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Previous: PSB BANCORP INC, 424B3, 1998-05-26 |
Next: DISPATCH MANAGEMENT SERVICES CORP, S-4, 1998-05-26 |
<PAGE>
================================================================================
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
March 13, 1998
-----------------------------------------------------
(Date of earliest event reported)
BIG FLOWER HOLDINGS, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 0-29474 13-397-1556
(State of Incorporation) (Commission File Number) (IRS Employer
Identification No.)
3 East 54th Street
New York, NY 10022
------------------------------------------------------
(Address of Registrant's principal executive office)
(212) 521-1600
------------------------------------------------------
(Registrant's telephone number)
================================================================================
<PAGE>
Item 7. Financial Statements, Pro Forma Information and Exhibits.
(a) Financial Statements of Businesses Acquired.
The financial statements for Troypeak Limited ("Troypeak") and Pismo
Limited ("Pismo") are filed herewith.
(b) Pro Forma Financial Information.
The unaudited pro forma condensed combined financial information of
the Registrant, reflecting the acquisitions of Troypeak and Pismo (together,
the "Fusion Group"), is filed herewith.
Exhibits.
2.1 Agreement, dated March 13, 1998, between Big Flower Digital Services
Limited, the holders of capital stock of Troypeak Limited and Pismo
Limited, Troypeak Limited and Pismo Limited. (1)
99.1 Registrant's press release dated March 17, 1998.(1)
99.2 Financial Statements of Troypeak. *
99.3 Financial Statements of Pismo. *
99.4 Pro forma condensed combined financial data. *
- --------------------------------
* Being Filed Herewith
(1) Incorporated by reference to Registrant's Current Report on Form 8-K,
dated March 13, 1998, concerning the consummation of the Registrant's
acquisition of Troypeak Limited and Pismo Limited (File #0-29474).
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BIG FLOWER HOLDINGS, INC.
/s/ Richard L. Ritchie
-------------------------------------
Richard L. Ritchie
Executive Vice President and Chief
Financial Officer (Principal Financial
and Accounting Officer)
DATE: May 26, 1998
<PAGE>
EXHIBIT INDEX
EXHIBIT
NO.
2.1 Agreement, dated March 13, 1998, between Big Flower Digital Services
Limited, the holders of capital stock of Troypeak Limited and Pismo
Limited, Troypeak Limited and Pismo Limited. (1)
99.1 Registrant's press release dated March 17, 1998.(1)
99.2 Financial Statements of Troypeak. *
99.3 Financial Statements of Pismo. *
99.4 Pro forma condensed combined financial data. *
- --------------------------------
* Being Filed Herewith
(1) Incorporated by reference to Registrant's Current Report on Form 8-K,
dated March 13, 1998, concerning the consummation of the Registrant's
acquisition of Troypeak Limited and Pismo Limited (File #0-29474).
<PAGE>
Exhibit 99.2
TROYPEAK LIMITED
NON STATUTORY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 1997
Registered no: 3030868
<PAGE>
TROYPEAK LIMITED
NON STATUTORY FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 1997
Pages
DIRECTORS AND ADVISERS 1
REPORT OF THE AUDITORS 2
PROFIT AND LOSS ACCOUNT 3
BALANCE SHEET 4
CASH FLOW STATEMENT 5 - 7
NOTES TO THE FINANCIAL STATEMENTS 8 - 19
<PAGE>
TROYPEAK LIMITED
DIRECTORS AND ADVISERS
Directors C G Budd (Chairman)
P J Hughes
A W Edwards
R Penfold
A Brady
R M Potts
P C Blowes
Company secretary P J Hughes
Registered office 1 Embankment Place
LONDON
WC2N 6NN
Auditors Coopers & Lybrand
Registered Auditors
Chartered Accountants
1 Embankment Place
LONDON
WC2N 6NN
<PAGE>
REPORT OF THE AUDITORS TO THE MEMBERS OF
TROYPEAK LIMITED
We have audited the accompanying consolidated balance sheet of Troypeak Limited
and its subsidiaries as of 30 September 1997 and the related consolidated profit
and loss account and cash flow statement, all expressed in pounds sterling.
These financial statements are the responsibility of the company's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audit in accordance with United Kingdom Auditing Standards
which do not differ in any significant respect from United States generally
accepted auditing standards. These standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatements. An audit includes examination, on a test
basis, of evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion such consolidated financial statements present fairly, in all
material respects, the financial position of Troypeak Limited and its
subsidiaries as of 30 September 1997 and the profit and cash flow for the year
ended 30 September 1997, in conformity with accounting principles generally
accepted in the United Kingdom.
/s/ COOPERS & LYBRAND
Chartered Accountants and Registered Auditors
London
21 May 1998
<PAGE>
3
TROYPEAK LIMITED
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30 SEPTEMBER 1997
AUDITED UNAUDITED
3 MONTHS TO
Notes 30 SEPTEMBER 31 DECEMBER
1997 1997
L L
TURNOVER 2 11,550,030 2,651,392
Cost of sales (6,497,549) (1,591,875)
------------------------------
GROSS PROFIT 5,052,481 1,059,517
Administrative expenses (3,589,211) (1,064,844)
------------------------------
OPERATING PROFIT/(loss) 1,463,270 (5,327)
Interest receivable 6 1,723 431
Interest payable and similar charges 7 (181,785) (45,051)
------------------------------
PROFIT/(loss) ON ORDINARY ACTIVITIES
BEFORE TAXATION 1,283,208 (49,947)
Tax on profit on ordinary activities 8 (532,919) (27,170)
------------------------------
PROFIT/(loss) ON ORDINARY ACTIVITIES
AFTER TAXATION 750,289 (77,117)
Dividends 9 (17,600) -
------------------------------
RETAINED PROFIT/(loss) FOR THE
FINANCIAL YEAR 732,689 (77,117)
------------------------------
------------------------------
Earnings per ordinary share 9.74 (1.00)
------------------------------
------------------------------
All of the activities of the company are classed as continuing.
The company has no recognised gains or losses other than the results for the
year as set out above, and therefore no separate statement of total recognised
gains and losses has been presented.
There is no difference between the profit on ordinary activities before taxation
and the retained profit for the year stated above, and their historical cost
equivalents.
<PAGE>
4
TROYPEAK LIMITED
CONSOLIDATED BALANCE SHEET
AT 30 SEPTEMBER 1997
AUDITED UNAUDITED
Notes 30 SEPTEMBER 31 DECEMBER
1997 1997
L L
FIXED ASSETS
Tangible assets 10 2,201,088 2,262,460
CURRENT ASSETS
Stocks 12 217,848 246,295
Debtors due within one year 13 4,349,419 3,384,013
Debtors due after more than one year 13 125,510 125,510
Cash at bank and in hand 229,943 203,915
------------------------------
4,922,720 3,959,733
CREDITORS: amounts falling due
within one year 14 (5,022,586) (4,247,025)
------------------------------
NET CURRENT LIABILITIES (99,866) (287,292)
------------------------------
TOTAL ASSETS LESS CURRENT LIABILITIES 2,101,222 1,975,168
CREDITORS: amounts falling due after more
than one year 15 (380,671) (331,734)
------------------------------
NET ASSETS 1,720,551 1,643,434
------------------------------
------------------------------
CAPITAL AND RESERVES
Called up share capital 18 110,000 110,000
Profit and loss account 1,185,416 1,108,299
Capital redemption reserve 19 161,429 161,429
Merger reserve 19 263,706 263,706
------------------------------
1,720,551 1,643,434
------------------------------
EQUITY SHAREHOLDERS' FUNDS 1,687,551 1,610,434
NON-EQUITY SHAREHOLDERS' FUNDS 33,000 33,000
------------------------------
SHAREHOLDERS' FUNDS 20 1,720,551 1,643,434
------------------------------
------------------------------
The financial statements were approved by the board of directors on 20 May
1998 and were signed on its behalf by:
DIRECTOR
<PAGE>
5
TROYPEAK LIMITED
CONSOLIDATED CASH FLOW STATEMENT
YEAR ENDED 30 SEPTEMBER 1997
AUDITED UNAUDITED
YEAR ENDED 3 MONTHS TO
30 SEPTEMBER 31 DECEMBER
1997 1997
L L
NET CASH INFLOW FROM OPERATING
ACTIVITIES 2,808,842 783,429
RETURNS ON INVESTMENT AND SERVICING
OF FINANCE
Interest received 1,723 431
Interest paid (94,479) (29,053)
Interest element of finance lease
rental payments (87,306) (15,998)
---------------------------
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS
AND SERVICING OF FINANCE (180,062) (44,620)
TAXATION (401,041) -
CAPITAL EXPENDITURE
Purchase of tangible fixed assets (644,982) (293,115)
Receipts from sale of tangible fixed assets 10,831 -
---------------------------
NET CASH OUTFLOW FROM CAPITAL EXPENDITURE (634,151) (293,115)
EQUITY DIVIDENDS PAID (17,600) -
---------------------------
CASH INFLOW BEFORE FINANCING 1,575,988 445,694
FINANCING
Capital repayments on finance leases (577,609) (62,138)
Net outflow from invoice discounting (902,280) (409,584)
---------------------------
NET CASH OUTFLOW FROM FINANCING (1,479,889) (471,722)
---------------------------
INCREASE/(DECREASE) IN CASH 96,099 (26,028)
---------------------------
---------------------------
<PAGE>
6
TROYPEAK LIMITED
CASH FLOW STATEMENT (CONTINUED)
YEAR ENDED 30 SEPTEMBER 1997
AUDITED UNAUDITED
YEAR ENDED 3 MONTHS TO
30 SEPTEMBER 31 DECEMBER
1997 1997
L L
Operating profit/(loss) 1,463,270 (5,327)
Depreciation 777,790 231,743
Loss on disposal of fixed assets 300 -
Increase in stocks (10,228) (28,447)
(Increase)/decrease in debtors (1,474,214) 965,406
Increase/(decrease) in creditors 2,051,924 (379,946)
---------------------------
NET CASH INFLOW FROM OPERATING ACTIVITIES 2,808,842 783,429
---------------------------
---------------------------
RECONCILIATION OF NET CASH FLOW MOVEMENT TO MOVEMENT IN NET DEBT
AUDITED UNAUDITED
YEAR ENDED 3 MONTHS TO
30 SEPTEMBER 31 DECEMBER
1997 1997
L L
INCREASE/(DECREASE) IN CASH IN THE PERIOD 96,099 (26,028)
Net outflow in respect of hire purchase agreements 577,609 62,138
Net (inflow)/outflow from other long-term creditors (897,230) 410,530
---------------------------
CHANGE IN NET DEBT RESULTING FROM CASH FLOWS (223,522) 446,640
New hire purchase agreements (401,885) -
NET DEBT AT BEGINNING OF PERIOD (1,475,286) (2,100,693)
---------------------------
NET DEBT AT END OF PERIOD (2,100,693) (1,654,053)
---------------------------
---------------------------
<PAGE>
TROYPEAK LIMITED
CASH FLOW STATEMENT (CONTINUED)
YEAR ENDED 30 SEPTEMBER 1997
ANALYSIS OF CHANGES IN NET DEBT
<TABLE>
<CAPTION>
At 1 October Cash Non- cash AT 30 SEPTEMBER
1996 flows movements 1997
L L L L
<S> <C> <C> <C> <C>
Cash in hand and at bank 133,844 96,099 - 229,943
Debt due within one year (1,125,348) (655,391) (171,416) (1,952,155)
Debt due after more than one year (483,782) 335,770 (230,469) (378,481)
----------------------------------------------------------
(1,475,286) (223,522) (401,885) (2,100,693)
----------------------------------------------------------
----------------------------------------------------------
CASH NON-CASH AT 31 DECEMBER
FLOWS MOVEMENTS 1997
L L L
Cash in hand and at bank (26,028) - 203,915
Debt due within one year 425,921 - (1,526,234)
Debt due after more than one year 46,747 - (331,734)
------------------------------------------
446,640 - (1,654,053)
------------------------------------------
------------------------------------------
</TABLE>
<PAGE>
8
TROYPEAK LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 SEPTEMBER 1997
1 PRINCIPAL ACCOUNTING POLICIES
These non-statutory financial statements have been prepared in accordance with
applicable Accounting Standards in the United Kingdom.
BASIS OF ACCOUNTING
The financial statements are prepared in accordance with the historical cost
convention.
BASIS OF CONSOLIDATION
The consolidated profit and loss account and balance sheet include the financial
statements of the Company and its subsidiary undertakings. Intra-group sales
and profits are eliminated fully on consolidation.
TURNOVER
Turnover represents amounts receivable for services provided in the United
Kingdom net of trade discounts and value added tax.
TANGIBLE FIXED ASSETS
The cost of tangible fixed assets is their purchase cost together with any
incidental costs of acquisition.
Depreciation is provided at rates calculated to write off the cost less
estimated residual value of each asset on a straight line basis over its
expected useful life, as follows:
Improvements to property term of lease
Plant and machinery 2-5 years
Fixtures and fittings and equipment 2-5 years
Motor vehicles 4 years
STOCK
Stocks are valued at the lower of cost and net realisable value, after making
due allowance for obsolete and slow moving items.
<PAGE>
9
TROYPEAK LIMITED
WORK IN PROGRESS
Work in progress is valued on the basis of direct costs plus attributable
overheads based on normal level of activity. Provision is made for any
foreseeable losses where appropriate. No element of profit is included in the
valuation of work in progress.
HIRE PURCHASE AGREEMENTS
Assets held under hire purchase agreements are capitalised and disclosed under
tangible fixed assets at their fair value. The capital element of the future
payments is treated as a liability and the interest is charged to the profit and
loss account on a sum of digit basis.
OPERATING LEASE AGREEMENTS
Rentals applicable to operating leases where substantially all of the benefits
and risks of ownership remain with the lessor are charged against profits as
incurred.
PENSION COSTS
The company operates a defined contribution pension scheme for employees. The
assets of the scheme are held separately from those of the company. The annual
contributions payable are charged to the profit and loss account.
DEFERRED TAXATION
Provision is made for deferred taxation, using the liability method, to take
account of timing differences between the treatment of certain items for
accounts purposes and their treatment for tax purposes. Tax deferred or
accelerated is accounted for to the extent that is probable that a liability or
asset will crystallise in the foreseeable future.
2 TURNOVER
The turnover and profit before tax are attributable to the one principal
activity of the company which arose within the United Kingdom.
<PAGE>
10
TROYPEAK LIMITED
3 OPERATING PROFIT
AUDITED UNAUDITED
30 SEPTEMBER 31 DECEMBER
1997 1997
L L
OPERATING PROFIT IS STATED AFTER CHARGING:
Staff pension contributions 9,972 2,500
Depreciation 777,790 231,743
Operating lease rentals
Plant and machinery 140,067 36,758
Other 207,013 58,758
Loss on disposal of fixed assets 300 -
Auditors remuneration
as auditors 17,750 -
-----------------------
-----------------------
4 EMPLOYEES
The average monthly number of persons (including executive directors) employed
by the group during the period was:
AUDITED UNAUDITED
30 SEPTEMBER 31 DECEMBER
1997 1997
NUMBER NUMBER
Production 100 92
Administration 45 46
Sales 14 16
-----------------------
159 154
-----------------------
-----------------------
The aggregate payroll costs in respect of the above were:
AUDITED UNAUDITED
30 SEPTEMBER 31 DECEMBER
1997 1997
L L
Wages and salaries 5,006,854 1,210,578
Social security costs 449,771 112,814
Other pension costs 36,648 9,375
-----------------------
5,493,273 1,332,767
-----------------------
-----------------------
<PAGE>
11
TROYPEAK LIMITED
5 DIRECTORS' EMOLUMENTS
AUDITED UNAUDITED
30 SEPTEMBER 31 DECEMBER
1997 1997
L L
Emoluments 734,948 172,330
Value of company pension contributions to money
purchase schemes 26,676 6,875
-----------------------
761,624 179,205
-----------------------
-----------------------
During the year six of the directors were members of the pension scheme.
6 INTEREST RECEIVABLE
AUDITED UNAUDITED
30 SEPTEMBER 31 DECEMBER
1997 1997
L L
Other interest receivable 1,723 431
-----------------------
-----------------------
7 INTEREST PAYABLE
AUDITED UNAUDITED
30 SEPTEMBER 31 DECEMBER
1997 1997
L L
Interest payable on bank borrowing 94,479 29,053
Interest charges on hire purchase 87,306 15,998
-----------------------
181,785 45,051
-----------------------
-----------------------
<PAGE>
12
TROYPEAK LIMITED
8 TAX ON PROFIT ON ORDINARY ACTIVITIES
AUDITED UNAUDITED
30 SEPTEMBER 31 DECEMBER
1997 1997
L L
In respect of the year:
Corporation tax based on the results for the
year at 33% (December 1997: 33 %) 506,698 27,170
Adjustment in respect of previous year:
Corporation tax 26,221 -
-----------------------
532,919 27,170
-----------------------
-----------------------
9 DIVIDENDS
The following dividends have been paid or proposed in respect of the period:
AUDITED UNAUDITED
30 SEPTEMBER 31 DECEMBER
1997 1997
L L
Dividends paid on ordinary shares 17,600 -
-----------------------
17,600 -
-----------------------
-----------------------
On 13 March 1998 the holders of the preferred ordinary shares agreed to waive
their rights to dividends from 1 October 1996 to that date.
<PAGE>
13
TROYPEAK LIMITED
10 TANGIBLE FIXED ASSETS
GROUP
<TABLE>
<CAPTION>
IMPROVEMENTS PLANT AND FIXTURES MOTOR
TO PROPERTY MACHINERY AND FITTINGS VEHICLES TOTAL
L L L L L
<S> <C> <C> <C> <C> <C>
COST
At 1 October 1996 298,506 2,812,367 91,415 3,062 3,205,350
Additions 164,326 851,676 30,865 - 1,046,867
Disposals - (9,178) - (3,062) (12,240)
----------------------------------------------------------------------
AT 30 SEPTEMBER 1997 462,832 3,654,865 122,280 - 4,239,977
----------------------------------------------------------------------
----------------------------------------------------------------------
ADDITIONS 30,355 239,372 23,388 - 293,115
----------------------------------------------------------------------
AT 31 DECEMBER 1997 493,187 3,894,237 145,668 - 4,533,092
----------------------------------------------------------------------
----------------------------------------------------------------------
DEPRECIATION
At 1 October 1996 136,039 1,083,944 41,809 416 1,262,208
Charge for the year 53,604 697,242 26,251 693 777,790
Disposals - - - (1,109) (1,109)
----------------------------------------------------------------------
AT 30 SEPTEMBER 1997 189,643 1,781,186 68,060 - 2,038,889
----------------------------------------------------------------------
----------------------------------------------------------------------
CHARGE FOR PERIOD 15,772 209,320 6,651 - 231,743
----------------------------------------------------------------------
AT 31 DECEMBER 1997 205,415 1,990,506 74,711 - 2,270,632
----------------------------------------------------------------------
----------------------------------------------------------------------
NET BOOK VALUE
AT 30 SEPTEMBER 1997 273,189 1,873,679 54,220 - 2,201,088
----------------------------------------------------------------------
----------------------------------------------------------------------
AT 31 DECEMBER 1997 287,772 1,903,731 70,957 - 2,262,460
----------------------------------------------------------------------
----------------------------------------------------------------------
</TABLE>
Included within the net book value of L2,201,088 is L1,036,837 relating to
assets held under hire purchase agreements. The depreciation charged to the
accounts in the year in respect of such assets amounted to L305,475.
<PAGE>
14
TROYPEAK LIMITED
11 FIXED ASSET INVESTMENT
Troypeak Limited's investment in the ordinary share capital of unlisted
companies at the balance sheet date related to the following, all of which are
involved in pre-press service to the marketing industry:
Company COUNTRY OF
INCORPORATION % AGE HOLDING
Production Response Limited England 100
Studio Response Limited England 100
Eric Studio Limited England 100
12 STOCK
AUDITED UNAUDITED
30 SEPTEMBER 31 DECEMBER
1997 1997
L L
Raw materials 89,895 93,630
Work in progress 127,953 152,665
-------------------------
217,848 246,295
-------------------------
-------------------------
13 DEBTORS
AUDITED UNAUDITED
30 SEPTEMBER 31 DECEMBER
1997 1997
L L
AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
Other debtors - rental deposits 125,510 125,510
-------------------------
-------------------------
AMOUNTS FALLING DUE WITHIN ONE YEAR
Trade debtors 4,135,868 3,161,853
Other debtors 28,990 36,416
ACT recoverable against future taxation 26,368 26,368
Prepayments and accrued income 158,193 159,376
-------------------------
4,349,419 3,384,013
-------------------------
-------------------------
<PAGE>
15
TROYPEAK LIMITED
14 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
AUDITED UNAUDITED
30 SEPTEMBER 31 DECEMBER
1997 1997
L L
Trade creditors 936,620 779,031
Advanced corporation tax 26,368 26,368
Corporation tax 524,370 551,541
Other taxes and social security 476,606 301,801
Hire purchase agreements 419,798 404,407
Dividends payable 105,473 105,473
Other loans 1,262 316
Other creditors 1,750,347 1,361,860
Accruals and deferred income 781,742 716,228
-------------------------
5,022,586 4,247,025
-------------------------
-------------------------
Included within other creditors is L1,531,095 (31 December 1997: L1,121,511) due
to Lombard Nat West Discounting Limited.
Lombard Nat West Discounting Limited have a first charge over the company's
trade debtors.
Dividends payable includes fixed cumulative dividends owing to Preferred
ordinary shareholders and "A" preference ordinary shares of L26,738 for the year
ended 30 September 1995 and L78,734 for the year ended 31 December 1996.
15 CREDITORS AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
AUDITED UNAUDITED
30 SEPTEMBER 31 DECEMBER
1997 1997
L L
Hire purchase agreements 378,481 331,734
Other creditors 2,190 -
-------------------------
380,671 331,734
-------------------------
-------------------------
<PAGE>
16
TROYPEAK LIMITED
16 COMMITMENTS UNDER OPERATING LEASES
At 30 September 1997 the group had annual commitments under non-cancellable
operating leases as set out below:
<TABLE>
<CAPTION>
Audited UNAUDITED
30 SEPTEMBER 1997 31 DECEMBER 1997
LAND AND OTHER LAND AND OTHER
BUILDINGS ITEMS BUILDINGS ITEMS
L L L L
<S> <C> <C> <C> <C>
Operating lease which expire:
Within one year 107,865 21,961 119,089 43,705
Within two to five years 123,680 125,497 93,200 94,264
After more than five years 20,000 - 20,000 -
-----------------------------------------------------------------
251,545 147,458 232,289 137,969
-----------------------------------------------------------------
-----------------------------------------------------------------
</TABLE>
17 CALLED UP SHARE CAPITAL
<TABLE>
<CAPTION>
AUTHORISED 30 SEPTEMBER 31 DECEMBER
NOMINAL 1997 1997
NUMBER CLASS VALUE L L
<S> <C> <C> <C> <C>
77,000 Ordinary L 1 77,000 77,000
21,429 Preferred ordinary L 1 21,429 21,429
11,571 'A' Preferred ordinary L 1 11,571 11,571
61,429 'A' Cumulative redeemable L 1 61,429 61,429
100,000 'B' Cumulative redeemable L 1 100,000 100,000
---------------------------
271,429 271,429
---------------------------
---------------------------
ALLOTTED, CALLED UP AND FULLY PAID
77,000 Ordinary L 1 77,000 77,000
21,429 Preferred ordinary L 1 21,429 21,429
11,571 'A' Preferred ordinary L 1 11,571 11,571
---------------------------
110,000 110,000
---------------------------
---------------------------
</TABLE>
The preferred ordinary shares are entitled to a dividend of 11 pence per share
and a participating dividend of 7.5% of profits of Troypeak Limited's
subsidiaries.
The `A' preferred ordinary shares are entitled to a dividend of 9 pence per
share and a participating dividend of 7.5% of profits of Troypeak Limited's
subsidiaries.
Interest accrues on all unpaid dividends at 3% above the National Westminster
Bank base rate.
<PAGE>
17
TROYPEAK LIMITED
The preferred ordinary and "A" preferred ordinary shares can be converted to
ordinary shares at any time.
The ordinary shareholders, preferred ordinary shareholders and "A" preferred
ordinary shareholders, are entitled to vote at the General Meeting of the
Company.
18 RESERVES
Capital Profit and
Merger redemption loss account
reserve reserve
L L L
At 1 October 1996 263,706 161,429 452,727
Profit for the financial period - - 750,289
Dividends - - (17,600)
--------------------------------------
AT 30 SEPTEMBER 1997 263,706 161,429 1,185,416
--------------------------------------
--------------------------------------
LOSS FOR THE FINANCIAL PERIOD - - (77,117)
--------------------------------------
AT 31 DECEMBER 1997 263,706 161,429 1,108,299
--------------------------------------
--------------------------------------
19 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
AUDITED UNAUDITED
30 SEPTEMBER 31 DECEMBER
1997 1997
L L
Profit/(loss) for the financial period 750,289 (77,117)
Dividends (17,600) -
---------------------------
732,689 (77,117)
Opening shareholders' funds 987,862 1,720,551
---------------------------
CLOSING SHAREHOLDERS' FUNDS 1,720,551 1,643,434
---------------------------
---------------------------
<PAGE>
18
TROYPEAK LIMITED
20 NON EQUITY SHAREHOLDERS' FUNDS
AUDITED UNAUDITED
30 SEPTEMBER 31 DECEMBER
1997 1997
L L
Preferred ordinary 21,429 21,429
'A' preferred ordinary 11,571 11,571
---------------------------
33,000 33,000
---------------------------
---------------------------
21 DEFERRED TAXATION
Deferred taxation for which no provision has been made in the accounts is as
follows:
AUDITED UNAUDITED
30 SEPTEMBER 31 DECEMBER
1997 1997
L L
Accelerated capital allowances 59,864 31,835
Other timing differences (3,100) (3,100)
---------------------------
56,764 28,735
---------------------------
---------------------------
22 FINANCIAL COMMITMENTS
The company has guaranteed rents payable to the landlords of properties used in
the business up to the value of L208,680.
A guarantee has also been given by the company to National Westminster Bank over
the debts of Troypeak Limited. At 30 September 1997, there was no liability.
23 RELATED PARTY TRANSACTIONS
During the year the Group paid L150,000 (31 December 1997: L30,000) to a company
of which the wife of C Budd is a director. The company arranges travel and
hospitality for Production Response Limited.
<PAGE>
19
TROYPEAK LIMITED
24 POST BALANCE SHEET EVENTS
On 16 January 1998 a subsidiary, Production Response Limited, acquired certain
assets of Reacta Graphics Limited (in liquidation) for the consideration of
L100,000.
On 9 March 1998 all the company's ordinary shares were re-designated and
converted to `B' ordinary shares. The company's preferred ordinary shares and
`A' preferred ordinary shares were redesignated and converted to `C' ordinary
shares.
On 13 March 1998 Troypeak Limited's entire share capital was acquired by Big
Flower Digital Services Limited. The ultimate parent company then became Big
Flower Holdings Inc., a company incorporated in the USA.
The hire purchase creditors have been repaid as part of this arrangement at a
cost of L505,132.
<PAGE>
Registered no: 0265981
Exhibit 99.3
PISMO LIMITED
Non statutory financial statements
for the year ended 31 March 1998
<PAGE>
PISMO LIMITED
Non statutory financial statements
for the year ended 31 March 1998
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
Report of the auditors....................... 1
Profit and loss account...................... 2
Balance sheet................................ 3
Cash flow statement.......................... 4 - 6
Notes to the financial statements............ 7 - 15
</TABLE>
<PAGE>
PISMO LIMITED
Directors and advisers
Directors Registered Auditors
A Tout (Chairman) Coopers & Lybrand
R Leach 1 Embankment Place
M B Kennedy LONDON
D P Whithall WC2N 6NN
Secretary and registered office
A Tout
50/54 Beak Street
LONDON
W1R 3DH
<PAGE>
1
PISMO LIMITED
Report of the auditors to the members of
PISMO LIMITED
We have audited the accompanying consolidated balance sheet of Pismo Limited and
its subsidiaries as of 31 March 1998 and the related consolidated profit and
loss account and cash flow statement all expressed in pounds sterling. These
financial statements are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audit in accordance with United Kingdom Auditing Standards
which do not differ in any significant respect from United States generally
accepted auditing standards. These standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatements. An audit includes examination, on a test
basis, of evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion such consolidated financial statements present fairly, in all
material respects, the financial position of Pismo Limited and its subsidiaries
as of 31 March 1998 and the profit and cash flow for the year ended 31 March
1998, in conformity with accounting principles generally accepted in the United
Kingdom.
/s/Coopers & Lybrand
Chartered Accountants and Registered Auditors
London
22 May, 1998
<PAGE>
2
PISMO LIMITED
Consolidated profit and loss account
for the year ended 31 March 1998
<TABLE>
<CAPTION>
Audited
Notes
31 March
1998
L
<S> <C> <C>
Turnover 2
4,309,694
Cost of sales (2,180,829)
-------------------
Gross profit 2,128,865
Distribution costs (845,912)
Administrative expenses (736,527)
Other operating income 300,000
-------------------
Operating profit 846,426
Interest receivable 6 29,935
Interest payable and similar charges 7 (15,432)
-------------------
Profit on ordinary activities before taxation 860,929
Tax on profit on ordinary activities 8 (274,601)
-------------------
Profit on ordinary activities after taxation 586,328
Dividends 9 (1,125,000)
-------------------
Retained loss for the financial year (538,672)
-------------------
-------------------
Earnings per ordinary share 44.76
-------------------
-------------------
</TABLE>
All of the activities of the company are classed as continuing.
The company has no recognised gains or losses other than the results for the
year as set out above, and therefore no separate statement of total recognised
gains and losses has been presented.
There is no difference between the profit on ordinary activities before taxation
and the retained profit for the year stated above, and their historical cost
equivalents.
<PAGE>
3
PISMO LIMITED
Consolidated balance sheet
at 31 March 1998
<TABLE>
<CAPTION>
31 March
Notes 1998
L
<S> <C> <C>
Fixed assets
Tangible assets 10 592,947
-------------------
Current assets
Stocks 12 600
Debtors 13 823,603
Cash at bank and in hand 289,574
-------------------
1,113,777
Creditors: amounts falling due
within one year 14 (954,344)
-------------------
Net current assets 159,433
-------------------
Net assets 752,380
-------------------
-------------------
Capital and reserves
Called up share capital 16 13,100
Profit and loss account 17 739,280
-------------------
Equity shareholders' funds 18 752,380
-------------------
-------------------
</TABLE>
The financial statements were approved by the board of directors on 21 May
1998 and were signed on its behalf by:
Director
<PAGE>
4
PISMO LIMITED
Consolidated cash flow statement
year ended 31 March 1998
<TABLE>
<CAPTION>
Year ended
31 March
1998
L
<S> <C>
Net cash inflow from operating activities 1,281,004
Returns on investment and servicing of finance
Interest received 29,935
Interest paid (3,490)
Interest element of finance lease rental payments (11,942)
-------------------
Net cash outflow from returns on investments and servicing of finance 14,503
Taxation (537,720)
Capital expenditure
Purchase of tangible fixed assets (149,066)
Receipts from sale of tangible fixed assets 18,246
-------------------
Net cash outflow from capital expenditure (130,820)
Equity dividends paid (1,112,000)
-------------------
Cash outflow before financing (485,033)
Financing
Capital repayments on finance leases (417,730)
Issue of share capital 48
-------------------
Net cash outflow from financing (417,682)
-------------------
Decrease in cash (902,715)
-------------------
-------------------
</TABLE>
<PAGE>
5
PISMO LIMITED
Cash flow statement (continued)
year ended 31 March 1998
<TABLE>
<CAPTION>
31 March
1998
L
<S> <C>
Operating profit 846,426
Depreciation 164,101
Profit on disposal of fixed assets (1,602)
Increase in stocks (600)
Increase in debtors (30,256)
Increase in creditors 302,935
-------------------
Net cash inflow from operating activities 1,281,004
-------------------
-------------------
</TABLE>
Reconciliation of net cash flow movement to movement in net funds
<TABLE>
<CAPTION>
31 March
1998
L
<S> <C>
Decrease in cash in the period (902,715)
Net outflow in respect of hire purchase agreements 417,730
-------------------
Change in net funds resulting from cash flows (484,985)
New hire purchase agreements (251,659)
Net funds at beginning of period 1,026,218
-------------------
Net funds at end of period 289,574
-------------------
-------------------
</TABLE>
<PAGE>
6
PISMO LIMITED
Cash flow statement (continued)
year ended 31 March 1998
Analysis of changes in net funds
<TABLE>
<CAPTION>
At
At 1 April Cash Non- cash 31 March
1997 flows movements 1998
L L L L
<S> <C> <C> <C> <C>
Cash in hand and at bank 1,192,289 (902,715) - 289,574
Hire purchase leases (166,071) 417,730 (251,659) -
-----------------------------------------------------------------------
1,026,218 (484,985) (251,659) 289,574
-----------------------------------------------------------------------
-----------------------------------------------------------------------
</TABLE>
<PAGE>
7
PISMO LIMITED
Notes to the financial statements
for the year ended 31 March 1998
1 PRINCIPAL ACCOUNTING POLICIES
These non-statutory financial statements have been prepared in accordance with
applicable Accounting Standards in the United Kingdom.
BASIS OF ACCOUNTING
The financial statements are prepared in accordance with the historical cost
convention.
BASIS OF CONSOLIDATION
The consolidated profit and loss account and balance sheet include the financial
statements of the Company and its subsidiary undertakings. Intra-group sales and
profits are eliminated fully on consolidation.
TURNOVER
Turnover represents amounts receivable for services provided in the United
Kingdom net of trade discounts and value added tax.
TANGIBLE FIXED ASSETS
The cost of tangible fixed assets is their purchase cost together with any
incidental costs of acquisition.
Depreciation is provided at rates calculated to write off the cost less
estimated residual value of each asset over its expected useful life, as
follows:
<TABLE>
<S> <C>
Plant and machinery 4 years
Fixtures and fittings and equipment 4 years
Motor vehicles 4 years
Leasehold improvements 7 years
</TABLE>
WORK IN PROGRESS
Work in progress is valued on the basis of direct costs plus attributable
overheads based on normal level of activity. Provision is made for any
foreseeable losses where appropriate. No element of profit is included in the
valuation of work in progress.
<PAGE> 8
PISMO LIMITED
FINANCE AND OPERATING LEASES
Costs in respect of operating leases are charged on a straight line basis over
the lease term. Leasing agreements which transfer to the company substantially
all the benefits and risks of ownership of an asset are treated as if the asset
had been purchased outright. The assets are included in fixed assets and the
capital element of the leasing commitments is shown as obligations under finance
leases. The lease rentals are treated as consisting of capital and interest
elements. The capital element is applied to reduce the outstanding obligations
and the interest element is charged against profit in proportion to the reducing
capital element outstanding. Assets held under finance leases are depreciated
over the shorter of the lease terms and useful lives of equivalent owned assets.
PENSION COSTS
Contributions to the company's defined contribution pension scheme are charged
to the profit and loss account in the year in which they become payable.
DEFERRED TAXATION
Provision is made for deferred taxation, using the liability method, to take
account of timing differences between the treatment of certain items for
accounts purposes and their treatment for tax purposes. Tax deferred or
accelerated is accounted for to the extent that is probable that a liability or
asset will crystallise in the foreseeable future.
2 TURNOVER
The turnover and profit before tax are attributable to the one principal
activity of the company which arose within the United Kingdom.
<PAGE>
9
PISMO LIMITED
3 OPERATING PROFIT
<TABLE>
<CAPTION>
31 March
1998
L
<S> <C>
Operating profit is stated after charging/(crediting):
Depreciation:
Owned tangible fixed assets 94,362
Asset held under hire purchase contracts 69,739
Operating lease rentals:
Land and buildings 78,828
Profit on disposal of fixed assets (1,602)
Auditors remuneration as auditors 9,635
Reverse premium to end property lease (300,000)
------------------
------------------
</TABLE>
Prior to 13 March 1998 the company participated in various commercial
arrangements with major customers including J Walter Thompson (JWT) and Bartle
Hegarty (BBH). Under these arrangements the company was guaranteed certain sales
volumes. During the year net sales to JWT were L1,422,272 and to BBH were
L775,086. At 31 March 1998 BBH and JWT were owed L121,070 and
L236,691 by the company respectively.
Additionally, the company rents property from BBH, the annual net rental under
this arrangement is L165,000.
4 EMPLOYEES
The average monthly number of persons (including executive directors)
employed by the group during the period was 27 (1997: 23).
The aggregate payroll costs in respect of the above persons were:
<TABLE>
<CAPTION>
31 March
1998
L
<S> <C>
Wages and salaries 1,095,549
Social security costs 114,487
Pension costs 32,928
-------------------
1,242,964
-------------------
-------------------
</TABLE>
<PAGE>
10
PISMO LIMITED
5 DIRECTORS' EMOLUMENTS
<TABLE>
<CAPTION>
31 March
1998
L
<S> <C>
Emoluments 462,096
Company pension contributions
to money purchase schemes 20,472
-------------------
482,568
-------------------
-------------------
</TABLE>
During the year all the directors were members of the pension scheme.
6 INTEREST RECEIVABLE
<TABLE>
<CAPTION>
31 March
1998
L
<S> <C>
Bank interest receivable 29,935
-------------------
-------------------
</TABLE>
7 Interest payable
<TABLE>
<CAPTION>
31 March
1998
L
<S> <C>
Interest charges on hire purchase 11,942
Other interest payable 3,490
-------------------
15,432
-------------------
-------------------
</TABLE>
8 TAX ON PROFIT ON ORDINARY ACTIVITIES
<TABLE>
<CAPTION>
31 March
1998
L
<S> <C>
In respect of the year:
Corporation tax based on the results for the year at 31% 274,581
Adjustment in respect of previous year:
Corporation tax 20
-------------------
274,601
-------------------
-------------------
</TABLE>
<PAGE>
11
PISMO LIMITED
9 Dividends
<TABLE>
<CAPTION>
1998
L
<S> <C>
Interim dividend paid on ordinary shares 1,100,000
Final scrip dividend paid on `A' and `B' ordinary shares 25,000
-------------------
1,125,000
-------------------
-------------------
</TABLE>
Amounts shown in respect of the final dividend reflect the cash dividend of
L250 per share. A scrip dividend alternative to this was offered of 250
new shares and elected for by the holders of the `A' ordinary shares, with the
result that only L12,000 of the final dividend was paid in cash.
10 TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
Leasehold/
Plant and fixtures and Motor
machinery fittings vehicles Total
L L L L
<S> <C> <C> <C> <C> <C>
Cost
At 1 April 1997 829,155 144,415 174,521 1,148,091
Additions 288,186 80,539 32,000 400,725
Disposals (261,580) (79,240) (24,873) (365,693)
-----------------------------------------------------------------------
At 31 March 1998 855,761 145,714 181,648 1,183,123
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Depreciation
At 1 April 1997 618,511 104,508 52,105 775,124
Charge for the year 102,010 20,150 41,941 164,101
Disposals (261,580) (77,106) (10,363) (349,049)
-----------------------------------------------------------------------
At 31 March 1998 458,941 47,552 83,683 590,176
-----------------------------------------------------------------------
-----------------------------------------------------------------------
Net book value
At 31 March 1998 396,820 98,162 97,965 592,947
-----------------------------------------------------------------------
-----------------------------------------------------------------------
At 31 March 1997 210,644 39,907 122,416 372,967
-----------------------------------------------------------------------
-----------------------------------------------------------------------
</TABLE>
The net book value of fixed assets includes LNil (1997: L171,195) in
respect of assets held under hire purchase agreements.
<PAGE>
12
PISMO LIMITED
11 SUBSIDIARY UNDERTAKINGS
Pismo Limited has the following subsidiary undertakings:
<TABLE>
<CAPTION>
Proportion of ordinary
Name of undertaking shares held by company Principal business
<S> <C> <C>
Matelot Productions Limited 100% Television post production
Flitclaim Limited 100% Non trading
</TABLE>
12 STOCK
<TABLE>
<CAPTION>
31 March
1998
L
<S> <C>
Work in progress 600
-------------------
600
-------------------
-------------------
</TABLE>
13 DEBTORS
<TABLE>
<CAPTION>
31 March
1998
L
<S> <C>
Amounts falling due within one year
Trade debtors 572,445
Other debtors 77,128
ACT recoverable against future taxation 3,419
Prepayments and accrued income 170,611
-------------------
823,603
-------------------
-------------------
</TABLE>
Other debtors include amounts due from a director of L6,716. The year end
balance is the maximum owed to the company in the year.
<PAGE>
13
PISMO LIMITED
14 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
31 March
1998
L
<S> <C>
Trade creditors 502,717
Amounts owed to group undertakings 221,287
Advanced corporation tax 3,000
Other taxes and social security 179,780
Other creditors 4,116
Accruals and deferred income 43,444
-------------------
954,344
-------------------
-------------------
</TABLE>
15 COMMITMENTS UNDER OPERATING LEASES
At 31 March 1998 the group had annual commitments under non-cancellable
operating leases as set out below:
<TABLE>
<CAPTION>
31 March
1998
Land and
buildings
L
<S> <C>
Operating leases which expire:
After more than five years 313,086
-------------------
-------------------
</TABLE>
16 CALLED UP SHARE CAPITAL
<TABLE>
<CAPTION>
1998
L
<S> <C>
Authorised
`A' ordinary shares of L1 each 52,000
`B' ordinary shares of L1 each 48,000
-------------------
100,000
-------------------
-------------------
Allotted, called up and fully paid
`A' ordinary shares of L1 each 13,052
`B' ordinary shares of L1 each 48
-------------------
13,100
-------------------
-------------------
</TABLE>
In June 1997 share options were exercised creating 48 L1 ordinary shares.
On 9 March 1998 the ordinary share capital was re-designated into `A' and `B'
ordinary share capital. The 48 ordinary shares originally created in June 1997
under the options were converted into `B' ordinary shares and the remaining 52
ordinary shares were converted into `A' shares.
<PAGE>
14
PISMO LIMITED
As a result of a scrip dividend in March 1998, 13,000 further `A' ordinary
shares of L1 each were issued at par.
VOTING RIGHTS
The allotted `A' ordinary share capital is entitled to 52% of the total voting
rights regardless of the number of shares in issue. Each `A' share gets votes
equal to 52% divided by the total `A' shares in issue. Similarly, the allotted
`B' ordinary share capital is entitled to 48% of the total voting rights. Each
`B' share gets votes equal to 48% divided by the total `B' shares in issue.
DIVIDENDS
A dividend can be declared and paid on one class of share alone. However, a
second dividend cannot be paid on those shares until a dividend equal to the
original dividend is paid on the other shares.
A dividend declared with a scrip alternative does not count as a dividend for
the above purposes.
RIGHT TO SURPLUS ASSETS ON WINDING UP
`A' and `B' ordinary share capital rank equally in the event of a winding up,
except that any shares issued via a scrip dividend will be repaid after the
share capital not issued by scrip dividend. Further surplus assets will then be
split in the ratio of 52% to `A' shareholders and 48% to `B' shareholders.
17 RESERVES
<TABLE>
<CAPTION>
Profit and
loss account
L
<S> <C>
At 1 April 1997 1,277,952
Retained loss for the financial year (538,672)
-------------------
At 31 March 1998 739,280
-------------------
-------------------
</TABLE>
<PAGE>
15
PISMO LIMITED
18 RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
31 March
1998
L
<S> <C>
Profit for the financial period 586,328
Dividends (1,125,000)
-------------------
(538,672)
Issue of share capital:
Options exercised 48
Scrip dividend 13,000
Opening shareholders' funds 1,278,004
-------------------
Closing shareholders' funds 752,380
-------------------
-------------------
</TABLE>
19 DEFERRED TAXATION
Deferred taxation for which no provision has been made in the accounts is as
follows:
<TABLE>
<CAPTION>
31 March
1998
L
<S> <C>
Accelerated capital allowances 5,582
Other timing differences (1,257)
-------------------
4,325
-------------------
-------------------
</TABLE>
20 RELATED PARTY TRANSACTION
The following transactions occurred during the year:
In March 1998 the company was acquired by a subsidiary of Big Flower Holdings
Inc. During the year ended 31 March 1998 the company purchased supplies from
Production Response Limited, an indirect subsidiary of Big Flower Holdings Inc.
of L1,137,649. Debtors include L324,253 and trade creditors includes L219,965
relating to this company.
21 ULTIMATE PARENT COMPANY AND IMMEDIATE PARENT COMPANY
Pismo Limited is a wholly owned subsidiary of Big Flower Digital Services
Limited. The ultimate parent company is Big Flower Holdings Inc., a company
incorporated in the USA. Copies of the financial statements of Big Flower
Holdings Inc. are available from the company's address, 3 East 54th Street, New
York, New York, USA 10022.
<PAGE>
Exhibit 99.4
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
The following unaudited pro forma condensed combined financial data is
based on, and should be read in conjunction with, the consolidated financial
statements of Big Flower Holdings, Inc. and its subsidiaries (the "Company").
These financial statements were filed in the Company's annual report on Form
10-K for the year ended December 31, 1997 and its quarterly filing on Form 10-Q
for the three months ended March 31, 1998. The pro forma information has been
prepared to illustrate the effect of the acquisition of the Fusion Group which
was accounted for under the purchase method of accounting.
Since the acquisition of the Fusion Group was completed on March 13, 1998,
its balance sheet and the effects of financing the acquisition are reflected in
the Company's March 31, 1998 balances included in the Company's filing on Form
10-Q and, therefore, no pro forma balance sheet data is filed herein. The
unaudited pro forma condensed combined statements of operations for the three
months ended March 31, 1998, and for the year ended December 31, 1997, assume
that the acquisition of the Fusion Group was consummated as of the first day of
the periods presented.
The pro forma adjustments are based on preliminary estimates which are
derived from available information and certain assumptions. While the Company
believes, based on available information, that the fair values and allocations
included in the unaudited pro forma condensed combined financial statements are
reasonable estimates, final purchase accounting adjustments will be made at the
completion of the evaluations and estimates as of the actual purchase dates. As
a result, the final allocation of costs related to the acquired companies may
differ materially from that presented herein.
The unaudited pro forma condensed combined financial data excludes any
potential benefits that might result from the acquisitions due to synergies that
may be derived from the elimination of certain costs. The pro forma financial
data does not purport to represent what the Company's results of operations
actually would have been if the acquisition had actually occurred on the date or
for the periods indicated or what such results will be for any future date or
future periods.
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
BIG FUSION PRO FORMA
FLOWER GROUP(a) ADJUSTMENTS PRO FORMA
------ --------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales $ 383,902 $ 4,609 $ 388,511
Operating expenses:
Costs of production 295,188 2,195 297,383
Selling, general and administrative 48,437 2,023 50,460
Depreciation and amortization of intangibles 20,757 386 $ 212 (b) 21,355
---------- ---------- ------- ----------
364,382 4,604 212 369,198
---------- ---------- ------- ----------
Operating income 19,520 5 (212) 19,313
---------- ---------- ------- ----------
Other expense (income):
Interest expense 13,029 109 339 (c) 13,477
Amortization of deferred financing costs 429 429
Preferred dividends of a subsidiary trust 1,725 1,725
Interest income (120) (120)
Other, net 2,447 (492) 1,955
---------- ---------- ------- ----------
17,510 (383) 339 17,466
---------- ---------- ------- ----------
Income (loss) before income taxes 2,010 388 (551) 1,847
Income tax expense (benefit) 925 325 (253)(d) 997
---------- ---------- ------- ----------
Net Income (loss) $ 1,085 $ 63 $ (298) $ 850
========== ========== ======= ==========
Weighted average shares - basic 19,455 19,455
========== ==========
Weighted average shares - diluted 20,563 20,563
========== ==========
Basic earnings per share $ 0.06 $ 0.04
========== ==========
Diluted earnings per share (e) $ 0.05 $ 0.04
========== ==========
</TABLE>
See notes to unaudited pro forma condensed combined statements of operations.
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(in thousands, except per share amounts)
<TABLE>
<CAPTION>
BIG FUSION PRO FORMA
FLOWER GROUP ADJUSTMENTS PRO FORMA
------ --------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales $1,376,706 $ 24,231 $1,400,937
Operating expenses:
Costs of production 1,072,296 11,098 1,083,394
Selling, general and administrative 140,394 8,259 148,653
Depreciation and amortization of intangibles 67,322 1,603 $ 848 (b) 69,773
---------- ---------- ------- ----------
1,280,012 20,960 848 1,301,820
---------- ---------- ------- ----------
Operating income 96,694 3,271 (848) 99,117
---------- ---------- ------- ----------
Other expense (income):
Interest expense 40,300 370 1,780 (c) 42,450
Amortization of deferred financing costs 1,696 1,696
Interest income (349) (53) (402)
Preferred dividends of a subsidiary trust 1,340 1,340
In process acquired technology write off 58,192 58,192
Other, net 7,141 7,141
---------- ---------- ------- ----------
108,320 317 1,780 110,417
---------- ---------- ------- ----------
Income (loss) before income taxes (11,626) 2,954 (2,628) (11,300)
Income tax expense (benefit) 21,945 1,128 (1,235)(d) 21,838
---------- ---------- ------- ----------
Income (loss) before extraordinary item $ (33,571) $ 1,826 $(1,393) $ (33,138)
========== ========== ======= ==========
Loss per share before extraordinary item $ (1.79) $ (1.77)
========== ==========
Weighted average shares - basic and diluted (e) 18,704 18,704
========== ==========
</TABLE>
See notes to unaudited pro forma condensed combined statements of operations.
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
(a) Represents the historical statement of operations for the Fusion Group
for the period from January 1, 1998 to its acquisition by the Company on
March 13, 1998.
(b) Represents the amortization of the estimated excess purchase cost over
book value which is being amortized over a 25 year period.
(c) Reflects (i) the interest on the additional borrowings under the
Company's UK credit facility which were used to finance the acquisition
and (ii) the elimination of interest incurred by the acquired companies
on debt repaid upon acquisition.
YEAR ENDED THREE MONTHS ENDED
DECEMBER 31, 1997 MARCH 31, 1998
----------------- ------------------
(in thousands)
Eliminate interest expense on debt
repaid upon acquisition $ (370) $ (109)
Additional interest expense on UK
credit facility borrowings of
$25.0 million at 8.60% 2,150 448
-------- --------
$ 1,780 $ 339
-------- --------
-------- --------
(d) Pro forma tax adjustments reflect applying the Company's effective tax
rates of 47% in 1997 and 46% in 1998 to all pro forma adjustments for
the respective periods.
(e) The pro forma earnings per share calculations exclude the anti-dilutive
effect of conversion of redeemable convertible preferred securities.
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