt.
4.2**....... Form of Deposit Agreement dated November 6, 1997 among the
Registrant, Morgan Guaranty Trust Company of New York, as
Depositary, and holders from time to time of ADSs issued thereunder.
10.1*....... Executive Share Option Plan.
10.2*....... 1997 Share Option Plan.
10.3*....... Terms and Conditions of Convertible Notes and Shareholder's Deed Poll
relating to Convertible Notes.
10.4*....... Major Agreements relating to the Registrant's Credit Facility with
Australia and New Zealand Banking Corporation Group Limited ("ANZ"),
including Deed of Charge by and between the Registrant and ANZ, as
successor in interest to Westpac Banking Corporation as agent; Offer
Letter dated July 14, 1994 from
</TABLE>
15.
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BARBEQUES GALORE LIMITED AND SUBSIDIARIES
<TABLE>
<CAPTION>
<C> <S>
ANZ to the Registrant re: lines of credit; Variation Letter dated
December 12, 1996 from ANZ to the Registrant modifying terms of
certain lines of credit.
10.5*....... Major Agreements relating to the Registrant's U.S. Operating
Subsidiary's Credit Facility with Merrill Lynch Business Financial
Services Inc. ("Merrill Lynch") including Term WCMA/R/ Loan and
Security Agreement No. 9502340701, dated as of February 23, 1995 by
and between Galore USA and Merrill Lynch; WCMA/R/ Note, Loan and
Security Agreement No. 231-07T10, dated as of February 23, 1995 by
and between Galore USA and Merrill Lynch; Unconditional Guaranty by
the Registrant relating to Term WCMA/R/ Loan and Security Agreement No.
9502340701; Unconditional Guaranty by the Registrant relating to WCMA/R/
Note, Loan and Security Agreement No. 231-07710; Term WCMA/R/ Note No.
9502340701; Letter dated November 27, 1996 from Merrill Lynch to Galore USA
re: WCMA/R/ line of credit variation; Letter and Letter Agreement
dated August 27, 1997 from Merrill Lynch to Galore U.S.A. re: WCMA/R/
line of credit variation.
10.6*....... Deed of purchase of Registrant's headquarters facility.
10.7*....... Lease dated as of March 6, 1992 by and between Galore USA and Phoenix Business Center
Partners re: Irvine, California U.S. headquarters and distribution facility.
11.1*....... Statement re: Computation of Per Share Earnings.
</TABLE>
(b) Reports on Form 8-K. There were no reports on Form 8-K for the quarter
ended 31 October 1997.
* Incorporated by reference to the Registrant's Registration Statement on Form
F-1 (Registration No. 33-37259) pursuant to Rule 12b-32 of the Exchange Act.
** Incorporated by reference to Amendment No. 1 to the Registrant's
Registration Statement on Form F-1 (Registration No. 33-37259) pursuant to Rule
12b-32 of the Exchange Act.
16.
<PAGE>
BARBEQUES GALORE LIMITED AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Report of Foreign Issuer Pursuant to Rule 13a-16 or 15d-16 of the Securities
Exchange Act of 1934
Barbeques Galore Limited
------------------------------------------------
(Registrant)
Date: February 11, 1997 By /s/ Robert B. Gavshon
------------------------------------------------
Robert B. Gavshon, Executive Deputy Chairman
(Signature)
17.
